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<SEC-DOCUMENT>0000950137-04-003264.txt : 20040428
<SEC-HEADER>0000950137-04-003264.hdr.sgml : 20040428
<ACCEPTANCE-DATETIME>20040428135335
ACCESSION NUMBER:		0000950137-04-003264
CONFORMED SUBMISSION TYPE:	N-2/A
PUBLIC DOCUMENT COUNT:		12
FILED AS OF DATE:		20040428

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CALAMOS STRATEGIC TOTAL RETURN FUND
		CENTRAL INDEX KEY:			0001275214
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1933 Act
		SEC FILE NUMBER:	333-113439
		FILM NUMBER:		04759858

	BUSINESS ADDRESS:	
		STREET 1:		1111 E WARRENVILLE RD
		CITY:			NAPERVILLE
		STATE:			IL
		ZIP:			60653
		BUSINESS PHONE:		8003239943

	MAIL ADDRESS:	
		STREET 1:		1111 E WARRENVILLE RD
		CITY:			NAPPERVILLE
		STATE:			IL
		ZIP:			60653

FILER:

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			CALAMOS STRATEGIC TOTAL RETURN FUND
		CENTRAL INDEX KEY:			0001275214
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1031

	FILING VALUES:
		FORM TYPE:		N-2/A
		SEC ACT:		1940 Act
		SEC FILE NUMBER:	811-21484
		FILM NUMBER:		04759859

	BUSINESS ADDRESS:	
		STREET 1:		1111 E WARRENVILLE RD
		CITY:			NAPERVILLE
		STATE:			IL
		ZIP:			60653
		BUSINESS PHONE:		8003239943

	MAIL ADDRESS:	
		STREET 1:		1111 E WARRENVILLE RD
		CITY:			NAPPERVILLE
		STATE:			IL
		ZIP:			60653
</SEC-HEADER>
<DOCUMENT>
<TYPE>N-2/A
<SEQUENCE>1
<FILENAME>c82676a1nv2za.txt
<DESCRIPTION>PRE-EFFECTIVE AMENDMENT TO REGISTRATION STATEMENT
<TEXT>
<PAGE>


     AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 28, 2004



                                                    1933 ACT FILE NO. 333-113439


                                                     1940 ACT FILE NO. 811-21484
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
                    U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM N-2
                           (CHECK APPROPRIATE BOXES)


<Table>
<S>     <C>
[ ]     REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X]     PRE-EFFECTIVE AMENDMENT NO. 1
[ ]     POST-EFFECTIVE AMENDMENT NO.
                               AND/OR
[ ]     REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
        1940
[X]     AMENDMENT NO. 5
</Table>


                      CALAMOS STRATEGIC TOTAL RETURN FUND
                Exact Name of Registrant as Specified in Charter

          1111 East Warrenville Road, Naperville, Illinois 60563-1493
 Address of Principal Executive Offices (Number, Street, City, State, ZIP Code)

                                 (630) 245-7200
               Registrant's Telephone Number, including Area Code

                             James S. Hamman, Jr.,
                                   Secretary
                         Calamos Asset Management, Inc.
                           1111 East Warrenville Road
                        Naperville, Illinois 60563-1493

 Name and Address (Number, Street, City, State, ZIP Code) of Agent for Service

                          COPIES OF COMMUNICATIONS TO:

<Table>
<S>                             <C>                             <C>
        David A. Sturms                Cameron S. Avery                Cynthia G. Cobden
   Vedder, Price, Kaufman &         Bell, Boyd & Lloyd, LLC     Simpson Thacher & Bartlett LLP
        Kammholz, P.C.           70 West Madison Street, Suite       425 Lexington Avenue
   222 North LaSalle Street                  3300                  New York, New York 10017
 Chicago, Illinois 60601-1003    Chicago, Illinois 60602-4207
</Table>

     APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING:  As soon as practicable after
the effective date of this Registration Statement.
                             ---------------------
     If any of the securities being registered on this Form will be offered on a
delayed or continuous basis in reliance on Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered in
connection with a dividend or interest reinvestment plan, check the following
box. [ ]

     It is proposed that this filing will become effective (check appropriate
box)


     [ ] when declared effective pursuant to section 8(c).

                             ---------------------
        CALCULATION OF REGISTRATION FEE UNDER THE SECURITIES ACT OF 1933


<Table>
<Caption>
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
                                                     PROPOSED MAXIMUM      PROPOSED MAXIMUM        AMOUNT OF
    TITLE OF SECURITIES          AMOUNT BEING         OFFERING PRICE          AGGREGATE           REGISTRATION
      BEING REGISTERED            REGISTERED             PER UNIT         OFFERING PRICE(1)          FEE(2)
- ------------------------------------------------------------------------------------------------------------------
<S>                          <C>                  <C>                    <C>                  <C>
Preferred Shares (no par
  value)....................    43,200 Shares          $25,000,000          $1,080,000,000          $136,836
- ------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------
</Table>


(1) Estimated solely for the purpose of calculating the registration fee.

(2) $126.70 has been previously paid.

     THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT, WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON
SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>


THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES
IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.



                  SUBJECT TO COMPLETION, DATED APRIL 28, 2004


PROSPECTUS

                                 $1,080,000,000


                      CALAMOS STRATEGIC TOTAL RETURN FUND
                                PREFERRED SHARES


                                7,040 SHARES, SERIES M


                                7,040 SHARES, SERIES TU


                                7,040 SHARES, SERIES W


                                7,040 SHARES, SERIES TH


                                7,040 SHARES, SERIES F


                                4,000 SHARES, SERIES A


                                4,000 SHARES, SERIES B


                    LIQUIDATION PREFERENCE $25,000 PER SHARE
                               ------------------

     Calamos Strategic Total Return Fund (the "Fund") is a recently organized,
diversified, closed-end management investment company. The Fund's investment
objective is to provide total return through a combination of capital
appreciation and current income. Under normal circumstances, the Fund will
invest primarily in 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 35% of its managed assets in securities of foreign issuers, including debt
and equity securities of corporate issuers and debt securities of government
issuers in developed and emerging markets. The Fund may invest up to 15% of its
managed assets in securities of foreign issuers in emerging markets. "Managed
assets" means the total assets of the Fund (including any assets attributable to
any leverage that may be outstanding) minus the sum of accrued liabilities
(other than debt representing financial leverage). For this purpose, the
liquidation preference on any preferred shares will not constitute a liability.
Below investment grade (high yield/high risk) securities are rated Ba or lower
by Moody's Investors Service, Inc. ("Moody's") or BB or lower by Standard &
Poor's Corporation, a division of The McGraw-Hill Companies ("Standard &
Poor's") or are unrated securities of comparable quality as determined by the
Fund's investment adviser. Below investment grade securities are commonly
referred to as "junk bonds" and are considered speculative with respect to the
issuer's capacity to pay interest and repay principal. They involve greater risk
of loss, are subject to greater price volatility and are less liquid, especially
during periods of economic uncertainty or change, than higher rated securities.
There can be no assurance that the Fund will achieve its investment objective.
                               ------------------


     INVESTING IN THE FUND'S PREFERRED SHARES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE 22 OF THIS PROSPECTUS.


     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
                               ------------------

<Table>
<Caption>
                                                              PER SHARE    TOTAL
                                                              ---------   --------
<S>                                                           <C>         <C>
Public Offering Price                                          $25,000
Sales Load                                                     $
Proceeds, before expenses, to the Fund(1)                      $
</Table>

- ---------------
(1) Total expenses of issuance and distribution are estimated to be $          .


     The underwriters are offering the Preferred Shares subject to various
conditions. The Preferred Shares will be ready for delivery in book-entry form
only, through the facilities of The Depository Trust Company on or about
       , 2004.

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


CITIGROUP


                            MERRILL LYNCH & CO.


                                                             UBS INVESTMENT BANK

            , 2004.
<PAGE>

(continued from previous page)


     You should read this prospectus, which contains important information about
the Fund, before deciding whether to invest in the Preferred Shares and retain
it for future reference. A statement of additional information, dated
          , 2004, containing additional information about the Fund, has been
filed with the Securities and Exchange Commission and is incorporated by
reference in its entirety into this prospectus. You may request a free copy of
the statement of additional information, the table of contents of which is on
page 55 of this prospectus, by calling 1-800-582-6959 or by writing to the Fund.
You can review and copy documents the Fund has filed at the Securities and
Exchange Commission's Public Reference Room in Washington, D.C. Call
1-202-942-8090 for information. The Commission charges a fee for copies. You can
get the same information free from the Commission's EDGAR database on the
Internet (http://www.sec.gov). You may also e-mail requests for these documents
to publicinfo@sec.gov or make a request in writing to the Commission's Public
Reference Section, Washington, D.C. 20549-0102.



     The Fund is offering 7,040 shares of Series M Preferred Shares, 7,040
shares of Series TU Preferred Shares, 7,040 shares of Series W Preferred Shares,
7,040 shares of Series TH Preferred Shares, 7,040 shares of Series F Preferred
Shares, 4,000 shares of Series A Preferred Shares and 4,000 shares of Series B
Preferred Shares. The shares are referred to in this prospectus as "Preferred
Shares." The Preferred Shares have a liquidation preference of $25,000 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. It is a condition of closing this offering that the
Preferred Shares be offered with a rating of "AAA" from Fitch and "AAA" from
S&P.



     The dividend rate for the initial dividend period will be      % for Series
M,      % for Series TU,      % for Series W,      % for Series TH,      % for
Series F,      % for Series A, and      % for Series B. The initial dividend
period is from the date of issuance through           , 2004 for Series M,
          , 2004 for Series TU,           , 2004 for Series W,           , 2004
for Series TH,           , 2004 for Series F,           , 2004 for Series A and
          , 2004 for Series B. Series M, TU, W, TH and F will have initial
dividend periods of   ,   ,   ,   and   days, respectively. Series A and B will
have initial dividend periods of   and   days, respectively. For subsequent
dividend periods, Preferred Shares pay dividends based on a rate set at auction,
usually held weekly in the case of Series M, TU, W, TH and F or every 28 days in
the case of Series A and B. Dividends on the Preferred Shares will be
cumulative. Prospective purchasers should carefully review the auction
procedures described in this prospectus and should note: (1) a buy order (called
a "bid order") or sell order is a commitment to buy or sell Preferred Shares
based on the results of an auction; (2) auctions will be conducted by telephone;
and (3) purchases and sales will be settled on the next business day after the
auction.


     The Preferred Shares are redeemable, in whole or in part, at the option of
the Fund on the second business day prior to any date dividends are paid on the
Preferred Shares, and will be subject to mandatory redemption in certain
circumstances at a redemption price of $25,000 per share, plus accumulated,
unpaid dividends to the date of redemption, plus a premium in certain
circumstances.

     The Preferred Shares will not be listed on an exchange. You may only buy or
sell Preferred Shares through an order placed at an auction with or through a
broker-dealer that has entered into an agreement with the auction agent and the
Trust or in a secondary market maintained by certain broker-dealers. These
broker-dealers are not required to maintain this market, and it may not provide
you with liquidity.

     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.
<PAGE>


     YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROSPECTUS. WE HAVE NOT, AND THE UNDERWRITERS HAVE NOT,
AUTHORIZED ANY OTHER PERSON TO PROVIDE YOU WITH DIFFERENT INFORMATION. IF ANYONE
PROVIDES YOU WITH DIFFERENT OR INCONSISTENT INFORMATION, YOU SHOULD NOT RELY ON
IT. WE ARE NOT, AND THE UNDERWRITERS ARE NOT, MAKING AN OFFER TO SELL THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

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

                               TABLE OF CONTENTS


<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Prospectus Summary..........................................    1
Financial Highlights........................................   12
The Fund....................................................   13
Use of Proceeds.............................................   13
Capitalization..............................................   14
Portfolio Composition.......................................   14
The Fund's Investments......................................   15
Leverage....................................................   18
Interest Rate Transactions..................................   20
Risk Factors................................................   22
Management of the Fund......................................   30
Description of Preferred Shares.............................   33
The Auction.................................................   43
Description of Borrowings...................................   47
Description of Common Shares................................   48
U.S. Federal Income Tax Matters.............................   48
Certain Provisions of the Agreement and Declaration of Trust
  and By-Laws...............................................   50
Custodian, Auction Agent, Transfer Agent, Dividend Paying
  Agent and Registrar.......................................   51
Underwriting................................................   52
Legal Opinions..............................................   53
Available Information.......................................   54
Table of Contents for Statement of Additional Information...   55
</Table>


                                        i
<PAGE>

                               PROSPECTUS SUMMARY


     This is only a summary. This summary may not contain all of the information
that you should consider before investing in the Fund's Preferred Shares. You
should review the more detailed information contained in this prospectus and in
the Statement of Additional Information, especially the information set forth
under the heading "Risk Factors."



The Fund......................   Calamos Strategic Total Return Fund is a
                                 recently organized, diversified, closed-end
                                 management investment company. Throughout the
                                 prospectus, we refer to Calamos Strategic Total
                                 Return Fund as the "Fund" or as "we," "us," or
                                 "our." See "The Fund." The Fund's common shares
                                 are traded on the New York Stock Exchange under
                                 the symbol "CSQ." As of April 26, 2004, the
                                 Fund had 154,514,000 common shares outstanding
                                 and net assets of $2,198,800,041. The Fund's
                                 principal offices are located at 1111 East
                                 Warrenville Road, Naperville, Illinois 60563.



The Offering..................   We are offering 7,040 Series M Preferred
                                 Shares, 7,040 Series TU Preferred Shares, 7,040
                                 Series W Preferred Shares, 7,040 Series TH
                                 Preferred Shares, 7,040 Series F Preferred
                                 Shares, 4,000 Series A Preferred Shares and
                                 4,000 Series B Preferred Shares, each at a
                                 purchase price of $25,000 per share. The
                                 Preferred Shares are offered through a group of
                                 underwriters led by Citigroup Global Markets
                                 Inc.



                                 The Preferred Shares entitle their holders to
                                 receive cash dividends at an annual rate that
                                 may vary for the successive dividend periods
                                 for the Preferred Shares. In general, except as
                                 described under "-- Dividends and Dividend
                                 Periods" below and "Description of Preferred
                                 Shares -- Dividends and Dividend Periods," the
                                 dividend period for the Series M, TU, W, TH and
                                 F Preferred Shares will each be seven days and
                                 for the Series A and B Preferred Shares the
                                 dividend period will be 28 days. The auction
                                 agent will determine the dividend rate for a
                                 particular period by an auction conducted on
                                 the business day immediately prior to the start
                                 of that dividend period. See "The Auction."


                                 Generally, investors in Preferred Shares will
                                 not receive certificates representing ownership
                                 of their shares. The securities depository (The
                                 Depository Trust Company or any successor) or
                                 its nominee for the account of the investor's
                                 broker-dealer will maintain record ownership of
                                 Preferred Shares in book-entry form. An
                                 investor's broker-dealer, in turn, will
                                 maintain records of that investor's beneficial
                                 ownership of Preferred Shares.


                                 An investor should consider whether to invest
                                 in a particular series based on the series'
                                 rate of return, the investor's time horizon for
                                 investment, and the investor's liquidity
                                 preference. Investors can choose between seven
                                 tranches.


Investment Objective..........   The Fund's investment objective is to provide
                                 total return, through a combination of capital
                                 appreciation and current income. There can be
                                 no assurance that the Fund will achieve its
                                 investment objective. See "The Fund's
                                 Investments -- Investment Objective."

                                        1
<PAGE>

Investment Policies...........   PRIMARY INVESTMENTS.  Under normal
                                 circumstances, the Fund will invest primarily
                                 in 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 35% of its managed assets in
                                 securities of foreign issuers, including debt
                                 and equity securities of corporate issuers and
                                 debt securities of government issuers in
                                 developed and emerging markets. The Fund may
                                 invest up to 15% of its managed assets in
                                 securities of foreign issuers in emerging
                                 markets. "Managed assets" means the total
                                 assets of the Fund (including any assets
                                 attributable to any leverage that may be
                                 outstanding) minus the sum of accrued
                                 liabilities (other than debt representing
                                 financial leverage). For this purpose the
                                 liquidation preference on any preferred shares
                                 will not constitute a liability. See "The
                                 Fund's Investments -- Principal Investment
                                 Strategies."


                                 Calamos will dynamically allocate the Fund's
                                 investments among multiple asset classes,
                                 seeking to obtain an appropriate balance of
                                 risk and reward through all market cycles using
                                 multiple strategies and combining them to seek
                                 to achieve favorable risk adjusted returns. See
                                 "The Fund's Investments -- Principal Investment
                                 Strategies."


                                 EQUITY SECURITIES.  Equity securities include
                                 common and preferred stocks, warrants, rights,
                                 and depository receipts. Under normal
                                 circumstances, the Fund will invest at least
                                 50% of its managed assets in equity securities
                                 (including securities that are convertible into
                                 equity securities). An investment in the equity
                                 securities of a company represents a
                                 proportionate ownership interest in that
                                 company. Therefore, the Fund participates in
                                 the financial success or failure of any company
                                 in which it has an equity interest. See "The
                                 Fund's Investments -- Principal Investment
                                 Strategies -- Equity Securities."


                                 HIGH YIELD SECURITIES.  The Fund may invest in
                                 high yield securities for either current income
                                 or capital appreciation or both. These
                                 securities are rated Ba or lower by Moody's or
                                 BB or lower by Standard & Poor's or are unrated
                                 securities of comparable quality as determined
                                 by Calamos Asset Management, Inc. ("Calamos"),
                                 the Fund's investment adviser. The Fund may
                                 invest in high yield securities of any rating.
                                 Non-convertible debt securities rated below
                                 investment grade are commonly referred to as
                                 "junk bonds" and are considered speculative
                                 with respect to the issuer's capacity to pay
                                 interest and repay principal. They involve
                                 greater risk of loss, are subject to greater
                                 price volatility and are less liquid,
                                 especially during periods of economic
                                 uncertainty or change, than higher rated
                                 securities. See "The Fund's
                                 Investments -- Principal Investment
                                 Strategies -- High Yield Securities."


                                        2
<PAGE>

                                 FOREIGN ISSUERS.  Although the Fund primarily
                                 invests in securities of U.S. issuers, the Fund
                                 may invest up to 35% of its managed assets in
                                 securities of foreign issuers, including debt
                                 and equity securities of corporate issuers and
                                 debt securities of government issuers in
                                 developed and emerging markets. The Fund may
                                 invest up to 15% of its managed assets in
                                 securities of foreign issuers in emerging
                                 markets. A foreign issuer is a company
                                 organized under the laws of a foreign country
                                 that is principally traded in the financial
                                 markets of a foreign country. For purposes of
                                 these percentage limitations, foreign
                                 securities do not include securities
                                 represented by American Depository Receipts
                                 ("ADRs") or securities guaranteed by a U.S.
                                 person. See "The Fund's
                                 Investments -- Principal Investment
                                 Strategies -- Foreign Securities."

                                 CONVERTIBLE SECURITIES.  The Fund may invest in
                                 convertible securities. A convertible security
                                 is a debt security or preferred stock that is
                                 exchangeable for an equity security (typically
                                 of the same issuer) at a predetermined price
                                 (the "conversion price"). Depending upon the
                                 relationship of the conversion price to the
                                 market value of the underlying security, a
                                 convertible security may trade more like an
                                 equity security than a debt instrument. The
                                 Fund may invest in convertible securities of
                                 any rating. Securities that are convertible
                                 into equity securities are considered equity
                                 securities for purposes of the Fund's policy to
                                 invest at least 50% of its managed assets in
                                 equity securities. See "The Fund's
                                 Investments -- Principal Investment
                                 Strategies -- Convertible Securities."

                                 SYNTHETIC CONVERTIBLE SECURITIES.  Calamos may
                                 also create a "synthetic" convertible security
                                 by combining separate securities that possess
                                 the two principal characteristics of a true
                                 convertible security, i.e., a fixed-income
                                 security ("fixed-income component") and the
                                 right to acquire an equity security
                                 ("convertible component"). The fixed-income
                                 component is achieved by investing in
                                 non-convertible, fixed-income securities such
                                 as bonds, preferred stocks and money market
                                 instruments. The convertible component is
                                 achieved by investing in warrants or options to
                                 buy common stock at a certain exercise price,
                                 or options on a stock index. The Fund may also
                                 purchase synthetic securities created by other
                                 parties, typically investment banks, including
                                 convertible structured notes. Different
                                 companies may issue the fixed-income and
                                 convertible components which may be purchased
                                 separately, and at different times. The Fund's
                                 holdings of synthetic convertible securities
                                 are considered equity securities for purposes
                                 of the Fund's policy to invest at least 50% of
                                 its managed assets in equity securities. See
                                 "The Fund's Investments -- Principal Investment
                                 Strategies -- Synthetic Convertible
                                 Securities."

                                 RULE 144A SECURITIES.  The Fund may invest
                                 without limit in securities that have not been
                                 registered for public sale, but that are
                                 eligible for purchase and sale by certain
                                 qualified institutional buyers ("Rule 144A
                                 Securities"). Calamos, under the supervision of
                                 the Board of Trustees, will determine whether

                                        3
<PAGE>

                                 securities purchased under Rule 144A are
                                 illiquid (that is, not readily marketable) and
                                 thus subject to the Fund's limit on investing
                                 no more than 15% of its managed assets in
                                 illiquid securities. See "The Fund's
                                 Investments -- Principal Investment
                                 Strategies -- Rule 144A Securities."


                                 ZERO COUPON SECURITIES.  The securities in
                                 which the Fund invests may include zero coupon
                                 securities, which are debt obligations that are
                                 issued or purchased at a significant discount
                                 from face value. The discount approximates the
                                 total amount of interest the security will
                                 accrue and compound over the period until
                                 maturity or the particular interest payment
                                 date at a rate of interest reflecting the
                                 market rate of the security at the time of
                                 issuance. Zero coupon securities do not require
                                 the periodic payment of interest. These
                                 investments benefit the issuer by mitigating
                                 its need for cash to meet debt service, but
                                 generally require a higher rate of return to
                                 attract investors who are willing to defer
                                 receipt of cash. These investments may
                                 experience greater volatility in market value
                                 than U.S. government or other securities that
                                 make regular payments of interest. The Fund
                                 accrues income on these investments for tax and
                                 accounting purposes, which is distributable to
                                 shareholders and which, because no cash is
                                 received at the time of accrual, may require
                                 the liquidation of other portfolio securities
                                 to satisfy the Fund's distribution obligations,
                                 in which case the Fund will forgo the
                                 opportunity to purchase additional income
                                 producing assets with the liquidation proceeds.
                                 Zero coupon U.S. government securities include
                                 STRIPS and CUBES, which are issued by the U.S.
                                 Treasury as component parts of U.S. Treasury
                                 bonds and represent scheduled interest and
                                 principal payments on the bonds. See "The
                                 Fund's Investments -- Principal Investment
                                 Strategies -- Zero Coupon Securities."


                                 OTHER SECURITIES.  The Fund may invest in other
                                 securities of various types. Normally, the Fund
                                 invests substantially all of its assets to meet
                                 its investment objective. For temporary
                                 defensive purposes, the Fund may depart from
                                 its principal investment strategies and invest
                                 part or all of its assets in securities with
                                 remaining maturities of less than one year,
                                 cash equivalents, or may hold cash. During such
                                 periods, the Fund may not be able to achieve
                                 its investment objective. See "The Fund's
                                 Investments -- Principal Investment
                                 Strategies."


Use of Leverage by the Fund...   The Fund may, but is not required to, use
                                 financial leverage for investment purposes. In
                                 addition to issuing Preferred Shares, the Fund
                                 may borrow money or issue debt securities such
                                 as commercial paper or notes. Throughout the
                                 prospectus, borrowing money and issuing debt
                                 securities may be collectively referred to as
                                 "Borrowings." Any Borrowings will have
                                 seniority over Preferred Shares, and payments
                                 to holders of Preferred Shares in liquidation
                                 or otherwise will be subject to the prior
                                 payment of any Borrowings. As a non-fundamental
                                 policy, financial leverage (the total of
                                 Preferred Shares or other preferred shares and
                                 any Borrowings) may not exceed 38% of the
                                 Fund's total assets. However, the Board of
                                 Trustees reserves


                                        4
<PAGE>


                                 the right to issue preferred shares and
                                 Borrowings to the extent permitted by the
                                 Investment Company Act of 1940 (the "1940
                                 Act"). Since Calamos's fee is based upon a
                                 percentage of the Fund's managed assets, which
                                 include assets attributable to any outstanding
                                 leverage, the investment management fee will be
                                 higher if the Fund is leveraged and Calamos
                                 will have an incentive to be more aggressive
                                 and leverage the Fund. Calamos intends only to
                                 leverage the Fund when it believes that the
                                 potential return on such additional investments
                                 is likely to exceed the costs incurred in
                                 connection with the borrowing. See "Leverage."



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



                                 In an interest rate swap, the Fund would agree
                                 to pay to the other party to the interest rate
                                 swap (which is known as the "counterparty") a
                                 fixed rate payment in exchange for the
                                 counterparty agreeing to pay to the Fund a
                                 payment at a variable rate that is expected to
                                 approximate the rate on any variable rate
                                 payment obligations on the Fund's leverage. The
                                 payment obligations would be based on the
                                 notional amount of the swap. The Fund's payment
                                 obligations under the swap are general
                                 unsecured obligations of the Fund and are
                                 ranked senior to distributions applicable to
                                 the common shares and the Preferred Shares.


                                 In an interest rate cap, the Fund would pay a
                                 premium to the counterparty to the interest
                                 rate cap and, to the extent that a specified
                                 variable rate index exceeds a predetermined
                                 fixed rate, would receive from the counterparty
                                 payments of the difference based on the
                                 notional amount of such cap. If the
                                 counterparty to an interest rate swap or cap
                                 defaults, the Fund would be obligated to make
                                 the payments that it had intended to avoid.
                                 Depending on the state of interest rates in
                                 general, this default could negatively impact
                                 the Fund's ability to make dividend payments on
                                 the Preferred Shares.

                                 In addition, at the time an interest rate swap
                                 or cap transaction reaches its scheduled
                                 termination date, there is a risk that the Fund
                                 would not be able to obtain a replacement
                                 transaction or that the terms of the
                                 replacement would not be as favorable as on the
                                 expiring transaction. If this occurs, it could
                                 have a negative impact on the Fund's ability to
                                 make dividend payments on the Preferred Shares
                                 or interest payments on Borrowings. If the Fund
                                 fails to meet an asset coverage ratio required
                                 by law or if the Fund does not meet a rating
                                 agency guideline in a timely manner, the Fund
                                 may be required to redeem some or all of the
                                 Preferred Shares. See "Redemption" below.
                                 Similarly, the Fund

                                        5
<PAGE>


                                 could be required to prepay the principal
                                 amount of Borrowings, if any. Such redemption
                                 or prepayment would likely result in the Fund
                                 seeking to terminate early all or a portion of
                                 any swap or cap transaction. Early termination
                                 of a swap could result in a termination payment
                                 by or to the Fund. A termination payment by the
                                 Fund would result in a reduction in common
                                 share net earnings. Early termination of a cap
                                 could result in a termination payment to the
                                 Fund. The Fund intends to maintain in a
                                 segregated account with its custodian, cash or
                                 liquid securities having a value at least equal
                                 to the Fund's net payment obligations under any
                                 swap transaction, marked-to-market daily. Under
                                 certain circumstances, the Fund may be required
                                 to pledge the assets in such segregated account
                                 to the counter-party. The Fund will not enter
                                 into interest rate swap or cap transactions
                                 having a notional amount that exceeds the
                                 outstanding amount of the Fund's leverage. See
                                 "Interest Rate Transactions" for additional
                                 information.



Investment Adviser............   Calamos is the Fund's investment adviser.
                                 Calamos is responsible on a day-to-day basis
                                 for investment of the Fund's portfolio in
                                 accordance with its investment objective and
                                 policies. Calamos makes all investment
                                 decisions for the Fund and places purchase and
                                 sale orders for the Fund's portfolio
                                 securities. As of March 31, 2004, Calamos
                                 managed approximately $29 billion in assets of
                                 individuals and institutions. Calamos is a
                                 wholly-owned subsidiary of Calamos Holdings,
                                 Inc. ("Holdings"). Holdings is controlled by
                                 John P. Calamos, who has been engaged in the
                                 investment advisory business since 1977.


Portfolio Manager.............   John P. Calamos, Nick P. Calamos and John P.
                                 Calamos, Jr. are responsible for managing the
                                 portfolio of the Fund. During the past five
                                 years, John P. Calamos has been a Chairman, CEO
                                 and Co-Chief Investment Officer of Calamos;
                                 Nick P. Calamos has been a Senior Executive
                                 Vice President and Co-Chief Investment Officer
                                 of Calamos; and John P. Calamos, Jr. has been
                                 an Executive Vice President of Calamos.

Fund Accountant...............   State Street Bank and Trust Company ("State
                                 Street"), will provide fund accounting and
                                 financial accounting services to the Fund.

Risk Factors Summary..........   Risk is inherent in all investing. Therefore,
                                 before investing in the Preferred Shares you
                                 should consider certain risks carefully. The
                                 primary risks of investing in the Preferred
                                 Shares are:

                                 - the Fund will not be permitted to declare
                                   dividends or other distributions with respect
                                   to your Preferred Shares or redeem your
                                   Preferred Shares unless the Fund meets
                                   certain asset coverage requirements;


                                 - if you try to sell your Preferred Shares
                                   between auctions you may not be able to sell
                                   any or all of your shares or you may not be
                                   able to sell them for $25,000 per share or
                                   $25,000 per share plus accumulated dividends.
                                   If the Fund has designated a special dividend
                                   period, changes in interest rates could
                                   affect the price you would receive if you
                                   sold your shares in the secondary market. You
                                   may transfer shares outside of an


                                        6
<PAGE>

                                   auction only to or through a broker-dealer
                                   that has entered into an agreement with the
                                   auction agent and the Fund or other person as
                                   the Fund permits;

                                 - if an auction fails you may not be able to
                                   sell some or all of your shares;

                                 - because of the nature of the market for
                                   Preferred Shares, you may receive less than
                                   the price you paid for your shares if you
                                   sell them outside of the auction, especially
                                   when market interest rates are rising;

                                 - a rating agency could downgrade the rating
                                   assigned to the Preferred Shares, which could
                                   affect liquidity;


                                 - the Fund may be forced to redeem your shares
                                   to meet regulatory or rating agency
                                   requirements or may voluntarily redeem your
                                   shares in certain circumstances at a time
                                   when it is not advantageous;


                                 - in certain circumstances, the Fund may not
                                   earn sufficient income from its investments
                                   to pay dividends;

                                 - the Preferred Shares will be junior to any
                                   Borrowings;

                                 - any Borrowing may constitute a substantial
                                   lien and burden on the Preferred Shares by
                                   reason of its priority claim against the
                                   income of the Fund and against the net assets
                                   of the Fund in liquidation;

                                 - if the Fund leverages through Borrowings, the
                                   Fund may not be permitted to declare
                                   dividends or other distributions with respect
                                   to the Preferred Shares or purchase Preferred
                                   Shares unless at the time thereof the Fund
                                   meets certain asset coverage requirements and
                                   the payments of principal and of interest on
                                   any such Borrowings are not in default;


                                 - the value of the Fund's investment portfolio
                                   may decline, reducing the asset coverage for
                                   the Preferred Shares. See "Risk
                                   Factors -- General Risks of Investing in the
                                   Fund" for a discussion of the general risks
                                   of the Fund's investment portfolio; and


                                 - certain events, such as terrorist attacks
                                   (including the terrorist attacks in the
                                   United States on September 11, 2001), war and
                                   other geopolitical events have led to
                                   increased short-term market volatility and
                                   may have long-term effects on U.S. and world
                                   economies and markets. The Fund cannot
                                   predict the effects of similar events in the
                                   future on the U.S. economy or other
                                   economies. Similar disruptions of the
                                   financial markets could impact interest
                                   rates, auctions, secondary trading, ratings,
                                   credit risk, inflation and other factors
                                   relating to securities or other financial
                                   interests.

                                 For additional information about the risks of
                                 investing in Preferred Shares and in the Fund,
                                 see "Risk Factors."

                                 In addition to the risks associated with
                                 investing in the Preferred Shares, an investor
                                 in the Preferred Shares will also be subject to
                                 the general risks associated with the Fund's
                                 investment policies, including the risks
                                 associated with equity securities, convertible

                                        7
<PAGE>


                                 securities, high yield securities and foreign
                                 securities. These and other general risks of
                                 the Fund are described in more detail in "Risk
                                 Factors -- General Risks of Investing in the
                                 Fund."



Trading Market................   The Preferred Shares will not be listed on an
                                 exchange. Instead, you may buy or sell the
                                 Preferred Shares at an auction that normally is
                                 held every seven days for the Series M, TU, W,
                                 TH and F and every 28 days for the Series A and
                                 B by submitting orders to a broker-dealer that
                                 has entered into an agreement with the auction
                                 agent and the Trust (a "Broker-Dealer"), or to
                                 a broker-dealer that has entered into a
                                 separate agreement with a Broker-Dealer. In
                                 addition to the auctions, Broker-Dealers and
                                 other broker-dealers may maintain a secondary
                                 trading market in Preferred Shares outside of
                                 auctions, but may discontinue this activity at
                                 any time. There is no assurance that a
                                 secondary market will be created or, if
                                 created, that it will provide shareholders with
                                 liquidity or that the trading price in any
                                 secondary market would be $25,000. You may
                                 transfer shares outside of auctions only to or
                                 through a Broker-Dealer or a broker-dealer that
                                 has entered into a separate agreement with a
                                 Broker-Dealer.



                                 The table below shows the first auction date
                                 for each series of Preferred Shares and the day
                                 of the week on which each subsequent auction,
                                 if any, will normally be held for each series
                                 of Preferred Shares. The first auction date for
                                 each series of Preferred Shares will be the
                                 business day before the dividend payment date
                                 for the initial dividend period for that series
                                 of Preferred Shares. The start date for
                                 subsequent dividend periods will normally be
                                 the business day following the auction date
                                 unless the then-current dividend period is a
                                 special dividend period or the first day of the
                                 subsequent dividend period is not a business
                                 day.



<Table>
<Caption>
                                                                                         SUBSEQUENT
                                                SERIES   FIRST AUCTION DATE              AUCTION DAY
                                                ------   ------------------   ---------------------------------
                                                <S>      <C>                  <C>
                                                M....                                      Monday
                                                TU...                                      Tuesday
                                                W....                                     Wednesday
                                                TH...                                     Thursday
                                                F....                                      Friday
                                                A....                         Every fourth Wednesday thereafter
                                                B....                         Every fourth Thursday thereafter
</Table>



Dividends and Dividend
Periods.......................   The table below shows the initial dividend
                                 rates, the dividend payment dates and the day
                                 of the week upon which subsequent dividends, if
                                 any, will be paid for each series and the
                                 number of days for the initial dividend periods
                                 on each series of Preferred Shares offered in
                                 this prospectus. For subsequent dividend
                                 periods, each series of Preferred Shares will
                                 pay dividends based on a rate set at auctions,
                                 normally held every seven days in the case of
                                 Series M, TU, W, TH and F and every 28 days in
                                 the case of Series A and B. In most instances,
                                 dividends are payable on the first business day
                                 following the end of the dividend period. The
                                 rate set at auctions will not exceed the
                                 maximum rate. See "Description of Preferred
                                 Shares -- Dividends and Dividend Periods."


                                        8
<PAGE>

<Table>
<Caption>
                                INITIAL        DATE OF
                                DIVIDEND    ACCUMULATION        DIVIDEND PAYMENT DAY
                       SERIES     RATE     AT INITIAL RATE   FOR INITIAL DIVIDEND PERIOD   SUBSEQUENT DIVIDEND PAYMENT DATE
                       ------   --------   ---------------   ---------------------------   --------------------------------
<S>                    <C>      <C>        <C>               <C>                           <C>
                       M....                                                                           Tuesday
                       TU...                                                                          Wednesday
                       W....                                                                           Thursday
                       TH...                                                                            Friday
                       F....                                                                            Monday
                       A....                                                               Every fourth Thursday thereafter
                       B....                                                                Every fourth Friday thereafter

<Caption>
                       NUMBER OF DAYS
                         OF INITIAL
                       DIVIDEND PERIOD
                       ---------------
<S>                    <C>
</Table>


                                 Dividends on the Preferred Shares will be
                                 cumulative from the date the shares are first
                                 issued and will be paid out of legally
                                 available funds.


                                 The Fund may, subject to certain conditions,
                                 designate special dividend periods of more than
                                 seven or 28 days. A requested special dividend
                                 period will not be effective unless sufficient
                                 clearing bids were made in the auction
                                 immediately preceding the special dividend
                                 period. In addition, full cumulative dividends,
                                 any amounts due with respect to mandatory
                                 redemptions and any additional dividends
                                 payable prior to such date must be paid in
                                 full. In addition, the Fund does not intend to
                                 designate a special dividend period if such
                                 designation would adversely affect Fitch or S&P
                                 or any substitute rating agency's then-current
                                 rating on the Preferred Shares. The dividend
                                 payment date for special dividend periods will
                                 be set out in the notice designating a special
                                 dividend period. See "Description of Preferred
                                 Shares -- Dividends and Dividend
                                 Periods -- Designation of Special Dividend
                                 Periods" and "The Auction."



Determination of Maximum
Rate..........................   Except during a default period, the applicable
                                 rate for any dividend period for Preferred
                                 Shares will not be more than the maximum rate.
                                 The maximum rate for the Preferred Shares will
                                 depend on the credit rating assigned to such
                                 Preferred Shares and on the duration of the
                                 dividend period. The maximum rate will be the
                                 applicable percentage of the reference rate.
                                 The reference rate is the applicable LIBOR rate
                                 (for a dividend period of fewer than 365 days)
                                 or the applicable Treasury index rate (for a
                                 dividend period of 365 days or more). The
                                 applicable percentage is further subject to
                                 upward but not downward adjustment at the
                                 discretion of the Board of Trustees after
                                 consultation with the Broker-Dealers. There is
                                 no minimum rate in respect of any dividend
                                 period. See "Description of Preferred
                                 Shares -- Dividends and Dividend Periods."



Ratings.......................   The Fund will issue Preferred Shares only if
                                 such shares have received a credit quality
                                 rating of "AAA" from Fitch and "AAA" from S&P.
                                 These ratings are an assessment of the capacity
                                 and willingness of an issuer to pay preferred
                                 stock obligations. The ratings are not a
                                 recommendation to purchase, hold or sell those
                                 shares inasmuch as the ratings do not comment
                                 as to market price or suitability for a
                                 particular investor. The ratings described
                                 above also do not address the likelihood that
                                 an owner of Preferred Shares will be able to
                                 sell such shares in an auction or otherwise.
                                 The ratings are based on current information
                                 furnished to Fitch and S&P by the Fund and
                                 Calamos and information obtained from

                                        9
<PAGE>


                                 other sources. The ratings may be changed,
                                 suspended or withdrawn in the rating agencies'
                                 discretion as a result of changes in, or the
                                 unavailability of, such information. See
                                 "Description of Preferred Shares -- Rating
                                 Agency Guidelines."


Asset Maintenance.............   Under the Fund's Statement of Preferences for
                                 Preferred Shares (the "Statement"), which
                                 establishes and fixes the rights and
                                 preferences of the shares of each series of
                                 Preferred Shares, the Fund must maintain:

                                 - asset coverage of the Preferred Shares as
                                   required by the rating agency or agencies
                                   rating the Preferred Shares; and

                                 - asset coverage of at least 200% with respect
                                   to senior securities that are stock,
                                   including the Preferred Shares.

                                 In the event that the Fund does not maintain or
                                 cure these coverage tests, some or all of the
                                 Preferred Shares will be subject to mandatory
                                 redemption. See "Description of Preferred
                                 Shares -- Redemption."


                                 Based on the composition of the Fund's
                                 portfolio as of April 26, 2004, the asset
                                 coverage of the Preferred Shares as measured
                                 pursuant to the 1940 Act would be approximately
                                 303% if the Fund were to issue all of the
                                 Preferred Shares offered in this Prospectus,
                                 representing approximately 33% of the Fund's
                                 managed assets.



Restrictions on Dividends,
Redemption and Other
Payments......................   If the Fund issues any Borrowings that
                                 constitute senior securities representing
                                 indebtedness (as defined in the 1940 Act),
                                 under the 1940 Act, the Fund would not be
                                 permitted to declare any dividend on Preferred
                                 Shares unless, after giving effect to such
                                 dividend, asset coverage with respect to the
                                 Fund's Borrowings that constitute senior
                                 securities representing indebtedness, if any,
                                 is at least 200%. In addition, the Fund would
                                 not be permitted to declare any distribution on
                                 or purchase or redeem Preferred Shares unless,
                                 after giving effect to such distribution,
                                 purchase or redemption, asset coverage with
                                 respect to the Fund's Borrowings that
                                 constitute senior securities representing
                                 indebtedness, if any, is at least 300%.
                                 Dividends or other distributions on or
                                 redemptions or purchases of Preferred Shares
                                 may also be prohibited (i) at any time when an
                                 event of default under any Borrowings has
                                 occurred and is continuing; or (ii) after
                                 giving effect to such distribution or
                                 redemption, the Fund would not have eligible
                                 portfolio holdings with an aggregated
                                 discounted value at least equal to any asset
                                 coverage requirements associated under 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. See "Description of Preferred
                                 Shares -- Restrictions on Dividend, Redemption
                                 and Other Payments."



Redemption....................   The Fund may be required to redeem shares if,
                                 for example, the Fund does not meet an asset
                                 coverage ratio required by law or does not
                                 correct a failure to meet a rating agency
                                 guideline in a timely manner. The Fund
                                 voluntarily may redeem Preferred Shares under
                                 certain conditions. See "Description of
                                 Preferred


                                        10
<PAGE>

                                 Shares -- Redemption" and "Description of
                                 Preferred Shares -- Rating Agency Guidelines."

Liquidation Preference........   The liquidation preference for shares of each
                                 series of Preferred Shares will be $25,000 per
                                 share plus accumulated but unpaid dividends, if
                                 any, whether or not declared. See "Description
                                 of Preferred Shares -- Liquidation."


Voting Rights.................   Except as otherwise indicated, holders of
                                 Preferred Shares have one vote per share. The
                                 holders of preferred shares, including
                                 Preferred Shares, voting as a separate class,
                                 have the right to elect at least two trustees
                                 of the Fund at all times. The Board of Trustees
                                 will determine to which class or classes the
                                 Trustees elected by the holders of Preferred
                                 Shares will be assigned, and the holders of the
                                 Preferred Shares will only be entitled to elect
                                 the Trustees so designated as being elected by
                                 the holders of the Preferred Shares, when their
                                 term will have expired and such Trustees
                                 appointed by the holders of Preferred Shares
                                 will be allocated as evenly as possible among
                                 the classes of Trustees. Holders of preferred
                                 shares, including Preferred Shares, also have
                                 the right to elect a majority of the trustees
                                 in the event that two years' dividends on the
                                 preferred shares are unpaid. In each case, the
                                 remaining trustees will be elected by holders
                                 of common shares and preferred shares,
                                 including Preferred Shares, voting together as
                                 a single class. The holders of preferred
                                 shares, including Preferred Shares, will vote
                                 as a separate class or classes on certain other
                                 matters as required under the Fund's Agreement
                                 and Declaration of Trust, the 1940 Act and
                                 Delaware law. See "Description of Preferred
                                 Shares -- Voting Rights," and "Certain
                                 Provisions in the Agreement and Declaration of
                                 Trust and By-Laws."



Federal Income Taxes..........   Distributions with respect to the Preferred
                                 Shares will generally be subject to U.S.
                                 federal income taxation. A portion of such
                                 distributions may qualify for the dividends
                                 received deduction available to corporate
                                 holders or for treatment as "qualified dividend
                                 income" available to individual and other
                                 noncorporate holders. The Internal Revenue
                                 Service ("IRS") currently requires that a
                                 regulated investment company, which has two or
                                 more classes of stock, allocate to each such
                                 class proportionate amounts of each type of its
                                 income (such as ordinary income and capital
                                 gain) based upon the percentage of total
                                 dividends distributed to each class for the tax
                                 year. Accordingly, the Fund intends each year
                                 to allocate ordinary income dividends, capital
                                 gain dividends, dividends qualifying for the
                                 dividends received deduction and "qualified
                                 dividend income," if any, between its common
                                 shares and the Preferred Shares in proportion
                                 to the total dividends paid to each class
                                 during or with respect to such year. See "U.S.
                                 Federal Income Tax Matters."


Custodian, Auction Agent,
Transfer Agent, Dividend
Paying Agent and Registrar....   The Bank of New York serves as custodian of the
                                 Fund's securities and cash. The Bank of New
                                 York also serves as auction agent with respect
                                 to the Preferred Shares, and transfer agent,
                                 dividend paying agent and registrar for the
                                 Fund's common shares and Preferred Shares.

                                        11
<PAGE>

                        FINANCIAL HIGHLIGHTS (UNAUDITED)


     Information contained in the table below shows the unaudited operating
performance of the Fund from the commencement of the Fund's operations on March
26, 2004 through April 14, 2004. Since the Fund was recently organized and
commenced operations on March 26, 2004, the table covers less than one month of
operations, during which a substantial portion of the Fund's portfolio was held
in temporary investments pending investment in securities that meet the Fund's
investment objectives and policies. Accordingly, the information presented may
not provide a meaningful picture of the Fund's future operating performance.



<Table>
<Caption>
                                                                  FOR THE
                                                               PERIOD ENDED
                                                              APRIL 14, 2004*
                                                              ---------------
                                                                (UNAUDITED)
<S>                                                           <C>
Net asset value, beginning of period........................    $    14.32(a)
                                                                ----------
Offering costs..............................................         (0.01)
Income from investment operations:
  Net investment income(b)..................................          0.02
  Net realized and unrealized gain (loss) on investments and
     foreign currency transactions..........................         (0.16)
                                                                ----------
Total from investment operations............................         (0.14)
                                                                ----------
Net asset value, end of period..............................    $    14.17
                                                                ==========
Market value, end of period.................................    $    15.00
TOTAL INVESTMENT RETURN BASED ON(C):
  Net Asset Value...........................................         (1.05%)
  Market Value..............................................          0.00%
RATIO TO AVERAGE NET ASSETS APPLICABLE TO COMMON
  SHAREHOLDERS/SUPPLEMENTARY DATA:
Net assets applicable to common shareholders, end of period
  (000's omitted)...........................................    $1,991,470
Ratio of expenses to average net assets(d)..................          1.08%
Ratio of net investment income to average net assets(d).....          3.01%
Portfolio turnover rate(d)..................................          0.00%
</Table>


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

(a) Net of sales load and organizational fees of $0.68 per share.



(b) Based on average shares outstanding.



(c) Total investment return is calculated assuming a purchase of common stock on
    the opening of the first day and a sale on the closing of the last day of
    the period reported. Dividends and distributions are assumed, for purposes
    of this calculation, to be reinvested at prices obtained under the Fund's
    dividend reinvestment plan. Total return is not annualized for periods less
    than one year. Brokerage commissions are not reflected.



(d) Annualized.


     The information above represents the unaudited operation performance for a
common share outstanding, total investment return, ratios to average net assets
and other supplemental data for the periods indicated. This information has been
determined based upon financial information provided in the financial statements
and market value data for the Fund's common shares.

                                        12
<PAGE>

                                    THE FUND


     Calamos Strategic Total Return Fund is a recently organized, diversified,
closed-end management investment company. The Fund was organized under the laws
of the state of Delaware on December 31, 2003, and has registered under the 1940
Act. On March 30, 2004, the Fund issued an aggregate of 140,500,000 common
shares of beneficial interest, no par value, pursuant to the initial public
offering and commenced its investment operations. The Fund granted the
underwriters an option to purchase up to 19,800,000 additional common shares at
the public offering price less the sales load. On April 20, 2004, the Fund
issued an additional 14,000,000 common shares of beneficial interest in
connection with a partial exercise by the underwriters of their over-allotment
option. The underwriters may exercise the remaining portion of the
over-allotment option through May 9, 2004, however, there can be no assurance
that the underwriters will exercise any of the remaining portion of the
over-allotment option. The Fund's common shares are traded on the New York Stock
Exchange under the symbol "CSQ." The Fund's principal office is located at 1111
East Warrenville Road, Naperville, Illinois 60563-1493, and its telephone number
is 1-800-582-6959.



     The following provides information about the Fund's authorized and
outstanding shares as of April 20, 2004.



<Table>
<Caption>
                                                       AMOUNT HELD BY THE
                                           AMOUNT       FUND OR FOR ITS
TITLE OF CLASS                           AUTHORIZED         ACCOUNT         AMOUNT OUTSTANDING
- --------------                           -----------   ------------------   ------------------
                                         (UNAUDITED)
<S>                                      <C>           <C>                  <C>
Common.................................   Unlimited            0               154,514,000
Preferred..............................   Unlimited            0                         0
  Series M.............................       7,040            0                         0
  Series TU............................       7,040            0                         0
  Series W.............................       7,040            0                         0
  Series TH............................       7,040            0                         0
  Series F.............................       7,040            0                         0
  Series A.............................       4,000            0                         0
  Series B.............................       4,000            0                         0
</Table>


                                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 $1,068,665,000. The
Fund will invest the net proceeds of the offering in accordance with the Fund's
investment objective and policies as stated below. It is presently anticipated
that the Fund will be able to invest substantially all of the net proceeds in
securities that meet these investment objectives and policies within 3 months
after completion of this offering. Pending such investment, the Fund anticipates
that all or a portion of the proceeds will be invested in U.S. government
securities or high-grade, short-term money market instruments. If necessary, the
Fund may also purchase, as temporary investments, securities of other open- or
closed-end investment companies that invest primarily in the types of securities
in which the Fund may invest directly. See "The Fund's Investments."


                                        13
<PAGE>

                           CAPITALIZATION (UNAUDITED)


     The following table sets forth the capitalization of the Fund as of April
14, 2004, and as adjusted, to give effect to the issuance of all the Preferred
Shares offered hereby (including estimated offering expenses and sales load of
$11,335,000).





<Table>
<Caption>
                                                         AS ADJUSTED FOR
                                                         4/20/04 COMMON      AS ADJUSTED
                                            ACTUAL       SHARES ISSUED*    PREFERRED SHARES
                                        --------------   ---------------   ----------------
<S>                                     <C>              <C>               <C>
SHAREHOLDERS' EQUITY
Preferred Shares, no par value per
  share, $25,000 stated value per
  share, at liquidation value;
  unlimited shares authorized (no
  shares issued; no shares issued; and
  43,200 shares issued,
  respectively).......................  $           --   $           --     $1,080,000,000
Common shares, no par value per share,
  unlimited shares authorized,
  140,514,000 shares outstanding**....   2,011,132,859    2,211,682,859      2,200,347,859
Undistributed net investment income...       2,555,152        2,555,152          2,555,152
Accumulated net realized gain (loss)
  on investments......................        (110,331)        (110,331)          (110,331)
Net unrealized appreciation
  (depreciation) on investments.......     (22,107,475)     (22,107,475)       (22,107,475)
                                        --------------   --------------     --------------
NET ASSETS APPLICABLE TO COMMON
  SHARES..............................  $1,991,470,205   $2,192,020,205     $2,180,685,205
                                        ==============   ==============     ==============
</Table>


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


 * On April 20, 2004, the Fund issued an additional 14,000,000 common shares of
   beneficial interest in connection with a partial exercise by the underwriters
   of their over-allotment option.



** None of these outstanding shares are held by or for the account of the Fund.


                             PORTFOLIO COMPOSITION


     As of April 14, 2004, approximately 48.8% of the market value of the Fund's
portfolio was invested in equities and approximately 39.0% of the market value
was invested in convertible securities and high yield debt securities and
approximately 12.2% of the market value of the Fund's portfolio was invested in
short-term investment grade debt securities. The following table sets forth
certain information with respect to the composition of the Fund's investment
portfolio as of April 14, 2004, based on the highest rating assigned each
investment by either Moody's or S&P.



<Table>
<Caption>
CREDIT RATING                                                 VALUE (000)   PERCENT
- -------------                                                 -----------   -------
<S>                                                           <C>           <C>
Aaa/AAA.....................................................          --      0.0%
Aa/AA.......................................................          --      0.0%
A/A.........................................................  $   60,202      2.9%
Baa/BBB.....................................................      59,027      2.9%
Ba/BB.......................................................     126,105      6.1%
B/B.........................................................     432,680     21.0%
Caa/CCC.....................................................      54,728      2.6%
Ca/CC.......................................................          --      0.0%
C/C.........................................................      21,161      1.0%
Unrated+....................................................      48,920      2.4%
Equities....................................................   1,003,397     48.8%
Short-Term..................................................     251,381     12.2%
                                                              ----------    ------
  Total.....................................................  $2,057,602    100.0%
                                                              ==========    ======
</Table>


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


+ Refers to securities that have not been rated by Moody's or S&P.


                                        14
<PAGE>

                             THE FUND'S INVESTMENTS

INVESTMENT OBJECTIVE


     The Fund's investment objective is to provide total return, through a
combination of capital appreciation and current income. The Fund's investment
objective may be changed by the Board of Trustees without a shareholder vote,
except that the Fund will give shareholders at least 60 days notice of any
change to the Fund's investment objective. The Fund makes no assurance that it
will realize its objective. An investment in the Fund may be speculative in that
it involves a high degree of risk and should not constitute a complete
investment program. See "Risk Factors."


PRINCIPAL INVESTMENT STRATEGIES

     Under normal circumstances, the Fund will invest primarily in common and
preferred stocks, 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 35% of its
managed assets in securities of foreign issuers, including debt and equity
securities of corporate issuers and debt securities of government issuers in
developed and emerging markets. The Fund may invest up to 15% of its managed
assets in securities of foreign issuers in emerging markets.

     Calamos will dynamically allocate the Fund's investments among multiple
asset classes, seeking to obtain an appropriate balance of risk and reward
through all market cycles using multiple strategies and combining them to seek
to achieve favorable risk adjusted returns.

     Calamos analyzes securities for the Fund's portfolio using an approach that
focuses on assessing a total enterprise value before assessing the value of the
securities issued by a company. Calamos seeks to assess the value of an issuer's
total enterprise by studying its financial statements, including its balance
sheet. Once enterprise value is determined, Calamos seeks to assess the value of
the issuer's different types of securities, taking into account the business
risk of the issuer, its competitive position and the seniority of each type of
security relative to the rest of the issuer's capital structure. This approach
serves as the basis for the Calamos research team's design and use of
proprietary models which, along with risk management and portfolio construction
techniques, assist in determining whether a given security presents an
investment opportunity for the Fund.

     EQUITY SECURITIES.  Equity securities include common and preferred stocks,
warrants, rights, and depository receipts. Under normal circumstances, the Fund
will invest at least 50% of its managed assets in equity securities (including
securities that are convertible into equity securities). An investment in the
equity securities of a company represents a proportionate ownership interest in
that company. Therefore, the Fund participates in the financial success or
failure of any company in which it has a equity interest.

     HIGH YIELD SECURITIES.  The Fund may invest in high yield securities for
either current income or capital appreciation or both. The high yield securities
in which the Fund invests are rated Ba or lower by Moody's or BB or lower by
Standard & Poor's or are unrated but determined by Calamos to be of comparable
quality. The Fund may invest in high yield securities of any rating.
Non-convertible debt securities rated below investment grade are commonly
referred to as "junk bonds" and are considered speculative with respect to the
issuer's capacity to pay interest and repay principal. Below investment grade
non-convertible debt securities involve greater risk of loss, are subject to
greater price volatility and are less liquid, especially during periods of
economic uncertainty or change, than higher rated debt securities.

     OTHER INCOME SECURITIES.  The Fund may also invest in investment grade
income securities. The Fund's investments in investment grade income securities
may have fixed or variable principal payments and all types of interest rate and
dividend payment and reset terms, including fixed rate, adjustable rate, zero
coupon, contingent, deferred, payment in kind and auction rate features.

                                        15
<PAGE>

     FOREIGN SECURITIES.  Although the Fund primarily invests in securities of
U.S. issuers, the Fund may invest up to 35% of its managed assets in securities
of foreign issuers, including debt and equity securities of corporate issuers
and debt securities of government issuers in developed and emerging markets. The
Fund may invest up to 15% of its managed assets in securities of foreign issuers
in emerging markets. A foreign issuer is a company organized under the laws of a
foreign country that is principally traded in the financial markets of a foreign
country. For purposes of these percentage limitations, foreign securities do not
include securities represented by American Depository Receipts ("ADRs") or
securities guaranteed by a U.S. person.

     CONVERTIBLE SECURITIES.  A convertible security is a debt security or
preferred stock that is exchangeable for an equity security (typically of the
same issuer) at a predetermined price. Depending upon the relationship of the
conversion price to the market value of the underlying security, a convertible
security may trade more like an equity security than a debt instrument. The Fund
may invest in convertible securities of any rating. Securities that are
convertible into equity securities are considered equity securities for purposes
of the Fund's policy to invest at least 50% of its managed assets in equity
securities.

     SYNTHETIC CONVERTIBLE SECURITIES.  Calamos may also create a "synthetic"
convertible security by combining separate securities that possess the two
principal characteristics of a true convertible security, i.e., a fixed-income
security ("fixed-income component") and the right to acquire an equity security
("convertible component"). The fixed-income component is achieved by investing
in non-convertible, fixed-income securities such as bonds, preferred stocks and
money market instruments. The convertible component is achieved by investing in
warrants or options to buy common stock at a certain exercise price, or options
on a stock index. The Fund may also purchase synthetic securities created by
other parties, typically investment banks, including convertible structured
notes. Convertible structured notes are fixed income debentures linked to
equity. Convertible structured notes have the attributes of a convertible
security, however, the investment bank that issued the convertible note assumes
the credit risk associated with the investment, rather than the issuer of the
underlying common stock into which the note is convertible. Different companies
may issue the fixed-income and convertible components, which may be purchased
separately and at different times. The Fund's holdings of synthetic convertible
securities are considered equity securities for purposes of the Fund's policy to
invest at least 50% of its managed assets in equity securities.

     RULE 144A SECURITIES.  The Fund may invest without limit in securities that
have not been registered for public sale, but that are eligible for purchase and
sale by certain qualified institutional buyers ("Rule 144A Securities").
Calamos, under the supervision of the Board of Trustees, will consider whether
securities purchased under Rule 144A are illiquid and thus subject to the Fund's
limit of investing no more than 15% of its managed assets in illiquid
securities. A determination of whether a Rule 144A security is liquid or not is
a question of fact. In making this determination, Calamos will consider the
trading markets for the specific security, taking into account the unregistered
nature of a Rule 144A security. In addition, Calamos could consider the (1)
frequency of trades and quotes, (2) number of dealers and potential purchasers,
(3) dealer undertakings to make a market and (4) nature of a security and of
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A
securities will be monitored and, if as a result of changed conditions, it is
determined that a Rule 144A security is no longer liquid, the Fund's holdings of
illiquid securities would be reviewed to determine what, if any, steps are
required to assure that the Fund does not invest more than 15% of its assets in
illiquid securities. Investing in Rule 144A securities could have the effect of
increasing the amount of the portfolio's assets invested in illiquid securities
if qualified institutional buyers are unwilling to purchase such securities.

     U.S. GOVERNMENT SECURITIES.  U.S. government securities in which the Fund
invests include debt obligations of varying maturities issued by the U.S.
Treasury or issued or guaranteed by an agency or instrumentality of the U.S.
government, including the Federal Housing Administration, Federal Financing
Bank, Farmers Home Administration, Export-Import Bank of the United States,
Small Business Administration, Government National Mortgage Association, General
Services Administration, Central
                                        16
<PAGE>

Bank for Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks,
Federal Home Loan Mortgage Corporation, Federal National Mortgage Association
("FNMA"), Maritime Administration, Tennessee Valley Authority, District of
Columbia Armory Board, Student Loan Marketing Association, Resolution Fund
Corporation and various institutions that previously were or currently are part
of the Farm Credit System (which has been undergoing reorganization since 1987).
Some U.S. government securities, such as U.S. Treasury bills, Treasury notes and
Treasury bonds, which differ only in their interest rates, maturities and times
of issuance, are supported by the full faith and credit of the United States.
Others are supported by: (i) the right of the issuer to borrow from the U.S.
Treasury, such as securities of the Federal Home Loan Banks; (ii) the
discretionary authority of the U.S. government to purchase the agency's
obligations, such as securities of the FNMA; or (iii) only the credit of the
issuer. No assurance can be given that the U.S. government will provide
financial support in the future to U.S. government agencies, authorities or
instrumentalities that are not supported by the full faith and credit of the
United States. Securities guaranteed as to principal and interest by the U.S.
government, its agencies, authorities or instrumentalities include: (i)
securities for which the payment of principal and interest is backed by an
irrevocable letter of credit issued by the U.S. government or any of its
agencies, authorities or instrumentalities; and (ii) participations in loans
made to non-U.S. governments or other entities that are so guaranteed. The
secondary market for certain of these participations is limited and, therefore,
may be regarded as illiquid. U.S. government securities include STRIPS and
CUBES, which are issued by the U.S. Treasury as component parts of U.S. Treasury
bonds and represent scheduled interest and principal payments on the bonds.


     ZERO COUPON SECURITIES.  The securities in which the Fund invests may
include zero coupon securities, which are debt obligations that are issued or
purchased at a significant discount from face value. The discount approximates
the total amount of interest the security will accrue and compound over the
period until maturity or the particular interest payment date at a rate of
interest reflecting the market rate of the security at the time of issuance.
Zero coupon securities do not require the periodic payment of interest. These
investments benefit the issuer by mitigating its need for cash to meet debt
service, but generally require a higher rate of return to attract investors who
are willing to defer receipt of cash. These investments may experience greater
volatility in market value than U.S. government or other securities that make
regular payments of interest. The Fund accrues income on these investments for
tax and accounting purposes, which is distributable to shareholders and which,
because no cash is received at the time of accrual, may require the liquidation
of other portfolio securities to satisfy the Fund's distribution obligations, in
which case the Fund will forgo the opportunity to purchase additional income
producing assets with the liquidation proceeds. Zero coupon U.S. government
securities include STRIPS and CUBES, which are issued by the U.S. Treasury as
component parts of U.S. Treasury bonds and represent scheduled interest and
principal payments on the bonds.


     OTHER INVESTMENT COMPANIES.  The Fund may invest in the securities of other
investment companies to the extent that such investments are consistent with the
Fund's investment objective and policies and are permissible under the 1940 Act.
Under the 1940 Act, the Fund may not acquire the securities of other domestic or
non-U.S. investment companies if, as a result, (1) more than 10% of the Fund's
total assets would be invested in securities of other investment companies, (2)
such purchase would result in more than 3% of the total outstanding voting
securities of any one investment company being held by the Fund, or (3) more
than 5% of the Fund's total assets would be invested in any one investment
company. These limitations do not apply to the purchase of shares of any
investment company in connection with a merger, consolidation, reorganization or
acquisition of substantially all the assets of another investment company.

     The Fund, as a holder of the securities of other investment companies, will
bear its pro rata portion of the other investment companies' expenses, including
advisory fees. These expenses are in addition to the direct expenses of the
Fund's own operations.


     TEMPORARY DEFENSIVE INVESTMENTS.  Under unusual market or economic
conditions or for other temporary defensive purposes, the Fund may invest up to
100% of its total assets in securities issued or guaranteed by the U.S.
government or its instrumentalities or agencies, certificates of deposit,
bankers' acceptances and other bank obligations, commercial paper rated in the
highest category by a nationally

                                        17
<PAGE>

recognized statistical rating organization or other fixed income securities
deemed by Calamos to be consistent with a defensive posture, or may hold cash.
The yield on such securities may be lower than the yield on lower rated fixed
income securities. During such periods, the Fund may not be able to achieve its
investment objective.

     REPURCHASE AGREEMENTS.  The Fund may enter into repurchase agreements with
broker-dealers, member banks of the Federal Reserve System and other financial
institutions. Repurchase agreements are arrangements under which the Fund
purchases securities and the seller agrees to repurchase the securities within a
specific time and at a specific price. The repurchase price is generally higher
than the Fund's purchase price, with the difference being income to the Fund.
The counterparty's obligations under the repurchase agreement are collateralized
with U.S. Treasury and/or agency obligations with a market value of not less
than 100% of the obligations, valued daily. Collateral is held by the Fund's
custodian in a segregated, safekeeping account for the benefit of the Fund.
Repurchase agreements afford the Fund an opportunity to earn income on
temporarily available cash at low risk. In the event of commencement of
bankruptcy or insolvency proceedings with respect to the seller of the security
before repurchase of the security under a repurchase agreement, the Fund may
encounter delay and incur costs before being able to sell the security. Such a
delay may involve loss of interest or a decline in price of the security. If the
court characterizes the transaction as a loan and the Fund has not perfected a
security interest in the security, the Fund may be required to return the
security to the seller's estate and be treated as an unsecured creditor of the
seller. As an unsecured creditor, the Fund would be at risk of losing some or
all of the principal and interest involved in the transaction.

     LENDING OF PORTFOLIO SECURITIES.  The Fund may lend portfolio securities to
registered broker-dealers or other institutional investors deemed by Calamos to
be of good standing under agreements which require that the loans be secured
continuously by collateral in cash, cash equivalents or U.S. Treasury bills
maintained on a current basis at an amount at least equal to the market value of
the securities loaned. The Fund continues to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned as well as the
benefit of an increase and the detriment of any decrease in the market value of
the securities loaned and would also receive compensation based on investment of
the collateral. The Fund would not, however, have the right to vote any
securities having voting rights during the existence of the loan, but could call
the loan in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of consent on a material matter
affecting the investment.

     As with other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower of the securities fail
financially. At no time would the value of the securities loaned exceed 33 1/3%
of the value of the Fund's total assets.

     PORTFOLIO TURNOVER.  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 considered ordinary income for federal income tax purposes.


                                    LEVERAGE


     The Fund may issue preferred shares, including Preferred Shares, or borrow
or issue short-term debt securities to increase its assets available for
investment. The Fund is authorized to issue preferred shares, borrow money or
issue debt securities. The Preferred Shares will have a liquidation preference
of $25,000 per share plus an amount equal to accumulated but unpaid dividends.
As a non-fundamental policy, such preferred shares, including Preferred Shares,
or Borrowings may not exceed 38% of the Fund's total assets. However, the Board
of Trustees reserves the right to issue preferred shares or borrow to the extent

                                        18
<PAGE>


permitted by the 1940 Act. Before issuing any additional preferred shares to
increase its assets available for investment, the Fund must have received
confirmation from Fitch and S&P or any substitute rating agency that the
proposed issuance will not adversely affect such rating agency's then-current
rating on the Preferred Shares. The Fund generally will not issue preferred
shares or borrow unless Calamos expects that the Fund will achieve a greater
return on such borrowed funds than the additional costs the Fund incurs as a
result of such borrowing. The Fund also may borrow money as a temporary measure
for extraordinary or emergency purposes, including the payment of dividends and
the settlement of securities transactions which otherwise might require untimely
dispositions of the Fund's holdings. When the Fund leverages its assets, the
fees paid to Calamos for investment management services will be higher than if
the Fund did not borrow because Calamos's fees are calculated based on the
Fund's managed assets, which include the proceeds of the issuance of preferred
shares or any outstanding Borrowings. Consequently, the Fund and Calamos may
have differing interests in determining whether to leverage the Fund's assets.



     The Fund's use of leverage is premised upon the expectation that the Fund's
preferred share dividends or borrowing costs will be lower than the return the
Fund achieves on its investments with the proceeds of the issuance of preferred
shares or Borrowings. Such difference in return may result from the Fund's
higher credit rating or the short-term nature of its borrowings compared to the
long-term nature of its investments. Since the total assets of the Fund
(including the assets obtained from leverage) will be invested in the higher
yielding portfolio investments or portfolio investments with the potential for
capital appreciation, the holders of common shares will be the beneficiaries of
the incremental return. Should the differential between the underlying assets
and cost of leverage narrow, the incremental return "pick up" will be reduced.
Furthermore, if long-term interest rates rise or the Fund otherwise incurs
losses on its investments, the Fund's net asset value attributable to its common
shares will reflect the decline in the value of portfolio holdings resulting
therefrom.



     To the extent the income or capital appreciation derived from securities
purchased with funds received from leverage exceeds the cost of leverage, the
Fund's return to common shareholders will be greater than if leverage had not
been used. Conversely, if the income or capital appreciation from the securities
purchased with such funds is not sufficient to cover the cost of leverage or if
the Fund incurs capital losses, the return of the Fund to common shareholders
will be less than if leverage had not been used. Calamos may determine to
maintain the Fund's leveraged position if it expects that the long-term benefits
to the Fund's common shareholders of maintaining the leveraged position will
outweigh the current reduced return. Capital raised through the issuance of
preferred shares or Borrowings will be subject to dividend payments or interest
costs that may or may not exceed the income and appreciation on the assets
purchased. The Fund also may be required to maintain minimum average balances in
connection with Borrowings or to pay a commitment or other fee to maintain a
line of credit; either of these requirements would increase the cost of
borrowing over the stated interest rate.


     Under the 1940 Act, the Fund is not permitted to issue preferred shares
unless immediately after such issuance the net asset value of the Fund's
portfolio is at least 200% of the liquidation value of the outstanding preferred
shares (i.e., such liquidation value may not exceed 50% of the value of the
Fund's total assets). In addition, the Fund is not permitted to declare any cash
dividend or other distribution on its common shares unless, at the time of such
declaration, the net asset value of the Fund's portfolio (determined after
deducting the amount of such dividend or distribution) is at least 200% of such
liquidation value. In the event preferred shares are issued, the Fund intends,
to the extent possible, to purchase or redeem preferred shares from time to time
to maintain coverage of any preferred shares of at least 200%. Under the 1940
Act, the Fund is not permitted to incur indebtedness unless immediately after
such borrowing the Fund has an asset coverage of at least 300% of the aggregate
outstanding principal balance of indebtedness (i.e., such indebtedness may not
exceed 33 1/3% of the value of the Fund's total assets). Additionally, under the
1940 Act, the Fund may not declare any dividend or other distribution upon any
class of its shares, or purchase any such shares, unless the aggregate
indebtedness of the Fund has, at the time of the declaration of any such
dividend or distribution or at the time of any such purchase, an asset coverage
of at least 300% after deducting the amount of such dividend, distribution, or
purchase price, as the case may be.

                                        19
<PAGE>

     The Fund may be subject to certain restrictions on investments imposed by
guidelines of one or more nationally recognized statistical rating organizations
which may issue ratings for the preferred shares or short-term debt instruments
issued by the Fund. These guidelines may impose asset coverage or portfolio
composition requirements that are more stringent than those imposed by the 1940
Act. Certain types of borrowings may result in the Fund being subject to
covenants in credit agreements, including those relating to asset coverage,
borrowing base and portfolio composition requirements and additional covenants.
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.

     If and to the extent that the Fund employs leverage will depend on many
factors, the most important of which are investment outlook, market conditions
and interest rates.

                           INTEREST RATE TRANSACTIONS


     In order to seek to reduce the interest rate risk inherent in the Fund's
underlying investments and capital structure, the Fund likely will enter into
interest rate swap or cap transactions. Interest rate swaps involve the Fund's
agreement with the swap counterparty to pay a fixed rate payment in exchange for
the counterparty agreeing to pay the Fund a variable rate payment that is
expected to approximate the rate of any variable rate payment obligation on
Preferred Shares or any variable rate borrowing. The payment obligations would
be based on the notional amount of the swap. The Fund's payment obligations
under the swap are general unsecured obligations of the Fund and are ranked
senior to distributions under the common shares and Preferred Shares.


     The Fund may use an interest rate cap, which would require it to pay a
premium to the cap counterparty and would entitle it, to the extent that a
specified variable rate index exceeds a predetermined fixed rate, to receive
from the counterparty payment of the difference based on the notional amount.
The Fund would use interest rate swaps or caps only with the intent to reduce or
eliminate the risk that an increase in short-term interest rates could have on
common share net earnings as a result of leverage.


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


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

                                        20
<PAGE>

cap. The Fund will not enter into interest rate swap or cap transactions in an
aggregate notional amount that exceeds the outstanding amount of the Fund's
leverage.

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

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

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

     The Fund may choose or be required to redeem some or all Preferred Shares
or prepay any Borrowings. This redemption would likely result in the Fund
seeking to terminate early all or a portion of any swap or cap transaction. Such
early termination of a swap could result in a termination payment by or to the
Fund. A termination payment by the Fund would result in a reduction in common
share net earnings. An early termination of a cap could result in a termination
payment to the Fund.

                                        21
<PAGE>

                                  RISK FACTORS

     Risk is inherent in all investing. Investing in any investment company
security involves risk, including the risk that you may receive little or no
return on your investment or that you may lose part or all of your investment.
Therefore, before investing you should consider carefully the following risks
that you assume when you invest in Preferred Shares.

RISKS OF INVESTING IN PREFERRED SHARES


     INTEREST RATE RISK.  The Fund issues Preferred Shares, which pay dividends
based on short-term interest rates. The Fund purchases convertible securities,
high yield securities and other securities that pay dividends that are based on
the performance of the issuing companies, and/or that pay interest, based on
longer term yields. These dividends and interest payments are typically,
although not always, higher than short-term interest rates. Such dividends and
interest payments, as well as long-term and short-term interest rates,
fluctuate. If short-term interest rates rise, dividend rates on the Preferred
Shares may rise so that the amount of dividends paid to shareholders of
Preferred Shares exceeds the income from the portfolio securities. Because
income from the Fund's entire investment portfolio (not just the portion of the
portfolio purchased with the proceeds of the Preferred Shares offering) is
available to pay dividends on the Preferred Shares, dividend rates on the
Preferred Shares would need to greatly exceed the Fund's net portfolio income
before the Fund's ability to pay dividends on the Preferred Shares would be
jeopardized. If long-term interest rates rise, this could negatively impact the
value of the Fund's investment portfolio, reducing the amount of assets serving
as asset coverage for the Preferred Shares. Market interest rates currently are
at historically low levels.


     AUCTION RISK.  You may not be able to sell your Preferred Shares at an
auction if the auction fails; that is, if there are more Preferred Shares
offered for sale than there are buyers for those shares. Also, if you place hold
orders (orders to retain Preferred Shares) at an auction only at a specified
rate, and that bid rate exceeds the rate set at the auction, you will not retain
your Preferred Shares. Additionally, if you buy shares or elect to retain shares
without specifying a rate below which you would not wish to continue to hold
those shares, and the auction sets a below-market rate, you may receive a lower
rate of return on your shares than the market rate. Finally, the dividend
periods for the Preferred Shares may be changed by the Fund, subject to certain
conditions with notice to the holders of Preferred Shares, which could also
affect the liquidity of your investment. See "Description of Preferred Shares"
and "The Auction -- Auction Procedures."


     SECONDARY MARKET RISK.  If you try to sell your Preferred Shares between
auctions, you may not be able to sell any or all of your shares, or you may not
be able to sell them for $25,000 per share or $25,000 per share plus accumulated
dividends. If the Fund has designated a special dividend period (a dividend
period other than 7 days in the case of Series M, TU, W, TH and F and other than
28 days in the case of Series A and B), changes in interest rates could affect
the price you would receive if you sold your shares in the secondary market.
Broker-dealers that maintain a secondary trading market for Preferred Shares are
not required to maintain that market, and the Fund is not required to redeem
shares either if an auction or an attempted secondary market sale fails because
of a lack of buyers. Preferred Shares are not listed on a stock exchange or
quoted on the Nasdaq stock market. You may transfer shares outside of auctions
only to or through a Broker-Dealer that has entered into an agreement with the
Fund's auction agent, The Bank of New York, and the Fund or such other persons
as the Fund permits. If you sell your Preferred Shares to a broker-dealer
between auctions, you may receive less than the price you paid for them,
especially if market interest rates have risen since the last auction.
Accumulated Preferred Shares dividends, however, should at least partially
compensate for the increased market interest rates.



     RATINGS AND ASSET COVERAGE RISK.  Although it is expected that Fitch will
assign a rating of "AAA" to the Preferred Shares and S&P will assign a rating of
"AAA" to the Preferred Shares, such ratings do not eliminate or necessarily
mitigate the risks of investing in Preferred Shares. Fitch or S&P could
downgrade its rating of the Preferred Shares or withdraw its rating of the
Preferred Shares at any time, which may make your shares less liquid at an
auction or in the secondary market. If Fitch or S&P


                                        22
<PAGE>

downgrades the Preferred Shares, the Fund may alter its portfolio or redeem
Preferred Shares in an effort to improve the rating, although there is no
assurance that it will be able to do so to the extent necessary to restore the
prior rating. If the Fund fails to satisfy the asset coverage ratios discussed
under "Description of Preferred Shares -- Rating Agency Guidelines," the Fund
will be required to redeem a sufficient number of Preferred Shares in order to
return to compliance with the asset coverage ratios. The Fund may be required to
redeem Preferred Shares at a time when it is not advantageous for the Fund to
make such redemption or to liquidate portfolio securities in order to have
available cash for such redemption. The Fund may voluntarily redeem Preferred
Shares under certain circumstances in order to meet asset maintenance tests.
Although a sale of substantially all the assets of the Fund or the merger of the
Fund into another entity would require the approval of the holders of the
Preferred Shares voting as a separate class as discussed under "Description of
the Preferred Shares -- Voting Rights," a sale of substantially all of the
assets of the Fund or the merger of the Fund with or into another entity would
not be treated as a liquidation of the Fund nor require that the Fund redeem the
Preferred Shares, in whole or in part, provided that the Fund continued to
comply with the asset coverage ratios discussed under "Description of Preferred
Shares -- Rating Agency Guidelines." See "Description of Preferred Shares --
Rating Agency Guidelines" for a description of the asset maintenance tests the
Fund must meet.

     INFLATION RISK.  Inflation is the reduction in the purchasing power of
money resulting from the increase in the price of goods and services. Inflation
risk is the risk that the inflation adjusted (or "real") value of your Preferred
Shares investment or the income from that investment will be worth less in the
future. As inflation occurs, the real value of the Preferred Shares and
distributions declines. In an inflationary period, however, it is expected that,
through the auction process, Preferred Shares dividend rates would increase,
tending to offset this risk.

     INCOME RISK.  The Fund's income is based primarily on the income it earns
from its investments, which vary widely over the short- and long-term. If the
Fund's income drops, over time the Fund's ability to make dividend payments with
respect to the Preferred Shares may be impaired. See "-- General Risks of
Investing in the Fund" below for the general risks affecting the Fund.

     DECLINE IN NET ASSET VALUE RISK.  A material decline in the Fund's net
asset value may impair the Fund's ability to maintain required levels of asset
coverage. For a description of risks affecting the Fund, see "-- General Risks
of Investing in the Fund" below.


     PAYMENT RESTRICTIONS.  The Fund is prohibited from declaring, paying or
making any dividends or distributions on Preferred Shares unless it satisfies
certain conditions. See "Description of Preferred Shares -- Restrictions on
Dividend, Redemption and Other Payments." The Fund is also prohibited from
declaring, paying or making any dividends or distributions on common shares
unless it satisfies certain conditions. These prohibitions on the payment of
dividends or distributions might impair the Fund's ability to maintain its
qualification as a regulated investment company for federal income tax purposes.
The Fund intends, however, to redeem Preferred Shares if necessary to comply
with the asset coverage requirements. There can be no assurance, however, that
such redemptions can be effected in time to permit the Fund to distribute its
income as required to maintain its qualification as a regulated investment
company under the Code. See "U.S. Federal Income Tax Matters" below and in the
Statement of Additional Information.



     LEVERAGE RISK.  The Fund uses financial leverage for investment purposes.
In addition to issuing Preferred Shares, the Fund may make further use of
financial leverage through borrowing, including the issuance of commercial paper
or notes. As a non-fundamental policy, financial leverage (including Preferred
Shares and Borrowings) may not exceed 38% of the Funds' total assets. The Fund
may also borrow funds (a) in connection with a loan made by a bank or other
party that is privately arranged and not intended to be publicly distributed or
(b), in addition to financial leverage, in an amount equal to up to 5% of its
total assets for temporary purposes only.


     If the Fund issues any senior securities representing indebtedness (as
defined in the 1940 Act), under the requirements of the 1940 Act, the value of
the Fund's total assets, less all liabilities and indebtedness of the Fund not
represented by such senior securities, must be at least equal, immediately after
any such senior securities representing indebtedness, to 300% of the aggregate
value of such senior securities. Upon
                                        23
<PAGE>

the issuance of Preferred Shares, the value of the Fund's total assets, less all
liabilities and indebtedness of the Fund not represented by senior securities
must be at least equal, immediately after the issuance of the Preferred Shares,
to 200% of the aggregate value of any senior securities and the Preferred
Shares.

     If the Fund seeks an investment grade rating from one or more nationally
recognized statistical rating organizations for any commercial paper and notes
(which the Fund expects to do if it issues any such commercial paper or notes),
asset coverage or portfolio composition provisions in addition to and more
stringent than those required by the 1940 Act may be imposed in connection with
the issuance of such a rating. In addition, restrictions may be imposed on
certain investment practices in which the Fund may otherwise engage. Any lender
with respect to Borrowings by the Fund may require additional asset coverage and
portfolio composition provisions as well as restrictions on the Fund's
investment practices.

     The money borrowed pursuant to any Borrowings may constitute a substantial
lien and burden on the Preferred Shares by reason of their prior claim against
the income of the Fund and against the net assets of the Fund in liquidation.
The Fund may not be permitted to declare dividends or other distributions,
including with respect to Preferred Shares or purchase or redeem shares,
including Preferred Shares unless (i) at the time thereof the Fund meets certain
asset coverage requirements and (ii) there is no event of default under any
Borrowings, that is continuing. See "Description of Preferred Shares --
Restrictions on Dividend, Redemption and Other Payments." In the event of a
default under any Borrowings, the lenders may have the right to cause a
liquidation of the collateral (i.e., sell portfolio securities) and if any such
default is not cured, the lenders may be able to control the liquidation as
well.

     The Fund reserves the right at any time, if it believes that market
conditions are appropriate, to increase its level of debt or other senior
securities to maintain or increase the Fund's current level of leverage to the
extent permitted by the 1940 Act and existing agreements between the Fund and
third parties. However, as a non-fundamental policy, financial leverage (the
total of Preferred Shares or other preferred shares and any Borrowings) may not
exceed 38% of the Fund's total assets.

     Because the fee paid to Calamos will be calculated on the basis of managed
assets, the fee will be higher when leverage is utilized, giving Calamos an
incentive to utilize leverage.

GENERAL RISKS OF INVESTING IN THE FUND

     LIMITED OPERATING HISTORY.  The Fund is a recently organized closed-end
management investment company with a limited operating history.

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

     HIGH YIELD SECURITIES.  The Fund may invest in high yield securities of any
rating. Investment in high yield securities involves substantial risk of loss.
Below investment grade non-convertible debt securities or comparable unrated
securities are commonly referred to as "junk bonds" and are considered
predominantly speculative with respect to the issuer's ability to pay interest
and principal and are susceptible to default or decline in market value due to
adverse economic and business developments. The market values for high yield
securities tend to be very volatile, and these securities are less liquid than
investment grade debt securities. For these reasons, your investment in the Fund
is subject to the following specific risks:

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

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

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

                                        24
<PAGE>

     - if a negative perception of the high yield market develops, the price and
       liquidity of high yield securities may be depressed. This negative
       perception could last for a significant period of time.

     Securities rated below investment grade are speculative with respect to the
capacity to pay interest and repay principal in accordance with the terms of
such securities. A rating of C from Moody's means that the issue so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Standard & Poor's assigns a rating of C to issues that are
currently highly vulnerable to nonpayment, and the C rating may be used to cover
a situation where a bankruptcy petition has been filed or similar action taken,
but payments on the obligation are being continued (a C rating is also assigned
to a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying). See the statement of additional information for a
description of Moody's and Standard & Poor's ratings.

     Adverse changes in economic conditions are more likely to lead to a
weakened capacity of a high yield issuer to make principal payments and interest
payments than an investment grade issuer. The principal amount of high yield
securities outstanding has proliferated in the past decade as an increasing
number of issuers have used high yield securities for corporate financing. An
economic downturn could severely affect the ability of highly leveraged issuers
to service their debt obligations or to repay their obligations upon maturity.
Similarly, downturns in profitability in specific industries could adversely
affect the ability of high yield issuers in those industries to meet their
obligations. The market values of lower quality debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. Factors having an adverse impact on the market value of lower
quality securities may have an adverse effect on the Fund's net asset value and
the market value of its common shares. In addition, the Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in payment of principal or interest on its portfolio holdings. In certain
circumstances, the Fund may be required to foreclose on an issuer's assets and
take possession of its property or operations. In such circumstances, the Fund
would incur additional costs in disposing of such assets and potential
liabilities from operating any business acquired.

     The secondary market for high yield securities may not be as liquid as the
secondary market for more highly rated securities, a factor which may have an
adverse effect on the Fund's ability to dispose of a particular security. There
are fewer dealers in the market for high yield securities than for investment
grade obligations. The prices quoted by different dealers may vary significantly
and the spread between the bid and asked price is generally much larger than for
higher quality instruments. Under adverse market or economic conditions, the
secondary market for high yield securities could contract further, independent
of any specific adverse changes in the condition of a particular issuer, and
these instruments may become illiquid. As a result, the Fund could find it more
difficult to sell these securities or may be able to sell the securities only at
prices lower than if such securities were widely traded. Prices realized upon
the sale of such lower rated or unrated securities, under these circumstances,
may be less than the prices used in calculating the Fund's net asset value.

     Since investors generally perceive that there are greater risks associated
with lower quality debt securities of the type in which the Fund may invest a
portion of its assets, the yields and prices of such securities may tend to
fluctuate more than those for higher rated securities. In the lower quality
segments of the debt securities market, changes in perceptions of issuers'
creditworthiness tend to occur more frequently and in a more pronounced manner
than do changes in higher quality segments of the debt securities market,
resulting in greater yield and price volatility.

     If the Fund invests in high yield securities that are rated C or below, the
Fund will incur significant risk in addition to the risks associated with
investments in high yield securities and corporate loans. Distressed securities
frequently do not produce income while they are outstanding. The Fund may
purchase distressed securities that are in default or the issuers of which are
in bankruptcy. The Fund may be required to bear certain extraordinary expenses
in order to protect and recover its investment.

                                        25
<PAGE>

     INTEREST RATE RISK.  Fixed income securities, including high yield
securities, are subject to certain common risks, including:

          - if interest rates go up, the value of debt securities in the Fund's
            portfolio generally will decline;

          - during periods of declining interest rates, the issuer of a security
            may exercise its option to prepay principal earlier than scheduled,
            forcing the Fund to reinvest in lower yielding securities. This is
            known as call or prepayment risk. Debt securities frequently have
            call features that allow the issuer to repurchase the security prior
            to its stated maturity. An issuer may redeem an obligation if the
            issuer can refinance the debt at a lower cost due to declining
            interest rates or an improvement in the credit standing of the
            issuer;

          - during periods of rising interest rates, the average life of certain
            types of securities may be extended because of slower than expected
            principal payments. This may lock in a below market interest rate,
            increase the security's duration (the estimated period until the
            security is paid in full) and reduce the value of the security. This
            is known as extension risk; and

          - market interest rates currently are at historically low levels.

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


     ILLIQUID INVESTMENTS.  The Fund may invest up to 15% of its managed assets
in securities that, at the time of investment, are illiquid (determined using
the Commission's standard applicable to investment companies, i.e., securities
that cannot be disposed of within 7 days in the ordinary course of business at
approximately the value at which the Fund has valued the securities). The Fund
may also invest without limit in securities that have not been registered for
public sale, but that are eligible for purchase and sale by certain qualified
institutional buyers. Calamos, under the supervision of the Board of Trustees,
will determine whether securities purchased under Rule 144A are illiquid (that
is, not readily marketable) and thus subject to the Fund's limit of investing no
more than 15% of its managed assets in illiquid securities. Investments in Rule
144A Securities could have the effect of increasing the amount of the Fund's
assets invested in illiquid securities if qualified institutional buyers are
unwilling to purchase these Rule 144A Securities. Illiquid securities may be
difficult to dispose of at a fair price at the times when the Fund believes it
is desirable to do so. Investment of the Fund's assets in illiquid securities
may restrict the Fund's ability to take advantage of market opportunities. The
market price of illiquid securities generally is more volatile than that of more
liquid securities, which may adversely affect the price that the Fund pays for
or recovers upon the sale of illiquid securities. Illiquid securities are also
more difficult to value and Calamos' judgment may play a greater role in the
valuation process. Investment of the Fund's assets in illiquid securities may
restrict the Fund's ability to take advantage of market opportunities. The risks
associated with illiquid securities may be particularly acute in situations in
which the Fund's operations require cash and could result in the Fund borrowing
to meet its short-term needs or incurring losses on the sale of illiquid
securities.


     FOREIGN SECURITIES.  Investments in non-U.S. issuers may involve unique
risks compared to investing in securities of U.S. issuers. These risks are more
pronounced to the extent that the Fund invests a significant portion of its
non-U.S. investments in one region or in the securities of emerging market
issuers. These risks may include:

          - less information about non-U.S. issuers or markets may be available
            due to less rigorous disclosure or accounting standards or
            regulatory practices;

          - many non-U.S. markets are smaller, less liquid and more volatile. In
            a changing market, Calamos may not be able to sell the Fund's
            portfolio securities at times, in amounts and at prices it considers
            reasonable;

          - the adverse effect of currency exchange rates or controls on the
            value of the Fund's investments;
                                        26
<PAGE>

          - the economies of non-U.S. countries may grow at slower rates than
            expected or may experience a downturn or recession;

          - economic, political and social developments may adversely affect the
            securities markets, including expropriation and nationalization;

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

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

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

          - withholding and other non-U.S. taxes may decrease the Fund's return.

     There may be less publicly available information about non-U.S. markets and
issuers than is available with respect to U.S. securities and issuers. Non-U.S.
companies generally are not subject to accounting, auditing and financial
reporting standards, practices and requirements comparable to those applicable
to U.S. companies. The trading markets for most non-U.S. securities are
generally less liquid and subject to greater price volatility than the markets
for comparable securities in the United States. The markets for securities in
certain emerging markets are in the earliest stages of their development. Even
the markets for relatively widely traded securities in certain non-U.S. markets,
including emerging market countries, may not be able to absorb, without price
disruptions, a significant increase in trading volume or trades of a size
customarily undertaken by institutional investors in the United States.

     Additionally, market making and arbitrage activities are generally less
extensive in such markets, which may contribute to increased volatility and
reduced liquidity.


     Economies and social and political conditions in individual countries may
differ unfavorably from the United States. Non-U.S. economies may have less
favorable rates of growth of gross domestic product, rates of inflation,
currency valuation, capital reinvestment, resource self-sufficiency and balance
of payments positions. Many countries have experienced substantial, and in some
cases extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had, and may continue to have, very
negative effects on the economies and securities markets of certain emerging
market countries. Unanticipated political or social developments may also affect
the values of the Fund's investments and the availability to the Fund of
additional investments in such countries.


     CURRENCY RISK.  The value of the securities denominated or quoted in
foreign currencies may be adversely affected by fluctuations in the relative
currency exchange rates and by exchange control regulations. The Fund's
investment performance may be negatively affected by a devaluation of a currency
in which the Fund's investments are denominated or quoted. Further, the Fund's
investment performance may be significantly affected, either positively or
negatively, by currency exchange rates because the U.S. dollar value of
securities denominated or quoted in another currency will increase or decrease
in response to changes in the value of such currency in relation to the U.S.
dollar.

     CONVERTIBLE SECURITIES.  Convertible securities generally offer lower
interest or dividend yields than non-convertible securities of similar quality.
The market values of convertible securities tend to decline as interest rates
increase and, conversely, to increase as interest rates decline. However, the
convertible's market value tends to reflect the market price of the common stock
of the issuing company when that stock price is greater than the convertible's
"conversion price." The conversion price is defined as the predetermined price
at which the convertible could be exchanged for the associated stock. As the
market price of the underlying common stock declines, the price of the
convertible security tends to be influenced more by the yield of the convertible
security. Thus, it may not decline in price to the same extent as the underlying
common stock. In the event of a liquidation of the issuing company, holders of
convertible securities would be paid before the company's common stockholders.
Consequently, the issuer's convertible securities generally entail less risk
than its common stock.

     SYNTHETIC CONVERTIBLE SECURITIES.  The value of a synthetic convertible
security may respond differently to market fluctuations than a convertible
security because a synthetic convertible is composed of

                                        27
<PAGE>

two or more separate securities, each with its own market value. In addition, if
the value of the underlying common stock or the level of the index involved in
the convertible component falls below the exercise price of the warrant or
option, the warrant or option may lose all value.

     INTEREST RATE TRANSACTIONS RISK.  The Fund may enter into an interest rate
swap or cap transaction to attempt to protect itself from increasing dividend or
interest expenses on its preferred shares, debt securities or other borrowings
resulting from increasing short-term interest rates. A decline in interest rates
may result in a decline in the value of the swap or cap, which may result in a
decline in the net asset value of the Fund.

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

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

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

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

     MANAGEMENT RISK.  Calamos' judgment about the attractiveness, relative
value or potential appreciation of a particular sector, security or investment
strategy may prove to be incorrect.


     ANTITAKEOVER PROVISIONS.  The Fund's Agreement and Declaration of Trust and
By-laws include provisions that could limit the ability of other entities or
persons to acquire control of the Fund or to change the composition of its Board
of Trustees. Such provisions could limit the ability of shareholders to sell
their shares at a premium over prevailing market prices by discouraging a third
party from seeking to obtain control of the Fund. These provisions include
staggered terms of office for the Trustees, advance notice requirements for
shareholder proposals, and super-majority voting requirements for certain
transactions with affiliates, converting the Fund to an open-end investment
company or a merger, asset sale or similar transaction. Holders of preferred
shares will have voting rights in addition to and separate from the voting
rights of common shareholders with respect to certain of these matters. See
"Description of Preferred Shares" and "Certain Provisions of the Agreement and
Declaration of Trust and By-Laws." The


                                        28
<PAGE>

holders of preferred shares, on the one hand, and the holders of the common
shares, on the other, may have interests that conflict in these situations.

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

                                        29
<PAGE>

                             MANAGEMENT OF THE FUND

TRUSTEES AND OFFICERS


     The Fund's Board of Trustees provides broad supervision over the affairs of
the Fund. The officers of the Fund are responsible for the Fund's operations.
Currently, there are seven Trustees of the Fund, three of whom are "interested
persons" of the Trust (as defined in the 1940 Act) and four of whom are not
"interested persons." The names and business addresses of the trustees and
officers of the Fund and their principal occupations and other affiliations
during the past five years are set forth under "Management of the Fund" in the
Statement of Additional Information.


INVESTMENT ADVISER


     The Fund's investments are managed by Calamos, 1111 E. Warrenville Road,
Naperville, IL. On March 31, 2004 Calamos managed approximately $29 billion in
assets of individuals and institutions. Calamos is a wholly-owned subsidiary of
Holdings. Holdings is controlled by John P. Calamos, who has been engaged in the
investment advisory business since 1977.


INVESTMENT MANAGEMENT AGREEMENT

     Subject to the overall authority of the Board of Trustees, Calamos
regularly provides the Fund with investment research, advice and supervision and
furnishes continuously an investment program for the Fund. In addition, Calamos
furnishes for use of the Fund such office space and facilities as the Fund may
require for its reasonable needs, supervises the business and affairs of the
Fund and provides the following other services on behalf of the Fund and not
provided by persons not a party to the investment management agreement: (a)
preparing or assisting in the preparation of reports to and meeting materials
for the Trustees; (b) supervising, negotiating contractual arrangements with, to
the extent appropriate, and monitoring the performance of, accounting agents,
custodians, depositories, transfer agents and pricing agents, accountants,
attorneys, printers, underwriters, brokers and dealers, insurers and other
persons in any capacity deemed to be necessary or desirable to Fund operations;
(c) assisting in the preparation and making of filings with the Commission and
other regulatory and self-regulatory organizations, including, but not limited
to, preliminary and definitive proxy materials, amendments to the Fund's
registration statement on Form N-2 and semi-annual reports on Form N-SAR and
Form N-CSR; (d) overseeing the tabulation of proxies by the Fund's transfer
agent; (e) assisting in the preparation and filing of the Fund's federal, state
and local tax returns; (f) assisting in the preparation and filing of the Fund's
federal excise tax return pursuant to Section 4982 of the Code; (g) providing
assistance with investor and public relations matters; (h) monitoring the
valuation of portfolio securities and the calculation of net asset value; (i)
monitoring the registration of shares of beneficial interest of the Fund under
applicable federal and state securities laws; (j) maintaining or causing to be
maintained for the Fund all books, records and reports and any other information
required under the 1940 Act, to the extent that such books, records and reports
and other information are not maintained by the Fund's custodian or other agents
of the Fund; (k) assisting in establishing the accounting policies of the Fund;
(l) assisting in the resolution of accounting issues that may arise with respect
to the Fund's operations and consulting with the Fund's independent accountants,
legal counsel and the Fund's other agents as necessary in connection therewith;
(m) reviewing the Fund's bills; (n) assisting the Fund in determining the amount
of dividends and distributions available to be paid by the Fund to its
shareholders, preparing and arranging for the printing of dividend notices to
shareholders, and providing the transfer and dividend paying agent, the
custodian, and the accounting agent with such information as is required for
such parties to effect the payment of dividends and distributions; and (o)
otherwise assisting the Fund as it may reasonably request in the conduct of the
Fund's business, subject to the direction and control of the Trustees.

     Under the investment management agreement, the Fund will pay to Calamos a
fee based on the average weekly managed assets that is accrued daily and paid on
a monthly basis. The fee paid by the Fund is at the annual rate of 1.00% of
managed assets. Because the fees paid to Calamos are determined

                                        30
<PAGE>

on the basis of the Fund's managed assets, Calamos' interest in determining
whether to leverage the Fund may differ from the interests of the Fund and its
common shareholders.

     Under the terms of its investment management agreement, except for the
services and facilities provided by Calamos as set forth therein, the Fund shall
assume and pay all expenses for all other Fund operations and activities and
shall reimburse Calamos for any such expenses incurred by Calamos. The expenses
borne by the Fund shall include, without limitation: (a) organization expenses
of the Fund (including out-of-pocket expenses, but not including Calamos'
overhead or employee costs); (b) fees payable to Calamos; (c) legal expenses;
(d) auditing and accounting expenses; (e) maintenance of books and records that
are required to be maintained by the Fund's custodian or other agents of the
Fund; (f) telephone, telex, facsimile, postage and other communications
expenses; (g) taxes and governmental fees; (h) fees, dues and expenses incurred
by the Fund in connection with membership in investment company trade
organizations and the expense of attendance at professional meetings of such
organizations; (i) fees and expenses of accounting agents, custodians,
sub-custodians, transfer agents, dividend disbursing agents and registrars; (j)
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; (k) expenses of preparing
share certificates; (l) expenses in connection with the issuance, offering,
distribution, sale, redemption or repurchase of securities issued by the Fund;
(m) expenses relating to investor and public relations provided by parties other
than Calamos; (n) expenses and fees of registering or qualifying shares of
beneficial interest of the Fund for sale; (o) interest charges, bond premiums
and other insurance expenses; (p) freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; (q) the
compensation and all expenses (specifically including travel expenses relating
to Fund business) of Trustees, officers and employees of the Fund who are not
affiliated persons of Calamos; (r) brokerage commissions or other costs of
acquiring or disposing of any portfolio securities of the Fund; (s) expenses of
printing and distributing reports, notices and dividends to shareholders; (t)
expenses of preparing and setting in type, printing and mailing prospectuses and
statements of additional information of the Fund and supplements thereto; (u)
costs of stationery; (v) any litigation expenses; (w) indemnification of
Trustees and officers of the Fund; (x) costs of shareholders' and other
meetings; (y) interest on borrowed money, if any; and (z) the fees and other
expenses of listing the Fund's shares on the New York Stock Exchange or any
other national stock exchange.

PORTFOLIO MANAGERS


     John P. Calamos, Nick P. Calamos and John P. Calamos, Jr. are responsible
for managing the portfolio of the Fund. During the past five years, John P.
Calamos has been a Chairman, CEO and Co-Chief Investment Officer of Calamos.
Nick P. Calamos has been a Senior Executive Vice President and Co-Chief
Investment Officer of Calamos. John P. Calamos, Jr. has been an Executive Vice
President of Calamos. For over 20 years, the Calamos management team has managed
money for their clients in convertible, high yield and global strategies.
Furthermore, Calamos has extensive experience investing in foreign markets
through its convertible securities and high yield securities strategies. Such
experience has included investments in established as well as emerging foreign
markets.


FUND ACCOUNTANT


     Under the arrangements with State Street to provide fund accounting
services, State Street, provides certain administrative and accounting services,
to the Fund and such other funds advised by Calamos that may be part of those
arrangements (the Fund and such other funds are collectively referred to as the
"Calamos Funds") as described more fully in the statement of additional
information. For the services rendered to the Calamos Funds, State Street
receives fees based on the combined managed assets of the Calamos Funds
("Combined Assets"). Each fund of the Calamos Funds pays its pro-rata share of
the fees payable to State Street described below based on relative managed
assets of each fund.


     State Street receives a fee at the annual rate of 0.0225% for the first $3
billion of Combined Assets and 0.0150% for the Combined Assets in excess of $3
billion.

                                        31
<PAGE>


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


                                        32
<PAGE>

                        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 for
Preferred Shares (the "Statement") attached as Appendix A to the Statement of
Additional Information. Where appropriate, terms used in "Description of
Preferred Shares" and in "The Auction" 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 7,040 Preferred
Shares, Series M, 7,040 Preferred Shares, Series TU, 7,040 Preferred Shares,
Series W, 7,040 Preferred Shares, Series TH, 7,040 Preferred Shares, Series F,
4,000 Preferred Shares, Series A, and 4,000 Preferred Shares, Series B. All
Preferred Shares will have a liquidation preference of $25,000 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, 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 initial dividend period and rate for each series of
Preferred Shares is as set forth below:



<Table>
<Caption>
SERIES                                            INITIAL DIVIDEND PERIOD   INITIAL DIVIDEND RATE
- ------                                            -----------------------   ---------------------
<S>                                               <C>                       <C>
M...............................................
TU..............................................
W...............................................
TH..............................................
F...............................................
A...............................................
B...............................................
</Table>



     Any subsequent dividend periods of Series M, TU, W, TH and F of Preferred
Shares will generally be seven or, in the case of Series A and B Preferred
Shares, 28 days. The Fund, subject to certain conditions, may change the length
of subsequent dividend periods by designating them as special dividend periods.
See "--Designation of Special Dividend Periods" below.


     DIVIDEND PAYMENT DATES.  Dividends on each series of 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

                                        33
<PAGE>

Declaration of Trust, the Statement and applicable law. The initial dividend
payment date and the day of the week upon which subsequent dividends, if any,
will be paid for each series are as follows:


<Table>
<Caption>
                                          INITIAL DIVIDEND
SERIES                                      PAYMENT DATE     SUBSEQUENT DIVIDEND PAYMENT DAY
- ------                                    ----------------   --------------------------------
<S>                                       <C>                <C>
M.......................................                     Tuesday
TU......................................                     Wednesday
W.......................................                     Thursday
TH......................................                     Friday
F.......................................                     Monday
A.......................................                     Every fourth Thursday thereafter
B.......................................                     Every fourth Friday thereafter
</Table>



     Dividend periods generally will begin on the first business day after an
auction. If dividends are payable on a day that is not a business day, then
dividends will generally be payable on the next day if such day is a business
day, or as otherwise specified in the Statement. In addition, the Fund may
specify different dividend payment dates for any special dividend period of more
than seven days in the case of Series M, T, W, TH, and F Preferred Shares and
more than 28 days in the case of Series A and B Preferred Shares, provided that
such dates shall be set forth in the notice of special dividend period relating
to such special dividend period.


     Dividends will be paid through the Depository Trust Company ("DTC") on each
dividend payment date. The dividend payment date will normally be the first
business day after the dividend period ends. DTC, in accordance with its current
procedures, is expected to distribute dividends received from the auction agent
in same-day funds on each dividend payment date to agent members (members of DTC
that will act on behalf of existing or potential holders of Preferred Shares).
These agent members are in turn expected to distribute such dividends to the
persons for whom they are acting as agents. However, each of the current
Broker-Dealers has indicated to the Fund that dividend payments will be
available in same-day funds on each dividend payment date to customers that use
a Broker-Dealer or a Broker-Dealer's designee as agent member.


     CALCULATION OF DIVIDEND PAYMENT.  The Fund computes the dividends per share
payable on each series of Preferred Shares by multiplying the applicable rate in
effect by a fraction. For each dividend period of less than one (1) year, the
numerator of this fraction will normally be the number of days in the dividend
period and the denominator will normally be 360. This rate is then multiplied by
$25,000 to arrive at the dividends per share. For each dividend period of one
(1) year or more, the dividends per share payable is computed as described
above, except that it will be determined on the basis of a year consisting of
twelve 30-day months.



     Dividends on Preferred Shares will accumulate from the date of their
original issue, which is   , 2004. For each dividend payment period after the
initial dividend period, the dividend will be the dividend rate determined at
auction. The dividend rate that results from an auction will not be greater than
the maximum rate described below. Prior to each auction, Broker-Dealers will
notify holders of the term of the next succeeding dividend period as soon as
practicable after the Broker-Dealers have been so advised by the Fund. After
each auction, on the auction date, Broker-Dealers will notify holders of the
applicable rate for the next succeeding dividend period and as of the auction
date of the next succeeding auction.



     Except during a Default Period as described below, the applicable rate
resulting from an auction will not be greater than the maximum rate. The maximum
rate will be the applicable percentage of the reference rate. The "Reference
Rate" will be the applicable LIBOR Rate (as defined below) (for a dividend
period of fewer than 365 days) or the Treasury Index Rate (as defined below)
(for a dividend period of 365 days or more). The applicable percentage for any
standard dividend period will generally be determined based on the credit
ratings assigned to the Preferred Shares by Fitch and S&P on the auction


                                        34
<PAGE>


date for such period (as set forth in the table below). If Fitch and/or S&P
shall not make such rating available, the rate shall be determined by reference
to equivalent ratings issued by any other rating agency.



<Table>
<Caption>
        FITCH AND/OR S&P CREDIT RATING                     APPLICABLE PERCENTAGE
        ------------------------------                     ---------------------
<S>                                            <C>
                AA- or higher                                       150%
                   A- to A+                                         200%
                 BBB- to BBB+                                       250%
                  Below BBB-                                        275%
</Table>



     The "LIBOR Rate" is the applicable London Inter-Bank Offered Rate for
deposits in U.S. dollars for the period most closely approximating the
applicable dividend period for a series of Preferred Shares.



     The "Treasury Index Rate" is the average yield to maturity for certain U.S.
Treasury securities having substantially the same length to maturity as the
applicable dividend period for a series of Preferred Shares.



     The Board of Trustees may amend the maximum rate to increase the percentage
amount by which the reference rate described above is multiplied to determine
the maximum rate shown without the consent of the holders of Preferred Shares,
including each series, or any shareholder of the Fund, but only with
confirmation from each rating agency then rating the Preferred Shares that such
action will not impair such agency's then-current rating of the Preferred
Shares, and after consultation with the Broker-Dealers, provided that
immediately following any such increase the Fund could meet the Preferred Shares
Basic Maintenance Amount test discussed below under "-- Rating Agency
Guidelines."



     The maximum rate for the Preferred Shares will apply automatically
following an auction for such Preferred Shares in which sufficient clearing bids
have not been made (other than because all Preferred Shares were subject to
submitted hold orders) or following the failure to hold an auction for any
reason on the auction date scheduled to occur (except for circumstances in which
the dividend rate is the Default Rate, as described below).



     Prior to each auction, Broker-Dealers will notify holders of the term of
the next succeeding dividend period as soon as practicable after the
Broker-Dealers have been so advised by the Fund. After each auction, on the
auction date, Broker-Dealers will notify holders of the applicable rate for the
next succeeding dividend period and of the auction date of the next succeeding
auction.



     On each dividend payment date, the Fund is required to deposit with the
auction agent sufficient funds for the payment of declared dividends. The
failure to make such deposit will not result in the cancelation of any auction.
The Fund does not intend to establish any reserves for the payment of dividends.



     DEFAULT PERIOD. Subject to the applicable cure provisions, a "Default
Period" with respect to a particular series will commence on any date the Fund
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 declared dividend
on that series payable on the dividend payment date (a "Dividend Default") or
(B) the full amount of any redemption price (the "Redemption Price") payable on
the date fixed for redemption (the "Redemption Date") (a "Redemption Default"
and together with a Dividend Default, hereinafter referred to as "Default").



     Subject to the applicable cure provisions, a Default Period with respect to
a Dividend Default or a Redemption Default shall end on the business day on
which, by 12:00 noon, New York City time, all unpaid dividends and any unpaid
Redemption Price shall have been deposited irrevocably in trust in same-day
funds with the paying agent. In the case of a Dividend Default, the applicable
rate for each dividend period commencing during a Default Period will be equal
to the default rate described below, and each subsequent dividend period
commencing after the beginning of a Default Period shall be a standard dividend
period; provided, however, that the commencement of a Default Period will not by
itself cause the commencement of a new dividend period. No Auction shall be held
during a Default Period applicable to that series.


                                        35
<PAGE>


     No Default Period with respect to a Dividend Default or Redemption Default
shall be deemed to commence if the amount of any dividend or any Redemption
Price due (if such default is not solely due to the willful failure of the Fund)
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
dividend 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).



     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 Borrowings that are 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 instrument constituting a security
(other than shares of beneficial interest) and evidencing indebtedness and could
include the Fund's obligations under any Borrowings. For purposes of determining
asset coverage for senior securities representing indebtedness in connection
with the payment of dividends or other distributions on or purchases or
redemptions of stock, the term "senior security" does not include any promissory
note or other evidence of indebtedness issued in consideration of any loan,
extension or renewal thereof, made by a bank or other person and privately
arranged, and not intended to be publicly distributed. The term "senior
security" also does not include any such 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.


     While any of the Preferred Shares are outstanding, the Fund generally may
not declare, pay or set apart for payment, any dividend or other distribution in
respect of its common shares (other than in additional common shares or rights
to purchase common shares) or repurchase any of its common shares (except by
conversion into or exchange for shares of the Fund ranking junior to the
Preferred Shares as to the payment of dividends and the distribution of assets
upon liquidation) unless each of the following conditions has been satisfied:


     - In the case of Fitch's coverage requirements, immediately after such
       transaction, the aggregate discounted value (i.e., the aggregate value of
       the Fund's portfolio discounted according to Fitch criteria) would be
       equal to or greater than the Preferred Shares Basic Maintenance Amount
       (as defined in the Prospectus under "Rating Agency Guidelines" below);

                                        36
<PAGE>


     - In the case of S&P's coverage requirements, immediately after such
       transaction, the aggregate discounted value (i.e., the aggregate value of
       the Fund's portfolio discounted according to S&P criteria) would be equal
       to or greater than the Preferred Shares Basic Maintenance Amount;


     - Immediately after such transaction, the 1940 Act Preferred Shares Asset
       Coverage (as defined in this Prospectus under "Rating Agency Guidelines"
       below) is met;

     - Full cumulative dividends on the Preferred Shares due on or prior to the
       date of the transaction have been declared and paid or have been declared
       and sufficient funds for the payment thereof deposited with the auction
       agent; and

     - The Fund has redeemed the full number of Preferred Shares required to be
       redeemed by any provision for mandatory redemption contained in the
       Statement.

     The Fund generally will not declare, pay or set apart for payment any
dividend on any shares of the Fund ranking, as to the payment of dividends, on a
parity with Preferred Shares unless the Fund has declared and paid or
contemporaneously declares and pays full cumulative dividends on the Preferred
Shares through its most recent dividend payment date. However, if the Fund has
not paid dividends in full on the Preferred Shares through the most recent
dividend payment date or upon any shares of the Fund ranking, as to the payment
of dividends, on a parity with Preferred Shares through their most recent
respective dividend payment dates, the amount of dividends declared per share on
Preferred Shares and such other class or series of shares will in all cases bear
to each other the same ratio that accumulated dividends per share on the
Preferred Shares and such other class or series of shares bear to each other.


     DESIGNATION OF SPECIAL DIVIDEND PERIODS.  The Fund may, in certain
situations, declare a special dividend period. Prior to declaring a special
dividend period, the Fund will give notice (a "notice of special dividend
period") to the auction agent and to each Broker-Dealer. The notice of special
dividend period will state that the next succeeding dividend period for the
Preferred Shares will be a number of days as specified in such notice of special
dividend period. The Fund may not designate a special dividend period unless
sufficient clearing bids were made in the most recent auction. In addition, full
cumulative dividends, any amounts due with respect to mandatory redemptions and
any additional dividends payable prior to such date must be paid in full or
deposited with the auction agent. In addition, the Fund does not intend to
designate a special dividend period if such designation would adversely affect
Fitch's or S&P's or any substitute rating agency's then-current rating on the
Preferred Shares. The Fund also must have portfolio securities with a discounted
value at least equal to the Preferred Share Maintenance Amount. A notice of
special dividend period also will specify whether the Preferred Shares will be
subject to optional redemption during such special dividend period and, if so,
the redemption, premium, if any, required to be paid by the Fund in connection
with such optional redemption.



     If the Fund proposes to designate any special dividend period, not fewer
than seven business days (or two business days in the event the duration of the
dividend period prior to such special dividend period is fewer than eight days)
nor more than 30 business days prior to the first day of such special dividend
period, notice of special dividend period shall be (i) made by press release and
(ii) communicated by the Fund by telephonic or other means to the auction agent
and each Broker-Dealer and the rating agency and confirmed in writing promptly
thereafter. Each such notice of special dividend period shall state (A) that the
Fund proposes to exercise its option to designate a succeeding special dividend
period, specifying the first and last days thereof and the maximum rate for such
special dividend period and (B) that the Fund will by 3:00 P.M., New York City
time, on the second business day next preceding the first day of such special
dividend period, notify the auction agent, who will promptly notify the
Broker-Dealers, of either (x) its determination, subject to certain conditions,
to proceed with such special dividend period, subject to the terms of any
specific redemption provisions, or (y) its determination not to proceed with
such special dividend period, in which latter event the succeeding dividend
period shall be a standard dividend period. No later than 3:00 P.M., New York
City time, on the second business day next preceding the first day of


                                        37
<PAGE>


any proposed special dividend period, the Fund shall deliver to the auction
agent, who will promptly deliver to the Broker-Dealers and existing holders,
either:



          (i) a notice of special dividend period stating (A) that the Fund has
     determined to designate the next succeeding dividend period as a special
     dividend period, specifying the first and last days thereof and (B) the
     terms of any specific redemption provisions; or



          (ii) a notice of special dividend period stating that the Fund has
     determined not to exercise its option to designate a special dividend
     period.



     If the Fund fails to deliver either such notice of special dividend period
to the auction agent by 3:00 P.M., New York City time, on the second business
day next preceding the first day of such proposed special dividend period, the
Fund shall be deemed to have delivered a notice to the auction agent with
respect to such dividend period to the effect set forth in clause (ii) above,
thereby resulting in a standard dividend period.



     In addition, the Board of Trustees may amend the dividend periods of one or
more series of Preferred Shares on a permanent basis.


VOTING RIGHTS

     Except as noted below, 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 and the holders of the Preferred Shares shall only be entitled to elect
the trustees so designated as being elected by the holders of the Preferred
Shares when their term shall have expired and such trustees appointed by the
holders of Preferred Shares will be allocated as evenly as possible among the
classes of trustees. The holders of the common shares and holders of Preferred
Shares vote together as a single class to elect the remaining trustees. In
addition, during any period ("Voting Period") in which the Fund has not paid
dividends on the Preferred Shares in an amount equal to two full years
dividends, the holders of Preferred Shares, voting as a single class, are
entitled to elect (in addition to the two trustees set forth above) the smallest
number of additional trustees as is necessary to ensure that a majority of the
trustees has been elected by the holders of Preferred Shares. The holders of
Preferred Shares will continue to have these rights until all dividends in
arrears have been paid or otherwise provided for.

     In an instance when the Fund has not paid dividends as set forth in the
immediately preceding paragraph, the terms of office of all persons who are
trustees of the Fund at the time of the commencement of a Voting Period will
continue, notwithstanding the election by the holders of the Preferred Shares of
the number of trustees that such holders are entitled to elect. The persons
elected by the holders of the Preferred Shares, together with the incumbent
trustees, will constitute the duly elected trustees of the Fund. When all
dividends in arrears on the Preferred Shares have been paid or provided for, the
terms of office of the additional trustees elected by the holders of the
Preferred Shares will terminate.

     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, (i) institute any proceedings to be adjudicated bankrupt or
insolvent, or consent to the institution of bankruptcy or insolvency proceedings
against it, or file a petition seeking or consenting to reorganization or relief
under any applicable federal or state law relating to bankruptcy or insolvency,
or consent to the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of the Fund or a substantial part of
its property, or make any assignment for the benefit of creditors, or, except as
may be required by applicable law, admit in writing its inability to pay its
debts generally as they become due or take any corporate action in furtherance
of any such action; (ii) create, incur or suffer to exist, or agree to create,
incur or suffer to exist, or consent to cause or permit in the future (upon the
happening of a contingency or otherwise) the creation, incurrence or existence
of any material lien, mortgage, pledge, charge, security interest, security

                                        38
<PAGE>


agreement, conditional sale or trust receipt or other material encumbrance of
any kind upon any of the Fund's assets as a whole, except (A) liens the validity
of which are being contested in good faith by appropriate proceedings, (B) liens
for taxes that are not then due and payable or that can be paid thereafter
without penalty, (C) liens, pledges, charges, security interests, security
agreements or other encumbrances arising in connection with any indebtedness
senior to the Preferred Shares, or arising in connection with any futures
contracts or options thereon, interest rate swap or cap transactions, forward
rate transactions, put or call options or other similar transactions, (D) liens,
pledges, charges, security interests, security agreements or other encumbrances
arising in connection with any indebtedness permitted under clause (iii) below
and (E) liens to secure payment for services rendered including, without
limitation, services rendered by the Fund's paying agent and the auction agent;
or (iii) create, authorize, issue, incur or suffer to exist any indebtedness for
borrowed money or any direct or indirect guarantee of such indebtedness for
borrowed money, except the Fund may borrow as may be permitted by the Fund's
investment restrictions; provided, however, that transfers of assets by the Fund
subject to an obligation to repurchase will not be deemed to be indebtedness for
purposes of this provision to the extent that after any such transaction the
Fund has eligible assets with an aggregate discounted value at least equal to
the preferred shares Basic Maintenance Amount as of the immediately preceding
valuation date.


     In addition, the affirmative vote of the holders of a majority, as defined
in the 1940 Act, of the outstanding Preferred Shares is required to approve any
plan of reorganization (as such term is used in the 1940 Act) adversely
affecting such shares or any action requiring a vote of security holders of the
Fund under Section 13(a) of the 1940 Act, including, among other things, changes
in the Fund's fundamental investment restrictions described under "Investment
Restrictions" in the Statement of Additional Information and changes in the
Fund's subclassification as a closed-end investment company.


     The affirmative vote of the holders of a majority, as defined in the 1940
Act, of the outstanding Preferred Shares of any series, voting separately from
any other series, shall be required with respect to any matter that materially
and adversely affects the rights, preferences, or powers of that series in a
manner different from that of other series or classes of the Fund's shares of
beneficial interest. For purposes of the foregoing, no matter will be deemed to
adversely affect any right, preference or power unless such matter (i) alters or
abolishes any preferential right of such series; (ii) creates, alters or
abolishes any right in respect of redemption of such series; or (iii) creates or
alters (other than to abolish) any restriction on transfer applicable to such
series. The vote of holders of any series described in this paragraph will in
each case be in addition to a separate vote of the requisite percentage of
common shares and/or preferred shares necessary to authorize the action in
question.


     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 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.


RATING AGENCY GUIDELINES


     The Fund is required under Fitch and S&P guidelines to maintain assets
having in the aggregate a discounted value at least equal to the Preferred
Shares Basic Maintenance Amount (as defined below). Fitch and S&P have each
established separate guidelines for determining discounted value. To the extent


                                        39
<PAGE>


any particular portfolio holding does not satisfy the applicable rating agency's
guidelines, all or a portion of such holding's value will not be included in the
calculation of discounted value (as defined by the rating agency). The Fitch and
S&P guidelines also impose certain diversification requirements on the Fund's
overall portfolio. The "Preferred Shares Basic Maintenance Amount" means as of
any valuation date as the dollar amount equal to:



          (i) the sum of (A) the product of the number of Preferred Shares
     outstanding on such date multiplied by $25,000 (plus the product of the
     number of shares of any other series of preferred shares outstanding on
     such date multiplied by the liquidation preference of such shares), plus
     any redemption premium applicable to the Preferred Shares (or other
     preferred shares) then subject to redemption; (B) the aggregate amount of
     dividends that will have accumulated at the respective applicable rates
     (whether or not earned or declared) to (but not including) the first
     respective dividend payment dates for Preferred Shares outstanding that
     follow such valuation date (plus the aggregate amount of dividends, whether
     or not earned or declared, that will have accumulated in respect of other
     outstanding preferred shares to, but not including, the first respective
     dividend payment dates for such other shares that follow such valuation
     date); (C) the aggregate amount of dividends that would accumulate on
     shares of each series of Preferred Shares outstanding from such first
     respective dividend payment date therefor through the 42nd day after such
     valuation date, at the maximum rate (calculated as if such valuation date
     were the auction date for the dividend period commencing on such dividend
     payment date) for a standard dividend period of shares of such series to
     commence on such dividend payment date, assuming, solely for purposes of
     the foregoing, that if on such valuation date the Fund shall have delivered
     a notice of special dividend period to the auction agent pursuant to
     Section 4(b) of Part I of the Statement with respect to shares of such
     series, such maximum rate shall be the maximum rate for the special
     dividend period of shares of such series to commence on such dividend
     payment date (except that (1) if such valuation date occurs at a time when
     a failure to deposit (or, in the case of preferred shares other than
     Preferred Shares, a failure similar to a failure to deposit) has occurred
     that has not been cured, the dividend for purposes of calculation would
     accumulate at the current dividend rate then applicable to the shares in
     respect of which such failure has occurred and (2) for those days during
     the period described in this subparagraph (C) in respect of which the
     applicable rate in effect immediately prior to such dividend payment date
     will remain in effect (or, in the case of preferred shares other than
     Preferred Shares, in respect of which the dividend rate or rates in effect
     immediately prior to such respective dividend payment dates will remain in
     effect), the dividend for purposes of calculation would accumulate at such
     applicable rate (or other rate or rates, as the case may be in respect of
     those days); (D) the amount of anticipated expenses of the Fund for the 90
     days subsequent to such valuation date; (E) the amount of any indebtedness
     or obligations of the Fund senior in right of payments to the Preferred
     Shares; and (F) any current liabilities as of such valuation date to the
     extent not reflected in any of (i)(A) through (i)(E) (including, without
     limitation, any payables for portfolio securities purchased as of such
     valuation date and any liabilities incurred for the purpose of clearing
     securities transactions) less (ii) the value (i.e., the face value of cash,
     short-term municipal obligations and short-term securities that are the
     direct obligation of the U.S. government, provided in each case that such
     securities mature on or prior to the date upon which any of (i)(A) though
     (i)(F) became payable, otherwise the S&P discounted value) of any of the
     Fund's assets irrevocably deposited by the Fund for the payment of any of
     (i)(A) through (i)(F).



     The Fund also is required under rating agency guidelines to maintain, with
respect to the Preferred Shares, as of the last business day of each month in
which Preferred Shares are outstanding, asset coverage of at least 200% with
respect to senior securities that are shares of the Fund, including the
Preferred Shares (or such other asset coverage as may in the future be specified
in or under the 1940 Act as the minimum asset coverage for senior securities
that are shares of a closed-end investment company as a condition of declaring
dividends on its Common Shares) ("1940 Act Preferred Shares Asset Coverage").
Fitch and S&P have agreed that the auditors must certify annually the asset
coverage test on a date randomly selected by the auditors. Based on the Fund's
assets and liabilities as of April 26, 2004, and assuming the issuance of all
Preferred Shares offered hereby and the use of the proceeds as intended,

                                        40
<PAGE>

the 1940 Act Preferred Shares Asset Coverage with respect to Preferred Shares
would be computed as follows:


<Table>
<S>                                                                      <C>  <C>             <C>  <C>
Value of Fund assets less liabilities not constituting senior
  securities                                                                  $3,267,465,041
- -----------------------------------------------------------------------  =    --------------  =    303%
Senior securities representing indebtedness plus liquidation value of         $1,080,000,000
  the Preferred Shares
</Table>



     If the Fund does not timely cure a failure to maintain (1) a discounted
value of its portfolio equal to the Preferred Shares Basic Maintenance Amount or
(2) the 1940 Act Preferred Shares Asset Coverage, in each case in accordance
with the requirements of the rating agency or agencies then rating the Preferred
Shares, the Fund will be required to redeem Preferred Shares as described below
under "-- Redemption."



     The Fund may, but is not required to, adopt any modifications to the
guidelines that may hereafter be established by Fitch and S&P. Failure to adopt
any such modifications, however, may result in a change or a withdrawal of the
ratings altogether. In addition, any rating agency providing a rating for the
Preferred Shares may, at any time, change or withdraw any such rating. The Board
of Trustees may, without shareholder approval, amend, alter, add to or repeal
any or all of the definitions and related provisions that have been adopted by
the Fund pursuant to the rating agency guidelines in the event the Fund receives
written confirmation from Fitch or S&P, or both, as appropriate, that any such
change would not impair the ratings then assigned by Fitch and S&P to the
Preferred Shares.



     The Board of Trustees may amend the definition of standard dividend period
to change the dividend period with respect to one or more series without the
vote or consent of the holders of the Preferred Shares.



     As described by Fitch and S&P, the Preferred Shares rating is an assessment
of the capacity and willingness of the Fund to pay Preferred Shares'
obligations. The ratings on the Preferred Shares are not recommendations to
purchase, hold or sell the Preferred Shares, inasmuch as the ratings do not
comment as to market price or suitability for a particular investor. The rating
agency guidelines also do not address the likelihood that an owner of the
Preferred Shares will be able to sell such shares in an auction or otherwise.
The ratings are based on current information furnished to Fitch and S&P by the
Fund and Calamos and information obtained from other sources. The ratings may be
changed, suspended or withdrawn as a result of changes in, or the unavailability
of, such information.



     The rating agency guidelines will apply to the Preferred Shares only so
long as such rating agency is rating these shares. The Fund will pay fees to
Fitch and S&P for rating the Preferred Shares.



     The Fund shall deliver to the auction agent and each rating agency a
certificate which sets forth a determination regarding the Preferred Shares
Basic Maintenance Amount (a "Preferred Shares Basic Maintenance Certificate") as
of (A) within seven business days after the Date of Original Issue, (B) the last
valuation date of each month, (C) any date requested by any rating agency, (D) a
business day on or before any asset coverage cure date relating to the Fund's
cure of a failure to meet the Preferred Shares Basic Maintenance Amount test,
(E) any day that common shares or Preferred Shares are redeemed, (F) any day the
Fitch eligible assets have an aggregate discounted value less than or equal to
110% of the Preferred Shares Basic Maintenance Amount and (G) weekly if S&P's
eligible assets have an aggregate discounted value less than 1.30 times the
Preferred Shares Basic Maintenance Amount. Such Preferred Shares Basic
Maintenance Certificate shall be delivered in the case of (A) above on or before
the seventh business day after the date of original issue and in the case of B-G
above on or before the seventh business day after the relevant valuation date or
asset coverage cure date.



     The Fund shall deliver to the auction agent and each rating agency a
certificate which sets forth a determination regarding the 1940 Act Preferred
Shares Asset Coverage (a "1940 Act Preferred Shares Asset Coverage Certificate")
(i) as of the date of original issue, and (ii) as of (A) the last valuation date
of each quarter thereafter, and (B) as of a business day on or before any asset
coverage cure date relating to the failure to meet the 1940 Act Preferred Shares
Asset Coverage. Such 1940 Act Preferred Shares


                                        41
<PAGE>


Asset Coverage Certificate shall be delivered in the case of clause (i) on or
before the seventh business day after the date of original issue and in the case
of clause (ii) on or before the seventh business day after the relevant
valuation date or the asset coverage cure date. The certificates required by the
Statement may be combined into a single certificate.



     Within ten business days of the date of original issue, the Fund shall
deliver to the Auction Agent and each Rating Agency a letter prepared by the
Fund's independent auditors (an "Auditor's Certificate") regarding the accuracy
of the calculations made by the Trust in the Preferred Shares Basic Maintenance
Certificate and the 1940 Act Preferred Shares Asset Coverage Certificate
required to be delivered by the Trust on or before the seventh business day
after the date of original issue. Within ten business days after delivery of the
Preferred Shares Basic Maintenance Certificate and the 1940 Act Preferred Shares
Asset Coverage Certificate relating to the last valuation date of each fiscal
year of the Fund, the Fund will deliver to the auction agent and each rating
agency an Auditor's Certificate regarding the accuracy of the calculations made
by the Fund in such certificates. In addition, the Fund will deliver to the
persons specified in the preceding sentence an Auditor's Certificate regarding
the accuracy of the calculations made by the Fund on each Preferred Shares Basic
Maintenance Certificate and 1940 Act Preferred Shares Asset Coverage Certificate
delivered in relation to an asset coverage cure date within ten days after the
relevant asset coverage cure date. If an Auditor's Certificate shows that an
error was made in any such report, the calculation or determination made by the
Fund's independent auditors will be conclusive and binding on the Fund.


REDEMPTION

     MANDATORY REDEMPTION.  If the Fund does not timely cure a failure to (1)
maintain a discounted value of its portfolio equal to the Preferred Shares Basic
Maintenance Amount, (2) maintain the 1940 Act Preferred Shares Asset Coverage,
or (3) file a required certificate related to asset coverage on time, the
Preferred Shares will be subject to mandatory redemption out of funds legally
available therefor in accordance with the Statement and applicable law, at the
redemption price of $25,000 per share plus an amount equal to accumulated but
unpaid dividends thereon (whether or not earned or declared) to (but not
including) the date fixed for redemption. Any such redemption will be limited to
the number of Preferred Shares necessary to restore the required discounted
value or the 1940 Act Preferred Shares Asset Coverage, as the case may be.

     In determining the number of Preferred Shares required to be redeemed in
accordance with the foregoing, the Fund will allocate the number of shares
required to be redeemed to satisfy the Preferred Shares Basic Maintenance Amount
or the 1940 Act Preferred Shares Asset Coverage, as the case may be, prorata
among the Preferred Shares of the Fund and any other preferred shares of the
Fund, subject to redemption or retirement. If fewer than all outstanding shares
of any series are, as a result, to be redeemed, the Fund may redeem such shares
prorata, by lot or other method that it deems fair and equitable.


     OPTIONAL REDEMPTION.  To the extent permitted under the 1940 Act and
Delaware law, the Fund at its option may without the consent of the holders of
Preferred Shares, redeem Preferred Shares having a dividend period of one year
or less, in whole or in part, on the business day after the last day of such
dividend period upon not less than 15 calendar days and not more than 40
calendar days prior notice. The optional redemption price per share will be
$25,000 per share, plus an amount equal to accumulated but unpaid dividends
thereon (whether or not earned or declared) to the date fixed for redemption.
Preferred Shares having a dividend period of more than one year are redeemable
at the option of the Fund, in whole or in part, on any business day prior to the
end of the relevant dividend period, subject to any specific redemption
provisions, which may include the payment of redemption premiums to the extent
required under any applicable specific redemption provisions. The Fund will not
make any optional redemption unless, after giving effect thereto, (i) the Fund
has available certain deposit securities with maturities 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
the Preferred Shares by reason of the redemption of the Preferred Shares on such
date fixed for the redemption and (ii) the Fund has

                                        42
<PAGE>

eligible assets with an aggregate discounted value at least equal to the
Preferred Shares Basic Maintenance Amount.

     Notwithstanding the foregoing, Preferred Shares may not be redeemed at the
option of the Fund unless all dividends in arrears on the outstanding Preferred
Shares, and any other outstanding preferred shares, have been or are being
contemporaneously paid or set aside for payment. This would not prevent the
lawful purchase or exchange offer for Preferred Shares made on the same terms to
holders of all outstanding preferred shares.

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 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, before any payment or
distribution is made on the common shares, an amount equal to the liquidation
preference with respect to such shares ($25,000 per share), plus an amount equal
to all dividends thereon (whether or not earned or declared by the Fund, but
excluding the interest thereon) accumulated but unpaid to and including the date
of final distribution in same-day funds in connection with the liquidation of
the Fund. 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.



     Neither the sale of all or substantially all the property or business of
the Fund, nor the merger or consolidation of the Fund into or with any other
entity nor the merger or consolidation of any other entity into or with the
Fund, will be a liquidation, dissolution or winding up, whether voluntary or
involuntary, for the purposes of the foregoing paragraph.


                                  THE AUCTION

GENERAL


     The Statement provides that, except as otherwise described in this
prospectus, the applicable rate for the Preferred Shares for each dividend
period after the initial dividend period will be the rate that results from an
auction conducted as set forth in the Statement and summarized below. In such an
auction, persons determine to hold or offer to sell or, based on dividend rates
bid by them, offer to purchase or sell Preferred Shares. See the Statement
included in the Statement of Additional Information for a more complete
description of the auction process.


     AUCTION AGENCY AGREEMENT.  The Fund will enter into an auction agency
agreement with the auction agent (currently, The Bank of New York) which
provides, among other things, that the auction agent will follow the auction
procedures to determine the applicable rate for Preferred Shares, so long as the
applicable rate for Preferred Shares is to be based on the results of an
auction.

                                        43
<PAGE>

     The auction agent may terminate the auction agency agreement upon notice to
the Fund no earlier than 60 days after the delivery of such notice. If the
auction agent should resign, the Fund will use its best efforts to enter into an
agreement with a successor auction agent containing substantially the same terms
and conditions as the auction agency agreement. The Fund may remove the auction
agent provided that, prior to such removal, the Fund has entered into such an
agreement with a successor auction agent.

     BROKER-DEALER AGREEMENTS.  Each auction requires the participation of one
or more Broker-Dealers. The auction agent will enter into agreements with
several Broker-Dealers selected by the Fund, which provide for the participation
of those Broker-Dealers in auctions for Preferred Shares.

     The auction agent will pay to each Broker-Dealer after each auction from
funds provided by the Fund, a service charge at the annual rate of 1/4 of 1% of
the liquidation preference ($25,000 per share) of the Preferred Shares held by
that Broker-Dealer's customer upon settlement in an auction.

     The Fund may request that the auction agent terminate one or more
Broker-Dealer agreements at any time upon five days' notice, provided that at
least one Broker-Dealer agreement is in effect after termination of the
agreement.

AUCTION PROCEDURES

     Prior to the submission deadline on each auction date for the Preferred
Shares, each customer of a Broker-Dealer who is listed on the records of that
Broker-Dealer (or, if applicable, the auction agent) as a beneficial owner of
Preferred Shares may submit the following types of orders with respect to shares
of such series of Preferred Shares to that Broker-Dealer:


     1. Hold Order -- indicating its desire to hold Preferred Shares without
regard to the applicable rate for the next dividend period.



     2. Bid -- indicating its desire to sell shares of such series at $25,000
per share if the applicable rate for shares of such series for the next dividend
period is less than the rate or spread specified in the bid.



     3. Sell Order -- indicating its desire to sell shares of such series at
$25,000 per share without regard to the applicable rate for shares of such
series for the next dividend period.



     A beneficial owner of Preferred Shares may submit different types of orders
to its Broker-Dealer with respect to Preferred Shares then held by the
beneficial owner. A beneficial owner that submits a bid to its Broker-Dealer
having a rate higher than the maximum rate on the auction date will be treated
as having submitted a sell order to its Broker-Dealer. A beneficial owner that
fails to submit an order to its Broker-Dealer will ordinarily be deemed to have
submitted a hold order to its Broker-Dealer. However, if a beneficial owner
fails to submit an order for some or all of its shares to its Broker-Dealer for
an auction relating to a dividend period of more than 91 days, such beneficial
owner will be deemed to have submitted a sell order for such shares to its
Broker-Dealer. A sell order constitutes an irrevocable offer to sell the
Preferred Shares subject to the sell order. A beneficial owner that offers to
become the beneficial owner of additional Preferred Shares is, for the purposes
of such offer, a potential holder as discussed below.


     A potential holder is either a customer of a Broker-Dealer that is not a
beneficial owner of Preferred Shares but that wishes to purchase shares of such
series or that is a beneficial owner of shares of such series that wishes to
purchase additional shares of such series. A potential holder may submit bids to
its Broker-Dealer in which it offers to purchase shares of such series at
$25,000 per share if the applicable rate for the next dividend period is not
less than the specified rate in such bid. A bid placed by a potential holder
specifying a rate higher than the maximum rate for shares of such series on the
auction date will not be accepted.

     The Broker-Dealers in turn will submit the orders of their respective
customers who are beneficial owners and potential holders to the auction agent.
They will designate themselves (unless otherwise permitted by the Fund) as
existing holders of shares subject to orders submitted or deemed submitted to
them by beneficial owners. They will designate themselves as potential holders
of shares subject to orders
                                        44
<PAGE>

submitted to them by potential beneficial owners. However, neither the Fund nor
the auction agent will be responsible for a Broker-Dealer's failure to comply
with these procedures. Any order placed with the auction agent by a
Broker-Dealer as or on behalf of an existing holder or a potential holder will
be treated the same way as an order placed with a Broker-Dealer by a beneficial
owner or potential holder. Similarly, any failure by a Broker-Dealer to submit
to the auction agent an order for any Preferred Shares held by it or customers
who are beneficial owners will be treated as a beneficial owner's failure to
submit to its Broker-Dealer an order in respect of Preferred Shares held by it.
A Broker-Dealer may also submit orders to the auction agent for its own account
as an existing holder or potential holder, provided it is not an affiliate of
the Fund.


     There are sufficient clearing bids in an auction if the number of shares
subject to bids submitted or deemed submitted to the auction agent by
Broker-Dealers for potential holders with rates or spreads equal to or lower
than the maximum rate is at least equal to the number of shares of such series
subject to sell orders and the number of shares of such series subject to bids
specifying rates or spreads higher than the maximum rate for such series
submitted or deemed submitted to the auction agent by Broker-Dealers for
existing holders of such series. If there are sufficient clearing bids, the
applicable rate for shares of such series for the next succeeding dividend
period thereof will be the lowest rate specified in the submitted bids which,
taking into account such rate and all lower rates bid by Broker-Dealers as or on
behalf of existing holders and potential holders, would result in existing
holders and potential holders owning the shares of such series available for
purchase in the auction.



     If there are not sufficient clearing bids for such series, the applicable
rate for the next dividend period will be the maximum rate on the auction date.
However, if the Fund has declared a special dividend period and there are not
sufficient clearing bids, the election of a special dividend period will not be
effective and the applicable rate for the next dividend period will be the same
as during the current dividend period. If there are not sufficient clearing
bids, beneficial owners of Preferred Shares that have submitted or are deemed to
have submitted sell orders may not be able to sell in the auction all shares
subject to such sell orders. If all of the outstanding Preferred Shares are the
subject of submitted hold orders, then the dividend period following the auction
will automatically be the same length as the preceding dividend period and the
applicable rate for the next dividend period will be the all hold rate. The all
hold rate is 80% of the applicable Reference Rate.


     The auction procedures include a prorata allocation of shares for purchase
and sale which may result in an existing holder continuing to hold or selling,
or a potential holder purchasing, a number of Preferred Shares that is different
than the number of shares specified in its order. To the extent the allocation
procedures have that result, Broker-Dealers that have designated themselves as
existing holders or potential holders in respect of customer orders will be
required to make appropriate prorata allocations among their respective
customers.


     Settlement of purchases and sales will be made on the next business day
(which is also a dividend payment date) after the auction date through DTC.
Purchasers will make payment through their agent members in same-day funds to
DTC against delivery to their respective agent members. DTC will make payment to
the sellers' agent members in accordance with DTC's normal procedures, which now
provide for payment against delivery by their agent members in same-day funds.



     The auctions for Series M, TU, W, TH and F Preferred Shares will normally
be held every seven days and the auctions for Series A and B Preferred Shares
will normally be held every 28 days. Each subsequent dividend period will
normally begin on the following business day.



     If an auction date is not a business day because the New York Stock
Exchange is closed for business for more than three consecutive business days
due to an act of God, natural disaster, act of war, civil or military
disturbance, act of terrorism, sabotage, riots or a loss or malfunction of
utilities or communications services, or the auction agent is not able to
conduct an auction in accordance with the auction procedures for any reason,
then the applicable rate for the next dividend period will be the applicable
rate determined on the previous auction date.


                                        45
<PAGE>


     If a dividend payment date is not a business day because the New York Stock
Exchange is closed for business for more than three consecutive business days
due to an act of God, natural disaster, act of war, civil or military
disturbance, act of terrorism, sabotage, riots or a loss or malfunction of
utilities or communications services, or the dividend payable on such date can
not be paid for any such reason, then:



     - the dividend payment date for the affected dividend period will be the
       next business day on which the trust and its paying agent, if any, can
       pay the dividend;


     - the affected dividend period will end on the day it otherwise would have
       ended; and

     - the next dividend period will begin and end on the dates on which it
       otherwise would have begun and ended.


     The following is a simplified example of how a typical auction works.
Assume that the Fund has 1,000 outstanding Preferred Shares of any series, and
three existing holders. The three existing holders and three potential holders
submit orders through Broker-Dealers at the auction:



<Table>
<S>                          <C>                          <C>
Existing Holder A..........  Owns 500 shares, wants to    Bid order of 4.1% rate for
                             sell all 500 shares if       500 shares
                             auction rate is less than
                             4.1%
Existing Holder B..........  Owns 300 shares, wants to    Hold order -- will take the
                             hold                         auction rate
Existing Holder C..........  Owns 200 shares, wants to    Bid order of 3.9% rate for
                             sell all 200 shares if       200 shares
                             auction rate is less than
                             3.9%
Potential Holder D.........  Wants to buy 200 shares      Places order to buy at or
                                                          above 4.0%
Potential Holder E.........  Wants to buy 300 shares      Places order to buy at or
                                                          above 3.9%
Potential Holder F.........  Wants to buy 200 shares      Places order to buy at or
                                                          above 4.1%
</Table>



     The lowest dividend rate that will result in all 1,000 Preferred Shares
continuing to be held is 4.0% (the offer by D). Therefore, the dividend rate
will be 4.0%. Existing holders B and C will continue to own their shares.
Existing holder A will sell its shares because A's dividend rate bid was higher
than the dividend rate. Potential holder D will buy 200 shares and potential
holder E will buy 300 shares because their bid rates were at or below the
dividend rate. Potential holder F will not buy any shares because its bid rate
was above the dividend rate.


SECONDARY MARKET TRADING AND TRANSFER OF PREFERRED SHARES

     The underwriters are not required to make a market in the Preferred Shares.
The Broker-Dealers (including the underwriters) may maintain a secondary trading
market for outside of auctions, but they are not required to do so. There can be
no assurance that a secondary trading market for Preferred Shares will develop
or, if it does develop, that it will provide owners with liquidity of
investment. Preferred Shares will not be registered on any stock exchange or on
the Nasdaq market.


     Investors who purchase Preferred Shares in an auction for a special
dividend period should note that because the dividend rate on such shares will
be fixed for the length of that dividend period, the value of such shares may
fluctuate in response to the changes in interest rates, and may be more or less
than their original cost if sold on the open market in advance of the next
auction thereof, depending on market conditions.


                                        46
<PAGE>

     A beneficial owner or an existing holder may sell, transfer or otherwise
dispose of Preferred Shares only in whole shares and only:

     - pursuant to a bid or sell order placed with the auction agent in
       accordance with the auction procedures;

     - to a Broker-Dealer; or

     - to such other persons as may be permitted by the Fund; provided, however,
       that (x) if you hold your Preferred Shares in the name of a
       Broker-Dealer, a sale or transfer of your Preferred Shares to that
       Broker-Dealer, or to another customer of that Broker-Dealer, will not be
       considered a sale or transfer for purposes of the foregoing if that
       Broker-Dealer remains the existing holder of the Preferred Shares
       immediately after the transaction and (y) in the case of all transfers,
       other than through an auction, the Broker-Dealer (or other person, if the
       Fund permits) receiving the transfer will advise the auction agent of the
       transfer.

     Further description of the auction procedures can be found in the
Statement.

                           DESCRIPTION OF BORROWINGS


     The Agreement and Declaration of Trust authorizes the Fund, without prior
approval of holders of common and preferred shares, including Preferred Shares,
to borrow money. In this connection, the Fund may issue notes or other evidence
of indebtedness (including bank borrowings or commercial paper) and may secure
any such borrowings by mortgaging, pledging or otherwise subjecting as security
the Fund's assets. In connection with such Borrowings, the Fund may be required
to maintain minimum average balances with the lender or to pay a commitment or
other fee to maintain a line of credit. Any such requirements will increase the
cost of borrowing over the stated interest rate.


     LIMITATIONS.  Under the requirements of the 1940 Act, the Fund, immediately
after issuing any Borrowings that are senior securities representing
indebtedness (as defined in the 1940 Act), must have an asset coverage of at
least 300%. With respect to any such Borrowings, asset coverage means the ratio
which the value of the total assets of the Fund, less all liabilities and
indebtedness not represented by senior securities, bears to the aggregate amount
of any such Borrowings that are senior securities representing indebtedness,
issued by the Fund. Certain types of Borrowings may also result in the Fund
being subject to covenants in credit agreements relating to asset coverages or
portfolio composition or otherwise. In addition, the Fund may be subject to
certain restrictions imposed by guidelines of one or more rating agencies which
may issue ratings for commercial paper or notes issued by the Fund. Such
restrictions may be more stringent than those imposed by the 1940 Act.

     DISTRIBUTION PREFERENCE.  The rights of lenders to the Fund to receive
interest on and repayment of principal of any such Borrowings will be senior to
those of the Preferred Shares shareholders, and the terms of any such Borrowings
may contain provisions which limit certain activities of the Fund, including the
payment of dividends to Preferred Shares shareholders in certain circumstances.


     VOTING RIGHTS.  The 1940 Act does (in certain circumstances) grant to the
lenders to the Fund certain voting rights in the event of default in the payment
of interest on or repayment of principal. In the event that such provisions
would impair the Fund's status as a regulated investment company under the Code,
the Fund, subject to its ability to liquidate its relatively illiquid portfolio,
intends to repay the Borrowings. Any Borrowings will likely be ranked senior or
equal to all other existing and future borrowings of the Fund, including
Preferred Shares.


     The discussion above describes the Board of Trustees' present intention
with respect to a possible offering of Borrowings. If the Board of Trustees
determines to authorize any of the foregoing, the terms may be the same as, or
different from, the terms described above, subject to applicable law and the
Fund's Declaration of Trust.

                                        47
<PAGE>

                          DESCRIPTION OF COMMON SHARES

     The Fund is authorized to issue an unlimited number of common shares,
without par value. The Board of Trustees is authorized, however, to classify and
reclassify any unissued shares into one or more additional classes or series of
shares. The Board of Trustees may establish such series or class, including
preferred shares, from time to time by setting or changing in any one or more
respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to dividends, qualifications or terms or
conditions of redemption of such shares and pursuant to such classification or
reclassification to increase or decrease the number of authorized shares of any
existing class or series. The Board of Trustees, without shareholder approval,
is authorized to amend the Agreement and Declaration of Trust and By-laws to
reflect the terms of any such class or series.

     Common shares, when issued and outstanding, will be fully paid and
non-assessable. Common shareholders are entitled to share prorata in the net
assets of the Fund available for distribution to common shareholders upon
liquidation of the Fund. Common shareholders are entitled to one vote for each
share held.

     So long as any Preferred Shares of the Fund are outstanding, holders of
common shares will not be entitled to receive any net income of or other
distributions from the Fund unless all accumulated dividends on Preferred Shares
have been paid, and unless asset coverage (as defined in the 1940 Act) with
respect to Preferred Shares would be at least 200% after giving effect to such
distributions.


     The common shares are listed on the New York Stock Exchange.


                        U.S. FEDERAL INCOME TAX MATTERS

     The following is a description of certain U.S. federal income tax
consequences to a shareholder that acquires, holds and/or disposes of Preferred
Shares of the Fund. The discussion reflects applicable tax laws of the United
States as of the date of this prospectus, which tax laws may be changed or
subject to new interpretations by the courts or the Internal Revenue Service
("IRS") retroactively or prospectively. No attempt is made to present a detailed
explanation of U.S. federal income tax concerns affecting the Fund and its
shareholders, and the discussion set forth herein does not constitute tax
advice. In addition, no attempt is made to present state, local or foreign tax
concerns or tax concerns applicable to an investor with a special tax status
such as a financial institutional or non-U.S. investors. INVESTORS ARE URGED TO
CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE TAX CONSEQUENCES TO THEM OF
INVESTING IN THE FUND.


     The Fund intends to elect to be treated, and to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), so that it will not pay U.S. federal income
tax on income and capital gains 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 and certain net foreign exchange gains as reduced by
certain deductible expenses) without regard to the deduction for dividends paid
and (ii) the excess of its gross tax-exempt interest, if any, over certain
disallowed deductions, the Fund will be relieved of U.S. federal income tax on
any income of the Fund, including long-term capital gains, distributed to
shareholders. However, if the Fund retains any investment company taxable income
or "net capital gain" (i.e., the excess of net long-term capital gain over net
short-term capital loss), it will be subject to U.S. federal income tax at
regular corporate rates (currently at the maximum rate of 35%) on the amount
retained. The Fund intends to distribute at least annually all or substantially
all of its investment company taxable income, net tax-exempt interest, and net
capital gain.



     Under the Code, the Fund will generally be subject to a nondeductible 4%
federal excise tax on the portion of its undistributed ordinary income and
capital gains if it fails to meet certain distribution requirements with respect
to each calendar year. The Fund intends to make distributions in a timely manner
and accordingly does not expect to be subject to this excise tax.

                                        48
<PAGE>


     If for any taxable year the Fund does not qualify as a regulated investment
company for U.S. federal income tax purposes, it would be treated in the same
manner as an ordinary corporation subject to U.S. federal income tax and
distributions to its shareholders would not be deducted by the Fund in computing
its taxable income. In such event, the Fund's distributions, to the extent
derived from the Fund's current or accumulated earnings and profits, would
generally constitute ordinary dividends, which would generally be eligible for
the dividends received deduction available to corporate shareholders.
Furthermore, individual and other noncorporate shareholders would generally be
able to treat such distributions as "qualified dividend income" eligible for
reduced rates of Federal income taxation in taxable years beginning on or before
2008.



     It is anticipated that Preferred Shares will constitute stock of the Fund,
and thus distributions with respect to Preferred Shares (other than capital gain
distributions and distributions in redemption of Preferred Shares subject to
Section 302(b) of the Code) will generally constitute dividends to the extent of
the Fund's current or accumulated earnings and profits, as calculated for
federal income tax purposes. Such dividends generally will be taxable as
ordinary income to holders and a portion of such dividends, if any, may qualify
for the dividends received deduction available to corporations under Section 243
of the Code and the reduced rate of taxation that applies to "qualified dividend
income" received by individual and other noncorporate shareholders under Section
1(h)(11) of the Code. Dividends designated by the Fund as capital gain
distributions will be treated as long-term capital gains in the hands of holders
regardless of the length of time such holders have held their 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 Preferred Shares and, thereafter, as capital gain. The IRS
currently requires that a regulated investment company that has two or more
classes of stock allocate to each such class proportionate amounts of each type
of its income (such as ordinary income and capital gains). Accordingly, the Fund
intends to designate distributions made with respect to Preferred Shares as
ordinary income, capital gain distributions, dividends qualifying for the
dividend's received deduction, if any, and "qualified dividend income," if any,
in proportion to the Preferred Shares' share of total dividends paid during the
year. See "U.S. Federal Income Tax Matters" in the Statement of Additional
Information.



     If the Fund retains any net capital gain, the Fund may designate the
retained amount as undistributed capital gains in a notice to shareholders who,
if subject to U.S. federal income tax on long-term capital gains, (i) will be
required to include in income as long-term capital gain, their proportionate
share of such undistributed amount and (ii) will be entitled to credit their
proportionate share of the tax paid by the Fund on the undistributed amount
against their U.S. federal income tax liabilities, if any, and to claim refunds
to the extent the credit exceeds such liabilities. If such an event occurs, the
tax basis of shares owned by a shareholder of the Fund will, for U.S. federal
income tax purposes, generally be increased by the difference between the amount
of undistributed net capital gain included in the shareholder's gross income and
the tax deemed to have been paid by the shareholders.



     Sales and other dispositions of the Preferred Shares are taxable events for
shareholders that are subject to federal income tax. Shareholders should consult
their own tax advisors with reference to their individual circumstances to
determine whether any particular transaction in the Preferred Shares is properly
treated as a sale for U.S. federal income tax purposes, as the following
discussion assumes, and the tax treatment of any gains or losses recognized in
such transactions. Any loss realized by a shareholder upon the sale or other
disposition of shares with a tax holding period of six months or less will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares. Losses on
sales or other dispositions of shares may be disallowed under the "wash sale"
rules in the event of other investments in the Fund (including those made
pursuant to reinvestment of dividends) within a period of 61 days beginning 30
days before and ending 30 days after a sale or other disposition of shares. In
such a case, the disallowed portion of any loss generally would be included in
the U.S. federal tax basis of the shares acquired in the other investments.


     The Fund is required in certain circumstances to backup withhold at a rate
of 28% on reportable payments including dividends, capital gain distributions
and proceeds of sales or other dispositions of the Preferred Shares paid to
certain holders of the Preferred Shares who do not furnish the Fund with their
                                        49
<PAGE>

correct social security number or other taxpayer identification number and
certain other certifications, or who are otherwise subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
from payments made to a shareholder may be refunded or credited against such
shareholder's U.S. federal income tax liability, if any, provided that the
required information is furnished to the IRS.


     Non-U.S. Shareholders of the Fund, including shareholders who, with respect
to the United States, are nonresident alien individuals, may be subject to U.S.
withholding tax on certain dividends and distributors at a rate of 30% or such
lower rates as may be prescribed by an applicable treaty.



     THE FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE PROVISIONS OF THE
CODE AND THE TREASURY REGULATIONS IN EFFECT AS THEY DIRECTLY GOVERN THE TAXATION
OF THE FUND AND ITS SHAREHOLDERS. THESE PROVISIONS ARE SUBJECT TO CHANGE BY
LEGISLATIVE OR ADMINISTRATIVE ACTION, AND ANY SUCH CHANGE MAY BE RETROACTIVE. A
MORE COMPLETE DISCUSSION OF THE TAX RULES APPLICABLE TO THE FUND CAN BE FOUND IN
THE STATEMENT OF ADDITIONAL INFORMATION WHICH IS INCORPORATED BY REFERENCE INTO
THIS PROSPECTUS. SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS REGARDING
SPECIFIC QUESTIONS AS TO U.S. FEDERAL, FOREIGN, STATE, AND LOCAL INCOME OR OTHER
TAXES.


                    CERTAIN PROVISIONS OF THE AGREEMENT AND
                        DECLARATION OF TRUST AND BY-LAWS

     The Fund's Agreement and Declaration of Trust includes provisions that
could have the effect of limiting the ability of other entities or persons to
acquire control of the Fund or to change the composition of its Board of
Trustees and could have the effect of depriving shareholders of an opportunity
to sell their shares at a premium over prevailing market prices by discouraging
a third party from seeking to obtain control of the Fund. These provisions,
however, have the advantage of potentially requiring persons seeking control of
the Fund to negotiate with its management regarding the price to be paid and
facilitating the continuity of the Fund's investment objective and policies. The
Board of Trustees of the Fund has considered these provisions and concluded that
they are in the best interests of the Fund.


     The Board of Trustees is divided into three classes of approximately equal
size. The terms of the Trustees of the different classes are staggered so that
approximately one third of the Board of Trustees is elected by shareholders each
year. A Trustee may be removed from office with or without cause by a vote of at
least a majority of the then Trustees if such removal is approved by the holders
of at least 75% of the shares entitled to vote with respect to the election of
such Trustee and present in person or by proxy at a meeting of shareholders
called for such purpose.



     In addition, the Agreement and Declaration of Trust requires the
affirmative vote of at least 75% of the outstanding shares entitled to vote on
the matter for the Trust to merge or consolidate with any other corporation,
association, trust or other organization or to sell, lease or exchange all or
substantially all of the Fund's assets; unless such action has been approved,
adopted or authorized by the affirmative vote of at least 75% of the Trustees
then in office, in which case, the affirmative vote of a majority of the
outstanding shares entitled to vote on the matter is required.


     In addition, conversion of the Fund to an open-end investment company would
require an amendment to the Fund's Agreement and Declaration of Trust. Such an
amendment would require the favorable vote of a majority of the then Trustees
followed by a favorable vote of the holders of at least 75% of the shares
entitled to vote on the matter, voting as separate classes or series (or a
majority of such shares if the amendment was previously approved by 75% of the
Trustees). Such a vote also would satisfy a separate requirement in the 1940 Act
that the change be approved by the shareholders. The Fund would be required to
redeem all of its outstanding Preferred Shares prior to its conversion to an
open-end investment company.

     Shareholders of an open-end investment company may require the company to
redeem their shares of common stock at any time (except in certain circumstances
as authorized by or under the 1940 Act) at their net asset value, less such
redemption charge, if any, as might be in effect at the time of a
                                        50
<PAGE>

redemption. If the Fund is converted to an open-end investment company, it could
be required to liquidate portfolio securities to meet requests for redemption,
and the common shares would no longer be listed on the New York Stock Exchange.
Conversion to an open-end investment company would also require changes in
certain of the Fund's investment policies and restrictions.


     In addition, the Agreement and Declaration of Trust requires the
affirmative vote or consent of a majority of the then Trustees followed by the
affirmative vote or consent of the holders of at least 75% of the shares of each
affected class or series of the Fund outstanding, voting separately as a class
or series, to approve, adopt or authorize certain transactions with 5% or
greater holders of a class or series of shares and their associates, unless the
transaction has been approved by at least 75% of the Trustees, in which case a
majority of the outstanding shares entitled to vote shall be required. For
purposes of these provisions, a 5% or greater holder of a class or series of
shares (a "Principal Shareholder") refers to any person who, whether directly or
indirectly and whether alone or together with its affiliates and associates,
beneficially owns 5% or more of the outstanding shares of any class or series of
shares of beneficial interest of the Fund. The 5% holder transactions subject to
these special approval requirements are:


     - the merger or consolidation of the Fund or any subsidiary of the Fund
       with or into any Principal Shareholder;

     - the issuance of any securities of the Fund to any Principal Shareholder
       for cash; or


     - the sale, lease or exchange to the Fund or any subsidiary of the Fund, in
       exchange for securities of the Fund, of any assets of any Principal
       Shareholder, except assets having an aggregate fair market value of less
       than $1,000,000, aggregating for the purpose of such computation all
       assets sold, leased or exchanged in any series of similar transactions
       within a 12-month period.


     The Fund may be terminated by the affirmative vote of not less than 75% of
the Trustees then in office by written notice to the shareholders.

     The Agreement and Declaration of Trust and By-laws provide that the Board
of Trustees has the power, to the exclusion of shareholders, to make, alter or
repeal any of the By-laws (except for any By-law specified not to be amended or
repealed by the Board), subject to the requirements of the 1940 Act. Neither
this provision of the Agreement and Declaration of Trust, nor any of the
foregoing provisions thereof requiring the affirmative vote of 75% of
outstanding shares of the Fund, can be amended or repealed except by the vote of
such required number of shares.

     The Fund's By-laws generally require that advance notice be given to the
Fund in the event a shareholder desires to nominate a person for election to the
Board of Trustees or to transact any other business at an annual meeting of
shareholders. With respect to an annual meeting following the first annual
meeting of shareholders, notice of any such nomination or business must be
delivered to or received at the principal executive offices of the Fund not less
than 90 calendar days nor more than 120 calendar days prior to the anniversary
date of the prior year's annual meeting (subject to certain exceptions). In the
case of the first annual meeting of shareholders, the notice must be given no
later than the tenth calendar day following public disclosure as specified in
the By-laws of the date of the meeting. Any notice by a shareholder must be
accompanied by certain information as provided in the By-laws.

                   CUSTODIAN, AUCTION AGENT, TRANSFER AGENT,
                      DIVIDEND PAYING AGENT AND REGISTRAR

     The Fund's securities and cash are held under a custodian agreement with
The Bank of New York, One Wall Street, New York, New York 10286. The Bank of New
York is also the transfer agent, dividend paying agent and registrar for the
Fund's common shares and the Preferred Shares. In addition, The Bank of New York
is the auction agent with respect to Preferred Shares.

                                        51
<PAGE>

                                  UNDERWRITING


     Citigroup Global Markets Inc. is acting as representative of the
underwriters named below. Subject to the terms and conditions stated in the
underwriting agreement dated the date hereof, each underwriter named below has
severally agreed to purchase, and the Fund has agreed to sell to such
underwriter, the number of Preferred Shares set forth opposite the name of such
underwriter.



<Table>
<Caption>
                                                               NUMBER OF SHARES OF UNDERWRITER
                                         ----------------------------------------------------------------------------
UNDERWRITER                              SERIES M   SERIES TU   SERIES W   SERIES TH   SERIES F   SERIES A   SERIES B
- -----------                              --------   ---------   --------   ---------   --------   --------   --------
<S>                                      <C>        <C>         <C>        <C>         <C>        <C>        <C>
Citigroup Global Markets Inc. .........
Merrill Lynch, Pierce, Fenner & Smith
            Incorporated...............
UBS Securities LLC.....................
                                         -------     -------    -------     -------    -------    -------    -------
       Total...........................
                                         =======     =======    =======     =======    =======    =======    =======
</Table>



     The underwriting agreement provides that the obligations of the
underwriters to purchase the Preferred Shares included in this offering are
subject to approval of certain legal matters by counsel and to certain other
conditions. The underwriters are obligated to purchase all the Preferred Shares
if they purchase any of the Preferred Shares.



     The underwriters propose to offer some of the Preferred Shares directly to
the public at the public offering price set forth on the cover page of this
prospectus and some of the Preferred Shares to certain dealers at the public
offering price less a concession not in excess of $     per Preferred Share. The
sales load the Fund will pay of $     per Preferred Share is equal to      % of
the initial offering price. The underwriters may allow, and such dealers may
reallow, a concession not in excess of $     per Preferred Share on sales to
certain other dealers. If all of the Preferred Shares are not sold at the
initial offering price, the representatives may change the public offering price
and other selling terms. Investors must pay for any Preferred Shares purchased
on or before           , 2004.



     The Fund and Calamos have each agreed that, for a period of 180 days from
the date of this prospectus, they will not, without the prior written consent of
Citigroup Global Markets Inc. on behalf of the underwriters, sell, contract to
sell, grant any options or warrants to purchase or otherwise dispose of, any
senior securities (as defined in the 1940 Act) of the Fund other than the
Preferred Shares, or any securities convertible into or exchangeable for senior
securities other than the Preferred Shares.


     The Fund anticipates that from time to time the underwriters may act as
brokers or dealers in connection with the execution of the Fund's portfolio
transactions after they have ceased to be underwriters and, subject to certain
restrictions, may act as brokers while they are underwriters. The underwriters
are active underwriters of, and dealers in, securities and act as market makers
in a number of such securities, and therefore can be expected to engage in
portfolio transactions with, and perform services for the Fund, subject to
applicable law.


     A prospectus in electronic format may be available on the website
maintained by one or more of the underwriters.


     The Fund anticipates that the underwriters or one of their respective
affiliates may, from time to time, act in auctions as Broker-Dealers and receive
fees as set forth under "The Auction" and in the Statement of Additional
Information.

     Certain underwriters have performed investment banking and advisory
services for Calamos and its affiliates from time to time, for which they have
received customary fees and expenses. Certain underwriters may, from time to
time, engage in transactions with or perform services for Calamos in the
ordinary course of business.


     The underwriting agreement provides that it may be terminated in the
absolute discretion of the representative, without liability on the part of any
underwriter to the Fund or Calamos, by notice to the Fund or Calamos if, prior
to the delivery of and payment for the Preferred Shares, (i) trading in the


                                        52
<PAGE>


Common Shares shall have been suspended by the SEC or the New York Stock
Exchange or trading in securities generally on the New York Stock Exchange shall
have been suspended or limited or minimum prices for trading in securities
generally shall have been established on such exchange, (ii) a banking
moratorium shall have been declared by either federal or New York state
authorities, or (iii) there shall have occurred any outbreak or escalation of
hostilities, declaration by the United States of a national emergency or war, or
other calamity or crisis the effect of which on financial markets in the United
States is such as to make it, in the representative's sole judgment,
impracticable or inadvisable to proceed with the offering or delivery of the
Preferred Shares as contemplated by this prospectus.


     The Fund and Calamos have agreed to indemnify the underwriters against
certain liabilities, including liabilities under the Securities Act of 1933, or
to contribute to payments the underwriters may be required to make because of
any of those liabilities. Insofar as indemnification for liability arising under
the Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Fund pursuant to the foregoing provisions, or
otherwise, the Fund 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 Fund of
expenses incurred or paid by a director, officer or controlling person of the
Fund 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 Fund 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.


     The principal business address of Citigroup Global Markets Inc. is 388
Greenwich Street, New York, New York 10013.


                                 LEGAL OPINIONS


     Bell, Boyd & Lloyd LLC, Chicago, Illinois, serves as counsel to the Fund
and to the non-interested Trustees. Vedder, Price, Kaufman & Kammholz, P.C.
("Vedder Price"), Chicago, Illinois, which is serving as special counsel to the
Fund in connection with the offering, will pass on the legality of the shares
offered hereby. Vedder Price is also counsel to Calamos. Certain matters will be
passed upon for the underwriters by Simpson Thacher & Bartlett LLP, New York,
New York. Vedder Price and Simpson Thacher & Bartlett LLP may rely on the
opinion of Morris, Nichols, Arsht & Tunnell, Wilmington, Delaware on certain
matters of Delaware law.


                                        53
<PAGE>

                             AVAILABLE 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 can be inspected and copied for a fee at the SEC's public
reference room, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the SEC's
Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 West
Madison Street, Chicago, Illinois 60661-2511. Reports, proxy statements, and
other information about the Trust can be inspected at the offices of the New
York Stock Exchange, 20 Broad Street, New York, New York 10005.


     This prospectus does not contain all of the information in the Fund's
registration statement, including amendments, exhibits, and schedules.
Statements in this 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 SEC. The SEC maintains a web site
(http://www.sec.gov) that contains the Trust's registration statement, other
documents incorporated by reference, and other information the Trust has filed
electronically with the Commission, including proxy statements and reports filed
under the Securities Exchange Act of 1934.

                                        54
<PAGE>

           TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION

<Table>
<S>                                                            <C>
Use of Proceeds.............................................    S-2
Investment Objective and Policies...........................    S-2
Investment Restrictions.....................................   S-22
Management of the Fund......................................   S-24
Portfolio Transactions......................................   S-31
Net Asset Value.............................................   S-32
Additional Information Concerning the Auctions for Preferred
  Shares....................................................   S-33
Repurchase of Common Shares.................................   S-34
U.S. Federal Income Tax Matters.............................   S-36
Custodian, Transfer Agent, Dividend Paying Agent and
  Registrar.................................................   S-41
Experts.....................................................   S-42
Additional Information......................................   S-42
Financial Statement and Independent Auditors' Report........    F-1
Appendix A -- Statement of Preference of Preferred Shares...    A-1
Appendix B -- Description of Ratings........................    B-1
</Table>

                                        55
<PAGE>

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


                                 $1,080,000,000


                            CALAMOS STRATEGIC TOTAL
                                  RETURN FUND
                                PREFERRED SHARES


                            7,040 SHARES, SERIES M


                            7,040 SHARES, SERIES TU


                            7,040 SHARES, SERIES W


                            7,040 SHARES, SERIES TH


                            7,040 SHARES, SERIES F


                            4,000 SHARES, SERIES A


                            4,000 SHARES, SERIES B

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

                                   PROSPECTUS


                                        , 2004


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

                                   CITIGROUP


                              MERRILL LYNCH & CO.


                              UBS INVESTMENT BANK

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

The information in this Statement of Additional Information is not complete and
may be changed. We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
Statement of Additional Information is not an offer to sell these securities and
is not soliciting an offer to buy these securities in any state where the offer
or sale is not permitted.


                   SUBJECT TO COMPLETION, DATED APRIL 28, 2004


                       CALAMOS STRATEGIC TOTAL RETURN FUND

                       STATEMENT OF ADDITIONAL INFORMATION


         Calamos Strategic Total Return Fund (the "Fund") is a recently
organized, diversified, closed-end management investment company. This Statement
of Additional Information relating to Preferred Shares ("Preferred Shares") does
not constitute a prospectus, but should be read in conjunction with the
prospectus relating thereto dated ____,2004. This Statement of Additional
Information does not include all information that a prospective investor should
consider before purchasing and investors should obtain and read the Prospectus
prior to purchasing such shares. A copy of the prospectus may be obtained
without charge by calling 1-800-582-6959. You may also obtain a copy of the
prospectus on the Securities and Exchange Commission's web site
(http://www.sec.gov). Capitalized terms used but not defined in this Statement
of Additional Information have the same meanings ascribed to them in the
prospectus or the Statement of Preferences of Preferred Shares (the "Statement")
attached as Appendix A.


            TABLE OF CONTENTS FOR STATEMENT OF ADDITIONAL INFORMATION

<TABLE>
<S>                                                                                        <C>
Use of Proceeds.................................................................            S-2
Investment Objective and Policies...............................................            S-2
Investment Restrictions.........................................................           S-22
Management of the Fund..........................................................           S-24
Portfolio Transactions..........................................................           S-31
Net Asset Value.................................................................           S-32
Additional Information Concerning the Auctions for Preferred Shares.............           S-33
Repurchase of Common Shares.....................................................           S-34
U.S. Federal Income Tax Matters.................................................           S-36
Custodian, Transfer Agent, Dividend Paying Agent and Registrar..................           S-41
Experts.........................................................................           S-42
Additional Information..........................................................           S-42
Financial Statement and Independent Auditors' Report............................            F-1
Appendix A -- Statement of Preference of Preferred Shares.......................            A-1
Appendix B -- Description of Ratings............................................            B-1
</TABLE>


         This Statement of Additional Information is dated   , 2004.


                                       S-1
<PAGE>

                                 USE OF PROCEEDS


         The Fund will invest the net proceeds of the offering in accordance
with the Fund's investment objective and policies as stated below and in the
Prospectus. It is presently anticipated that the Fund will be able to invest
substantially all of the net proceeds in securities that meet the investment
objective and policies within three months after completion of the offering.
Pending such investment, the net proceeds may be invested in U.S. government
securities high-grade, short-term money market instruments. If necessary, the
Fund may also purchase, as temporary investments, securities of other open- or
closed-end investment companies that invest primarily the types of securities in
which the Fund may invest directly.


                        INVESTMENT OBJECTIVE AND POLICIES


         The prospectus presents the investment objective and the principal
investment strategies and risks of the Fund. This section supplements the
disclosure in the Fund's prospectus and provides additional information on the
Fund's investment policies or restrictions. Restrictions or policies stated as a
maximum percentage of the Fund's assets are only applied immediately after a
portfolio investment to which the policy or restriction is applicable (other
than the limitations on borrowing or investment in illiquid securities).
Accordingly, any later increase or decrease resulting from a change in values,
net assets or other circumstances will not be considered in determining whether
the investment complies with the Fund's restrictions and policies.


         PRIMARY INVESTMENTS. Under normal circumstances, the Fund will invest
primarily in common and preferred stock, convertible securities and income
producing securities such as investment grade and below investment grade debt
securities. The Fund, under normal circumstances, will invest at least 50% of
its managed assets in equity securities (including securities that are
convertible into equity securities). The Fund may invest up to 35% of its
managed assets in securities of foreign issuers, including debt and equity
securities of corporate issuers and debt securities of government issuers in
developed and emerging markets. The Fund may invest up to 15% of its managed
assets in securities of foreign issuers in emerging markets. "Managed Assets"
means the total assets of the Fund (including any assets attributable to any
leverage that may be outstanding) minus the sum of accrued liabilities (other
than debt representing financial leverage). For this purpose the liquidation
preference on any preferred shares will not constitute a liability.

         Calamos will dynamically allocate the Fund's investments among multiple
asset classes, seeking to obtain an appropriate balance of risk and reward
through all market cycles using multiple strategies and combining them to seek
to achieve favorable risk adjusted returns.

         Calamos analyzes securities for the Fund's portfolio using an approach
that focuses on assessing a total enterprise value before assessing the value of
the securities issued by a company. Calamos seeks to assess the value of an
issuer's total enterprise by studying its financial statements, including its
balance sheet. Once enterprise value is determined, Calamos seeks to assess the
value of the issuer's different types of securities, taking into account the
business risk of the issuer, its competitive position and the seniority of each
type of security relative to the rest of the issuer's capital structure. This
approach serves as the basis for the Calamos research team's design and use of
proprietary models which, along with risk management and portfolio construction
techniques, assist in determining whether a given security presents an
investment opportunity for the Fund.

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

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

                                      S-2
<PAGE>

receiving income from that stock. In certain varying circumstances, an issuer
may redeem its preferred stock prior to a specified date in the event of certain
tax or legal changes or at the issuer's call. In the event of a redemption, the
Fund may not be able to reinvest the proceeds at comparable rates of return.
Preferred stocks typically do not provide any voting rights, except incases when
dividends are in arrears for a specified number of periods.

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

         HIGH YIELD SECURITIES. The high yield securities in which the Fund
invests are rated Ba or lower by Moody's or BB or lower by Standard & Poor's or
are unrated but determined by Calamos to be of comparable quality.
Non-convertible debt securities rated below investment grade are commonly
referred to as "junk bonds" and are considered speculative with respect to the
issuer's capacity to pay interest and repay principal.

         INVESTMENT IN HIGH YIELD SECURITIES INVOLVES SUBSTANTIAL RISK OF LOSS.
Below investment grade non-convertible debt securities or comparable unrated
securities are commonly referred to as "junk bonds" and are considered
predominantly speculative with respect to the issuer's ability to pay interest
and principal and are susceptible to default or decline in market value due to
adverse economic and business developments. The market values for high yield
securities tend to be very volatile, and these securities are less liquid than
investment grade debt securities. For these reasons, your investment in the Fund
is subject to the following specific risks:

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

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

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

         -  if a negative perception of the high yield market develops, the
            price and liquidity of high yield securities may be depressed. This
            negative perception could last for a significant period of time.

         Securities rated below investment grade are speculative with respect to
the capacity to pay interest and repay principal in accordance with the terms of
such securities. A rating of C from Moody's means that the issue so rated can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. Standard & Poor's assigns a rating of C to issues that are
currently highly vulnerable to nonpayment, and the C rating may be used to cover
a situation where a bankruptcy petition has been filed or similar action taken,
but payments on the obligation are being continued (a C rating is also assigned
to a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying). See Appendix A to this statement of additional
information for a description of Moody's and Standard & Poor's ratings.

                                      S-3
<PAGE>

         Adverse changes in economic conditions are more likely to lead to a
weakened capacity of a high yield issuer to make principal payments and interest
payments than an investment grade issuer. The principal amount of high yield
securities outstanding has proliferated in the past decade as an increasing
number of issuers have used high yield securities for corporate financing. An
economic downturn could severely affect the ability of highly leveraged issuers
to service their debt obligations or to repay their obligations upon maturity.
Similarly, down-turns in profitability in specific industries could adversely
affect the ability of high yield issuers in that industry to meet their
obligations. The market values of lower quality debt securities tend to reflect
individual developments of the issuer to a greater extent than do higher quality
securities, which react primarily to fluctuations in the general level of
interest rates. Factors having an adverse impact on the market value of lower
quality securities may have an adverse effect on the Fund's net asset value and
the market value of its common shares. In addition, the Fund may incur
additional expenses to the extent it is required to seek recovery upon a default
in payment of principal or interest on its portfolio holdings. In certain
circumstances, the Fund may be required to foreclose on an issuer's assets and
take possession of its property or operations. In such circumstances, the Fund
would incur additional costs in disposing of such assets and potential
liabilities from operating any business acquired.

         The secondary market for high yield securities may not be as liquid as
the secondary market for more highly rated securities, a factor which may have
an adverse effect on the Fund's ability to dispose of a particular security when
necessary to meet its liquidity needs. There are fewer dealers in the market for
high yield securities than investment grade obligations. The prices quoted by
different dealers may vary significantly and the spread between the bid and
asked price is generally much larger than higher quality instruments. Under
adverse market or economic conditions, the secondary market for high yield
securities could contract further, independent of any specific adverse changes
in the condition of a particular issuer, and these instruments may become
illiquid. As a result, the Fund could find it more difficult to sell these
securities or may be able to sell the securities only at prices lower than if
such securities were widely traded. Prices realized upon the sale of such lower
rated or unrated securities, under these circumstances, may be less than the
prices used in calculating the Fund's net asset value.

         Since investors generally perceive that there are greater risks
associated with lower quality debt securities of the type in which the Fund may
invest a portion of its assets, the yields and prices of such securities may
tend to fluctuate more than those for higher rated securities. In the lower
quality segments of the debt securities market, changes in perceptions of
issuers' creditworthiness tend to occur more frequently and in a more pronounced
manner than do changes in higher quality segments of the debt securities market,
resulting in greater yield and price volatility.

         If the Fund invests in high yield securities that are rated C or below,
the Fund will incur significant risk in addition to the risks associated with
investments in high yield securities and corporate loans. Distressed securities
frequently do not produce income while they are outstanding. The Fund may
purchase distressed securities that are in default or the issuers of which are
in bankruptcy. The Fund may be required to bear certain extraordinary expenses
in order to protect and recover its investment.

         DISTRESSED SECURITIES. The Fund may, but currently does not intend to,
invest up to 5% of its total assets in distressed securities, including
corporate loans, which are the subject of bankruptcy proceedings or otherwise in
default as to the repayment of principal and/or payment of interest at the time
of acquisition by the Fund or are rated in the lower rating categories (Ca or
lower by Moody's or CC or lower by Standard & Poor's) or which are unrated
investments considered by Calamos to be of comparable quality. Investment in
distressed securities is speculative and involves significant risk. Distressed
securities frequently do not produce income while they are outstanding and may
require the Fund to bear certain extraordinary expenses in order to protect and
recover its investment. Therefore, to the extent the Fund seeks capital
appreciation through investment in distressed securities, the Fund's

                                      S-4
<PAGE>

ability to achieve current income for its shareholders may be diminished. The
Fund also will be subject to significant uncertainty as to when and in what
manner and for what value the obligations evidenced by the distressed securities
will eventually be satisfied (e.g., through a liquidation of the obligor's
assets, an exchange offer or plan of reorganization involving the distressed
securities or a payment of some amount in satisfaction of the obligation). In
addition, even if an exchange offer is made or a plan of reorganization is
adopted with respect to distressed securities held by the Fund, there can be no
assurance that the securities or other assets received by the Fund in connection
with such exchange offer or plan of reorganization will not have a lower value
or income potential than may have been anticipated when the investment was made.
Moreover, any securities received by the Fund upon completion of an exchange
offer or plan of reorganization may be restricted as to resale. As a result of
the Fund's participation in negotiations with respect to any exchange offer or
plan of reorganization with respect to an issuer of distressed securities, the
Fund may be restricted from disposing of such securities.


         LOANS. The Fund may invest up to 5% of its total assets in loan
participations and other direct claims against a borrower. The corporate loans
in which the Fund invests primarily consist of direct obligations of a borrower
and may include debtor in possession financings pursuant to Chapter 11 of the
U.S. Bankruptcy Code, obligations of a borrower issued in connection with a
restructuring pursuant to Chapter 11 of the U.S. Bankruptcy Code, leveraged
buy-out loans, leveraged recapitalization loans, receivables purchase
facilities, and privately placed notes. The Fund may invest in a corporate loan
at origination as a co-lender or by acquiring in the secondary market
participations in, assignments of or novations of a corporate loan. By
purchasing a participation, the Fund acquires some or all of the interest of a
bank or other lending institution in a loan to a corporate or government
borrower. The participations typically will result in the Fund having a
contractual relationship only with the lender not the borrower. The Fund will
have the right to receive payments of principal, interest and any fees to which
it is entitled only from the lender selling the participation and only upon
receipt by the lender of the payments from the borrower. Many such loans are
secured, although some may be unsecured. Such loans may be in default at the
time of purchase. Loans that are fully secured offer the Fund more protection
than an unsecured loan in the event of non-payment of scheduled interest or
principal. However, there is no assurance that the liquidation of collateral
from a secured loan would satisfy the corporate borrower's obligation, or that
the collateral can be liquidated. Direct debt instruments may involve a risk of
loss in case of default or insolvency of the borrower and may offer less legal
protection to the Fund in the event of fraud or misrepresentation. In addition,
loan participations involve a risk of insolvency of the lending bank or other
financial intermediary. The markets in loans are not regulated by federal
securities laws or the Securities and Exchange Commission (SEC).


         As in the case of other high yield investments, such corporate loans
may be rated in the lower rating categories of the established rating services
(Ba or lower by Moody's or BB or lower by Standard & Poor's), or may be unrated
investments considered by Calamos to be of comparable quality. As in the case of
other high yield investments, such corporate loans can be expected to provide
higher yields than lower yielding, higher rated fixed income securities, but may
be subject to greater risk of loss of principal and income. There are, however,
some significant differences between corporate loans and high yield bonds.
Corporate loan obligations are frequently secured by pledges of liens and
security interests in the assets of the borrower, and the holders of corporate
loans are frequently the beneficiaries of debt service subordination provisions
imposed on the borrower's bondholders. These arrangements are designed to give
corporate loan investors preferential treatment over high yield investors in the
event of a deterioration in the credit quality of the issuer. Even when these
arrangements exist, however, there can be no assurance that the borrowers of the
corporate loans will repay principal and/or pay interest in full. Corporate
loans generally bear interest at rates set at a margin above a generally
recognized base lending rate that may fluctuate on a day-to-day basis, in the
case of the prime rate of a U.S. bank, or which may be adjusted on set dates,
typically 30 days but generally not more than one year, in the case of the
London Interbank Offered Rate. Consequently, the value of corporate loans held
by the Fund may be expected to

                                      S-5
<PAGE>

fluctuate significantly less than the value of other fixed rate high yield
instruments as a result of changes in the interest rate environment. On the
other hand, the secondary dealer market for certain corporate loans may not be
as well developed as the secondary dealer market for high yield bonds, and
therefore presents increased market risk relating to liquidity and pricing
concerns.

         FOREIGN SECURITIES. The Fund may invest up to 35% of its managed assets
in securities of foreign issuers. The Fund may invest up to 15% of its managed
assets in securities of foreign issuers in emerging markets. For these purposes,
foreign securities do not include American Depositary Receipts ("ADRs") or
securities guaranteed by a United States person, but may include foreign
securities in the form of European Depositary Receipts ("EDRs"), Global
Depositary Receipts ("GDRs") or other securities representing underlying shares
of foreign issuers. Positions in those securities are not necessarily
denominated in the same currency as the common stocks into which they may be
converted. ADRs are receipts typically issued by an American bank or trust
company evidencing ownership of the underlying securities. EDRs are European
receipts listed on the Luxembourg Stock Exchange evidencing a similar
arrangement. GDRs are U.S. dollar-denominated receipts evidencing ownership of
foreign securities. Generally, ADRs, in registered form, are designed for the
U.S. securities markets and EDRs and GDRs, in bearer form, are designed for use
in foreign securities markets. The Fund may invest in sponsored or unsponsored
ADRs. In the case of an unsponsored ADR, the Fund is likely to bear its
proportionate share of the expenses of the depository and it may have greater
difficulty in receiving shareholder communications than it would have with a
sponsored ADR. To the extent positions in portfolio securities are denominated
in foreign currencies, the Fund's investment performance is affected by the
strength or weakness of the U.S. dollar against those currencies. For example,
if the dollar falls in value relative to the Japanese yen, the dollar value of a
Japanese stock held in the portfolio will rise even though the price of the
stock remains unchanged. Conversely, if the dollar rises in value relative to
the yen, the dollar value of the Japanese stock will fall. (Seediscussion of
transaction hedging and portfolio hedging below under "Currency Exchange
Transactions.")

         Investors should understand and consider carefully the risks involved
in foreign investing. Investing in foreign securities, which are generally
denominated in foreign currencies, and utilization of forward foreign currency
exchange contracts involve certain considerations comprising both risks and
opportunities not typically associated with investing in U.S. securities. These
considerations include: fluctuations in exchange rates of foreign currencies;
possible imposition of exchange control regulation or currency restrictions that
would prevent cash from being brought back to the United States less public
information with respect to issuers of securities; less governmental supervision
of stock exchanges, securities brokers, and issuers of securities; lack of
uniform accounting, auditing and financial reporting standards; lack of uniform
settlement periods and trading practices; less liquidity and frequently greater
price volatility in foreign markets than in the United States; possible
imposition of foreign taxes; and sometimes less advantageous legal, operational
and financial protections applicable to foreign sub-custodial arrangements.

         Although the Fund intends to invest in companies and government
securities of countries having stable political environments, there is the
possibility of expropriation or confiscatory taxation, seizure or
nationalization of foreign bank deposits or other assets, establishment of
exchange controls, the adoption of foreign government restrictions, or other
adverse political, social or diplomatic developments that could affect
investment in these nations.

         The Fund may invest in the securities of emerging countries. The
securities markets of emerging countries are substantially smaller, less
developed, less liquid and more volatile than the securities markets of the U.S.
and other more developed countries. Disclosure and regulatory standards in many
respects are less stringent than in the U.S. and other major markets. There also
may be a lower level of monitoring and

                                      S-6
<PAGE>

regulation of emerging markets and the activities of investors in such markets,
and enforcement of existing regulations has been extremely limited. Economies in
individual emerging markets may differ favorably or unfavorably from the U.S.
economy in such respects as growth of gross domestic product, rates of
inflation, currency depreciation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many emerging market
countries have experienced high rates of inflation for many years, which has had
and may continue to have very negative effects on the economies and securities
markets of those countries.

         CURRENCY EXCHANGE TRANSACTIONS. Currency exchange transactions may be
conducted either on a spot (i.e., cash) basis at the spot rate for purchasing or
selling currency prevailing in the foreign exchange market or through forward
currency exchange contracts ("forward contracts"). Forward contracts are
contractual agreements to purchase or sell a specified currency at a specified
future date (or within a specified time period) and price set at the time of the
contract. Forward contracts are usually entered into with banks, foreign
exchange dealers and broker-dealers, are not exchange traded, and are usually
for less than one year, but may be renewed.

         Forward currency exchange transactions may involve currencies of the
different countries in which the Fund may invest and serve as hedges against
possible variations in the exchange rate between these currencies. Currency
exchange transactions are limited to transaction hedging and portfolio hedging
involving either specific transactions or portfolio positions, except to the
extent described below under "Synthetic Foreign Money Market Positions."
Transaction hedging is the purchase or sale of forward contracts with respect to
specific receivables or payables of the Fund accruing in connection with the
purchase and sale of its portfolio securities or the receipt of dividends or
interest thereon. Portfolio hedging is the use of forward contracts with respect
to portfolio security positions denominated or quoted in a particular foreign
currency. Portfolio hedging allows the Fund to limit or reduce its exposure in a
foreign currency by entering into a forward contract to sell such foreign
currency (or another foreign currency that acts as a proxy for that currency) at
a future date for a price payable in U.S. dollars so that the value of the
foreign denominated portfolio securities can be approximately matched by a
foreign denominated liability. The Fund may not engage in portfolio hedging with
respect to the currency of a particular country to an extent greater than the
aggregate market value (at the time of making such sale) of the securities held
in its portfolio denominated or quoted in that particular currency, except that
the Fund may hedge all or part of its foreign currency exposure through the use
of a basket of currencies or a proxy currency where such currencies or currency
act as an effective proxy for other currencies. In such a case, the Fund may
enter into a forward contract where the amount of the foreign currency to be
sold exceeds the value of the securities denominated in such currency. The use
of this basket hedging technique may be more efficient and economical than
entering into separate forward contracts for each currency held in the Fund. The
Fund may not engage in "speculative" currency exchange transactions.

         If the Fund enters into a forward contract, the Fund's custodian will
segregate liquid assets of the Fund having a value equal to the Fund's
commitment under such forward contract. At the maturity of the forward contract
to deliver a particular currency, the Fund may either sell the portfolio
security related to the contract and make delivery of the currency, or it may
retain the security and either acquire the currency on the spot market or
terminate its contractual obligation to deliver the currency by purchasing an
offsetting contract with the same currency trader obligating it to purchase on
the same maturity date the same amount of the currency. It is impossible to
forecast with absolute precision the market value of portfolio securities at the
expiration of a forward contract. Accordingly, it may be necessary for a Fund to
purchase additional currency on the spot market (and bear the expense of such
purchase) if the market value of the security is less than the amount of
currency the Fund is obligated to deliver and if a decision is made to sell the
security and make delivery of the currency. Conversely, it may be necessary to
sell on the spot market some of the currency received upon the sale of the
portfolio security if its market value exceeds the amount of currency the Fund
is obligated to deliver.

                                      S-7
<PAGE>

         If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund will incur a gain or a loss to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
currency. Should forward prices decline during the period between the Fund's
entering into a forward contract for the sale of a currency and the date it
enters into an offsetting contract for the purchase of the currency, the Fund
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should forward
prices increase, the Fund will suffer a loss to the extent the price of the
currency it has agreed to purchase exceeds the price of the currency it has
agreed to sell. A default on the contract would deprive the Fund of unrealized
profits or force the Fund to cover its commitments for purchase or sale of
currency, if any, at the current market price.

         Hedging against a decline in the value of a currency does not eliminate
fluctuations in the value of a portfolio security traded in that currency or
prevent a loss if the value of the security declines. Hedging transactions also
preclude the opportunity for gain if the value of the hedged currency should
rise. Moreover, it may not be possible for a Fund to hedge against a devaluation
that is so generally anticipated that the Fund is not able to contract to sell
the currency at a price above the devaluation level it anticipates. The cost to
the Fund of engaging in currency exchange transactions varies with such factors
as the currency involved, the length of the contract period, and prevailing
market conditions. Because currency exchange transactions are usually conducted
on a principal basis, no fees or commissions are involved.

         SYNTHETIC FOREIGN MONEY MARKET POSITIONS. The Fund may invest in money
market instruments denominated in foreign currencies. In addition to, or in lieu
of, such direct investment, the Fund may construct a synthetic foreign money
market position by (a) purchasing a money market instrument denominated in one
currency, generally U.S. dollars, and (b) concurrently entering into a forward
contract to deliver a corresponding amount of that currency in exchange for a
different currency on a future date and at a specified rate of exchange. For
example, a synthetic money market position in Japanese yen could be constructed
by purchasing a U.S. dollar money market instrument, and entering concurrently
into a forward contract to deliver a corresponding amount of U.S. dollars in
exchange for Japanese yen on a specified date and at a specified rate of
exchange. Because of the availability of a variety of highly liquid short-term
U.S. dollar money market instruments, a synthetic money market position
utilizing such U.S. dollar instruments may offer greater liquidity than direct
investment in foreign currency and a concurrent construction of a synthetic
position in such foreign currency, in terms of both income yield and gain or
loss from changes in currency exchange rates, in general should be similar, but
would not be identical because the components of the alternative investments
would not be identical.

         DEBT OBLIGATIONS OF NON-U.S. GOVERNMENTS. An investment in debt
obligations of non-U.S. governments and their political subdivisions (sovereign
debt) involves special risks that are not present in corporate debt obligations.
The non-U.S. issuer of the sovereign debt or the non-U.S. governmental
authorities that control the repayment of the debt may be unable or unwilling to
repay principal or interest when due, and the Fund may have limited recourse in
the event of a default. During periods of economic uncertainty, the market
prices of sovereign debt may be more volatile than prices of debt obligations of
U.S. issuers. In the past, certain non-U.S. countries have encountered
difficulties in servicing their debt obligations, withheld payments of principal
and interest and declared moratoria on the payment of principal and interest on
their sovereign debt.

         A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability of
sufficient non-U.S. currency, the relative size of the debt service burden, the
sovereign debtor's policy toward its principal international lenders and local
political constraints.

                                      S-8
<PAGE>

         Sovereign debtors may also be dependent on expected disbursements from
non-U.S. governments, multilateral agencies and other entities to reduce
principal and interest arrearages on their debt. The failure of a sovereign
debtor to implement economic reforms, achieve specified levels of economic
performance or repay principal or interest when due may result in the
cancellation of third-party commitments to lend funds to the sovereign debtor,
which may further impair such debtor's ability or willingness to service its
debts.

         EURODOLLAR INSTRUMENTS AND SAMURAI AND YANKEE BONDS. The Fund may
invest in Eurodollar instruments and Samurai and Yankee bonds. Eurodollar
instruments are bonds of corporate and government issuers that pay interest and
principal in U.S. dollars but are issued in markets outside the United States,
primarily in Europe. Samurai bonds are yen-denominated bonds sold in Japan by
non-Japanese issuers. Yankee bonds are U.S. dollar-denominated bonds typically
issued in the U.S. by non-U.S. governments and their agencies and non-U.S. banks
and corporations. The Fund may also invest in Eurodollar Certificates of Deposit
("ECDs"), Eurodollar Time Deposits ("ETDs") and Yankee Certificates of Deposit
("Yankee CDs"). ECDs are U.S. dollar-denominated certificates of deposit issued
by non-U.S. branches of domestic banks; ETDs are U.S. dollar-denominated
deposits in a non-U.S. branch of a U.S. bank or in a non-U.S. bank; and Yankee
CDs are U.S. dollar-denominated certificates of deposit issued by a U.S. branch
of a non-U.S. bank and held in the U.S. These investments involve risks that are
different from investments in securities issued by U.S. issuers, including
potential unfavorable political and economic developments, non-U.S. withholding
or other taxes, seizure of non-U.S. deposits, currency controls, interest
limitations or other governmental restrictions which might affect payment of
principal or interest.

         CONVERTIBLE SECURITIES. Convertible securities include any corporate
debt security or preferred stock that may be converted into underlying shares of
common stock. The common stock underlying convertible securities may be issued
by a different entity than the issuer of the convertible securities. Convertible
securities entitle the holder to receive interest payments paid on corporate
debt securities or the dividend preference on a preferred stock until such time
as the convertible security matures or is redeemed or until the holder elects to
exercise the conversion privilege. As a result of the conversion feature,
however, the interest rate or dividend preference on a convertible security is
generally less than would be the case if the securities were issued in
non-convertible form.

         The value of convertible securities is influenced by both the yield of
non-convertible securities of comparable issuers and by the value of the
underlying common stock. The value of a convertible security viewed without
regard to its conversion feature (i.e., strictly on the basis of its yield) is
sometimes referred to as its "investment value." The investment value of the
convertible security typically will fluctuate inversely with changes in
prevailing interest rates. However, at the same time, the convertible security
will be influenced by its "conversion value," which is the market value of the
underlying common stock that would be obtained if the convertible security were
converted. Conversion value fluctuates directly with the price of the underlying
common stock.

         If, because of a low price of the common stock, the conversion value is
substantially below the investment value of the convertible security, the price
of the convertible security is governed principally by its investment value. If
the conversion value of a convertible security increases to a point that
approximates or exceeds its investment value, the value of the security will be
principally influenced by its conversion value. A convertible security will sell
at a premium over its conversion value to the extent investors place value on
the right to acquire the underlying common stock while holding a fixed income
security. Holders of convertible securities have a claim on the assets of the
issuer prior to the common stockholders, but may be subordinated to holders of
similar non-convertible securities of the same issuer.

                                      S-9
<PAGE>

         SYNTHETIC CONVERTIBLE SECURITIES. Calamos Asset Management, Inc.
("Calamos") may create a "synthetic" convertible security by combining fixed
income securities with the right to acquire equity securities. More flexibility
is possible in the assembly of a synthetic convertible security than in the
purchase of a convertible security. Although synthetic convertible securities
may be selected where the two components are issued by a single issuer, thus
making the synthetic convertible security similar to the true convertible
security, the character of a synthetic convertible security allows the
combination of components representing distinct issuers, when Calamos believes
that such a combination would better promote the Fund's investment objective. A
synthetic convertible security also is a more flexible investment in that its
two components may be purchased separately. For example, the Fund may purchase a
warrant for inclusion in a synthetic convertible security but temporarily hold
short-term investments while postponing the purchase of a corresponding bond
pending development of more favorable market conditions.

         A holder of a synthetic convertible security faces the risk of a
decline in the price of the security or the level of the index involved in the
convertible component, causing a decline in the value of the call option or
warrant purchased to create the synthetic convertible security. Should the price
of the stock fall below the exercise price and remain there throughout the
exercise period, the entire amount paid for the call option or warrant would be
lost. Because a synthetic convertible security includes the fixed-income
component as well, the holder of a synthetic convertible security also faces the
risk that interest rates will rise, causing a decline in the value of the
fixed-income instrument.

         The Fund may also purchase synthetic convertible securities
manufactured by other parties, including convertible structured notes.
Convertible structured notes are fixed income debentures linked to equity, and
are typically issued by investment banks. Convertible structured notes have the
attributes of a convertible security, however, the investment bank that issued
the convertible note assumes the credit risk associated with the investment,
rather than the issuer of the underlying common stock into which the note is
convertible.

         LENDING OF PORTFOLIO SECURITIES. The Fund may lend its portfolio
securities to broker-dealers and banks. Any such loan must be continuously
secured by collateral in cash or cash equivalents maintained on a current basis
in an amount at least equal to the market value of the securities loaned by the
Fund. The Fund would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned, and would also receive an
additional return that may be in the form of a fixed fee or a percentage of the
collateral. The Fund may pay reasonable fees to persons unaffiliated with the
Fund for services in arranging these loans. The Fund would have the right to
call the loan and obtain the securities loaned at any time on notice of not more
than five business days. The Fund would not have the right to vote the
securities during the existence of the loan but would call the loan to permit
voting of the securities, if, in Calamos' judgment, a material event requiring a
shareholder vote would otherwise occur before the loan was repaid. In the event
of bankruptcy or other default of the borrower, the Fund could experience both
delays in liquidating the loan collateral or recovering the loaned securities
and losses, including (a) possible decline in the value of the collateral or in
the value of the securities loaned during the period while the Fund seeks to
enforce its rights thereto, (b) possible subnormal levels of income and lack of
access to income during this period, and (c) expenses of enforcing its rights.

         OPTIONS ON SECURITIES, INDEXES AND CURRENCIES. The Fund may purchase
and sell put options and call options on securities, indexes or foreign
currencies. The Fund may purchase agreements, sometimes called cash puts, that
may accompany the purchase of a new issue of bonds from a dealer. A put option
gives the purchaser of the option, upon payment of a premium, the right to sell,
and the writer the obligation to buy, the underlying security, commodity, index,
currency or other instrument at the exercise price. For instance, the Fund's
purchase of a put option on a security might be designed to protect its holdings
in the underlying instrument (or, in some cases, a similar instrument) against a

                                      S-10
<PAGE>

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

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

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

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

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

         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

                                      S-11
<PAGE>

convertible into the needed securities without additional consideration) or to
segregate cash or liquid assets sufficient to purchase and deliver the
securities if the call is exercised. A call option sold by a fund on an index
will require the Fund to own portfolio securities which correlate with the index
or to segregate cash or liquid assets equal to the excess of the index value
over the exercise price on a current basis. A put option written by the Fund
requires the Fund to segregate cash or liquid assets equal to the exercise
price.

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

         If an option written by the Fund expires, the Fund realizes a capital
gain equal to the premium received at the time the option was written. If an
option purchased by the Fund expires, the Fund realizes a capital loss equal to
the premium paid.

         The Fund will realize a capital gain from a closing purchase
transaction if the cost of the closing option is less than the premium received
from writing the option, or, if it is more, the Fund will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Fund will realize a capital gain or, if
it is less, the Fund will realize a capital loss. The principal factors
affecting the market value of a put or a call option include supply and demand,
interest rates, the current market price of the underlying security or index in
relation to the exercise price of the option, the volatility of the underlying
security or index, and the time remaining until the expiration date.

         A put or call option purchased by the Fund is an asset of the Fund,
valued initially at the premium paid for the option. The premium received for an
option written by the Fund is recorded as a deferred credit. The value of an
option purchased or written is marked-to-market daily and is valued at the
closing price on the exchange on which it is traded or, if not traded on an
exchange or no closing price is available, at the mean between the last bid and
asked prices.

         RISKS ASSOCIATED WITH OPTIONS. There are several risks associated with
transactions in options. For example, there are significant differences between
the securities markets, the currency markets and the options markets that could
result in an imperfect correlation among these markets, causing a given
transaction not to achieve its objectives. A decision as to whether, when and
how to use options involves the exercise of skill and judgment, and even a
well-conceived transaction may be unsuccessful to some degree because of market
behavior or unexpected events. The ability of the Fund to utilize options
successfully will depend on Calamos' ability to predict pertinent market
investments, which cannot be assured.

         The Fund's ability to close out its position as a purchaser or seller
of an OCC or exchange listed put or call option is dependent, in part, upon the
liquidity of the option market. Among the possible

                                      S-12
<PAGE>

reasons for the absence of a liquid option market on an exchange are: (i)
insufficient trading interest in certain options; (ii) restrictions on
transactions imposed by an exchange; (iii) trading halts, suspensions or other
restrictions imposed with respect to particular classes or series of options or
underlying securities including reaching daily price limits; (iv) interruption
of the normal operations of the OCC or an exchange; (v) inadequacy of the
facilities of an exchange or OCC to handle current trading volume; or (vi) a
decision by one or more exchanges to discontinue the trading of options (or a
particular class or series of options), in which event the relevant market for
that option on that exchange would cease to exist, although outstanding options
on that exchange would generally continue to be exercisable in accordance with
their terms. If the Fund were unable to close out an option that it has
purchased on a security, it would have to exercise the option in order to
realize any profit or the option would expire and become worthless. If the Fund
were unable to close out a covered call option that it had written on a
security, it would not be able to sell the underlying security until the option
expired. As the writer of a covered call option on a security, the Fund
foregoes, during the option's life, the opportunity to profit from increases in
the market value of the security covering the call option above the sum of the
premium and the exercise price of the call. As the writer of a covered call
option on a foreign currency, the Fund foregoes, during the option's life, the
opportunity to profit from currency appreciation.

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

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

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

         FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. The Fund may use
interest rate futures contracts, index futures contracts and foreign currency
futures contracts. An interest rate, index or foreign currency futures contract
provides for the future sale by one party and purchase by another party of a

                                      S-13
<PAGE>

specified quantity of a financial instrument or the cash value of an index(1) at
a specified price and time. A public market exists in futures contracts covering
a number of indexes (including, but not limited to: the Standard & Poor's 500
Index, the Russell 2000 Index, the Value Line Composite Index, and the New York
Stock Exchange Composite Index) as well as financial instruments (including, but
not limited to: U.S. Treasury bonds, U.S. Treasury notes, Eurodollar
certificates of deposit and foreign currencies). Other index and financial
instrument futures contracts are available and it is expected that additional
futures contracts will be developed and traded.

         The Fund may purchase and write call and put futures options. Futures
options possess many of the same characteristics as options on securities,
indexes and foreign currencies (discussed above). A futures option gives the
holder the right, in return for the premium paid, to assume a long position
(call) or short position (put) in a futures contract at a specified exercise
price at any time during the period of the option. Upon exercise of a call
option, the holder acquires a long position in the futures contract and the
writer is assigned the opposite short position. In the case of a put option, the
opposite is true. The Fund might, for example, use futures contracts to hedge
against or gain exposure to fluctuations in the general level of stock prices,
anticipated changes in interest rates or currency fluctuations that might
adversely affect either the value of the Fund's securities or the price of the
securities that the Fund intends to purchase. Although other techniques could be
used to reduce or increase the Fund's exposure to stock price, interest rate and
currency fluctuations, the Fund may be able to achieve its desired exposure more
effectively and perhaps at a lower cost by using futures contracts and futures
options.

         The Fund will only enter into futures contracts and futures options
that are standardized and traded on an exchange, board of trade or similar
entity, or quoted on an automated quotation system.

         The success of any futures transaction depends on the investment
manager correctly predicting changes in the level and direction of stock prices,
interest rates, currency exchange rates and other factors. Should those
predictions be incorrect, the Fund's return might have been better had the
transaction not been attempted; however, in the absence of the ability to use
futures contracts, the investment manager might have taken portfolio actions in
anticipation of the same market movements with similar investment results, but,
presumably, at greater transaction costs. When a purchase or sale of a futures
contract is made by the Fund, the Fund is required to deposit with its custodian
(or broker, if legally permitted) a specified amount of cash or U.S. Government
securities or other securities acceptable to the broker ("initial margin"). The
margin required for a futures contract is set by the exchange on which the
contract is traded and may be modified during the term of the contract, although
the Fund's broker may require margin deposits in excess of the minimum required
by the exchange. The initial margin is in the nature of a performance bond or
good faith deposit on the futures contract, which is returned to the Fund upon
termination of the contract, assuming all contractual obligations have been
satisfied. The Fund expects to earn interest income on its initial margin
deposits. A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund pays
or receives cash, called "variation margin," equal to the daily change in value
of the futures contract. This process is known as "marking-to-market." Variation
margin paid or received by the Fund does not represent a borrowing or loan by
the Fund but is instead settlement between the Fund and the broker of the amount

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

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

                                      S-14
<PAGE>

one would owe the other if the futures contract had expired at the close of the
previous day. In computing daily net asset value, the Fund will mark-to-market
its open futures positions.

         The Fund is also required to deposit and maintain margin with respect
to put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option and
other futures positions held by the Fund. Although some futures contracts call
for making or taking delivery of the underlying securities, usually these
obligations are closed out prior to delivery by offsetting purchases or sales of
matching futures contracts (same exchange, underlying security or index, and
delivery month). If an offsetting purchase price is less than the original sale
price, the Fund engaging in the transaction realizes a capital gain, or if it is
more, the Fund realizes a capital loss. Conversely, if an offsetting sale price
is more than the original purchase price, the Fund engaging in the transaction
realizes a capital gain, or if it is less, the Fund realizes a capital loss. The
transaction costs must also be included in these calculations.

         RISKS ASSOCIATED WITH FUTURES. There are several risks associated with
the use of futures contracts and futures options. A purchase or sale of a
futures contract may result in losses in excess of the amount invested in the
futures contract. In trying to increase or reduce market exposure, there can be
no guarantee that there will be a correlation between price movements in the
futures contract and in the portfolio exposure sought. In addition, there are
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given
transaction not to achieve its objectives. The degree of imperfection of
correlation depends on circumstances such as: variations in speculative market
demand for futures, futures options and the related securities, including
technical influences in futures and futures options trading and differences
between the securities markets and the securities underlying the standard
contracts available for trading. For example, in the case of index futures
contracts, the composition of the index, including the issuers and the weighing
of each issue, may differ from the composition of the Fund's portfolio, and, in
the case of interest rate futures contracts, the interest rate levels,
maturities and creditworthiness of the issues underlying the futures contract
may differ from the financial instruments held in the Fund's portfolio. A
decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment, and even a well-conceived transaction may be
unsuccessful to some degree because of market behavior or unexpected stock price
or interest rate trends.

         Futures exchanges may limit the amount of fluctuation permitted in
certain futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a price
beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because the
limit may work to prevent the liquidation of unfavorable positions. For example,
futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses. Stock index futures contracts are not normally subject to
such daily price change limitations.

         There can be no assurance that a liquid market will exist at a time
when the Fund seeks to close out a futures or futures option position. The Fund
would be exposed to possible loss on the position during the interval of
inability to close, and would continue to be required to meet margin
requirements until the position is closed. In addition, many of the contracts
discussed above are relatively new instruments without a significant trading
history. As a result, there can be no assurance that an active secondary market
will develop or continue to exist.

                                      S-15
<PAGE>

         LIMITATIONS ON OPTIONS AND FUTURES. If other options, futures contracts
or futures options of types other than those described herein are traded in the
future, the Fund may also use those investment vehicles, provided the Board of
Trustees determines that their use is consistent with the Fund's investment
objective.

         When purchasing a futures contract or writing a put option on a futures
contract, the Fund must maintain with its custodian (or broker, if legally
permitted) cash or cash equivalents (including any margin) equal to the market
value of such contract. When writing a call option on a futures contract, the
Fund similarly will maintain with its custodian cash or cash equivalents
(including any margin) equal to the amount by which such option is in-the-money
until the option expires or is closed by the Fund.

         The Fund may not maintain open short positions in futures contracts,
call options written on futures contracts or call options written on indexes if,
in the aggregate, the market value of all such open positions exceeds the
current value of the securities in its portfolio, plus or minus unrealized gains
and losses on the open positions, adjusted for the historical relative
volatility of the relationship between the portfolio and the positions. For this
purpose, to the extent the Fund has written call options on specific securities
in its portfolio, the value of those securities will be deducted from the
current market value of the securities portfolio.

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

         WARRANTS. The Fund may invest in warrants. A warrant is a right to
purchase common stock at a specific price (usually at a premium above the market
value of the underlying common stock at time of issuance) during a specified
period of time. A warrant may have a life ranging from less than a year to
twenty years or longer, but a warrant becomes worthless unless it is exercised
or sold before expiration. In addition, if the market price of the common stock
does not exceed the warrant's exercise price during the life of the warrant, the
warrant will expire worthless. Warrants have no voting rights, pay no dividends
and have no rights with respect to the assets of the corporation issuing them.
The percentage increase or decrease in the value of a warrant may be greater
than the percentage increase or decrease in the value of the underlying common
stock.

         PORTFOLIO TURNOVER. Although the Fund does not purchase securities with
a view to rapid turnover, there are no limitations on the length of time that
portfolio securities must be held. Portfolio turnover can occur for a number of
reasons, including calls for redemption, general conditions in the securities
markets, more favorable investment opportunities in other securities, or other
factors relating to the desirability of holding or changing a portfolio
investment. The portfolio turnover rates may vary greatly from year to year. A
high rate of portfolio turnover in the Fund would result in increased
transaction expense, which must be borne by that Fund. High portfolio turnover
may also result in the realization of capital gains or losses and, to the extent
net short-term capital gains are realized, any distributions resulting from such
gains will be considered ordinary income for federal income tax purposes.

         SHORT SALES. The Fund may attempt to hedge against market risk and to
enhance income by selling short "against the box," that is: (1) entering into
short sales of securities that it currently has the right to acquire through the
conversion or exchange of other securities that it owns, or to a lesser extent,
entering into short sales of securities that it currently owns; and (2) entering
into arrangements with the broker-dealers through which such securities are sold
short to receive income with respect to the proceeds of short sales during the
period the Fund's short positions remain open. The Fund may make short sales

                                      S-16
<PAGE>

of securities only if at all times when a short position is open the Fund owns
an equal amount of such securities or securities convertible into or
exchangeable for, without payment of any further consideration, securities of
the same issue as, and equal in amount to, the securities sold short.

         In a short sale against the box, the Fund does not deliver from its
portfolio the securities sold and does not receive immediately the proceeds from
the short sale. Instead, the Fund borrows the securities sold short from a
broker-dealer through which the short sale is executed, and the broker-dealer
delivers such securities, on behalf of the Fund, to the purchaser of such
securities. Such broker-dealer is entitled to retain the proceeds from the short
sale until the Fund delivers to such broker-dealer the securities sold short. In
addition, the Fund is required to pay to the broker-dealer the amount of any
dividends paid on shares sold short. Finally, to secure its obligation to
deliver to such broker-dealer the securities sold short, the Fund must deposit
and continuously maintain in a separate account with the Fund's custodian an
equivalent amount of the securities sold short or securities convertible into or
exchangeable for such securities without the payment of additional
consideration. The Fund is said to have a short position in the securities sold
until it delivers to the broker-dealer the securities sold, at which time the
Fund receives the proceeds of the sale. Because the Fund ordinarily will want to
continue to hold securities in its portfolio that are sold short, the Fund will
normally close out a short position by purchasing on the open market and
delivering to the broker-dealer an equal amount of the securities sold short,
rather than by delivering portfolio securities.

         A short sale works the same way, except that the Fund places in the
segregated account cash or U.S. government securities equal in value to the
difference between (i) the market value of the securities sold short at the time
they were sold short and (ii) any cash or U.S. government securities required to
be deposited with the broker as collateral. In addition, so long as the short
position is open, the Fund must adjust daily the value of the segregated account
so that the amount deposited in it, plus any amount deposited with the broker as
collateral, will equal the current market value of the security sold short.
However, the value of the segregated account may not be reduced below the point
at which the segregated account, plus any amount deposited with the broker, is
equal to the market value of the securities sold short at the time they were
sold short.

         Short sales may protect the Fund against the risk of losses in the
value of its portfolio securities because any unrealized losses with respect to
such portfolio securities should be wholly or partially offset by a
corresponding gain in the short position. However, any potential gains in such
portfolio securities should be wholly or partially offset by a corresponding
loss in the short position. The extent to which such gains or losses are offset
will depend upon the amount of securities sold short relative to the amount the
Fund owns, either directly or indirectly, and, in the case where the Fund owns
convertible securities, changes in the conversion premium. Short sale
transactions of the Fund involve certain risks. In particular, the imperfect
correlation between the price movements of the convertible securities and the
price movements of the underlying common stock being sold short creates the
possibility that losses on the short sale hedge position may be greater than
gains in the value of the portfolio securities being hedged. In addition, to the
extent that the Fund pays a conversion premium for a convertible security, the
Fund is generally unable to protect against a loss of such premium pursuant to a
short sale hedge. In determining the number of shares to be sold short against
the Fund's position in the convertible securities, the anticipated fluctuation
in the conversion premiums is considered. The Fund will also incur transaction
costs in connection with short sales. Certain provisions of the Internal Revenue
Code of 1986, as amended (the "Code") (and related Treasury regulations
thereunder) may limit the degree to which the Fund is able to enter into short
sales and other transactions with similar effects without triggering adverse tax
consequences, which limitations might impair the Fund's ability to achieve its
investment objective. See "U.S. Federal Income Tax Matters."

                                      S-17
<PAGE>

         In addition to enabling the Fund to hedge against market risk, short
sales may afford the Fund an opportunity to earn additional current income to
the extent the Fund is able to enter into arrangements with broker-dealers
through which the short sales are executed to receive income with respect to the
proceeds of the short sales during the period the Fund's short positions remain
open.


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


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

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

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

         Although this will not guarantee that the counterparty does not
default, the Fund will not enter into an interest rate swap or cap transaction
with any counter-party that Calamos believes does not have the financial
resources to honor its obligation under the interest rate swap or cap
transaction. Further,

                                      S-18
<PAGE>

Calamos will continually monitor the financial stability of a counterparty to an
interest rate swap or cap transaction in an effort to proactively protect the
Fund's investments.

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

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

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

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

         STRUCTURED 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. See
"Investment Objective and Policies -- Synthetic Convertible Securities 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 not be an active trading market for
structured products. As a result, certain structured products in which the Fund
invests may be deemed illiquid and subject to its limitation on illiquid
investments.




                                      S-19
<PAGE>




         "WHEN-ISSUED" AND DELAYED DELIVERY SECURITIES AND REVERSE REPURCHASE
AGREEMENTS. The Fund may purchase securities on a when-issued or
delayed-delivery basis. Although the payment and interest terms of these
securities are established at the time the Fund enters into the commitment, the
securities may be delivered and paid for a month or more after the date of
purchase, when their value may have changed. The Fund makes such commitments
only with the intention of actually acquiring the securities, but may sell the
securities before settlement date if Calamos deems it advisable for investment
reasons. The Fund may utilize spot and forward foreign currency exchange
transactions to reduce the risk inherent in fluctuations in the exchange rate
between one currency and another when securities are purchased or sold on a
when-issued or delayed-delivery basis.

         The Fund may enter into reverse repurchase agreements with banks and
securities dealers. A reverse repurchase agreement is a repurchase agreement in
which the Fund is the seller of, rather than the investor in, securities and
agrees to repurchase them at an agreed-upon time and price. Use of a reverse
repurchase agreement may be preferable to a regular sale and later repurchase of
securities because it avoids certain market risks and transaction costs.

         At the time when the Fund enters into a binding obligation to purchase
securities on a when-issued basis or enters into a reverse repurchase agreement,
liquid assets (cash, U.S. Government securities or other "high-grade" debt
obligations) of the Fund having a value at least as great as the purchase price
of the securities to be purchased will be segregated on the books of the Fund
and held by the custodian throughout the period of the obligation. The use of
these investment strategies may increase net asset value fluctuation.

         ILLIQUID SECURITIES. The Fund may invest up to 15% of its managed
assets in securities that, at the time of investment, are illiquid (determined
using the Commission's standard applicable to investment companies, i.e.,
securities that cannot be disposed of within 7 days in the ordinary course of
business at approximately the value at which the Fund has valued the
securities). The Fund may invest without limitation in securities that have not
been registered for public sale, but that are eligible for purchase and sale by
certain qualified institutional buyers. Calamos, under the supervision of the
Board of Trustees, will determine whether securities purchased under Rule 144A
are illiquid (that is, not readily marketable) and thus subject to the Fund's
limit on investing no more than 15% of its managed assets in illiquid
securities. Investments in Rule 144A Securities could have the effect of
increasing the amount of the Fund's assets invested in illiquid securities if
qualified institutional buyers are unwilling to purchase these Rule 144A
Securities. Illiquid securities may be difficult to dispose of at a fair price
at the times when the Fund believes it is desirable to do so. The market price
of illiquid securities generally is more volatile than that of more liquid
securities, which may adversely affect the price that the Fund pays for or
recovers upon the sale of illiquid securities. Illiquid securities are also more
difficult to value and Calamos' judgment may play a greater role in the
valuation process. Investment of the Fund's assets in illiquid securities may
restrict the Fund's ability to take advantage of market opportunities. The risks
associated with illiquid securities may be particularly acute in situations in
which the Fund's operations require cash and could result in the Fund borrowing
to meet its short-term needs or incurring losses on the sale of illiquid
securities.

                                      S-20
<PAGE>

         The Fund may invest in bonds, corporate loans, convertible securities,
preferred stocks and other securities that lack a secondary trading market or
are otherwise considered illiquid. Liquidity of a security relates to the
ability to easily dispose of the security and the price to be obtained upon
disposition of the security, which may be less than would be obtained for a
comparable more liquid security. Such investments may affect the Fund's ability
to realize the net asset value in the event of a voluntary or involuntary
liquidation of its assets.

         TEMPORARY DEFENSIVE INVESTMENTS. The Fund may make temporary
investments without limitation when Calamos determines that a defensive position
is warranted. Such investments may be in money market instruments, consisting of
obligations of, or guaranteed as to principal and interest by, the U.S.
Government or its agencies or instrumentalities; certificates of deposit,
bankers' acceptances and other obligations of domestic banks having total assets
of at least $500 million and that are regulated by the U.S. Government, its
agencies or instrumentalities; commercial paper rated in the highest category by
a recognized rating agency; and repurchase agreements.

         REPURCHASE AGREEMENTS. As part of its strategy for the temporary
investment of cash, the Fund may enter into "repurchase agreements" with member
banks of the Federal Reserve System or primary dealers (as designated by the
Federal Reserve Bank of New York) in such securities. A repurchase agreement
arises when the Fund purchases a security and simultaneously agrees to resell it
to the vendor at an agreed upon future date. The resale price is greater than
the purchase price, reflecting an agreed upon market rate of return that is
effective for the period of time the Fund holds the security and that is not
related to the coupon rate on the purchased security. Such agreements generally
have maturities of no more than seven days and could be used to permit the Fund
to earn interest on assets awaiting long term investment. The Fund requires
continuous maintenance by the custodian for the Fund's account in the Federal
Reserve/Treasury Book Entry System of collateral in an amount equal to, or in
excess of, the market value of the securities that are the subject of a
repurchase agreement. Repurchase agreements maturing in more than seven days are
considered illiquid securities. In the event of a bankruptcy or other default of
a seller of a repurchase agreement, the Fund could experience both delays in
liquidating the underlying security and losses, including: (a) possible decline
in the value of the underlying security during the period while the Fund seeks
to enforce its rights thereto; (b) possible subnormal levels of income and lack
of access to income during this period; and (c) expenses of enforcing its
rights.

         REAL ESTATE INVESTMENT FUNDS ("REITs") AND ASSOCIATED RISK FACTORS.
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of their assets directly in
real property and derive income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling properties that have appreciated
in value. Mortgage REITs invest the majority of their assets in real estate
mortgages and derive income from the collection of interest payments. REITs are
not taxed on income distributed to shareholders provided they comply with the
applicable requirements of the Code. The Fund will indirectly bear its
proportionate share of any management and other expenses paid by REITs in which
it invests in addition to the expenses paid by the Fund. Debt securities issued
by REITs are, for the most part, general and unsecured obligations and are
subject to risks associated with REITs.

         Investing in REITs involves certain unique risks in addition to those
risks associated with investing in the real estate industry in general. An
equity REIT may be affected by changes in the value of the underlying properties
owned by the REIT. A mortgage REIT may be affected by changes in 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

                                      S-21
<PAGE>

the risk of default by lessees or borrowers. REITs whose underlying assets are
concentrated in properties used by a particular industry, such as health care,
are also subject to risks associated with such industry.

         REITs (especially mortgage REITs) are also subject to interest rate
risks. When interest rates decline, the value of a REIT's investment in fixed
rate obligations can be expected to rise. Conversely, when interest rates rise,
the value of a REIT's investment in fixed rate obligations can be expected to
decline. If the REIT invests in adjustable rate mortgage loans the interest
rates on which are reset periodically, yields on a REIT's investments in such
loans will gradually align themselves to reflect changes in market interest
rates. This causes the value of such investments to fluctuate less dramatically
in response to interest rate fluctuations than would investments in fixed rate
obligations.

         REITs may have limited financial resources, may trade less frequently
and in a limited volume and may be subject to more abrupt or erratic price
movements than larger company securities. Historically REITs have been more
volatile in price than the larger capitalization stocks included in Standard &
Poor's 500 Stock Index.

         OTHER INVESTMENT COMPANIES. The Fund may invest in the securities of
other investment companies to the extent that such investments are consistent
with the Fund's investment objective and policies and permissible under the 1940
Act). Under the 1940 Act, the Fund may not acquire the securities of other
domestic or non-U.S. investment companies if, as a result, (i) more than 10% of
the Fund's total assets would be invested in securities of other investment
companies, (ii) such purchase would result in more than 3% of the total
outstanding voting securities of any one investment company being held by the
Fund, or (iii) more than 5% of the Fund's total assets would be invested in any
one investment company. These limitations do not apply to the purchase of shares
of any investment company in connection with a merger, consolidation,
reorganization or acquisition of substantially all the assets of another
investment company.

         The Fund, as a holder of the securities of other investment companies,
will bear its pro rata portion of the other investment companies' expenses,
including advisory fees. These expenses are in addition to the direct expenses
of the Fund's own operations.

                             INVESTMENT RESTRICTIONS

         The following are the Fund's fundamental investment restrictions. These
restrictions may not be changed without the approval of the holders of a
majority of the Fund's outstanding voting securities (which for this purpose and
under the 1940 Act means the lesser of (i) 67% of the common shares represented
at a meeting at which more than 50% of the outstanding common shares are
represented or (ii) more than 50% of the outstanding common shares). If the Fund
were to issue a class of preferred shares, the investment restrictions could not
be changed without the approval of a majority of the outstanding common and
preferred shares, voting together as a class, and the approval of a majority of
the outstanding preferred shares, voting separately by class.

         The Fund may not:

         (1)  Issue senior securities, except as permitted by the 1940 Act and
              the rules and interpretive positions of the SEC thereunder.

         (2)  Borrow money, except as permitted by the 1940 Act and the rules
              and interpretive positions of the Commission thereunder.


                                      S-22
<PAGE>

         (3)  Invest in real estate, except that the Fund may invest in
              securities of issuers that invest in real estate or interests
              therein, securities that are secured by real estate or interests
              therein, securities of real estate investment funds and
              mortgage-backed securities.

         (4)  Make loans, except by the purchase of debt obligations, by
              entering into repurchase agreements or through the lending of
              portfolio securities and as otherwise permitted by the 1940 Act
              and the rules and interpretive positions of the Commission
              thereunder.

         (5)  Invest in physical commodities or contracts relating to physical
              commodities.

         (6)  Act as an underwriter, except as it may be deemed to be an
              underwriter in a sale of securities held in its portfolio.

         (7)  Make any investment inconsistent with the Fund's classification as
              a diversified investment company under the 1940 Act and the rules
              and interpretive positions of the Commission 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 Commission thereunder.

         All other investment policies of the Fund are considered
non-fundamental and may be changed by the Board of Trustees without prior
approval of the Fund's outstanding voting shares.

         Currently under the 1940 Act, the Fund is not permitted to issue
preferred shares unless immediately after such issuance the net asset value of
the Fund's portfolio is at least 200% of the liquidation value of the
outstanding preferred shares (i.e., such liquidation value may not exceed 50% of
the value of the Fund's total assets). In addition, currently under the 1940
Act, the Fund is not permitted to declare any cash dividend or other
distribution on its common shares unless, at the time of such declaration, the
net asset value of the Fund's portfolio (determined after deducting the amount
of such dividend or distribution) is at least 200% of such liquidation value.
Currently under the 1940 Act, the Fund is not permitted to incur indebtedness
unless immediately after such borrowing the Fund has asset coverage of at least
300% of the aggregate outstanding principal balance of indebtedness (i.e., such
indebtedness may not exceed 33 1/3% of the value of the Fund's total assets).
Additionally, currently under the 1940 Act, the Fund may not declare any
dividend or other distribution upon any class of its shares, or purchase any
such shares, unless the aggregate indebtedness of the Fund has, at the time of
the declaration of any such dividend or distribution or at the time of any such
purchase, an asset coverage of at least 300% after deducting the amount of such
dividend, distribution, or purchase price, as the case may be.

         Currently under the 1940 Act, the Fund is not permitted to lend money
or property to any person, directly or indirectly, if such person controls or is
under common control with the Fund, except for a loan from the Fund to a company
which owns all of the outstanding securities of the Fund, except directors'
qualifying shares. Currently, under 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.

                                      S-23
<PAGE>

         Currently, the Fund would be deemed to "concentrate" in a particular
industry if it invested 25% or more of its total assets in that industry.

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

         Under the 1940 Act, the Fund may invest up to 10% of its total assets
in the aggregate in shares of other investment companies and up to 5% of its
total assets in any one investment company, provided the investment does not
represent more than 3% of the voting stock of the acquired investment company at
the time such shares are purchased. As a shareholder in any investment company,
the Fund will bear its ratable share of that investment company's expenses, and
would remain subject to payment of the Fund's advisory fees and other expenses
with respect to assets so invested. Holders of common shares would therefore be
subject to duplicative expenses to the extent the Fund invests in other
investment companies. In addition, the securities of other investment companies
may also be leveraged and will therefore be subject to the same leverage risks
described herein and in the Prospectus. As described in the prospectus in the
section entitled "Risk Factors," the net asset value and market value of
leveraged shares will be more volatile and the yield to shareholders will tend
to fluctuate more than the yield generated by unleveraged shares.

         In addition, to comply with federal income tax requirements for
qualification as a "regulated investment company," the Fund's investments will
be limited by both an income and an asset test. See "U.S. Federal Income Tax
Matters."

         As a non-fundamental policy, the Fund may not issue preferred shares,
borrow money or issue debt securities in an aggregate amount exceeding 38% of
the Fund's total assets.

                             MANAGEMENT OF THE FUND

         TRUSTEES AND OFFICERS. The Fund's Board of Trustees provides broad
supervision over the Fund's affairs. The officers of the Fund are responsible
for the Fund's operations. The Fund's Trustees and officers are listed below,
together with their age, positions held with the Fund, term of office and length
of service and principal occupations during the past five years. Asterisks
indicates those Trustees who are interested persons of the Fund within the
meaning of the 1940 Act, and they are referred to as Interested Trustees.
Trustees who are not interested persons of the Fund are referred to as
Independent Trustees. Each of the Trustees serves as a Trustee of other
investment companies (11 U.S. registered investment portfolios) for which
Calamos serves as investment adviser (collectively, the "Calamos Funds"). The
address for all independent and Interested Trustees and all officers of the
Fund is 1111 East Warrenville Road, Naperville, Illinois 60563-1493.


                                      S-24
<PAGE>

<TABLE>
<CAPTION>
                                                    TERM OF OFFICE       PRINCIPAL OCCUPATION DURING PAST FIVE
    NAME AND AGE AT            POSITIONS HELD        AND LENGTH OF        YEARS AND OTHER DIRECTORSHIPS HELD BY
     MARCH 1, 2004              WITH THE FUND           SERVICE                        THE TRUSTEE
- -------------------------   ---------------------  -----------------   -------------------------------------------
<S>                         <C>                    <C>                 <C>
INTERESTED TRUSTEES:

*John P. Calamos (63)       Trustee and President  Trustee since       President and CEO, Calamos Holdings, Inc.,
                                                   December 15, 2003.  Calamos and Calamos Financial Services,
                                                   Term expires in     Inc. ("CFS").
                                                   2005.

*Nick P. Calamos (42)       Trustee                Trustee since       Senior Executive Vice President, Calamos
                                                   December 15, 2003.  Holdings, Inc., Calamos and CFS.
                                                   Term expires in
                                                   2007.

+Weston W. Marsh (53)       Trustee                Trustee since       Partner, Freeborn & Peters (law firm).
                                                   December 15, 2003.
                                                   Term expires in
                                                   2005.
INDEPENDENT TRUSTEES:

Joe F. Hanauer (66)         Trustee                Trustee since       Director, MAF Bancorp (banking); Director,
                                                   December 15, 2003.  Homestore.com, Inc., (Internet provider of
                                                   Term expires in     real estate information and products);
                                                   2006.               Director, Combined Investments, L.P.
                                                                       (investment management).

John E. Neal (53)           Trustee                Trustee since       Managing Director, Bank One Capital Markets
                                                   December 15, 2003.  (investment banking) (since 2000);
                                                   Term expires in     Executive Vice President and Head of Real
                                                   2006.               Estate Department, Bank One (1998-2000);
                                                                       Director, the Brickman Group, Ltd.

William R. Rybak (53)       Trustee                Trustee since       Retired Private Investor; Executive Vice
                                                   December 15, 2003.  President and CFO, Van Kampen Investments,
                                                   Term expires in     Inc. (investment manager) prior thereto;
                                                   2005.               Director, Howe Barnes Investments;
                                                                       Director, PrivateBancorp, Inc.

Stephen B. Timbers (58)     Trustee                Trustee since       Retired. Private Investor; Director,
                                                   March 12, 2004.     President and Chief Executive Officer, Northern
                                                   Term expires in     Trust Investments, N.A. (formerly known and
                                                   2007.               conducting business as Northern Trust
                                                                       Investments, Inc.) (1998-2004); President,
                                                                       Northern Trust Global Investments, a division
                                                                       of Northern Trust Corporation and Executive
                                                                       Vice President, The Northern Trust
                                                                       Company; President, Chief Executive Officer
                                                                       and Director, Zurich KemperInvestments
                                                                       (a financial services company) (from 1996
                                                                       to 1998); Trustee, Northern Mutual Fund Complex
                                                                       (registered investment companies); Director,
                                                                       USFreightways Corporation.
</TABLE>


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


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


+        Mr. Marsh is a partner at a law firm that has performed work for a
number of underwriters and may be deemed to be an interested person for as long
as those underwriters serve as principal underwriters to the Fund.  In addition,
Mr. Marsh's law firm has performed  work for John P. Calamos, the chief
executive and a controlling person of Calamos (such work was not with respect to
1940 Act or Investment Advisers Act of 1940 matters). Upon the advice of counsel
to the Fund, the Fund does not believe that Mr. Marsh is an "interested person"
of Calamos.


                                      S-25
<PAGE>


<TABLE>
<CAPTION>
                                                    TERM OF OFFICE       PRINCIPAL OCCUPATION DURING PAST FIVE
     NAME AND AGE AT           POSITIONS HELD        AND LENGTH OF        YEARS AND OTHER DIRECTORSHIPS HELD BY
   ___________ __, 2004         WITH THE FUND           SERVICE                        THE TRUSTEE
- -------------------------   ---------------------  -----------------   -------------------------------------------
<S>                         <C>                    <C>                 <C>
FUND OFFICERS:

Nimish Bhatt (40)           Treasurer              Since March 12,     Senior Vice President and Director of
                                                   2004. Serves at     Operations, Calamos (since 2004); Senior
                                                   the discretion of   Vice President, Alternative Investments
                                                   the Board.          and Tax Services, BISYS (financial services
                                                                       firm) (1996-2004).

Patrick H. Dudasik (48)     Vice President         Since December      Executive Vice President, Chief Financial
                                                   15, 2003. Serves    and Administrative Officer and Treasurer of
                                                   at the discretion   Calamos Holdings, Inc., Calamos and CFS
                                                   of the Board.       (since 2001); Chief Financial Officer,
                                                                       David Gomez and Associates, Inc. (executive
                                                                       search firm) (1998-2001).

James S. Hamman, Jr. (34)   Secretary              Since December      Executive Vice President and General
                                                   15, 2003. Serves    Counsel, Calamos Holdings, Inc., Calamos
                                                   at the discretion   and CFS (since 1998).
                                                   of the Board.

Jeff Lotito (32)            Assistant              Since December      Operations Supervisor, Calamos (since
                            Treasurer              15, 2003. Serves    2000); Manager-Fund Administration, Van
                                                   at the discretion   Kampen Investments, Inc. (investment
                                                   of the Board.       management) (1999-2000)
                                                                       Supervisor-Corporate Accounting, Stein
                                                                       Roe and Farnham (investment manager)
                                                                       (1998-1999).

Ian J. McPheron (32)        Assistant              Since December      Associate Counsel and Director of
                            Secretary              15, 2003. Serves    Compliance of Calamos and CFS (since 2002);
                                                   at the discretion   Associate, Gardner, Carton & Douglas (law
                                                   of the Board.       firm) (2002); Vice President, Associate
                                                                       General Counsel and Assistant Secretary,
                                                                       Van Kampen Investments, Inc. (2000-2002);
                                                                       Associate, Wildman, Harrold, Allen & Dixon
                                                                       (law firm) (1997-2000).
</TABLE>



         The Fund's Board of Trustees consists of six members. The term of one
class expires each year commencing with the first annual meeting following this
public offering and no term shall continue for more than three years after the
applicable election. The terms of John P. Calamos, Weston W. Marsh and William
Rybak expire at the first annual meeting following this public offering, the
terms of Joe F. Hanauer and John E. Neal expire at the second annual meeting,
and the terms of Nick P. Calamos and Stephen B. Timbers expires at the third
annual meeting. Subsequently, each class of Trustees will stand for election at
the conclusion of its respective term. Such classification may prevent
replacement of a majority of the Trustees for up to a two-year period. Each
officer serves until his or her successor is chosen and qualified or until his
or her resignation or removal by the Board of Trustees.



                                      S-26
<PAGE>


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

         Executive Committee. Messrs. John Calamos and Nick Calamos are members
of the Executive Committee, which has authority during intervals between
meetings of the Board of Trustees to exercise the powers of the Board, with
certain exceptions.


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



         Governance Committee. Messrs. Hanauer, Neal, Rybak and Timbers, each a
non-interested Trustee, serve on the Governance Committee. The Governance
Committee oversees the independence and effective functioning of the Board of
Trustees and endeavors to be informed about good practices for fund boards. The
members of the Governance Committee make recommendations to the Board of
Trustees regarding candidates for election as non-interested Trustees. The
Governance Committee will not consider shareholder recommendations regarding
candidates for election as Trustees.


         In addition to the above committees, there is a Board of Trustee
directed pricing committee comprised of officers of the Fund and employees of
Calamos. The Fund's Agreement and Declaration of Trust provides that the Fund
will indemnify the Trustees and officers against liabilities and expenses
incurred in connection with any claim in which they may be involved because of
their offices with the Fund, unless it is determined in the manner specified in
the Agreement and Declaration of Trust that they have not acted in good faith in
the reasonable belief that their actions were in the best interests of the Fund
or that such indemnification would relieve any officer or Trustee of any
liability to the Fund or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of his or her duties.

         COMPENSATION OF OFFICERS AND TRUSTEES. The Fund pays no salaries or
compensation to any of its officers or to the Trustees who are affiliated
persons of Calamos. The following table sets forth certain information with
respect to the compensation paid to each Trustee by the Fund and the Calamos
Fund Complex as a group. Compensation from the Fund is for the current calendar
year and is estimated. Total compensation from the Calamos Fund Complex as a
group is for the calendar year ended December 31, 2003.


<TABLE>
<CAPTION>
                                                          TOTAL
                                       ESTIMATED       COMPENSATION
                                       AGGREGATE          FROM
                                      COMPENSATION     CALAMOS FUND
       NAME OF TRUSTEE                 FROM FUND       COMPLEX(1)*
- -------------------------------       ------------     ------------
<S>                                   <C>              <C>
John P. Calamos................           $    0         $      0
Nick P. Calamos................                0                0
Richard J. Dowen(2)............                0           45,000
Joe F. Hanauer.................            2,583           45,000
Weston W. Marsh................            2,583           45,000
John E. Neal...................            2,583           45,000
William Rybak..................            2,583           45,000
Stephen B. Timbers.............            1,937                0
</TABLE>


- -------------------------
(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

                                      S-27
<PAGE>


         one or more of the Calamos Funds selected by the trustee. As of
         December 31, 2003, the values of Mr. Neal's deferred compensation
         accounts was $102,377.


(2)      Mr. Dowen resigned effective January 1, 2004.

*        The Calamos Fund Complex consists of five investment companies and each
         applicable series thereunder including the Fund, Calamos Investment
         Trust, Calamos Advisors Trust, Calamos Convertible Opportunities and
         Income Fund and Calamos Convertible and High Income Fund.

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

         OWNERSHIP OF SHARES OF THE FUND AND OTHER CALAMOS FUNDS. The following
table indicates the value of shares that each Trustee beneficially owns in the
Fund and the Calamos Fund Complex in the aggregate. The value of shares of the
Calamos Funds is determined on the basis of the net asset value of the class of
shares held as of December 31, 2003. The value of the shares held are stated in
ranges in accordance with the requirements of the Commission. The table reflects
the Trustee's beneficial ownership of shares of the Calamos Fund Complex.
Beneficial ownership is determined in accordance with the rules of the
Commission.


<TABLE>
<CAPTION>
                                                              AGGREGATE DOLLAR RANTE OF EQUITY
                                         DOLLAR RANGE OF        SECURITIES IN ALL REGISTERED
                                        EQUITY SECURITIES        INVESTMENT COMPANIES IN THE
          NAME OF TRUSTEE                  IN THE FUND               CALAMOS FUND COMPLEX
- ------------------------------------    -----------------     --------------------------------
<S>                                     <C>                   <C>
INTERESTED TRUSTEES:
John P. Calamos.....................          None                     Over $100,000
Nick P. Calamos.....................          None                     Over $100,000
Weston W. Marsh.....................          None                          None

NON-INTERESTED TRUSTEES:
Joe F. Hanauer......................          None                          None
John E. Neal........................          None                     Over $100,000
William Rybak.......................          None                    $50,001-100,000
Stephen B. Timbers..................                                        None
</TABLE>


         CODE OF ETHICS. The Fund and Calamos have adopted a code of ethics
under Rule 17j-1 of the 1940 Act which is applicable to officers,
directors/Trustees and designated employees of Calamos and CFS. Employees of
Calamos and CFS are permitted to make personal securities transactions,
including transactions in securities that the Fund may purchase, sell or hold,
subject to requirements and restrictions set forth in the code of ethics of
Calamos and CFS. The code of ethics contains provisions and requirements
designed to identify and address certain conflicts of interest between personal
investment activities of Calamos and CFS employees and the interests of
investment advisory clients such as the Fund. Among other things, the code of
ethics prohibits certain types of transactions absent prior approval, imposes
time periods during which personal transactions may not be made in certain
securities, and requires the submission of duplicate broker confirmations and
statements and quarterly reporting of securities transactions. Additional
restrictions apply to portfolio managers, traders, research analysts and

                                      S-28
<PAGE>

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
Commission's internet web site at www.sec.gov. You may review and copy the code
of ethics by visiting the Commission's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room may be obtained by
calling the Commission at 202-942-8090. In addition, copies of the code of
ethics may be obtained, after mailing the appropriate duplicating fee, by
writing to the Commission's Public Reference Section, 450 5th Street, N.W.,
Washington, DC 20549-0102 or by e-mail request at publicinfo@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 economic interests.
Calamos has adopted its own Proxy Voting Policies and Procedures ("Policies").
The Policies address, among other things, conflicts of interest that may arise
between the interests of the Fund, and the interests of the adviser 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 Committee
comprised of members of its Portfolio Management and Research 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 a 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. Although Calamos will examine board
member elections on a case-by-case basis, it will generally vote for the
election of directors that would result in a board comprised of a majority 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-take over 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 the 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.

         Finally Calamos has established procedures to help resolve conflicts of
interests that might arise when voting proxies for the Fund. These procedures
provide that the Committee, along with Calamos' Legal and Compliance
Departments, will examine conflicts of interests with the Fund of which Calamos
is aware and seek to resolve such conflicts in the best interests of the Fund,
irrespective of any such conflict. If a member of the Committee has a personal
conflict of interest, that member will refrain from voting and the remainder of
the Committee will determine how to vote the proxy solely on the investment
merits of any proposal. The Committee will then memorialize the conflict and the
procedures used to address the conflict.


         You may obtain a copy of Calamos' Policies by calling (800) 582-6959,
by visiting the Fund's website at www.calamos.com, by writing Calamos at:
Calamos Investments, Attn: Client Services, 1111 East Warrenville Road,
Naperville, IL 60563, and on the Commission's website at www.sec.gov.


         INVESTMENT ADVISER AND INVESTMENT MANAGEMENT AGREEMENT. Subject to the
overall authority of the board of trustees, Calamos provides the Fund with
investment research, advice and supervision and furnishes continuously an
investment program for the Fund. In addition, Calamos furnishes for use of the
Fund such office space and facilities as the Fund may require for its reasonable
needs and supervises the business and affairs of the Fund and provides the
following other services on behalf of the Fund and not provided by persons not a
party to the investment management agreement: (i) preparing or assisting in the
preparation of reports to and meeting materials for the Trustees; (ii)
supervising, negotiating contractual arrangements with, to the extent
appropriate, and monitoring the performance of, accounting agents, custodians,
depositories, transfer agents and pricing agents, accountants, attorneys,
printers, underwriters, brokers and dealers, insurers and other persons in any
capacity deemed to be necessary or desirable to Fund operations; (iii) assisting
in the preparation and making of filings with the Commission and other
regulatory and self-regulatory organizations, including, but not limited to,
preliminary and definitive proxy materials, amendments to the Fund's
registration statement on Form N-2 and semi-annual reports on Form N-SAR and
Form N-CSR; (iv) overseeing the tabulation of proxies by the Fund's transfer
agent; (v) assisting in the preparation and filing of the Fund's federal, state
and local tax returns; (vi) assisting in the preparation and filing of the
Fund's federal excise tax return pursuant to Section 4982 of the Code; (vii)
providing assistance with investor and public relations matters; (viii)
monitoring the valuation of portfolio securities and the calculation of net
asset value; (ix) monitoring the registration of shares of beneficial interest
of the Fund under applicable federal and state securities laws; (x) maintaining
or causing to be maintained for the Fund all books, records and reports and any
other information required under the 1940 Act, to the extent that such books,
records and reports and other information are not maintained by the Fund's
custodian or other agents of the Fund; (xi) assisting in establishing the
accounting policies of the Fund; (xii) assisting in the resolution of accounting
issues that may arise with respect to the Fund's operations and consulting with
the Fund's independent accountants, legal counsel and the Fund's other agents as
necessary in connection therewith; (xiii) reviewing the Fund's bills; (xiv)
assisting the Fund in determining the amount of dividends and distributions
available to be paid by the Fund to its shareholders, preparing and arranging
for the printing of dividend notices to shareholders, and providing the transfer
and dividend paying agent, the custodian, and the accounting agent with such
information as is required for such parties to effect the payment of dividends
and distributions; and (xv) otherwise assisting the Fund as it may reasonably
request in the conduct of the Fund's business, subject to the direction and
control of the Trustees.

         Under the investment management agreement, the Fund pays to Calamos a
fee based on the average weekly managed assets that is accrued daily and paid on
a monthly basis. The fee paid by the Fund is at the annual rate of 1.00% of
managed assets. Because the fees paid to Calamos are determined on the basis of
the Fund's managed assets, Calamos' interest in determining whether to leverage
the Fund may differ from the interests of the Fund.

         Under the terms of its investment management agreement with the Fund,
except for the services and facilities provided by Calamos as set forth therein,
the Fund shall assume and pay all expenses for all other Fund operations and
activities and shall reimburse Calamos for any such expenses incurred by
Calamos. The expenses borne by the Fund shall include, without limitation: (a)
organization expenses of the Fund (including out-of-pocket expenses, but not
including the Manager's overhead or employee costs); (b) fees payable to
Calamos; (c) legal expenses; (d) auditing and accounting expenses; (e)
maintenance of books and records that are required to be maintained by the
Fund's custodian or other agents of the Fund; (f) telephone, telex, facsimile,
postage and other communications expenses; (g) taxes and governmental fees; (h)
fees, dues and expenses incurred by the Fund in connection with membership in
investment company trade organizations and the expense of attendance at
professional meetings of

                                      S-29
<PAGE>

such organizations; (i) fees and expenses of accounting agents, custodians,
subcustodians, transfer agents, dividend disbursing agents and registrars; (j)
payment for portfolio pricing or valuation services to pricing agents,
accountants, bankers and other specialists, if any; (k) expenses of preparing
share certificates; (l) expenses in connection with the issuance, offering,
distribution, sale, redemption or repurchase of securities issued by the Fund;
(m) expenses relating to investor and public relations provided by parties other
than Calamos; (n) expenses and fees of registering or qualifying shares of
beneficial interest of the Fund for sale; (o) interest charges, bond premiums
and other insurance expenses; (p) freight, insurance and other charges in
connection with the shipment of the Fund's portfolio securities; (q) the
compensation and all expenses (specifically including travel expenses relating
to Fund business) of Trustees, officers and employees of the Fund who are not
affiliated persons of Calamos; (r) brokerage commissions or other costs of
acquiring or disposing of any portfolio securities of the Fund; (s) expenses of
printing and distributing reports, notices and dividends to shareholders; (t)
expenses of preparing and setting in type, printing and mailing prospectuses and
statements of additional information of the Fund and supplements thereto; (u)
costs of stationery; (v) any litigation expenses; (w) indemnification of
Trustees and officers of the Fund; (x) costs of shareholders' and other
meetings; (y) interest on borrowed money, if any; and (z) the fees and other
expenses of listing the Fund's shares on the New York Stock Exchange or any
other national stock exchange.

         Unless earlier terminated as described below, the investment management
agreement will remain in effect until August 1, 2005. The investment management
agreement continues in effect from year to year so long as such continuation is
approved at least annually by (1) the board of trustees or the vote of a
majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund, and (2) a majority of the trustees who are not interested persons of
any party to the investment management agreement, cast in person at a meeting
called for the purpose of voting on such approval. The investment management
agreement may be terminated at any time, without penalty, by either the Fund or
Calamos upon 60 days' written notice, and is automatically terminated in the
event of its assignment as defined in the 1940 Act.

         FACTORS CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE
INVESTMENT MANAGEMENT AGREEMENT. The Fund's investment management agreement is
required to be approved before it is entered into, and may be continued annually
beyond its initial term both by the Board of Trustees and by a majority of the
Independent Trustees voting separately. The Independent Trustees have determined
that the terms of the Fund's investment management agreement are fair and
reasonable and that the agreement is in the Fund's best interests. The
Independent Trustees believe that the investment management agreement will
enable the Fund to enjoy high quality investment management services at a cost
which they deem appropriate, reasonable and in the best interests of the Fund.
In making such determinations, the Independent Trustees relied upon the
assistance of counsel to the Independent Trustees.

         In evaluating the investment management agreement, the Independent
Trustees reviewed materials furnished by Calamos, including information
regarding Calamos, its affiliates and their personnel, operations and financial
condition. The Independent Trustees discussed with representatives of Calamos
the Fund's operations and Calamos' ability to provide advisory and other
services to the Fund. The Independent Trustees also reviewed, among other
things:

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

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

         -  the Fund's projected total operating expenses;

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

                                      S-30
<PAGE>

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

         The independent trustees considered the following as relevant to their
recommendations: (1) the favorable history, reputation, qualification,
investment process and background of Calamos, as well as the qualifications of
its personnel, resources available and its financial condition; (2) the
magnitude of Calamos' fees and the estimated expense ratio of the Fund in
relation to the nature and quality of services expected to be provided and the
fees and expense ratios of comparable investment companies; (3) the relative
performance of other funds managed by Calamos with similar objectives compared
to the results of other comparable investment companies and unmanaged indices;
and (4) other factors that the Independent Trustees deemed relevant. The
independent trustees deemed each of these factors to be relevant to their
consideration of the Agreement, and concluded that the terms of the Agreement
and the services to be provided were reasonable and appropriate, and that the
Agreement was in the best interests of the Funds.

         The use of the name "Calamos" in the name of the Fund is pursuant to
licenses granted by Calamos, and the Fund has agreed to change the names to
remove those references if Calamos ceases to act as investment adviser to the
Fund.

         Under the arrangements with State Street Bank and Trust Company ("State
Street") 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 and such other
funds advised by Calamos that may be part of those arrangements (the Fund and
such other funds are collectively referred to as the "Calamos Funds") as
described more fully in the statement of additional information. For the
services rendered to the Calamos Funds, State Street receives fees based on the
combined managed assets of the Calamos Funds ("Combined Assets"). Each fund of
the Calamos Funds pays its pro-rata share of the fees payable to State Street
described below based on relative managed assets of each fund.

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

         State Street receives a fee at the annual rate of 0.0225% for the first
$3 billion of Combined Assets and 0.0150% for the Combined Assets in excess of
$3 billion.

                             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.

                                      S-31
<PAGE>

         In executing portfolio transactions, Calamos uses its best efforts to
obtain for the Fund the most favorable combination of price and execution
available. In seeking the most favorable combination of price and execution,
Calamos considers all factors it deems relevant, including price, the size of
the transaction, the nature of the market for the security, the amount of
commission, the timing of the transaction taking into account market prices and
trends, the execution capability of the broker-dealer and the quality of service
rendered by the broker-dealer in other transactions.

         The Trustees have determined that portfolio transactions for the Fund
may be executed through Calamos Financial Services, Inc. ("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 Funds as those available
from other qualified brokers and if, in such transactions, CFS charges the Fund
commission rates consistent with those charged by CFS to comparable unaffiliated
customers in similar transactions. The Board of Trustees, including a majority
of the Trustees who are not "interested" trustees, has adopted procedures that
are reasonably designed to provide that any commissions, fees or other
remuneration paid to CFS are consistent with the foregoing standard. The Fund
will not effect principal transactions with CFS.

         Consistent with the Rules of Fair Practice of the National Association
of Securities Dealers, Inc. and subject to seeking the most favorable
combination of net price and execution available and such other policies as the
Trustees may determine, Calamos may consider sales of shares of the Fund as a
factor in the selection of broker-dealers to execute portfolio transactions for
that Fund.


         In allocating the Fund's portfolio brokerage transactions to
unaffiliated broker-dealers, Calamos may take into consideration the research,
analytical, statistical and other information and services provided by the
broker-dealer, such as general economic reports and information, reports or
analyses of particular companies or industry groups, market timing and technical
information, and the availability of the brokerage firm's analysts for
consultation. Although Calamos believes these services have substantial value,
they are considered supplemental to Calamos's own efforts in the performance of
its duties under the management agreement. As permitted by Section 28(e) of the
Securities Exchange Act of 1934 ("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.


                                 NET ASSET VALUE

         Net asset value per share is determined as of the close of regular
session trading on the New York Stock Exchange (usually 4:00 p.m., Eastern
time), on the last business day in each week. Net asset value is calculated by
dividing the value of all of the securities and other assets of the Fund, less
its liabilities (including accrued expenses and indebtedness) and the aggregate
liquidation value of any outstanding preferred shares, by the total number of
common shares outstanding. Currently, the net asset values of shares of publicly
traded closed-end investment companies investing in debt securities are
published in Barron's, the Monday edition of The Wall Street Journal and the
Monday and Saturday editions of The New York Times.

         The values of the securities in the Fund are based on market prices
from the primary market in which they are traded. As a general rule, equity
securities listed on a U.S. securities exchange are valued at the last current
reported sale price as of the time of valuation. Securities quoted on the NASDAQ
National Market System are valued at the Nasdaq Official Closing Price ("NOCP"),
as determined by

                                      S-32
<PAGE>

Nasdaq, or lacking an NOCP, at the last current reported sale price as of the
time of valuation. Bonds and other fixed-income securities that are traded over
the counter and on an exchange will be valued according to the broadest and most
representative market, and it is expected this will ordinarily be the
over-the-counter market. The foreign securities held by a Fund are traded on
exchanges throughout the world. Trading on these foreign securities exchanges is
completed at various times throughout the day and often does not coincide with
the close of trading on the New York Stock Exchange. The value of foreign
securities is determined at the close of trading of the exchange on which the
securities are traded or at the close of trading on the New York Stock Exchange,
whichever is earlier. If market prices are not readily available or the Fund's
valuation methods do not produce a value reflective of the fair value of the
security, securities and other assets are priced at a fair value as determined
by the Board of Trustees or a committee thereof.

       ADDITIONAL INFORMATION CONCERNING THE AUCTIONS FOR PREFERRED SHARES

GENERAL

         The Depository Trust Company ("DTC") will act as the Securities
Depository with respect to the Preferred Shares. One certificate for all of the
shares of each series will be registered in the name of Cede & Co., as nominee
of the Securities Depository. Such certificate will bear a legend to the effect
that such certificate is issued subject to the provisions restricting transfers
of shares of the Preferred Shares contained in the Statement. The Fund will also
issue stop-transfer instructions to the transfer agent for the Preferred Shares.
Prior to the commencement of the right of holders of the Preferred Shares to
elect a majority of the Fund's Trustees, as described under "Description of the
Preferred Shares -- Voting Rights" in the prospectus, Cede & Co. will be the
holder of record of the Preferred Shares and owners of such shares will not be
entitled to receive certificates representing their ownership interest in such
shares.

         DTC, a New York-chartered limited purpose trust company, performs
services for its participants, some of whom (and/or their representatives) own
DTC. DTC maintains lists of its participants and will maintain the positions
(ownership interests) held by each such participant in Preferred Shares, whether
for its own account or as a nominee for another person.

CONCERNING THE AUCTION AGENT

         The auction agent (the "Auction Agent") will act as agent for the Fund
in connection with the auctions of the Preferred Shares (the "Auctions"). In the
absence of willful misconduct or gross negligence on its part, the Auction Agent
will not be liable for any action taken, suffered, or omitted or for any error
of judgment made by it in the performance of its duties under the auction agency
agreement between the Fund and the Auction Agent and will not be liable for any
error of judgment made in good faith unless the Auction Agent was grossly
negligent in ascertaining the pertinent facts.

         The Auction Agent may conclusively rely upon, as evidence of the
identities of the holders of the Preferred Shares, the Auction Agent's registry
of holders, and the results of Auctions and notices from any Broker-Dealer (or
other person, if permitted by the Fund) with respect to transfers described
under

         "The Auction -- Secondary Market Trading and Transfers of the Preferred
Shares" in the prospectus and notices from the Fund. The Auction Agent is not
required to accept any such notice for an Auction unless it is received by the
Auction Agent by 3:00 p.m., New York City time, on the business day preceding
such Auction.


         The Auction Agent may terminate its auction agency agreement with the
Fund upon notice to the Fund on a date no earlier than 60 days after such
notice. If the auction agent should resign, the Fund


                                      S-33
<PAGE>

will use its best efforts to enter into an agreement with a successor auction
agent containing substantially the same terms and conditions as the auction
agency agreement. The Fund may remove the auction agent provided that prior to
such removal the Fund has entered into such an agreement with a successor
Auction Agent.

BROKER-DEALERS

         The Auction Agent after each Auction for the Preferred Shares will pay
to each Broker-Dealer, from funds provided by the Fund, a service charge at the
annual rate of 1/4 of 1% in the case of any auction immediately preceding the
dividend period of less than one year, or a percentage agreed to by the Fund and
the Broker-Dealer in the case of any Auction immediately preceding a dividend
period of one year or longer, of the purchase price of the Preferred Shares
placed by such Broker-Dealer at such auction. For the purposes of the preceding
sentence, the Preferred Shares will be placed by a Broker-Dealer if such shares
were (a) the subject of hold orders deemed to have been submitted to the Auction
Agent by the Broker-Dealer and were acquired by such Broker-Dealer for its
customers who are beneficial owners or (b) the subject of an order submitted by
such Broker-Dealer that is (i) a submitted bid of an existing holder that
resulted in the existing holder continuing to hold such shares as a result of
the Auction or (ii) a submitted bid of a potential bidder that resulted in the
potential holder purchasing such shares as a result of the auction or (iii) a
valid hold order.

         The Fund may request the Auction Agent to terminate one or more
Broker-Dealer agreements at any time, provided that at least one Broker-Dealer
agreement is in effect after such termination.

         The Broker-Dealer agreement provides that a Broker-Dealer (other than
an affiliate of the Fund) may submit orders in Auctions for its own account,
unless the Trust notifies all Broker-Dealers that they may no longer do so, in
which case Broker-Dealers may continue to submit hold orders and sell orders for
their own accounts. Any Broker-Dealer that is an affiliate of the Fund may
submit orders in Auctions, but only if such orders are not for its own account.
If a Broker-Dealer submits an order for its own account in any Auction, it might
have an advantage over other bidders because it would have knowledge of all
orders submitted by it in that Auction; such Broker-Dealer, however, would not
have knowledge of orders submitted by other Broker-Dealers in that Auction.

                           REPURCHASE OF COMMON SHARES

         The Fund is a closed-end investment company and as such its
shareholders will not have the right to cause the Fund to redeem their shares.
Instead, the Fund's common shares will trade in the open market at a price that
will be a function of several factors, including dividend levels (which are in
turn affected by expenses), net asset value, call protection, dividend
stability, relative demand for and supply of such shares in the market, general
market and economic conditions and other factors. Because shares of a closed-end
investment company may frequently trade at prices lower than net asset value,
the Fund's Board of Trustees may consider action that might be taken to reduce
or eliminate any material discount from net asset value in respect of common
shares, which may include the repurchase of such shares in the open market or in
private transactions, the making of a tender offer for such shares, or the
conversion of the Fund to an open-end investment company. The Board of Trustees
may decide not to take any of these actions. In addition, there can be no
assurance that share repurchases or tender offers, if undertaken, will reduce
market discount.

         Notwithstanding the foregoing, at any time when the Fund's preferred
shares are outstanding, the Fund may not purchase, redeem or otherwise acquire
any of its common shares unless (1) all accumulated preferred shares dividends
have been paid and (2) at the time of such purchase, redemption or acquisition,
the net asset value of the Fund's portfolio (determined after deducting the
acquisition price of the

                                      S-34
<PAGE>

common shares) is at least 200% of the liquidation value of the outstanding
preferred shares (expected to equal the original purchase price per share plus
any accrued and unpaid dividends thereon). Any service fees incurred in
connection with any tender offer made by the Fund will be borne by the Fund and
will not reduce the stated consideration to be paid to tendering shareholders.

         Subject to its investment restrictions, the Fund may borrow to finance
the repurchase of shares or to make a tender offer. Interest on any borrowings
to finance share repurchase transactions or the accumulation of cash by the Fund
in anticipation of share repurchases or tenders will reduce the Fund's net
income. Any share repurchase, tender offer or borrowing that might be approved
by the Fund's Board of Trustees would have to comply with the Exchange Act, the
1940 Act and the rules and regulations thereunder.

         Although the decision to take action in response to a discount from net
asset value will be made by the Board of Trustees at the time it considers such
issue, it is not currently anticipated that the Board of Trustees would
authorize repurchases of common shares or a tender offer for such shares if: (1)
such transactions, if consummated, would (a) result in the delisting of the
common shares from the New York Stock Exchange, or (b) impair the Fund's status
as a regulated investment company under the Code (which would make the Fund a
taxable entity, causing the Fund's income to be taxed at the corporate level in
addition to the taxation of shareholders who receive dividends from the Fund) or
as a registered closed-end investment company under the 1940 Act; (2) the Fund
would not be able to liquidate portfolio securities in an orderly manner and
consistent with the Fund's investment objective and policies in order to
repurchase shares; or (3) there is, in the board's judgment, any (a) material
legal action or proceeding instituted or threatened challenging such
transactions or otherwise materially adversely affecting the Fund, (b) general
suspension of or limitation on prices for trading securities on the New York
Stock Exchange, (c) declaration of a banking moratorium by federal or state
authorities or any suspension of payment by United States or New York banks, (d)
material limitation affecting the Fund or the issuers of its portfolio
securities by federal or state authorities on the extension of credit by lending
institutions or on the exchange of foreign currency, (e) commencement of war,
armed hostilities or other international or national calamity directly or
indirectly involving the United States, or (f) other event or condition which
would have a material adverse effect (including any adverse tax effect) on the
Fund or its shareholders if shares were repurchased.

         The repurchase by the Fund of its shares at prices below net asset
value will result in an increase in the net asset value of those shares that
remain outstanding. However, there can be no assurance that share repurchases or
tender offers at or below net asset value will result in the Fund's shares
trading at a price equal to their net asset value. Nevertheless, the fact that
the Fund's shares may be the subject of repurchase or tender offers from time to
time, or that the Fund may be converted to an open-end investment company, may
reduce any spread between market price and net asset value that might otherwise
exist.

         In addition, a purchase by the Fund of its common shares will decrease
the Fund's total managed assets which would likely have the effect of increasing
the Fund's expense ratio. Any purchase by the Fund of its common shares at a
time when preferred shares are outstanding will increase the leverage applicable
to the outstanding common shares then remaining.

         Before deciding whether to take any action if the common shares trade
below net asset value, the Fund's Board of Trustees would likely consider all
relevant factors, including the extent and duration of the discount, the
liquidity of the Fund's portfolio, the impact of any action that might be taken
on the Fund or its shareholders and market considerations. Based on these
considerations, even if the Fund's shares should trade at a discount, the Board
of Trustees may determine that, in the interest of the Fund and its
shareholders, no action should be taken.

                                      S-35
<PAGE>

                         U.S. FEDERAL INCOME TAX MATTERS

         The following is a summary discussion of certain U.S. federal income
tax consequences that may be relevant to a shareholder that acquires, holds
and/or disposes of Preferred Shares of the Fund. This discussion only addresses
U.S. federal income tax consequences to U.S. shareholders who hold their shares
as capital assets and does not address all of the U.S. federal income tax
consequences that may be relevant to particular shareholders in light of their
individual circumstances. This discussion also does not address the tax
consequences to shareholders who are subject to special rules, including,
without limitation, financial institutions, insurance companies, dealers in
securities or foreign currencies, foreign holders, persons who hold their shares
as or in a hedge against currency risk, a constructive sale, or conversion
transaction, holders who are subject to the alternative minimum tax, or tax-
exempt or tax-deferred plans, accounts, or entities. In addition, the discussion
does not address any state, local, or foreign tax consequences. The discussion
reflects applicable tax laws of the United States as of the date of this
prospectus, which tax laws may be changed or subject to new interpretations by
the courts or the Internal Revenue Service ("IRS") retroactively or
prospectively. No attempt is made to present a detailed explanation of all U.S.
federal income tax concerns affecting the Fund and its shareholders, and the
discussion set forth herein does not constitute tax advice. INVESTORS ARE URGED
TO CONSULT THEIR OWN TAX ADVISERS TO DETERMINE THE SPECIFIC TAX CONSEQUENCES TO
THEM OF INVESTING IN THE FUND, INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL
AND FOREIGN TAX CONSEQUENCES TO THEM AND THE EFFECT OF POSSIBLE CHANGES IN TAX
LAWS.


         The Fund intends to elect to be treated, and to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), so that it will not pay U.S. federal
income tax on investment company taxable income and net 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, and the excess of any
net short-term capital gains over net long-term capital losses as reduced by
certain deductible expenses) without regard to the deduction for dividends paid
and (ii) the excess of its gross tax-exempt interest, if any, over certain
disallowed deductions, the Fund will be relieved of U.S. federal income tax on
any income of the Fund, including long-term capital gains, distributed to
shareholders. However, if the Fund retains any investment company taxable income
or "net capital gain" (i.e., the excess of net long-term capital gain over the
sum of net short-term capital loss and any capital loss carryforward), 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, and net
capital gain.

         If for any taxable year the Fund does not qualify as a regulated
investment company for U.S. federal income tax purposes, it would be treated in
the same manner as an ordinary corporation subject to U.S. federal income tax
and distributions to its shareholders would not be deductible by the Fund in
computing its taxable income. In such event, the Fund's distributions, to the
extent derived from the Fund's current or accumulated earnings and profits,
would generally constitute ordinary dividends, which would generally be eligible
for the dividends received deduction available to corporate shareholders.
Furthermore, individual and other noncorporate shareholders would generally be
able to treat such distributions as "qualified income" eligible for reduced
rates of federal income taxation in taxable years beginning on or before 2008.




         Under the Code, the Fund will be subject to a nondeductible 4% federal
excise tax on a portion of its undistributed ordinary income and capital gains
for any taxable year if it fails to meet certain distribution requirements with
respect to that year. The Fund intends to make distributions in a timely manner
and accordingly does not expect to be subject to this excise tax.


                                      S-36
<PAGE>

         In order to qualify as a regulated investment company under Subchapter
M of the Code, the Fund must, among other things, derive at least 90% of its
gross income for each taxable year from dividends, interest, payments with
respect to securities loans, gains from the sale or other disposition of stock,
securities or foreign currencies, or other income (including gains from options,
futures and forward contracts) derived with respect to its business of investing
in such stock, securities or currencies (the "90% income test"). For purposes of
the 90% income test, the character of income earned by certain entities in which
the Fund invests that are not treated as corporations (e.g., partnerships) for
U.S. federal income tax purposes will generally pass through to the Fund.
Consequently, the Fund may be required to limit its equity investments in such
entities that earn fee income, rental income or other nonqualifying income.

         In addition to the 90% income test, the Fund must also diversify its
holdings (commonly referred to as the "asset test") so that, at the end of each
quarter of its taxable year (i) at least 50% of the market value of the Fund's
total assets is represented by cash and cash items, U.S. government securities,
securities of other regulated investment companies and other securities, with
such other securities of any one issuer limited for the purposes of this
calculation to an amount not greater in value than 5% of the value of the Fund's
total assets and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its total assets is
invested in the securities of any one issuer (other than U.S. government
securities or securities of other regulated investment companies) or of two or
more issuers controlled by the Fund and engaged in the same, similar or related
trades or businesses.

         Under present law and based in part on the fact that there is 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, it is anticipated that
the Preferred Shares will constitute stock of the Fund, and thus distributions
with respect to the Preferred Shares (other than capital gain distributions and
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 or accumulated earnings and profits, as calculated for U.S. federal
income tax purposes. The following discussion assumes such treatment will apply.
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 Preferred Shares and, after the adjusted basis is reduced to zero,
will be treated as capital gain to a holder of Preferred Shares that holds such
shares as a capital asset.


         Dividends from investment company taxable income, which includes net
investment income, net short-term capital gain in excess, of net long-term
capital loss and certain net foreign exchange gains, are, 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 that applies to "qualified dividend
income" received by individual and other noncorporate shareholders under Section
1(h)(ll) of the Code. For taxable years beginning on or before December 31,
2008, qualified dividend income received by individual and other noncorporate
shareholders is taxed at rates equivalent to long-term capital gains, which
reach a maximum of 15%. 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 to qualify as qualified dividend income.  The Fund generally can
pass the tax treatment of qualified dividend income it receives through to Fund
shareholders. For the Fund to receive qualified dividend income, the Fund must
meet certain holding period requirements for the stock on which the otherwise
qualified 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. The same provisions, including the holding period
requirements, apply to each shareholder's investment in the Fund. The provisions
of the Code applicable to qualified dividend income and the 15% maximum
individual tax rate on long-term capital gains are currently effective through
2008. Thereafter, qualified dividend income will no longer be taxed at the rates
applicable to long-term capital gains, and the maximum individual tax rate on
long-term capital gains will increase to 20%, unless Congress enacts legislation
providing otherwise.


         Distributors of net capital gain, if any, are taxable as long-term
capital gains for U.S. federal income tax purposes without regard to the length
of time the shareholder has held shares of the Fund. The U.S. federal income tax
status of all distributions will be designated by the Fund and reported to the
shareholders annually. Any dividend declared by the Fund as of a record date in
October, November or December and paid during the following January will be
treated for U.S. federal income tax purposes as received by shareholders on
December 31 of the calendar year in which it is declared.

         If the Fund retains any net capital gain, the Fund may designate the
retained amount as undistributed capital gains in a notice to shareholders who,
if subject to U.S. federal income tax on long-term capital gains (i) will be
required to include in income, as long-term capital gain, their proportionate
share of such undistributed amount, and (ii) will be entitled to credit their
proportionate share of the tax paid by the Fund on the undistributed amount
against their U.S. federal income tax liabilities, if any, and to claim refunds
to the extent the credit exceeds such liabilities. For U.S. federal income tax
purposes, the tax basis of shares owned by a shareholder of the Fund will be
increased by the difference between the amount of undistributed net capital gain
included in the shareholder's gross income and the tax deemed paid by the
shareholders.

         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.

                                      S-37
<PAGE>
         If the Fund acquires any equity interest (under proposed Treasury
regulations, generally including not only stock but also an option to acquire
stock such as is inherent in a convertible bond) in certain foreign corporations
that receive at least 75% of their annual gross income from passive sources
(such as interest, dividends, certain rents and royalties, or capital gains) or
that hold at least 50% of their assets in investments producing such passive
income ("passive foreign investment companies"), the Fund could be subject to
U.S. federal income tax and additional interest charges on "excess
distributions" received from such companies or on gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such a tax. An election
may generally be available that would ameliorate these adverse tax consequences,
but any such election could require the Fund to recognize taxable income or gain
(subject to tax distribution requirements) without the concurrent receipt of
cash. These investments could also result in the treatment of associated capital
gains as ordinary income. The Fund may limit and/or manage its holdings in
passive foreign investment companies to limit its tax liability or maximize its
return from these investments.

         The Fund may invest to a significant extent in debt obligations that
are in the lowest rating categories or are unrated, including debt obligations
of issuers not currently paying interest or who are in default. Investments in
debt obligations that are at risk of or in default present special tax issues
for the Fund. Tax rules are not entirely clear about issues such as when the
Fund may cease to accrue interest, original issue discount or market discount,
when and to what extent deductions may be taken for bad debts or worthless
securities and how payments received on obligations in default should be
allocated between principal and income. These and other related issues will be
addressed by the Fund when, as and if it invests in such securities, in order to
seek to ensure that it distributes sufficient income to preserve its status as a
regulated investment company and does not become subject to U.S. federal income
or excise taxes.


         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 for the reduced
rates of taxation available to regulated investment companies and/or might
subject the Fund to the nondeductible 4% excise tax. Upon any failure to meet
the asset coverage requirements imposed by the 1940 Act, the Fund may, in its
sole discretion and to the extent permitted under the 1940 Act, purchase or
redeem 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.



         If the Fund invests in certain pay-in-kind securities, zero coupon
securities, deferred interest securities or, in general, any other securities
with original issue discount (or with market discount if the Fund elects to
include market discount in income currently), the Fund must accrue income on
such investments for each taxable year, which generally will be prior to the
receipt of the corresponding cash payments. However, the Fund must distribute,
at least annually, all or substantially all of its net investment income,
including such accrued income, to shareholders to avoid U.S. federal income and
excise taxes. Therefore, the Fund may have to dispose of its portfolio
securities under disadvantageous circumstances to generate cash, or may have to
leverage itself by borrowing the cash, to satisfy distribution requirements.


         At the time of an investor's purchase of the Preferred Shares, a
portion of the purchase price may be attributable to realized or unrealized
appreciation in the Fund's portfolio or undistributed taxable

                                      S-38
<PAGE>

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.


         The Fund's income will consist of investment company taxable income and
may also consist of net capital gain. The character of the Fund's income will
not affect the amount of dividends to which the holders of the Preferred Shares
are entitled. Holders of the Preferred Shares are entitled to receive only the
amount of dividends as determined by periodic auctions. For U.S. federal income
tax purposes, however, the IRS currently 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 designate
distributions made with respect to the common shares and the 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 dividend paid with respect to the
Preferred Shares during a year will be designated as ordinary income dividends
and, if the Fund designates any dividend as a capital gains dividend, qualified
dividend income, and/or dividends eligible for the dividends received deduction,
such dividends will be paid in proportion to the Preferred Shares proportionate
share of the total distributions paid on the Preferred Shares during the year to
the total distributions paid on both the Preferred Shares and the Common Shares
during the year. Each holder of the Preferred Shares during the year will be
notified of the allocation within 60 days after the end of the year. The amount
of the net capital gain realized by the Fund may not be significant, and there
is no assurance that any such income will be realized by the Fund in any year.
Distributions of the Fund's investment company taxable income are, except in the
case of qualified dividend income, taxable to shareholders as ordinary income.
Distributions of the Fund's net capital gain, if any, are taxable to
shareholders at rates applicable to long- term capital gains, regardless of the
length of time the Preferred Shares have been held by holders. Distributions in
excess of the Fund's earnings and profits will first reduce a shareholder's
adjusted tax basis in his or her shares of Preferred Shares and, after the
adjusted tax basis is reduced to zero, will constitute capital gains to a holder
of shares of Preferred Shares who holds his or her shares of Preferred Shares as
a capital asset.



         Although the Fund is required to distribute annually at least 90% of
its investment company taxable income, the Fund is not required to distribute
net capital gain to the shareholders. The Fund may retain and reinvest such
gains and pay federal income taxes on such gains (the "net undistributed capital
gain"). However, it is unclear whether a portion of the net undistributed
capital gain would have to be allocated to the Preferred Shares for U.S. federal
income tax purposes. Until and unless the Fund receives acceptable guidance from
the IRS as to the allocation of the net undistributed capital gain between the
Common Shares and the Preferred Shares, the Fund intends to distribute its net
capital gain for any year during which it has shares of Preferred Shares
outstanding. Such distribution will affect the tax character but not the amount
of dividends to which holders of shares of Preferred Shares are entitled.


                                      S-39
<PAGE>

         Sales and other dispositions of the Preferred Shares are taxable events
for shareholders that are subject to U.S. federal income tax. Shareholders
should consult their own tax advisors with reference to their individual
circumstances to determine whether any particular transaction in the Preferred
Shares is properly treated as a sale for tax purposes (as the following
discussion assumes) and the tax treatment of any gains or losses recognized in
such transactions. Any loss realized by a shareholder upon the sale or other
disposition of shares with a tax holding period of six months or less will be
treated as a long-term capital loss to the extent of any amounts treated as
distributions of long-term capital gain with respect to such shares. Losses on
sales or other dispositions of shares may be disallowed under "wash sale" rules
in the event of other investments in the Fund (including those made pursuant to
reinvestment of dividends) within a period of 61 days beginning 30 days before
and ending 30 days after a sale or other disposition of shares. In such a case,
the disallowed portion of any loss generally would be included in the U.S.
federal tax basis of the shares acquired in the other investments in the Fund.

         The Fund may engage in various transactions utilizing options, futures
contracts, forward contracts, hedge instruments, straddles, and other similar
transactions. Such transactions may be subject to special provisions of the Code
that, among other things, affect the character of any income realized by the
Fund from such investments, accelerate recognition of income to the Fund, defer
Fund losses, and affect the determination of whether capital gain and loss is
characterized as long-term or short-term capital gain or loss. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions may also require the Fund to mark-to-market
certain types of the positions in its portfolio (i.e., treat them as if they
were closed out), which may cause the Fund to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy the
distribution requirements for avoiding U.S. federal income and excise taxes. The
Fund will monitor its transactions, will make the appropriate tax elections, and
will make the appropriate entries in its books and records when it acquires an
option, futures contract, forward contract, hedge instrument or other similar
investment in order to mitigate the effect of these rules, prevent
disqualification of the Fund as a regulated investment company and minimize the
imposition of U.S. federal income and excise taxes.


         Certain distributions by the Fund may qualify for the dividends
received deduction available to corporate shareholders, subject to certain
holding period and other requirements, but generally only to the extent the Fund
earned dividend income from stock investments in U.S. domestic corporations
(other than REITs). In addition, certain distributions of "qualified dividend
income" (as discussed above) will currently qualify for reduced rates of federal
income taxation if certain holding period and other requirements under the Code
are satisfied by both the Fund and such shareholder. Distributions from REITs
generally will not qualify for treatment as "qualified dividend income."



         The Fund may invest in REITs that hold residual interests in real
estate mortgage investment conduits ("REMICs"). Under Treasury regulations that
have not yet been issued, but may apply retroactively, a portion of the Fund's
income from a REIT that is attributable to the REIT's residual interest in a
REMIC (referred to in the Code as an "excess inclusion") will be subject to U.S.
federal income tax in all events. These regulations are also expected to provide
that excess inclusion income of a regulated investment company, such as the
Fund, will be allocated to shareholders


                                      S-40
<PAGE>

of the regulated investment company in proportion to the dividends received by
such shareholders, with the same consequences as if the shareholders held the
related REMIC residual interest directly. In general, excess inclusion income
allocated to shareholders (i) cannot be offset by net operating losses (subject
to a limited exception for certain thrift institutions), (ii) will constitute
unrelated business taxable income to entities (including a qualified pension
plan, an individual retirement account, a 401(k) plan, a Keogh plan or other
tax-exempt entity) subject to tax on unrelated business income, thereby
potentially requiring such an entity that is allocated excess inclusion income,
and otherwise might not be required to file a tax return, to file a tax return
and pay tax on such income, and (iii) in the case of a foreign shareholder, will
not qualify for any reduction in U.S. federal withholding tax. In addition, if
at any time during any taxable year a "disqualified organization" (as defined in
the Code) is a record holder of a share in a regulated investment company, then
the regulated investment company will be subject to a tax equal to that portion
of its excess inclusion income for the taxable year that is allocable to the
disqualified organization, multiplied by the highest federal income tax rate
imposed on corporations. The Fund does not intend to invest in REITs in which a
substantial portion of the assets will consist of residual interests in REMICs.

       The Fund may be subject to withholding and other taxes imposed by
foreign countries, including taxes on interest, dividends and capital gains with
respect to its investments in those countries, which would, if imposed, reduce
the yield on or return from those investments. Tax treaties between certain
countries and the U.S. may reduce or eliminate such taxes in some cases. The
Fund does not expect to satisfy the requirements for passing through to its
shareholders their prorata shares of qualified foreign taxes paid by the Fund,
with the result that shareholders will not include such taxes in their gross
incomes and will not be entitled to a tax deduction or credit for such taxes on
their own tax returns.


         Under Treasury regulations, if a shareholder recognizes a loss with
respect to shares of $2 million or more for an individual shareholder or $10
million or more for a corporate shareholder in any single taxable year (or a
greater loss over a combination of 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 advisors to determine the applicability of
these regulations in light of their individual circumstances.



         Federal law requires that the Fund withhold, as "backup withholding"
28% of reportable payments, including dividends, capital gain distributions and
the proceeds of sales or other dispositions of the Preferred Shares paid to
shareholders who have not complied with IRS requirements. In order to avoid this
withholding requirement, shareholders must certify on their Account
Applications, or on a separate IRS Form W-9, that the Social Security Number or
other Taxpayer Identification Number they provide is their correct number and
that they are not currently subject to backup withholding, or that they are
exempt from backup withholding. The Fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous
underreporting of interest or dividend income.


         The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons,
(i.e., U.S. citizens or residents or U.S. corporations, partnerships, trusts or
estates and who are subject to U.S. federal income tax). Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
non-resident alien individual. With respect to such persons, the Fund must
withhold U.S. federal withholding tax at the rate of 30% (or such lower rate as
prescribed by an applicable tax treaty) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8BEN, or other authorized
withholding certificate is on file, to backup withholding on certain other
payments from the Fund. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS ON
THESE MATTERS AND ON ANY SPECIFIC QUESTION OF U.S. FEDERAL, STATE, LOCAL,
FOREIGN AND OTHER APPLICABLE TAX LAWS, BEFORE MAKING AN INVESTMENT IN THE FUND.


         CUSTODIAN, TRANSFER AGENT, DIVIDEND PAYING AGENT AND REGISTRAR

         The Fund's securities and cash are held under a custodian agreement
with The Bank of New York, One Wall Street, New York, New York 10286. The
transfer agent, dividend paying agent and registrar for the Fund's shares is
also The Bank of New York.

                                      S-41
<PAGE>

                                     EXPERTS


         The financial statement of the Fund as of March 15, 2004 appearing in
this Statement of Additional Information has been audited by Deloitte & Touche
LLP independent auditors, as set forth in their report thereon appearing
elsewhere herein, and is included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.


                             ADDITIONAL INFORMATION

         A Registration Statement on Form N-2, including amendments thereto,
relating to the shares offered hereby, has been filed by the Fund with the
Commission, Washington, D.C. The prospectus and this Statement of Additional
Information do not contain all of the information set forth in the Registration
Statement, including any exhibits and schedules thereto. For further information
with respect to the Fund and the shares offered hereby, reference is made to the
Registration Statement. Statements contained in the prospectus and this
Statement of Additional Information as to the contents of any contract or other
document referred to are not necessarily complete and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference. A copy of the Registration Statement may be inspected without
charge at the Commission's principal office in Washington, D.C., and copies of
all or any part thereof may be obtained from the Commission upon the payment of
certain fees prescribed by the Commission.

                                      S-42
<PAGE>
             FINANCIAL STATEMENT AND REPORT OF INDEPENDENT AUDITORS

                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Calamos Strategic Total Return Fund:

We have audited the accompanying statement of assets and liabilities of Calamos
Strategic Total Return Fund (the "Fund"), as of March 15, 2004, and the related
statement of operations for the period from December 31, 2003 (date of
organization) through March 15, 2004. These financial statements are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 15, 2004, by correspondence with the Fund's custodian. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Calamos Strategic Total Return
Fund as of March 15, 2004 and the results of its operations for the period from
December 31, 2003 (date of organization) through March 15, 2004 in conformity
with accounting principles generally accepted in the United States of America.



DELOITTE & TOUCHE LLP /S/
Chicago, Illinois
March 24, 2004


                                      F-1
<PAGE>
                           CALAMOS STRATEGIC TOTAL RETURN FUND
                           STATEMENT OF ASSETS AND LIABILITIES
                                      MARCH 15,2004
<Table>
<Caption>
<S>                                                                                                         <C>
Assets:
Cash .................................................................................................      $   200,130
Deferred offering costs ..............................................................................        1,790,132
                                                                                                            -----------
Total assets .........................................................................................        1,990,262
                                                                                                            -----------

LIABILITIES:
Accrued offering costs ...............................................................................        1,790,132
Accrued organizational expenses ......................................................................           96,729
                                                                                                            -----------
                                                                                                              1,886,861
                                                                                                            -----------

Net assets (14,000 shares of beneficial interest issued and outstanding;
              unlimited shares authorized) ...........................................................      $   103,401
                                                                                                            ===========

Net asset value per share ............................................................................      $     7.386
                                                                                                            ===========
- ------------------------------------------------------------------------

                                 STATEMENT OF OPERATIONS
                   FOR THE PERIOD FROM DECEMBER 31, 2003 (DATE OF ORGANIZATION)
                             THROUGH MARCH 15, 2004

Investment income ....................................................................................      $        --
                                                                                                            -----------

Organizational expenses ..............................................................................           96,729
Less: reimbursement from investment advisor ..........................................................               --
                                                                                                            -----------
Net expenses .........................................................................................           96,729
                                                                                                            -----------

Net investment income ................................................................................      $   (96,729)
                                                                                                            -----------

- ------------------------------------------------------------------------
</Table>
NOTES
1.   ORGANIZATION

     Calamos Strategic Total Return Fund (the "Fund") is a diversified,
closed-end management investment company, organized on December 31, 2003 which
has had no operations other than the sale and issuance of 14,000 shares of
beneficial interest at an aggregate purchase price of $200,130 to Calamos Asset
Management, Inc. (the "Investment Adviser" or "Calamos"). The Fund estimates
that it will offer 170,000,000 common shares in its initial offering. The
Investment Adviser has agreed to reimburse the amount by which the aggregate of
all of the Fund's organizational expenses and all offering costs (other than the
sales load) exceeds $0.03 per share. Accordingly, the Fund's share of offering
costs will be recorded as a reduction of the proceeds from the sale of its
Common Shares upon the commencement of the Fund's operations. Estimated offering
costs to be borne by the Fund total $1,790,132. Estimated organizational costs
of $96,729 are accrued and expensed in the accompanying financial statements.
The Fund currently anticipates that it will issue Preferred Shares as soon as
practicable after the closing of the initial offering of common shares. If the
Fund completes an offering of Preferred Shares, the Fund will also pay, and
common shareholders will effectively bear, the offering costs in connection with
such offering and expenses related to the ongoing maintenance of such shares.

2.   ACCOUNTING POLICIES

     The preparation of the financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of income and expenses during the reporting period. Actual results could
differ from these estimates.

3.   AGREEMENTS

     The Fund has entered into an Investment Advisory Agreement with Calamos,
which provides for payment of a monthly fee computed at the annual rate of 1.00%
of the Fund's average weekly Total Managed Assets. "Total Managed Assets" means
the total assets of the Fund (including any assets attributable to leverage)
minus accrued liabilities (other than liabilities representing leverage). For
purposes of calculating "Total Managed Assets," the liquidation preference of
any preferred shares outstanding is not considered a liability.

     The Fund and such other funds advised by Calamos that may be a part of
these arrangements (the Fund and such other funds are collectively referred to
as the "Calamos Funds") have entered into a Fund Accounting Servicing Agreement
with State Street Bank & Trust Co. ("State Street"). The Calamos Funds will pay
State Street a monthly fee based on combined managed assets of the Calamos Funds
("Combined Assets") at the annual rate of 0.0225% for the first $3 billion of
Combined Assets and 0.0150% for the Combined Assets that exceed $3 billion.

     The Calamos Funds (including the Fund) have also entered into a Financial
Accounting Servicing Agreement with Calamos. The Calamos Funds will pay Calamos
a monthly fee based on Combined Assets at the annual rate of 0.0175% on the
first $1 billion of Combined Assets; 0.0150% on the next $1 billion of Combined
Assets; and 0.0110% on Combined Assets that exceed $2 billion. Each fund of the
Calamos Funds will pay its pro-rata share of the fees payable to State Street
and Calamos based on relative managed assets of each fund.

4.   FEDERAL INCOME TAXES

     The Fund intends to qualify as a "regulated investment company" and as such
(and by complying with the applicable provisions of the Internal Revenue Code of
1986, as amended) will not be subject to Federal income tax on taxable income
(including realized capital gains) that is distributed to shareholders.


                                      F-2
<PAGE>

                      CALAMOS STRATEGIC TOTAL RETURN FUND

SCHEDULE OF INVESTMENTS APRIL 14, 2004 (UNAUDITED)

<TABLE>
<CAPTION>


  PRINCIPAL                                                         PRINCIPAL
   AMOUNT                                            VALUE           AMOUNT                                                 VALUE
- ---------------------------------------------------------------- -------------------------------------------------------------------
<S>            <C>                                <C>              <C>          <C>  <C>                                 <C>
Corporate Bonds
                    (25.5%)                                                              CONSUMER CYCLICAL (3.5%)
               BASIC INDUSTRIES (3.3%)                             $ 3,800,000       Central Garden & Pet Company
               Boise Cascade Corp.                                                   9.125%, 02/01/13                    $ 4,246,500
$ 2,000,000    7.350%, 02/01/16                   $ 2,062,524        8,500,000  GBP  EMI Group, PLC
  2,000,000    7.000%, 11/01/13                     2,114,940                        9.750%, 05/20/08                     16,394,129
 15,730,000    Freeport-McMoRan Copper                               5,000,000       IMAX Corp. (b)
               & Gold, Inc.                                                          9.625%, 12/01/10                      5,150,000
               10.125%, 02/01/10                   17,794,563                        Intrawest Corp.
  5,000,000    Ipsco, Inc.                                           4,500,000       7.500%, 10/15/13                      4,612,500
               8.750%, 06/01/13                     5,725,000        1,750,000       10.500%, 02/01/10                     1,916,250
  8,500,000    Ispat International NV (b)                           12,000,000       Mandalay Resort Group
               9.750%, 04/01/14                     8,861,250                        10.250%, 08/01/07                    14,040,000
  4,000,000    Jarden Corp.                                         17,000,000       RH Donnelley Financial Corp.
               9.750%, 05/01/12                     4,520,000                        10.875%, 12/15/12                    20,400,000
 10,000,000    Phelps Dodge Corp.                                                    Warner Music Group (b)
               9.500%, 06/01/31                    14,036,884        2,500,000  GBP  8.125%, 04/15/14                      4,510,531
                                                                       500,000       7.375%, 04/15/14                        507,500
  2,175,000    Steel Dynamics, Inc.                                                                                      -----------
                                                                                                                          71,777,410
               9.500%, 03/15/09                     2,430,563                                                            -----------
               Union Carbide Corp.                                                   CONSUMER GROWTH STAPLES (4.1%)
  6,650,000    7.500%, 06/01/25                     6,151,250        5,000,000       Alpharma, Inc. (b)
  1,600,000    7.875%, 04/01/23                     1,528,000                        8.625%, 05/01/11                      5,237,500
                                                  ------------       5,000,000       Ameripath, Inc.
                                                   65,224,974
                                                  ------------                       10.500%, 04/01/13                     5,050,000
               CAPITAL GOODS - INDUSTRIAL (1.8%)
  5,000,000    Asbury Automotive Group, Inc. (b)                     1,605,000       Bausch & Lomb, Inc.
               8.000%, 03/15/14                     4,975,000                        7.125%, 08/01/28                      1,641,905
  8,500,000    CNH Global, NV (b)                                                    Charter Communications, Inc.
               9.250%, 08/01/11                     9,583,750       11,050,000       9.625%, 11/15/09                      9,558,250
  8,500,000    Imco Recycling, Inc.                                 10,000,000       11.125%, 01/15/11                     8,950,000
               10.375%, 10/15/10                    9,180,000        3,000,000       10.000%, 04/01/09                     2,640,000
  5,000,000    Jacuzzi Brands, Inc.                                 10,000,000       WH Intermediate Holdings, Ltd.
               9.625%, 07/01/10                     5,600,000                        11.750%, 07/15/10                    11,600,000
  5,000,000    Manitowoc Company, Inc.                               5,000,000       Quintiles Transisional Corp. (b)
               10.500%, 08/01/12                    5,700,000                        10.000%, 10/01/13                     5,175,000
                                                  ------------                       Rite Aid Corp.
                                                   35,038,750
                                                  ------------       5,250,000       11.250%, 07/01/08                     5,853,750
               CAPITAL GOODS - TECHNOLOGY (2.6%)
  8,500,000    Avnet, Inc.                                           4,000,000       6.875%, 08/15/13                      3,820,000
               9.750%, 02/15/08                     9,902,500        4,000,000       Service Corp. (b)
  5,000,000    Monitronics International, Inc. (b)                                   6.750%, 04/01/16                      4,070,000
               11.750%, 09/01/10                    5,300,000        8,500,000       Spanish Broadcasting System, Inc.
  2,000,000    Orbital Sciences Corp.                                                9.625%, 11/01/09                      9,010,000
               9.000%, 07/15/11                     2,210,000        9,000,000       Steinway Musical Instruments, Inc.
                                                                                     8.750%, 04/15/11                      9,765,000
  3,000,000    Rayovac Corp.                                                                                             -----------
                                                                                                                          82,371,405
               8.500%, 10/01/13                     3,225,000                                                            -----------
 12,000,000    Sanmina-Sci Corp.                                                     CREDIT CYCLICALS (1.4%)
               10.375%, 01/15/10                   14,250,000        9,000,000       Hovnanian Enterprises, Inc.
  1,000,000    Stoneridge, Inc.                                                      7.750%, 05/15/13                      9,562,500
               11.500%, 05/01/12                    1,195,000        3,500,000       Meritage Group
                                                                                     7.000%, 05/01/14                      3,438,260
  5,000,000    Stratus Technologies, Inc. (b)                                        Standard Pacific Corp.
                                                                     5,000,000       9.250%, 04/15/12                      5,575,000
               10.375%, 12/01/08                    5,050,000        2,790,000       9.500%, 09/15/10                      3,110,850
 10,000,000    Xerox Corp.                                           5,000,000       Texas Industries, Inc.
               7.625%, 06/15/13                    10,575,000                        10.250%, 06/15/11                     5,700,000
                                                  ------------                                                           -----------
                                                   51,707,500                                                             27,386,610
                                                  ------------                                                           -----------
                                                                                     ENERGY (2.5%)
                                                                     5,000,000       KCS Energy, Inc. (b)
                                                                                     7.125%, 04/01/12                      5,025,000

                                                                    10,000,000       Paramount Resources, Ltd.

                                                                                     7.875%, 11/01/10                     10,025,000
</TABLE>

<PAGE>


                       CALAMOS STRATEGIC TOTAL RETURN FUND

SCHEDULE OF INVESTMENTS APRIL 14, 2004 (UNAUDITED)

<TABLE>
<CAPTION>
 PRINCIPAL                                                           PRINCIPAL
  AMOUNT                                                VALUE         AMOUNT                                              VALUE
- ---------------------------------------------------------------   -----------------------------------------------------------------
<S>            <C>                                  <C>            <C>            <C>                                 <C>
               Petroleo Brasileiro S.A. - Petrobras                                CAPITAL GOODS - TECHNOLOGY (3.9%)
$ 6,000,000    9.125%, 07/02/13                     $  6,345,000   $ 33,000,000    Advanced Micro Devices, Inc.
  3,000,000    8.375%, 12/10/18                        3,000,000                   4.750%, 02/01/22                    $ 35,681,250
  6,325,000    Swift Energy Company                                  16,000,000    Fairchild Semiconductor
               9.375%, 05/01/12                        7,068,188                   International, Inc.
  5,000,000    Tesoro Petroleum Corp.                                              5.000%, 11/01/08                      17,560,000
               9.625%, 04/01/12                        5,687,500     22,000,000    LSI Logic Corp.
  1,100,000    Western Gas Resources, Inc.                                         4.000%, 05/15/10                      25,135,000
                                                                                                                       ------------
               10.000%, 06/15/09                       1,166,000                                                         78,376,250
                                                                                                                       ------------
 10,000,000    Williams Companies, Inc.                                            ENERGY (0.9%)
               8.125%, 03/15/12                       11,000,000     15,000,000    Repsol Ypf SA
                                                     -----------
                                                      49,316,688                   4.500%, 01/26/11                      17,006,250
                                                     -----------                                                       ------------
               FINANCIAL (2.5%)                                                                                          17,006,250
                                                                                                                       ------------
               Dow Jones TRAC-X North America High                                 FINANCIAL (0.4%)
               Yield Series 2 March 2009 Trust 3 (b)                  8,700,000    Host Marriott Corp.
 20,000,000    10.125%, 03/25/09                      20,000,000                   3.250%, 03/15/24                       8,493,375
                                                                                                                       ------------
 20,000,000    8.000%, 03/25/09                       19,950,000                                                          8,493,375
                                                                                                                       ------------
  8,500,000    Senior Housing Properties Trust                                     TELECOMMUNICATIONS (0.4%)
               8.625%, 01/15/12                        9,562,500      7,700,000    Nextel Communications, Inc.
                                                     -----------
                                                      49,512,500                   6.000%, 06/01/11                       8,585,500
                                                     -----------                                                       ------------
               TELECOMMUNICATIONS (1.7%)                                                                                  8,585,500
                                                                                                                       ------------
 17,000,000    AT&T Corp.
               8.500%, 11/15/31                       19,319,667                   TOTAL CONVERTIBLE BONDS
  8,500,000    General Cable Corp. (b)                                             (Cost $153,284,626)                  152,083,025

               9.500%, 11/15/10                        9,328,750
  5,000,000    Nextel Communications, Inc.                           NUMBER OF
               7.375%, 08/01/15                        5,337,500      SHARES                                               VALUE
                                                     -----------   ----------------------------------------------------------------
                                                      33,985,917   PREFERRED STOCKS (7.1%)
                                                     -----------
               UTILITIES (2.1%)                                                    CAPITAL GOODS - INDUSTRIAL (0.7%)
               Calpine Corp.                                             80,000    Cummins, Inc.
 25,600,000    8.500%, 05/01/08                       18,880,000                   7.000%, 06/15/31                       5,950,000
 19,500,000    8.500%, 02/15/11                       14,332,500        160,000    Ford Motor Company Capital Trust II
  4,865,000    7.750%, 04/15/09                        3,575,775                   6.500%, 01/15/32                       8,336,000
                                                                                                                        -----------
  5,000,000    Edison International                                                                                      14,286,000
                                                                                                                        -----------
               9.875%, 04/15/11                        5,250,000                   CAPITAL GOODS - TECHNOLOGY (1.7%)
                                                     -----------
                                                      42,038,275        255,000    Xerox Corp.
                                                     -----------
                                                                                   6.250%, 07/01/06                      33,435,600
                                                                                                                        -----------
               TOTAL CORPORATE BONDS                                                                                     33,435,600
                                                                                                                        -----------
               (Cost $511,555,579)                   508,360,029                   CONSUMER GROWTH STAPLES (1.7%)
                                                     ===========
                                                                        635,000    Baxter International, Inc.
 CONVERTIBLE BONDS (7.6%)                                                          3.500%, 02/16/06                      33,997,900
                                                                                                                        -----------
               BASIC INDUSTRIES (0.8%)                                                                                   33,997,900
                                                                                                                        -----------
 10,700,000    Freeport-McMoRan Copper & Gold, Inc.                                ENERGY (0.9%)
               7.000%, 02/11/11                       16,103,500        140,000    Amerada Hess Corp.
                                                     -----------
                                                      16,103,500                   3.500%, 12/01/06                       8,736,000
                                                     -----------
               CAPITAL GOODS - INDUSTRIAL (1.2%)                        150,000    Southern Union Company
    280,000    General Motors Corp.                                                2.875%, 08/16/06                       9,041,250
                                                                                                                        -----------
               6.250%, 07/15/33                        8,324,400                                                         17,777,250
                                                                                                                        -----------
 13,000,000    Kaydon Corp.                                                        FINANCIAL (1.3%)
               4.000%, 05/23/23                       15,193,750        300,000    Chubb Corp.
                                                     -----------
                                                      23,518,150                   1.750%, 08/16/06                       8,634,000
                                                     -----------
</TABLE>




<PAGE>




                      CALAMOS STRATEGIC TOTAL RETURN FUND

SCHEDULE OF INVESTMENTS APRIL 14, 2004 (UNAUDITED)

<TABLE>
<CAPTION>

  NUMBER OF                                                         NUMBER OF
   SHARES                                               VALUE        SHARES                                               VALUE
- ----------------------------------------------------------------   -----------------------------------------------------------------
<S>        <C> <C>                                 <C>             <C>       <C>  <C>                               <C>
   220,000     National Australia Bank, Ltd.                                      CONSUMER STAPLES (2.0%)
               7.875%, 12/31/49                      $ 8,360,000    1,600,000 GBP Enterprise Inns, PLC                $   18,292,215
    35,000     State Street Corp.                                     650,000     Sara Lee Corp.                          14,371,500
               13.500%, 02/15/06                       8,312,500      210,000     Supervalu, Inc.                          6,199,200
                                                     -----------                                                      --------------
                                                      25,306,500                                                          38,862,915
                                                     -----------                                                      --------------
               TELECOMMUNICATIONS (0.4%)                                          CREDIT CYCLICALS (2.5%)
   170,000     ALLTEL Corp.                                           130,000     Independence Community Bank Corp.        4,867,200
               3.875%, 05/17/05                        8,627,500      484,100     New York Community Bancorp, Inc.        13,821,055
                                                     -----------
                                                       8,627,500      800,000     Washington Mutual, Inc.                 31,600,000
                                                     -----------                                                      --------------
               UTILITIES (0.4%)                                                                                           50,288,255
                                                                                                                      --------------
   200,000     Calpine Capital Trust III                                          ENERGY (3.7%)
               5.000%, 08/01/30                        8,950,000      400,000     Chevrontexaco Corp.                     36,400,000
                                                     -----------
                                                       8,950,000      250,000     Conocophillips                          18,015,000
                                                     -----------
                                                                       29,000 EUR OMV, AG                                  5,560,166
               TOTAL PREFERRED STOCKS                                 270,000     PetroChina Company, Ltd.                13,154,400
                                                                                                                      --------------
               (Cost $144,313,840)                   142,380,750                                                          73,129,566
                                                     ===========                                                      --------------
                                                                                  FINANCIAL (8.8%)
COMMON STOCKS (50.5%)                                                 295,900     Allstate Corp.                          13,919,136
               BASIC INDUSTRIES (0.9%)                                335,000     Bank Of America Corp.                   26,830,150
   210,000     3M Company                             17,358,600      665,000     Citigroup, Inc.                         33,881,750
                                                     -----------
                                                      17,358,600      230,000     Federal National Mortgage
                                                     -----------                    Association                           16,744,000
               CAPITAL GOODS - INDUSTRIAL (4.9%)                      150,000     Fidelity National Corp.                  5,427,000
   215,000     Caterpillar, Inc.                      17,421,450      549,700     General Growth Properties, Inc.         15,034,295
 1,275,000     Ford Motor Company                     16,881,000      120,000     Jefferson-Pilot Corp.                    6,529,200
   560,000     General Electric Company               17,068,800      307,600     Mills Corp.                             13,002,252
   365,000     General Motors Corp.                   16,775,400      300,000     Morgan Stanley                          16,005,000
   920,000     Waste Management, Inc.                 27,572,400       81,900     UnionBanCal Corp.                        4,054,869
                                                     -----------
                                                      95,719,050      585,000     Wachovia Corp.                          26,120,250
                                                     -----------                                                      --------------
               CAPITAL GOODS - TECHNOLOGY (4.3%)                                                                         177,547,902
                                                                                                                      --------------
   280,000     Emerson Electric Company               17,063,200                  TELECOMMUNICATIONS (7.0%)
   945,000     Intel Corp.                            25,893,000    1,265,000     Bellsouth Corp.                         33,180,950
   280,000     International Business Machines Corp.  26,236,000      420,000     QUALCOMM, Inc.                          28,282,800
   495,000     Rockwell Automation, Inc.              16,830,000    2,100,000     SBC Communications, Inc.                50,736,000
                                                     -----------
                                                      86,022,200      710,000     Verizon Communications, Inc.            26,326,800
                                                     -----------                                                      --------------
               CONSUMER CYCLICAL (5.4%)                                                                                  138,526,550
                                                                                                                      --------------
   980,000     Saks, Inc. (a)                         16,689,400
   300,000     Eaton Corp.                            17,562,000                  TOTAL COMMON STOCK
   280,000     Kimberly-Clark Corp.                   17,936,800                  Cost ($1,019,132,372)                1,003,397,061
                                                                                                                      ==============
   500,000     May Department Stores Company          16,625,000
   335,000     Maytag Corp.                           10,160,550     PRINCIPAL
   165,000     Procter & Gamble Company               17,458,650       AMOUNT                                              VALUE
                                                                   -----------------------------------------------------------------
   240,000     Sears Roebuck & Co.                    10,125,600   SHORT TERM INVESTMENTS (12.6%)
                                                     -----------
                                                     106,558,000   $151,381,000   Exxon Mobil Corporation
                                                     -----------
               CONSUMER GROWTH STAPLES (11.0%)                                    0.800%, 04/15/04                       151,381,000
 2,000,000 AUD APN News & Media, Ltd.                  5,609,416    100,000,000   UBS Finance, Inc.
 2,835,000     Bristol-Myers Squibb Company           69,457,500                  0.800%, 04/15/04                       100,000,000
                                                                                                                      --------------
   440,000     Gillette Company                       17,054,400                  TOTAL SHORT TERM
    35,000 CHF Givaudan, SA                           17,831,307                  INVESTMENTS
   540,000     Johnson & Johnson                      28,404,000                  (Cost $251,381,000)                    251,381,000
                                                                                                                      ==============
 1,200,000     Merck & Company, Inc.                  54,528,000
   740,000     Pfizer, Inc.                           26,499,400                  TOTAL INVESTMENTS (103.3%)
                                                     -----------
                                                     219,384,023                  (Cost $2,079,667,417)                2,057,601,865
                                                     -----------                                                      ==============
                                                                                  LIABILITIES, LESS OTHER               (66,131,660)
                                                                                                                      --------------
                                                                                  ASSETS (-3.3%)
                                                                                  NET ASSETS (100.0%)                 $1,991,470,205
                                                                                                                      ==============
</TABLE>



<PAGE>




NOTES TO SCHEDULE OF INVESTMENTS


(a) Non-Income producing security.
(b) 144A securities are those that are exempt from registration under Rule
    144A of the Securities Act of 1933, as amended. These securities are
    generally issued to qualified institutional buyers ("QIBs"), such as the
    Portfolio. Any resale of these securities must generally be effected
    through a sale that is exempt from registration (e.g. a sale to another
    QIB), or the security must be registered for public sale. At April 14,
    2004 the market value of 144A securities that can not currently be
    exchanged to the registered form is $121,217,656 or 6.1% of net assets of
    the Portfolio.


FOREIGN CURRENCY ABBREVIATIONS

AUD:       Australian Dollar
CHF:       Swiss Franc
EUR:       European Monentary Unit
GBP:       British Pound Sterling

Note: Market values for securities denominated in Foreign currencies are shown
      in U.S. dollars.




<PAGE>



CALAMOS STRATEGIC TOTAL RETURN FUND

STATEMENT OF ASSET AND LIABILITIES
APRIL 14, 2004 (UNAUDITED)
<TABLE>
<S>                                                                                                          <C>
ASSETS
Investments, at value (Cost: $2,079,667,417) ......................................................                 $ 2,057,601,865
Cash with custodian (interest bearing) ............................................................                          15,369
Accrued and purchased interest and dividends receivable ...........................................                      16,235,385
                                                                                                                    ---------------
     Total Assets .................................................................................                   2,073,852,619
                                                                                                                    ---------------

LIABILITIES AND NET ASSETS
Payable for investments purchased .................................................................                      79,712,939
Payable for offering and organizational fees ......................................................                       1,826,175
Payable to investment advisor .....................................................................                         769,582
Accrued expense and other liabilities .............................................................                          73,718
                                                                                                                    ---------------
     Total Liabilities ............................................................................                      82,382,414
                                                                                                                    ---------------

NET ASSETS ........................................................................................                 $ 1,991,470,205
                                                                                                                    ===============


ANALYSIS OF NET ASSETS
Common stock, no par value, unlimited shares
   authorized, 140,514,000 shares issued and outstanding ..........................................                   2,011,132,859
Undistributed net investment income ...............................................................                       2,555,152
Accumulated net realized gain (loss) on investments and
   foreign currency transactions ..................................................................                        (110,331)
Unrealized appreciation (depreciation) of investments and
   foreign currency transactions ..................................................................                     (22,107,475)
                                                                                                                    ---------------

NET ASSETS ........................................................................................                 $ 1,991,470,205
                                                                                                                    ===============

Net asset value per share of common stock:
   ($1,991,470,205/140,514,000 shares of common
   stock issued and outstanding) ..................................................................                 $         14.17
                                                                                                                    ===============
</TABLE>






                See accompanying Notes to Financial Statements.





<PAGE>



CALAMOS STRATEGIC TOTAL RETURN FUND

STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED APRIL 14, 2004 * (UNAUDITED)
<TABLE>
<S>                                                                                                             <C>
INVESTMENT INCOME
Interest .................................................................................................             $  1,384,257
Dividends ................................................................................................                2,220,813
                                                                                                                       ------------
              Total Investment Income ....................................................................                3,605,070
                                                                                                                       ------------

EXPENSES
Investment advisory fees .................................................................................                  879,471
Fund accounting fees .....................................................................................                   19,792
Shareholder reports ......................................................................................                   10,416
Administration fees ......................................................................................                   10,116
Custodian fees ...........................................................................................                    6,480
Audit and legal fees .....................................................................................                    4,736
Registration fees ........................................................................................                    4,544
Transfer agent fees ......................................................................................                    1,312
Trustees' fees ...........................................................................................                      880
Other ....................................................................................................                   15,442
                                                                                                                       ------------
              Total Expenses .............................................................................                  953,189
                                                                                                                       ------------

NET INVESTMENT INCOME ....................................................................................                2,651,881
                                                                                                                       ------------


UNREALIZED GAIN (LOSS)
Net realized gain (loss) on investments and foreign currency transactions ................................                 (110,331)
Change in net unrealized appreciation/depreciation
     on investments and forward foreign currency transactions ............................................              (22,107,475)
                                                                                                                       ------------
NET GAIN (LOSS) ON INVESTMENTS ...........................................................................              (22,217,806)
                                                                                                                       ------------

NET INCREASE (DECREASE) IN NET ASSETS
     RESULTING FROM OPERATIONS ...........................................................................             $(19,565,925)
                                                                                                                       ============
</TABLE>

* March 26, 2004 (commencement of operations)




                See accompanying Notes to Financial Statements.




<PAGE>



CALAMOS STRATEGIC TOTAL RETURN FUND

STATEMENT OF CHANGES IN NET ASSETS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                                        FOR THE
                                                                                                                      PERIOD ENDED
                                                                                                                    APRIL 14, 2004 *
                                                                                                                      (UNAUDITED)
                                                                                                                    ----------------
<S>                                                                                                            <C>
CHANGE IN NET ASSETS:
    Net investment income ..............................................................................            $     2,651,881
    Net realized gain (loss) on investments and foreign currency transactions ..........................                   (110,331)
    Change in net unrealized appreciation/depreciation
       on investments and forward foreign currency contract ............................................                (22,107,475)
                                                                                                                    ---------------

    Net Increase (Decrease) in net assets resulting from operations ....................................                (19,565,925)
                                                                                                                    ---------------

CAPITAL TRANSACTIONS
    Proceeds from initial offering .....................................................................              2,012,662,500
    Offering costs .....................................................................................                 (1,729,771)
                                                                                                                    ---------------

   TOTAL INCREASE (DECREASE) IN NET ASSETS .............................................................              1,991,366,804
                                                                                                                    ---------------

NET ASSETS
    Beginning of period ................................................................................                    103,401
    End of period ......................................................................................            $ 1,991,470,205
                                                                                                                    ===============

    Undistributed net investment income ................................................................            $     2,555,152
                                                                                                                    ===============
</TABLE>


* March 26, 2004 (commencement of operations)





                See accompanying Notes to Financial Statements.



<PAGE>


CALAMOS STRATEGIC TOTAL RETURN FUND
FINANCIAL HIGHLIGHTS


Selected data for a common share outstanding throughout the period was as
follows:
<TABLE>
<CAPTION>
                                                                                                    FOR THE PERIOD
                                                                                                    ENDED APRIL 14,
                                                                                                        2004 *
                                                                                                      (UNAUDITED)
                                                                                                  -----------------
<S>                                                                                               <C>
Net asset value, beginning of period .....................................................        $          14.32 (a)
                                                                                                  ----------------
Offering costs ...........................................................................                   (0.01)
Income from investment operations:
   Net investment income (b) .............................................................                    0.02
   Net realized and unrealized gain (loss) on investments
        and foreign currency transactions ................................................                   (0.16)
                                                                                                  ----------------
Total from investment operations .........................................................                   (0.14)
                                                                                                  ----------------

Net asset value, end of period ...........................................................        $          14.17
                                                                                                  ================
Market value, end of period ..............................................................        $          15.00

TOTAL INVESTMENT RETURN BASED ON(C):
     Net Asset Value .....................................................................                   (1.05)%
     Market Value ........................................................................                    0.00%

RATIO TO AVERAGE NET ASSETS APPLICABLE TO COMMON
   SHAREHOLDERS/SUPPLEMENTARY DATA:
Net assets applicable to common shareholders, end of period (000's omitted) ..............        $       1,991,470
Ratio of expenses to average net assets (d) ..............................................                    1.08%
Ratio of net investment income to average net assets (d) .................................                    3.01%
Portfolio turnover rate (d) ..............................................................                    0.00%

</TABLE>


(a) Net of sales load and organizational fees of $0.68 per share.
(b) Based on average shares outstanding.
(c) Total investment return is calculated assuming a purchase of common stock
    on the opening of the first day and a sale on the closing of the last day
    of the period reported. Dividends and distributions are assumed, for
    purposes of this calculation, to be reinvested at prices obtained under
    the Fund's dividend reinvestment plan. Total return is not annualized for
    periods less than one year. Brokerage commissions are not reflected.
(d) Annualized.



<PAGE>






                          NOTES TO FINANCIAL STATEMENTS

NOTE 1 -- ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES

ORGANIZATION - CALAMOS Strategic Total Return Fund (the "Fund"), was organized
as a Delaware Statutory Trust on December 30, 2003 and is registered under the
Investment Company Act of 1940 as a diversified, closed-end management
investment company. The Fund commenced operations on March 26, 2004.

The Fund's investment objective is to provide total return, through a
combination of capital appreciation and current income.

PORTFOLIO VALUATION - In computing the net asset value of the Fund, securities,
including options, that are traded on a national securities exchange are valued
at the last reported sales price. Securities quoted on the NASDAQ National
Market System are valued at the NASDAQ Official Closing Price ("NOCP"), as
determined by NASDAQ, or lacking an NOCP, the last current reported sale price
as of the time of valuation. Securities traded in the over-the-counter market
and listed securities for which no sales were reported are valued at the mean of
the most recently quoted bid and asked prices. Short-term obligations with
maturities of 60 days or less are valued at amortized cost, which approximates
market value.

When market quotations are not readily available or when the valuation methods
mentioned above are not reflective of the fair value of the security, the
security is valued at a fair value following procedures approved by the Board of
Trustees or a committee thereof. These procedures may utilize valuations
furnished by pricing services approved by the Board of Trustees or a committee
thereof, 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.

Securities that are principally traded in a foreign market are valued as of the
close of the appropriate exchange or other designated time. Trading in
securities on European and Far Eastern securities exchanges and over-the-counter
markets is normally completed at various times before the close of business on
each day on which the New York Stock Exchange ("NYSE") is open. Trading of these
securities may not take place on every NYSE business day. In addition, trading
may take place in various foreign markets on Saturdays or on other days when the
NYSE is not open and on which the Fund's net asset value is not calculated.

INVESTMENT TRANSACTIONS AND INVESTMENT INCOME -- Short term investment
transactions are recorded on a trade date basis. Long term investment
transactions are recorded on a trade date plus one basis, except for October
31st and April 30th, which are recorded on trade date. Realized gains and
losses from investment transactions are recorded on an identified cost basis.
Interest income is recognized using the accrual method and includes accretion of
original issue and market discount and amortization of premium. Dividend income
is recognized on the ex-dividend date, except that certain dividends from
foreign securities are recorded as soon as the information becomes available.

FOREIGN CURRENCY TRANSLATION -- Values of investments denominated in foreign
currencies are converted into U.S. dollars using the spot market rate of
exchange at the time of valuation. Purchases and sales of investments and
dividend and interest income are translated into U.S. dollars using the spot
market rate of exchange prevailing on the respective dates of such transaction.
Realized foreign exchange losses of $110,331, and unrealized foreign exchange
losses of $41,923 are included as a component of net realized gain/loss on
investments, options, and forward foreign currency contracts and change in net
unrealized appreciation/depreciation on investments, options, and forward
foreign currency contracts, respectively.

FEDERAL INCOME TAXES -- No provision has been made for Federal income taxes
since the Portfolio is taxed as a "regulated investment company" under
Subchapter M of the Internal Revenue Code of 1986.


<PAGE>



                          NOTES TO FINANCIAL STATEMENTS


DIVIDENDS -- Dividends payable to shareholders are recorded on the ex-dividend
date. Income and capital gain dividends are determined in accordance with income
tax regulations, which may differ from accounting principles generally accepted
in the United States. These differences are primarily due to differing
treatments for foreign currency transactions and contingent payment debt
instruments.

USE OF ESTIMATES -- The preparation of financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the amounts reported in
the financial statements and accompanying notes. Actual results may differ from
those estimates.

NOTE 2 -- INVESTMENT ADVISOR AND TRANSACTIONS WITH AFFILIATES

The Fund has entered into an Investment Advisory Agreement with Calamos, which
provides for payment of a monthly fee computed at the annual rate of 1.00% of
the Fund's average weekly Total Managed Assets.  "Total Managed Assets" means
the total assets of the Fund (including any assets attributable to leverage)
minus accrued liabilities (other than liabilities representing leverage).
For purposes of calculating "Total Managed Assets," the liquidation preference
of any preferred shares outstanding is not considered a liability.

The Fund and such other funds advised by Calamos that may be a part of these
arrangements (the Fund and such other funds are collectively referred to as the
"Calamos Funds") has entered into a Fund Accounting Servicing Agreement with
State Street Bank & Trust Co. ("State Street").  The Calamos Funds will pay
State Street a monthly fee based on combined managed assets of the Calamos
Funds ("Combined Assets") at the annual rate of 0.0225% for the first $3
billion of Combined Assets and 0.0150% for the Combined Assets that exceed $3
billion.

The Calamos Funds (including the Fund) have also entered into a Financial
Accounting Servicing Agreement with Calamos.  The Calamos Funds will pay
Calamos a monthly fee based on Combined Assets at the annual rate of 0.0175% on
the first $1 billion of Combined Assets; 0.0150% on the next $1 billion of
Combined Assets; and 0.0110% on Combined Assets that exceed $2 billion. Each
fund of the Calamos Funds will pay its pro-rate share of the fees payable to
State Street and Calamos based on relative managed assets of each fund.

Certain portfolio transactions for the Portfolio can be executed through CALAMOS
FINANCIAL SERVICES, INC. ("CFS") as broker, consistent with the Portfolio's
policy of obtaining best price and execution. During the period ended April 14,
2004, the Portfolio paid no brokerage commissions to CFS on purchases and sales
of portfolio securities.

Certain officers and trustees of the Trust are also officers and directors of
CFS and CAM. All officers and affiliated trustees serve without direct
compensation from the Trust.

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

NOTE 3 -- INVESTMENTS

Purchases and sales of investments other than short-term obligations for the
period ended April 14, 2004 were as follows:

    Purchases                                         $ 1,828,281,209
    Proceeds from sales                                             -


The following information is presented on an income tax basis as of April 14,
2004. Differences between amounts for financial statements and Federal income
tax purposes are due to timing differences. The cost basis of investments for
Federal income tax purposes at April 14, 2004 was as follows:

   Cost basis of investments                           $2,079,667,417
   Gross unrealized appreciation                           11,407,470
   Gross unrealized depreciation                          (33,514,945)
   Net unrealized appreciation                            (22,107,475)




<PAGE>



                          NOTES TO FINANCIAL STATEMENTS



NOTE 4 -- FORWARD FOREIGN CURRENCY CONTRACTS

The Fund may engage in portfolio hedging with respect to change in currency
exchange rates by entering into foreign currency contracts to purchase or sell
currencies. A forward foreign currency contract is a commitment to purchase or
sell a foreign currency at a future date at a negotiated forward rate. Risks
associated with such contracts include movement in the value of the foreign
currency relative to the U.S. dollar and the ability to the counterparty to
perform. The net unrealized gain, if any, represents the credit risk to the Fund
on a forward foreign currency contract. The contracts are valued daily at
forward exchange rates and an unrealized gain or loss is recorded. The Fund
realizes a gain or loss upon settlement of the contracts. There were no open
forward foreign currency contracts at April 14, 2004.


NOTE 5 -- INTEREST BEARING CASH DEPOSIT WITH CUSTODIANS

The Fund earns interest on its average daily balance deposited with it
custodian. During the period ended April 14, 2004, the fund earned $2.19.

NOTE 6 -- CAPITAL

Of the 140,514,000 shares of the common stock outstanding, as April 14, 2004 CAM
owned 14,000 shares of the Fund.

NOTE 7 -- SECURITIES LENDING

The Fund may lend certain of its securities to broker-dealers and banks. Any
such loan must be continuously secured by collateral in cash or cash equivalents
maintained on a current basis in an amount at least equal to the market value of
the securities loaned by the Fund. The Fund would continue to receive the
equivalent of the interest or dividends paid by the issuer on the securities
loaned, and would also receive an additional return that may be in the form of a
fixed fee or a percentage of the collateral. The Fund may pay reasonable fees to
persons unaffiliated with the Fund for services in arranging these loans. The
Fund would have the right to call the loan and obtain the securities loaned at
any time on notice of not more than five business days. The Fund would not have
the right to vote the securities during the existence of the loan but generally
would call the loan in an attempt to permit voting of the securities. In the
event of bankruptcy or other default of the borrower, the Fund could experience
both delays in liquidating the loan collateral or recovering the loaned
securities and losses, including (a) possible decline in the value of the
collateral or in the value of the securities loaned during the period while the
Fund seeks to enforce its rights thereto, (b) possible subnormal levels of
income and lack of access to income during this period, and (c) expenses of
enforcing its rights. In an effort to reduce these risks, the investment manager
will monitor the creditworthiness of the firms to which the Fund lends
securities. For the period ended April 14, 2004, the Fund did not loan any of
its securities to broker-dealers and banks.




<PAGE>
                                   APPENDIX A

                      CALAMOS STRATEGIC TOTAL RETURN FUND
                          STATEMENT OF PREFERENCES OF
         AUCTION RATE CUMULATIVE PREFERRED SHARES ("PREFERRED SHARES")








<PAGE>





<TABLE>
<S>                                                                                                             <C>
DESIGNATION......................................................................................................1

PART I:  TERMS OF PREFERRED SHARES...............................................................................2
1.       Number of Shares; Ranking...............................................................................2
2.       Dividends...............................................................................................3
3.       Redemption..............................................................................................6
4.       Designation of Dividend Period..........................................................................9
5.       Restrictions on Transfer...............................................................................10
6.       Voting Rights..........................................................................................10
7.       Liquidation Rights.....................................................................................15
8.       Auction Agent..........................................................................................16
9.       1940 Act Preferred Shares Asset Coverage...............................................................16
10.      Preferred Shares Basic Maintenance Amount..............................................................16
11.      Certain Other Restrictions.............................................................................16
12.      Compliance Procedures for Asset Maintenance Tests......................................................17
13.      Notices................................................................................................18
14.      Waiver.................................................................................................18
15.      Termination............................................................................................19
16.      Amendment..............................................................................................19
17.      Definitions............................................................................................19
18.      Interpretation.........................................................................................44

PART II:  AUCTION PROCEDURES....................................................................................45
1.       Certain Definitions....................................................................................45
2.       Orders.................................................................................................46
3.       Submission of Orders by Broker-Dealers to Auction Agent................................................47
4.       Determination of Sufficient Clearing Bids, Winning Bid Rate and Applicable Rate........................49
5.       Acceptance and Rejection of Submitted Bids and Submitted Sell Orders and Allocation....................51
6.       Transfer of Preferred Shares...........................................................................53
</TABLE>





                                        i
<PAGE>
         Calamos Strategic Total Return Fund, a Delaware statutory trust (the
"Trust"), certifies that:


         FIRST: Pursuant to authority expressly vested in the Board of Trustees
of the Trust by Article V of its Agreement and Declaration of Trust (which as
hereafter amended, restated and supplemented from time to time, is together with
this Statement, the "Declaration"), the Board of Trustees has duly authorized
the creation and issuance of, 43,200 shares of the preferred shares (no par
value) and has further classified 7,040 of such shares as "Series M Preferred
Shares", liquidation preference $25,000 per share, 7,040 of such shares as
"Series TU Preferred Shares", liquidation preference $25,000 per share, 7,040 of
such shares as "Series W Preferred Shares", liquidation preference $25,000 per
share, 7,040 of such shares as "Series TH Preferred Shares", liquidation
preference $25,000 per share, 7,040 of such shares as "Series F Preferred
Shares", liquidation preference $25,000 per share, 4,000 of such shares as
"Series A Preferred Shares", liquidation preference $25,000 per share, and 4,000
of such shares as "Series B Preferred Shares", liquidation preference $25,000
per share (together with any additional series of Preferred Shares which may be
designated by the Board of Trustees, the "Series," and together, with any
additional Preferred Shares, the "Preferred Shares").


         SECOND: The preferences, voting powers, restrictions, limitations as to
dividends, qualifications, and terms and conditions of redemption, of the
Preferred Shares are as follows:

                                   DESIGNATION


         Series M Preferred Shares: a Series of 7,040 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series M
Preferred Shares" ("Series M Preferred Shares"). Each share of Series M
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law, or as are set forth in Part I and Part II of this
Statement. The Series M Preferred Shares shall constitute a separate Series of
Preferred Shares of the Trust.



         Series TU Preferred Shares: a Series of 7,040 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series TU
Preferred Shares" ("Series TU Preferred Shares"). Each share of Series TU
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law, or as are set forth in Part I and Part II of this
Statement. The Series TU Preferred Shares shall constitute a separate Series of
Preferred Shares of the Trust.



         Series W Preferred Shares: a Series of 7,040 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series W
Preferred Shares" ("Series W Preferred Shares"). Each share of Series W
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law, or as are set forth in Part I and Part II of this
Statement. The Series W Preferred Shares shall constitute a separate Series of
Preferred Shares of the Trust.



         Series TH Preferred Shares: a Series of 7,040 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series TH
Preferred Shares" ("Series TH Preferred Shares"). Each share of Series TH
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights,




                                      A-1
<PAGE>
voting powers, restrictions, limitations as to dividends, qualifications and
terms and conditions of redemption, in addition to those required by applicable
law, or as are set forth in Part I and Part II of this Statement. The Series TH
Preferred Shares shall constitute a separate Series of Preferred Shares of the
Trust.


         Series F Preferred Shares: a Series of 7,040 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series F
Preferred Shares" ("Series F Preferred Shares"). Each share of Series F
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law, or as are set forth in Part I and Part II of this
Statement. The Series F Preferred Shares shall constitute a separate Series of
Preferred Shares of the Trust.



         Series A Preferred Shares: a Series of 4,000 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series A
Preferred Shares" ("Series A Preferred Shares"). Each share of Series A
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law, or as are set forth in Part I and Part II of this
Statement. The Series A Preferred Shares shall constitute a separate Series of
Preferred Shares of the Trust.



         Series B Preferred Shares: a Series of 4,000 Preferred Shares, no par
value, liquidation preference $25,000 per share, is hereby designated "Series B
Preferred Shares" ("Series B Preferred Shares"). Each share of Series B
Preferred Shares shall have an initial dividend rate per annum equal to ____%
and an initial Dividend Payment Date of ______ __, 2004 and have such other
preferences, rights, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption, in addition to those
required by applicable law, or as are set forth in Part I and Part II of this
Statement. The Series B Preferred Shares shall constitute a separate Series of
Preferred Shares of the Trust.


         Subject to the provisions of Section 11(b) of Part I hereof, the Board
of Trusts of the Trust may, in the future, reclassify additional shares of the
Trust's unissued common shares as preferred shares, with the same preferences,
rights, voting powers, restrictions, limitations as to dividends, qualifications
and terms and conditions of redemption and other terms herein described, except
that the dividend rate for its initial Dividend Period, its initial Dividend
Payment Date and any other changes in the terms herein set forth shall be as set
forth in this Statement with respect to the additional shares.

         As used in Part I and Part II of this Statement, capitalized terms
shall have the meanings provided in Section 17 of Part I and Section 1 of Part
II of this Statement.

                        PART I: TERMS OF PREFERRED SHARES

         1.       Number of Shares; Ranking.


                 (a) The initial number of authorized shares constituting the
Series M Preferred Shares is 7,040 shares, Series TU Preferred Shares is 7,040
shares, Series W Preferred Shares is 7,040 shares, Series TH Preferred Shares is
7,040 shares, Series F Preferred Shares is 7,040 shares, Series A Preferred
Shares is 4,000 shares and Series B Preferred Shares is 4,000 shares. No
fractional shares of any Series shall be issued.





                                      A-2
<PAGE>
                  (b) Shares of each Series that at any time have been redeemed
or purchased by the Trust shall, after such redemption or purchase, have the
status of authorized but unissued preferred shares of beneficial interest.

                  (c) Shares of each Series shall rank on a parity with shares
of any other Series of preferred shares of the Trust (including any other
Preferred Shares) as to the payment of dividends to which such shares are
entitled.

                  (d) No Holder of shares of any Series shall have, solely by
reason of being such a holder, any preemptive exchange, conversion or other
right to acquire, purchase or subscribe for any shares of any Series, Common
Shares or other securities of the Trust which it may hereafter issue or sell.
The Preferred Shares shall not be subject to any sinking fund.

         2.       Dividends.

                  (a) The Holders of shares of each Series shall be entitled to
receive, when, as and if declared by the Board of Trustees, out of funds legally
available therefor, cumulative cash dividends on their shares at the Applicable
Rate, determined as set forth in paragraph (c) of this Section 2, and no more,
payable on the respective dates determined as set forth in paragraph (b) of this
Section 2. Dividends on the Outstanding shares of each Series issued on the Date
of Original Issue shall accumulate from the Date of Original Issue.

                           (b) (i) Dividends shall be payable when, as and if
         declared by the Board of Trustees following the initial Dividend
         Payment Date, subject to subparagraph (b)(ii) of this Section 2, on the
         shares of each Series, as follows:

                                    (A) with respect to any Dividend Period of
                  one year or less, on the Business Day following the last day
                  of such Dividend Period; provided, however, if the Dividend
                  Period is more than 91 days then on the 91st, 181st and 271st
                  days within such period, if applicable, and on the Business
                  Day following the last day of such Dividend Period; and

                                    (B) with respect to any Dividend Period of
                  more than one year, on a quarterly basis on each January 1,
                  April 1, July 1 and October 1 within such Dividend Period and
                  on the Business Day following the last day of such Dividend
                  Period.

                           (ii) If a day for payment of dividends resulting from
         the application of subparagraph (b) above is not a Business Day, then
         the Dividend Payment Date shall be the first Business Day following
         such day for payment of dividends.

                           (iii) The Trust shall pay to the Paying Agent not
         later than 12:00 noon, New York City time, on each Dividend Payment
         Date for a Series, an aggregate amount of immediately available funds
         equal to the dividends to be paid to all Holders of such Series on such
         Dividend Payment Date. The Trust shall not be required to establish any
         reserves for the payment of dividends.

                           (iv) All moneys paid to the Paying Agent for the
         payment of dividends shall be held in trust for the payment of such
         dividends by the Paying Agent for the benefit of the Holders specified
         in subparagraph (b)(v) of this Section 2. Any moneys paid to the Paying
         Agent in accordance with the foregoing but not applied by the Paying
         Agent to the payment of dividends


                                      A-3
<PAGE>
         will, upon request and to the extent permitted by law, be repaid to the
         Trust at the end of 90 days from the date on which such moneys were to
         have been so applied.

                           (v) Each dividend on each Series shall be paid on the
         Dividend Payment Date therefor to the Holders of that Series as their
         names appear on the share ledger or share records of the Trust on the
         Business Day next preceding such Dividend Payment Date; provided,
         however, if dividends are in arrears, they may be declared and paid at
         any time to Holders as their names appear on the share ledger or share
         records of the Trust on such date not exceeding 15 days preceding the
         payment date thereof, as may be fixed by the Board of Trustees. No
         interest will be payable in respect of any dividend payment or payments
         which may be in arrears.

                  (c) (i) The dividend rate on Outstanding shares of each Series
         during the period from and after the Date of Original Issue to and
         including the last day of the initial Dividend Period therefor shall be
         equal to the rate set forth under "Designation" above. For each
         subsequent Dividend Period for each Series, the dividend rate shall be
         equal to the rate per annum that results from an Auction (but the rate
         set at the Auction will not exceed the Maximum Rate); provided,
         however, that if an Auction for any subsequent Dividend Period of a
         Series is not held for any reason or if Sufficient Clearing Orders have
         not been made in an Auction (other than as a result of all shares of
         any Series being the subject of Submitted Hold Orders and other than in
         an auction for a Special Dividend Period), then the dividend rate on
         the shares of that Series for any such Dividend Period shall be the
         Maximum Rate (except (i) during a Default Period when the dividend rate
         shall be the Default Rate, as set forth in Section 2(c)(ii) below or
         (ii) after a Default Period and prior to the beginning of the next
         Dividend Period when the dividend rate shall be the Maximum Rate at the
         close of business on the last day of such Default Period). If the Trust
         has declared a Special Dividend Period and there are not Sufficient
         Clearing Orders, the dividend rate for the next Dividend Period will be
         the same as during the current Dividend Period. If as a result of an
         unforeseeable disruption of the financial markets, an Auction cannot be
         held, the dividend rate for the subsequent Dividend Period will be the
         same as the dividend rate for the current Dividend Period.

                           (ii) Subject to the cure provisions in Section
         2(c)(iii) below, a "Default Period" with respect to a particular Series
         will commence on any date the Trust 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 declared dividend on that Series
         payable on the Dividend Payment Date (a "Dividend Default") or (B) the
         full amount of any redemption price (the "Redemption Price") payable on
         the date fixed for redemption (the "Redemption Date") (a "Redemption
         Default") and together with a Dividend Default, hereinafter referred to
         as "Default").

                           Subject to the cure provisions of Section 2(c)(iii)
         below, a Default Period with respect to a Dividend Default or a
         Redemption Default shall end on the Business Day on which, by 12:00
         noon, New York City time, all unpaid dividends and any unpaid
         Redemption Price shall have been deposited irrevocably in trust in
         same-day funds with the Paying Agent. In the case of a Dividend
         Default, the Applicable Rate for each Dividend Period commencing during
         a Default Period will be equal to the Default Rate, and each subsequent
         Dividend Period commencing after the beginning of a Default Period
         shall be a Standard Dividend Period; provided, however, that the
         commencement of a Default Period will not by itself cause the
         commencement of a new Dividend Period. No Auction shall be held during
         a Default Period applicable to that Series.

                           (iii) No Default Period with respect to a Dividend
         Default or Redemption Default shall be deemed to commence if the amount
         of any dividend or any Redemption Price


                                      A-4
<PAGE>




         due (if such default is not solely due to the willful failure of the
         Trust) 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 Dividend 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 dividends per share payable (if
         declared) on each Dividend Payment Date of each Dividend Period of less
         than one (1) year (or in respect of dividends on another date in
         connection with a redemption during such Dividend Period) shall be
         computed by multiplying the Applicable Rate (or the Default Rate) for
         such Dividend Period (or a portion thereof) by a fraction, the
         numerator of which will be the number of days in such Dividend Period
         (or portion thereof) that such share was Outstanding and for which the
         Applicable Rate or the Default Rate was applicable and the denominator
         of which will be 360 for each Series, multiplying the amount so
         obtained by $25,000, and rounding the amount so obtained to the nearest
         cent. During any Dividend Period of one (1) year or more, the amount of
         dividends per share payable on any Dividend Payment Date (or in respect
         of dividends on another date in connection with a redemption during
         such Dividend Period) shall be computed as described in the preceding
         sentence, except that it will be determined on the basis of a year
         consisting of twelve 30-day months.

                  (d) Any dividend payment made on shares of any Series shall
first be credited against the earliest accumulated but unpaid dividends due with
respect to that Series.

                  (e) For so long as the Preferred Shares are Outstanding,
except as otherwise contemplated by Part I of this Statement, the Trust 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 ranking
junior to the Preferred Shares as to dividends or upon liquidation) with respect
to Common Shares or any other shares of beneficial interest of the Trust ranking
junior to the Preferred Shares as to dividends or upon liquidation, or call for
redemption, redeem, purchase or otherwise acquire for consideration any Common
Shares or other shares of beneficial interest ranking junior to the Preferred
Shares (except by conversion into or exchange for shares of the Trust ranking
junior to the Preferred Shares as to dividends and upon liquidation), unless (i)
immediately after such transaction, the Trust would have Eligible Assets with an
aggregate Discounted Value at least equal to the Preferred Shares Basic
Maintenance Amount and the 1940 Act Preferred Shares Asset Coverage would be
achieved, (ii) all cumulative and unpaid dividends due on or prior to the date
of the transaction have been declared and paid in full with respect to the
Trust's preferred shares, including the Preferred Shares, or shall have been
declared and sufficient funds for the payment thereof deposited with the Paying
Agent, and (iii) the Trust has redeemed the full number of preferred shares
required to be redeemed by any provision for mandatory redemption including the
Preferred Shares required to be redeemed by any provision for mandatory
redemption contained in Section 3(a)(ii) of Part I of this Statement.

                  (f) For so long as the Preferred Shares are Outstanding,
except as set forth in the next sentence, the Trust will not declare, pay or set
apart for payment on any series of shares of beneficial interest of the Trust
ranking, as to the payment of dividends, on a parity with the Preferred Shares
for any period unless full cumulative dividends have been or contemporaneously
are declared and paid on each Series through their most recent Dividend Payment
Date. When dividends are not paid in full upon the Preferred Shares through
their most recent Dividend Payment Dates or upon any other series of shares of
beneficial interest ranking on parity as to the payment of dividends with
Preferred Shares through their most recent respective Dividend Payment Dates,
all dividends declared upon the Preferred Shares and any






                                      A-5
<PAGE>

other such series of shares of beneficial interest ranking on parity as to the
payment of dividends with the Preferred Shares shall be declared pro rata so
that the amount of dividends declared per share on the Preferred Shares and such
other series of shares of beneficial interest ranking on parity therewith shall
in all cases bear to each other the same ratio that accumulated dividends per
share on the Preferred Shares and such other series of shares of beneficial
interest ranking on parity therewith bear to each other.

         3.       Redemption.

                           (i) After the initial Dividend Period, subject to the
         provisions of this Section 3 and to the extent permitted under the 1940
         Act and Delaware law, the Trust may, at its option, redeem in whole or
         in part out of funds legally available therefor shares of any Series
         herein designated as (A) having a Dividend Period of one year or less,
         on the Business Day after the last day of such Dividend Period by
         delivering a notice of redemption not less than 15 calendar days and
         not more than 40 calendar days prior to the Redemption Date, at a
         redemption price per share equal to $25,000, plus an amount equal to
         accumulated but unpaid dividends thereon (whether or not earned or
         declared) to the Redemption Date ("Redemption Price"), or (B) having a
         Dividend Period of more than one year, on any Business Day prior to the
         end of the relevant Dividend Period by delivering a notice of
         redemption not less than 15 calendar days and not more than 40 calendar
         days prior to the Redemption Date, at the Redemption Price, plus a
         redemption premium, if any, determined by the Board of Trustees after
         consultation with the Broker-Dealers and set forth in any applicable
         Specific Redemption Provisions at the time of the designation of such
         Dividend Period as set forth in Section 4 of Part I of this Statement;
         provided, however, that during a Dividend Period of more than one year,
         no shares of any Series will be subject to optional redemption except
         in accordance with any Specific Redemption Provisions approved by the
         Board of Trustees after consultation with the Broker-Dealers at the
         time of the designation of such Dividend Period. Notwithstanding the
         foregoing, the Trust shall not give a notice of or effect any
         redemption pursuant to this Section 3(a)(i) unless, on the date on
         which the Trust gives such notice and on the Redemption Date, (a) the
         Trust has available 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 each Series by reason of the redemption of
         each Series on the Redemption Date and (b) the Trust would have
         Eligible Assets with an aggregate Discounted Value at least equal to
         the Preferred Shares 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 3
         shall be applicable in such circumstances in the event the Trust makes
         the deposit and gives a notice of redemption to the Auction Agent under
         paragraph (b) of this Section 3.

                           (ii) If the Trust fails as of any Valuation Date to
         meet the Preferred Shares Basic Maintenance Amount Test or, as of the
         last Business Day of any month, the 1940 Act Preferred Shares Asset
         Coverage, and such failure is not cured within ten Business Days
         following the relevant Valuation Date, in the case of a failure to meet
         the Preferred Shares Basic Maintenance Amount Test, or the last
         Business Day of the following month in the case of a failure to meet
         the 1940 Act Preferred Shares Asset Coverage (each an "Asset Coverage
         Cure Date"), the Preferred Shares will be subject to mandatory
         redemption out of funds legally available therefor. The number of
         Preferred Shares to be redeemed in such circumstances will be equal to
         the lesser of (A) the minimum number of Preferred Shares 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 Trust meeting the Preferred Shares Basic Maintenance Amount Test,
         and the 1940 Act Preferred Shares 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

                                       A-6
<PAGE>


         number of shares the redemption of which would have such result, all
         Preferred Shares then Outstanding will be redeemed) and (B) the maximum
         number of Preferred Shares 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 3.

                           (iii) In determining the Preferred Shares required to
         be redeemed in accordance with the foregoing Section 3(a)(ii), the
         Trust shall allocate the number of Preferred Shares required to be
         redeemed to satisfy the Preferred Shares Basic Maintenance Amount Test
         or the 1940 Act Preferred Shares Asset Coverage, as the case may be,
         pro rata or among the Holders of the Preferred Shares in proportion to
         the number of shares they hold and other preferred shares subject to
         mandatory redemption provisions similar to those contained in this
         Section 3, subject to the further provisions of this subparagraph
         (iii). The Trust shall effect any required mandatory redemption
         pursuant to: (A) the Preferred Shares Basic Maintenance Amount Test, as
         described in subparagraph (a)(ii) of this Section 3, no later than 30
         days after the Trust last met the Preferred Shares Basic Maintenance
         Amount Test, or (B) the 1940 Act Preferred Shares Asset Coverage, as
         described in subparagraph (a)(ii) of this Section 3, no later than 30
         days after the Asset Coverage Cure Date (the "Mandatory Redemption
         Date"), except that if the Trust does not have funds legally available
         for the redemption of, or is not otherwise legally permitted to redeem,
         the number of Preferred Shares which would be required to be redeemed
         by the Trust under clause (A) of subparagraph (a)(ii) of this Section 3
         if sufficient funds were available, together with other preferred
         shares which are subject to mandatory redemption under provisions
         similar to those contained in this Section 3, or the Trust otherwise is
         unable to effect such redemption on or prior to such Mandatory
         Redemption Date, the Trust shall redeem those Preferred Shares, and
         other preferred shares which it was unable to redeem, on the earliest
         practicable date on which the Trust will have such funds available,
         upon notice pursuant to Section 3(b) to record owners of Preferred
         Shares to be redeemed and the Paying Agent. The Trust will deposit with
         the Paying Agent funds sufficient to redeem the specified number of
         Preferred Shares with respect to a redemption required under
         subparagraph (a)(ii) of this Section 3, 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 Preferred Shares
         are to be redeemed pursuant to this Section 3(a)(iii), the number of
         shares to be redeemed shall be redeemed pro rata from the Holders of
         such shares in proportion to the number of the Preferred Shares held by
         such Holders, by lot or by such other method as the Trust 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 Dividend Period of one year or
         more only) a redemption premium, if any, determined by the Board of
         Trustees after consultation with the Broker-Dealers and set forth in
         any applicable Specific Redemption Provisions.

                  (b) In the event of a redemption pursuant to the foregoing
Section 3(a), the Trust will file a notice of its intention to redeem with the
Securities and Exchange Commission so as to provide at least the minimum notice
required under Rule 23c-2 under the 1940 Act or any successor provision. In
addition, the Trust shall deliver a notice of redemption to the Auction Agent
(the "Notice of Redemption") containing the information set forth below (i) in
the case of an optional redemption pursuant to Section 3(a)(i) above, one
Business Day prior to the giving of notice to the Holders and (ii) in the case
of a mandatory redemption pursuant to Section 3(a)(ii) above, on or prior to the
10th day preceding the Mandatory Redemption Date. Only with respect to shares
held by the Securities Depository, the Auction Agent will use its reasonable
efforts to provide telephonic notice to each Holder of shares of any Series
called for redemption not later than the close of business on the Business

                                       A-7

<PAGE>


Day immediately following the day on which the Auction Agent determines the
shares to be redeemed (or, during a Default Period with respect to such shares,
not later than the close of business on the Business Day immediately following
the day on which the Auction Agent receives Notice of Redemption from the
Trust). The Auction Agent shall confirm such telephonic 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
shares called for redemption, the Paying Agent (if different from the Auction
Agent) and the Securities Depository. Notice of Redemption will be addressed to
the registered owners of shares of any Series at their addresses appearing on
the share records of the Trust. Such Notice of Redemption will set forth (i) the
date fixed for redemption, (ii) the number and identity of shares of each Series
to be redeemed, (iii) the redemption price (specifying the amount of accumulated
dividends to be included therein), (iv) that dividends on the shares to be
redeemed will cease to accumulate on such date fixed for redemption, and (v) 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 shares held by any Holder are to be redeemed, the Notice of Redemption
mailed to such Holder shall also specify the number of shares to be redeemed
from such Holder. The Trust shall provide Fitch (if Fitch is then rating the
Preferred Shares) written notice of the Trust's intent to redeem shares pursuant
to Section 3(a) above.

                  (c) Notwithstanding the provisions of paragraph (a) of this
Section 3, no preferred shares, including the Preferred Shares, may be redeemed
at the option of the Trust unless all dividends in arrears on the Outstanding
Preferred Shares and any other preferred shares 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 outstanding preferred
shares pursuant to the successful completion of an otherwise lawful purchase or
exchange offer made on the same terms to holders of all outstanding preferred
shares.

                  (d) Upon the deposit of funds sufficient to redeem shares of
 any Series with the Paying Agent and the giving of the Notice of Redemption to
the Auction Agent under paragraph (b) of this Section 3, dividends on such
shares shall cease to accumulate and such shares shall no longer be deemed to be
Outstanding for any purpose (including, without limitation, for purposes of
calculating whether the Trust has met the Preferred Shares Basic Maintenance
Amount Test or the 1940 Act Preferred Shares Asset Coverage), and all rights of
the Holders of the shares 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 Trust 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 shares of any
Series called for redemption on such date and (ii) such other amounts, if any,
to which Holders of shares of any Series 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, and upon request, be paid
to the Trust, after which time the Holders of shares of each Series so called
for redemption may look only to the Trust for payment of the Redemption Price
and all other amounts, if any, to which they may be entitled; provided, however,
that the Paying Agent shall notify all Holders whose funds are unclaimed by
placing a notice in The Wall Street Journal concerning the availability of such
funds once each week for three consecutive weeks.

                  (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 shares of
any Series shall be deemed to exist at any time after the date specified for
redemption in a Notice of Redemption when the Trust shall have failed, for any
reason whatsoever, to deposit in trust with the Paying Agent the Redemption
Price with respect to any shares for which such Notice

                                       A-8

<PAGE>


of Redemption has been given. Notwithstanding the fact that the Trust may not
have redeemed shares of each Series for which a Notice of Redemption has been
given, dividends may be declared and paid on shares of any Series and shall
include those shares of any Series 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 shares of any Series called for redemption shall be held in
trust by the Paying Agent for the benefit of holders of shares so to be
redeemed.

                  (g) So long as any shares of any Series are held of record by
the nominee of the Securities Depository, the redemption price for such shares
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 in this Statement limits any right of the Trust to purchase or
otherwise acquire any shares of each Series 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 dividends on, or the mandatory or
optional redemption price with respect to, any shares of each Series for which
Notice of Redemption has been given and the Trust meets the 1940 Act Preferred
Shares Asset Coverage and the Preferred Shares Basic Maintenance Amount Test
after giving effect to such purchase or acquisition on the date thereof. Any
shares which are purchased, redeemed or otherwise acquired by the Trust shall
have no voting rights. If fewer than all the Outstanding shares of any Series
are redeemed or otherwise acquired by the Trust, the Trust shall give notice of
such transaction to the Auction Agent, in accordance with the procedures agreed
upon by the Board of Trustees.

                  (i) In the case of any redemption pursuant to this Section 3,
only whole shares of each Series shall be redeemed, and in the event that any
provision of the Charter would require redemption of a fractional share, the
Auction Agent shall be authorized to round up so that only whole shares are
redeemed.

                  (j) Notwithstanding anything herein to the contrary,
 including, without limitation, Section 6 of Part I of this Statement, the Board
Of Trustees, upon notification to each Rating Agency, may authorize, create or
issue other Series of preferred shares, including other Series of Preferred
Shares, series of preferred shares ranking on parity with the Preferred Shares
with respect to the payment of dividends or the distribution of assets upon
dissolution, liquidation or winding up of the affairs of the Trust, and senior
securities representing indebtedness as defined in the 1940 Act, to the extent
permitted by the 1940 Act, if upon issuance of any such series, either (A) the
net proceeds from the sale of such shares (or such portion thereof needed to
redeem or repurchase the Outstanding Preferred Shares) are deposited with the
Paying Agent in accordance with Section 3(d) of Part I of this Statement, Notice
of Redemption as contemplated by Section 3(b) of Part I of this Statement has
been delivered prior thereto or is sent promptly thereafter, and such proceeds
are used to redeem all Outstanding Preferred Shares or (B) the Trust would meet
the 1940 Act Preferred Shares Asset Coverage, the Preferred Shares Basic
Maintenance Amount Test and the requirements of Section 11 of Part I of this
Statement.

         4.       Designation of Dividend Period.

                  (a) The initial Dividend Period for each Series shall be the
period from the Date of Original Issue to the initial Dividend Payment Date set
forth under "Designation" above. The Trust will designate the duration of
subsequent Dividend Periods of each Series; provided, however, that no such
designation is necessary for a Standard Dividend Period and, provided further,
that any designation of a Special Dividend Period shall be effective only if (i)
notice thereof shall have been given as provided

                                      A-9

<PAGE>





herein, (ii) any failure to pay in a timely manner to the Auction Agent the full
amount of any dividend on, or the Redemption Price of, each Series shall have
been cured as provided above, (iii) Sufficient Clearing Orders shall have
existed in an Auction held on the Auction Date immediately preceding the first
day of such proposed Special Dividend Period, and (iv) if the Trust shall have
mailed a Notice of Redemption with respect to any shares, the Redemption Price
with respect to such shares shall have been deposited with the Paying Agent.

                  (b) If the Trust proposes to designate any Special Dividend
Period, not fewer than seven Business Days (or two Business Days in the event
the duration of the Dividend Period prior to such Special Dividend Period is
fewer than eight days) nor more than 30 Business Days prior to the first day of
such Special Dividend Period, notice shall be (i) made by press release and (ii)
communicated by the Trust by telephonic or other means to the Auction Agent and
each Broker-Dealer and confirmed in writing promptly thereafter. Each such
notice shall state (A) that the Trust proposes to exercise its option to
designate a succeeding Special Dividend Period, specifying the first and last
days thereof and the Maximum Rate for such Special Dividend Period and (B) that
the Trust will by 3:00 P.M., New York City time, on the second Business Day next
preceding the first day of such Special Dividend Period, notify the Auction
Agent, who will promptly notify the Broker-Dealers, of either (x) its
determination, subject to certain conditions, to proceed with such Special
Dividend Period, subject to the terms of any Specific Redemption Provisions, or
(y) its determination not to proceed with such Special Dividend Period, in which
latter event the succeeding Dividend Period shall be a Standard Dividend 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 Dividend Period, the Trust shall
deliver to the Auction Agent, who will promptly deliver to the Broker-Dealers
and Existing Holders, either:

                           (i) a notice stating (A) that the Trust has
         determined to designate the next succeeding Dividend Period as a
         Special Dividend Period, specifying the first and last days thereof and
         (B) the terms of any Specific Redemption Provisions; or

                           (ii)     a notice stating that the Trust has
         determined not to exercise its option to designate a Special
         Dividend Period.

If the Trust fails to deliver either such notice with respect to any designation
of any proposed Special Dividend Period to the Auction Agent by 3:00 P.M., New
York City time, on the second Business Day next preceding the first day of such
proposed Special Dividend Period, the Trust shall be deemed to have delivered a
notice to the Auction Agent with respect to such Dividend Period to the effect
set forth in clause (ii) above, thereby resulting in a Standard Dividend Period.

         5.       Restrictions on Transfer.  Shares of each Series may be
transferred only (a) pursuant to an order placed in an Auction, (b) to or
through a Broker-Dealer or (c) to the Trust 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 shares 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
shares of any Series through different Broker-Dealers, advises the Auction Agent
of such transfer. The certificates representing the shares of each Series 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.

         6.       Voting Rights.

                                      A-10

<PAGE>


                  (a) Except as otherwise provided in the Declaration or as
otherwise required by applicable law, (i) each Holder of shares of any Series
shall be entitled to one vote for each share of any Series held on each matter
on which the Holders of the Preferred Shares are entitled to vote, and (ii) the
holders of the outstanding preferred shares, including each Series, and holders
of shares of Common Shares shall vote together as a single class on all matters
submitted to the shareholders; provided, however, that, with respect to the
election of trustees, the holders of the outstanding preferred shares, including
each Series, represented in person or by proxy at a meeting for the election of
trustees, shall be entitled, as a class, to the exclusion of the holders of all
other securities and classes of shares, including the Common Shares, to elect
two trustees of the Trust, each share of preferred, including each Series,
entitling the holder thereof to one vote. The identities of the nominees of such
trusteeships may be fixed by the Board of Trustees. The Board of Trustees will
determine to which class or classes the trustees elected by the outstanding
preferred shares will be assigned and the holders of outstanding preferred
shares shall only be entitled to elect the trustees so designated as being
elected by the holders of preferred shares when their term shall have expired
and such trustees appointed by the holders of preferred shares will be allocated
as evenly as possible among the classes of trustees. Subject to paragraph (b) of
this Section 6, the holders of Outstanding shares of Common Shares and
outstanding preferred shares, including each Series, voting together as a single
class, shall be entitled to elect the balance of the trustees.

                  (b) If at any time dividends on the Preferred Shares shall be
unpaid in an amount equal to two full years' dividends on the Preferred Shares
(a "Voting Period"), the number of trustees constituting the Board of Trustees
shall be automatically increased by the smallest number of additional trustees
that, when added to the number of trustees then constituting the Board of
Trustees, shall (together with the two trustees elected by the holders of
preferred shares, including each Series, pursuant to paragraph (a) of this
Section 6) constitute a majority of such increased number, and the holders of
any shares of preferred shares, including each Series, shall be entitled, voting
as a single class on a one-vote-per-share basis (to the exclusion of the holders
of all other securities and classes of shares of the Trust), to elect the
smallest number of such additional trustees of the Trust that shall constitute a
majority of the total number of trustees of the Trust so increased. The Voting
Period and the voting rights so created upon the occurrence of the conditions
set forth in this paragraph (b) of Section 6 shall continue unless and until all
dividends in arrears on each Series shall have been paid or declared and
sufficient cash or specified securities are set apart for the payment of such
dividends. Upon the termination of a Voting Period, the voting rights described
in this paragraph (b) of Section 6 shall cease, subject always, however, to the
revesting of such voting rights in the holders of preferred shares, including
each Series, upon the further occurrence of any of the events described in this
paragraph (b) of Section 6.

                  (c) As soon as practicable after the accrual of any right of
the holders of preferred shares, including each Series, to elect additional
trustees as described in paragraph (b) of this Section 6, the Trust shall notify
the Auction Agent, and the Auction Agent shall call a special meeting of such
holders, by mailing a notice of such special meeting to such holders, such
meeting to be held not less than ten nor more than 90 days after the date of
mailing of such notice. If the Trust fails to send such notice to the Auction
Agent or if the Auction Agent does not call such a special meeting, it may be
called by any such holder on like notice. The record date for determining the
holders entitled to notice of and to vote at such special meeting shall be the
close of business on the fifth Business Day preceding the day on which such
notice is mailed. At any such special meeting and at each meeting of holders of
preferred shares, including each Series, held during a Voting Period at which
trustees are to be elected, such holders, voting together as a class (to the
exclusion of the holders of all other securities and classes of shares of the
Trust), shall be entitled to elect the number of trustees prescribed in
paragraph (b) of this Section 6 on a one-vote-per-share basis. At any such
meeting or adjournment thereof in the absence of a quorum, a majority of the
holders of preferred shares, including Holders of the Preferred Shares, present
in person or

                                      A-11

<PAGE>


by proxy shall have the power to adjourn the meeting without notice, other than
an announcement at the meeting, until a quorum is present.

                  (d) For purposes of determining any rights of the holders of
the shares of preferred shares, including each Series, to vote on any matter,
whether such right is created by this Statement, by statute or otherwise, if
redemption of some or all of the preferred shares, including each Series, is
required, no holder of preferred shares, including each Series, shall be
entitled to vote and no preferred shares, including each Series, shall be deemed
to be "outstanding" for the purpose of voting or determining the number of
shares required to constitute a quorum, if prior to or concurrently with the
time of determination, sufficient Deposit Securities for the redemption of such
shares have been deposited in the case of Preferred Shares in trust with the
Paying Agent for that purpose and the requisite Notice of Redemption with
respect to such shares shall have been given as provided in Section 3(b) of Part
I of this Statement and in the case of other preferred shares, the Trust has
otherwise met the conditions for redemption applicable to such shares.

                  (e) The terms of office of all persons who are trustees of the
Trust at the time of a special meeting of Holders of the Preferred Shares and
holders of other preferred shares to elect trustees pursuant to paragraph (b) of
this Section 6 shall continue, notwithstanding the election at such meeting by
the holders of the number of trustees that they are entitled to elect.

                  (f) Simultaneously with the termination of a Voting Period,
the terms of office of the additional trustees elected by the Holders of the
Preferred Shares and holders of other preferred shares pursuant to paragraph (b)
of this Section 6 shall terminate, the remaining trustees shall constitute the
trustees of the Trust and the voting rights of such holders to elect additional
trustees pursuant to paragraph (b) of this Section 6 shall cease, subject to the
provisions of the last sentence of paragraph (b) of this Section 6.

                  (g) Unless otherwise required by law or in the Trust's
Declaration, the Holders of Preferred Shares shall not have any relative rights
or preferences or other special rights other than those specifically set forth
herein. In the event that the Trust fails to pay any dividends on the Preferred
Shares or fails to redeem any Preferred Shares which it is required to redeem,
or any other event occurs which requires the mandatory redemption of Preferred
Shares and the required Notice of Redemption has not been given, other than the
rights set forth in paragraph (a) of Section 3 of Part I of this Statement, the
exclusive remedy of the Holders of Preferred Shares shall be the right to vote
for trustees pursuant to the provisions of paragraph (b) of this Section 6. In
no event shall the Holders of Preferred Shares have any right to sue for, or
bring a proceeding with respect to, such dividends or redemptions or damages for
the failure to receive the same.

                  (h) For so long as any preferred shares, including each
Series, are outstanding, the Trust will not, without the affirmative vote of the
Holders of a majority of the outstanding preferred shares, (i) institute any
proceedings to be adjudicated bankrupt or insolvent, or consent to the
institution of bankruptcy or insolvency proceedings against it, or file a
petition seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy or insolvency, or consent to the
appointment of a receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Trust or a substantial part of its property, or make
any assignment for the benefit of creditors, or, except as may be required by
applicable law, admit in writing its inability to pay its debts generally as
they become due or take any corporate action in furtherance of any such action;
(ii) create, incur or suffer to exist, or agree to create, incur or suffer to
exist, or consent to cause or permit in the future (upon the happening of a
contingency or otherwise) the creation, incurrence or existence of any material
lien, mortgage, pledge, charge, security interest, security agreement,
conditional sale or trust receipt or other material encumbrance of any kind upon
any of the Trust's assets as a whole, except

                                      A-12

<PAGE>


(A) liens the validity of which are being contested in good faith by appropriate
proceedings, (B) liens for taxes that are not then due and payable or that can
be paid thereafter without penalty, (C) liens, pledges, charges, security
interests, security agreements or other encumbrances arising in connection with
any indebtedness senior to the Preferred Shares, or arising in connection with
any futures contracts or options thereon, interest rate swap or cap
transactions, forward rate transactions, put or call options or other similar
transactions, (D) liens, pledges, charges, security interests, security
agreements or other encumbrances arising in connection with any indebtedness
permitted under clause (iii) below and (E) liens to secure payment for services
rendered including, without limitation, services rendered by the Trust's Paying
Agent and the Auction Agent; or (iii) create, authorize, issue, incur or suffer
to exist any indebtedness for borrowed money or any direct or indirect guarantee
of such indebtedness for borrowed money or any direct or indirect guarantee of
such indebtedness, except the Trust may borrow as may be permitted by the
Trust's investment restrictions; provided, however, that transfers of assets by
the Trust subject to an obligation to repurchase shall not be deemed to be
indebtedness for purposes of this provision to the extent that after any such
transaction the Trust has Eligible Assets with an aggregate Discounted Value at
least equal to the Preferred Shares Basic Maintenance Amount as of the
immediately preceding Valuation Date.

                  (i) The affirmative vote of the holders of a majority, as
defined in the 1940 Act, of the outstanding preferred shares, including each
Series, voting as a separate class, shall be required to approve any plan of
reorganization (as such term is used in the 1940 Act) adversely affecting such
shares or any action requiring a vote of security holders of the Trust under
Section 13(a) of the 1940 Act. In the event a vote of holders of preferred
shares is required pursuant to the provisions of Section 13(a) of the 1940 Act,
the Trust shall, not later than ten Business Days prior to the date on which
such vote is to be taken, notify each Rating Agency that such vote is to be
taken and the nature of the action with respect to which such vote is to be
taken and shall, not later than ten Business Days after the date on which such
vote is taken, notify each Rating Agency of the results of such vote.

                  (j) The affirmative vote of the Holders of a majority, as
defined in the 1940 Act, of the outstanding preferred shares of any series,
voting separately from any other series, shall be required with respect to any
matter that materially and adversely affects the rights, preferences, or powers
of that series in a manner different from that of other series or classes of the
Trust's shares of beneficial interest. For purposes of the foregoing, no matter
shall be deemed to adversely affect any rights, preference or power unless such
matter (i) alters or abolishes any preferential right of such series; (ii)
creates, alters or abolishes any right in respect of redemption of such series;
or (iii) creates or alters (other than to abolish) any restriction on transfer
applicable to such series. The vote of holders of any series described in this
Section (j) will in each case be in addition to a separate vote of the requisite
percentage of Common Shares and/or preferred shares necessary to authorize the
action in question.

                  (k) The Board of Trustees, without the vote or consent of any
holder of preferred shares, including each Series, or any other shareholder of
the Trust, may from time to time amend, alter or repeal any or all of the
definitions contained herein, add covenants and other obligations of the Trust,
or confirm the applicability of covenants and other obligations set forth
herein, all in connection with obtaining or maintaining the rating of any Rating
Agency with respect to each Series, and any such amendment, alteration or repeal
will not be deemed to affect the preferences, rights or powers of Preferred
Shares or the Holders thereof, provided that the Board of Trustees receives
written confirmation from each relevant Rating Agency (with such confirmation in
no event being required to be obtained from a particular Rating Agency with
respect to definitions or other provisions relevant only to and adopted in
connection with another Rating Agency's rating of any Series) that any such
amendment, alteration or repeal would not adversely affect the rating then
assigned by such Rating Agency.

                                      A-13

<PAGE>


         In addition, subject to compliance with applicable law, the Board of
Trustees may amend the definition of Maximum Rate to increase the percentage
amount by which the Reference Rate is multiplied to determine the Maximum Rate
shown therein without the vote or consent of the holders of preferred shares,
including each Series, or any other shareholder of the Trust, but only with
confirmation from each Rating Agency, and after consultation with the
Broker-Dealers, provided that immediately following any such increase the Trust
would meet the Preferred Shares Basic Maintenance Amount test.

                                      A-14


<PAGE>








         The Board of Trustees may amend the definition of Standard Dividend
Period to change the Dividend Period with respect to one or more Series without
the vote or consent of the holders of shares of preferred, including each
series, or any other shareholder of the Trust, and any such change will not be
deemed to affect the preferences, rights or powers of Preferred Shares or the
Holders thereof.

         7.       Liquidation Rights.

                  (a) In the event of any liquidation, dissolution or winding up
of the affairs of the Trust, whether voluntary or involuntary, the holders of
preferred shares, including each Series, shall be entitled to receive out of the
assets of the Trust available for distribution to shareholders, after claims of
creditors but before distribution or payment shall be made in respect of the
Common Shares or to any other shares of beneficial interest of the Trust ranking
junior to the preferred shares, as to liquidation payments, a liquidation
distribution in the amount of $25,000 per share (the "Liquidation Preference"),
plus an amount equal to all unpaid dividends accrued to and including the date
fixed for such distribution or payment (whether or not declared by the Board of
Trustees, but excluding interest thereon), but such Holders shall be entitled to
no further participation in any distribution or payment in connection with any
such liquidation, dissolution or winding up. Each Series shall rank on a parity
with shares of any other series of preferred shares of the Trust (including each
Series) as to the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust.

                  (b) If, upon any such liquidation, dissolution or winding up
of the affairs of the Trust, whether voluntary or involuntary, the assets of the
Trust 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 Trust ranking junior to the preferred
shares as to liquidation.

                  (c) Neither the consolidation nor merger of the Trust with or
into any other business entity, nor the sale, lease, exchange or transfer by the
Trust of all or substantially all of its property and assets, shall be deemed to
be a liquidation, dissolution or winding up of the Trust for purposes of this
Section 7.

                  (d) After the payment to Holders of Preferred Shares of the
full preferential amounts provided for in this Section 7, the Holders of the
Preferred Shares as such shall have no right or claim to any of the remaining
assets of the Trust.

                  (e) In the event the assets of the Trust or proceeds thereof
available for distribution to the Holders of Preferred Shares, upon dissolution,
liquidation or winding up of the affairs of the Trust, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
Holders are entitled pursuant to paragraph (a) of this Section 7, no such
distribution shall be made on account of any shares of any other series of
preferred shares unless proportionate distributive amounts shall be paid on
account of the Preferred Shares, ratably, in proportion to the full
distributable amounts to which holders of all preferred shares are entitled upon
such dissolution, liquidation or winding up.

                  (f) Subject to the rights of the holders of other preferred
shares or after payment shall have been made in full to the Holders of Preferred
Shares as provided in paragraph (a) of this Section 7, but not prior thereto,
any other series or class of shares ranking junior to the Preferred Shares

                                      A-15

<PAGE>




with respect to the distribution of assets upon dissolution, liquidation or
winding up of the affairs of the Trust shall, subject to any respective terms
and provisions (if any) applying thereto, be entitled to receive any and all
assets remaining to be paid or distributed, and the Holders of the Preferred
Shares shall not be entitled to share therein.

         8.       Auction Agent. For so long as any Preferred Shares are
Outstanding, the Auction Agent, duly appointed by the Trust to so act, shall be
in each case a commercial bank, trust company or other financial institution
independent of the Trust and its Affiliates (which, however, may engage or have
engaged in business transactions with the Trust or its Affiliates) and at no
time shall the Trust or any of its Affiliates act as the Auction Agent in
connection with the Auction Procedures. If the Auction Agent resigns or for any
reason its appointment is terminated during any period that any shares of any
Series are Outstanding, the Trust will use its best efforts to enter into an
agreement with a successor auction agent containing substantially the same terms
and conditions as the auction agency agreement. The Trust may remove the Auction
Agent provided that prior to such removal the Trust shall have entered into such
an agreement with a successor auction agent.

         9.       1940 Act Preferred Shares Asset Coverage. The Trust shall
maintain, as of the last Business Day of each month in which any Preferred
Shares are Outstanding, the 1940 Act Preferred Shares Asset Coverage; provided,
however, that Section 3(a)(ii) shall be the sole remedy in the event the Trust
fails to do so.

         10.      Preferred Shares Basic Maintenance Amount. So long as any
Preferred Shares are Outstanding and any Rating Agency so requires, the Trust
shall maintain, as of each Valuation Date, S&P Eligible Assets and Fitch
Eligible Assets, as applicable, having an aggregate Discounted Value equal to or
greater than the Preferred Shares Basic Maintenance Amount; provided, however,
that Section 3(a)(ii) shall be the sole remedy in the event the Trust fails to
do so.

         11.     Certain Other Restrictions. So long as any Preferred Shares
are Outstanding and S&P, Fitch or any Other Rating Agency that is rating such
shares so requires, the Trust will not, unless it has received written
confirmation from S&P (if S&P is then rating the Preferred Shares), Fitch (if
Fitch is then rating the Preferred Shares) and (if applicable) such Other Rating
Agency, that any such action would not impair the rating then assigned by such
Rating Agency to the Preferred Shares, engage in any one or more of the
following transactions:

                  (a) issue any additional class or series of shares ranking
prior to the Preferred Shares with respect to the payment of dividends or the
distribution of assets upon dissolution, liquidation or winding up of the Trust;

                  (b)      issue additional shares of any Series of Preferred
Shares, including any Series previously purchased or redeemed by the Trust;

                  (c)      issue senior securities representing indebtedness as
defined under the 1940 Act;

                  (d)      engage in any short sales of securities;

                  (e)      lend portfolio securities;

                  (f)      merge or consolidate into or with any other entity;

                  (g)      borrow money except for the purpose of clearing
transactions in portfolio securities (which borrowings shall under any
circumstances be limited to the lesser of $10 million and an

                                      A-16

<PAGE>




amount equal to 5% of the Market Value of the Trust's total assets at the time
of such borrowings and which borrowings shall be repaid within 60 days and not
to be extended or renewed and shall not cause the aggregate Discounted Value of
the S&P Eligible Assets or the Fitch Eligible Assets to be less than the
Preferred Shares Basic Maintenance Amount);

                  (h) engage in dollar rolls and reverse repurchase agreements
if, at the time the Trust enters into such agreements, such activity results in
a failure to maintain the 1940 Act Preferred Shares Asset Coverage or the
Preferred Shares Basic Maintenance Amount, or if any such dollar rolls and
reverse repurchase agreements have a maturity of greater than 30 days.

         12.      Compliance Procedures for Asset Maintenance Tests.  For so
long as any Preferred Shares are Outstanding and any Rating Agency so requires:

                  (a) As of each Valuation Date, the Trust shall determine (i)
the Market Value of each Eligible Asset owned by the Trust on that date, (ii)
the Discounted Value of each such Eligible Asset, (iii) whether the Preferred
Shares Basic Maintenance Amount Test is met as of that date, (iv) the value (as
used in the 1940 Act) of the total assets of the Trust, less all liabilities,
and (v) whether the 1940 Act Preferred Shares Asset Coverage is met as of that
date.

                  (b) Upon any failure to meet the Preferred Shares Basic
Maintenance Amount Test or 1940 Act Preferred Shares Asset Coverage on any
Valuation Date, the Trust may use reasonable commercial efforts (including,
without limitation, altering the composition of its portfolio, purchasing
Preferred Shares outside of an Auction or, in the event of a failure to file a
certificate on a timely basis, submitting the requisite certificate), to meet
(or certify in the case of a failure to file a certificate on a timely basis, as
the case may be) the Preferred Shares Basic Maintenance Amount Test or 1940 Act
Preferred Shares Asset Coverage on or prior to the Asset Coverage Cure Date.

                  (c) Compliance with the Preferred Shares Basic Maintenance
Amount and 1940 Act Preferred Shares Asset Coverage tests shall be determined
with reference to those Preferred Shares which are deemed to be Outstanding
hereunder.

                  (d) In the case of the asset coverage requirements for Fitch
and S&P, the auditors must certify once per annum, or as requested by a Rating
Agency, the asset coverage test on a date randomly selected by the auditor.

                  (e) The Trust shall deliver to the Auction Agent and each
Rating Agency a certificate which sets forth a determination of items (i)-(iii)
of paragraph (a) of this Section 12 (a "Preferred Shares Basic Maintenance
Certificate") as of (A) within seven Business Days after the Date of Original
Issue, (B) the last Valuation Date of each month, (C) any date requested by any
Rating Agency, (D) a Business Day on or before any Asset Coverage Cure Date
relating to the Trust's cure of a failure to meet the Preferred Shares Basic
Maintenance Amount Test, (E) any day that Common Shares or Preferred Shares are
redeemed, (F) any day Fitch Eligible Assets have an aggregate Discounted Value
less than or equal to 110% of the Preferred Shares Basic Maintenance Amount and
(G) weekly if S&P Eligible Assets have an aggregate Discounted Value less than
1.30 times the Preferred Shares Basic Maintenance Amount. Such Preferred Shares
Basic Maintenance Certificate shall be delivered in the case of clause (i)(A) on
or before the seventh Business Day after the Date of Original Issue and in the
case of all other clauses above on or before the seventh Business Day after the
relevant Valuation Date or Asset Coverage Cure Date.

                  (f) The Trust shall deliver to the Auction Agent and each
Rating Agency a certificate which sets forth a determination of items (iv) and
(v) of paragraph(a) of this Section 12 (a

                                      A-17

<PAGE>




"1940 Act Preferred Shares Asset Coverage Certificate") (i) as of the Date of
Original Issue, and (ii) as of (A) the last Valuation Date of each quarter
thereafter, and (B) as of a Business Day on or before any Asset Coverage Cure
Date relating to the failure to meet the 1940 Act Preferred Shares Asset
Coverage. Such 1940 Act Preferred Shares Asset Coverage Certificate shall be
delivered in the case of clause (i) on or before the seventh Business Day after
the Date of Original Issue and in the case of clause (ii) on or before the
seventh Business Day after the relevant Valuation Date or the Asset Coverage
Cure Date. The certificates required by paragraphs (d) and (e) of this Section
12 may be combined into a single certificate.

                  (g) Within ten Business Days of the Date of Original Issue,
the Trust shall deliver to the Auction Agent and each Rating Agency a letter
prepared by the Trust's independent auditors (an "Auditor's Certificate")
regarding the accuracy of the calculations made by the Trust in the Preferred
Shares Basic Maintenance Certificate and the 1940 Act Preferred Shares Asset
Coverage Certificate required to be delivered by the Trust on or before the
seventh Business Day after the Date of Original Issue. Within ten Business Days
after delivery of the Preferred Shares Basic Maintenance Certificate and the
1940 Act Preferred Shares Asset Coverage Certificate relating to the last
Valuation Date of each fiscal year of the Trust, the Trust will deliver to the
Auction Agent and each Rating Agency an Auditor's Certificate regarding the
accuracy of the calculations made by the Trust in such Certificates. In
addition, the Trust will deliver to the persons specified in the preceding
sentence an Auditor's Certificate regarding the accuracy of the calculations
made by the Trust on each Preferred Shares Basic Maintenance Certificate and
1940 Act Preferred Shares Asset Coverage Certificate delivered in relation to an
Asset Coverage Cure Date within ten days after the relevant Asset Coverage Cure
Date. If an Auditor's Certificate shows that an error was made in any such
report, the calculation or determination made by the Trust's independent
auditors will be conclusive and binding on the Trust.

                  (h) The Auditor's Certificates referred to in paragraph (g)
above will confirm, based upon the independent auditor's review of portfolio
data provided by the Trust, (i) the mathematical accuracy of the calculations
reflected in the related Preferred Shares Basic Maintenance Amount Certificates
and 1940 Act Preferred Shares Asset Coverage Certificates and (ii) that, based
upon such calculations, the Trust had, at such Valuation Date, met the Preferred
Shares Basic Maintenance Amount Test.

                  (i) In the event that a Preferred Shares Basic Maintenance
Certificate or 1940 Act Preferred Shares Asset Coverage Certificate with respect
to an applicable Valuation Date is not delivered within the time periods
specified in this Section 12, the Trust shall be deemed to have failed to meet
the Preferred Shares Basic Maintenance Amount Test or the 1940 Act Preferred
Shares Asset Coverage, as the case may be, on such Valuation Date for purposes
of Section 12(b) of Part I of this Statement. In the event that a Preferred
Shares Basic Maintenance Certificate, a 1940 Act Preferred Shares Asset Coverage
Certificate or an applicable Auditor's Certificate with respect to an Asset
Coverage Cure Date is not delivered within the time periods specified herein,
the Trust shall be deemed to have failed to meet the Preferred Shares Basic
Maintenance Amount Test or the 1940 Preferred Shares Asset Coverage, as the case
may be, as of the related Valuation Date.

         13.      Notices. All notices or communications hereunder, unless
otherwise specified in this Statement, shall be sufficiently given if in writing
and delivered in person, by facsimile or mailed by first-class mail, postage
prepaid. Notices delivered pursuant to this Section 13 shall be deemed given on
the earlier of the date received or the date five days after which such notice
is mailed, except as otherwise provided in this Statement or by the Delaware law
for notices of shareholders' meetings.

         14.      Waiver.  To the extent permitted by Delaware law, Holders of
at least two-thirds of the Outstanding Preferred Shares, acting collectively, or
each Series, acting as a separate series, may waive

                                      A-18

<PAGE>




any provision hereof intended for their respective benefit in accordance with
such procedures as may from time to time be established by the Board of
Trustees.

         15.      Termination.  In the event that no Preferred Shares are
Outstanding, all rights and preferences of such shares established and
designated hereunder shall cease and terminate, and all obligations of the Trust
under this Statement shall terminate.

         16.      Amendment. Subject to the provisions of this Statement, the
Board of Trustees may, by resolution duly adopted without shareholder approval
(except as otherwise provided by this Statement or required by applicable law),
amend this Statement to reflect any amendments hereto which the Board of
Trustees is entitled to adopt pursuant to the terms of Section 6(k) of Part I of
this Statement without shareholder approval. To the extent permitted by
applicable law, the Board of Trustees may interpret, amend or adjust the
provisions of this Statement to resolve any inconsistency or ambiguity or to
remedy any patent defect.

         17.      Definitions.  As used in Part I and Part II of this Statement,
the following terms shall have the following meanings (with terms defined in the
singular having comparable meanings when used in the plural and vice versa),
unless the context otherwise requires:

          "Affiliate" means any person actually known to the Auction Agent to be
controlled by, in control of or under common control with the Trust; provided,
however, that no Broker-Dealer controlled by, in control of or under common
control with the Trust 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 a
trustee of the Trust be deemed to be an Affiliate solely because such director
or executive officer is also a trustee of the Trust.

         "Agent Member" means a member of or a participant in the Securities
Depository that will act on behalf of a Bidder.

         "All Hold Rate" means 80% of the Reference Rate

         "Applicable Percentage" means the percentage determined based on the
higher of the credit ratings assigned to the series of Preferred Shares on such
date by Fitch and S&P or equivalent credit rating by any Other Rating Agency as
follows:

                           CREDIT RATING          APPLICABLE PERCENTAGE
                     AA- or higher                         150%
                     A- to A+                              200%
                     BBB- to BBB+                          250%
                     Below BBB-                            275%

         The Applicable Percentage as so determined shall be further subject to
upward but not downward adjustment in the discretion of the Board of Trustees of
the Trust after consultation with the Broker-Dealers, provided that immediately
following any such increase the Trust would be in compliance with the Preferred
Shares Basic Maintenance Amount.

         "Applicable Rate" means, with respect to each Series for each Dividend
Period (i) if Sufficient Clearing Orders exist for the Auction in respect
thereof, the Winning Bid Rate, (ii) if Sufficient Clearing Orders do not exist
for the Auction in respect thereof, the Maximum Rate, and (iii) in the case of
any Dividend Period if all the shares of a Series are the subject of Submitted
Hold Orders for the Auction in respect thereof, the All Hold Rate corresponding
to that Series.

                                      A-19

<PAGE>




         "Asset Coverage Cure Date" has the meaning set forth in Section
3(a)(ii) of this Statement.

         "Auction" means each periodic operation of the Auction Procedures.

         "Auction Agent" means The Bank of New York unless and until another
commercial bank, trust company, or other financial institution appointed by a
resolution of the Board of Trustees enters into an agreement with the Trust to
follow the Auction Procedures for the purpose of determining the Applicable
Rate.

         "Auction Date" means the first Business Day next preceding the first
day of a Dividend Period for each Series.

         "Auction Procedures" means the procedures for conducting Auctions as
set forth in Part II of this Statement.

         "Auditor's Certificate" has the meaning set forth in Section 12(g) of
Part I of this Statement.

         "Beneficial Owner," with respect to shares of each Series, 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 shares of such series.

         "Bid" has the meaning set forth in Section 2(a)(ii) of Part II of this
Statement.

         "Bidder" has the meaning set forth in Section 2(a)(ii) of Part II of
this Statement, provided, however, that neither the Trust nor any Affiliate
shall be permitted to be a Bidder in an Auction.

         "Board of Trustees" or "Board" means the Board of Trustees of the Trust
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 functions required of a Broker-Dealer by
the Auction Procedures, that has been selected by the Trust and has entered into
a Broker-Dealer Agreement that remains effective.

         "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.

         "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.

         "Code" means the Internal Revenue Code of 1986, as amended.

         "Commission" means the Securities and Exchange Commission.

         "Common Shares" means the shares of the Trust common shares of
beneficial interest, no par value.

         "Date of Original Issue" means the date on which a Series is originally
issued by the Trust.

         "Default" has the meaning set forth in Section 2(c)(ii) of Part I of
this Statement.

         "Default Period" has the meaning set forth in Sections 2(c)(ii) or
(iii) of Part I of this Statement.

                                      A-20
<PAGE>

         "Default Rate" has the meaning set forth in Section 2(c)(iii) of Part I
of this Statement.

         "Deposit Securities" means cash and any obligations or securities,
including Short Term Money Market Instruments that are Eligible Assets, rated at
least AAA or A-1 by S&P, except that, for purposes of optional redemption, such
obligations or securities will be considered "Deposit Securities" only if they
also are rated at least P-1 by Moody's.

         "Discount Factor" means the S&P Discount Factor (if S&P is then rating
the Preferred Shares), the Fitch Discount Factor (if Fitch is then rating the
Preferred Shares) or the discount factor established by any Other Rating Agency
which is then rating the Preferred Shares and which so requires, whichever is
applicable.

         "Discounted Value" means the quotient of the Market Value of an
Eligible Asset divided by the applicable Discount Factor.

         "Dividend Default" has the meaning set forth in Section 2(c)(iii) of
Part I of this Statement.

         "Dividend Payment Date" with respect to the Preferred Shares means any
date on which dividends are payable pursuant to Section 2(b) of Part I of this
Statement.

         "Dividend Period" means, with respect to each Series, the initial
period from the Date of Original Issue to the initial Dividend Payment Date set
forth under "Designation" above, and thereafter, as to such Series, the period
commencing on the Business Day following each Dividend Period for such Series
and ending on the calendar day immediately preceding the next Dividend Payment
Date for such Series.

         "Eligible Assets" means Fitch Eligible Assets (if Fitch is then rating
the Preferred Shares), S&P Eligible Assets (if S&P is then rating the Preferred
Shares), and/or Other Rating Agency Eligible Assets if any Other Rating Agency
is then rating the Preferred Shares, whichever is applicable.

         "Existing Holder" has the meaning set forth in Section 1(d) of Part II
of this Statement.

         "Failure to Deposit" with respect to shares of a series of Preferred
Shares, means a failure by the Trust to pay the Auction Agent, not later than
12:00 noon, New York City time, (A) on the Business Day next preceding any
Dividend Payment Date for shares of such series, in funds available on such
Dividend Payment Date in The City of New York, New York, the full amount of any
dividend (whether or not earned or declared) to be paid on such Dividend Payment
Date on any share of such series or (B) on the Business Day next preceding any
redemption date in funds available on such redemption date for shares of such
series in The City of New York, New York, the Redemption Price to be paid on
such redemption date for any share of such series after notice of redemption is
mailed pursuant to paragraph (c) of Section 3 of Part I of this Statement;
provided, however, that the foregoing clause (B) shall not apply to the Trust's
failure to pay the Redemption Price in respect of shares of Preferred Shares
when the related Notice of Redemption provides that redemption of such shares is
subject to one or more conditions precedent and any such condition precedent
shall not have been satisfied at the time or times and in the manner specified
in such Notice of Redemption.

         "Fitch" means Fitch Ratings.

         "Fitch Discount Factor" means, for the purposes of determining the
Discounted Value of any Fitch Eligible Asset, the percentage determined as
follows. The Fitch Discount Factor for any Fitch Eligible Asset other than the
securities set forth below will be the percentage provided in writing by Fitch.



                                      A-21



<PAGE>




                           (i)      Corporate debt securities.  The percentage
determined by reference to the rating of a corporate debt security in accordance
with the table set forth below.


<TABLE>
<CAPTION>


        TERM TO MATURITY OF CORPORATE
           DEBT SECURITY UNRATED(1)                                                                       NOT
                                                                                                         RATED
                                                                                                          OR
                                                                                                         BELOW
                                                     AAA       AA         A         BBB       BB          BB
<S>                                               <C>       <C>        <C>        <C>       <C>         <C>
3 years or less (but longer than 1 year).....     106.38%   108.11%    109.89%    111.73%   129.87%     151.52%
5 years or less (but longer than 3 years)....     111.11    112.99     114.94     116.96    134.24      151.52
7 years or less (but longer than 5 years)....     113.64    115.61     117.65     119.76    135.66      151.52
10 years or less (but longer than 7 years)...     115.61    117.65     119.76     121.95    136.74      151.52
15 years or less (but longer than 10 years)..     119.76    121.95     124.22     126.58    139.05      151.52
More than 15 years...........................     124.22    126.58     129.03     131.58    144.55      151.52
</TABLE>


- ------------------
(1)     If a security is not rated by Fitch but is rated by two other Rating
        Agencies, then the lower of the ratings on the security from the two
        other Rating Agencies will be used to determine the Fitch Discount
        Factor (e.g., where the S&P rating is A- and the Moody's rating is Baa1,
        a Fitch rating of BBB+ will be used). If a security is not rated by
        Fitch but is rated by only one other Rating Agency, then the rating on
        the security from the other Rating Agency will be used to determine the
        Fitch Discount Factor (e.g., where the only rating on a security is an
        S&P rating of AAA, a Fitch rating of AAA will be used, and where the
        only rating on a security is a Moody's rating of Ba3, a Fitch rating of
        BB- will be used). If a security is not rated by any Rating Agency, the
        Trust will use the percentage set forth under "Unrated" in this table.

                           (ii) Convertible securities. The Fitch Discount
         Factor applied to convertible securities is (A) 200% for investment
         grade convertibles and (B) 222% for below investment grade convertibles
         so long as such convertible securities have neither (x) conversion
         premium greater than 100% nor (y) have a yield to maturity or yield to
         worst of >15.00% above the relevant Treasury curve.

                           The Fitch Discount Factor applied to convertible
         securities which have conversion premiums of greater than 100% is (A)
         152% for investment grade convertibles and (B) 179% for below
         investment grade convertibles so long as such convertible securities do
         not have a yield to maturity or yield to worst of > 15.00% above the
         relevant Treasury curve.

                           The Fitch Discount Factor applied to convertible
         securities which have a yield to maturity or yield to worst of > 15.00%
         above the relevant Treasury curve is 370%.

                           If a security is not rated by Fitch but is rated by
         two other Rating Agencies, then the lower of the ratings on the
         security from the two other Rating Agencies will be used to determine
         the Fitch Discount Factor (e.g., where the S&P rating is A- and the
         Moody's rating is Baa1, a Fitch rating of BBB+ will be used). If a
         security is not rated by Fitch but is rated by only one other Rating
         Agency, then the rating on the security from the other Rating Agency
         will be used to determine the Fitch Discount Factor (e.g., where the
         only rating on a security is an S&P rating of AAA, a Fitch rating of
         AAA will be used, and where the only rating on a security is a Moody's
         rating of Ba3, a Fitch rating of BB- will be used). If a security is
         not rated by any Rating Agency, the Trust will treat the security as if
         it were below investment grade.

                           (iii) Preferred securities: The percentage determined
         by reference to the rating of a preferred security in accordance with
         the table set forth below.



                                      A-22


<PAGE>

<TABLE>
<CAPTION>

                                                                                            NOT
                                                                                           RATED
      PREFERRED SECURITY(1)                                                                 OR
                                                                                           BELOW
                                       AAA         AA        A          BBB      BB          BB
<S>                                   <C>        <C>       <C>        <C>       <C>        <C>
Taxable Preferred.............        130.58%    133.19%   135.91%    138.73%   153.23%    161.08%
Dividend-Received Deduction           163.40%    163.40%   163.40%    163.40%   201.21%    201.21%
   (DRD) Preferred............
</TABLE>

- --------------------------
         (1)    If a security is not rated by Fitch but is rated by two other
                Rating Agencies, then the lower of the ratings on the security
                from the two other Rating Agencies will be used to determine the
                Fitch Discount Factor (e.g., where the S&P rating is A- and the
                Moody's rating is Baa1, a Fitch rating of BBB+ will be used). If
                a security is not rated by Fitch but is rated by only one other
                Rating Agency, then the rating on the security from the other
                Rating Agency will be used to determine the Fitch Discount
                Factor (e.g., where the only rating on a security is an S&P
                rating of AAA, a Fitch rating of AAA will be used, and where the
                only rating on a security is a Moody's rating of Ba3, a Fitch
                rating of BB- will be used). If a security is not rated by any
                Rating Agency, the Trust will use the percentage set forth under
                "Unrated" in this table.

                           (iv)     U.S. Government Securities and U.S. Treasury
 Strips:



<TABLE>
<CAPTION>

                                                                  DISCOUNT
                     TIME REMAINING TO MATURITY                    FACTOR

                <S>                                               <C>
                1 year or less.............................         100%
                2 years or less (but longer than 1 year)...         103%
                3 years or less (but longer than 2 years)..         105%
                4 years or less (but longer than 3 years)..         107%
                5 years or less (but longer than 4 years)..         109%
                7 years or less (but longer than 5 years)..         112%
                10 years or less (but longer than 7 years).         114%
                15 years or less (but longer than 10 years)         122%
                20 years or less (but longer than 15 years)         130%
                25 years or less (but longer than 20 years)         146%
                Greater than 30 years......................         154%
</TABLE>


                           (v) Short-Term Investments and Cash: The Fitch
         Discount Factor applied to short-term portfolio securities, including
         without limitation Debt Securities, Short Term Money Market Instruments
         and municipal debt obligations, will be (A) 100%, so long as such
         portfolio securities mature or have a demand feature at par exercisable
         within the Fitch Exposure Period; (B) 115%, so long as such portfolio
         securities mature or have a demand feature at par not exercisable
         within the Fitch Exposure Period; and (C) 125%, so long as such
         portfolio securities neither mature nor have a demand feature at par
         exercisable within the Fitch Exposure Period. A Fitch Discount Factor
         of 100% will be applied to cash.

                           (vi) Rule 144A Securities: The Fitch Discount Factor
         applied to Rule 144A Securities will be 110% of the Fitch Discount
         Factor which would apply were the securities registered under the
         Securities Act.

                           (vii) Foreign Bonds: The Fitch Discount Factor (A)
         for a Foreign Bond the principal of which (if not denominated in U.S.
         dollars) is subject to a currency hedging transaction will be the Fitch
         Discount Factor that would otherwise apply to such Foreign Bonds in
         accordance with this definition and (B) for (1) a Foreign Bond the
         principal of which (if not denominated in U.S. dollars) is not subject
         to a currency hedging transaction and (2) a bond issued in a currency
         other than U.S. dollars by a corporation, limited liability company or
         limited partnership domiciled in, or the government or any agency,
         instrumentality or political subdivision of, a nation other than an
         Approved Foreign Nation, will be 370%.




                                      A-23

<PAGE>




         "Fitch Eligible Assets" means:

                           (i) cash (including interest and dividends due on
         assets rated (A) BBB or higher by Fitch or the equivalent by another
         Rating Agency if the payment date is within five Business Days of the
         Valuation Date, (B) A or higher by Fitch or the equivalent by another
         Rating Agency if the payment date is within thirty days of the
         Valuation Date, and (C) A+ or higher by Fitch or the equivalent by
         another Rating Agency if the payment date is within the Fitch Exposure
         Period) and receivables for Fitch Eligible Assets sold if the
         receivable is due within five Business Days of the Valuation Date, and
         if the trades which generated such receivables are settled within five
         business days;

                           (ii) Short Term Money Market Instruments so long as
         (A) such securities are rated at least F1+ by Fitch or the equivalent
         by another Rating Agency, (B) in the case of demand deposits, time
         deposits and overnight funds, the supporting entity is rated at least A
         by Fitch or the equivalent by another Rating Agency, or (C) in all
         other cases, the supporting entity (1) is rated at least A by Fitch or
         the equivalent by another Rating Agency and the security matures within
         one month, (2) is rated at least A by Fitch or the equivalent by
         another Rating Agency and the security matures within three months or
         (3) is rated at least AA by Fitch or the equivalent by another Rating
         Agency and the security matures within six months;

                           (iii)    U.S. Government Securities and U.S. Treasury
         Strips;

                           (iv) debt securities if such securities have been
         registered under the Securities Act or are restricted as to resale
         under federal securities laws but are eligible for resale pursuant to
         Rule 144A under the Securities Act as determined by the Trust's
         investment manager or portfolio manager acting pursuant to procedures
         approved by the Board of Trustees of the Trust; and such securities are
         issued by (1) a U.S. corporation, limited liability company or limited
         partnership, (2) a corporation, limited liability company or limited
         partnership domiciled in Argentina, Australia, Brazil, Chile, France,
         Germany, Italy, Japan, Korea, Mexico, Spain or the United Kingdom (the
         "Approved Foreign Nations"), (3) the government of any Approved Foreign
         Nation or any of its agencies, instrumentalities or political
         subdivisions (the debt securities of Approved Foreign Nation issuers
         being referred to collectively as "Foreign Bonds"), (4) a corporation,
         limited liability company or limited partnership domiciled in Canada or
         (5) the Canadian government or any of its agencies, instrumentalities
         or political subdivisions (the debt securities of Canadian issuers
         being referred to collectively as "Canadian Bonds"). Foreign Bonds held
         by the Trust will qualify as Fitch Eligible Assets only up to a maximum
         of 20% of the aggregate Market Value of all assets constituting Fitch
         Eligible Assets. Similarly, Canadian Bonds held by the Trust will
         qualify as Fitch Eligible Assets only up to a maximum of 20% of the
         aggregate Market Value of all assets constituting Fitch Eligible
         Assets. Notwithstanding the limitations in the two preceding sentences,
         Foreign Bonds and Canadian Bonds held by the Trust will qualify as
         Fitch Eligible Assets only up to a maximum of 30% of the aggregate
         Market Value of all assets constituting Fitch Eligible Assets. In
         addition, bonds which are issued in connection with a reorganization
         under U.S. federal bankruptcy law ("Reorganization Bonds") will be
         considered debt securities constituting Fitch Eligible Assets if (a)
         they provide for periodic payment of interest in cash in U.S. dollars
         or euros; (b) they do not provide for conversion or exchange into
         equity capital at any time over their lives; (c) they have been
         registered under the Securities Act or are restricted as to resale
         under federal securities laws but are eligible for trading under Rule
         144A promulgated pursuant to the Securities Act as determined by the
         Trust's investment manager or portfolio manager acting pursuant to
         procedures approved by the Board of Trustees of the Trust; (d) they
         were issued by a U.S. corporation, limited liability company or limited
         partnership; and (e) at the time of purchase at least one year had
         elapsed since the issuer's



                                      A-24


<PAGE>




         reorganization. Reorganization Bonds may also be considered debt
         securities constituting Fitch Eligible Assets if they have been
         approved by Fitch, which approval shall not be unreasonably withheld.
         All debt securities satisfying the foregoing requirements and
         restrictions of this paragraph (iv) are herein referred to as "Debt
         Securities."

                           (v) Preferred stocks if (A) dividends on such
         preferred stock are cumulative, (B) such securities provide for the
         periodic payment of dividends thereon in cash in U.S. dollars or euros
         and do not provide for conversion or exchange into, or have warrants
         attached entitling the holder to receive equity capital at any time
         over the respective lives of such securities, (C) the issuer of such a
         preferred stock has common stock listed on either the New York Stock
         Exchange or the American Stock Exchange, (D) the issuer of such a
         preferred stock has a senior debt rating or preferred stock rating from
         Fitch of BBB-- or higher or the equivalent rating by another Rating
         Agency. In addition, the preferred stocks issue must be at least $50
         million;

                           (vi)     Asset-backed and mortgage-backed securities;

                           (vii)    Rule 144A Securities;

                           (viii)   Bank Loans;

                           (ix) Municipal debt obligation that (A) pays interest
         in cash (B) is part of an issue of municipal debt obligations of at
         least $5 million, except for municipal debt obligations rated below A
         by Fitch or the equivalent rating by another Rating Agency, in which
         case the minimum issue size is $10 million;

                           (x)      Tradable credit baskets (e.g., Traded
         Custody Receipts or TRACERS and Targeted Return Index Securities Trust
         or TRAINS);

                           (xi)     Convertible debt and convertible preferred
         stocks;

                           (xii) Financial contracts, as such term is defined in
         Section 3(c)(2)(B)(ii) of the Investment Company Act, not otherwise
         provided for in this definition may be included in Fitch Eligible
         Assets, but, with respect to any financial contract, only upon receipt
         by the Trust of a writing from Fitch specifying any conditions on
         including such financial contract in Fitch Eligible Assets and assuring
         the Trust that including such financial contract in the manner so
         specified would not affect the credit rating assigned by Fitch to the
         Preferred Shares;

                           (xiii) Interest rate swaps entered into according to
         International Swap Dealers Association ("ISDA") standards if (1) the
         counterparty to the swap transaction has a short-term rating of not
         less than F1 by Fitch or the equivalent by another, NRSRO, or, if the
         swap counterparty does not have a short-term rating, the counterparty's
         senior unsecured long-term debt rating is AA or higher by Fitch or the
         equivalent by another NRSRO and (2) the original aggregate notional
         amount of the interest rate swap transaction or transactions is not
         greater than the liquidation preference of the Preferred Shares
         originally issued.

         Where the Trust sells an asset and agrees to repurchase such asset in
the future, the Discounted Value of such asset will constitute a Fitch Eligible
Asset and the amount the Trust is required to pay upon repurchase of such asset
will count as a liability for the purposes of the Preferred Shares Basic
Maintenance Amount. Where the Trust purchases an asset and agrees to sell it to
a third party in the future, cash receivable by the Trust thereby will
constitute a Fitch Eligible Asset if the long-term debt of such other party is
rated at least A-- by Fitch or the equivalent by another Rating Agency and such


                                      A-25


<PAGE>




agreement has a term of 30 days or less; otherwise the Discounted Value of such
purchased asset will constitute a Fitch Eligible Asset.

         Notwithstanding the foregoing, an asset will not be considered a Fitch
Eligible Asset to the extent that it has been irrevocably deposited for the
payment of (i)(A) through (i)(E) under the definition of Preferred Shares Basic
Maintenance Amount or to the extent it is subject to any Liens, except for (A)
Liens which are being contested in good faith by appropriate proceedings and
which Fitch has indicated to the Trust will not affect the status of such asset
as a Fitch Eligible Asset, (B) Liens for taxes that are not then due and payable
or that can be paid thereafter without penalty, (C) Liens to secure payment for
services rendered or cash advanced to the Trust by its investment manager or
portfolio manager, the Trust's custodian, transfer agent or registrar or the
Auction Agent and (D) Liens arising by virtue of any repurchase agreement.

         Portfolio holdings as described above must be within the following
diversification and issue size requirements in order to be included in Fitch's
Eligible Assets:

<TABLE>
<CAPTION>



      SECURITY              MAXIMUM             MAXIMUM             MINIMUM
        RATED                SINGLE              SINGLE            ISSUE SIZE
      AT LEAST             ISSUER(1)         INDUSTRY(1)(2)          ($ IN
                                                                  MILLION)(3)
<S>   <C>                  <C>                 <C>                <C>
          AAA                  100%                100%                $100
         AA--                   20                  75                  100
          A--                   10                  50                  100
        BBB--                    6                  25                  100
         BB--                    4                  16                   50
          B--                    3                  12                   50
          CCC                    2                   8                   50
</TABLE>


- ------------------
(1)     Percentages represent a portion of the aggregate market value of
        corporate debt securities.
(2)     Industries are determined according to Fitch's Industry Classifications,
        as defined herein.
(3)     Preferred stock has a minimum issue size of $50 million.

         "Fitch Exposure Period" means the period commencing on (and including)
a given Valuation Date and ending 41 days thereafter.

         "Fitch Hedging Transactions" means purchases or sales of
exchange-traded financial futures contracts based on any index approved by Fitch
or Treasury Bonds, and purchases, writings or sales of exchange-traded put
options on such futures contracts, any index approved by Fitch or Treasury Bonds
and purchases, writings or sales of exchange-traded call options on such
financial futures contracts, any index approved by Fitch or Treasury bonds
("Fitch Hedging Transactions"), subject to the following limitations:

                           (i) The Trust may not engage in any Fitch Hedging
         Transaction based on any index approved by Fitch (other than
         transactions that terminate a futures contract or option held by the
         Trust by the Trust's taking the opposite position thereto ("closing
         transactions")) that would cause the Trust at the time of such
         transaction to own or have sold outstanding financial futures contracts
         based on such index exceeding in number 10% of the average number of
         daily traded financial futures contracts based on such index in the 30
         days preceding the time of effecting such transaction as reported by
         The Wall Street Journal.

                           (ii) The Trust will not engage in any Fitch Hedging
         Transaction based on Treasury Bonds (other than closing transactions)
         that would cause the Trust at the time of such transaction to own or
         have sold:



                                      A-26



<PAGE>




                                    (A) Outstanding financial futures contracts
                  based on Treasury Bonds with such contracts having an
                  aggregate market value exceeding 20% of the aggregate market
                  value of Fitch Eligible Assets owned by the Trust and rated AA
                  by Fitch (or, if not rated by Fitch Ratings, rated Aa by
                  Moody's; or, if not rated by Moody's, rated AAA by S&P); or

                                    (B) Outstanding financial futures contracts
                  based on Treasury Bonds with such contracts having an
                  aggregate market value exceeding 40% of the aggregate market
                  value of all Fitch Eligible Assets owned by the Trust (other
                  than Fitch Eligible Assets already subject to a Fitch Hedging
                  Transaction) and rated A or BBB by Fitch (or, if not rated by
                  Fitch Ratings, rated Baa by Moody's; or, if not rated by
                  Moody's, rated A or AA by S&P) (for purposes of the foregoing
                  clauses (i) and (ii), the Trust shall be deemed to own futures
                  contracts that underlie any outstanding options written by the
                  Trust);

                           (iii) The Trust may engage in closing transactions to
         close out any outstanding financial futures contract based on any index
         approved by Fitch if the amount of open interest in such index as
         reported by The Wall Street Journal is less than an amount to be
         mutually determined by Fitch and the Trust.

                           (iv) The Trust may not enter into an option or
         futures transaction unless, after giving effect thereto, the Trust
         would continue to have Fitch Eligible Assets with an aggregate
         Discounted Value equal to or greater than the Preferred Shares Basic
         Maintenance Amount.

         "Fitch Industry Classifications" means, for the purposes of determining
Fitch Eligible Assets, each of the following industry classifications:

<TABLE>
<CAPTION>



       FITCH INDUSTRY CLASSIFICATIONS                       SIC CODE (MAJOR GROUPS)
<S>    <C>                                                  <C>
       1.   Aerospace and Defense                           37, 45
       2.   Automobiles                                     37, 55
       3.   Banking, Finance and Real Estate                60, 65, 67
       4.   Broadcasting and Media                          27, 48
       5.   Building and Materials                          15-17, 32, 52
       6.   Cable                                           48
       7.   Chemicals                                       28, 30
       8.   Computers and Electronics                       35, 36
       9.   Consumer Products                               23, 51
       10.  Energy                                          13, 29, 49
       11.  Environmental Services                          87
       12.  Farming and Agriculture                         1-3, 7-9
       13.  Food, Beverage and Tobacco                      20, 21, 54
       14.  Gaming, Lodging and Restaurants                 70, 58
       15.  Health Care and Pharmaceuticals                 38, 28, 80
       16.  Industrial/Manufacturing                        35
       17.  Insurance                                       63, 64
       18.  Leisure and Entertainment                       78, 79
       19.  Metals and Mining                               10, 12, 14, 33, 34
       20.  Miscellaneous                                   50, 72-76, 99
       21.  Paper and Forest Products                       8, 24, 26
       22.  Retail                                          53, 56, 59
       23.  Sovereign                                       NA
</TABLE>


                                      A-27



<PAGE>

<TABLE>


<S>                                                         <C>

       24.  Supermarkets and Drug Stores                    54
       25.  Telecommunications                              48
       26.  Textiles and Furniture                          22, 25, 31, 57
       27.  Transportation                                  40, 42-47
       28.  Utilities                                       49
       29.  Structured Finance Obligations                  NA
       30.  Packaging and Containers                        26, 32, 34
       31.  Business Series                                 73, 87
</TABLE>


         The Trust shall use its discretion in determining which industry
classification is applicable to a particular investment.

         "Hold Order" has the meaning set forth in Section 2(a)(ii) of Part II
of this Statement.

         "Holder" means, with respect to the Preferred Shares, the registered
holder of shares of each Series as the same appears on the share ledger or share
records of the Trust.

         "Investment Manager" means Calamos Asset Management, Inc.

               "LIBOR Rate" on any Auction Date, means (i) the rate for
deposits in U.S. dollars for the designated Dividend 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 Citigroup Global Markets Inc. or its successors) as of
11:00 a.m., London time, on the day that is the London Business Day on the
Auction Date or, if the Auction Date is not a London Business Day, the London
Business Day proceeding 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) Citigroup Global Markets Inc. 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 Dividend Period in an amount determined by Citigroup Global
Markets Inc. by reference to requests for quotations as of approximately 11:00
a.m. (London time) on such date made by Citigroup Global Markets Inc. to the
reference banks, (B) if at least two of the reference banks provide such
quotations, LIBOR Rate shall equal such arithmetic mean of such quotations, (C)
if only one or none of the reference banks provide such quotations, LIBOR Rate
shall be deemed to be the arithmetic mean of the offered quotations that leading
banks in The City of New York selected by Citigroup Global Markets Inc. (after
obtaining the Trust's approval) are quoting on the relevant LIBOR Determination
Date for deposits in U.S. dollars for the designated Dividend Period in an
amount determined by Citigroup Global Markets Inc. (after obtaining the Trust's
approval) that is representative of a single transaction in such market at such
time by reference to the principal London offices of leading banks in the London
interbank market; provided, however, that if Citigroup Global Markets Inc. is
not a Broker-Dealer or does not quote a rate required to determine the LIBOR
Rate, the LIBOR Rate will be determined on the basis of the quotation or
quotations furnished by any other Broker-Dealer selected by the Trust to provide
such rate or rates not being supplied by Citigroup Global Markets Inc.; provided
further, that if Citigroup Global Markets Inc. 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, the LIBOR Rate shall be the most recently
determinable LIBOR Rate. If the number of Dividend 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 that 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



                                      A-28


<PAGE>




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.

         "London Business Day" means any day on which commercial banks are
generally open for business in London.

         "Liquidation Preference" means $25,000 per preferred share.

         "Mandatory Redemption Date" has meaning set forth in Section 3(a)(iv)
of Part I of this Statement.

         "Mandatory Redemption Price" has the meaning set forth in Section
3(a)(iii) of Part I of this Statement.

         "Market Value" means the fair market value of an asset of the Trust as
computed as follows:

         The values of the securities in the Trust are based on market prices
from the primary market in which they are traded. As a general rule, equity
securities listed on a U.S. securities exchange or Nasdaq National Market are
valued at the last quoted sale priced on the day the valuation is made. Bonds
and other fixed-income securities that are traded over the counter and on an
exchange will be valued according to the broadest and most representative
market, and it is expected this will ordinarily be the over-the counter market.
The foreign securities held by the Trust are traded on exchanges throughout the
world. Trading on these foreign securities exchanges is completed at various
times throughout the day and often does not coincide with the close of trading
on the New York Stock Exchange. The value of foreign securities is determined at
the close of trading of the exchange on which the securities are traded or at
the close of trading on the New York Stock Exchange, whichever is earlier. If
market prices are not readily available or the Trust's valuation methods do not
produce a value reflective of the fair value of the security, securities and
other assets are priced at a fair value as determined by the Board of Trustees
or a committee thereof.

         "Maximum Rate" means the Applicable Percentage of the Reference Rate.
The Auction Agent will round each applicable Maximum Rate to the nearest
one-thousandth (0.001) of one percent per annum, with any such number ending in
five ten-thousandths of one percent being rounded upwards to the nearest
one-thousandth (0.001) of one percent.

         "Moody's" means Moody's Investors Service, Inc. and its successors at
law.

         "1933 Act" means the Securities Act of 1933, as amended.

         "1940 Act" means the Investment Company Act of 1940, as amended.

         "1940 Act Preferred Shares Asset Coverage" means asset coverage, as
determined in accordance with Section 18(h) of the 1940 Act, of at least 200%
with respect to all outstanding senior securities of the Trust which are stock,
including all Outstanding Preferred Shares (or such other asset coverage as may
in the future be specified in or under the 1940 Act as the minimum asset
coverage for senior securities which are stock of a closed-end investment
company as a condition of declaring dividends on its common shares), determined
on the basis of values calculated as of a time within 48 hours (not including
Sundays or holidays) next preceding the time of such determination.



                                      A-29




<PAGE>




         "1940 Act Preferred Shares Asset Coverage Certificate" means the
certificate required to be delivered by the Trust pursuant to Section 12(e) of
this Statement.

         "Notice of Redemption" means any notice with respect to the redemption
of Preferred Shares pursuant to Section 3 of Part I of this Statement.

         "Order" has the meaning set forth in Section 2(a)(ii) of Part II of
this Statement.

         "Other Rating Agency" means any rating agency other than S&P or Fitch
then providing a rating for the Preferred Shares pursuant to the request of the
Trust.

         "Other Rating Agency Eligible Assets" means assets of the Trust
designated by any Other Rating Agency as eligible for inclusion in calculating
the discounted value of the Trust's assets in connection with such Other Rating
Agency's rating of the Preferred Shares.

         "Outstanding" means, as of any date, Preferred Shares theretofore
issued by the Trust except, without duplication, (i) any Preferred Shares
theretofore canceled, redeemed or repurchased by the Trust, or delivered to the
Auction Agent for cancellation or with respect to which the Trust has given
notice of redemption and irrevocably deposited with the Paying Agent sufficient
funds to redeem such shares and (ii) any Preferred Shares represented by any
certificate in lieu of which a new certificate has been executed and delivered
by the Trust. Notwithstanding the foregoing, (A) for purposes of voting rights
(including the determination of the number of shares required to constitute a
quorum), any Preferred Shares as to which the Trust or any Affiliate is the
Existing Holder will be disregarded and not deemed Outstanding; (B) in
connection with any Auction, any Preferred Shares as to which the Trust or any
person known to the Auction Agent to be an Affiliate is the Existing Holder will
be disregarded and not deemed Outstanding; and (C) for purposes of determining
the Preferred Shares Basic Maintenance Amount, Preferred Shares held by the
Trust will be disregarded and not deemed Outstanding, but shares held by any
Affiliate will be deemed Outstanding.

         "Paying Agent" means The Bank of New York unless and until another
entity appointed by a resolution of the Board of Trustees enters into an
agreement with the Trust to serve as paying agent, which paying agent may be the
same as the Auction Agent.

         "Person" or "Persons" means and includes an individual, a partnership,
the Trust, a trust, a corporation, a limited liability company, an
unincorporated association, a joint venture or other entity or a government or
any agency or political subdivision thereof.

         "Potential Beneficial Owner" or "Potential Beneficial Holder" has the
meaning set forth in Section 1 of Part II of this Statement.

         "Preferred Shares" has the meaning set forth in paragraph FIRST of Part
I of this Statement.

         "Preferred Shares Basic Maintenance Amount" means as of any Valuation
Date as the dollar amount equal to:

                (i) the sum of (A) the product of the number of Preferred Shares
         outstanding on such date multiplied by $25,000 (plus the product of the
         number of shares of any other series of preferred shares outstanding on
         such date multiplied by the Liquidation Preference of such shares),
         plus any redemption premium applicable to the Preferred Shares (or
         other preferred shares) then subject to redemption; (B) the aggregate
         amount of dividends that will have accumulated at the respective
         Applicable Rates (whether or not earned or declared) to (but not
         including) the first respective Dividend Payment Dates for Preferred
         Shares outstanding that




                                      A-30


<PAGE>




         follow such Valuation Date (plus the aggregate amount of dividends,
         whether or not earned or declared, that will have accumulated in
         respect of other outstanding preferred shares to, but not including,
         the first respective dividend payment dates for such other shares that
         follow such Valuation Date); (C) the aggregate amount of dividends that
         would accumulate on shares of each series of Preferred Shares
         outstanding from such first respective Dividend Payment Date therefor
         through the 42nd day after such Valuation Date, at the Maximum Rate
         (calculated as if such Valuation Date were the Auction Date for the
         Dividend Period commencing on such Dividend Payment Date) for a
         Standard Dividend Period of shares of such series to commence on such
         Dividend Payment Date, assuming, solely for purposes of the foregoing,
         that if on such Valuation Date the Trust shall have delivered a notice
         of Special Dividend Period to the Auction Agent pursuant to Section
         4(b) of Part I of the Statement with respect to shares of such series,
         such Maximum Rate shall be the Maximum Rate for the Special Dividend
         Period of shares of such series to commence on such Dividend Payment
         Date (except that (1) if such Valuation Date occurs at a time when a
         Failure to Deposit (or, in the case of preferred shares other than
         Preferred Shares, a failure similar to a Failure to Deposit) has
         occurred that has not been cured, the dividend for purposes of
         calculation would accumulate at the current dividend rate then
         applicable to the shares in respect of which such failure has occurred
         and (2) for those days during the period described in this subparagraph
         (C) in respect of which the Applicable Rate in effect immediately prior
         to such Dividend Payment Date will remain in effect (or, in the case of
         preferred shares other than Preferred Shares, in respect of which the
         dividend rate or rates in effect immediately prior to such respective
         dividend payment dates will remain in effect), the dividend for
         purposes of calculation would accumulate at such Applicable Rate (or
         other rate or rates, as the case may be in respect of those days); (D)
         the amount of anticipated expenses of the Trust for the 90 days
         subsequent to such Valuation Date; (E) the amount of any indebtedness
         or obligations of the Trust senior in right of payments to the
         Preferred Shares; and (F) any current liabilities as of such Valuation
         Date to the extent not reflected in any of (i)(A) through (i)(E)
         (including, without limitation, any payables for portfolio securities
         purchased as of such Valuation Date and any liabilities incurred for
         the purpose of clearing securities transactions); less

                (ii) the value (i.e., the face value of cash, short-term
         municipal obligations and short-term securities that are the direct
         obligation of the U.S. government, provided in each case that such
         securities mature on or prior to the date upon which any of (i)(A)
         though (i)(F) became payable, otherwise the S&P Discounted Value) of
         any of the Trust's assets irrevocably deposited by the Trust for the
         payment of any of (i)(A) through (i)(F).

         "Preferred Shares Basic Maintenance Amount Test" means a test which is
met if the lower of the aggregate Discounted Values of the Fitch Eligible Assets
or the S&P Eligible Assets meets or exceeds the Preferred Shares Basic
Maintenance Amount.

         "Preferred Shares Basic Maintenance Certificate" has the meaning set
forth in Section 12(d) of Part I of this Statement.

         "Rating Agency" means Fitch and S&P, as long as such rating agency is
then rating the Preferred Shares and any Other Rating Agency then rating the
Preferred Shares.

         "Redemption Date" has the meaning set forth in Section 2(c)(ii) of Part
II of this Statement.

         "Redemption Default" has the meaning set forth in Section 2(c)(ii) of
Part I of this Statement.

         "Redemption Price" has the meaning set forth in Section 3(a)(i) of Part
I of this Statement.




                                      A-31



<PAGE>




          "Reference Rate" means, with respect to the determination of the
Default Rate, the applicable LIBOR Rate (for a Dividend Period of fewer than 365
days) or the applicable Treasury Index Rate (for a Dividend Period of 365 days
or more).

         "Registrar" means The Bank of New York, unless and until another entity
appointed by a resolution of the Board of Trustees enters into an agreement with
the Trust to serve as transfer agent.

         "S&P" means Standard & Poor's, a division of The McGraw-Hill Companies,
Inc., or its successors at law.

         "S&P Discount Factor" means:

<TABLE>
<CAPTION>



                                                                             DISCOUNT
                                                                            FACTOR FOR
                  TYPE OF S&P ELIGIBLE ASSET                                AAA RATING
<S>                                                                        <C>
Fixed rate Preferred stock.............................................      228.10%
Adjustable rate Preferred stock........................................      198.29%
Taxable Preferred stock (Non-DRD)......................................      154.66%
Convertible securities `AAA'...........................................      148.25%
Convertible securities `AA'............................................      154.97%
Convertible securities `A'.............................................      161.70%
Convertible securities `BBB'...........................................      168.42%
Convertible securities `BB'............................................      175.15%
Convertible securities `B'.............................................      181.87%
Convertible securities `CCC'...........................................      188.60%
Treasury 1-year........................................................      101.99%
Treasury 2-year........................................................      103.77%
Treasury 5-year........................................................      109.09%
Treasury 10-year.......................................................      115.14%
Treasury 30-year.......................................................      126.33%
U.S. Agency Debt Securities............................................      120.48%
U.S. Agency Mortgage Securities 15-year................................      128.80%
U.S. Agency Mortgage Securities 30-year................................      131.20%
U.S. Agency Mortgage Securities 1/1 ARMS...............................      121.70%
U.S. Agency Mortgage Securities 3/1 ARMS...............................      122.10%
U.S. Agency Mortgage Securities 5/1 ARMS...............................      122.50%
U.S. Agency Mortgage Securities 10/1 ARMS..............................      122.70%
Corporate Bonds Rated AAA..............................................      110.01%
Corporate Bonds Rated AA...............................................      113.28%
Corporate Bonds Rated A................................................      116.85%
Corporate Bonds Rated BBB..............................................      121.82%
Corporate Bonds Rated BB...............................................      135.32%
Corporate Bonds Rated B................................................      168.76%
Corporate Bonds Rated CCC..............................................      252.03%
Corporate Bonds Rated CCC-.............................................      350.00%
Bank Loan Performing, greater than $.90................................      117.79%
Bank Loan Performing, between $.85 and $.90............................      125.47%
Bank Loan Non-performing, greater than $.85............................      154.08%
Bank Loan Non-performing, less than or equal to $.85...................      178.25%
Auto Loans (fixed or floating) WAL less than 5-years...................      130.00%
Auto Loans (fixed or floating) WAL between 5 and 10-years..............      140.00%
Credit Card Loans (fixed) WAL less than 5-years........................      130.00%
Credit Card Loans (fixed) WAL between 5 and 10-years...................      140.00%
Credit Card Loans (floating)...........................................      112.70%
REIT Common Stock......................................................      148.79%


</TABLE>


                                      A-32


<PAGE>

<TABLE>
<CAPTION>

                                                                             DISCOUNT
                                                                            FACTOR FOR
                  TYPE OF S&P ELIGIBLE ASSET                                AAA RATING
<S>                                                                         <C>
Standard & Poor's 500 Index (including ADRs)...........................      168.46%
Master Limited Partnerships............................................      625.00%
</TABLE>


         Notwithstanding the foregoing, the S&P Discount Factor for short-term
Municipal Obligations will be 115% so long as such Municipal Obligations are
rated A-1 + or SP-1 + by S&P and mature or have a demand feature exercisable
within 30 days or less, or 123% so long as such Municipal Obligations are rated
A-1 or SP-1 by S&P and mature or have a demand feature exercisable in 30 days or
less, or 125% if such Municipal Obligations are not rated by S&P but are rated
equivalent to A-1+ or SP-1+ by another nationally recognized statistical rating
organization, on a case by case basis; provided, however, that any such non-S&P
rated short-term Municipal Obligations which have demand features exercisable
within 30 days or less must be backed by a letter of credit, liquidity facility
or guarantee from a bank or other financial institution with a short-term rating
of at least A-l+ from S&P ; and further provided that such non-S&P rated
short-term Municipal Obligations may comprise no more than 50% of short-term
Municipal Obligations that qualify as S&P Eligible Assets; provided, however,
that Municipal Obligations not rated by S&P but rated equivalent to BBB or lower
by another nationally recognized statistical rating organization, rated BB+ or
lower by S&P or non-rated (such Municipal Obligations are hereinafter referred
to as "High Yield Securities") may comprise no more than 20% of the short-term
Municipal Obligations that qualify as S&P Eligible Assets; (ii) the S&P Discount
Factor for Receivables for Municipal Obligations Sold that are due in more than
five Business Days from such Valuation Date will be the S&P Discount Factor
applicable to the Municipal Obligations sold; (iii) no S&P Discount Factor will
be applied to cash or to Receivables for Municipal Obligations Sold if such
receivables are due within five Business Days of such Valuation Date; and (iv)
except as set forth in clause (i) above, in the case of any Municipal Obligation
that is not rated by S&P but qualifies as an S&P Eligible Asset pursuant to
clause (iii) of that definition, such Municipal Obligation will be deemed to
have an S&P rating one full rating category lower than the S&P rating category
that is the equivalent of the rating category in which such Municipal Obligation
is placed by a nationally recognized statistical rating organization.
"Receivables for Municipal Obligations Sold," for purposes of calculating S&P
Eligible Assets as of any Valuation Date, means the book value of receivables
for Municipal Obligations sold as of or prior to such Valuation Date. The Trust
may adopt S&P Discount Factors for Municipal Obligations other than Municipal
Obligations provided that S&P advises the Trust in writing that such action will
not adversely affect its then current rating on the Preferred Shares. For
purposes of the foregoing, Anticipation Notes rated SP-1+ or, if not rated by
S&P, equivalent to A-l+ or SP-1+ by another nationally recognized statistical
rating organization, on a case by case basis, which do not mature or have a
demand feature at par exercisable in 30 days and which do not have a long-term
rating, shall be considered to be short-term Municipal Obligations.

         The S&P Discount Factor applied to cash, cash equivalents and demand
deposits in an "A-l+" rated institution will be 100%. "A-1+" rated commercial
paper, with maturities no greater then 30 calendar days and held instead of cash
until maturity is valued at 100%. Securities with next-day maturities invested
in "A-1+" rated institutions are considered cash equivalents and are valued at
100%. Securities maturing in 181 to 360 calendar days are valued at 114.2%.

         The S&P Discount Factor for shares of unrated affiliated Money Market
Funds used as "sweep" vehicles will be 110%. Money Market Funds rated "AAAm"
will be discounted at the appropriate level as dictated by the exposure period.
No S&P Discount Factor will be applied to Money Market Funds rated AAAm by S&P
with effective next day maturities.



                                      A-33


<PAGE>




         Receivables due within five business days of a valuation will be
treated as cash and are valued at 100%.

         Receivables that are due in more than five business days of a Valuation
Date qualify as an S&P Eligible Asset at a value no greater than the settlement
price discounted at the applicable credit rating and/or exposure period discount
factor.

         For purposes of determining the discount factors applicable to
collateral not rated by S&P, the collateral will carry an S&P rating one full
rating category lower than the equivalent S&P rating.

         "S&P Eligible Asset" means:

                           (i)      Deposit Securities;

                           (ii)     U.S. Government Obligations and U.S.
         Government Agencies;

                           (iii) Corporate Indebtedness. Evidences of
         indebtedness other than Deposit Securities, U.S. Government Obligations
         and Municipal Obligations that are not convertible into or exchangeable
         or exercisable for stock of a corporation (except to the extent of ten
         percent (10%) in the case of a share exchange or tender offer) ("Other
         Debt") and that satisfy all of the following conditions:

                                    (A)     no more than 10% of the Other Debt
                  may be unrated;

                                    (B)     the remaining term to maturity of
                  such Other Debt shall not exceed thirty (30) years;

                                    (C)     and such Other Debt must provide for
                  periodic interest payments in cash over the life of the
                  security;

                                    (D) the issuer of such evidences of
                  indebtedness files periodic financial statements with the
                  Commission; provided, however, non-rated evidences of such
                  indebtedness or issuers of Other Debt may not constitute more
                  than 10% of the Trust's Other Debt;

                           (iv)     Convertible Corporate Indebtedness.
         Evidences of indebtedness other than Deposit Securities, U.S.
         Government Obligations and Municipal Obligations that are convertible
         into or exchangeable or exercisable for stock of a corporation and that
         satisfy all of the following conditions:

                                    (A)     such evidence of indebtedness is
                  rated at least CCC by S&P ; and

                                    (B) if such evidence of indebtedness is
                  rated BBB or lower by S&P, the market capitalization of the
                  issuer of such evidence of indebtedness is at least $100
                  million;

                           (v)      Agency Mortgage Collateral. Certificates
         guaranteed by U.S. Government Agencies (as defined below) (e.g., FNMA,
         GNMA and FHLMC) for timely payment of interest and full and ultimate
         payment of principal. Agency Mortgage Collateral also evidence
         undivided interests in pools of level-payment, fixed, variable, or
         adjustable rate, fully amortizing loans that are secured by first liens
         on one- to four-family residences residential properties (or in


                                      A-34


<PAGE>




         the case of Plan B FHLMC certificates, five or more units primarily
         designed for residential use) ("Agency Mortgage Collateral"). Agency
         Mortgage Collateral the following conditions apply:

                                    (A) For GNMA certificates backed by pools of
                  graduated payment mortgages, levels are 20 points above
                  established levels;

                                    (B) Qualifying "large pool" FNMA
                  mortgage-backed securities and FHLMC participation
                  certificates are acceptable as eligible collateral. The
                  eligible fixed-rate programs include FNMA MegaPools, FNMA
                  Majors, FHLMC Multilender Swaps, and FHLMC Giant certificates.
                  Eligible adjustable rate mortgage ("ARMs") programs include
                  nonconvertible FNMA ARM MegaPools and FHLMC weighted average
                  coupon ARM certificates. Eligible FHLMC Giant programs exclude
                  interest-only and principal only stripped securities;

                                    (C) FNMA certificates backed by multifamily
                  ARMs pegged to the 11th District Cost of Funds Index are
                  acceptable as eligible collateral at 5 points above
                  established levels; and

                                    (D) Multiclass REMICs issued by FNMA and
                  FHLMC are acceptable as eligible collateral at the collateral
                  levels established for CMOs.

                           (vi) Mortgage Pass-Through Certificates. Publicly
         issued instruments maintaining at least a AA- ratings by S&P.
         Certificates evidence proportional, undivided interests in pools of
         whole residential mortgage loans. Pass-through certificates backed by
         pools of convertible ARMs are acceptable as eligible collateral at 5
         points above the levels established for pass-through certificates
         backed by fixed or non-convertible ARM pools.

                           (vii)    Mortgage-backed Securities.

                                    (A) Mortgage Pass-through Certificates are
                  publicly issued instruments rated at least `AA-' by S&P.
                  Pass-throughs backed by pools of convertible adjustable-rate
                  mortgages (ARMs) are discounted at an additional five
                  percentage points above the levels established for
                  pass-throughs backed by fixed or nonconventional ARM pools.

                                    (B) Fixed-Rate and Adjustable-rate mortgage
                  collateral (conventional/FHA/VA and Whole Loans) Pool must
                  consist of at least 100 loans each secured by single-family,
                  one-unit, detached primary residence. 25% of the total pool
                  may have an LTV greater than 80% but less than or equal to
                  90%. 10% may have an original LTV of no greater than 95%.
                  Loans with LTV greater than 80% must have a `AA' rated primary
                  mortgage insurance. 25% may have balances between $400,000 and
                  $600,000, provided the maximum size of any loan is appropriate
                  with respect to the market area of the originator. 10% of the
                  pool may represent condominiums that are four stories or less.
                  High LTVs, high loan balance, and condominiums, in aggregate,
                  should not exceed 35% of the pool.

                                    (C) FHAA-Insured Multifamily Loans must
                  have a minimum principal balance of $100,000 and have at least
                  a one-year remaining maturity. The aggregate market value of
                  any one loan may not exceed 5% of the aggregate market value
                  of the portfolio. Such loans should be initially included in
                  minimum blocks of $5 million. Project loans must have at least
                  a 90% occupancy rate at the time the loan is


                                      A-35



<PAGE>




                  pledged. After 90 days defaulted mortgage loans must be valued
                  at zero. A loan in default should be liquidated or substituted
                  within a 90-day period.

                                    (D) Collateralized Mortgage Obligations
                  tranches are publicly issued instruments rated `AAA' by S&P.
                  No more than 25% of the total market value of collateral may
                  be from one private sector issuer.

                           (viii)   Rule 144A Securities;

                           (ix) Senior Loans, provided, however, that the
         initial issue amount (facility size) is at least $100 million. The
         minimum accepted holding size (notional amount) of any given loan not
         rated by S&P, Fitch or other nationally recognized rating agency is at
         least $1 million, provided, that participation loans are limited to not
         more than 10% of the aggregate value of the S&P Eligible Asset. For
         loans rated by S&P, Fitch or other nationally recognized rating agency,
         there is no minimum accepted holding size. Senior Loan Participations
         and non-Senior Loans will qualify as S&P Eligible Assets only up to an
         aggregate maximum of 15% of the Trust's total assets. These levels
         apply to U.S. lenders only; any international loans are excluded.

                           (x)      Preferred stocks that satisfy all of the
following conditions:

                                    (A) The preferred stock issue has a senior
                  rating from S&P, or the preferred issue must be rated. In the
                  case of Yankee preferred stock, the issuer should have an S&P
                  senior rating of at least `BBB-, or the preferred issue must
                  be rated at least BBB-.

                                    (B) The issuer -- or if the issuer is a
                  special purpose corporation, its parent -- is listed on either
                  the New York Stock Exchange, the American Stock Exchange or
                  NASDAQ if the traded par amount is less than $1,000. If the
                  traded par amount is $1,000 or more exchange listing is not
                  required.

                                    (C)     The collateral pays cash dividends
                  denominated in U.S. dollars.

                                    (D) Private placements under Rule 144A with
                  registration rights are eligible assets.

                                    (E) The minimum market capitalization of
                  eligible issuers is $100 million.

                           Restrictions for floating-rate preferred stock:

                                    (F) Holdings must be limited to preferred
                  stock with a dividend period of less than or equal to 49 days,
                  except for a new issue, where the first dividend period may be
                  up to 64 days.

                                    (G) The floating-rate preferred stock may
                  not have been subject to a failed auction.

                           Restrictions for adjustable -- or auction-rate
                  preferred stock:

                                    (H) The total fair market value of
                  adjustable-rate preferred stock held in the portfolio may not
                  exceed 10% of eligible assets.



                                      A-36



<PAGE>




                           Concentration Limits:

                                    (I) Total issuer exposure in preferred stock
                  of any one issuer is limited to 10% of the fair market value
                  of eligible assets.

                                    (J) Preferred stock rated below B-
                  (including non-rated preferred stock) are limited to no more
                  than 15% of the fair market value of the eligible assets.

                                    (K) Add 5 points to over-collateralization
                  level for issuers with a senior rating or preferred stock
                  rating of less than BBB-.

                                    (L) Add 10 point to over-collateralization
                  level of issuers with no senior rating, preferred stock rating
                  or dividend history.

                           (xi)     Common Stocks.  Common stocks that satisfy
         all of the following conditions:

                                    (A) The issuer can hold no more than the
                  average monthly trading volume over the past year.

                                    (B)     Each stock must have a minimum
                  market capitalization of at least $100 million.

                                    (C) Restricted stocks (144A securities) or
                  any pink sheet stocks (generally, stocks that are not carried
                  in daily over-the-counter newspaper listings) are ineligible.

                                    (D) The issuer may not hold any equity
                  unless it has been listed on an exchange or traded for more
                  than one year and one quarter, or 15 months (eligible stock
                  exchanges are the New York Stock Exchange, American Stock
                  Exchange, Philadelphia Stock Exchange, Boston Stock Exchange,
                  Washington Stock Exchange, Midwest Stock Exchange, Pacific
                  Stock Exchange, NASDAQ, and National Market Quotations).

                                    (E) The collateral is owned by the Trust, or
                  the trustee or collateral agent has a first perfected priority
                  security interest in the collateral. (For S&P's perfection of
                  Security Interest Criteria, see Legal Criteria For Structured
                  Finance Transactions, April 2002).

Note:

         Add 20 percentage points to the overcollateralization level for common
stock that do not meet the requirement of item (D) above.

         Receivables due within five business days of a Valuation Date will be
treated as cash and are valued at 100%.

         Receivables that are due in more than five business days of a Valuation
Date qualify as an S&P Eligible Asset at a value no greater than the settlement
price discounted at the applicable credit rating and/or exposure period discount
factor.



                                      A-37
<PAGE>
                           (xii) Municipal Obligations. A Municipal Obligation
         owned by the Trust that (i) is interest bearing and pays interest at
         least semi-annually; (ii) is payable with respect to principal and
         interest in U.S. Dollars; (iii) has an original issuance size of $10
         million or greater and any securities with an issuance size of under
         $10 million must be rated `AA' or better by S&P; or, if not rated by
         S&P but rated AAA by another nationally recognized statistical rating
         organization, on a case by case basis; (iv) except for Inverse
         Floaters, is not part of a private placement of Municipal Obligations;
         (v) is issued by any of the 50 states of the U.S., its territories, and
         their subdivisions, counties, cities, towns, villages, and school
         districts; by agencies such as authorities and special districts
         created by the states; and by certain federally sponsored agencies such
         as local housing authorities. Payments made on these bonds are exempt
         from federal income taxes and are generally exempt from state and local
         taxes in the state of issuance; and (vi) Fifty percent of the aggregate
         fair market value of the pledged pool may be rated by a nationally
         recognized statistical rating organization other than S&P.
         Notwithstanding the foregoing limitations:

                                    (A) Municipal Obligations (excluding
                  Escrowed Bonds) of any one issuer or guarantor (excluding bond
                  insurers) rated at least "BBB" by S&P or "A" by another NRSRO
                  shall be considered S&P Eligible Assets only to the extent the
                  Market Value of such Municipal Obligations (including
                  short-term Municipal Obligations) does not exceed 10% of the
                  aggregate Market Value of S&P Eligible Assets, provided that
                  either (i) 2% is added to the S&P Discount Factor for every 1%
                  by which the Market Value for any issuer exceeds 5%, up to a
                  maximum of 10% or (ii) 10% is added to the S&P Discount Factor
                  for any issuer that exceeds 5% of the aggregate S&P Eligible
                  Assets. High Yield Securities (as defined below) of any one
                  issuer shall be considered S&P Eligible Assets only to the
                  extent the Market Value of such Municipal Obligations does not
                  exceed 5% of the aggregate Market Value of S&P Eligible
                  Assets;

                                    (B) Municipal Obligations not rated by S&P
                  shall be considered S&P Eligible Assets only to the extent the
                  Market Value of such Municipal Obligations does not exceed 50%
                  of the aggregate Market Value of S&P Eligible Assets;
                  provided, however, that High Yield Securities (as defined
                  below) shall be considered S&P Eligible Assets only to the
                  extent the Market Value of such Municipal Obligations does not
                  exceed 20% of the aggregate Market Value of S&P Eligible
                  Assets; and

                                    (C) Municipal Obligations issued by issuers
                  in any one state or territory will be considered S&P Eligible
                  Assets only to the extent the Market Value of such Municipal
                  Obligations does not exceed 25% of the aggregate Market Value
                  of S&P Eligible Assets; or

                           (xiii) Asset Backed Securities. Receivables-backed
         tranches are publicly issued with a rating of "AA" or higher by S&P,
         tranches are current interest-bearing, fixed- or floating-rate, and are
         backed by automobile loans or credit card (fixed-rate only) receivables
         with an original issuance size of at least $200 million. No more than
         25% of the total market value of the collateral can be from one private
         sector issuer. With respect to floating-rate credit card receivables,
         not more than 25% of the collateral may be from one investment-grade
         private sector issuer. No more than 10% of the market value of the
         collateral may be from one noninvestment-grade private sector issuer.

                  Escrow Bonds may comprise 100% of the Trust's S&P Eligible
         Assets. Bonds that are legally defeased and secured by direct U.S.
         government obligations are not required to meet any minimum issuance
         size requirement. Bonds that are economically defeased or secured by
         other


                                      A-38
<PAGE>
         U.S. agency paper must meet the minimum issuance size requirement for
         the Trust described above. Bonds initially rated or rerated as an
         escrow bond by another NRSRO are limited to 50% of the Trust's S&P
         Eligible Assets, and carry one full rating lower than the equivalent
         S&P rating for purposes of determining the applicable discount factors.
         Bonds economically defeased and either initially rated or rerated by
         S&P or another NRSRO are assigned that same rating level as its debt
         issuer, and will remain in its original industry category.

                  The Trust's portfolio must consist of no less than 20 issues
         representing no less than 10 industries as determined by the S&P Global
         Industry Classification System.

         "S&P Exposure Period" means the sum of (i) that number of days from the
last Valuation Date on which the Trust's Discounted Value of S&P Eligible Assets
were greater than the Preferred Shares Basic Maintenance Amount to the Valuation
Date on which the Trust's Discounted Value of S&P Eligible Assets failed to
exceed the Preferred Shares Basic Maintenance Amount, (ii) the maximum number of
days following a Valuation Date that the Trust has under this Statement to cure
any failure to maintain a Discounted Value of S&P Eligible Assets at least equal
to the Preferred Shares Basic Maintenance Amount, and (iii) the maximum number
of days the Trust has to effect a mandatory redemption under this Statement.

         "S&P Hedging Transactions" means the purchases or sales of futures
contracts based on the Municipal Index or Treasury Bonds, the writings,
purchases or sales of put and call options on such contracts, purchases of
interest rate locks, interest rate caps, interest rate floors, interest rate
collars, and entering into interest rate swaps. For so long as any Preferred
Shares are rated by S&P, the Trust will not purchase or sell futures contracts,
write, purchase or sell options on futures contracts or write put options
(except covered put options) or call options (except covered call options) on
portfolio securities unless it receives written confirmation from S&P that
engaging in such transactions will not impair the ratings then assigned to the
Preferred Shares by S&P except that the Trust may engage in S&P Hedging
Transactions, subject to the following limitations.

                           (i) the Trust will not engage in any S&P Hedging
         Transaction based on the Municipal Index (other than Closing
         Transactions), which would cause the Trust at the time of such
         transaction to own or have sold the least of (A) more than 1,000
         outstanding futures contracts based on the Municipal Index, (B)
         outstanding futures contracts based on the Municipal Index exceeding in
         number 50% of the quotient of the Market Value of the Trust's total
         assets divided by $1,000 or (C) outstanding futures contracts based on
         the Municipal Index exceeding in number 10% of the average number of
         daily traded futures contracts based on the Municipal Index in the 30
         days preceding the time of effecting such transaction as reported by
         The Wall Street Journal;

                           (ii) the Trust will not engage in any S&P Hedging
         Transaction based on Treasury Bonds (other than Closing Transactions)
         which would cause the Trust at the time of such transaction to own or
         have sold the lesser of (A) outstanding futures contracts based on
         Treasury Bonds and on the Municipal Index exceeding in number 50% of
         the quotient of the Market Value of the Trust's total assets divided by
         $100,000 ($200,000 in the case of the two-year United States Treasury
         Note) or (B) outstanding futures contracts based on Treasury Bonds
         exceeding in number 10% of the average number of daily traded futures
         contracts based on Treasury Bonds in the 30 days preceding the time of
         effecting such transaction as reported by The Wall Street Journal;

                           (iii) the Trust will engage in Closing Transactions
         to close out any outstanding futures contract which the Trust owns or
         has sold or any outstanding option thereon








                                      A-39
<PAGE>

         owned by the Trust in the event (A) the Trust does not have S&P
         Eligible Assets with an aggregate Discounted Value equal to or greater
         than the Preferred Shares Basic Maintenance Amount on two consecutive
         Valuation Dates and (B) the Trust is required to pay variation margin
         on the second such Valuation Date;

                           (iv) the Trust will engage in a Closing Transaction
         to close out any outstanding futures contract or option thereon in the
         month prior to the delivery month under the terms of such futures
         contract or option thereon unless the Trust holds the securities
         deliverable under such terms; and

                           (v) when the Trust writes a futures contract or
         option thereon, it will either (A) maintain an amount of cash, cash
         equivalents or high grade (rated A or better by S&P), fixed-income
         securities in a segregated account with the Trust's custodian, so that
         the amount so segregated plus the amount of initial margin and
         variation margin held in the account of or on behalf of the Trust's
         broker with respect to such futures contract or option equals the
         Market Value of the futures contract or option, or, (B) in the event
         the Trust writes a futures contract or option thereon which requires
         delivery of an underlying security, hold such underlying security in
         its portfolio.

                  For purposes of determining whether the Trust has S&P Eligible
         Assets with a Discounted Value that equals or exceeds the Preferred
         Shares Basic Maintenance Amount, the Discounted Value of cash or
         securities held for the payment of initial margin or variation margin
         shall be zero and the aggregate Discounted Value of S&P Eligible Assets
         shall be reduced by an amount equal to (i) 30% of the aggregate
         settlement value, as marked-to-market, of any outstanding futures
         contracts based on the Municipal Index which are owned by the Trust,
         plus (ii) 25% of the aggregate settlement value, as marked to market,
         of any outstanding futures contracts based on Treasury Bonds which
         contracts are owned by the Trust.

                  The Trust will only enter into interest rate swaps subject to
         the following conditions:

                                    (A) The counterparty to the swap transaction
                  has a short-term rating of "A-l," "A-" or equivalent by S&P,
                  or, if the counterparty does not have a short-term rating, the
                  counterparty's senior unsecured long-term debt rating is "A+,"
                  or equivalent by S&P, or higher.

                                    (B) The original aggregate notional amount
                  of the interest rate swap transaction or transactions is not
                  to be greater than the liquidation preference of the Preferred
                  Shares.

                                    (C) The interest rate swap transaction will
                  be marked-to-market weekly by the swap counterparty.

                                    (D) If the Trust fails to maintain an
                  aggregate discounted value at least equal to the Preferred
                  Shares Basic Maintenance Amount on two consecutive valuation
                  dates then the agreement shall terminate immediately.

                                    (E) For the purpose of calculating the
                  Preferred Shares Basic Maintenance Amount: (i) 90% of any
                  positive mark-to-market valuation of the Trust's rights will
                  be S&P Eligible Assets and 100% of any negative mark-to-market
                  valuation of the Trust's rights will be included in the
                  calculation of the basic maintenance amount.





                                      A-40
<PAGE>
                                    (F) The Trust must maintain liquid assets
                  with an aggregate value at least equal to the net amount of
                  the excess, if any, of the Trust's obligations over its
                  entitlement with respect to each swap. For caps/floors, the
                  Trust must maintain liquid assets with an aggregate a value at
                  least equal to the Trust's obligations with respect to such
                  caps or floors.

         "S&P Industry Classifications" means for the purpose of determining S&P
Eligible Assets, each of the following industry classifications (as defined by
the S&P Global Industry Classification System):

Aerospace & Defense                          Industrial Conglomerates
Air Freight and Logistics Airlines           Insurance
Automobiles                                  Internet & Catalog Retail
Automobile Components                        Internet Software & Services
Beverages                                    IT Services
Biotechnology                                Leisure Equipment & Products
Building Products                            Machinery
Cable                                        Marine
Capital Markets                              Media
Computers & Peripherals                      Metals & Mining
Commercial Banks                             Office Electronics
Commercial Services & Supplies               Oil & Gas
Communications Equipment                     Packaging and Containers
Construction & Engineering                   Paper & Forest Products
Consumer Finance                             Personal Products
Containing & Packaging                       Pharmaceuticals
Distributors                                 Real Estate
Diversified Financial Services               Retail
Diversified Telecommunication Services       Road & Rail
Electric Utilities                           Software
Electrical Equipment                         Specialty Retail
Electronic Equipment & Instrument            Semiconducters and Semi Conducter
Energy Equipment & Services                  Equipment
Food & Staples Retailing                     Textiles, Apparel and Luxury Goods
Food Products                                Thrift & Mortgage Finance
Gas Utilities                                Tobacco
Healthcare Equipment & Supplies              Trading Companies & Distributors
Healthcare Providers & Services              Transportation and Infrastructure
Hotels, Restaurants & Leisure                Transportation Utilities
Household Durables                           Water Utilities
Household Products                           Wireless Telecommunication Services

         The Trust will use its discretion in determining which industry
classification is applicable to a particular investment in consultation with its
independent auditors and S&P, to the extent the Trust considers necessary.

         "S&P Loan Category" means the following four categories (and, for
purposes of this categorization, the Market Value of an S&P Eligible Asset
trading at par is equal to $1.00):

                           (i)      "S&P Loan Category A" means Performing
         Senior Loans which have a Market Value greater than $0.90;




                                      A-41
<PAGE>

                           (ii) "S&P Loan Category B" means Performing Senior
         Loans which have a Market Value greater than or equal to $0.85 but
         equal to or less than $0.90;

                           (iii) "S&P Loan Category C" means non-Performing
         Senior Loans which have a Market Value greater than $0.85;

                           (iv) "S&P Loan Category D" means:

                                    (A) Performing Senior Loans which have a
                  Market Value less than $.85; and

                                    (B) Non-Performing Senior Loans which have a
                  Market Value less than or equal to $.85.

                           (v) "Performing" means that no default as to the
         payment of principal or interest has occurred and is continuing.

         "S&P Real Estate Industry/Property Sector Classification" means, for
the purposes of determining S&P Eligible Assets, each of the following industry
classifications (as defined by NAREIT):

Office                                       Shopping Centers Industrial
Regional Malls
Mixed                                        Free Standing
Apartments                                   Home Financing
Manufactured Homes                           Commercial Financing Diversified
Self Storage
Lodging/Resorts                              Specialty
Health Care

         The Trust will use its discretion in determining which NAREIT Industry
Classification is applicable to a particular investment, and, will consult with
the independent auditor and/or S&P, as necessary.

         "Securities Depository" means The Depository Trust Company and its
successors and assigns or any successor securities depository selected by the
Trust that agrees to follow the procedures required to be followed by such
securities depository in connection with the Preferred Shares.

         "Sell Order" has the meaning set forth in Section 2(b) of Part II of
this Statement.

         "Short-Term Money Market Instrument" means the following types of
instruments if, on the date of purchase or other acquisition thereof by the
Trust, the remaining term to maturity thereof is not in excess of 180 days:

                           (i) commercial paper rated A-1 if such commercial
         paper matures in 30 days or A-1+ if such commercial paper matures in
         over 30 days;

                           (ii) demand or time deposits in, and banker's
         acceptances and certificates of deposit of (A) a depository institution
         or trust company incorporated under the laws of the United States of
         America or any state thereof or the District of Columbia or (B) a
         United States branch office or agency of a foreign depository
         institution (provided that such branch office or agency is subject to
         banking regulation under the laws of the United States, any state
         thereof or the District of Columbia);




                                      A-42
<PAGE>
                           (iii)  overnight funds; and

                           (iv)   U.S. Government Securities.

         "Special Dividend Period" means a Dividend Period that is not a
Standard Dividend Period.

         "Specific Redemption Provisions" means, with respect to any Special
Dividend Period of more than one year, either, or any combination of (i) a
period (a "Non-Call Period") determined by the Board of Trustees after
consultation with the Broker-Dealers, during which the shares subject to such
Special Dividend Period are not subject to redemption at the option of the
Trust, and (ii) a period (a "Premium Call Period"), consisting of a number of
whole years, as determined by the Board of Trustees after consultation with the
Broker-Dealers, during each year of which the shares subject to such Special
Dividend Period will be redeemable at the Trust's option at a price per share
equal to the Liquidation Preference plus accumulated but unpaid dividends
(whether or not earned or declared) plus a premium expressed as a percentage or
percentages of the Liquidation Preference or expressed as a formula using
specified variables as determined by the Board of Trustees after consultation
with the Broker-Dealers.

         "Standard Dividend Period" means a Dividend Period of seven days in the
case of Series M, T, W, TH, and F Preferred Shares and twenty-eight days in the
case of Series A and B Preferred Shares unless such seventh day or twenty-eighth
day is not a Business Day, then the number of days ending on the Business Day
next Business Day following such seventh day or twenty-eighth day.

         "Submission Deadline" means 1:00 p.m., New York City time, on any
Auction Date or such other time on any Auction Date by which Broker-Dealers are
required to submit Orders to the Auction Agent as specified by the Auction Agent
from time to time.

         "Transfer Agent" means The Bank of New York, unless and until another
entity appointed by a resolution of the Board of Trustees enters into an
agreement with the Trust to serve as Transfer Agent.

         "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 Dividend
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 Dividend 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 Trust by at least three
recognized dealers in U.S. Government Securities selected by the Trust.

         "U.S. Government Securities" means direct obligations of the United
States or of its agencies or instrumentalities that are entitled to the full
faith and credit of the United States and that, other than United States
Treasury Bills, provide for the periodic payment of interest and the full
payment of principal at maturity or call for redemption.

         "Valuation Date" means the last Business Day of each week, or such
other date as to which the Trust and Rating Agencies may agree for purposes of
determining the Preferred Shares Basic Maintenance Amount.

         "Voting Period" has the meaning set forth in Section 6(b) of Part I of
this Statement.






                                      A-43
<PAGE>
         "Winning Bid Rate" has the meaning set forth in Section 4(a)(iii) of
Part II of this Statement.

         18. Interpretation. References to sections, subsections, clauses,
sub-clauses, paragraphs and subparagraphs are to such sections, subsections,
clauses, sub-clauses, paragraphs and subparagraphs contained in this Part I or
Part II hereof, as the case may be, unless specifically identified otherwise.











                                      A-44
<PAGE>
                           PART II: AUCTION PROCEDURES

         1. Certain Definitions. As used in Part II of this Statement, the
following terms shall have the following meanings, unless the context otherwise
requires and all section references below are to Part II of this Statement
except as otherwise indicated. Capitalized terms not defined in Section 1 of
Part II of this Statement shall have the respective meanings specified in Part I
of this Statement.

         "Agent Member" means a member of or participant in the Securities
Depository that will act on behalf of existing or potential holders of Preferred
Shares.

         "Available Preferred Shares" has the meaning set forth in Section
4(a)(i) of Part II of this Statement.

         "Existing Holder" with respect to shares of a series of Preferred
Shares means a Broker-Dealer (or any such other Person as may be permitted by
the Trust) that is listed on the records of the Auction Agent as a holder of
such series.

         "Hold Order" has the meaning set forth in Section 2(a) of Part II of
this Statement.

         "Order" has the meaning set forth in Section 2(a) of Part II of this
Statement.

         "Potential Beneficial Holder" or "Potential Beneficial Owner" means (a)
any Existing Holder who may be interested in acquiring additional Preferred
Shares, or (b) any other person who may be interested in acquiring Preferred
Shares or whose shares will be listed under such person's Broker-Dealer's name
on the records of the Auction Agent.

         "Sell Order" has the meaning set forth in Section 2(a) of Part II of
this Statement.

         "Submitted Bid Order" has the meaning set forth in Section 4(a) of Part
II of this Statement.

         "Submitted Hold Order" has the meaning set forth in Section 4(a) of
Part II of this Statement.

         "Submitted Order" has the meaning set forth in Section 4(a) of Part II
of this Statement.

         "Submitted Sell Order" has the meaning set forth in Section 4(a) of
Part II of this Statement.

         "Sufficient Clearing Orders" means that all Preferred Shares are the
subject of Submitted Hold Orders or that the number of Preferred Shares that are
the subject of Submitted Buy Orders by Potential Holders specifying one or more
rates equal to or less than the Maximum Rate exceeds or equals the sum of (A)
the number of Preferred Shares that are subject of Submitted Hold/Sell Orders by
Existing Holders specifying one or more rates higher than the Maximum Rate and
(B) the number of Preferred Shares that are subject to Submitted Sell Orders.

         "Winning Bid Rate" means the lowest rate specified in the Submitted
Orders which, if (A) each Submitted Hold/Sell Order from Existing Holders
specifying such lowest rate and all other Submitted Hold/Sell Orders from
Existing Holders specifying lower rates were accepted and (B) each Submitted Buy
Order from Potential Holders specifying such lowest rate and all other Submitted
Buy Orders from Potential Holders specifying lower rates were accepted, would
result in the Existing Holders described in clause (A) above continuing to hold
an aggregate number of Preferred Shares which, when added to the number of
Preferred Shares to be purchased by the Potential Holders described in clause
(B) above and the number of Preferred Shares subject to Submitted Hold Orders,
would be equal to the number of Preferred Shares.





                                      A-45
<PAGE>
         2.       Orders.

                  (a) On or prior to the Submission Deadline on each Auction
Date for shares of a Series of Preferred Shares:

                           (i) each Beneficial Owner of shares of such Series
         may submit to its Broker-Dealer by telephone or otherwise information
         as to:

                                    (A) the number of Outstanding shares, if
                  any, of such Series held by such Beneficial Owner which such
                  Beneficial Owner desires to continue to hold without regard to
                  the Applicable Rate for shares of such Series for the next
                  succeeding Dividend Period of such shares;

                                    (B) the number of Outstanding shares, if
                  any, of such Series held by such Beneficial Owner which such
                  Beneficial Owner offers to sell if the Applicable Rate for
                  shares of such Series for the next succeeding Dividend Period
                  of shares of such Series shall be less than the rate per annum
                  specified by such Beneficial Owner; and/or

                                    (C) the number of Outstanding shares, if
                  any, of such Series held by such Beneficial Owner which such
                  Beneficial Owner offers to sell without regard to the
                  Applicable Rate for shares of such Series for the next
                  succeeding Dividend Period of shares of such series; and

                           (ii) each Broker-Dealer, using lists of Potential
         Beneficial Owners, shall in good faith for the purpose of conducting a
         competitive Auction in a commercially reasonable manner, contact
         Potential Beneficial Owners (by telephone or otherwise), including
         Persons that are not Beneficial Owners, on such lists to determine the
         number of shares, if any, of such Series which each such Potential
         Beneficial Owner offers to purchase if the Applicable Rate for shares
         of such Series for the next succeeding Dividend Period of shares of
         such Series shall not be less than the rate per annum specified by such
         Potential Beneficial Owner.

For the purposes hereof, the communication by a Beneficial Owner or Potential
Beneficial Owner to a Broker-Dealer, or by a Broker-Dealer to the Auction Agent,
of information referred to in clause (i)(A), (i)(B), (i)(C) or (ii) of this
paragraph (a) is hereinafter referred to as an "Order" and collectively as
"Orders" and each Beneficial Owner and each Potential Beneficial Owner placing
an Order with a Broker-Dealer, and such Broker-Dealer placing an Order with the
Auction Agent, is hereinafter referred to as a "Bidder" and collectively as
"Bidders"; an Order containing the information referred to in clause (i)(A) of
this paragraph (a) is hereinafter referred to as a "Hold Order" and collectively
as "Hold Orders"; an Order containing the information referred to in clause
(i)(B) or (ii) of this paragraph (a) is hereinafter referred to as a "Bid" and
collectively as "Bids"; and an Order containing the information referred to in
clause (i)(C) of this paragraph (a) is hereinafter referred to as a "Sell Order"
and collectively as "Sell Orders."

                  (b) (i) A Bid by a Beneficial Owner or an Existing Holder of
shares of a Series of Preferred Shares subject to an Auction on any Auction Date
shall constitute an irrevocable offer to sell:

                                    (A) the number of Outstanding shares of such
                  Series specified in such Bid if the Applicable Rate for shares
                  of such Series determined on such Auction Date shall be less
                  than the rate specified therein;





                                      A-46
<PAGE>
                                    (B) such number or a lesser number of
                  Outstanding shares of such Series to be determined as set
                  forth in clause (iv) of paragraph (a) of Section 5 of this
                  Part II if the Applicable Rate for shares of such Series
                  determined on such Auction Date shall be equal to the rate
                  specified therein; or

                                    (C) the number of Outstanding shares of such
                  Series specified in such Bid if the rate specified therein
                  shall be higher than the Maximum Rate for shares of such
                  series, or such number or a lesser number of Outstanding
                  shares of such Series to be determined as set forth in clause
                  (iii) of paragraph (b) of Section 5 of this Part II if the
                  rate specified therein shall be higher than the Maximum Rate
                  for shares of such Series and Sufficient Clearing Bids for
                  shares of such Series do not exist.

                           (ii) A Sell Order by a Beneficial Owner or an
         Existing Holder of shares of a Series of Preferred Shares subject to an
         Auction on any Auction Date shall constitute an irrevocable offer to
         sell:

                                    (A) the number of Outstanding shares of such
                  Series specified in such Sell Order; or

                                    (B) such number or a lesser number of
                  Outstanding shares of such series as set forth in clause (iii)
                  of paragraph (b) of Section 5 of this Part II if Sufficient
                  Clearing Bids for shares of such Series do not exist;

         provided, however, that a Broker-Dealer that is an Existing Holder with
         respect to shares of a Series of Preferred Shares shall not be liable
         to any Person for failing to sell such shares pursuant to a Sell Order
         described in the proviso to paragraph (c) of Section 3 of this Part II
         if (1) such shares were transferred by the Beneficial Owner thereof
         without compliance by such Beneficial Owner or its transferee
         Broker-Dealer (or other transferee person, if permitted by the Trust)
         with the provisions of Section 6 of this Part II or (2) such
         Broker-Dealer has informed the Auction Agent pursuant to the terms of
         its Broker-Dealer Agreement that, according to such Broker-Dealer's
         records, such Broker-Dealer believes it is not the Existing Holder of
         such shares.

                           (iii) A Bid by a Potential Holder of shares of a
         Series of Preferred Shares subject to an Auction on any Auction Date
         shall constitute an irrevocable offer to purchase:

                                    (A) the number of Outstanding shares of such
                  Series specified in such Bid if the Applicable Rate for shares
                  of such Series determined on such Auction Date shall be higher
                  than the rate specified therein; or (B) such number or a
                  lesser number of Outstanding shares of such Series as set
                  forth in clause (v) of paragraph (a) of Section 5 of this Part
                  II if the Applicable Rate for shares of such Series determined
                  on such Auction Date shall be equal to the rate specified
                  therein.

                  (c) No Order for any number of Preferred Shares other than
whole shares shall be valid.

         3.       Submission of Orders by Broker-Dealers to Auction Agent.

                  (a) Each Broker-Dealer shall submit in writing to the Auction
Agent prior to the Submission Deadline on each Auction Date all Orders for
Preferred Shares of a Series subject to an Auction on such Auction Date obtained
by such Broker-Dealer, designating itself (unless otherwise permitted by the
Trust) as an Existing Holder in respect of shares subject to Orders submitted or
deemed





                                      A-47
<PAGE>
submitted to it by Beneficial Owners and as a Potential Holder in respect of
shares subject to Orders submitted to it by Potential Beneficial Owners, and
shall specify with respect to each Order for such shares:

                           (i) the name of the Bidder placing such Order (which
         shall be the Broker-Dealer unless otherwise permitted by the Trust);

                           (ii) the aggregate number of shares of such Series
         that are the subject of such Order;

                           (iii) to the extent that such Bidder is an Existing
         Holder of shares of such series:

                                    (A) the number of shares, if any, of such
                  Series subject to any Hold Order of such Existing Holder;

                                    (B) the number of shares, if any, of such
                  Series subject to any Bid of such Existing Holder and the rate
                  specified in such Bid; and

                                    (C) the number of shares, if any, of such
                  Series subject to any Sell Order of such Existing Holder; and

                                    (D) to the extent such Bidder is a Potential
                  Holder of shares of such series, the rate and number of shares
                  of such Series specified in such Potential Holder's Bid.

                  (b) If any rate specified in any Bid contains more than three
figures to the right of the decimal point, the Auction Agent shall round such
rate up to the next highest one thousandth (.001) of 1%.

                  (c) If an Order or Orders covering all of the Outstanding
Preferred Shares of a Series held by any Existing Holder is not submitted to the
Auction Agent prior to the Submission Deadline, the Auction Agent shall deem a
Hold Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such Series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent; provided,
however, that if an Order or Orders covering all of the Outstanding shares of
such Series held by any Existing Holder is not submitted to the Auction Agent
prior to the Submission Deadline for an Auction relating to a Special Dividend
Period consisting of more than 91 Dividend Period days, the Auction Agent shall
deem a Sell Order to have been submitted by or on behalf of such Existing Holder
covering the number of Outstanding shares of such Series held by such Existing
Holder and not subject to Orders submitted to the Auction Agent.

                  (d) If one or more Orders of an Existing Holder is submitted
to the Auction Agent covering in the aggregate more than the number of
Outstanding Preferred Shares of a Series subject to an Auction held by such
Existing Holder, such Orders shall be considered valid in the following order of
priority:

                           (i) all Hold Orders for shares of such Series shall
         be considered valid, but only up to and including in the aggregate the
         number of Outstanding shares of such Series held by such Existing
         Holder, and if the number of shares of such Series subject to such Hold
         Orders exceeds the number of Outstanding shares of such Series held by
         such Existing Holder, the






                                      A-48
<PAGE>

         number of shares subject to each such Hold Order shall be reduced pro
         rata to cover the number of Outstanding shares of such Series held by
         such Existing Holder;

                              (ii) (A) any Bid for shares of such Series shall
         be considered valid up to and including the excess of the number of
         Outstanding shares of such Series held by such Existing Holder over the
         number of shares of such series subject to any Hold Orders referred to
         in clause (i) above;

                                    (B) subject to subclause (A), if more than
                  one Bid of an Existing Holder for shares of such Series is
                  submitted to the Auction Agent with the same rate and the
                  number of Outstanding shares of such Series subject to such
                  Bids is greater than such excess, such Bids shall be
                  considered valid up to and including the amount of such
                  excess, and the number of shares of such Series subject to
                  each Bid with the same rate shall be reduced pro rata to cover
                  the number of shares of such Series equal to such excess;

                                    (C) subject to subclauses (A) and (B), if
                  more than one Bid of an Existing Holder for shares of such
                  Series is submitted to the Auction Agent with different rates,
                  such Bids shall be considered valid in the ascending order of
                  their respective rates up to and including the amount of such
                  excess; and

                                    (D) in any such event, the number, if any,
                  of such Outstanding shares of such Series subject to any
                  portion of Bids considered not valid in whole or in part under
                  this clause (ii) shall be treated as the subject of a Bid for
                  shares of such Series by or on behalf of a Potential Holder at
                  the rate therein specified; and

                           (iii) all Sell Orders for shares of such Series shall
         be considered valid up to and including the excess of the number of
         Outstanding shares of such Series held by such Existing Holder over the
         sum of shares of such Series subject to valid Hold Orders referred to
         in clause (i) above and valid Bids referred to in clause (ii) above.

                  (e) If more than one Bid for one or more shares of a Series of
Preferred Shares is submitted to the Auction Agent by or on behalf of any
Potential Holder, each such Bid submitted shall be a separate Bid with the rate
and number of shares therein specified.

                  (f) Any Order submitted by a Beneficial Owner or a Potential
Beneficial Owner to its Broker-Dealer, or by a Broker-Dealer to the Auction
Agent, prior to the Submission Deadline on any Auction Date, shall be
irrevocable.

         4.       Determination of Sufficient Clearing Bids, Winning Bid Rate
and Applicable Rate.

                  (a) Not earlier than the Submission Deadline on each Auction
Date for shares of a Series of Preferred Shares, the Auction Agent shall
assemble all valid Orders submitted or deemed submitted to it by the
Broker-Dealers in respect of shares of such Series (each such Order as submitted
or deemed submitted by a Broker-Dealer being hereinafter referred to
individually as a "Submitted Hold Order," a "Submitted Bid" or a "Submitted Sell
Order," as the case may be, or as a "Submitted Order" and collectively as
"Submitted Hold Orders," "Submitted Bids" or "Submitted Sell Orders," as the
case may be, or as "Submitted Orders") and shall determine for such series:







                                      A-49
<PAGE>
                           (i) the excess of the number of Outstanding shares of
         such Series over the number of Outstanding shares of such Series
         subject to Submitted Hold Orders (such excess being hereinafter
         referred to as the "Available Preferred Shares" of such series);

                           (ii) from the Submitted Orders for shares of such
         Series whether:

                                    (A) the number of Outstanding shares of such
                  Series subject to Submitted Bids of Potential Holders
                  specifying one or more rates equal to or lower than the
                  Maximum Rate (for all Dividend Periods) for shares of such
                  series;

         exceeds or is equal to the sum of

                                    (B) the number of Outstanding shares of such
                  Series subject to Submitted Bids of Existing Holders
                  specifying one or more rates higher than the Maximum Rate (for
                  all Dividend Periods) for shares of such Series; and

                                    (C) the number of Outstanding shares of such
                  Series subject to Submitted Sell Orders

         (in the event such excess or such equality exists (other than because
         the number of shares of such Series in subclauses (B) and (C) above is
         zero because all of the Outstanding shares of such Series are subject
         to Submitted Hold Orders), such Submitted Bids in subclause (A) above
         being hereinafter referred to collectively as "Sufficient Clearing
         Bids" for shares of such series); and

                           (iii) if Sufficient Clearing Bids for shares of such
         Series exist, the lowest rate specified in such Submitted Bids (the
         "Winning Bid Rate" for shares of such series) which if:

                                    (A) (I) each such Submitted Bid of Existing
                  Holders specifying such lowest rate and (II) all other such
                  Submitted Bids of Existing Holders specifying lower rates were
                  rejected, thus entitling such Existing Holders to continue to
                  hold the shares of such Series that are subject to such
                  Submitted Bids; and

                                    (B) (I) each such Submitted Bid of Potential
                  Holders specifying such lowest rate and (II) all other such
                  Submitted Bids of Potential Holders specifying lower rates
                  were accepted;

         would result in such Existing Holders described in subclause (A) above
         continuing to hold an aggregate number of Outstanding shares of such
         Series which, when added to the number of Outstanding shares of such
         Series to be purchased by such Potential Holders described in subclause
         (B) above, would equal not less than the Available Preferred Shares of
         such series.

                  (b) Promptly after the Auction Agent has made the
determinations pursuant to paragraph (a) of this Section 4, the Auction Agent
shall advise the Trust of the Maximum Rate for shares of the Series of Preferred
Shares for which an Auction is being held on the Auction Date and, based on such
determination, the Applicable Rate for shares of such Series for the next
succeeding Dividend Period thereof as follows:

                           (i) if Sufficient Clearing Bids for shares of such
         Series exist, that the Applicable Rate for all shares of such Series
         for the next succeeding Dividend Period thereof shall be equal to the
         Winning Bid Rate for shares of such Series so determined;






                                      A-50
<PAGE>
                           (ii) if Sufficient Clearing Bids for shares of such
         Series do not exist (other than because all of the Outstanding shares
         of such Series are subject to Submitted Hold Orders), that the
         Applicable Rate for all shares of such Series for the next succeeding
         Dividend Period thereof shall be equal to the Maximum Rate for shares
         of such series; or

                           (iii) if all of the Outstanding shares of such Series
         are subject to Submitted Hold Orders, that the Applicable Rate for all
         shares of such Series for the next succeeding Dividend Period thereof
         shall be the All Hold Rate.

         5. Acceptance and Rejection of Submitted Bids and Submitted Sell Orders
and Allocation. Existing Holders shall continue to hold the Preferred Shares
that are subject to Submitted Hold Orders, and, based on the determinations made
pursuant to paragraph (a) of Section 4 of this Part II, the Submitted Bids and
Submitted Sell Orders shall be accepted or rejected by the Auction Agent and the
Auction Agent shall take such other action as set forth below:

                  (a) If Sufficient Clearing Bids for shares of a Series of
Preferred Shares have been made, all Submitted Sell Orders with respect to
shares of such Series shall be accepted and, subject to the provisions of
paragraphs (d) and (e) of this Section 5, Submitted Bids with respect to shares
of such Series shall be accepted or rejected as follows in the following order
of priority and all other Submitted Bids with respect to shares of such Series
shall be rejected:

                           (i) Existing Holders' Submitted Bids for shares of
         such series specifying any rate that is higher than the Winning Bid
         Rate for shares of such Series shall be accepted, thus requiring each
         such Existing Holder to sell the Preferred Shares subject to such
         Submitted Bids;

                           (ii) Existing Holders' Submitted Bids for shares of
         such series specifying any rate that is lower than the Winning Bid Rate
         for shares of such Series shall be rejected, thus entitling each such
         Existing Holder to continue to hold the Preferred Shares subject to
         such Submitted Bids;

                           (iii) Potential Holders' Submitted Bids for shares of
         such series specifying any rate that is lower than the Winning Bid Rate
         for shares of such Series shall be accepted;

                           (iv) each Existing Holder's Submitted Bid for shares
         of such series specifying a rate that is equal to the Winning Bid Rate
         for shares of such Series shall be rejected, thus entitling such
         Existing Holder to continue to hold the Preferred Shares subject to
         such Submitted Bid, unless the number of Outstanding Preferred Shares
         subject to all such Submitted Bids shall be greater than the number of
         Preferred Shares ("remaining shares") in the excess of the Available
         Preferred Shares of such Series over the number of Preferred Shares
         subject to Submitted Bids described in clauses (ii) and (iii) of this
         paragraph (a), in which event such Submitted Bid of such Existing
         Holder shall be rejected in part, and such Existing Holder shall be
         entitled to continue to hold Preferred Shares subject to such Submitted
         Bid, but only in an amount equal to the Preferred Shares of such Series
         obtained by multiplying the number of remaining shares by a fraction,
         the numerator of which shall be the number of Outstanding Preferred
         Shares held by such Existing Holder subject to such Submitted Bid and
         the denominator of which shall be the aggregate number of Outstanding
         Preferred Shares subject to such Submitted Bids made by all such
         Existing Holders that specified a rate equal to the Winning Bid Rate
         for shares of such series; and

                           (v) each Potential Holder's Submitted Bid for shares
         of such series specifying a rate that is equal to the Winning Bid Rate
         for shares of such Series shall be accepted





                                      A-51
<PAGE>


         but only in an amount equal to the number of shares of such Series
         obtained by multiplying the number of shares in the excess of the
         Available Preferred Shares of such Series over the number of Preferred
         Shares subject to Submitted Bids described in clauses (ii) through (iv)
         of this paragraph (a) by a fraction, the numerator of which shall be
         the number of Outstanding Preferred Shares subject to such Submitted
         Bid and the denominator of which shall be the aggregate number of
         Outstanding Preferred Shares subject to such Submitted Bids made by all
         such Potential Holders that specified a rate equal to the Winning Bid
         Rate for shares of such series.

                  (b) If Sufficient Clearing Bids for shares of a Series of
Preferred Shares have not been made (other than because all of the Outstanding
shares of such series are subject to Submitted Hold Orders), subject to the
provisions of paragraph (d) of this Section 5, Submitted Orders for shares of
such series shall be accepted or rejected as follows in the following order of
priority and all other Submitted Bids for shares of such Series shall be
rejected:

                           (i) Existing Holders' Submitted Bids for shares of
         such series specifying any rate that is equal to or lower than the
         Maximum Rate for shares of such Series shall be rejected, thus
         entitling such Existing Holders to continue to hold the Preferred
         Shares subject to such Submitted Bids;

                           (ii) Potential Holders' Submitted Bids for shares of
         such series specifying any rate that is equal to or lower than the
         Maximum Rate for shares of such Series shall be accepted; and

                           (iii) each Existing Holder's Submitted Bid for shares
         of such series specifying any rate that is higher than the Maximum Rate
         for shares of such Series and the Submitted Sell Orders for shares of
         such Series of each Existing Holder shall be accepted, thus entitling
         each Existing Holder that submitted or on whose behalf was submitted
         any such Submitted Bid or Submitted Sell Order to sell the shares of
         such Series subject to such Submitted Bid or Submitted Sell Order, but
         in both cases only in an amount equal to the number of shares of such
         Series obtained by multiplying the number of shares of such Series
         subject to Submitted Bids described in clause (ii) of this paragraph
         (b) by a fraction, the numerator of which shall be the number of
         Outstanding shares of such Series held by such Existing Holder subject
         to such Submitted Bid or Submitted Sell Order and the denominator of
         which shall be the aggregate number of Outstanding shares of such
         Series subject to all such Submitted Bids and Submitted Sell Orders.

                  (c) If all of the Outstanding shares of a Series of Preferred
Shares are subject to Submitted Hold Orders, all Submitted Bids for shares of
such Series shall be rejected.

                  (d) If, as a result of the procedures described in clause (iv)
or (v) of paragraph (a) or clause (iii) of paragraph (b) of this Section 5, any
Existing Holder would be entitled or required to sell, or any Potential Holder
would be entitled or required to purchase, a fraction of a share of a Series of
Preferred Shares on any Auction Date, the Auction Agent shall, in such manner as
it shall determine in its sole discretion, round up or down the number of
Preferred Shares of such Series to be purchased or sold by any Existing Holder
or Potential Holder on such Auction Date as a result of such procedures so that
the number of shares so purchased or sold by each Existing Holder or Potential
Holder on such Auction Date shall be whole shares of a Series of Preferred
Shares.

                  (e) If, as a result of the procedures described in clause (v)
of paragraph (a) of this Section 5 any Potential Holder would be entitled or
required to purchase less than a whole share of a Series of Preferred Shares on
any Auction Date, the Auction Agent shall, in such manner as it shall




                                      A-52
<PAGE>
determine in its sole discretion, allocate Preferred Shares of such Series for
purchase among Potential Holders so that only whole Preferred Shares of such
Series are purchased on such Auction Date as a result of such procedures by any
Potential Holder, even if such allocation results in one or more Potential
Holders not purchasing Preferred Shares of such Series on such Auction Date.

                  (f) Based on the results of each Auction for shares of a
Series of Preferred Shares, the Auction Agent shall determine the aggregate
number of shares of such Series to be purchased and the aggregate number of
shares of such Series to be sold by Potential Holders and Existing Holders and,
with respect to each Potential Holder and Existing Holder, to the extent that
such aggregate number of shares to be purchased and such aggregate number of
shares to be sold differ, determine to which other Potential Holder(s) or
Existing Holder(s) they shall deliver, or from which other Potential Holder(s)
or Existing Holder(s) they shall receive, as the case may be, Preferred Shares
of such series. Notwithstanding any provision of the Auction Procedures or the
Settlement Procedures to the contrary, in the event an Existing Holder or
Beneficial Owner of shares of a Series of Preferred Shares with respect to whom
a Broker-Dealer submitted a Bid to the Auction Agent for such shares that was
accepted in whole or in part, or submitted or is deemed to have submitted a Sell
Order for such shares that was accepted in whole or in part, fails to instruct
its Agent Member to deliver such shares against payment therefor, partial
deliveries of Preferred Shares that have been made in respect of Potential
Holders' or Potential Beneficial Owners' Submitted Bids for shares of such
Series that have been accepted in whole or in part shall constitute good
delivery to such Potential Holders and Potential Beneficial Owners.

                  (g) Neither the Trust nor the Auction Agent nor any affiliate
of either shall have any responsibility or liability with respect to the failure
of an Existing Holder, a Potential Holder, a Beneficial Owner, a Potential
Beneficial Owner or its respective Agent Member to deliver Preferred Shares of
any Series or to pay for Preferred Shares of any Series sold or purchased
pursuant to the Auction Procedures or otherwise.

         6. Transfer of Preferred Shares. Unless otherwise permitted by the
Trust, a Beneficial Owner or an Existing Holder may sell, transfer or otherwise
dispose of Preferred Shares only in whole shares and only pursuant to a Bid or
Sell Order placed with the Auction Agent in accordance with the procedures
described in this Part II or to a Broker-Dealer; provided, however, that (a) a
sale, transfer or other disposition of Preferred Shares from a customer of a
Broker-Dealer who is listed on the records of that Broker-Dealer as the holder
of such shares to that Broker-Dealer or another customer of that Broker-Dealer
shall not be deemed to be a sale, transfer or other disposition for purposes of
this Section 6 if such Broker-Dealer remains the Existing Holder of the shares
so sold, transferred or disposed of immediately after such sale, transfer or
disposition and (b) in the case of all transfers other than pursuant to
Auctions, the Broker-Dealer (or other Person, if permitted by the Trust) to whom
such transfer is made shall advise the Auction Agent of such transfer.

                         [Remainder of page left blank]







                                      A-53
<PAGE>
         IN WITNESS WHEREOF, CALAMOS STRATEGIC TOTAL RETURN FUND has caused
these presents to be signed in its name and on its behalf by its Secretary and
witnessed by its Assistant Secretary as of this ____ day of _________, 2004.

                                          CALAMOS STRATEGIC TOTAL RETURN FUND


                                          By:________________________________
                                               Name:    James S. Hamman, Jr.
                                               Title:   Secretary
WITNESS:


By:__________________________________
     Name:     Ian J. McPheron
     Title:    Assistant Secretary
<PAGE>

                     APPENDIX B -- DESCRIPTION OF RATINGS(1)

MOODY'S PRIME RATING SYSTEM

         Moody's short-term ratings are opinions of the ability of issuers to
honor senior financial obligations and contracts. Such obligations generally
have an original maturity not exceeding one year, unless explicitly noted.

         Moody's employs the following designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

         PRIME-1: Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt obligations. Prime-1
repayment ability will often be evidenced by many of the following
characteristics:

         Leading market positions in well-established industries. High rates of
return on funds employed. Conservative capitalization structure with moderate
reliance on debt and ample asset protection. Broad margins in earnings coverage
of fixed financial charges and high internal cash generation. Well-established
access to a range of financial markets and assured sources of alternate
liquidity.

         PRIME-2: Issuers (or supporting institutions) rated Prime-2 have a
strong ability to repay senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation than is the case for Prime-2 securities. Capitalization
characteristics, while still appropriate, may be more affected by external
conditions. Ample alternate liquidity is maintained.

         PRIME-3: Issuers (or supporting institutions) rated Prime-3 have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt-protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

         NOT PRIME: Issuers rated Not Prime do not fall within any of the Prime
rating categories.

         In addition, in certain countries the prime rating may be modified by
the issuer's or guarantor's senior unsecured long-term debt rating.

MOODY'S DEBT RATINGS

         Aaa: Bonds and preferred stock which are rated Aaa are judged to be of
the best quality. They carry the smallest degree of investment risk and are
generally referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of such
issues.

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

                                      B-1
<PAGE>

         Aa: Bonds and preferred stock which are rated Aa are judged to be of
high quality by all standards. Together with the Aaa group they comprise what
are generally known as high-grade bonds.

         They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risk in Aa-rated securities appear somewhat larger than those
securities rated Aaa.

         A: Bonds and preferred stock which are rated A possess many favorable
investment attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment some time in the future.

         Baa: Bonds and preferred stock which are rated Baa are considered as
medium-grade obligations (i.e., they are neither highly protected nor poorly
secured). Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds lack
outstanding investment characteristics and in fact have speculative
characteristics as well.

         Ba: Bonds and preferred stock which are rated Ba are judged to have
speculative elements; their future cannot be considered as well-assured. Often
the protection of interest and principal payments may be very moderate, and
thereby not well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

         B: Bonds and preferred stock which are rated B generally lack
characteristics of the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over any long period
of time may be small.

         Caa: Bonds and preferred stock which are rated Caa are of poor
standing. Such issues may be in default or there may be present elements of
danger with respect to principal or interest.

         Ca: Bonds and preferred stock which are rated Ca represent obligations
which are speculative in a high degree. Such issues are often in default or have
other marked shortcomings.

         C: Bonds and preferred stock which are rated C are the lowest rated
class of bonds, and issues so rated can be regarded as having extremely poor
prospects of ever attaining any real investment standing.

         Moody's assigns ratings to individual debt securities issued from
medium-term note (MTN) programs, in addition to indicating ratings to MTN
programs themselves. Notes issued under MTN programs with such indicated ratings
are rated at issuance at the rating applicable to all pari passu notes issued
under the same program, at the program's relevant indicated rating, provided
such notes do not exhibit any of the characteristics listed below. For notes
with any of the following characteristics, the rating of the individual note may
differ from the indicated rating of the program:

         1)   Notes containing features which link the cash flow and/or market
              value to the credit performance of any third party or parties.

         2)   Notes allowing for negative coupons, or negative principal.

         3)   Notes containing any provision which could obligate the investor
              to make any additional payments.

                                      B-2
<PAGE>

         Market participants must determine whether any particular note is
rated, and if so, at what rating level.

         Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of that generic rating category.

STANDARD & POOR'S SHORT-TERM ISSUE CREDIT RATINGS

         A-1: A short-term obligation rated A-1 is rated in the highest category
by Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

         A-2: A short-term obligation rated A-2 is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.

         A-3: A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

         B: A short-term obligation rated B is regarded as having significant
speculative characteristics. The obligor currently has the capacity to meet its
financial commitment on the obligation; however, it faces major ongoing
uncertainties which could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.

         C: A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the obligation.

         D: A short-term obligation rated D is in payment default. The D rating
category is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless Standard & Poor's
believes that such payments will be made during such grace period. The D rating
also will be used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.

STANDARD & POOR'S LONG-TERM ISSUE CREDIT RATINGS

         Issue credit ratings are based, in varying degrees, on the following
considerations:

         -    Likelihood of payment-capacity and willingness of the obligor to
              meet its financial commitment on an obligation in accordance with
              the terms of the obligation;

         -    Nature of and provisions of the obligation;

         -    Protection afforded by, and relative position of, the obligation
              in the event of bankruptcy, reorganization, or other arrangement
              under the laws of bankruptcy and other laws affecting creditors'
              rights.

         The issue rating definitions are expressed in terms of default risk. As
such, they pertain to senior obligations of an entity. Junior obligations are
typically rated lower than senior obligations, to reflect the

                                      B-3
<PAGE>

lower priority in bankruptcy, as noted above. (Such differentiation applies when
an entity has both senior and subordinated obligations, secured and unsecured
obligations, or operating company and holding company obligations.) Accordingly,
in the case of junior debt, the rating may not conform exactly with the category
definition.

         AAA: An obligation rated AAA has the highest rating assigned by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is extremely strong.

         AA: An obligation rated AA differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.

         A: An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

         BBB: An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

         Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least degree of
speculation and C the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

         BB: An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial, or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

         B: An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial, or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

         CCC: An obligation rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

         CC: An obligation rated CC is currently highly vulnerable to
nonpayment.

         C: A subordinated debt or preferred stock obligation rated C is
CURRENTLY HIGHLY VULNERABLE to nonpayment. The C rating may be used to cover a
situation where a bankruptcy petition has been filed or similar action taken,
but payments on this obligation are being continued. A C also will be assigned
to a preferred stock issue in arrears on dividends or sinking fund payments, but
that is currently paying.

         D: An obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless Standard & Poor's believes that
such payments will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a similar action
if payments on an obligation are jeopardized.

                                      B-4
<PAGE>

         PLUS (+) OR MINUS (-): The ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.

         r: This symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or volatility of
expected returns which are not addressed in the credit rating.

         N.R.: This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that Standard & Poor's
does not rate a particular obligation as a matter of policy.

LOCAL CURRENCY AND FOREIGN CURRENCY RISKS

         Country risk considerations are a standard part of Standard & Poor's
analysis for credit ratings on any issuer or issue. Currency of repayment is a
key factor in this analysis. An obligor's capacity to repay foreign currency
obligations may be lower than its capacity to repay obligations in its local
currency due to the sovereign government's own relatively lower capacity to
repay external versus domestic debt. These sovereign risk considerations are
incorporated in the debt ratings assigned to specific issues. Foreign currency
issuer ratings are also distinguished from local currency issuer ratings to
identify those instances where sovereign risks make them different for the same
issuer.

                                      B-5
<PAGE>



                           PART C - OTHER INFORMATION

ITEM 24: FINANCIAL STATEMENT AND EXHIBITS

         1.       Financial Statement


         The Registrant's statement of assets and liabilities, dated March 15,
2004, and notes thereto, schedule of investments, statement of operations,
statement of changes in net assets, financial highlights (unaudited) dated April
14, 2004, and report of independent auditors thereon are filed herewith and
appear in the statement of additional information.



         2.       Exhibits:

                  a.1.     Agreement and Declaration of Trust. (*)

                  a.2.     Certificate of Trust. (*)

                  b.       By-laws. (*)

                  c.       None.

                  d.       Form of Share Certificate. (**)

                  e.       Terms and Conditions of the Dividend Reinvestment
                           Plan. (*)

                  f.       None.

                  g.1      Investment Management Agreement with Calamos Asset
                           Management, Inc. (*)

                  h.1.     Form of Underwriting Agreement. (**)

                  h.2.     Form of Master Selected Dealer Agreement. (**)

                  h.3.     Form of Master Agreement Among Underwriters. (**)

                  i.       None.

                  j.1.     Custody Agreement. (*)

                  j.2.     Foreign Custody Manager Agreement. (*)

                  k.1.     Stock Transfer Agency Agreement. (*)

                  k.2.     Form of Master Services Agreement. (**)

                  k.3.     Financial Accounting Services Agreement. (*)

                  k.4.     Form of Auction Agency Agreement. (**)

                  k.5.     Form of Broker-Dealer Agreement. (**)

                  k.6.     Form of DTC Representations Letter. (**)

                  l.1.     Opinion of Vedder, Price, Kaufman & Kammholz, P.C.
                           (**)

                  l.2.     Opinion of Morris, Nichols, Arsht & Tunnell. (**)

                  m.       None.

                  n.       Consent of Auditors. (**)

                  o.       Not applicable.

                  p.       Subscription Agreement. (*)


                                      C-1
<PAGE>


                  q.       None.

                  r.       Code of Ethics. (*)

                  s.       Powers of Attorney. (*)



- ------------------
(*) Incorporated by reference to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-2, File Number 333-111756, as filed on March
25, 2004.



(**) Filed herewith.


ITEM 25: MARKETING ARRANGEMENTS

        Reference is made to the underwriting agreement for the Registrant's
shares of beneficial interest, filed herewith.


ITEM 26: OTHER EXPENSES AND DISTRIBUTION

        The following table sets forth the estimated expenses to be incurred in
connection with the offering described in this Registration Statement:


<TABLE>
<S>                                                            <C>
SEC Registration Fees                                           $ 141,904
Printing & Mailing                                                 70,596
Audit Fees                                                          7,500
Legal Fees                                                        150,000
Rating Agency Fees                                                165,000
Miscellaneous                                                         -
- ------------------                                              ---------
  Total                                                           535,000
</TABLE>

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



ITEM 27. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL

         None.

ITEM 28. NUMBER OF HOLDERS OF SECURITIES


         As of March 15, 2004, the number or record holders of each class
of securities of the Registrant was





<TABLE>
<CAPTION>
                         TITLE OF CLASS                                    NUMBER OF RECORD HOLDERS
                         --------------                                    ------------------------
<S>                                                                        <C>
Common Shares (no par value)..............................                               1
</TABLE>


ITEM 29. INDEMNIFICATION

         The Registrant's Agreement and Declaration of Trust (the "Declaration")
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

                                      C-2
<PAGE>

otherwise by virtue of his being or having been a Covered Person and against
amounts paid or incurred by him in the settlement thereof; provided that no
indemnification shall be provided to a Covered Person (i) who shall have been
adjudicated by a court or body before which the proceeding was brought (A) to be
liable to the Registrant or its shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office, or (B) not to have acted in good faith and in a manner
the person reasonably believed to be or not opposed to the best interest of the
Registrant; or (ii) in the event of a settlement, unless there has been a
determination that such Covered Person did not engage in willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office; (A) by the court or other body approving the settlement;
(B) by at least a majority of those Trustees who are neither Interested Persons
of the Trust nor are parties to the matter based upon a review of readily
available facts (as opposed to a full trial-type inquiry); (C) by written
opinion of independent legal counsel based upon a review of readily available
facts (as opposed to a full trial-type inquiry) or (D) by a vote of a majority
of the Outstanding Shares entitled to vote (excluding any Outstanding Shares
owned of record or beneficially by such individual).

         The Declaration also provides that if any shareholder or former
shareholder of any series of the Registrant shall be held personally liable
solely by reason of his being or having been a shareholder and not because of
his acts or omissions or for some other reason, the shareholder or former
shareholder (or his heirs, executors, administrators or other legal
representatives or in the case of any entity, its general successor) shall be
entitled out of the assets belonging to the applicable series of the Registrant
to be held harmless from and indemnified against all loss and expense arising
from such liability. The Registrant, on behalf of its affected series, shall,
upon request by such shareholder, assume the defense of any claim made against
such shareholder for any act or obligation of the series and satisfy any
judgment thereon from the assets of the series.

         Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended (the "1933 Act"), may be available to Trustees, officers
and controlling persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the opinion of the SEC
such indemnification is against public policy as expressed in the 1933 Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant's expenses
incurred or paid by a Trustee, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the 1933 Act and will be governed by the final
adjudication of such issue.

         The registrant, its trustees and officers, its investment adviser, the
other investment companies advised by the adviser and certain persons affiliated
with them are insured, within the limits and subject to the limitations of the
insurance, against certain expenses in connection with the defense of actions,
suits or proceedings, and certain liabilities that might be imposed as a result
of such actions, suits or proceedings. The insurance expressly excludes coverage
for any trustee or officer whose personal dishonesty, fraudulent breach of
trust, lack of good faith, or intention to deceive or defraud has been finally
adjudicated or may be established or who willfully fails to act prudently.

ITEM 30. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER

         The information in the Statement of Additional Information under the
caption "Management -- Trustees and Officers" is incorporated by reference.

                                      C-3
<PAGE>

ITEM 31. LOCATION OF ACCOUNTS AND RECORDS

         All such accounts, books, and other documents are maintained at the
offices of the Registrant, at the offices of the Registrant's investment
manager, Calamos Asset Management, Inc., 1111 East Warrenville Road, Naperville,
Illinois 60563, at the offices of the custodian, 100 Church Street, New York,
New York 10286 or at the offices of the transfer agent, 111 8th Avenue, New
York, New York 10011-5201.

ITEM 32. MANAGEMENT SERVICES

         Not applicable.

ITEM 33. UNDERTAKINGS

         1. The Registrant undertakes to suspend the offering of shares until
the prospectus is amended if (1) subsequent to the effective date of its
registration statement, the net asset value declines more than ten percent from
its net asset value as of the effective date of the registration statement or
(2) the net asset value increases to an amount greater than its net proceeds as
stated in the prospectus.

         2. Not applicable.

         3. Not applicable.

         4. Not applicable.

         5. (a) For the purposes of determining any liability under the 1933
Act, the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form of
prospectus filed by the Registrant under Rule 497(h) under the 1933 Act shall be
deemed to be part of the Registration Statement as of the time it was declared
effective.

         (b) For the purpose of determining any liability under the 1933 Act,
each post-effective amendment that contains a form of prospectus shall be deemed
to be a new registration statement relating to the securities offered therein,
and the offering of the securities at that time shall be deemed to be the
initial bona fide offering thereof.

         6. The Registrant undertakes to send by first class mail or other means
designed to ensure equally prominent delivery within two business days of
receipt of a written or oral request the Registrant's statement of additional
information.

                                      C-4
<PAGE>

                                   SIGNATURES


         Pursuant to the requirements of the Securities Act of 1933 and/or
Investment Company Act of 1940, the Registrant has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in this City of Naperville and State of Illinois, on the 28th day of
April, 2004.


                                      Calamos Strategic Total Return Fund

                                      By: /s/ John P. Calamos
                                          --------------------------------------
                                          John P. Calamos, Trustee and President

         Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date(s) indicated.

<TABLE>
<S>                                             <C>                                          <C>
/s/ John P. Calamos                              Trustee and President (Principal            April 28, 2004
- ------------------------------------------              Executive Officer)
John P. Calamos

/s/ Patrick Dudasik                             Vice President (Principal Financial and      April 28, 2004
- ------------------------------------------              Accounting Officer)
Patrick Dudasik

Nick P. Calamos*                                              Trustee



Joe E. Hanauer*                                               Trustee                       *By: /s/ James S. Hamman, Jr.
                                                                                                 ------------------------
                                                                                                     James S. Hamman, Jr.
                                                                                                     Attorney-In-Fact
John E. Neal*                                                 Trustee
                                                                                                     April 28, 2004


Weston W. Marsh*                                              Trustee



William Rybak*                                                Trustee
</TABLE>


* Original powers of attorney authorizing James S. Hamman, Jr. and John P.
Calamos to execute this Registration Statement, and Amendments thereto,
for each of the Trustees on whose behalf this Registration Statement
is filed, have been executed and are incorporated by reference to Pre-Effective
Amendment No. 3 to Registrant's Registration Statement on Form N-2, File
Number 333-111756, as filed on March 25, 2004.
<PAGE>

                                  EXHIBIT INDEX

EXHIBIT                             DOCUMENT

a.1.     Agreement and Declaration of Trust. (*)

a.2.     Certificate of Trust. (*)

b.       By-laws. (*)

c.       None.

d.       Form of Share Certificate. (**)

e.       Terms and Conditions of the Dividend Reinvestment Plan. (*)

f.       None.

g.1      Investment Management Agreement with Calamos Asset Management, Inc.
         (*)

h.1.     Form of Underwriting Agreement. (**)

h.2.     Form of Standard Dealer Agreement. (**)

h.3.     Form of Master Agreement Among Underwriters. (**)

i.       None.

j.1.     Custody Agreement. (*)

j.2.     Foreign Custody Manager Agreement. (*)

k.1.     Stock Transfer Agency Agreement. (*)

k.2.     Form of Master Services Agreement. (**)

k.3.     Financial Accounting Services Agreement. (*)

k.4.     Form of Auction Agency Agreement. (**)

k.5.     Form of Broker-Dealer Agreement. (**)

k.6.     Form of DTC Representations Letter. (**)

l.1.     Opinion of Vedder, Price, Kaufman & Kammholz, P.C. (**)

l.2.     Opinion of Morris, Nichols, Arsht & Tunnell. (**)

m.       None.

n.       Consent of Auditors. (**)

o.       Not applicable.

p.       Subscription Agreement. (*)

q.       None.

r.       Code of Ethics. (*)

s.       Powers of Attorney. (*)


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


(*) Incorporated by reference to Pre-Effective Amendment No. 3 to Registrant's
Registration Statement on Form N-2, File Number 333-111756, as filed on March
25, 2004.


(**) Filed herewith.


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.D
<SEQUENCE>2
<FILENAME>c82676a1exv99wd.txt
<DESCRIPTION>FORM OF SHARE CERTIFICATE
<TEXT>
<PAGE>
                                                                       EXHIBIT D


CERTIFICATE NUMBER                                    NUMBER OF SHARES
                  ----                                                ----------

                      CALAMOS STRATEGIC TOTAL RETURN FUND
                          Preferred Shares - Series ___
                                  No Par Value
                    $25,000 Liquidation Preference Per Share

                                                         Cusip No.
                                                                   -------------


         This certifies that Cede & Co. is the registered owner of
_________________ fully paid and non-assessable shares of Preferred Shares -
Series ____, no par value, $25,000 liquidation preference per share, of Calamos
Strategic Total Return Fund (the "Trust") transferable only on the books of the
Trust by the record holder thereof in person or by duly authorized agent upon
delivery to the Trustees or the Trust's transfer agent of this Certificate
properly endorsed. This Certificate is not valid unless countersigned by the
transfer agent and registrar.

         A statement in full, of all the designations, preferences,
qualifications, limitations, restrictions and special or relative rights of the
shares of each class authorized to be issued, will be furnished by the Trust to
any shareholders upon request and without charge.

         IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
by its duly authorized officers this __th day of May, 2004.


THE BANK OF NEW YORK                    CALAMOS STRATEGIC TOTAL RETURN FUND
as Transfer Agent and Registrar

                                        By:
                                           -------------------------------------

By:
   -----------------------------
                                        ATTEST:


                                        By
                                          --------------------------------------


<PAGE>

         FOR VALUE RECEIVED, __________________________ hereby sells, assigns
and transfers unto _________________________________ Shares represented by this
Certificate, and do hereby irrevocably constitute and appoint ______________
Attorney to transfer the said Shares on the books of the within named Trust with
full power of substitution in the premises.

Dated             ,
     ------------- -----

In presence of

_______________________________________  _______________________________________

         Shares of Preferred Shares evidenced by this Certificate may be
         sold, transferred, or otherwise disposed of only pursuant to the
         provisions of the Trust's Agreement and Declaration of Trust and
         the Trust's Statement of Preferences.

         The Trust will furnish to any shareholder, upon request and
         without charge, the Trust's Agreement and Declaration of Trust and
         a full statement of the designations, preferences, limitations and
         relative rights of the shares of each class or series of shares of
         beneficial interest of the Trust authorized to be issued, so far
         as they have been determined, and the authority of the Board of
         Trustees to determine the relative rights and preferences of
         subsequent classes or series. Any such request should be addressed
         to the Secretary of the Trust.

Unless this certificate is presented by an authorized representative of The
Depository Trust Company, a New York corporation ("DTC"), to the Trust or its
agent for registration of transfer, exchange, or payment, and any certificate
issued is registered in the name of Cede & Co. or in such other name as is
requested by an authorized representative of DTC (and any payment is made to
Cede & Co. or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.


                                       2



</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.H1
<SEQUENCE>3
<FILENAME>c82676a1exv99wh1.txt
<DESCRIPTION>FORM OF UNDERWRITING AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT h.1



                    AUCTION RATE CUMULATIVE PREFERRED SHARES

                       CALAMOS STRATEGIC TOTAL RETURN FUND

                                SHARES, SERIES M
                                SHARES, SERIES T
                                SHARES, SERIES W
                                SHARES, SERIES TH
                                SHARES, SERIES F
                                SHARES, SERIES A
                                SHARES, SERIES B
                    LIQUIDATION PREFERENCE $25,000 PER SHARE
                         FORM OF UNDERWRITING AGREEMENT


                                                                      May , 2004

Citigroup Global Markets Inc.
As Representative of the several Underwriters

c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York  10013


Ladies and Gentlemen:

         The undersigned, Calamos Strategic Total Return Fund, a Delaware
statutory trust (the "Fund") and Calamos Asset Management, Inc., an Illinois
corporation (the "Adviser"), address you as underwriters and as the
representative (the "Representative") of each of the several underwriters named
on Schedule I hereto (the "Underwriters"). The Fund proposes to sell to the
Underwriters an aggregate of (i)   shares of its Series M Preferred Shares, (ii)
    shares of its Series T Preferred Shares, (iii)    shares of its Series W
Preferred Shares, (iv)    shares of its Series TH Preferred Shares, (v)
     shares of its Series F Preferred Shares, (vi)    shares of its Series A
Preferred Shares and (vii) and    shares of its Series B Preferred Shares
(collectively, the "Preferred Shares"), each no par value per share, with a
liquidation preference of $25,000 per share to the Underwriters. The
Preferred Shares will be authorized by, and subject to the terms and
conditions of, the Statement of Preferences of Preferred Shares adopted in
connection with the issuance of the Preferred Shares and as amended through
the date hereof (the "Statement") and the Agreement and Declaration of Trust
dated December 31, 2003, as it may be amended (the "Declaration of Trust")
in the forms filed as exhibits to the Registration Statement referred to in
Section 1 of this Agreement. Unless otherwise stated, the term "you" as used
herein means Citigroup Global Markets Inc. individually on its own behalf and
on behalf of the other Underwriters. Certain terms used herein are defined in
Section 18 hereof.


<PAGE>
                                                                               2

                  The Fund and the Adviser wish to confirm as follows their
agreements with you and the other several Underwriters on whose behalf you are
acting in connection with the several purchases of the Preferred Shares by the
Underwriters.

                  The Fund has entered into an Investment Management Agreement
with the Adviser dated as of March 12, 2004, a Custody Agreement with The Bank
of New York dated as of March 12, 2004, a Stock Transfer Agency Agreement with
The Bank of New York dated as of March 12, 2004, a Financial Accounting Services
Agreement with the Adviser dated as of March 30, 2004, a Master Services
Agreement with State Street Bank and Trust Company dated as of March 15, 2004
and an Auction Agency Agreement (including the form of Broker-Dealer Agreement)
with the Bank of New York dated May , 2004, and such agreements are herein
referred to as the "Management Agreement," the "Custodian Agreement, " the
"Transfer Agency Agreement," the "Accounting Agreement," the "Administration
Agreement" and the "Auction Agency Agreement" respectively. Collectively, the
Management Agreement, the Custodian Agreement, the Transfer Agency Agreement,
the Accounting Agreement, the Administration Agreement and the Auction Agent
Agreement are herein referred to as the "Fund Agreements." In addition, the Fund
has adopted a dividend reinvestment plan (the "Dividend Reinvestment Plan")
pursuant to which holders of common shares of beneficial interest, no par value
per share (the "Common Shares"), shall have their dividends automatically
reinvested in additional Common Shares of the Fund unless they elect to receive
such dividends in cash. This Underwriting Agreement is herein referred to as the
"Agreement".

                  1. Representations and Warranties of the Fund and the Adviser.
The Fund and the Adviser, jointly and severally, represent and warrant to, and
agree with, each Underwriter as set forth below in this Section 1.

                  (a) The Fund has prepared and filed with the Commission a
         registration statement (file numbers 333-113439 and 811-21484) on Form
         N-2, including a related preliminary prospectus (including the
         statement of additional information incorporated by reference therein),
         for registration under the Act and the 1940 Act of the offering and
         sale of the Preferred Shares. The Fund may have filed one or more
         amendments thereto, including a related preliminary prospectus
         (including the statement of additional information incorporated by
         reference therein), each of which has previously been furnished to you.
         The Fund will next file with the Commission one of the following:
         either (1) prior to the Effective Date of such registration statement,
         a further amendment to such registration statement (including the form
         of final prospectus (including the statement of additional information
         incorporated by reference therein)) or (2) after the Effective Date of
         such registration statement, a final prospectus (including the
         statement of additional information incorporated by reference therein)
         in accordance with Rules 430A and 497. In the case of clause (2), the
         Fund has included in such registration statement, as amended at the
         Effective Date, all information (other than Rule 430A Information)
         required by the Act and the 1940 Act and the Rules and Regulations to
         be included in such registration statement and the Prospectus. As
         filed, such amendment and form of final prospectus (including the
         statement of additional information incorporated by reference therein),
         or such final prospectus (including the statement of additional
         information incorporated by reference therein), shall contain all Rule
         430A Information, together with all other such required information,
         and, except to the extent the


<PAGE>
                                                                               3

         Representative shall agree in writing to a modification, shall be in
         all substantive respects in the form furnished to you prior to the
         Execution Time or, to the extent not completed at the Execution Time,
         shall contain only such specific additional information and other
         changes (beyond that contained in the latest Preliminary Prospectus) as
         the Fund has advised you, prior to the Execution Time, will be included
         or made therein.

                  (b) Each Preliminary Prospectus complied when filed with the
         Commission in all material respects with the provisions of the Act, the
         1940 Act and the Rules and Regulations, except that this representation
         and warranty does not apply to statements in or omissions from the
         registration statement or the Preliminary Prospectus made in reliance
         upon and in conformity with information relating to any Underwriter
         furnished to the Fund in writing by or on behalf of any Underwriter
         through you expressly for use therein. The Commission has not issued
         any order preventing or suspending the use of any Preliminary
         Prospectus.

                  (c) On the Effective Date, the Registration Statement did or
         will, and when the Prospectus (and any supplement thereto) is first
         filed (if required) in accordance with Rule 497 it will, and the 1940
         Act Notification when originally filed with the Commission and any
         amendment or supplement thereto when filed with the Commission did or
         will, comply in all material respects with the applicable requirements
         of the Act, the 1940 Act and the Rules and Regulations and the
         Registration Statement on the Effective Date did not or will not
         contain any untrue statement of a material fact or omit to state any
         material fact required to be stated therein or necessary in order to
         make the statements therein not misleading; and, on the Effective Date,
         the Prospectus, if not filed pursuant to Rule 497, and on the date of
         any filing pursuant to Rule 497, will not include any untrue statement
         of a material fact or omit to state a material fact necessary in order
         to make the statements therein, in the light of the circumstances under
         which they were made, not misleading; provided, however, that the Fund
         makes no representations or warranties as to the information contained
         in or omitted from the Registration Statement, or the Prospectus (or
         any supplement thereto) in reliance upon and in conformity with
         information furnished in writing to the Fund by or on behalf of any
         Underwriter through the Representative specifically for inclusion in
         the Registration Statement or the Prospectus (or any supplement
         thereto).

                  (d) The Fund has been duly formed and is validly existing in
         good standing as a statutory trust under the laws of the State of
         Delaware, with full power and authority to own, lease and operate its
         properties and to conduct its business as described in the Registration
         Statement and the Prospectus (and any amendment or supplement to either
         of them) and is duly registered and qualified to conduct business and
         is in good standing in each jurisdiction or place where the nature of
         its properties or the conduct of its business requires such
         registration or qualification, except where the failure so to register
         or to qualify does not have a material, adverse effect on the condition
         (financial or other), business, prospects, properties, net assets or
         results of operations of the Fund. The Fund has no subsidiaries.

                  (e) The Fund's authorized equity capitalization is as set
         forth in the Prospectus; the capital stock of the Fund conforms in all
         material respects to the description thereof


<PAGE>
                                                                               4


         contained in the Prospectus; all outstanding Common Shares have been
         duly and validly authorized and issued and are fully paid and, except
         as described in the Prospectus, nonassessable; the Preferred Shares
         have been duly and validly authorized, and, when issued and delivered
         to and paid for by the Underwriters pursuant to this Agreement, will be
         fully paid and, except as described in the Prospectus, nonassessable
         and free of any preemptive or similar rights that entitle or will
         entitle any person to acquire any Preferred Shares upon issuance
         thereof by the Fund; the certificates for the Preferred Shares are in
         valid and sufficient form; the holders of outstanding Common Shares are
         not entitled to preemptive or other rights to subscribe for the
         Preferred Shares; and, except as set forth in the Prospectus, no
         options, warrants or other rights to purchase, agreements or other
         obligations to issue, or rights to convert any obligations into or
         exchange any securities for, shares of capital stock of, or ownership
         interests in, the Fund are outstanding.

                  (f) The Fund's registration statement on Form 8-A under the
         Exchange Act has become effective.

                  (g) The Fund, subject to the Registration Statement having
         been declared effective and the filing of the Prospectus under Rule
         497, has taken all required action under the Act, the 1940 Act and the
         Rules and Regulations to make the public offering and consummate the
         sale of the Preferred Shares as contemplated by this Agreement.

                  (h) There are no agreements, contracts, indentures, leases or
         other instruments that are required to be described in the Registration
         Statement or the Prospectus, or to be filed as an exhibit thereto,
         which are not described or filed as required; and the statements in the
         Registration Statement and Prospectus, insofar as they are descriptions
         of contracts, agreements or other legal documents or refer to
         statements of law or legal conclusions, are accurate and present fairly
         the information required to be shown.

                  (i) The execution and delivery of and the performance by the
         Fund of its obligations under this Agreement and the Fund Agreements
         have been duly and validly authorized by the Fund and this Agreement
         and the Fund Agreements have been duly executed and delivered by the
         Fund and constitute the valid and legally binding agreements of the
         Fund, enforceable against the Fund in accordance with their terms,
         except as rights to indemnity and contribution hereunder may be limited
         by federal or state securities laws and subject to the qualification
         that the enforceability of the Fund's obligations hereunder and
         thereunder may be limited by bankruptcy, insolvency, reorganization,
         moratorium and other laws relating to or affecting creditors' rights
         generally and by general equitable principles.

                  (j) The Fund is duly registered under the 1940 Act as a
         closed-end, diversified management investment company and the 1940 Act
         Notification has been duly filed with the Commission. The Fund has not
         received any notice from the Commission pursuant to Section 8(e) of the
         1940 Act with respect to the 1940 Act Notification or the Registration
         Statement.

                  (k) No consent, approval, authorization, filing with or order
         of any court or governmental agency or body is required in connection
         with the transactions


<PAGE>
                                                                               5


         contemplated herein or in the Fund Agreements, except such as have been
         made or obtained under the Act, the 1940 Act and the rules and
         regulations of the National Association of Securities Dealers, Inc.
         (the "NASD"), and such as may be required under the blue sky laws of
         any jurisdiction in connection with the purchase and distribution of
         the Preferred Shares by the Underwriters in the manner contemplated
         herein and in the Prospectus.

                  (l) Neither the issuance and sale of the Preferred Shares, the
         execution, delivery or performance of this Agreement or any of the Fund
         Agreements by the Fund, nor the consummation by the Fund of the
         transactions contemplated hereby or thereby (i) conflicts or will
         conflict with or constitutes or will constitute a breach of the
         Statement, Declaration of Trust or by-laws of the Fund ("By-Laws"),
         (ii) conflicts or will conflict with or constitutes or will constitute
         a breach of or a default under, any material agreement, indenture,
         lease or other instrument to which the Fund is a party or by which it
         or any of its properties may be bound or (iii) materially violates or
         will materially violate any material statute, law, regulation or filing
         or judgment, injunction, order or decree applicable to the Fund or any
         of its properties or will result in the creation or imposition of any
         material lien, charge or encumbrance upon any property or assets of the
         Fund pursuant to the terms of any agreement or instrument to which it
         is a party or by which it may be bound or to which any of the property
         or assets of the Fund is subject.

                  (m) No holders of securities of the Fund have rights to the
         registration of such securities under the Registration Statement.

                  (n) The financial statements, together with related schedules
         and notes, included in the Prospectus and the Registration Statement
         present fairly in all material respects the financial condition and
         results of operations of the Fund as of the dates and for the periods
         indicated, comply as to form with the applicable accounting
         requirements of the Act and the 1940 Act and have been prepared in
         conformity with generally accepted accounting principles applied on a
         consistent basis throughout the periods involved (except as otherwise
         noted therein).

                  (o) No action, suit or proceeding by or before any court or
         governmental agency, authority or body or any arbitrator involving the
         Fund or its property is pending or, to the knowledge of the Fund,
         threatened that (i) could reasonably be expected to have a material
         adverse effect on the performance of this Agreement or the consummation
         of any of the transactions contemplated hereby or (ii) could reasonably
         be expected to have a material adverse effect on the condition
         (financial or otherwise), prospects, earnings, business or properties
         of the Fund, whether or not arising from transactions in the ordinary
         course of business, except as set forth in or contemplated in the
         Prospectus (exclusive of any supplement thereto).

                  (p) The Fund is not (i) in violation of its Statement,
         Declaration of Trust or By-Laws, (ii) in breach or default in any
         material respect in the performance of the terms of any material
         indenture, contract, lease, mortgage, deed of trust, note agreement,
         loan agreement or other agreement, obligation, condition, covenant or
         instrument to which it is a party or bound or to which its property is
         subject or (iii) in material violation of any
<PAGE>
                                                                               6

        material law, ordinance, administrative or governmental rule or
        regulation applicable to the Fund, including, without limitation, the
        applicable provisions of the Sarbanes-Oxley Act of 2002 (the
        "Sarbanes-Oxley Act") and the rules and regulations promulgated in
        connection therewith, or of any material decree of the Commission, the
        NASD, any state securities commission, any national securities exchange,
        any arbitrator, any court or any other governmental, regulatory,
        self-regulatory or administrative agency or any official having
        jurisdiction over the Fund.

                  (q) Since the date as of which information is given in the
         Prospectus, except as otherwise stated therein, (i) there has been no
         material, adverse change in the condition (financial or other),
         business, properties, net assets or results of operations of the Fund
         or business prospects (other than as a result of a change in the
         financial markets generally) of the Fund, whether or not arising in the
         ordinary course of business, (ii) there have been no transactions
         entered into by the Fund which are material to the Fund other than
         those in the ordinary course of its business as described in the
         Prospectus and (iii) there has been no dividend or distribution of any
         kind declared, paid or made by the Fund on any class of its Common
         Shares.

                  (r) Deloitte & Touche LLP, who have audited the Statement of
         Assets and Liabilities and the related Statement of Operations included
         in the Registration Statement and the Prospectus, are independent
         public accountants with respect to the Fund within the meaning of the
         Act, the 1940 Act and the Rules and Regulations.

                  (s) The Fund has not distributed and, prior to the later to
         occur of (i) the Closing Date (as defined below in Section 4) and (ii)
         completion of the distribution of the Preferred Shares, will not
         distribute any offering material in connection with the offering and
         sale of the Preferred Shares other than the Registration Statement, the
         Preliminary Prospectus, the Prospectus or other materials permitted by
         the Act, the 1940 Act or the Rules and Regulations.

                  (t) The Fund has filed all tax returns required to be filed
         and the Fund is not in material default in the payment of any taxes
         which were shown as payable on said returns or any assessments with
         respect thereto; and, as required by Subchapter M of the Code, the Fund
         is currently in compliance with the requirements to qualify as a
         regulated investment company under the Code.

                  (u) All advertising, sales literature or other promotional
         material (including "prospectus wrappers", "broker kits", "road show
         slides" and "road show scripts"), whether in printed or electronic
         form, authorized in writing by or prepared by the Fund or the Adviser
         for use in connection with the offering and sale of the Preferred
         Shares (collectively, "sales material") complied and comply in all
         material respects with the applicable requirements of the Act, the Act
         Rules and Regulations and the rules and interpretations of the NASD and
         if required to be filed with the NASD under the NASD's conduct rules
         were provided to Simpson Thacher & Bartlett LLP, counsel for the
         Underwriters, for filing. No sales material contained or contains an
         untrue statement of a material fact or omitted or omits to state a
         material fact necessary in order to make the


<PAGE>
                                                                               7


         statements therein, in the light of the circumstances under which they
         were made, not misleading.

                  (v) The Fund's directors and officers/errors and omissions
         insurance policy and its fidelity bond required by Rule 17g-1 of the
         1940 Act Rules and Regulations are in full force and effect; the Fund
         is in compliance with the terms of such policy and fidelity bond in all
         material respects; and there are no claims by the Fund under any such
         policy or fidelity bond as to which any insurance company is denying
         liability or defending under a reservation of rights clause; the Fund
         has not been refused any insurance coverage sought or applied for; and
         the Fund has no reason to believe that it will not be able to renew its
         existing insurance coverage as and when such coverage expires or to
         obtain similar coverage from similar insurers as may be necessary to
         continue its business at a cost that would not have a material adverse
         effect on the condition (financial or otherwise), prospects, earnings,
         business or properties of the Fund, whether or not arising from
         transactions in the ordinary course of business, except as set forth in
         or contemplated in the Prospectus (exclusive of any supplement
         thereto).

                  (w) The Fund has such licenses, permits, and authorizations of
         governmental or regulatory authorities ("permits") as are necessary to
         own its property and to conduct its business in the manner described in
         the Prospectus, except where the failure to hold any such permit does
         not have a material, adverse effect on the condition (financial or
         other), business, prospects, properties, net assets or results of
         operations of the Fund; the Fund has fulfilled and performed all its
         material obligations with respect to such permits and no event has
         occurred which allows or, after notice or lapse of time, would allow,
         revocation or termination thereof or results in any other material
         impairment of the rights of the Fund under any such permit, subject in
         each case to such qualification as may be set forth in the Prospectus;
         and, except as described in the Prospectus, none of such permits
         contains any restriction that is materially burdensome to the Fund.

                  (x) The Fund maintains and will maintain a system of internal
         accounting controls sufficient to provide reasonable assurances that
         (i) transactions are executed in accordance with management's general
         or specific authorization and with the investment objectives, policies
         and restrictions of the Fund and the applicable requirements of the
         1940 Act, the 1940 Act Rules and Regulations and the Internal Revenue
         Code of 1986, as amended (the "Code"); (ii) transactions are recorded
         as necessary to permit preparation of financial statements in
         conformity with generally accepted accounting principles, to calculate
         net asset value, to maintain accountability for assets and to maintain
         material compliance with the books and records requirements under the
         1940 Act and the 1940 Act Rules and Regulations; (iii) access to assets
         is permitted only in accordance with management's general or specific
         authorization; and (iv) the recorded accountability for assets is
         compared with existing assets at reasonable intervals and appropriate
         action is taken with respect to any differences.

                  (y) Except as stated in this Agreement and the Prospectus, the
         Fund has not taken, directly or indirectly, any action designed to or
         that would constitute or that might reasonably be expected to cause or
         result in, under the Exchange Act or otherwise, stabilization or
         manipulation of the price of any security of the Fund to facilitate the
         sale


<PAGE>
                                                                               8


         or resale of the Preferred Shares, and the Fund is not aware of any
         such action taken or to be taken by any affiliates of the Fund.

                  (z) This Agreement and each of the Fund Agreements complies in
         all material respects with all applicable provisions of the 1940 Act,
         the 1940 Act Rules and Regulations, the Advisers Act and the Advisers
         Act Rules and Regulations.

                  (aa) The Fund intends to direct the investment of the proceeds
         of the offering of the Preferred Shares in such a manner as to comply
         with the requirements of Subchapter M of the Code.

                  (bb) The conduct by the Fund of its business (as described in
         the Prospectus) does not require it to be the owner, possessor or
         licensee of any patents, patent licenses, trademarks, service marks or
         trade names which it does not own, possess or license, except where the
         failure to own, possess or license any such patent, patent license,
         trademark, service mark or trade name does not have a material, adverse
         effect on the condition (financial or other), business, prospects,
         properties, net assets or results of operations of the Fund.

                  (cc) Except as disclosed in the Registration Statement and the
         Prospectus, the Fund (i) does not have any material lending or other
         relationship with any bank or lending affiliate of Citigroup Global
         Markets Holdings Inc. and (ii) does not intend to use any of the
         proceeds from the sale of the Preferred Shares hereunder to repay any
         outstanding debt owed to any affiliate of Citigroup Global Markets
         Holdings Inc.

                  (dd) The Common Shares are duly listed on the New York Stock
         Exchange (the "NYSE").

                  Any certificate signed by any officer of the Fund and
delivered to the Representative or counsel for the Underwriters in connection
with the offering of the Preferred Shares shall be deemed a representation and
warranty by the Fund, as to matters covered thereby, to each Underwriter.

                  2. Representations and Warranties of the Adviser. The Adviser
         represents and warrants to each Underwriter as follows:

                  (a) The Adviser has been duly formed and is validly existing
         in good standing as a corporation under the laws of the State of
         Illinois, with full corporate power and authority to own, lease and
         operate its properties and to conduct its business as described in the
         Prospectus, and is duly qualified to do business as a foreign
         corporation and is in good standing under the laws of each jurisdiction
         which requires such qualification, except where the failure to so
         qualify would not have a material, adverse effect on the condition
         (financial or other), business, prospects, properties, net assets or
         results of operations of the Adviser.

                  (b) The Adviser is duly registered as an investment adviser
         under the Advisers Act and is not prohibited by the Advisers Act, the
         1940 Act, the Advisers Act Rules and


<PAGE>
                                                                               9


         Regulations or the 1940 Act Rules and Regulations from acting under the
         Management Agreement and the Accounting Agreement as contemplated by
         the Prospectus.

                  (c) The Adviser has full power and authority to enter into
         this Agreement, the Management Agreement and the Accounting Agreement;
         the execution and delivery of, and the performance by the Adviser of
         its obligations under, this Agreement, the Management Agreement and the
         Accounting Agreement have been duly and validly authorized by the
         Adviser; and this Agreement, the Management Agreement and the
         Accounting Agreement have been duly executed and delivered by the
         Adviser and constitute the valid and legally binding agreements of the
         Adviser, enforceable against the Adviser in accordance with their
         terms, except as rights to indemnity and contribution hereunder may be
         limited by federal or state securities laws and subject to the
         qualification that the enforceability of the Adviser's obligations
         hereunder and thereunder may be limited by bankruptcy, insolvency,
         reorganization, moratorium and other laws relating to or affecting
         creditors' rights generally and by general equitable principles.

                  (d) The Adviser has the financial resources available to it
         necessary for the performance of its services and obligations as
         contemplated in the Prospectus and under this Agreement, the Management
         Agreement and the Accounting Agreement.

                  (e) The description of the Adviser and its business, and the
         statements attributable to the Adviser, in the Prospectus complied and
         comply in all material respects with the provisions of the Act, the
         1940 Act, the Advisers Act, the Rules and Regulations and the Advisers
         Act Rules and Regulations and did not and will not contain an untrue
         statement of a material fact or omit to state a material fact necessary
         in order to make the statements therein, in light of the circumstances
         under which they were made, not misleading.

                  (f) No action, suit or proceeding by or before any court or
         governmental agency, authority or body or any arbitrator involving the
         Adviser or its property is pending or, to the best knowledge of the
         Adviser, threatened that (i) is required to be described in the
         Prospectus that is not so described as required, (ii) could reasonably
         be expected to have a material adverse effect on the ability of the
         Adviser to fulfill its obligations hereunder or under the Management
         Agreement and the Accounting Agreement or (iii) could reasonably be
         expected to have a material adverse effect on the condition (financial
         or otherwise), prospects, earnings, business or properties of the
         Adviser, whether or not arising from transactions in the ordinary
         course of business, except as set forth in or contemplated in the
         Prospectus (exclusive of any supplement thereto).

                  (g) Since the date as of which information is given in the
         Prospectus, except as otherwise stated therein, (i) there has been no
         material, adverse change in the condition (financial or other),
         business, properties, net assets or results of operations or business
         prospects of the Adviser, whether or not arising from the ordinary
         course of business and (ii) there have been no transactions entered
         into by the Adviser which are material to the Adviser other than those
         in the ordinary course of its business as described in the Prospectus.


<PAGE>
                                                                              10


                  (h) The Adviser has such licenses, permits and authorizations
         of governmental or regulatory authorities ("permits") as are necessary
         to own its property and to conduct its business in the manner described
         in the Prospectus, except where the failure to hold any such permit
         does not have a material, adverse effect on the condition (financial or
         other), business, prospects, properties, net assets or results of
         operations of the Adviser or on the ability of the Adviser to perform
         its obligations under this Agreement, the Management Agreement and the
         Accounting Agreement; the Adviser has fulfilled and performed all its
         material obligations with respect to such permits and no event has
         occurred which allows, or after notice or lapse of time would allow,
         revocation or termination thereof or results in any other material
         impairment of the rights of the Adviser under any such permit.

                  (i) This Agreement, the Management Agreement and the
         Accounting Agreement comply in all material respects with all
         applicable provisions of the 1940 Act, the 1940 Act Rules and
         Regulations, the Advisers Act and the Advisers Act Rules and
         Regulations.

                  (j) No consent, approval, authorization, filing with or order
         of any court or governmental agency or body is required in connection
         with the transactions contemplated herein or in the Management
         Agreement and the Accounting Agreement, except such as have been made
         or obtained under the Act and the 1940 Act and such as may be required
         under the blue sky laws of any jurisdiction in connection with the
         purchase and distribution of the Preferred Shares by the Underwriters
         in the manner contemplated herein and in the Prospectus.

                  (k) Neither the execution, delivery or performance of this
         Agreement, the Management Agreement and the Accounting Agreement, nor
         the consummation by the Fund or the Adviser of the transactions
         contemplated hereby or thereby (i) conflicts or will conflict with or
         constitutes or will constitute a breach of the certificate of
         incorporation or By-Laws of the Adviser, (ii) conflicts or will
         conflict with or constitutes or will constitute a breach of or a
         default under, any material agreement, indenture, lease or other
         instrument to which the Adviser is a party or by which it or any of its
         properties may be bound or (iii) materially violates or will materially
         violate any material statute, law, regulation or filing or judgment,
         injunction, order or decree applicable to the Adviser or any of its
         properties or will result in the creation or imposition of any material
         lien, charge or encumbrance upon any property or assets of the Adviser
         pursuant to the terms of any agreement or instrument to which the
         Adviser is a party or by which the Adviser may be bound or to which any
         of the property or assets of the Adviser is subject.

                  (l) Except as stated in this Agreement and in the Prospectus,
         the Adviser has not taken nor will it take, directly or indirectly, any
         action designed to or which should reasonably be expected to cause or
         result in or which will constitute, stabilization or manipulation of
         the price of any security of the Fund in violation of federal
         securities laws and the Adviser is not aware of any such action taken
         or to be taken by any affiliates of the Adviser.

                  (m) In the event that the Fund or the Adviser makes available
         any promotional materials intended for use only by qualified
         broker-dealers and registered representatives


<PAGE>
                                                                              11

         thereof by means of an Internet web site or similar electronic means,
         the Adviser will install and maintain pre-qualification and
         password-protection or similar procedures which are reasonably designed
         to effectively prohibit access to such promotional materials by persons
         other than qualified broker-dealers and registered representatives
         thereof.

                  Any certificate signed by any officer of the Adviser and
delivered to the Representative or counsel for the Underwriters in connection
with the offering of the Preferred Shares shall be deemed a representation and
warranty by the Adviser, as to matters covered thereby, to each Underwriter.

                  3. Purchase and Sale. Subject to the terms and conditions and
in reliance upon the representations and warranties herein set forth, the Fund
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Fund, at a purchase price of $ per share, the
amount of the Preferred Shares set forth opposite such Underwriter's name in
Schedule I hereto.

                  4. Delivery and Payment. Delivery of and payment for the
Preferred Shares shall be made at 10:00 AM, New York City time, on      , 2004
or at such time on such later date not more than three Business Days after the
foregoing date as the Representative shall designate, which date and time may be
postponed by agreement between the Representative and the Fund or as provided in
Section 10 hereof (such date and time of delivery and payment for the Preferred
Shares being herein called the "Closing Date"). Delivery of the Preferred Shares
shall be made to the Representative for the respective accounts of the several
Underwriters against payment by the several Underwriters through the
Representative of the purchase price thereof to or upon the order of the Fund by
wire transfer payable in same-day funds to an account specified by the Fund.
Delivery of the Preferred Shares shall be made through the facilities of The
Depository Trust Company unless the Representative shall otherwise instruct.

                  5. Offering by Underwriters. It is understood that the several
Underwriters propose to offer the Preferred Shares for sale to the public as set
forth in the Prospectus.

                  6. Agreements of the Fund and the Adviser. The Fund and the
Adviser, jointly and severally, agree with the several Underwriters as follows:

                  (a) The Fund will use its best efforts to cause the
         Registration Statement, if not effective at the Execution Time, and any
         amendment thereof, to become effective. Prior to the termination of the
         offering of the Preferred Shares, the Fund will not file any amendment
         of the Registration Statement or supplement to the Prospectus or any
         Rule 462(b) Registration Statement unless the Fund has furnished you a
         copy for your review prior to filing and will not file any such
         proposed amendment or supplement to which you reasonably object.
         Subject to the foregoing sentence, if the Registration Statement has
         become or becomes effective pursuant to Rule 430A, or filing of the
         Prospectus is otherwise required under Rule 497, the Fund will cause
         the Prospectus, properly completed, and any supplement thereto to be
         filed in a form approved by the Representative with the Commission
         pursuant to Rule 497 within the time period prescribed and will provide
         evidence satisfactory to the Representative of such timely


<PAGE>
                                                                              12


         filing. The Fund will promptly advise the Representative (1) when the
         Registration Statement, if not effective at the Execution Time, shall
         have become effective, (2) when the Prospectus, and any supplement
         thereto, shall have been filed (if required) with the Commission
         pursuant to Rule 497 or when any Rule 462(b) Registration Statement
         shall have been filed with the Commission, (3) when, prior to
         termination of the offering of the Preferred Shares, any amendment to
         the Registration Statement shall have been filed or become effective,
         (4) of any request by the Commission or its staff for any amendment of
         the Registration Statement, or any Rule 462(b) Registration Statement,
         or for any supplement to the Prospectus or for any additional
         information, (5) of the issuance by the Commission of any stop order
         suspending the effectiveness of the Registration Statement or the
         institution or threatening of any proceeding for that purpose and (6)
         of the receipt by the Fund of any notification with respect to the
         suspension of the qualification of the Preferred Shares for sale in any
         jurisdiction or the institution or threatening of any proceeding for
         such purpose. The Fund will use its best efforts to prevent the
         issuance of any such stop order or the suspension of any such
         qualification and, if issued, to obtain as soon as possible the
         withdrawal thereof.

                  (b) If, at any time when a prospectus relating to the
         Preferred Shares is required to be delivered under the Act, any event
         occurs as a result of which, in the judgment of the Fund or in the
         reasonable opinion of counsel for the Underwriters, the Prospectus as
         then supplemented would include any untrue statement of a material fact
         or omit to state any material fact necessary to make the statements
         therein in the light of the circumstances under which they were made
         not misleading, or if it shall be necessary to amend the Registration
         Statement or supplement the Prospectus to comply with the Act, the 1940
         Act and the Rules and Regulations, the Fund promptly will (1) notify
         the Representative of any such event; (2) prepare and file with the
         Commission, subject to the second sentence of paragraph (a) of this
         Section 6, an amendment or supplement which will correct such statement
         or omission or effect such compliance; and (3) supply any supplemented
         Prospectus to you in such quantities as you may reasonably request.

                  (c) As soon as practicable, the Fund will make generally
         available to its security holders and to the Representative an earnings
         statement or statements of the Fund which will satisfy the provisions
         of Section 11(a) of the Act and Rule 158 under the Act.

                  (d) The Fund will furnish to the Representative and counsel
         for the Underwriters signed copies of the Registration Statement
         (including exhibits thereto) and to each other Underwriter a copy of
         the Registration Statement (without exhibits thereto) and, so long as
         delivery of a prospectus by an Underwriter or dealer may be required by
         the Act, as many copies of each Preliminary Prospectus and the
         Prospectus and any supplement thereto as the Representative may
         reasonably request.

                  (e) The Fund will cooperate with you and with counsel for the
         Underwriters in connection with the registration or qualification of
         the Preferred Shares for offering and sale by the several Underwriters
         and by dealers with the NASD and under the securities or blue sky laws
         of such jurisdictions as you may designate and will file such consents
         to service of process or other documents necessary or appropriate in
         order to effect such registration or qualification; provided that in no
         event shall the Fund be obligated to


<PAGE>
                                                                              13

         qualify to do business in any jurisdiction where it is not now so
         qualified or to take any action which would subject it to service of
         process in suits, other than those arising out of the offering or sale
         of the Preferred Shares, in any jurisdiction where it is not now so
         subject.

                  (f) Except as provided in this Agreement or pursuant to any
         dividend reinvestment plan of the Fund in effect on the date hereof,
         the Fund will not sell, contract to sell, grant any options or warrants
         to purchase or otherwise dispose of, any senior securities (as defined
         in the 1940 Act) other than the Preferred Shares or any securities
         convertible into, or exercisable, or exchangeable for, senior
         securities other than the Preferred Shares, or publicly announce an
         intention to effect any such transaction for a period of 180 days
         following the Execution Time, without the prior written consent of
         Citigroup Global Markets Inc.

                  (g) The Fund will comply with all applicable securities and
         other applicable laws, rules and regulations, including, without
         limitation, the Sarbanes-Oxley Act, and to use its best efforts to
         cause the Fund's trustees and officers, in their capacities as such, to
         comply with such laws, rules and regulations, including, without
         limitation, the provisions of the Sarbanes-Oxley Act.

                  (h) Except as stated in this Agreement and the Prospectus,
         neither the Fund nor the Adviser will take, directly or indirectly, any
         action designed to or that would constitute or that might reasonably be
         expected to cause or result in, under the Exchange Act or otherwise,
         stabilization or manipulation of the price of any security of the Fund
         to facilitate the sale or resale of the Preferred Shares.

                  (i) The Fund agrees to pay the costs and expenses relating to
         the following matters: (i) the preparation, printing or reproduction
         and filing with the Commission of the Registration Statement (including
         financial statements and exhibits thereto), each Preliminary
         Prospectus, the Prospectus and the 1940 Act Notification and each
         amendment or supplement to any of them; (ii) the printing (or
         reproduction) and delivery (including postage, air freight charges and
         charges for counting and packaging) of such copies of the Registration
         Statement, each Preliminary Prospectus, the Prospectus, any sales
         material and all amendments or supplements to any of them, as may, in
         each case, be reasonably requested for use in connection with the
         offering and sale of the Preferred Shares; (iii) the preparation,
         printing, authentication, issuance and delivery of certificates for the
         Preferred Shares, including any stamp or transfer taxes in connection
         with the original issuance and sale of the Preferred Shares; (iv) the
         printing (or reproduction) and delivery of this Agreement, any blue sky
         memorandum, dealer agreements and all other agreements or documents
         printed (or reproduced) and delivered in connection with the offering
         of the Preferred Shares; (v) the registration of the Preferred Shares
         under the Exchange Act; (vi) any registration or qualification of the
         Preferred Shares for offer and sale under the Preferred Shares or blue
         sky laws of the several states (including filing fees and the
         reasonable fees and expenses of counsel for the Underwriters relating
         to such registration and qualification); (vii) any filings required to
         be made with the NASD (including filing fees and the reasonable fees
         and expenses of counsel for the Underwriters relating to such filings);
         (viii) the transportation and other expenses


<PAGE>
                                                                              14


         incurred by or on behalf of Fund representatives in connection with
         presentations to prospective purchasers of the Preferred Shares; (ix)
         the fees and expenses of the Fund's accountants and the fees and
         expenses of counsel (including local and special counsel) for the Fund,
         (x) any expenses and fees for the cost of Rating Agencies (as defined
         below); and (xi) all other costs and expenses incident to the
         performance by the Fund of its obligations hereunder.

                  (j) The Fund will direct the investment of the net proceeds of
         the offering of the Preferred Shares in such a manner as to comply with
         the investment objectives, policies and restrictions of the Fund as
         described in the Prospectus.

                  (k) The Fund will comply with the requirements of Subchapter M
         of the Code to qualify as a regulated investment company under the
         Code.

                  (l) The Fund and the Adviser will use their reasonable best
         efforts to perform all of the agreements required of them by this
         Agreement and discharge all conditions of theirs to closing as set
         forth in this Agreement.

                  (m) The Fund will use its reasonable best efforts to cause the
         Preferred Shares, prior to the Closing Date, to be assigned a rating of
         `AAA' by Fitch Ratings ("Fitch") and `AAA' by Standard & Poor's ("S&P",
         and together with Fitch, the "Rating Agencies").

                  7. Conditions to the Obligations of the Underwriters. The
obligations of the Underwriters to purchase the Preferred Shares, shall be
subject to the accuracy of the representations and warranties on the part of the
Fund and the Adviser contained herein as of the Execution Time and the Closing
Date, to the accuracy of the statements of the Fund and Adviser made in any
certificates pursuant to the provisions hereof, to the performance by the Fund
or the Adviser of its obligations hereunder and to the following additional
conditions:

                  (a) If the Registration Statement has not become effective
         prior to the Execution Time, unless the Representative agrees in
         writing to a later time, the Registration Statement will become
         effective not later than (i) 6:00 PM New York City time on the date of
         determination of the public offering price, if such determination
         occurred at or prior to 3:00 PM New York City time on such date or (ii)
         9:30 AM on the Business Day following the day on which the public
         offering price was determined, if such determination occurred after
         3:00 PM New York City time on such date; if filing of the Prospectus,
         or any supplement thereto, is required pursuant to Rule 497, the
         Prospectus, and any such supplement, will be filed in the manner and
         within the time period required by Rule 497; and no stop order
         suspending the effectiveness of the Registration Statement shall have
         been issued and no proceedings for that purpose shall have been
         instituted or threatened.

                  (b) You shall have received on the Closing Date an opinion of
         Vedder, Price, Kaufman & Kammholz, special counsel for the Fund, dated
         the Closing Date and addressed to the Representative, in substantially
         the form attached as Exhibit A, which opinion may rely as to matters of
         Delaware law on the opinion of Morris, Nichols, Arsht & Tunnell,
         special Delaware counsel for the Fund, dated the Closing Date and
         addressed


<PAGE>
                                                                              15


         to the Representative, in substantially the form attached as Exhibit B.
         The opinion of Morris, Nichols, Arsht & Tunnell shall state that
         Simpson Thacher & Bartlett LLP, counsel for the Underwriters, may rely
         on such opinion as to matters of Delaware law for the purposes of
         rendering its opinion referenced in Section 7(d).

                  (c) You shall have received on the Closing Date an opinion of
         Vedder, Price, Kaufman & Kammholz, special counsel for the Adviser,
         dated the Closing Date and addressed to the Representative, in
         substantially the form attached as Exhibit C. The opinion of Vedder,
         Price, Kaufman & Kammholz shall state that Simpson Thacher & Bartlett
         LLP, counsel for the Underwriters, may rely on opinion 4 of Exhibit C
         as to matters of Illinois law for the purposes of rendering its opinion
         referenced in Section 7(d).

                  (d) The Representative shall have received from Simpson
         Thacher & Bartlett LLP, counsel for the Underwriters, such opinion or
         opinions, dated the Closing Date and addressed to the Representative,
         with respect to the issuance and sale of the Preferred Shares, the
         Registration Statement, the Prospectus (together with any supplement
         thereto) and other related matters as the Representative may reasonably
         require, and the Fund and the Adviser shall have furnished to such
         counsel such documents as they request for the purpose of enabling them
         to pass upon such matters.

                  (e) Each of the Fund and the Adviser shall have furnished to
         the Representative a certificate, signed by the president, any managing
         director or any vice president and of the controller, treasurer or
         assistant treasurer of each of the Fund and the Adviser, dated the
         Closing Date, to the effect that the signers of such certificates have
         carefully examined the Registration Statement, the Prospectus, any
         supplements to the Prospectus and this Agreement and that:

                           (i) The representations and warranties of the Fund or
                  the Adviser, as the case may be, in this Agreement are true
                  and correct on and as of the Closing Date with the same effect
                  as if made on the Closing Date and the Fund or the Adviser, as
                  the case may be, have complied with all the agreements and
                  satisfied all the conditions on its part to be performed or
                  satisfied at or prior to the Closing Date;

                           (ii) No stop order suspending the effectiveness of
                  the Registration Statement has been issued and no proceedings
                  for that purpose have been instituted or, to the Fund's or the
                  Adviser's knowledge, as the case may be, threatened; and

                           (iii) Since the date of the most recent financial
                  statements included in the Prospectus (exclusive of any
                  supplement thereto) (with respect to the Fund), and since the
                  date of the Prospectus (exclusive of any supplement thereto)
                  (with respect to the Adviser), there has been no material
                  adverse effect on the condition (financial or otherwise),
                  prospects, earnings, business or properties of the Fund or the
                  Adviser, as the case may be, whether or not arising from
                  transactions in the ordinary course of business, except as set
                  forth in or contemplated in the Prospectus (exclusive of any
                  supplement thereto).


<PAGE>
                                                                              16


                  (f) The Fund shall have requested and caused Deloitte & Touche
         LLP to have furnished to the Representative, at the Execution Time and
         at the Closing Date, letters, dated respectively as of the Execution
         Time and as of the Closing Date, in form and substance heretofore
         approved by the Representative.

                  (g) Subsequent to the Execution Time or, if earlier, the dates
         as of which information is given in the Registration Statement
         (exclusive of any amendment thereof) and the Prospectus (exclusive of
         any supplement thereto), there shall not have been (i) any material
         change specified in the letter referred to in paragraph (f) of this
         Section 7 delivered on the Closing Date from the letter delivered at
         the Execution Time or (ii) any change, or any development involving a
         prospective change, in or affecting the condition (financial or
         otherwise), earnings, business or properties of the Fund and the
         Adviser, whether or not arising from transactions in the ordinary
         course of business, except as set forth in or contemplated in the
         Prospectus (exclusive of any supplement thereto) the effect of which,
         in any case referred to in clause (i) or (ii) above, is, in the sole
         judgment of the Representative, so material and adverse as to make it
         impractical or inadvisable to proceed with the offering or delivery of
         the Preferred Shares as contemplated by the Registration Statement
         (exclusive of any amendment thereof) and the Prospectus (exclusive of
         any supplement thereto).

                  (h) The Fund shall have furnished to you as soon as
         practicable from the Closing Date a report showing compliance with the
         asset coverage requirements of the 1940 Act and a Preferred Shares
         Basic Maintenance Report (as defined in the Statement), each in form
         and substance satisfactory to you. Each such report shall assume the
         receipt of the net proceeds from the sale of the Preferred Shares and
         may use portfolio holdings and valuations as of the close of business
         of any day not more than six business days preceding the Closing Date,
         provided, however, that the Fund represents in such report that its
         total net assets as of the Closing Date have not declined by 5% or more
         from such valuation date.

                  (i) The Fund shall have delivered and the Underwriters shall
         have received evidence satisfactory to the Underwriters that each
         series of Preferred Shares is rated `AAA' by Fitch and `AAA' by S&P as
         of the Closing Date, and there shall not have been given any notice of
         any intended or potential downgrading, or of any review for a potential
         downgrading, in the rating accorded to the shares of each series of the
         Preferred Shares by either Rating Agency.

                  (j) Prior to the Closing Date, the Fund and the Adviser shall
         have furnished to the Representative such further information,
         certificates and documents as the Representative may reasonably
         request.

                  If any of the conditions specified in this Section 7 shall not
have been fulfilled when and as provided in this Agreement, or if any of the
opinions and certificates mentioned above or elsewhere in this Agreement shall
not be reasonably satisfactory in form and substance to the Representative and
counsel for the Underwriters, this Agreement and all obligations of the
Underwriters hereunder may be canceled at, or at any time prior to, the Closing
Date by the


<PAGE>
                                                                              17


Representative. Notice of such cancellation shall be given to the Fund in
writing or by telephone or facsimile confirmed in writing.

                  The documents required to be delivered by this Section 7 shall
be delivered at the office of Simpson Thacher & Bartlett LLP, counsel for the
Underwriters, at 425 Lexington Avenue, New York, New York, 10017, on the Closing
Date.

                  8. Reimbursement of Underwriters' Expenses. If the sale of the
Preferred Shares provided for herein is not consummated because any condition to
the obligations of the Underwriters set forth in Section 7 hereof is not
satisfied, because of any termination pursuant to Section 11 hereof or because
of any refusal, inability or failure on the part of the Fund or the Adviser to
perform any agreement herein or comply with any provision hereof other than by
reason of a default by any of the Underwriters, the Fund and the Adviser,
jointly and severally, agree to reimburse the Underwriters severally through
Citigroup Global Markets Inc. on demand for all reasonable out-of-pocket
expenses (including reasonable fees and disbursements of counsel) that shall
have been incurred by them in connection with the proposed purchase and sale of
the Preferred Shares.

                  9. Indemnification and Contribution. (a) The Fund and the
Adviser, jointly and severally, agree to indemnify and hold harmless each of you
and each other Underwriter, the directors, officers, employees and agents of
each Underwriter and each person who controls any Underwriter within the meaning
of either the Act or the Exchange Act against any and all losses, claims,
damages or liabilities, joint or several (including reasonable costs of
investigation), to which they or any of them may become subject under the Act,
the Exchange Act or other Federal or state statutory law or regulation, at
common law or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, any Preliminary Prospectus, any sales
material (or any amendment or supplement to any of the foregoing), or arise out
of or are based upon the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and agrees to reimburse each such indemnified party, as
incurred, for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Fund and Adviser will not be
liable in any such case to the extent that any such loss, claim, damage or
liability arises out of or is based upon any such untrue statement or alleged
untrue statement or omission or alleged omission made therein in reliance upon
and in conformity with written information furnished to the Fund or Adviser by
or on behalf of any Underwriter through the Representative specifically for
inclusion therein. This indemnity agreement will be in addition to any liability
which the Fund and Adviser may otherwise have.

                  (b) Each Underwriter severally and not jointly agrees to
indemnify and hold harmless each of the Fund and the Adviser, each of their
directors, trustees, each officer who signs the Registration Statement, and each
person who controls the Fund or the Adviser within the meaning of either the Act
or the Exchange Act, to the same extent as the foregoing indemnity from the Fund
and the Adviser to each Underwriter, but only with reference to written
information relating to such Underwriter furnished to the Fund or the Adviser by
or on behalf of such Underwriter through the Representative specifically for
inclusion in the documents referred


<PAGE>
                                                                              18


to in the foregoing indemnity. This indemnity agreement will be in addition to
any liability which any Underwriter may otherwise have. The Fund and the Adviser
acknowledge that the statements set forth in the last paragraph of the cover
page regarding delivery of the Preferred Shares and, under the heading
"Underwriting", (i) the list of Underwriters and their respective participation
in the sale of the Preferred Shares, (ii) the sentences related to concessions
and reallowances, (iii) the paragraph related to stabilization, syndicate
covering transactions and penalty bids and (iv) the paragraph related to
prospectuses in electronic format in any Preliminary Prospectus and the
Prospectus constitute the only information furnished in writing by or on behalf
of the several Underwriters for inclusion in any Preliminary Prospectus or the
Prospectus.

                  (c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against the indemnifying party
under this Section 9, notify the indemnifying party in writing of the
commencement thereof; but the failure so to notify the indemnifying party (i)
will not relieve it from liability under paragraph (a) or (b) above unless and
to the extent it did not otherwise learn of such action and such failure results
in the forfeiture by the indemnifying party of substantial rights and defenses
and (ii) will not, in any event, relieve the indemnifying party from any
obligations to any indemnified party other than the indemnification obligation
provided in paragraph (a) or (b) above. The indemnifying party shall be entitled
to appoint counsel of the indemnifying party's choice at the indemnifying
party's expense to represent the indemnified party in any action for which
indemnification is sought (in which case the indemnifying party shall not
thereafter be responsible for the fees and expenses of any separate counsel
retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party.

                  (d) In the event that the indemnity provided in paragraph (a)
or (b) of this Section 9 is unavailable to or insufficient to hold harmless an
indemnified party for any reason, the Fund, the Adviser and the Underwriters
severally agree to contribute to the aggregate losses, claims, damages and
liabilities (including legal or other expenses reasonably incurred in connection
with investigating or defending same) (collectively "Losses") to which the Fund,
the Adviser and one or more of the Underwriters may be subject in such
proportion as is appropriate to reflect the relative benefits received by the
Fund and the Adviser on the one hand (treated jointly for this purpose as one
person) and by the Underwriters on the other from the offering of the Preferred
Shares; provided, however, that in no case shall any Underwriter (except as may
be

<PAGE>
                                                                              19


provided in any agreement among underwriters relating to the offering of the
Preferred Shares) be responsible for any amount in excess of the underwriting
discount or commission applicable to the Preferred Shares purchased by such
Underwriter hereunder. If the allocation provided by the immediately preceding
sentence is unavailable for any reason, the Fund, the Adviser and the
Underwriters severally shall contribute in such proportion as is appropriate to
reflect not only such relative benefits but also the relative fault of the Fund
and the Adviser on the one hand (treated jointly for this purpose as one person)
and of the Underwriters on the other in connection with the statements or
omissions which resulted in such Losses as well as any other relevant equitable
considerations. Benefits received by the Fund and the Adviser (treated jointly
for this purpose as one person) shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses) received by it, and
benefits received by the Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set forth on the cover
page of the Prospectus. Relative fault shall be determined by reference to,
among other things, whether any untrue or any alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information provided by the Fund and the Adviser on the one hand
(treated jointly for this purpose as one person) or the Underwriters on the
other, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such untrue statement or
omission. The Fund, the Adviser and the Underwriters agree that it would not be
just and equitable if contribution pursuant to this Section 9 were determined by
pro rata allocation or any other method of allocation which does not take
account of the equitable considerations referred to above. Notwithstanding the
provisions of this paragraph (d), no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 9, each person who controls an
Underwriter within the meaning of either the Act or the Exchange Act and each
director, officer, employee and agent of an Underwriter shall have the same
rights to contribution as such Underwriter, and each person who controls the
Fund or the Adviser within the meaning of either the Act or the Exchange Act,
each officer of the Fund and the Adviser who shall have signed the Registration
Statement and each director of the Fund and the Adviser shall have the same
rights to contribution as the Fund and the Adviser, subject in each case to the
applicable terms and conditions of this paragraph (d).

                  (e) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened action, suit or proceeding in respect of which any indemnified party
is or could have been a party and indemnity could have been sought hereunder by
such indemnified party, unless such settlement includes an unconditional release
of such indemnified party from all liability from claimants on claims that are
the subject matter of such action, suit or proceeding.

                  (f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 9 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 9 and the
representations and warranties of the Fund and the Adviser set forth in this
Agreement shall remain operative and in full force and effect, regardless of (i)
any investigation made by or on behalf of any Underwriter or any person
controlling any Underwriter, the Fund, the Adviser or their shareholders,
trustees, directors, managers, members or officers or any person controlling


<PAGE>
                                                                              20


the Fund or the Adviser (control to be determined within the meaning of the Act
or the Exchange Act), (ii) acceptance of any Preferred Shares and payment
therefor hereunder and (iii) any termination of this Agreement. A successor to
any Underwriter or to the Fund, the Adviser or their shareholders, trustees,
directors, managers, members or officers or any person controlling any
Underwriter, the Fund or the Adviser shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section
9.

                  10. Default by an Underwriter. If any one or more Underwriters
shall fail to purchase and pay for any of the Preferred Shares agreed to be
purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be obligated
severally to take up and pay for (in the respective proportions which the amount
of Preferred Shares set forth opposite their names in Schedule I hereto bears to
the aggregate amount of Preferred Shares set forth opposite the names of all the
remaining Underwriters or in such other proportion as you may specify in
accordance with the Citigroup Global Markets Inc. Master Agreement Among
Underwriters) the Preferred Shares which the defaulting Underwriter or
Underwriters agreed but failed to purchase; provided, however, that in the event
that the aggregate amount of Preferred Shares which the defaulting Underwriter
or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate
amount of Preferred Shares set forth in Schedule I hereto, the remaining
Underwriters shall have the right to purchase all, but shall not be under any
obligation to purchase any, of the Preferred Shares, and if such nondefaulting
Underwriters do not purchase all the Preferred Shares, this Agreement will
terminate without liability to any nondefaulting Underwriter, the Fund or the
Adviser. In the event of a default by any Underwriter as set forth in this
Section 10, the Closing Date shall be postponed for such period, not exceeding
five Business Days, as the Representative shall determine in order that the
required changes in the Registration Statement and the Prospectus or in any
other documents or arrangements may be effected. Nothing contained in this
Agreement shall relieve any defaulting Underwriter of its liability, if any, to
the Fund and any nondefaulting Underwriter for damages occasioned by its default
hereunder.

                  11. Termination. This Agreement shall be subject to
termination in the absolute discretion of the Representative, without liability
on the part of the Underwriters to the Fund or the Adviser, by notice given to
the Fund or the Adviser prior to delivery of and payment for the Preferred
Shares, if at any time prior to such time (i) trading in the Common Shares shall
have been suspended by the Commission or the NYSE or trading in securities
generally on the NYSE shall have been suspended or limited or minimum prices
shall have been established on the NYSE, (ii) a banking moratorium shall have
been declared either by Federal or New York State authorities or (iii) there
shall have occurred any outbreak or escalation of hostilities, declaration by
the United States of a national emergency or war, or other calamity or crisis
the effect of which on financial markets is such as to make it, in the sole
judgment of the Representative, impractical or inadvisable to proceed with the
offering or delivery of the Preferred Shares as contemplated by the Prospectus
(exclusive of any supplement thereto).

                  12. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Fund and the Adviser or their officers and of the Underwriters set forth in or
made pursuant to this Agreement will remain in full force and effect, regardless
of any investigation made by or on behalf of any Underwriter or


<PAGE>
                                                                              21


the Fund or the Adviser or any of the officers, trustees, directors, employees,
agents or controlling persons referred to in Section 9 hereof, and will survive
delivery of and payment for the Preferred Shares. The provisions of Sections 8
and 9 hereof shall survive the termination or cancellation of this Agreement.

                  13. Notices. All communications hereunder will be in writing
and effective only on receipt, and, if sent to the Representative, will be
mailed, delivered or telefaxed to the Citigroup Global Markets Inc. General
Counsel (fax no.: (212) 816-7912) and confirmed to the General Counsel,
Citigroup Global Markets Inc., at 388 Greenwich Street, New York, New York,
10013, Attention: General Counsel; or, if sent to the Fund or the Adviser, will
be mailed, delivered or telefaxed to: c/o Calamos Asset Management, Inc. at 1111
E. Warrenville Road, Naperville, Illinois 60563, Attention: General Counsel,
(fax no.: (630) 245-6343).

                  14. Successors. This Agreement will inure to the benefit of
and be binding upon the parties hereto and their respective successors and the
officers, trustees, directors, employees, agents and controlling persons
referred to in Section 9 hereof, and no other person will have any right or
obligation hereunder.

                  15. Applicable Law. This Agreement will be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed within the State of New York.

                  16. Counterparts. This Agreement may be signed in one or more
counterparts, each of which shall constitute an original and all of which
together shall constitute one and the same agreement.

                  17. Headings. The section headings used herein are for
convenience only and shall not affect the construction hereof.

                  18. Definitions. The terms which follow, when used in this
Agreement, shall have the meanings indicated.

                  "1940 Act" shall mean the Investment Company Act of 1940, as
         amended.

                  "1940 Act Rules and Regulations" shall mean the rules and
         regulations of the Commission under the 1940 Act.

                  "1940 Act Notification" shall mean a notification of
         registration of the Fund as an investment company under the 1940 Act on
         Form N-8A, as the 1940 Act Notification may be amended from time to
         time.

                  "Act" shall mean the Securities Act of 1933, as amended.

                  "Act Rules and Regulations" shall mean the rules and
         regulations of the Commission under the Act.

                  "Advisers Act" shall mean the Investment Advisers Act of 1940,
         as amended.


<PAGE>
                                                                              22


                  "Advisers Act Rules and Regulations" shall mean the rules and
         regulations of the Commission under the Advisers Act.

                  "Business Day" shall mean any day other than a Saturday, a
         Sunday or a legal holiday or a day on which banking institutions or
         trust companies are authorized or obligated by law to close in New York
         City.

                  "Commission" shall mean the Securities and Exchange
         Commission.

                  "Effective Date" shall mean each date and time that the
         Registration Statement, any post-effective amendment or amendments
         thereto and any Rule 462(b) Registration Statement became or become
         effective.

                  "Exchange Act" shall mean the Securities Exchange Act of 1934,
         as amended, and the rules and regulations of the Commission promulgated
         thereunder.

                  "Execution Time" shall mean the date and time that this
         Agreement is executed and delivered by the parties hereto.

                  "Preliminary Prospectus" shall mean any preliminary prospectus
         (including the statement of additional information incorporated by
         reference therein) referred to in paragraph 1(a) above and any
         preliminary prospectus (including the statement of additional
         information incorporated by reference therein) included in the
         Registration Statement at the Effective Date that omits Rule 430A
         Information.

                  "Prospectus" shall mean the prospectus (including the
         statement of additional information incorporated by reference therein)
         relating to the Preferred Shares that is first filed pursuant to Rule
         497 after the Execution Time or, if no filing pursuant to Rule 497 is
         required, shall mean the form of final prospectus (including the
         statement of additional information incorporated by reference therein)
         relating to the Preferred Shares included in the Registration Statement
         at the Effective Date.

                  "Registration Statement" shall mean the registration statement
         referred to in paragraph 1(a) above, including exhibits and financial
         statements, as amended at the Execution Time (or, if not effective at
         the Execution Time, in the form in which it shall become effective)
         and, in the event any post-effective amendment thereto or any Rule
         462(b) Registration Statement becomes effective prior to the Closing
         Date, shall also mean such registration statement as so amended or such
         Rule 462(b) Registration Statement, as the case may be. Such term shall
         include any Rule 430A Information deemed to be included therein at the
         Effective Date as provided by Rule 430A.

                  "Rule 430A" and "Rule 462" refer to such rules under the Act.

                  "Rule 430A Information" shall mean information with respect to
         the Preferred Shares and the offering thereof permitted to be omitted
         from the Registration Statement when it becomes effective pursuant to
         Rule 430A.


<PAGE>
                                                                              23


                  "Rule 462(b) Registration Statement" shall mean a registration
         statement and any amendments thereto filed pursuant to Rule 462(b)
         relating to the offering covered by the registration statement referred
         to in Section 1(a) hereof.

                  "Rule 497" refers to Rule 497(c) or 497(h) under the Act, as
         applicable.

                  "Rules and Regulations" shall mean, collectively, the Act
         Rules and Regulations and the 1940 Act Rules and Regulations.



<PAGE>
                                                                              24




                  If the foregoing is in accordance with your understanding of
our agreement, please sign and return to us the enclosed duplicate hereof,
whereupon this letter and your acceptance shall represent a binding agreement
among the Fund, the Adviser and the several Underwriters.



                                     Very truly yours,

                                     CALAMOS STRATEGIC TOTAL RETURN FUND


                                     By:
                                          --------------------------------------
                                          Name:
                                          Title:


                                     CALAMOS ASSET MANAGEMENT, INC.


                                     By:
                                          --------------------------------------
                                          Name:
                                          Title:




<PAGE>
                                                                              25




The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

Citigroup Global Markets Inc.

     By:
          ---------------------------------------------
          Name:
          Title:

For itself and the other
several Underwriters named in
Schedule I to the foregoing
Agreement.


<PAGE>
                                   SCHEDULE I


<TABLE>
<CAPTION>
                                         NUMBER        NUMBER       NUMBER       NUMBER       NUMBER         NUMBER        NUMBER
                                       OF SHARES     OF SHARES    OF SHARES    OF SHARES    OF SHARES      OF SHARES     OF SHARES
                                           OF            OF           OF           OF           OF             OF            OF
UNDERWRITERS                            SERIES M      SERIES T     SERIES W    SERIES TH     SERIES F       SERIES A      SERIES B
- ------------
<S>                                     <C>          <C>          <C>          <C>          <C>            <C>           <C>

Citigroup Global Markets Inc. ........

Merrill Lynch, Pierce, Fenner & Smith
                     Incorporated.....

UBS Securities LLC....................



                  Total...............
                                          ====          ====         ====         ====         ====         ====            ====
</TABLE>



<PAGE>


                                                                       EXHIBIT A



     Opinions of Vedder, Price, Kaufman & Kammholz, P.C. Regarding the Fund



         1. The Fund has been duly formed and is validly existing in good
standing as a statutory trust under the Delaware Act. The Fund has the statutory
trust power and authority to own property and conduct its business as described
in the Prospectus;

         2. Under the Delaware Act and the Declaration, the execution and
delivery of the Underwriting Agreement and each of the Fund Agreements by the
Fund, and the performance by the Fund of its obligations thereunder, have been
duly authorized by all requisite statutory trust action on the part of the Fund;
the Underwriting Agreement and each of the Fund Agreements have been duly
executed and delivered by the Fund; each of the Fund Agreements constitute the
valid and binding agreement of the Fund enforceable against the Fund in
accordance with its terms; and the Underwriting Agreement and each of the Fund
Agreements comply with all applicable provisions of the 1940 Act and the 1940
Act Rules and Regulations and the Advisers Act and the Advisers Act Rules and
Regulations;

         3. The Common Shares have been duly authorized for issuance by the
Fund, are validly issued and, subject to the qualifications below, fully paid
and non-assessable beneficial interests in the Fund. The holders of Common
Shares will be, subject to the terms of the Declaration, entitled to the same
limitation of personal liability extended to stockholders of private
corporations for profit organized under the General Corporation Law of the State
of Delaware; provided, however, that we express no opinion with respect to the
liability of any holder of Common Shares who is, was or may become a named
Trustee of the Fund;

         4. The Shares have been duly authorized for issuance by the Fund and,
when issued and delivered against payment therefor in accordance with the terms,
conditions, requirements and procedures set forth in the Underwriting Agreement,
will be validly issued and, subject to the qualifications below, fully paid and
non-assessable beneficial interests in the Fund. The holders of Shares will be,
subject to the terms of the Declaration, entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware; provided,
however, that we express no opinion with respect to the liability of any holder
of Shares who is, was or may become a named Trustee of the Fund;

         5. Under the Declaration and the Delaware Act, the issuance of the
Shares is not subject to preemptive rights;

         6. The form of certificate evidencing the Shares complies with all
applicable requirements of the Delaware Act and the NYSE;

         7. The execution and delivery by the Fund of the Underwriting Agreement
and the Fund Agreements, the consummation by the Fund of the transactions
contemplated by the Underwriting Agreement and the Fund Agreements, the
performance by the Fund of its obligations thereunder, the issuance and sale by
the Fund of the Shares will not violate (i) the Organizational Documents or (ii)
any applicable Delaware law or administrative regulation;


                                       A-1

<PAGE>


         8. None of the issuance and sale of the Shares by the Fund pursuant to
the Underwriting Agreement, the execution and delivery of the Underwriting
Agreement or any of the Fund Agreements by the Fund, or the performance by the
Fund of its agreements under the Underwriting Agreement or any of the Fund
Agreements (A) requires any consent, approval, authorization or other order of
or registration or filing with, the Commission, the National Association of
Securities Dealers, Inc., or any national securities exchange, or governmental
body or agency, or arbitrator or court of the United States of America, or State
of Illinois or State of Delaware or, based solely on the Docket Search, an order
of any Delaware Court (as that term is defined in the opinion of Morris,
Nichols, Arsht & Tunnell) (except (1) the absence of which, either individually
or in the aggregate, would not have a material adverse effect on the Fund or the
offering of the Shares as contemplated in the Underwriting Agreement; (2) such
as may have been obtained prior to the date hereof; and (3) such as may be
required for compliance with state securities or blue sky laws of various
jurisdictions) or (B) violates or will violate or constitutes or will constitute
a breach of any of the provisions of the Statement or the Organizational
Documents of the Fund or (C) violates or will violate or constitutes or will
constitute a breach of, or a default under, any material agreement, indenture,
lease or other instrument known to us to which the Fund is party or by which it
or any of its properties may be bound, or violates any existing material United
States of America or State of Illinois or State of Delaware statute, law or
regulation (assuming compliance with all applicable state securities and blue
sky laws, and except that, in the published opinion of the Commission, the
indemnification provisions in the Underwriting Agreement and the Fund
Agreements, insofar as they relate to indemnification for liabilities arising
under the 1933 Act, are against public policy as expressed in the 1933 Act and
therefore unenforceable), or violates any judgment, injunction, order or decree
known to us to be applicable to the Fund or any of its properties, or will
result in the creation or imposition of any material lien, charge or encumbrance
upon any property or assets of the Fund pursuant to the terms of any agreement
or instrument known to us to which the Fund is a party or by which any of its
property or assets is bound. To the best of our knowledge, the Fund is not
subject to any order of any court or of any arbitrator, governmental authority
or administrative agency of the United States of America or the State of
Illinois;

         9. Based solely on the Docket Search, there is not any Delaware court
action, suit or proceeding pending against the Fund.

         10. The Registration Statement is effective under the 1933 Act and was
filed under the 1940 Act; any required filing of the Prospectus pursuant to Rule
497 of the 1933 Act Rules and Regulations has been made within the time periods
required by Rule 497; no stop-order suspending the effectiveness of the
Registration Statement or order pursuant to Section 8(e) of the 1940 Act has
been issued and to the best of our knowledge, no proceeding for any such purpose
has been instituted or is pending or threatened in writing by the Commission;

         11. The Fund is registered under the 1940 Act as a closed-end
diversified management investment company;

         12. The description of the authorized Common Shares contained under the
captions "Description of Preferred Shares," "The Auction" and "Description of
Common Shares" in the Prospectus conforms in all material respects as to legal
matters to the terms thereof contained in the Fund's Declaration and Statement;

                                       A-2
<PAGE>


         13. The statements made in the Prospectus under the captions "U.S.
Federal Income Tax Matters," insofar as they constitute matters of law or legal
conclusions, have been reviewed by us and constitute accurate statements of any
such matters of law or legal conclusions;

         14. The Registration Statement and the Prospectus and each amendment or
supplement to the Registration Statement and the Prospectus as of their
respective issue dates (except the financial statements and other financial data
contained therein, as to which we express no opinion) comply as to form in all
material respects with the requirements of the 1933 Act, the 1940 Act and the
Rules and Regulations;

         15. To the best of our knowledge, there are no legal or governmental
proceedings pending or threatened in writing against the Fund, or to which the
Fund or any of its properties is subject, that are required to be described in
the Registration Statement or the Prospectus, but are not described therein as
required;

         16. To the best of our knowledge, there are no material agreements,
contracts, indentures, leases or other instruments that are required to be
described in the Registration Statement or the Prospectus, or to be filed as an
exhibit to the Registration Statement that are not described or filed as
required by the 1933 Act, the 1940 Act or the Rules and Regulations; and

         We have participated in conferences with officers and employees of the
Fund, Adviser, representatives of the independent auditors for the Fund, special
Delaware counsel to the Fund, the Underwriters and counsel for the Underwriters
at which the contents of the Registration Statement and the Prospectus and
related matters were discussed and, although we are not passing upon, and do not
assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Registration Statement or the Prospectus, except to
the limited extent otherwise covered by paragraphs 12 and 13 hereof and have
made no independent check or verification thereof, on the basis of the
foregoing, no facts have come to our attention that would have led us to believe
that (a) the Registration Statement, at the time it became effective, contained
any untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, (b) the Prospectus, as of its date and as of the Closing Date,
contained or contains an untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements contained therein, in
the light of the circumstances under which they were made, not misleading, or
(c) the 1940 Act Notification as of January 7, 2004 contained any untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary in order to make the statements therein not
misleading, except that in each case we express no belief with respect to the
financial statements, schedules and other financial information and statistical
data included therein or excluded therefrom or the exhibits to the Registration
Statement.


                                       A-3
<PAGE>

                                                                       EXHIBIT B


                  Opinions of Morris, Nichols, Arsht & Tunnell

         1. The Fund has been duly formed and is validly existing in good
standing as a statutory trust under the Delaware Act. The Fund has the statutory
trust power and authority to own property and conduct its business as described
in the Prospectus.

         2. Under the Delaware Act and the Governing Instrument, the execution
and delivery of the Underwriting Agreement and each of the Fund Agreements by
the Fund, and the performance by the Fund of its obligations thereunder, have
been duly authorized by all requisite statutory trust action on the part of the
Fund.

         3. The Common Shares have been duly authorized for issuance by the
Fund, are validly issued and, subject to the qualifications below, fully paid
and non-assessable beneficial interests in the Common Series. The holders of the
Common Shares will be, subject to the terms of the Governing Instrument,
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware; provided, however, that we express no opinion with
respect to the liability of any holder of Common Shares who is, was or may
become a named Trustee of the Fund.

         4. The Preferred Shares have been duly authorized for issuance by the
Fund and, when issued and delivered against payment therefor in accordance with
the terms, conditions, requirements and procedures set forth in the Underwriting
Agreement, will be validly issued and, subject to the qualifications below,
fully paid and non-assessable beneficial interests in the Series. The holders of
Preferred Shares will be, subject to the terms of the Governing Instrument,
entitled to the same limitation of personal liability extended to stockholders
of private corporations for profit organized under the General Corporation Law
of the State of Delaware; provided, however, that we express no opinion with
respect to the liability of any holder of Preferred Shares who is, was or may
become a named Trustee of the Fund.

         5. Under the Governing Instrument and the Delaware Act, the issuance of
the Preferred Shares is not subject to preemptive rights.

         6. The form of Preferred Shares Certificate complies with all
applicable requirements of the Delaware Act.

         7. No authorization, approval, consent or order of any governmental
authority or agency of the State of Delaware or, based solely on the Docket
Search, an order of any Delaware Court, is required to be obtained by the Fund
solely as a result of the issuance and sale of the Preferred Shares, the
consummation by the Fund of the transactions contemplated by the Underwriting
Agreement and the Fund Agreements or the performance by the Fund of its
obligations thereunder, or the adoption of the Automatic Dividend Reinvestment
Plan.

                                       B-1

<PAGE>

         8. The execution and delivery by the Fund of the Underwriting Agreement
and the Fund Agreements, the consummation by the Fund of the transactions
contemplated by the Underwriting Agreement and the Fund Agreements, the
performance by the Fund of its obligations thereunder, the issuance and sale by
the Fund of the Preferred Shares and the adoption of the Automatic Dividend
Reinvestment Plan will not violate (i) the Certificate or the Governing
Instrument or (ii) any applicable Delaware law or administrative regulation.

         9. Based solely on the Docket Search, there is not in any Delaware
Court any action, suit or proceeding pending against the Fund.

         With respect to the opinions expressed in paragraphs 3 and 4 above, we
note that, pursuant to Section 2 of Article VIII of the Governing Instrument,
the Trustees have the power to cause each Shareholder, or each Shareholder of
any particular Series, to pay directly, in advance or arrears, for charges of
the Fund's custodian or transfer, shareholder servicing or similar agent, an
amount fixed from time to time by the Trustees, by setting off such charges due
from such Shareholder from declared but unpaid dividends owed such Shareholder
and/or by reducing the number of Shares in the account of such Shareholder by
that number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.


                                       B-2

<PAGE>
                                                                       EXHIBIT C



    Opinions of Vedder, Price, Kaufman & Kammholz, P.C. Regarding the Adviser




         1. The Adviser is validly existing as a corporation in good standing
under the laws of the State of Illinois.

         2. The Adviser has full corporate power and authority to own, lease and
operate its properties and to conduct its business as described in the
Prospectus and to enter into and perform its obligations under the Underwriting
Agreement, the Management Agreement and the Accounting Agreement.

         3. The Adviser is registered with the Commission as an investment
adviser under the Advisers Act and is not prohibited by the Advisers Act, the
Advisers Act Rules and Regulations, the 1940 Act or the 1940 Act Rules and
Regulations from acting under the Management Agreement and the Accounting
Agreement as contemplated by the Prospectus.

         4. The Underwriting Agreement, the Management Agreement and the
Accounting Agreement have been duly authorized by all requisite corporate action
on the part of the Adviser, have each been duly executed and delivered on behalf
of the Adviser, and each of the Management Agreement and the Accounting
Agreement constitutes a valid and binding obligation of the Adviser, enforceable
against the Adviser in accordance with its terms.

         5. To the best of our knowledge, there is not pending or threatened in
writing any action, suit, proceeding, inquiry or investigation, to which the
Adviser is a party, or to which the property of the Adviser is subject, before
or brought by any court or governmental agency or body, which might reasonably
be expected to (i) result in any material adverse change in the condition,
financial or otherwise, earnings, business affairs or business prospects of the
Adviser, (ii) materially and adversely affect the properties or assets of the
Adviser or (iii) materially impair or adversely affect the ability of the
Adviser to function as an investment adviser or perform its obligations under
the Management Agreement and the Accounting Agreement, or which is required to
be disclosed in the Registration Statement or the Prospectus.

         6. No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency of the United States of America or the State of Illinois (other than (i)
under the 1933 Act, the 1940 Act and the Rules and Regulations; (ii) such as
have been obtained; and (iii) as may be required under the securities or blue
sky laws of the various states, as to each of which we express no opinion) is
necessary or required in connection with the performance by the Adviser of its
obligations under the Management Agreement and the Accounting Agreement.

         7. The execution and delivery of the Underwriting Agreement the
Management Agreement and the Accounting Agreement by the Adviser, and


                                      C-1

<PAGE>

performance by the Adviser of its obligations thereunder do not and will not,
whether with or without the giving of notice or lapse of time or both: (A)
result in the creation or imposition of any lien, charge or encumbrance upon any
property or assets of the Adviser, or (B) violate or constitute a breach of, or
default under any material contract, indenture, mortgage, deed of trust, loan or
credit agreement, note, lease or any other material agreement or instrument
known to us and to which the Adviser is a party or by which it may be bound, or
to which any of the property or assets of the Adviser is subject, or (C) violate
any applicable federal or State of Illinois law, statute, rule, regulation, or
any judgment, order, writ or decree, known to us, of any governmental authority
or administrative agency of the United States of America or the State of
Illinois (except in each case for such violations, breaches or defaults or
liens, charges or encumbrances that would not have a material adverse effect on
the ability of the Adviser to perform its obligations under the Management
Agreement and the Accounting Agreement) nor will such action result in any
violation of the provisions of the Organizational Documents of the Adviser.




                                      C-2

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.H2
<SEQUENCE>4
<FILENAME>c82676a1exv99wh2.txt
<DESCRIPTION>FORM OF STANDARD DEALER AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT h.2

                        MASTER SELECTED DEALER AGREEMENT

                                                                    July 1, 1999


Ladies and Gentlemen:

      In connection with registered public offerings of securities for which we
are acting as manager or co-manager of an underwriting syndicate or unregistered
offerings of securities for which we are acting as manager or co-manager of the
initial purchasers, you may be offered the right as a selected dealer to
purchase as principal a portion of such securities. This will confirm our mutual
agreement as to the general terms and conditions applicable to your
participation in any such selected dealer group.

      1. APPLICABILITY OF THIS AGREEMENT. The terms and conditions of this
Agreement shall be applicable to any offering of securities ("Securities"),
whether pursuant to a registration statement filed under the Securities Act of
1933, as amended (the "Securities Act"), or exempt from registration thereunder,
in respect of which Salomon Smith Barney Inc. (acting for its own account or for
the account of any underwriting or similar group or syndicate) is responsible
for managing or otherwise implementing the sale of the Securities to selected
dealers ("Selected Dealers") and has expressly informed you that such terms and
conditions shall be applicable. Any such offering of Securities to you as a
Selected Dealer is hereinafter called an "Offering". In the case of any Offering
where we are acting for the account of any underwriting or similar group or
syndicate ("Underwriters"), the terms and conditions of this Agreement shall be
for the benefit of, and binding upon, such Underwriters, including, in the case
of any Offering where we are acting with others as representatives of
Underwriters, such other representatives.

      2. CONDITIONS OF OFFERING; ACCEPTANCE AND PURCHASES. Any Offering will be
subject to delivery of the Securities and their acceptance by us and any other
Underwriters, may be subject to the approval of all legal matters by counsel and
the satisfaction of other conditions, and may be made on the basis of
reservation of Securities or an allotment against subscription. We will advise
you by telecopy, telex or other form of written communication ("Written
Communication", which term, in the case of any Offering described in Section
3(a) or 3(b) hereof, may include a prospectus or offering circular) of the
particular method and supplementary terms and conditions (including, without
limitation, the information as to prices and the offering date referred to in
Section 3(c) hereof) of any Offering in which you are invited to participate. To
the extent such supplementary terms and conditions are inconsistent with any
provision herein, such terms and conditions shall supersede any such provision.
Unless otherwise indicated in any such Written Communication, acceptances and
other communications
<PAGE>
by you with respect to an Offering should be sent to the appropriate Syndicate
Department of Salomon Smith Barney Inc. We may close the subscription books at
any time in our sole discretion without notice, and we reserve the right to
reject any acceptance in whole or in part.

      Unless notified otherwise by us, Securities purchased by you shall be paid
for on such date as we shall determine, on one day's prior notice to you, by
wire transfer payable in immediately available funds to the order of Salomon
Smith Barney Inc., in an amount equal to the Public Offering Price (as
hereinafter defined) or, if we shall so advise you, at such Public Offering
Price less the Concession (as hereinafter defined). If Securities are purchased
and paid for at such Public Offering Price, such Concession will be paid after
the termination of the provisions of Section 3(c) hereof with respect to such
Securities. Unless notified otherwise by us, payment for and delivery of
Securities purchased by you shall be made through the facilities of The
Depository Trust Company, if you are a member, unless you have otherwise
notified us prior to the date specified in a Written Communication to you from
us or, if you are not a member, settlement may be made through a correspondent
who is a member pursuant to instructions which you will send to us prior to such
specified date.

      3. REPRESENTATIONS, WARRANTIES AND AGREEMENTS.

      (a) REGISTERED OFFERINGS. In the case of any Offering of Securities which
are registered under the Securities Act ("Registered Offering"), we will make
available to you as soon as practicable after sufficient copies are made
available to us by the issuer of the Securities such number of copies of each
preliminary prospectus and of the final prospectus relating thereto as you may
reasonably request for the purposes contemplated by the Securities Act and the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and the
applicable rules and regulations of the Securities and Exchange Commission
thereunder.

      You represent and warrant that you are familiar with Rule 15c2-8 under the
Exchange Act relating to the distribution of preliminary and final prospectuses
and agree that you will comply therewith. You agree to make a record of your
distribution of each preliminary prospectus and when furnished with copies of
any revised preliminary prospectus, you will promptly forward copies thereof to
each person to whom you have theretofore distributed a preliminary prospectus.

      You agree that in purchasing Securities in a Registered Offering you will
rely upon no statement whatsoever, written or oral, other than the statements in
the final prospectus delivered to you by us. You will not be authorized by the
issuer or other seller of Securities offered pursuant to a prospectus or by any
Underwriters to give any information or to make any representation not contained
in the prospectus in connection with the sale of such Securities.

      (b) OFFERINGS PURSUANT TO OFFERING CIRCULAR. In the case of any Offering
of Securities, other than a Registered Offering, which is made pursuant to an
offering circular or other document comparable to a prospectus in a Registered
Offering, we will make available to you as soon as practicable after sufficient
copies are made available to us by the issuer of the Securities such number of
copies of each preliminary offering circular and of the final offering circular
relating thereto as you may reasonably request. You agree that you will comply
with applicable Federal, state and other laws, and the


                                       2
<PAGE>
applicable rules and regulations of any regulatory body promulgated thereunder,
governing the use and distribution of offering circulars by brokers or dealers.

      You agree that in purchasing Securities pursuant to an offering circular
you will rely upon no statements whatsoever, written or oral, other than the
statements in the final offering circular delivered to you by us. You will not
be authorized by the issuer or other seller of Securities offered pursuant to an
offering circular or by any Underwriters to give any information or to make any
representation not contained in the offering circular in connection with the
sale of such Securities.

      (c) OFFER AND SALE TO THE PUBLIC. The Offering of Securities is made
subject to the conditions referred to the prospectus or offering circular
relating to the Offering and to the terms and conditions set forth in this
Agreement. With respect to any Offering of Securities, we will inform you by a
Written Communication of the public offering price, the selling concession, the
reallowance (if any) to dealers and the time when you may commence selling
Securities to the public. After such public offering has commenced, we may
change the public offering price, the selling concession and the reallowance to
dealers. The offering price, selling concession and reallowance (if any) to
dealers at any time in effect with respect to an Offering are hereinafter
referred to, respectively, as the "Public Offering Price", the "Concession" and
the "Reallowance". With respect to each Offering of Securities, until the
provisions of this Section 3(c) shall be terminated pursuant to Section 4
hereof, you agree to offer Securities to the public only at the Public Offering
Price, except that if a Reallowance is in effect, a Reallowance from the Public
Offering Price not in excess of such Reallowance may be allowed as consideration
for services rendered in distribution to dealers who are actually engaged in the
investment banking or securities business who are either members in good
standing of the NASD who agree to abide by the applicable rules of the NASD (see
Section 3(e) below) or foreign banks, dealers or institutions not eligible for
membership in the NASD who represent to you that they will promptly reoffer such
Securities at the Public Offering Price and will abide by the conditions with
respect to foreign banks, dealers and institutions set forth in Section 3(e)
hereof.

      (d) OVER-ALLOTMENT; STABILIZATION; UNSOLD ALLOTMENTS. We may, with respect
to any Offering, be authorized to over-allot in arranging sales to Selected
Dealers, to purchase and sell Securities for long or short account and to
stabilize or maintain the market price of the Securities. You agree that upon
our request at any time and from time to time prior to the termination of the
provisions of Section 3(c) hereof with respect to any Offering, you will report
to us the amount of Securities purchased by you pursuant to such Offering which
then remain unsold by you and will, upon our request at any such time, sell to
us for our account or the account of one or more Underwriters such amount of
such unsold Securities as we may designate at the Public Offering Price less an
amount to be determined by us not in excess of the Concession. If, prior to the
later of (a) the termination of the provisions of Section 3(c) hereof with
respect to any Offering, or (b) the covering by us of any short position created
by us in connection with such Offering for our account or the account of one or
more Underwriters, we purchase or contract to purchase for our account or the
account of one or more Underwriters in the open market or otherwise any
Securities purchased by you under this Agreement as part of such Offering, you
agree to pay us on demand for the account of the Underwriters an amount equal to
the Concession with respect to such Securities (unless you shall have purchased
such Securities pursuant to Section 2 hereof at the Public Offering Price and
you have not received or been credited with any Concession, in which case we
shall not


                                       3
<PAGE>
be obligated to pay such Concession to you pursuant to Section 2) plus transfer
taxes and broker's commissions or dealer's mark-up, if any, paid in connection
with such purchase or contract to purchase.

      (e) NASD. You represent and warrant that you are actually engaged in the
investment banking or securities business and either are a member in good
standing of the NASD or, if you are not such a member, you are a foreign bank,
dealer or institution not eligible for membership in the NASD which agrees to
make no sales within the United State, its territories or its possessions or to
persons who are citizens thereof or residents therein, and in making other sales
to comply with the NASD's interpretation with respect to free-riding and
withholding. You further represent, by your participation in an Offering, that
you have provided to us all documents and other information required to be filed
with respect to you, any related person or any person associated with you or any
such related person pursuant to the supplementary requirements of the NASD's
interpretation with respect to review of corporate financing as such
requirements relate to such Offering.

      You agree that, in connection with any purchase or sale of the Securities
wherein a selling concession, discount or other allowance is received or
granted, you will (a) if you are a member of the NASD, comply with all
applicable interpretive material ("IM") and Conduct Rules of the NASD,
including, without limitation, IM 2110-1 (relating to Free-Riding and
Withholding) and Conduct Rule 2740 (relating to Selling Concessions, Discounts
and Other Allowances) or (b) if you are a foreign bank or dealer or institution
not eligible for such membership, comply with IM 2110-1 and with Conduct Rules
2730 (relating to Securities Taken in Trade), 2740 (relating to Selling
Concessions) and 2750 (relating to Transactions With Related Persons) as though
you were such a member and Conduct Rule 2420 (relating to Dealing with
Non-Members) as it applies to a non-member broker or dealer in a foreign
country.

      You further agree that, in connection with any purchase of securities from
us that is not otherwise covered by the terms of this Agreement (whether we are
acting as manager, as member of an underwriting syndicate or a selling group or
otherwise), if a selling concession, discount or other allowance is granted to
you, clauses (a) and (b) of the preceding paragraph will be applicable.

      (f) RELATIONSHIP AMONG UNDERWRITERS AND SELECTED DEALERS. We may buy
Securities from or sell Securities to any Underwriter or Selected Dealer and,
with our consent, the Underwriters (if any) and the Selected Dealers may
purchase Securities from and sell Securities to each other at the Public
Offering Price less all or any part of the Concession. We shall have full
authority to take such action as we deem advisable in all matters pertaining to
any Offering under this Agreement. You are not authorized to act as agent for
us, any Underwriter or the issuer or other seller of any Securities in offering
Securities to the public or otherwise. Neither we nor any Underwriter shall be
under any obligation to you except for obligations assumed hereby or in any
Written Communication from us in connection with any Offering. Nothing contained
herein or in any Written Communication from us shall constitute the Selected
Dealers an association or partners with us or any Underwriter or with one
another. If the Selected Dealers, among themselves or with the Underwriters,
should be deemed to constitute a partnership for Federal income tax purposes,
then you elect to be excluded from the application of Subchapter K, Chapter 1,
Subtitle A of the Internal Revenue Code of 1986 and agree not to take any
position inconsistent with that election. You authorize us, in


                                       4
<PAGE>
our discretion, to execute and file on your behalf such evidence of that
election as may be required by the Internal Revenue Service. In connection with
any Offering you shall be liable for your proportionate amount of any tax,
claim, demand or liability that may be asserted against you alone or against one
or more Selected Dealers participating in such Offering, or against us or the
Underwriters, based upon the claim that the Selected Dealers, or any of them
constitute an association, an unincorporated business or other entity,
including, in each case, your proportionate amount of any expense incurred in
defending against any such tax, claim, demand or liability.

      (g) BLUE SKY LAWS. Upon application to us, we shall inform you as to any
advice we have received from counsel concerning the jurisdictions in which
Securities have been qualified for sale or are exempt under the securities or
blue sky laws of such jurisdictions, but we do not assume any obligation or
responsibility as to your right to sell Securities in any such jurisdiction.

      (h) COMPLIANCE WITH LAW. You agree that in selling Securities pursuant to
any Offering (which agreement shall also be for the benefit of the issuer or
other seller of such Securities), you will comply with all applicable laws,
rules and regulations, including the applicable provisions of the Securities Act
and the Exchange Act, the applicable rules and regulations of the Securities and
Exchange Commission thereunder, the applicable rules and regulations of the
NASD, the applicable rules and regulations of any securities exchange or other
regulatory authority having jurisdiction over the Offering and the applicable
laws, rules and regulations specified in Section 3(b) hereof. Without limiting
the foregoing, (a) you agree that, at all times since you were invited to
participate in an Offering of Securities, you have complied with the provisions
of Regulation M applicable to such Offering, in each case after giving effect to
any applicable exemptions and (b) you represent that your incurrence of
obligations hereunder in connection with any Offering of Securities will not
result in the violation by you of Rule 15c3-1 under the Exchange Act, if such
requirements are applicable to you.

      4. TERMINATION; SUPPLEMENTS AND AMENDMENTS. This Agreement shall continue
in full force and effect until terminated by a written instrument executed by
each of the parties hereto. This Agreement may be supplemented or amended by us
by written notice thereof to you, and any such supplement or amendment to this
Agreement shall be effective with respect to any Offering to which this
Agreement applies after the date of such supplement or amendment. Each reference
to "this Agreement" herein shall, as appropriate, be to this Agreement as so
amended and supplemented. The terms and conditions set forth in Section 3(c)
hereof with regard to any Offering will terminate at the close of business on
the 30th day after the commencement of the public offering of the Securities to
which such Offering relates, but in our discretion may be extended by us for a
further period not exceeding 30 days and in our discretion, whether or not
extended, may be terminated at any earlier time.

      5. SUCCESSORS AND ASSIGNS. This Agreement shall be binding on, and inure
to the benefit of, the parties hereto and other persons specified in Section 1
hereof, and the respective successors and assigns of each of them.

      6. GOVERNING LAW. This Agreement and the terms and conditions set forth
herein with respect to any Offering together with such supplementary terms and
conditions with respect to such Offering as may be contained in any Written
Communication from us to you in connection therewith shall be governed by, and
construed in accordance with, the


                                       5
<PAGE>
laws of the State of New York applicable to contracts made and to be performed
within the State of New York.

      Please confirm by signing and returning to us the enclosed copy of this
Agreement that your subscription to or your acceptance of any reservation of any
Securities pursuant to an Offering shall constitute (i) acceptance of and
agreement to the terms and conditions of this Agreement (as supplemented and
amended pursuant to Section 4 hereof; together with and subject to any
supplementary terms and conditions contained in any Written Communication from
us in connection with such Offering, all of which shall constitute a binding
agreement between you and us, individually or as representative of any
Underwriters, (ii) confirmation that your representations and warranties set
forth in Section 3 hereof are true and correct at that time, (iii) confirmation
that your agreements set forth in Sections 2 and 3 hereof have been and will be
fully performed by you to the extent and at the times required thereby and (iv)
in the case of any Offering described in Section 3(a) or 3(b) hereof,
acknowledgment that you have requested and received from us sufficient copies of
the final prospectus or offering circular, as the case may be, with respect to
such Offering in order to comply with your undertakings in Section 3(a) or 3(b)
hereof.

                                          Very truly yours,

                                          SALOMON SMITH BARNEY INC.



                                          By:
                                             -----------------------------------
                                             Name:
                                             Title:



CONFIRMED:..............................1999

.............................................
               (Name of Dealer)

by:.........................................
    Name:
    Title:


Address:
        ------------------------------------

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

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

Telephone:

Fax:
        ------------------------------------


                                       6




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.H3
<SEQUENCE>5
<FILENAME>c82676a1exv99wh3.txt
<DESCRIPTION>FORM OF MASTER AGREEMENT AMONG UNDERWRITERS
<TEXT>
<PAGE>
                                                                     EXHIBIT h.3

                  FORM OF MASTER AGREEMENT AMONG UNDERWRITERS

                            REGISTERED SEC OFFERINGS
                    (INCLUDING MULTIPLE SYNDICATE OFFERINGS),
                   STANDBY UNDERWRITINGS AND EXEMPT OFFERINGS
                 (OTHER THAN OFFERINGS OF MUNICIPAL SECURITIES)

                                                                    July 1, 1999


Ladies and Gentlemen:

            From time to time SALOMON SMITH BARNEY INC. ("SALOMON SMITH BARNEY")
may invite you (and others) to participate on the terms set forth herein as an
underwriter or an initial purchaser, or in a similar capacity, in connection
with certain offerings of securities that are managed solely by us or with one
or more other co-managers. If we invite you to participate in a specific
offering and sale (an "OFFERING") to which this Master Agreement Among
Underwriters (the "SALOMON SMITH BARNEY MASTER AAU") shall apply, we will send
the information set forth below in Section 1.1 to you by one or more wires,
telexes, facsimile or electronic data transmissions or other written
communications (each a "WIRE" and collectively, an "AAU"). Each Wire will
indicate that it is a Wire pursuant to the SALOMON SMITH BARNEY MASTER AAU. The
Wire inviting you to participate in an Offering is referred to herein as the
"INVITATION WIRE". You and we hereby agree that by the terms hereof the
provisions of this SALOMON SMITH BARNEY MASTER AAU automatically shall be
incorporated by reference in each AAU, EXCEPT THAT ANY SUCH AAU MAY ALSO EXCLUDE
OR REVISE ANY PROVISION OF THIS SALOMON SMITH BARNEY MASTER AAU OR MAY CONTAIN
SUCH ADDITIONAL PROVISIONS AS MAY BE SPECIFIED IN SUCH AAU.

                                   I. GENERAL

            1.1. TERMS OF AAU; CERTAIN DEFINITIONS; CONSTRUCTION. Each AAU shall
relate to an Offering and shall identify (i) the securities to be offered in the
Offering (the "SECURITIES"), their principal terms, the issuer or issuers (each
an "ISSUER") and any guarantor (each a "GUARANTOR") thereof and, if different
from the Issuer, the seller or sellers (each a "SELLER") of the Securities, (ii)
the underwriting agreement, purchase agreement, standby underwriting agreement,
distribution agreement or similar agreement (as identified in such AAU and as
amended or supplemented, including a terms agreement or pricing agreement
pursuant to any of the foregoing, collectively, the "UNDERWRITING AGREEMENT")
providing for the purchase, on a several and not joint basis, of the Securities
by the several underwriters, initial purchasers or others acting in a similar
capacity on whose behalf the Manager (as defined below) executes the
<PAGE>
Underwriting Agreement (including the Manager and the Co-Managers (as defined
below), the "UNDERWRITERS"), (iii) if applicable, that the Underwriting
Agreement includes an option (an "OVER-ALLOTMENT OPTION") to purchase Additional
Securities (as defined below) to cover over-allotments, if any, (iv) if
applicable, that the Offering is part of an offering that includes concurrent
offerings by two or more syndicates (an "INTERNATIONAL OFFERING"), each of which
will offer and sell Securities subject to such restrictions as shall be
specified in any Intersyndicate Agreement (as defined below) referred to in such
AAU, (v) the price at which the Securities are to be purchased by the several
Underwriters from any Issuer or Seller thereof (the "PURCHASE PRICE"), (vi) the
offering terms, including, if applicable, the price or prices at which the
Securities initially will be offered by the Underwriters (the "OFFERING PRICE"),
any selling concession to dealers (the "SELLING CONCESSION"), reallowance (the
"REALLOWANCE"), management fee, global coordinators' fee, praecipium or other
similar fees, discounts or commissions (collectively, the "FEES AND
COMMISSIONS") with respect to the Securities, (vii) the proposed pricing date
("PRICING DATE") and settlement date (the "SETTLEMENT DATE"), (viii) any
contractual restrictions on the offer and sale of the Securities pursuant to the
Underwriting Agreement, Intersyndicate Agreement or otherwise, (ix) any
co-managers for such Offering (the "CO-MANAGERS"), (x) your proposed
participation in the Offering, (xi) if applicable, the trustee, fiscal agent or
similar agent (the "TRUSTEE") for the indenture, trust agreement, fiscal agency
agreement or similar agreement (the "INDENTURE") under which such Securities
will be issued and (xii) any other principal terms of the Offering.

            The term "MANAGER" means SALOMON SMITH BARNEY. The term
"UNDERWRITERS" includes the Manager and the Co-Managers. The term "FIRM
SECURITIES" means the number or amount of Securities that the several
Underwriters are initially committed to purchase under the Underwriting
Agreement (which may be expressed as a percentage of an aggregate number or
amount of Securities to be purchased by the Underwriters as in the case of a
standby Underwriting Agreement). The term "ADDITIONAL SECURITIES" means the
Securities, if any, that the several Underwriters have an option to purchase
under the Underwriting Agreement to cover over-allotments, if any. The number,
amount or percentage of Firm Securities set forth opposite each Underwriter's
name in the Underwriting Agreement plus any additional Firm Securities that such
Underwriter has become obligated to purchase under the Underwriting Agreement or
Article XI hereof is hereinafter referred to as the "ORIGINAL PURCHASE
OBLIGATION" of such Underwriter and the ratio which such Original Purchase
Obligation bears to the total of all Firm Securities set forth in the
Underwriting Agreement (or, in the case of a standby Underwriting Agreement, to
100%) is hereinafter referred to as the "UNDERWRITING PERCENTAGE" of such
Underwriter.

            References herein to statutory sections, rules, regulations, forms
and interpretive materials shall be deemed to include any successor provisions.

            1.2. ACCEPTANCE OF AAU. You shall have accepted an AAU for an
Offering if we receive your acceptance, prior to the time specified in the
Invitation Wire for such Offering, by wire, telex, facsimile or electronic data
transmission or other written communication (any such manner of communication
being deemed "IN WRITING") (or


                                       2
<PAGE>
orally, if promptly confirmed In Writing) in the manner specified in the
Invitation Wire, of our invitation to participate in the Offering. If we receive
your timely acceptance of the invitation to participate, such AAU shall
constitute a valid and binding contract between us. Your acceptance of the
Invitation Wire shall also constitute acceptance by you of the terms of
subsequent Wires to you relating to the Offering unless we receive In Writing,
within the time and in the manner specified in such subsequent Wire, a notice
from you to the effect that you do not accept the terms of such subsequent Wire,
in which case you shall be deemed to have elected not to participate in the
Offering.

            1.3. UNDERWRITERS' QUESTIONNAIRE. Your acceptance of the Invitation
Wire shall confirm that you have no exceptions to the Underwriters'
Questionnaire attached as Exhibit A hereto (or to any other questions addressed
to you in any Wires relating to the Offering previously sent to you), other than
exceptions noted by you In Writing in connection with the Offering and received
from you by us before the time specified in the Invitation Wire or any
subsequent Wire.

                             II. OFFERING MATERIALS

            2.1. REGISTERED OFFERINGS. In the case of an Offering that will be
registered in whole or in part (a "REGISTERED OFFERING") under the United States
Securities Act of 1933, as amended (the "1933 ACT"), you understand that the
Issuer has filed with the Securities and Exchange Commission (the "COMMISSION")
a registration statement including a prospectus relating to the Securities. The
term "REGISTRATION STATEMENT" means such registration statement as amended or
deemed to be amended to the effective date of the Underwriting Agreement and, in
the event that the Issuer files an abbreviated registration statement to
register additional Securities pursuant to Rule 462(b) under the 1933 Act, such
abbreviated registration statement. The term "PROSPECTUS" means the prospectus,
together with the final prospectus supplement, if any, relating to the Offering
first used to confirm sales of Securities and, in the case of a Registered
Offering that is an International Offering, the term "PROSPECTUS" shall mean,
collectively, each prospectus or offering circular, together with each final
prospectus supplement or final offering circular supplement, if any, relating to
the Offering, in the respective forms first used or made available for use to
confirm sales of Securities. The term "PRELIMINARY PROSPECTUS" means any
preliminary prospectus relating to the Offering or any preliminary prospectus
supplement together with a prospectus relating to the Offering and, in the case
of a Registered Offering that is an International Offering, the term
"PRELIMINARY PROSPECTUS" shall mean, collectively, each preliminary prospectus
or preliminary offering circular relating to the Offering or each preliminary
prospectus supplement or preliminary offering circular supplement, together with
a prospectus or offering circular, respectively, relating to the Offering. As
used herein the terms "REGISTRATION STATEMENT", "PROSPECTUS" and "PRELIMINARY
PROSPECTUS" shall include in each case the material, if any, incorporated by
reference therein. The Manager will furnish to you, or make arrangements for you
to obtain, copies of each Prospectus and Preliminary Prospectus (but excluding
for this purpose, unless otherwise required pursuant to regulations under the
1933 Act, documents incorporated therein by reference) as soon as practicable
after sufficient quantities thereof have been made available by the Issuer.


                                       3
<PAGE>
            2.2. UNREGISTERED OFFERINGS. In the case of an Offering other than a
Registered Offering, you understand that no registration statement has been
filed with the Commission. The term "OFFERING CIRCULAR" means an offering
circular or memorandum, if any, or any other written materials authorized by the
Issuer to be used in connection with an Offering that is not a Registered
Offering. The term "PRELIMINARY OFFERING CIRCULAR" means any preliminary
offering circular or memorandum, if any, or any other written preliminary
materials authorized by the Issuer to be used in connection with such an
Offering. As used herein, the terms "OFFERING CIRCULAR" and "PRELIMINARY
OFFERING CIRCULAR" shall include the material, if any, incorporated by reference
therein. We will either, as soon as practicable after the later of the date of
the Invitation Wire or the date made available to us by the Issuer, furnish to
you (or make available for your review in our office) a copy of any Preliminary
Offering Circular or any proof or draft of the Offering Circular. In any event,
in any Offering involving an Offering Circular, the Manager will furnish to you,
or make arrangements for you to obtain, as soon as practicable after sufficient
quantities thereof are made available by the Issuer, copies of the final
Offering Circular, as amended or supplemented, if applicable (but excluding for
this purpose documents incorporated therein by reference).

                            III. MANAGER'S AUTHORITY

            3.1. AUTHORITY OF MANAGER TO DETERMINE FORM OF DOCUMENTS, TERMS OF
OFFERING, ETC. You authorize the Manager to act as lead manager of the Offering
of the Securities by the Underwriters (the "UNDERWRITERS' SECURITIES") or by the
Issuer or Seller pursuant to delayed delivery contracts (the "CONTRACT
SECURITIES"), if any, contemplated by the Underwriting Agreement. You authorize
the Manager, on your behalf, (a) to determine the form of the Underwriting
Agreement, (b) to execute and deliver the Underwriting Agreement to the Issuer,
Guarantor or Seller, (c) to determine the form of any agreement or agreements
between or among the syndicates participating in the International Offering of
which the Offering is a part (each an "INTERSYNDICATE AGREEMENT"), and (d) to
execute and deliver any such Intersyndicate Agreement. You authorize the Manager
(i) to exercise any Over-allotment Option for the purchase any of or all the
Additional Securities for the accounts of the several Underwriters pursuant to
the Underwriting Agreement, (ii) to agree, on your behalf and on behalf of the
Co-Managers, to any addition to, change in or waiver of any provision of, or the
termination of, the Underwriting Agreement or any Intersyndicate Agreement
(other than an increase in the Purchase Price or in your Original Purchase
Obligation to purchase Securities, in either case from that contemplated by the
applicable AAU), (iii) to add or remove prospective Underwriters to or from the
syndicate, (iv) to exercise, in the Manager's discretion, all the authority
vested in the Manager in the Underwriting Agreement and (v) except as described
below in this Section 3.1, to take any other action as may seem advisable to the
Manager in respect of the Offering (including, without limitation, actions and
communications with the Commission, the National Association of Securities
Dealers, Inc. (the "NASD"), state blue sky or securities commissions, stock
exchanges and other regulatory bodies or organizations). If, in accordance with
the terms of the applicable AAU, the Offering of the Securities is at varying
prices based on prevailing market prices or prices related to prevailing market


                                       4
<PAGE>
prices or at negotiated prices, you authorize the Manager to determine, on your
behalf in the Manager's discretion, any Offering Price and the Fees and
Commissions applicable to the Offering from time to time. You authorize the
Manager on your behalf to arrange for any currency transactions (including
forward and hedging currency transactions) as the Manager deems necessary to
facilitate settlement of the purchase of the Securities, but you do not
authorize the Manager on your behalf to engage in any other forward or hedging
transactions in connection with the Offering unless such transactions are
specified in an applicable AAU or are otherwise consented to by you. You further
authorize the Manager, subject to the provisions of Section 1.2 hereof, (i) to
vary the offering terms of the Securities in effect at any time, including, if
applicable, the Offering Price and Fees and Commissions set forth in the
applicable AAU, (ii) to determine, on your behalf, the Purchase Price and (iii)
to increase or decrease the number, amount or percentage of Securities being
offered. Notwithstanding the foregoing provisions of this Section 3.1, the
Manager shall notify the Underwriters, prior to the signing of the Underwriting
Agreement, of any provision in the Underwriting Agreement that could result in
an increase in the amount or percentage of Firm Securities set forth opposite
each Underwriter's name in the Underwriting Agreement by more than 25% (or such
other percentage as shall have been specified in the applicable Invitation Wire
or otherwise consented to by you) as a result of the failure or refusal of
another Underwriter or Underwriters to perform its or their obligations
thereunder.

            3.2. OFFERING DATE. The Offering is to be made as soon after the
Underwriting Agreement is entered into by the Issuer, Guarantor or Seller and
the Manager as in the Manager's judgment is advisable, on the terms and
conditions set forth in the Prospectus or the Offering Circular, as the case may
be, and the applicable AAU. You agree not to sell any Securities prior to the
time the Manager releases such Securities for sale to purchasers. The date on
which such Securities are released for sale is referred to herein as the
"OFFERING DATE".

            3.3. ADVERTISING; SUPPLEMENTAL OFFERING MATERIAL. Any public
advertisement of the Offering shall be made by the Manager on behalf of the
Underwriters on such date as the Manager shall determine. You agree not to
advertise the Offering prior to the date of the Manager's advertisement thereof
without the Manager's consent. If the offering is made in whole or in part in
reliance on Rule 144A (or upon another exemption from registration), you agree
not to engage in any general solicitation and to abide by any other restrictions
in the AAU or the Underwriting Agreement in connection therewith relating to any
advertising or publicity. Any advertisement you may make of the Offering after
such date will be your own responsibility and at your own expense and risk. In
addition to your agreement to comply with restrictions on the Offering pursuant
to Sections 10.10 and 10.11 hereof, you also agree that you will not, in
connection with the offer and sale of the Securities in the Offering, without
the consent of the Manager, give to any prospective purchaser of the Securities
or other person not in your employ any written information concerning the
Offering, the Issuer, the Guarantor or the Seller, other than information
contained in any Preliminary Prospectus, Prospectus, Preliminary Offering
Circular or Offering Circular or in any computational materials ("COMPUTATIONAL
MATERIALS") or other offering materials prepared by or with the consent of the
Manager for use by the Underwriters in


                                       5
<PAGE>
connection with the Offering and, in the case of a Registered Offering, filed
with the Commission or the NASD, as applicable (the "SUPPLEMENTAL OFFERING
MATERIALS"). You further agree to cease distribution of any COMPUTATIONAL
MATERIALS on the Offering Date.

            3.4. INSTITUTIONAL AND RETAIL SALES. You authorize the Manager to
sell to institutions or retail purchasers such Securities purchased by you
pursuant to the Underwriting Agreement as the Manager shall determine. The
Selling Concession on any such sales shall be credited to the accounts of the
Underwriters as the Manager shall determine.

            3.5. SALES TO DEALERS. You authorize the Manager to sell to Dealers
(as defined below) such Securities purchased by you pursuant to the Underwriting
Agreement as the Manager shall determine. A "DEALER" shall be a person who is
(a) a broker or dealer (as defined in the By-Laws of the NASD) actually engaged
in the investment banking or securities business and (i) a member in good
standing of the NASD or (ii) a foreign bank, broker, dealer or other institution
not eligible for membership in the NASD that, in the case of either clause
(a)(i) or (a)(ii), makes the representations and agreements applicable to such
institutions contained in Section 10.6 hereof or (b) in the case of Offerings of
Securities that are exempt securities under Section 3(a)(12) of the Securities
Exchange Act of 1934, as amended (the "1934 ACT"), and such other Securities as
from time to time may be sold by a "bank" (as defined in Section 3(a)(6) of the
1934 Act (a "BANK")), a Bank that is not a member of the NASD and that makes the
representations and agreements applicable to such institutions contained in
Section 10.6 hereof. If the price for any such sales by the Manager to Dealers
exceeds an amount equal to the Offering Price less the Selling Concession set
forth in the applicable AAU, the amount of such excess, if any, shall be
credited to the accounts of the Underwriters as the Manager shall determine.

            3.6. DIRECT SALES. The Manager will advise you promptly, on the date
of the Offering, as to the Securities purchased by you pursuant to the
Underwriting Agreement that you shall retain for direct sale. At any time prior
to the termination of the applicable AAU, any such Securities that are held by
the Manager for sale but not sold, may, on your request and at the Manager's
discretion, be released to you for direct sale, and Securities so released to
you shall no longer be deemed held for sale by the Manager. You may allow, and
Dealers may reallow, a discount on sales to Dealers in an amount not in excess
of the Reallowance set forth in the applicable AAU. You may not purchase
Securities from, or sell Securities to, any other Underwriter or Dealer at any
discount or concession other than the Reallowance, except with the consent of
the Manager.

            3.7. RELEASE OF UNSOLD SECURITIES. From time to time prior to the
termination of the applicable AAU, on the request of the Manager, you shall
advise the Manager of the amount of Securities remaining unsold which were
retained by or released to you for direct sale and of the amount of Securities
and Other Securities (as defined below) purchased for your account remaining
unsold which were delivered to you pursuant to Article V hereof or pursuant to
any Intersyndicate Agreement, and, on the request of the Manager, you shall
release to the Manager any such Securities and


                                       6
<PAGE>
Other Securities remaining unsold (i) for sale by the Manager to institutions,
Dealers or retail purchasers, (ii) for sale by the Issuer or Seller pursuant to
delayed delivery contracts or (iii) if, in the Manager's opinion, such
Securities or Other Securities are needed to make delivery against sales made
pursuant to Article V hereof or any Intersyndicate Agreement.

            3.8. INTERNATIONAL OFFERINGS. In the case of an International
Offering, you authorize the Manager (i) to make representations on your behalf
as set forth in any Intersyndicate Agreement or Underwriting Agreement and (ii)
to purchase or sell for your account pursuant to the Intersyndicate Agreement
(a) Securities, (b) any other securities of the same class and series, or any
securities into which the Securities may be converted or for which the
Securities may be exchanged or exercised and (c) any other securities designated
in the applicable AAU or applicable Intersyndicate Agreement (the securities
referred to in clauses (b) and (c) above being referred to collectively as the
"OTHER SECURITIES").

                         IV. DELAYED DELIVERY CONTRACTS

            4.1. ARRANGEMENTS FOR SALES. You agree that arrangements for sales
of Contract Securities will be made only through the Manager acting either
directly or through Dealers (including Underwriters acting as Dealers), and you
authorize the Manager to act on your behalf in making such arrangements. The
aggregate amount of Securities to be purchased by the several Underwriters shall
be reduced by the respective amounts of Contract Securities attributed to such
Underwriters as hereinafter provided. Subject to the provisions of Section 4.2,
the aggregate amount of Contract Securities shall be attributed to the
Underwriters as nearly as practicable in their respective Underwriting
Percentages, except that, as determined by the Manager in its discretion, (i)
Contract Securities directed and allocated by a purchaser to specific
Underwriters shall be attributed to such Underwriters and (ii) Contract
Securities for which arrangements have been made for sale through Dealers shall
be attributed to each Underwriter approximately in the proportion that
Securities of such Underwriter held by the Manager for sales to Dealers bear to
all Securities so held. The fee with respect to Contract Securities payable to
the Manager for the accounts of the Underwriters pursuant to the Underwriting
Agreement shall be credited to the accounts of the respective Underwriters in
proportion to the Contract Securities attributed to such Underwriters pursuant
to the provisions of this Section 4.1, less, in the case of each Underwriter,
the concession to Dealers on Contract Securities sold through Dealers and
attributed to such Underwriter.

            4.2. EXCESS SALES. If the amount of Contract Securities attributable
to an Underwriter pursuant to Section 4.1 would exceed such Underwriter's
Original Purchase Obligation reduced by the amount of Underwriters' Securities
sold by or on behalf of such Underwriter, such excess shall not be attributed to
such Underwriter, and such Underwriter shall be regarded as having acted only as
a Dealer with respect to, and shall receive only the concession to Dealers on,
such excess.


                                       7
<PAGE>
        V. PURCHASE AND SALE OF SECURITIES; FACILITATION OF DISTRIBUTION

            5.1. PURCHASE AND SALE OF SECURITIES; FACILITATION OF DISTRIBUTION.
In order to facilitate the distribution and sale of the Securities, you
authorize the Manager to buy and sell Securities and any Other Securities, in
addition to Securities sold pursuant to Article III hereof, in the open market
or otherwise (including, without limitation, pursuant to any Intersyndicate
Agreement), for long or short account, on such terms as it shall deem advisable,
and to over-allot in arranging sales. Such purchases and sales and
over-allotments shall be made for the accounts of the several Underwriters as
nearly as practicable in their respective Underwriting Percentages or, in the
case of an International Offering, such purchases and sales shall be for such
accounts as set forth in the applicable Intersyndicate Agreement. Any securities
which may have been purchased by the Manager for stabilizing purposes in
connection with the Offering prior to the execution of the applicable AAU shall
be treated as having been purchased pursuant to this Section 5.1 for the
accounts of the several Underwriters or, in the case of an International
Offering, for such accounts as are set forth in the applicable Intersyndicate
Agreement. Your net commitment pursuant to the foregoing authorization shall not
exceed at the close of business on any day an amount equal to 20% of your
Underwriting Percentage of the aggregate initial Offering Price of the Firm
Securities, it being understood that, in calculating such net commitment, the
initial Offering Price shall be used with respect to the Securities so purchased
or sold and, in the case of all Other Securities, shall be the purchase price
thereof. Your net commitment for short account (i.e., "naked short") shall be
calculated by assuming that all Securities that may be purchased upon exercise
of any over-allotment option then exercisable are acquired (whether or not
actually acquired) and, in the case of an International Offering, after giving
effect to the purchase of any Securities or Other Securities that the Manager
has agreed to purchase for your account pursuant to any applicable
Intersyndicate Agreement. On demand you shall take up and pay for any Securities
or Other Securities so purchased for your account and any Securities released to
you pursuant to Section 3.7 hereof and you shall deliver to the Manager against
payment any Securities or Other Securities so sold or over-allotted for your
account or released to you. The Manager agrees to notify you if it engages in
any stabilization transaction requiring reports to be filed pursuant to Rule
17a-2 under the 1934 Act and to notify you of the date of termination of
stabilization. You agree not to stabilize or engage in any syndicate covering
transaction (as defined in Rule 100 of Regulation M under the 1934 Act
("Regulation M")) in connection with the Offering without the prior consent of
the Manager. You further agree to provide to Salomon Smith Barney any reports
required of you pursuant to Rule 17a-2 not later than the date specified therein
and you authorize Salomon Smith Barney to file on your behalf with the
Commission any reports required by such Rule.

      If the limitations of Rule 101 of Regulation M ("Rule 101") do not apply
to you with respect to the Securities, Other Securities or other reference
securities (as defined in Rule 100 of Regulation M) because they satisfy the
exception for actively-traded securities in subsection (c)(1) of Rule 101 or the
exception for Rule 144A securities in subsection (b)(10) of Rule 101, you agree
that promptly upon notice from the Manager (or, if later, at the time stated in
the notice) you will comply with Rule 101 as though such exception were not
available but the other provisions of Rule 101 (as interpreted by


                                       8
<PAGE>
the Commission and after giving effect to any applicable exemptions) did apply.
If the securities in question are NASDAQ securities (as defined in Rule 100 of
Regulation M) you may engage in passive market making in accordance with Rule
103 of Regulation M (except that the daily net purchase volume limitation will
not apply and the maximum displayed bid size shall be 5,000 shares excluding
transactions effected in the SOES system) unless the notice from the Manager
also states that passive market making is not permitted.

            5.2. PENALTY WITH RESPECT TO SECURITIES REPURCHASED BY THE MANAGER.
If pursuant to the provisions of Section 5.1 and prior to the termination of the
Manager's authority to cover any short position incurred under the applicable
AAU or such other date as the Manager shall specify in a Wire, either (A) the
Manager purchases or contracts to purchase for the account of any Underwriter in
the open market or otherwise any Securities which were retained by, or released
to, you for direct sale or any Securities sold pursuant to Section 3.4 for which
you received a portion of the Selling Concession set forth in the applicable
AAU, or any Securities which may have been issued on transfer or in exchange for
such Securities, and which Securities were therefore not effectively placed for
investment or (B) if the Manager has advised you by Wire that trading in the
Securities will be reported to the Manager pursuant to the "Initial Public
Offering Tracking System" of The Depository Trust Company ("DTC") and the
Manager determines, based on notices from DTC, that your customers sold an
amount of Securities during any day that exceeds the amount previously notified
to you by Wire, then you authorize the Manager either to charge your account
with an amount equal to such portion of the Selling Concession set forth in the
applicable AAU received by you with respect to such Securities or, in the case
of clause (B), such Securities as exceed the amount specified in such Wire or to
require you to repurchase such Securities or, in the case of clause (B), such
Securities as exceed the amount specified in such Wire, at a price equal to the
total cost of such purchase, including transfer taxes, accrued interest,
dividends and commissions, if any.

            5.3. COMPLIANCE WITH REGULATION M. You represent that, at all times
since you were invited to participate in the Offering, you have complied with
the provisions of Regulation M applicable to such Offering, in each case as
interpreted by the Commission and after giving effect to any applicable
exemptions. If you have been notified in a Wire that the Underwriters may
conduct passive market making in compliance with Rule 103 of Regulation M in
connection with the Offering, you represent that, at all times since your
receipt of such Wire, you have complied with the provisions of such Rule
applicable to such Offering, as interpreted by the Commission and after giving
effect to any applicable exemptions.

            5.4. STANDBY UNDERWRITINGS. You authorize the Manager in its
discretion, at any time on, or from time to time prior to, the expiration of the
conversion right of convertible securities identified in the applicable AAU in
the case of securities called for redemption, or the expiration of rights to
acquire securities in the case of rights offerings, for which, in either case,
standby underwriting arrangements have been made: (i) to purchase convertible
securities or rights to acquire Securities for your account, in the open market
or otherwise, on such terms as the Manager determines and to convert convertible
securities or exercise rights so purchased; and (ii) to offer and


                                       9
<PAGE>
sell the underlying common stock or depositary shares for your account, in the
open market or otherwise, for long or short account (for purposes of such
commitment, such common stock or depositary shares being considered the
equivalent of convertible securities or rights), on such terms consistent with
the terms of the Offering set forth in the Prospectus or Offering Circular as
the Manager determines. On demand you shall take up and pay for any securities
so purchased for your account or you shall deliver to the Manager against
payment any securities so sold, as the case may be. During such period you may
offer and sell the underlying common stock or depositary shares, but only at
prices set by the Manager from time to time, and any such sales shall be subject
to the Manager's right to sell to you the underlying common stock or depositary
shares as above provided and to the Manager's right to reserve your Securities
purchased, received or to be received upon conversion. You agree not to bid for,
purchase, attempt to induce others to purchase, or sell, directly or indirectly,
any convertible securities or rights or underlying common stock or depositary
shares, provided, however, that no Underwriter shall be prohibited from (a)
selling underlying common stock owned beneficially by such Underwriter on the
day the convertible securities were first called for redemption, (b) converting
convertible securities owned beneficially by such Underwriter on such date or
selling underlying common stock issued upon conversion of convertible securities
so owned, (c) exercising rights owned beneficially by such Underwriter on the
record date for a rights offering or selling the underlying common stock or
depositary shares issued upon exercise of rights so owned or (d) purchasing or
selling convertible securities or rights or underlying common stock or
depositary shares as a broker pursuant to unsolicited orders.

                           VI. PAYMENT AND SETTLEMENT

            6.1. PAYMENT AND SETTLEMENT. You shall deliver to the Manager on the
date and at the place and time specified in the applicable AAU (or on such later
date and at such place and time as may be specified by the Manager in a
subsequent Wire) the funds specified in the applicable AAU, payable to the order
of Salomon Smith Barney Inc., for (i) an amount equal to the Offering Price plus
(if not included in the Offering Price) accrued interest, amortization of
original issue discount or dividends, if any, specified in the Prospectus or
Offering Circular, less the applicable Selling Concession in respect of the Firm
Securities to be purchased by you, (ii) an amount equal to the Offering Price
plus (if not included in the Offering Price) accrued interest, amortization of
original issue discount or dividends, if any, specified in the Prospectus or
Offering Circular, less the applicable Selling Concession in respect of such of
the Firm Securities to be purchased by you as shall have been retained by or
released to you for direct sale as contemplated by Section 3.6 hereof or (iii)
the amount set forth or indicated in the applicable AAU, as the Manager shall
advise. You shall make similar payment as the Manager may direct for Additional
Securities, if any, to be purchased by you on the date specified by the Manager
for such payment. The Manager will make payment to the Issuer or Seller against
delivery to the Manager for your account of the Securities to be purchased by
you, and the Manager will deliver to you the Securities paid for by you which
shall have been retained by or released to you for direct sale. If the Manager
determines that transactions in the Securities are to be settled through the
facilities of DTC or other clearinghouse facility, payment for and delivery of
Securities


                                       10
<PAGE>
purchased by you shall be made through such facilities, if you are a member, or,
if you are not a member, settlement shall be made through your ordinary
correspondent who is a member.

                                  VII. EXPENSES

            7.1. MANAGEMENT FEE. You authorize the Manager to charge your
account as compensation for the Manager's and Co-Managers' services in
connection with the Offering, including the purchase from the Issuer or Seller
of the Securities, as the case may be, and the management of the Offering, the
amount, if any, set forth as the management fee, global coordinators fee,
praecipium or other similar fee in the applicable AAU. Such amount shall be
divided among the Manager and any Co-Managers named in the applicable AAU as
they may determine.

            7.2. GENERAL EXPENSES. You authorize the Manager to charge your
account with your Underwriting Percentage of all expenses of a general nature
incurred by the Manager and Co-Managers under the applicable AAU in connection
with the Offering, including the negotiation and preparation thereof, or in
connection with the purchase, carrying, marketing and sale of any securities
under the applicable AAU and any Intersyndicate Agreement, including, without
limitation, legal fees and expenses, transfer taxes, costs associated with
approval of the Offering by the NASD and the costs of currency transactions
(including forward and hedging currency transactions) entered into to facilitate
settlement of the purchase of Securities permitted under Section 3.1 hereof.

                    VIII. MANAGEMENT OF SECURITIES AND FUNDS

            8.1. ADVANCES; LOANS; PLEDGES. You authorize the Manager to advance
the Manager's own funds for your account, charging current interest rates, or to
arrange loans for your account for the purpose of carrying out the provisions of
the applicable AAU and any Intersyndicate Agreement and in connection therewith,
to hold or pledge as security therefor all or any securities which the Manager
may be holding for your account under the applicable AAU and any Intersyndicate
Agreement, to execute and deliver any notes or other instruments evidencing such
advances or loans and to give all instructions to the lenders with respect to
any such loans and the proceeds thereof. The obligations of the Underwriters
under loans arranged on their behalf shall be several in proportion to their
respective Original Purchase Obligations and not joint. Any lender is authorized
to accept the Manager's instructions as to the disposition of the proceeds of
any such loans. In the event of any such advance or loan, repayment thereof
shall, in the discretion of the Manager, be effected prior to making any
remittance or delivery pursuant to Section 8.2, 8.3 or 9.2 hereof.

            8.2. RETURN OF AMOUNT PAID FOR SECURITIES. Out of payment received
by the Manager for Securities sold for your account which have been paid for by
you, the Manager will remit to you promptly an amount equal to the price paid by
you for such Securities.


                                       11
<PAGE>
            8.3. DELIVERY AND REDELIVERY OF SECURITIES FOR CARRYING PURPOSES.
The Manager may deliver to you from time to time prior to the termination of the
applicable AAU pursuant to Section 9.1 hereof against payment, for carrying
purposes only, any Securities or Other Securities purchased by you under the
applicable AAU or any Intersyndicate Agreement which the Manager is holding for
sale for your account but which are not sold and paid for. You shall redeliver
to the Manager against payment any Securities or Other Securities delivered to
you for carrying purposes at such times as the Manager may demand.

                        IX. TERMINATION; INDEMNIFICATION

            9.1. TERMINATION. Each AAU shall terminate at the close of business
on the later of the date on which the Underwriters pay the Issuer or Seller for
the Securities and 45 full days after the applicable Offering Date, unless
sooner terminated by the Manager. The Manager may in its discretion by notice to
you prior to the termination of such AAU alter any of the terms or conditions of
the Offering to the extent permitted by Articles III or IV hereof, or terminate
or suspend the effectiveness of Article V hereof, or any part thereof. No
termination or suspension pursuant to this paragraph shall affect the Manager's
authority under Section 3.1 hereof to take actions in respect of the Offering or
under Article V hereof to cover any short position incurred under such AAU or in
connection with covering any such short position to require you to repurchase
Securities as specified in Section 5.2 hereof.

            9.2. DELIVERY OR SALE OF SECURITIES; SETTLEMENT OF ACCOUNTS. Upon
termination of each AAU or prior thereto at the Manager's discretion, the
Manager shall deliver to you any Securities paid for by you pursuant to Section
6.1 hereof and held by the Manager for sale pursuant to Section 3.4 or 3.5
hereof but not sold and paid for and any Securities or Other Securities that are
held by the Manager for your account pursuant to the provisions of Article V
hereof or any Intersyndicate Agreement. Notwithstanding the foregoing, at the
termination of such AAU, if the aggregate initial Offering Price of any such
Securities and the aggregate purchase price of any Other Securities so held and
not sold and paid for does not exceed an amount equal to 20% of the aggregate
initial Offering Price of the Securities, the Manager may, in its discretion,
sell such Securities and Other Securities for the accounts of the several
Underwriters, at such prices, on such terms, at such times and in such manner as
it may determine. Within the period specified by applicable NASD Rules or, if no
period is so specified, as soon as practicable after termination of such AAU,
your account shall be settled and paid. The Manager may reserve from
distribution such amount as the Manager deems advisable to cover possible
additional expenses. The determination by the Manager of the amount so to be
paid to or by you shall be final and conclusive. Any of your funds in the
Manager's hands may be held with the Manager's general funds without
accountability for interest

            Notwithstanding any provision of this Master AAU other than Section
10.12, upon termination of each AAU or prior thereto at the Manager's
discretion, the Manager (i) may allocate to the accounts of the Underwriters the
expenses described in


                                       12
<PAGE>
Section 7.2 hereof and any losses incurred upon the sale of Securities or Other
Securities pursuant to the applicable AAU or any Intersyndicate Agreement
(including any losses incurred upon the sale of securities referred to in
Section 5.4(ii) hereof), (ii) may deliver to the Underwriters any unsold
Securities or Other Securities purchased pursuant to Section 5.1 hereof or any
Intersyndicate Agreement and (iii) may deliver to the Underwriters any unsold
Securities purchased pursuant to the applicable Underwriting Agreement, in each
case in the Manager's discretion. The Manager shall have full discretion to
allocate expenses and Securities to the accounts of any Underwriter as the
Manager decides, except that (a) no Underwriter (other than the Manager or a
Co-Manager) shall bear more than its share of such expenses, losses or
Securities (such share shall not exceed such Underwriter's Underwriting
Percentage and shall be determined pro rata among all such Underwriters based on
their Underwriting Percentages), (b) no such Underwriter shall receive
Securities that, together with any Securities purchased by such Underwriter
pursuant to Section 6.1 (but excluding any Securities that such Underwriter is
required to repurchase pursuant to Section 5.2) exceed such Underwriter's
Original Purchase Obligation and (c) no Co-Manager shall bear more than its
share, as among the Manager and the other Co-Managers, of such expenses, losses
or Securities (such share to be determined pro rata among the Manager and all
Co-Managers based on (1) their relative Underwriting Percentages as a percentage
of the total combined Underwriting Percentages of the Manager and all
Co-Managers, or (2) if the Manager so determines, their relative Offering
Economics (as hereinafter defined) as a percentage of the combined Offering
Economics of the Manager and all Co-Managers together. The Manager's or a
Co-Manager's "OFFERING ECONOMICS" equals the sum of its Management Fee Share,
its Underwriting Fee Share and its Selling Concession Share (each as hereinafter
defined). The Manager's or a Co-Manager's "MANAGEMENT FEE SHARE" is the dollar
amount of its share, as agreed among the Manager and any Co-Managers, of the
amount payable by all Underwriters to some or all of the Manager and any
Co-Manager as a global coordinators' fee, praecipium, management fee or other
fee. The Manager's or a Co-Manager's "UNDERWRITING FEE SHARE" is the dollar
amount of its Underwriting Percentage of the aggregate initial Offering Price of
the Firm Securities less the Purchase Price thereof, less the Selling Concession
thereon. The Manager's or a Co-Manager's "SELLING CONCESSION SHARE" is the
dollar amount of any Selling Concession credited to it on sales from the
institutional pot or on sales made for the account of any other Underwriter. If
any Securities or Other Securities returned to you pursuant to clause (ii) or
(iii) above were not paid for by you pursuant to Section 6.1 hereof, you shall
pay to the Manager an amount per security equal to the amount set forth in
Section 6.1(i), in the case of Securities returned to you pursuant to clause
(iii) above, or the purchase price of such securities, in the case of Securities
or Other Securities returned to you pursuant to clause (ii) above.

            9.3. POST-SETTLEMENT EXPENSES. Notwithstanding any settlement on the
termination of the applicable AAU, you agree to pay any transfer taxes which may
be assessed and paid after such settlement on account of any sales or transfers
under such AAU or any Intersyndicate Agreement for your account and your
Underwriting Percentage of (i) all expenses incurred by the Manager in
investigating, preparing to defend or defending against any action, claim or
proceeding which is asserted or instituted by any party (including any
governmental or regulatory body) relating to (a) the


                                       13
<PAGE>
Registration Statement, any Preliminary Prospectus or Prospectus (or any
amendment or supplement thereto), any Preliminary Offering Circular or Offering
Circular (or any amendment or supplement thereto) or Supplemental Offering
Materials, (b) the violation of any applicable restrictions on the offer, sale,
resale or purchase of Securities or Other Securities imposed by United States
Federal or state laws or foreign laws and the rules and regulations of any
regulatory body promulgated thereunder or pursuant to the terms of such AAU, the
Underwriting Agreement or any Intersyndicate Agreement or (c) any claim that the
Underwriters constitute a partnership, an association or an unincorporated
business or other separate entity and (ii) any liability, including attorneys'
fees, incurred by the Manager in respect of any such action, claim or
proceeding, whether such liability shall be the result of a judgment or
arbitrator's determination or as a result of any settlement agreed to by the
Manager, other than any such expense or liability as to which the Manager
actually receives indemnity pursuant to Section 9.4, contribution pursuant to
Section 9.5, indemnity or contribution pursuant to the Underwriting Agreement or
damages from an Underwriter for breach of its representations, warranties,
agreements, or covenants contained in the applicable AAU. None of the foregoing
provisions of this Section 9.3 shall relieve any defaulting or breaching
Underwriter from liability for its defaults or breach.

            9.4. INDEMNIFICATION. You agree to indemnify and hold harmless each
other Underwriter and each person, if any, who controls any such Underwriter
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act, to the extent and upon the terms which you agree to indemnify and hold
harmless any of the Issuer, the Guarantor, the Seller, any person controlling
the Issuer, the Guarantor, the Seller, its directors and, in the case of a
Registered Offering, its officers who signed the Registration Statement and, in
the case of an Offering other than a Registered Offering, its officers, in each
case as set forth in the Underwriting Agreement. You further agree to indemnify
and hold harmless any investment banking firm identified in a Wire as the
qualified independent underwriter as defined in Rule 2720 of the NASD's Conduct
Rules ("QIU") for an Offering and each person, if any, who controls such QIU
within the meaning of either Section 15 of the 1933 Act or Section 20 of the
1934 Act, from and against any and all losses, claims, damages and liabilities
related to, arising out of or in connection with such investment banking firm's
activities as QIU for the Offering. You agree with the other Underwriters to
reimburse such QIU for all expenses, including fees and expenses of counsel as
they are incurred, in connection with investigating, preparing for, or defending
any action, claim or proceeding related to, arising out of, or in connection
with such QIU's activities as a QIU for the Offering. Each Underwriter shall be
responsible for its Underwriting Percentage of any amount due to such QIU on
account of the foregoing indemnity. You agree that such QIU shall have no
additional liability to any Underwriter or otherwise as a result of its serving
as QIU in connection with the Offering. You further agree that to the extent the
indemnification provided to a QIU under this Section 9.4 is unavailable to such
QIU or insufficient in respect of any losses, claims, damages or liabilities
(and expenses relating thereto), whether as a matter of law or public policy or
as a result of the default of any Underwriter in performing its obligations
under this Section 9.4, you and each other Underwriter shall contribute to the
amount paid or payable by such QIU as a result of such losses, claims, damages
or liabilities (and expenses relating thereto) in proportion to your
Underwriting Percentage.


                                       14
<PAGE>
            9.5. CONTRIBUTION. Notwithstanding any settlement on the termination
of the applicable AAU, you agree to pay upon request of the Manager, as
contribution, your Underwriting Percentage of any losses, claims, damages or
liabilities, joint or several, paid or incurred by any Underwriter to any person
other than an Underwriter, arising out of or based upon any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement, any Preliminary Prospectus or Prospectus (or any amendment or
supplement thereto), any Preliminary Offering Circular or Offering Circular (or
any amendment or supplement thereto) or Supplemental Offering Materials or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading (other
than an untrue statement or alleged untrue statement or omission or alleged
omission made in reliance upon and in conformity with information furnished to
the Company in writing by the Underwriter on whose behalf the request for
contribution is being made expressly for use therein) and your Underwriting
Percentage of any legal or other expenses reasonably incurred by the Underwriter
(with the approval of the Manager) on whose behalf the request for contribution
is being made in connection with investigating or defending any such loss,
claim, damage or liability or any action in respect thereof; provided that no
request shall be made on behalf of any Underwriter guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) from any
Underwriter who was not guilty of such fraudulent misrepresentation. None of the
foregoing provisions of this Section 9.5 shall relieve any defaulting or
breaching Underwriter from liability for its defaults or breach.

            9.6. SEPARATE COUNSEL. If any claim is asserted or action or
proceeding commenced pursuant to which the indemnity provided in Section 9.4 may
apply, the Manager may take such action in connection therewith as it deems
necessary or desirable, including retention of counsel for the Underwriters, and
in its discretion separate counsel for any particular Underwriter or group of
Underwriters, and the fees and disbursements of any counsel so retained shall be
allocated among the several Underwriters as determined by the Manager. Any
Underwriter may elect to retain at its own expense its own counsel and, on
advice of such counsel but only with the consent of the Manager, may settle or
consent to the settlement of any such claim, action or proceeding. The Manager
may settle or consent to the settlement of any such claim, action or proceeding.
Whenever the Manager receives notice of the assertion of any claim, action or
proceeding to which the provisions of Section 9.4 would apply, it will give
prompt notice thereof to each Underwriter, and whenever you receive notice of
the assertion of any claim or commencement of any action or proceeding to which
the provisions of Section 9.4 would apply, you will give prompt notice thereof
to the Manager. The Manager also will furnish each Underwriter with periodic
reports, at such times as it deems appropriate, as to the status of such claim,
action or proceeding, and the action taken by it in connection therewith.

            9.7. SURVIVAL OF AGREEMENTS. Regardless of any termination of an
AAU, your agreements contained in Article V and Sections 3.1, 9.3, 9.4, 9.5, 9.6
and 11.2 shall remain operative and in full force and effect regardless of (i)
any termination of the Underwriting Agreement, (ii) any investigation made by or
on behalf of any Underwriter or any person controlling any Underwriter or by or
on behalf of the Issuer,


                                       15
<PAGE>
the Guarantor, the Seller, its directors or officers or any person controlling
the Issuer, the Guarantor or the Seller and (iii) acceptance of any payment for
any Securities.

                X. REPRESENTATIONS AND COVENANTS OF UNDERWRITERS

            10.1. KNOWLEDGE OF OFFERING. You understand that it is your
responsibility to examine the Registration Statement, the Prospectus or the
Offering Circular, as the case may be, relating to the Offering, any amendment
or supplement thereto, any Preliminary Prospectus or Preliminary Offering
Circular and the material, if any, incorporated by reference therein and any
Supplemental Offering Materials and you will familiarize yourself with the terms
of the Securities, any applicable Indenture and the other terms of the Offering
thereof which are to be reflected in the Prospectus or the Offering Circular, as
the case may be, and the applicable AAU and Underwriting Agreement. The Manager
is authorized, with the advice of counsel for the Underwriters, to approve on
your behalf any amendments or supplements to the Registration Statement and the
Prospectus or the Offering Circular, as the case may be.

            10.2. DISTRIBUTION OF MATERIALS. You will keep an accurate record of
the names and addresses of all persons to whom you give copies of the
Registration Statement, the Prospectus, any Preliminary Prospectus (or any
amendment or supplement thereto) or any Offering Circular or any Preliminary
Offering Circular and, when furnished with any subsequent amendment to the
Registration Statement, any subsequent Prospectus, any subsequent Offering
Circular or any memorandum outlining changes in the Registration Statement or
any Prospectus or Offering Circular, you will, upon request of the Manager,
promptly forward copies thereof to such persons.

            10.3. ACCURACY OF UNDERWRITERS' INFORMATION. You confirm that the
information that you have given or are deemed to have given in response to the
Underwriters' Questionnaire attached as Exhibit A hereto (and to any other
questions addressed to you in the Invitation Wire or other Wires), which
information has been furnished to the Issuer for use in the Registration
Statement and the Prospectus or the Offering Circular, as the case may be, or
has otherwise been relied upon in connection with the Offering, is complete and
accurate. You shall notify the Manager immediately of any development before the
termination of the applicable AAU which makes untrue or incomplete any
information that you have given or are deemed to have given in response to the
Underwriters' Questionnaire (or such other questions).

            10.4. NAME; ADDRESS. Unless you have promptly notified the Manager
in writing otherwise, your name as it should appear in the Prospectus or the
Offering Circular and any advertisement, if different, and your address are as
set forth on the signature pages hereof.

            10.5. CAPITAL REQUIREMENTS. You represent that your commitment to
purchase the Securities will not result in a violation of the financial
responsibility requirements of Rule 15c3-1 under the 1934 Act or of any similar
provision of any applicable rules of any securities exchange to which you are
subject or, if you are a financial institution subject to regulation by the
Board of Governors of the United States


                                       16
<PAGE>
Federal Reserve System, the United States Comptroller of the Currency or the
United States Federal Deposit Insurance Corporation, will not place you in
violation of any applicable capital requirements or restrictions of such
regulator or any other regulator to which you are subject.

            10.6. COMPLIANCE WITH NASD REQUIREMENTS. You represent that you are
a member in good standing of the NASD, a Bank that is not a member of the NASD
or a foreign bank or dealer not eligible for membership in the NASD. In making
sales of Securities, if you are such a member, you agree to comply with all
applicable interpretive material ("IM") and rules of the NASD, including,
without limitation, IM-2110-1 (the NASD's interpretation with respect to
free-riding and withholding) and Rule 2740 of the NASD's Conduct Rules, or, if
you are such a foreign bank or dealer, you agree to comply, as applicable, with
IM-2110-1 and Rules 2730, 2740 and 2750 of the NASD's Conduct Rules as though
you were such a member and Rule 2420 of the NASD's Conduct Rules as it applies
to a nonmember broker or dealer in a foreign country. If you are a Bank, you
agree, to the extent required by applicable law or the Conduct Rules of the
NASD, that you will not, in connection with the public offering of any
Securities that do not constitute "exempted securities" within the meaning of
Section 3(a)(12) of the 1934 Act or such other Securities as from time to time
may be sold by a Bank, purchase any Securities at a discount from the Offering
Price from any Underwriter or dealer or otherwise accept any Fees and
Commissions from any Underwriter or Dealer, and you agree to comply, as
applicable, with Rule 2420 of the NASD's Conduct Rules as though you were a
member.

            10.7. FURTHER STATE NOTICE. The Manager will file a Further State
Notice with the Department of State of New York, if required.

            10.8. COMPLIANCE WITH RULE 15C2-8. In the case of a Registered
Offering and any other Offering to which the provisions of Rule 15c2-8 under the
1934 Act are made applicable pursuant to the AAU or otherwise, you agree to
comply with such Rule in connection with the Offering. In the case of an
Offering other than a Registered Offering, you agree to comply with applicable
Federal and state laws and the applicable rules and regulations of any
regulatory body promulgated thereunder governing the use and distribution of
offering circulars by underwriters.

            10.9. DISCRETIONARY ACCOUNTS. In the case of a Registered Offering
of Securities issued by an Issuer that was not, immediately prior to the filing
of the Registration Statement, subject to the requirements of Section 13(d) or
15(d) of the 1934 Act, you agree that you will not make sales to any account
over which you exercise discretionary authority in connection with such sale
except as otherwise permitted by the applicable AAU for such Offering.

            10.10. OFFERING RESTRICTIONS. If you are a foreign bank or dealer
and you are not registered as a broker-dealer under Section 15 of the 1934 Act,
you agree that while you are acting as an Underwriter in respect of the
Securities and in any event during the term of the applicable AAU, you will not
directly or indirectly effect in, or with persons who are nationals or residents
of, the United States, its territories or possessions any transactions (except
for the purchases provided for in the Underwriting


                                       17
<PAGE>
Agreement and transactions contemplated by Articles III and V hereof) in
Securities or any Other Securities.

            It is understood that, except as specified in the applicable AAU, no
action has been taken by the Manager, the Issuer, the Guarantor or the Seller to
permit you to offer Securities in any jurisdiction other than the United States,
in the case of a Registered Offering, where action would be required for such
purpose.

            10.11. REPRESENTATIONS, WARRANTIES AND AGREEMENTS. You agree to make
to each other Underwriter participating in an Offering the same representations,
warranties and agreements, if any, made by the Underwriters to the Issuer, the
Guarantor or the Seller in the applicable Underwriting Agreement or any
Intersyndicate Agreement and you authorize the Manager to make such
representations, warranties and agreements to the Issuer, the Guarantor or the
Seller on your behalf.

            10.12. LIMITATION ON THE AUTHORITY OF THE MANAGER TO PURCHASE AND
SELL SECURITIES FOR THE ACCOUNT OF CERTAIN UNDERWRITERS. Notwithstanding any
provision of this AAU authorizing the Manager to purchase or sell any Securities
or Other Securities (including arranging for the sale of Contract Securities) or
over-allot in arranging sales of Securities for the accounts of the several
Underwriters, the Manager may not, in connection with the Offering of any
Securities, make any such purchases, sales and/or over-allotments for the
account of any Underwriter that, not later than its acceptance of the Invitation
Wire relating to such Offering, has advised the Manager that, due to its status
as, or relationship to, a bank or bank holding company such purchases, sales
and/or over-allotments are prohibited by applicable law. If any Underwriter so
advises the Manager, the Manager may allocate any such purchases, sales and
over-allotments (and the related expenses) which otherwise would have been
allocated to your account based on your respective Underwriting Percentage to
your account based on the ratio of your Original Purchase Obligation to the
Original Purchase Obligations of all Underwriters other than the advising
Underwriter or Underwriters or in such other manner as the Manager shall
determine.

                           XI. DEFAULTING UNDERWRITERS

            11.1. EFFECT OF TERMINATION. If the Underwriting Agreement is
terminated as permitted by the terms thereof, your obligations hereunder with
respect to the Offering of the Securities shall immediately terminate except (i)
as set forth in Section 9.7, (ii) that you shall remain liable for your
Underwriting Percentage (or such other percentage as may be specified pursuant
to Section 9.2) of all expenses and for any purchases or sales which may have
been made for your account pursuant to the provisions of Article V hereof or any
Intersyndicate Agreement and (iii) that such termination shall not affect any
obligations of any defaulting or breaching Underwriter.

            11.2. SHARING OF LIABILITY. If any Underwriter shall default in its
obligations (i) pursuant to Section 5.1, 5.2 or 5.4, (ii) to pay amounts charged
to its account pursuant to Section 7.1, 7.2 or 8.1 or (iii) pursuant to Section
9.2, 9.3, 9.4, 9.5,


                                       18
<PAGE>
9.6 or 11.1, you will assume your proportionate share (determined on the basis
of the respective Underwriting Percentages of the non-defaulting Underwriters)
of such obligations, but no such assumption shall relieve any defaulting
Underwriter from liability to the non-defaulting Underwriters, the Issuer, the
Guarantor or the Seller for its default.

            11.3. ARRANGEMENTS FOR PURCHASES. The Manager is authorized to
arrange for the purchase by others (including the Manager or any other
Underwriter) of any Securities not purchased by any defaulting Underwriter in
accordance with the terms of the applicable Underwriting Agreement or, if the
applicable Underwriting Agreement does not provide arrangements for defaulting
Underwriters, in the discretion of the Manager. If such arrangements are made,
the respective amounts of Securities to be purchased by the remaining
Underwriters and such other person or persons, if any, shall be taken as the
basis for all rights and obligations hereunder, but this shall not relieve any
defaulting Underwriter from liability for its default.

                               XII. MISCELLANEOUS

            12.1. OBLIGATIONS SEVERAL. Nothing contained in this Salomon Smith
Barney Master AAU or any AAU constitutes you partners with the Manager or with
the other Underwriters and the obligations of you and each of the other
Underwriters are several and not joint. Each Underwriter elects to be excluded
from the application of Subchapter K, Chapter 1, Subtitle A, of the United
States Internal Revenue Code of 1986, as amended. Each Underwriter authorizes
the Manager, on behalf of such Underwriter, to execute such evidence of such
election as may be required by the United States Internal Revenue Service.

            12.2. LIABILITY OF MANAGER. The Manager shall be under no liability
to you for any act or omission except for obligations expressly assumed by the
Manager in the applicable AAU.

            12.3. TERMINATION OF MASTER AGREEMENT AMONG UNDERWRITERS. This
SALOMON SMITH BARNEY Master AAU may be terminated by either party hereto upon
five business days' written notice to the other party; provided that with
respect to any Offering for which an AAU was sent prior to such notice, this
Salomon Smith Barney Master AAU as it applies to such Offering shall remain in
full force and effect and shall terminate with respect to such Offering in
accordance with Section 9.1 hereof.

            12.4. GOVERNING LAW. THIS SALOMON SMITH BARNEY MASTER AAU AND EACH
AAU SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE
OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THE STATE OF NEW
YORK.

            12.5. AMENDMENTS. This Salomon Smith Barney Master AAU may be
amended from time to time by consent of the parties hereto. Your consent shall
be deemed to have been given to an amendment to this Salomon Smith Barney Master
AAU, and such amendment shall be effective, five business days following written
notice


                                       19
<PAGE>
to you of such amendment if you do not notify Salomon Smith Barney in writing
prior to the close of business on such fifth business day that you do not
consent to such amendment. Upon effectiveness, the provisions of this Salomon
Smith Barney Master AAU as so amended shall apply to each AAU thereafter entered
into except as otherwise specifically provided in any such AAU.

            12.6. NOTICES. Any notice to any Underwriter shall be deemed to have
been duly given if mailed, sent by wire, telex, facsimile or electronic
transmission or other written communication or delivered in person to such
Underwriter at the address which shall have been provided to Salomon Smith
Barney as provided in Section 10.4 hereof. Any such notice shall take effect
upon receipt thereof.

            Please confirm your acceptance of this Salomon Smith Barney Master
AAU by signing and returning to us the enclosed duplicate copy hereof.

                                                     Very truly yours,

                                                     SALOMON SMITH BARNEY INC.



                                                     By:
                                                        ------------------------
                                                        Name:
                                                        Title:


CONFIRMED:..............................1999

.............................................
            (Name of Underwriter)

By:.........................................
Name:
Title:

         (If person signing is not an officer or a partner,
          please attach instrument of authorization)

Address:
        ------------------------------------

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

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


Telephone:
          ----------------------------------

Fax:
     ---------------------------------------


                                       20
<PAGE>
                                                                       EXHIBIT A
                                                                    JUNE 1, 1999

                            SALOMON SMITH BARNEY INC.
                           UNDERWRITERS' QUESTIONNAIRE


            In connection with each Offering covered by the Salomon Smith Barney
Inc. Master Agreement Among Underwriters dated June 1, 1999, we confirm that
except as set forth in a timely reply by us to the Invitation Wire:

            (1) Neither we nor any of our directors, officers or partners have a
      material relationship (as "material" is defined in Regulation C under the
      1933 Act) with the Issuer, the Guarantor or any Seller.

            (2) (If the offer and sale of the Securities are to be registered
      under the 1933 Act pursuant to a Registration Statement on Form S-1 of
      Form F-1:) Neither we nor any "group" (as that term is used in Section
      13(d)(3) of the Securities Exchange Act of 1934, as amended (the "Exchange
      Act")) of which we are a member is the beneficial owner (determined in
      accordance with Rule 13d-3 under the Exchange Act) of more than 5% of any
      class of voting securities of the Issuer or the Guarantor, nor do we have
      any knowledge that more than 5% of any class of voting securities of the
      Issuer or the Guarantor is held or to be held subject to any voting trust
      or other similar agreement.

            (3) Other than as may be stated in the Salomon Smith Barney Master
      Agreement Among Underwriters dated June 1, 1999, the applicable AAU, the
      Intersyndicate Agreement or dealer agreement, if any, the Prospectus, the
      Registration Statement or the Offering Circular, we do not know and have
      no reason to believe that there is an intention to over-allot or that the
      price of any security may be stabilized to facilitate the offering of the
      Securities.

            (4) Except as described in the Prospectus or Offering Circular, as
      the case may, be and the Invitation Wire, we do not know of any discounts
      or commissions to be allowed or paid to dealers, including all cash,
      securities, contracts or other consideration to be received by any dealer
      in connection with the sale of the securities.


                                       21
<PAGE>
            (5) We have not prepared any report or memorandum for external use
      in connection with the Offering. (If there are any exceptions, (i) furnish
      four (4) copies of each report and memorandum to Salomon Smith Barney
      Inc., 388 Greenwich Street, New York, N.Y. 10013, Attention: Investment
      Banking Department/Transaction Structuring Group, (ii) identify each class
      of person who received such material and the number of copies distributed
      to each such class, and (iii) indicate when such distribution commenced
      and ceased.)

            (6) (If the offer and sale of the Securities are to be registered
      under the 1933 Act pursuant to a Registration Statement on Form S-1 or
      Form F-1:) We have not within the past twelve months prepared or had
      prepared for us any engineering, management or similar report or
      memorandum relating to broad aspects of the business, operations or
      products of the Issuer or the Guarantor. (The immediately preceding
      sentence does not apply to reports solely comprised of recommendations to
      buy, sell or hold the Issuer's or the Guarantor's securities, unless such
      recommendations have changed within the past six months or to information
      already contained in documents filed with the Commission. If there are any
      exceptions, (i) furnish four (4) copies of each report and memorandum to
      Salomon Smith Barney Inc. 388 Greenwich Street, New York, N.Y. 10013,
      Attention: Investment Banking Department/Transaction Structuring Group,
      (ii) identify each class of persons who received such material and the
      number of copies distributed to each such class, and (iii) indicate when
      such distribution commenced and ceased.)

            (7) We are not an "affiliate" of the Issuer or the Guarantor for
      purposes of Rule 2720 of the National Association of Securities Dealers,
      Inc.'s ("NASD") Conduct Rules. We understand that under Rule 2720 (except
      as provided in Rule 2720(b)(1)(C) thereof) two entities are "affiliates"
      of each other if one entity controls, is controlled by, or is under common
      control with, the second entity and that "control" is presumed to exist if
      one entity (or, in the case of an NASD member, the entity and all "persons
      associated with" it (as defined in the NASD By-Laws)) beneficially owns
      10% or more of the second entity's outstanding voting securities or, if
      the second entity is a partnership, if the first entity has a partnership
      interest in 10% or more of the second entity's distributable profits or
      losses.

            (8) (If the Securities are not investment grade debt securities or
      preferred stock, or equity securities for which there exists a "bona fide
      independent market" (as defined in Rule 2720(b)(3) of the NASD's Conduct
      Rules) or otherwise exempted under Rule 2720(b)(7)(D) of the NASD's
      Conduct Rules:) We do not have a "conflict of interest" with the Issuer or
      the Guarantor under Rule 2720 of the NASD's Conduct Rules. In that regard,
      we specifically confirm that we, our "parent" (as defined in Rule 2720),
      affiliates and "persons associated with" us (as defined in the NASD
      By-Laws), in the aggregate do not (i) beneficially own 10% or more of the
      Issuer's or the Guarantor's "common equity", "preferred equity", or
      "subordinated debt" (as each such term is defined in Rule 2720), or (ii)
      in the case of an Issuer or Guarantor which is a partnership, beneficially
      own a general, limited or special partnership interest in 10% or more


                                       22
<PAGE>
      of the Issuer's or Guarantor's distributable profits or losses.

            (9) (If filing with the NASD is required:) Neither we nor any of our
      directors, officers, partners or "persons associated with" us (as defined
      in the NASD By-Laws) nor, to our knowledge, any "related person" (defined
      by the NASD to include counsel, financial consultants and advisors,
      finders, members of the selling or distribution group, any NASD member
      participating in the offering and any other persons associated with or
      related to and members of the immediate family of any of the foregoing) or
      any other broker-dealer, (a) within the last 12 months have purchased in
      private transactions, or intend before, at or within six months after the
      commencement of the public offering of the Securities to purchase in
      private transactions, any securities of the Issuer, the Guarantor or any
      Issuer Related Party (as hereinafter defined), (b) within the last 12
      months had any dealings with the Issuer, the Guarantor, any Seller or any
      subsidiary or controlling person thereof (other than relating to the
      proposed Underwriting Agreement) as to which documents or information are
      required to be filed with the NASD pursuant to its Corporate Financing
      Rule, or (c) during the 12 months immediately preceding the filing of the
      Registration Statement (or, if there is none, the Offering Circular), have
      entered into any arrangement which provided or provides for the receipt of
      any item of value (including, but not limited to, cash payments and
      expense reimbursements) and/or the transfer of any warrants, options or
      other securities from the Issuer, the Guarantor or any Issuer Related
      Party to us or any related person.

            (10) (If filing with the NASD is required:) There is no association
      or affiliation between us and (i) any officer or director of the Issuer,
      the Guarantor or any Issuer Related Party, or (ii) any securityholder of
      five percent or more (or, in the case of an initial public offering of
      equity securities, any securityholder) of any class of securities of the
      Issuer, the Guarantor or an Issuer Related Party; it being understood that
      for purposes of paragraph (9) above and this paragraph (10), the term
      "Issuer Related Party" includes any Seller, any affiliate of the Issuer
      the Guarantor or a Seller and the officers or general partners, directors,
      employees and securityholders thereof. (If there are any exceptions, state
      the identity of the person with whom the association or affiliation exists
      and, if relevant, the number of equity securities or the face value of
      debt securities owned by such person, the date such securities were
      acquired and the price paid for such securities).

            (11) (If the Securities are not issued by a real estate investment
      trust:) No portion of the net offering proceeds from the sale of the
      Securities will be paid to us or any of our affiliates or "persons
      associated with" us (as defined in the NASD By-Laws) or members of the
      immediate family of any such person.

            (12) (If the Securities are debt securities and their offer and sale
      is to be registered under the 1933 Act:) We are not an affiliate (as
      defined in Rule 0-2 under the Trust Indenture Act of 1939) of the Trustee
      for the Securities or of its parent, if any. Neither the Trustee nor its
      parent, if any, nor any of their directors or executive officers is a
      "director, officer, partner, employee, appointee or


                                       23
<PAGE>
      representative" of ours (as those terms are defined in the Trust Indenture
      Act of 1939 or in the relevant instructions to Form T-1). We and our
      directors, partners, and executive officers, taken as a group, did not on
      the date specified in the Invitation Wire, and do not, own beneficially 1%
      or more of the shares of any class of voting securities of the Trustee or
      of its parent, if any. If we are a corporation, we do not have outstanding
      and have not assumed or guaranteed any securities issued otherwise than in
      our present corporate name.

            (13) (If the Issuer is a public utility:) We are not a "holding
      company" or a "subsidiary company" or an "affiliate" of a "holding
      company" or of a "public-utility company", each as defined in the Public
      Utility Holding Company Act of 1935.

            (14) If we are, or we are affiliated with, a U.S. or non-U.S. bank,
      we hereby represent that our participation in the offering of the
      Securities on the terms contemplated in the applicable AAU and the
      proposed Underwriting Agreement does not contravene any U.S. or state
      banking law restricting the exercise of securities powers in the United
      States.

            Capitalized terms used but not defined herein shall have the
respective meanings given to them in the applicable AAU.


                                       24


</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K2
<SEQUENCE>6
<FILENAME>c82676a1exv99wk2.txt
<DESCRIPTION>FORM OF MASTER SERVICES AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT k.2

                       FORM OF MASTER SERVICES AGREEMENT


This Agreement is made as of March 15, 2004 by and among each registered
management investment company identified on Appendix A hereto (each such
management investment company and each management investment company made
subject to this Agreement in accordance with Section 8.5 below shall hereinafter
be referred to as a "FUND" and are sometimes collectively hereinafter referred
to as the "FUNDS"), and STATE STREET BANK AND TRUST COMPANY, a Massachusetts
trust company, having its principal place of business at 225 Franklin Street,
Boston, Massachusetts 02110 (the "AGENT").

         WHEREAS, each Fund desires to retain the Agent to perform certain
services;

         WHEREAS, each Fund may or may not be authorized to issue common stock
or shares of beneficial interest ("SHARES") in separate series, with each such
series representing interests in a separate portfolio of securities and other
assets;

         WHEREAS, each Fund so authorized intends that this Agreement be
applicable to its series of Shares (as identified on Appendix A hereto (such
series together with all other series subsequently established by such Fund and
made subject to this Agreement in accordance with Section 8.6 below, shall
hereinafter be referred to as the "PORTFOLIO(S)");

         WHEREAS, each Fund not so authorized intends that this Agreement be
applicable to it and that all references hereinafter to one or more
"Portfolio(s)" shall be deemed to refer to such Fund(s); and

         WHEREAS, the Agent is willing to perform such services upon the terms
and conditions hereinafter set forth.

         NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter contained, the parties hereto agree as follows:

SECTION 1.        DUTIES OF THE AGENT.

         SECTION 1.1       BOOKS OF ACCOUNT.

         The Agent shall maintain the books of account of each Fund and shall
perform the following duties in the manner prescribed by such Fund's currently
effective prospectus, statement of additional information or other governing
document, certified copies of which have been supplied to the Agent (a
"GOVERNING DOCUMENT"):

         a. Maintain each Portfolio's general ledger and such other accounts,
            books and financial records of such Portfolio as the parties may
            agree upon from time to time, and as may be required by the
            Investment Company Act of 1940, as amended (the "1940 ACT");




<PAGE>
         b. Maintain each Portfolio's portfolio security transaction records
            utilizing trade date provided to the Agent by such Portfolio's duly
            authorized investment adviser (each, an "INVESTMENT ADVISER");

         c. For each valuation date, post each Portfolio's transactions to such
            Portfolio's general ledger including, but not limited to:

              -Calculate unrealized appreciation and depreciation regarding
               portfolio securities;
              -Amortize premiums and discounts regarding portfolio securities,
               as applicable;
              -Calculate fee-based expenses and set-up expense accruals as
               directed by the applicable Fund;
              -Record payments of Portfolio expenses upon written instructions
               of a Fund or duly authorized agent thereof;
              -Calculate interest and dividend income and reset interest accrual
               for variable rate securities, as applicable

         d. Reconcile cash, foreign currency and portfolio security holding
            positions with each Portfolio's custodian (each, a "CUSTODIAN")
            daily;

         e. Post each Portfolio's corporate actions;

         f. Calculate the net asset value of each Portfolio and report same to
            the Fund or such other entities or persons as the Fund may instruct
            from time to time;

         g. Prepare and transmit to the Fund, or such other entities or persons
            as the Fund may instruct from time to time, such periodic reports of
            Fund data as may be mutually agreed upon by the parties hereto; and

         h. Post shareholder reinvestment activity and reconcile share balances
            with each Portfolio's transfer agent (each, a "TRANSFER AGENT") in
            conjunction with Portfolio distributions.

         Each Fund shall provide timely prior notice to the Agent of any
modification in the manner in which such calculations are to be performed as
prescribed in any revision to such Fund's governing document and shall supply
the Agent with certified copies of all amendments and/or supplements to the
governing documents in a timely manner. For purposes of calculating the net
asset value of a Fund, the Agent shall value each Fund's portfolio securities
utilizing prices obtained from sources designated by such Fund (collectively,
the "AUTHORIZED PRICE SOURCES") on a Price Source Authorization substantially in
the form attached hereto as Exhibit A, as the same may be amended from time to
time, or otherwise designated by means of Proper Instructions (as such term is
defined in Section 2.2 below) (the "PRICE SOURCE AUTHORIZATION"). The Agent
shall not be responsible for any revisions to the methods of calculation unless
and until such revisions are communicated in writing to the Agent.

                                       2.

<PAGE>
         SECTION 1.2       ADDITIONAL SERVICES.

         The Agent shall provide the following services, as applicable, in each
case, subject to the control, supervision and direction of each Fund and subject
to any necessary review and comments by the Fund's auditors and legal counsel
and in accordance with procedures or policies that may be established from time
to time by and between the Agent and the Fund:

         a. Prepare and distribute daily total return calculations;

         b. Prepare monthly distribution analysis;

         c. Complete monthly preferred shares "asset coverage" test (as that
            term is defined in Section 18(h) of the 1940 Act following
            agreed-upon compliance procedures (the "COMPLIANCE PROCEDURES"); and

         d. Complete monthly (or more frequently as reasonably requested by the
            applicable rating agency) preferred shares basic maintenance test
            for applicable rating agency(ies) and preferred rate auction
            following the Compliance Procedures.

         SECTION 1.3       RECORDS.

         The Agent shall create and maintain all records relating to its
activities and obligations under this Agreement in such a manner as will meet
the obligations of each Fund under the 1940 Act, specifically Section 31 thereof
and Rules 31a-1 and 31a-2 thereunder. All such records shall be the property of
the applicable Fund and shall at all times during the regular business hours of
the Agent be open for inspection by duly authorized officers, employees or
agents of the applicable Fund and employees and agents of the Securities and
Exchange Commission. Subject to Section 3 below, the Agent shall preserve for
the period required by law the records required to be maintained thereunder.

         SECTION 1.4       APPOINTMENT OF AGENTS.

         The Agent may at its own expense employ agents in the performance of
its duties and the exercise of its rights under this Agreement, provided that
the employment of such agents shall not reduce the Agent's obligations or
liabilities hereunder.


SECTION 2.        DUTIES OF EACH FUND.

         SECTION 2.1       DELIVERY OF INFORMATION.

         Each Fund shall provide, or shall cause a third party to provide,
timely notice to the Agent of certain data as a condition to the Agent's
performance described in Section 1 above. The data required to be provided
pursuant to this section is set forth on Schedule A hereto, which schedule may
be separately amended or supplemented by the parties from time to time.

                                       3.
<PAGE>
         The Agent is authorized and instructed to rely upon the information it
receives from the Fund or any third party. The Agent shall have no
responsibility to review, confirm or otherwise assume any duty with respect to
the accuracy or completeness of any data supplied to it by or on behalf of any
Fund.

         SECTION 2.2       PROPER INSTRUCTIONS.

         The Fund or any other person duly authorized by the Fund shall
communicate to the Agent by means of Proper Instructions. Proper Instructions
shall mean (i) a writing signed or initialed by one or more persons as the Board
of Directors or Board of Trustees of a Fund shall have from time to time
authorized or (ii) communication effected directly between a Fund or its
third-party agents (each, a "THIRD PARTY AGENT") and the Agent by
electro-mechanical or electronic devices, provided that such Fund and the Agent
agree to security procedures. The Agent may rely upon any Proper Instruction
believed by it to be genuine and to have been properly issued by or on behalf of
the applicable Fund. Oral instructions shall be considered Proper Instructions
if the Agent reasonably believes them to have been given by a person authorized
to give such instructions. The Fund shall cause all oral instructions to be
confirmed in accordance with clauses (i) or (ii) above, as appropriate. The Fund
shall give timely Proper Instructions to the Agent in regard to matters
affecting accounting practices and the Agent's performance pursuant to this
Agreement.


SECTION 3.        STANDARD OF CARE; LIMITATION OF LIABILITY; EXCLUSIVE REMEDY.

         The Agent shall be held to the exercise of reasonable care in carrying
out the provisions of this Agreement, but shall be kept indemnified by the
Funds, and shall be without liability for any action taken or omitted by it
(including, without limitation, acting in accordance with any Proper
Instruction) in good faith without willful misconduct. The Agent shall be
entitled to rely on and may act upon the advice of counsel (who may be counsel
for the Fund) or the independent accountants for the Fund on all matters, and
shall be without liability for any action reasonably taken or omitted pursuant
to such advice. Nothing in this paragraph shall be construed as imposing upon
the Agent any obligation to seek such instructions or advice, or to act in
accordance with such advice when received. Without in any way limiting the
generality of the foregoing, the Agent shall in no event be liable for any loss
or damage arising from causes beyond its control including, without limitation,
delay or cessation of services hereunder or any damages resulting therefrom as a
result of work stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility of
performance.

         The Agent shall in no event be liable for any special, indirect,
incidental, or consequential damages of any kind whatsoever (including, without
limitation, attorney's fees) in any way due to a Fund's use of the
administration or accounting services or the performance of or failure to
perform the Agent's obligations under this Agreement.

         Each Fund, any Third Party Agent or Authorized Price Sources from which
the Agent shall receive or obtain certain records, reports and other data
utilized or included in the services

                                       4.
<PAGE>
provided hereunder are solely responsible for the contents of such information
including, without limitation, the accuracy thereof and each Fund agrees to make
no claim against the Agent arising out of the contents of such third-party data
including, but not limited to, the accuracy thereof. The Agent shall have no
responsibility to review, confirm or otherwise assume any duty with respect to
the accuracy or completeness of any such information and shall be without
liability for any loss or damage suffered as a result of the Agent's reasonable
reliance on and utilization of such information, except as otherwise required by
the Price Source Authorization with respect to the use of data obtained from
Authorized Price Sources. The Agent shall have no responsibility and shall be
without liability for any loss or damage caused by the failure of any Fund or
any Third Party Agent to provide it with the information required by Section 2.1
above. Further, and without in any way limiting the generality of the foregoing,
the Agent shall have no liability in respect of any loss, damage or expense
suffered by the Fund or any third party, insofar as such loss, damage or expense
arises from the performance of the Agent's duties hereunder by reason of the
Agent's reliance upon records that were maintained for any Fund by any entity
other than the Agent prior to such Fund's appointment of the Agent pursuant to
this Agreement.

         Each Fund agrees to indemnify and hold the Agent free and harmless from
any expense, loss, damage or claim, including reasonable attorney's fees,
suffered by the Agent and caused by or resulting from the acts or omissions of
such Fund or any third-party whose services the Agent must rely upon in
performing services hereunder.

         Each Fund acknowledges and agrees that, with respect to investments it
maintains with an entity which may from time to time act as a transfer agent for
uncertificated shares of registered investment companies (the "UNDERLYING
TRANSFER AGENT"), such Underlying Transfer Agent is the sole source of
information on the number of shares held by it on behalf of a Fund and that the
Agent has the right to rely on holdings information furnished by the Underlying
Transfer Agent to the Agent in performing its duties under this Agreement.


SECTION 3A.       PERFORMANCE GOALS.

         The Funds and the Agent may from time to time agree on the manner in
which they expect to deliver and receive the services contemplated by this
Agreement. The parties agree that such agreement(s) (hereinafter referred to as
"SERVICE LEVEL DOCUMENT(S)") reflect performance goals and any failure to
perform in accordance with the provisions thereof shall not be considered a
breach of contract that gives rise to contractual or other remedies. It is the
intention of the parties that the sole remedy for failure to perform in
accordance with the provisions of a Service Level Document, or any dispute
relating to performance goals set forth in a Service Level Document, will be a
meeting of the parties to resolve the failure pursuant to the consultation
procedure described in Sections 3A.1 and 3A.2 below.

         SECTION 3A.1 CONSULTATION PROCEDURE. If a party hereto is consistently
unable to meet the provisions of a Service Level Document, or in the event that
a dispute arises relating to performance goals set forth in a Service Level
Document, either party to this Agreement shall address any concerns it may have
by requiring a consultation with the other party.

                                       5.
<PAGE>
         SECTION 3A.2 PURPOSE OF CONSULTATION PROCEDURE. The purpose of the
consultation procedure is to endeavor to resolve a consistent failure to meet
the provisions of a Service Level Document. If a consultation occurs under this
Section 3A, all parties must negotiate in good faith to endeavor to:

         (a) implement changes which will enable the Service Level Document
             provisions to be more regularly met;

         (b) agree to alternative Service Level Document provisions which meet
             the parties' respective business requirements; or

         (c) otherwise find a solution such that within 30 days after the
             consultation, the inability to meet the Service Level Document
             provisions may be less likely to occur in the future.


SECTION 4.        REPRESENTATIONS AND WARRANTIES.

         SECTION 4.1       REPRESENTATIONS AND WARRANTIES OF THE AGENT.

         The Agent represents and warrants to each Fund that:

         a. It is a Massachusetts trust company, duly organized and existing
            under the laws of The Commonwealth of Massachusetts; and
         b. The person executing this Agreement on its behalf has been duly
            authorized to act on its behalf.

         SECTION 4.2       REPRESENTATIONS AND WARRANTIES OF EACH FUND.

         Each Fund represents and warrants to the Agent that:

         a. It is duly organized, existing and in good standing under the laws
            of the jurisdiction in which it was formed;
         b. It has the power and authority under applicable laws and by its
            organizational documents to enter into and perform this Agreement;
         c. All requisite proceedings have been taken to authorize it to enter
            into and perform this Agreement;
         d. It is an investment company properly registered under the 1940 Act;
            and
         e. A registration statement under the 1940 Act (and if Shares of the
            Fund are offered publicly, under the Securities Act of 1933, as
            amended (the "1933 Act")) has been filed and will be effective and
            remain effective during the term of this Agreement. Each Fund also
            warrants that as of the effective date of this Agreement, all
            necessary filings under the securities laws of the states in which
            the Fund offers or sells its Shares have been made.

                                       6.
<PAGE>
SECTION 5.        COMPENSATION OF AGENT.

         The Agent shall be entitled to reasonable compensation for its
services, expenses, out of pocket costs and disbursements as Agent hereunder, as
agreed upon from time to time between the Fund and the Agent.


SECTION 6.        TERM OF AGREEMENT.

         This Agreement shall become effective as of its execution, shall
continue in full force and effect until terminated as hereinafter provided and
may be terminated by either party by an instrument in writing delivered or
mailed, postage prepaid to the other party, such termination to take effect not
sooner than sixty (60) days after the date of such delivery or mailing.

         Termination of this Agreement with respect to the coverage of any one
particular Fund or Portfolio shall in no way affect the rights and duties under
this Agreement with respect to any other Fund or Portfolio.

         Upon termination of the Agreement or termination of its coverage with
respect to any Fund, such Fund shall pay to the Agent such compensation as may
be due as of the date of such termination (or with respect to the applicable
Fund with respect to a coverage termination) and shall likewise reimburse the
Agent for its costs, expenses and disbursements.


SECTION 7.        SUCCESSOR AGENT.

         If a successor agent for any Fund shall be appointed by a Fund, the
Agent shall upon termination deliver to such successor agent at the office of
the Agent all properties of such Fund held by it hereunder. If no such successor
agent shall be appointed, the Agent shall at its office upon receipt of Proper
Instructions deliver such properties in accordance with such instructions.


SECTION 8.        GENERAL.

         SECTION 8.1 MASSACHUSETTS LAW TO APPLY. This Agreement shall be
governed by, construed and the provisions thereof interpreted under and in
accordance with laws of The Commonwealth of Massachusetts excluding that body of
law applicable to conflicts of law.

         SECTION 8.2 PRIOR AGREEMENTS. This Agreement supersedes and terminates,
as of the date hereof, all prior agreements between any Fund and the Agent
relating to fund accounting and recordkeeping services regarding such Fund.

                                       7.
<PAGE>
         SECTION 8.3 ASSIGNMENT. This Agreement may not be assigned by (a) a
Fund without the prior written consent of the Agent or (b) by the Agent without
the prior written consent of the Funds, except that either party may, without
such prior consent, assign to an entity controlling, controlled by or under
common control with such party or to a successor of all of or a substantial
portion of its business.

         SECTION 8.4 INTERPRETIVE AND ADDITIONAL PROVISIONS. In connection with
the operation of this Agreement, the Agent and the Funds may from time to time
agree on such provisions interpretive of or in addition to the provisions of
this Agreement as may in their joint opinion be consistent with the general
tenor of this Agreement. Any such interpretive or additional provisions shall be
in a writing signed by all parties and shall be annexed hereto, provided that no
such interpretive or additional provisions shall contravene any applicable
federal or state regulations or any provision of a Fund's governing documents.
No interpretive or additional provisions made as provided in the preceding
sentence shall be deemed to be an amendment of this Agreement.

         SECTION 8.5 ADDITIONAL FUNDS. In the event that any management
investment company in addition to those listed on Appendix A hereto desires to
have the Agent render services as agent under the terms hereof, it shall so
notify the Agent in writing, and if the Agent agrees in writing to provide such
services, such management investment company shall become a Fund hereunder and
be bound by all terms and conditions and provisions hereof with respect to such
Fund.

         SECTION 8.6 ADDITIONAL PORTFOLIOS. In the event that any Fund
establishes one or more series of Shares in addition to those set forth on
Appendix A hereto with respect to which it desires to have the Agent render
services as agent under the terms hereof, it shall so notify the Agent in
writing, and if the Agent agrees in writing to provide such services, such
series of Shares shall become a Portfolio hereunder.

         SECTION 8.7 AMENDMENTS. No amendment to this Agreement shall be
effective unless it is in writing and signed by a duly authorized representative
or each party. The term "AGREEMENT," as used herein, includes all schedules,
addenda, exhibits, appendices and attachments hereto and any future written
amendments, modifications, or supplements made in accordance herewith.

         SECTION 8.8 REMOTE ACCESS SERVICES ADDENDUM. Each Fund and the Agent
hereby agree to the terms of the Remote Access Services Addendum hereto.

         SECTION 8.9 SERVICES NOT EXCLUSIVE. Each Fund hereby acknowledges
that the services of the Agent hereunder are not to be deemed exclusive to any
Fund and the Agent remains free to render similar services to others.

         SECTION 8.10 NOTICES. Any notice, instruction or other instrument
required to be given hereunder may be delivered in person to the offices of the
parties as set forth herein during normal business hours or delivered prepaid
registered mail or by telex, cable or telecopy to the

                                       8.
<PAGE>
parties at the following addresses or such other addresses as may be notified by
any party from time to time.

To any Fund:                                c/o Calamos Asset Management, Inc.
                                            111 East Warrenville Road
                                            Naperville, Illinois 60563-1493
                                            Attention:  _____________, Treasurer
                                            Telephone: (630) 577-2106
                                            Telecopy: (630) 955-6964

To the Agent:                               STATE STREET BANK AND TRUST COMPANY
                                            Joseph Palmer Building
                                            One Heritage Drive, JPB3N
                                            North Quincy, Massachusetts  02171
                                            Attention:  Scott E. Johnson,
                                                        Vice President
                                            Telephone: 617-985-6725
                                            Telecopy: 617-985-9797

Such notice, instruction or other instrument shall be deemed to have been served
in the case of a registered letter at the expiration of five business days after
posting, in the case of cable twenty-four hours after dispatch and, in the case
of telex, immediately on dispatch and if delivered outside normal business hours
it shall be deemed to have been received at the next time after delivery when
normal business hours commence and in the case of cable, telex or telecopy on
the business day after the receipt thereof. Evidence that the notice was
properly addressed, stamped and put into the post shall be conclusive evidence
of posting.

         SECTION 8.11 HEADINGS NOT CONTROLLING. Headings used in this Agreement
are for reference purposes only and shall not be deemed a part of this
Agreement.

         SECTION 8.12 SURVIVAL. All provisions regarding indemnification,
warranty, liability and limits thereon shall survive the expiration or
termination of this Agreement.

         SECTION 8.13 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original, and all such
counterparts taken together shall constitute one and the same agreement.

         SECTION 8.14 SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, unlawful or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired.

         SECTION 8.15 REPRODUCTION OF DOCUMENTS. This Agreement and all
schedules, addenda, exhibits, appendices, attachments and amendments hereto may
be reproduced by any photographic, photostatic, microfilm, micro-card, miniature
photographic or other similar process. The parties hereto all/each agree that
any such reproduction shall be admissible in evidence as the original itself in
any judicial or administrative proceeding, whether or not the

                                       9.
<PAGE>
original is in existence and whether or not such reproduction was made by a
party in the regular course of business, and that any enlargement, facsimile or
further reproduction of such reproduction shall likewise be admissible in
evidence.




                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK



                                      10.
<PAGE>
                                 SIGNATURE PAGE


IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and its
seal to be hereunder affixed as of the date first above-written.

SIGNATURE ATTESTED TO BY:                   EACH REGISTERED MANAGEMENT
                                            INVESTMENT COMPANY SET FORTH ON
                                            APPENDIX A HERETO



_______________________________             By: ________________________________
James S. Hamman, Jr., Secretary                 Patrick H. Dudasik,
                                                Vice President


SIGNATURE ATTESTED TO BY:                   STATE STREET BANK AND TRUST COMPANY



___________________________________         By: ________________________________
Stephanie L. Poster, Vice President

                                      11.
<PAGE>
                                   APPENDIX A
                                       TO
                      MASTER ACCOUNTING SERVICES AGREEMENT


MANAGEMENT INVESTMENT COMPANIES AND PORTFOLIOS THEREOF, IF ANY


CALAMOS STRATEGIC TOTAL RETURN FUND




                                       (i)
<PAGE>


                                    EXHIBIT A
                                       TO
                      MASTER ACCOUNTING SERVICES AGREEMENT

                       FORM OF PRICE SOURCE AUTHORIZATION





                                       (i)
<PAGE>
                                   SCHEDULE A
                                       TO
                      MASTER ACCOUNTING SERVICES AGREEMENT


INFORMATION REQUIRED TO BE SUPPLIED         RESPONSIBLE PARTY

Portfolio Trade Authorizations              Investment Adviser
Currency Transactions                       Investment Adviser
Cash Transaction Report                     Custodian
Portfolio Prices                            Third Party Vendors/Investment
                                            Adviser
Exchange Rates                              Third Party Vendors/Investment
                                            Adviser
Capital Stock Activity Report               Transfer Agent
Dividend/Distribution Schedule              Investment Adviser
Dividend/Distribution Declaration           Investment Adviser
Dividend Reconciliation/Confirmation        Transfer Agent
Corporate Actions                           Third Party Vendors/Custodian
Service Provider Fee Schedules              Investment Adviser
Expense Budget                              Investment Adviser/Administrator
Amortization Policy                         Investment Adviser
Accounting Policy/Complex Investments       Investment Adviser
Audit Management Letter                     Auditor
Annual Shareholder Letter                   Investment Adviser
Annual/Semi-Annual Reports                  Investment Adviser/Administrator
Declaration of Trust or Articles            Investment Adviser/Administrator
         of Incorporation, as amended
By-Laws, as amended                         Investment Adviser/Administrator
Currently Effective Registration Statement  Investment Adviser/Administrator
         under the 1933 and 1940 Act
Current Prospectus(es) and Statement(s)     Investment Adviser/Administrator
         of Additional Information
Such other certificates, documents or       Investment Adviser/Administrator
         opinions Investment Adviser/
         Administrator which the Agent may,
         in its reasonable discretion, deem
         necessary or appropriate in the
         proper performance of its duties

                                      (i)


<PAGE>
                   [ATTACH: REMOTE ACCESS SERVICES ADDENDUM]


                                      (i)

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K4
<SEQUENCE>7
<FILENAME>c82676a1exv99wk4.txt
<DESCRIPTION>FORM OF AUCTION AGENCY AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT k.4

                        CALAMOS AUCTION AGENCY AGREEMENT

                     BASIC TERMS FOR ACTING AS AUCTION AGENT

                                   RELATING TO

                    AUCTION RATE CUMULATIVE PREFERRED SHARES

                                 July 31, 2003



<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE


<S>                                                                                                             <C>
1.       DEFINITIONS AND RULES OF CONSTRUCTION...................................................................1
         1.1      Terms Defined by Reference to Statement........................................................1
         1.2      Terms Defined Herein...........................................................................1
         1.3      Rules of Construction..........................................................................2

2.       THE AUCTION.............................................................................................2
         2.1      Purpose; Incorporation by Reference of Auction Procedures and Settlement Procedures............2
         2.2      Preparation of Each Auction; Maintenance of Registry of Beneficial Owners......................3
         2.3      Information Concerning Rates...................................................................5
         2.4      Auction Schedule...............................................................................6
         2.5      Designation of Dividend Period.................................................................7
         2.6      Notice of Auction Results......................................................................8
         2.7      Broker-Dealers.................................................................................8
         2.8      Ownership of Preferred Shares..................................................................9
         2.9      Access to and Maintenance of Auction Records...................................................9
         2.10     Dividend and Redemption Price Deposit..........................................................9

3.       THE AUCTION AGENT AS DIVIDEND AND REDEMPTION PRICE DISBURSING AGENT....................................10

4.       THE AUCTION AGENT AS TRANSFER AGENT AND REGISTRAR......................................................10
         4.1      Issue of Share Certificates...................................................................10
         4.2      Registration of Transfer of Shares............................................................10
         4.3      Removal of Legend on Restricted Shares........................................................10
         4.4      Lost Share Certificates.......................................................................10
         4.5      Disposition of Canceled Certificates; Record Retention........................................11
         4.6      Share Transfer Books..........................................................................11
         4.7      Return of Funds...............................................................................11

5.       REPRESENTATIONS AND WARRANTIES OF THE FUND.............................................................11

6.       THE AUCTION AGENT......................................................................................12
         6.1      Duties and Responsibilities...................................................................12
         6.2      Rights of the Auction Agent...................................................................13
         6.3      Auction Agent's Disclaimer....................................................................14
         6.4      Compensation, Expenses and Indemnification....................................................14

7.       MISCELLANEOUS..........................................................................................14
         7.1      Term of Agreement.............................................................................14
         7.2      Force Majeure.................................................................................15
         7.3      Communications................................................................................15
         7.4      Entire Agreement..............................................................................16
         7.5      Benefits......................................................................................16
</TABLE>


                                       i
<PAGE>

<TABLE>

<S>                                                                                                             <C>
         7.6      Amendment; Waiver.............................................................................16
         7.7      Successors and Assigns........................................................................16
         7.8      Severability..................................................................................16
         7.9      Execution in Counterparts.....................................................................16
         7.10     Governing Law.................................................................................16
</TABLE>

                                    EXHIBITS

EXHIBIT A  -  Form of Broker-Dealer Agreement
EXHIBIT B  -  Settlement Procedures
EXHIBIT C  -  Form of Notice of Auction Dates
EXHIBIT D  -  Form of Notice of Proposed Designation of Special Dividend Period
EXHIBIT E  -  Form of Notice of Designation of Special Dividend Period
EXHIBIT F  -  Form of Notice of Determination Not to Designate Special Dividend
              Period


                                      ii
<PAGE>


         These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a bank or trust company identified in a Request and
Acceptance Letter will act as auction agent (an "Auction Agent") for Preferred
Shares issued by an investment company registered under the Investment Company
Act of 1940, as amended, as further identified by such Request and Acceptance
Letter (a "Fund"), for which Calamos Asset Management, Inc. is the investment
adviser.

         The Fund proposes to issue shares of Preferred Shares pursuant to its
Declaration of Trust, as amended or supplemented by the Statement. The Fund
desires that the Auction Agent perform certain duties in connection with the
Preferred Shares upon the terms and subject to the conditions of the Agreement.

1.       Definitions and Rules of Construction

         1.1      Terms Defined by Reference to Statement. Capitalized terms not
                  defined herein shall have the respective meanings specified in
                  the Statement.

         1.2      Terms Defined Herein. As used herein and in the Settlement
                  Procedures, the following terms shall have the following
                  meanings, unless the context otherwise requires:

                  (a)      "Adviser" shall mean Calamos Asset Management, Inc.

                  (b)      "Agent Member" of any Person shall mean the member
                           of, or participant in, the Securities Depository.

                  (c)      "Agreement" shall mean the Basic Terms, together with
                           the Request and Acceptance Letter relating to one or
                           more series of Preferred Shares.

                  (d)      "Auction" shall have the meaning specified in Section
                           2.1 hereof.

                  (e)      "Auction Procedures" shall mean the auction
                           procedures constituting Part II of the Statement.

                  (f)      "Authorized Officer" shall mean each Vice President,
                           Assistant Vice President and Assistant Treasurer of
                           the Auction Agent assigned to the Dealing and Trading
                           Group of its Corporate Trust and Division and every
                           other officer or employee of the Auction Agent
                           designated as an "Authorized Officer" for purposes
                           hereof in a written communication to the Fund.

                  (g)      "Broker-Dealer Agreement" shall mean each agreement
                           between the Auction Agent and a Broker-Dealer
                           substantially in the form attached hereto as Exhibit
                           A.

                  (h)      "Fund Officer" shall mean the officers of the Fund.


<PAGE>

                  (i)      "Person" means and includes an individual, a
                           partnership, a corporation, a trust, an
                           unincorporated association, a joint venture or other
                           entity or a government or any agency or political
                           subdivision thereof.

                  (j)      "Preferred Shares" shall mean the Preferred Shares,
                           no par value, of the Fund designated as its "_______"
                           and bearing such further designation as to series as
                           the Board of Trustees of the Fund or any committee
                           thereof shall specify; as set forth in the Request
                           and Acceptance Letter.

                  (k)      "Request and Acceptance Letter" shall mean the letter
                           from the Fund to the Auction Agent pursuant to which
                           the Fund appoints the Auction Agent and the Auction
                           Agent accepts its appointment as auction agent for
                           the Preferred Shares.

                  (l)      "Settlement Procedures" shall mean the Settlement
                           Procedures attached hereto as Exhibit B.

                  (m)      "Statement" shall mean the Statement of Preferences
                           of Preferred Shares, and authorizing the issuance of,
                           one or more series of Preferred Shares, a copy of
                           which is attached to the Request and Acceptance
                           Letter, as the same may be amended, supplemented or
                           modified from time to time.

         1.3      Rules of Construction. Unless the context or use indicates
                  another or different meaning or intent, the following rules
                  shall apply to the construction of this Agreement:

                  (a)      Words importing the singular number shall include the
                           plural number and vice versa.

                  (b)      The captions and headings herein are solely for
                           convenience of reference and shall not constitute a
                           part of this Agreement nor shall they affect its
                           meaning, construction or effect.

                  (c)      The words "hereof," "herein," "hereto" and other
                           words of similar import refer to this Agreement as a
                           whole.

                  (d)      All references herein to a particular time of day
                           shall be to New York City time.

2.       The Auction

         2.1      Purpose; Incorporation by Reference of Auction Procedures and
                  Settlement Procedures.

                  (a)      The Statement provides that the Applicable Rate per
                           annum for each series of Preferred Shares for each
                           Dividend Period after the initial Dividend Period
                           with respect to each series of Preferred Shares
                           shall, except under certain conditions, be equal to
                           the rate per annum that a bank or trust



                                       2
<PAGE>

                           company appointed by the Fund advises has resulted on
                           the Business Day preceding the first day of such
                           Dividend Period from implementation of the Auction
                           Procedures for such series. Each periodic operation
                           of the Auction Procedures is hereinafter referred to
                           as an "Auction." The Board of Trustees has adopted a
                           resolution appointing The Bank of New York as Auction
                           Agent for purposes of the Auction Procedures for each
                           series of the Preferred Shares. The Auction Agent
                           accepts such appointment and agrees to follow the
                           procedures set forth in this Section 2 and the
                           Auction Procedures for the purpose of determining the
                           Applicable Rate for each series of Preferred Shares
                           for each Dividend Period thereof for which the
                           Applicable Rate is to be determined by an Auction.

                  (b)      All of the provisions contained in the Auction
                           Procedures and the Settlement Procedures are
                           incorporated herein by reference in their entirety
                           and shall be deemed to be a part hereof to the same
                           extent as if such provisions were fully set forth
                           herein.

         2.2      Preparation of Each Auction; Maintenance of Registry of
                  Beneficial Owners.

                  (a)      Not later than seven days prior to the first Auction
                           Date for any series of Preferred Shares, the Fund
                           shall provide the Auction Agent with a list of the
                           Broker-Dealers. Not later than seven days prior to
                           any Auction Date for any series of Preferred Shares
                           for which any change in such list of Broker-Dealers
                           is to be effective, the Fund will notify the Auction
                           Agent in writing of such change and, if any such
                           change involves the addition of a Broker-Dealer to
                           such list, shall cause to be delivered to the Auction
                           Agent for execution by the Auction Agent a
                           Broker-Dealer Agreement signed by such Broker-Dealer;
                           provided, however, that if the Fund proposes to
                           designate any Special Dividend Period of any series
                           of Preferred Shares pursuant to Section 4 of Part I
                           of the Statement, not later than 11:00 A.M., New York
                           City time, on the Business Day next preceding the
                           Auction next preceding the first day of such Special
                           Dividend Period, upon the written request of the
                           Auction Agent, the Fund shall provide the Auction
                           Agent with a list of the Broker-Dealers for such
                           series. The Auction Agent and the Fund shall have
                           entered into a Broker-Dealer Agreement with each
                           Broker-Dealer prior to the participation of any such
                           Broker-Dealer in any Auction.


                  (b)      In the event that any Auction Date for any series of
                           Preferred Shares shall be changed after the Auction
                           Agent shall have given the notice referred to in
                           clause (vi) or (vii) of paragraph (a) of the
                           Settlement Procedures, or after the notice referred
                           to in Section 2.5(a) hereof, if applicable, the
                           Auction Agent, by such means as the Auction Agent
                           deems practicable, shall give notice of such change
                           to the Broker-Dealers for such series not later than
                           the earlier of 9:15 A.M. on the new Auction Date or
                           9:15 A.M. on the original Auction Date.

                                       3
<PAGE>

                  (c)      (i) The Auction Agent shall maintain a registry of
                           the beneficial owners of the shares of each series of
                           Preferred Shares who shall constitute Existing
                           Holders of shares of such series of Preferred Shares
                           for purposes of Auctions and shall indicate thereon
                           the identity of the respective Broker-Dealer of each
                           Existing Holder, if any, on whose behalf such
                           Broker-Dealer submitted the most recent Order in any
                           Auction which resulted in such Existing Holder
                           continuing to hold or purchasing shares of such
                           series of Preferred Shares. The Auction Agent shall
                           keep such registry current and accurate based on
                           information provided to it by Broker-Dealers. The
                           Fund shall provide or cause to be provided to the
                           Auction Agent at or prior to the Date of Original
                           Issue of each series of Preferred Shares a list of
                           the initial Existing Holders of the shares of each
                           such series, the number of shares purchased by each
                           such Existing Holder and the respective Broker-Dealer
                           of each such Existing Holder or the affiliate thereof
                           through which each such Existing Holder purchased
                           such shares. The Auction Agent may rely upon, as
                           conclusive evidence of the identities of the Existing
                           Holders of shares of any series of Preferred Shares,
                           (A) such list, (B) the results of Auctions (C)
                           notices from any Broker-Dealer as described in the
                           first sentence of Section 2.2(c)(iii) hereof and (D)
                           the results of any procedures approved by the Fund
                           that have been devised for the purpose of determining
                           the identities of Existing Holders in situations
                           where shares of Preferred Shares may have been
                           transferred without compliance with any restriction
                           on the transfer thereof set forth in the Auction
                           Procedures.

                           (ii)     In the event of any partial redemption of
                                    any series of Preferred Shares, the Auction
                                    Agent shall, at least two Business Days
                                    prior to the next Auction for such series,
                                    request each Broker-Dealer to provide the
                                    Auction Agent with a list of Persons who
                                    such Broker-Dealer believes should remain
                                    Existing Holders after such redemption based
                                    upon inquiries of those Persons such
                                    Broker-Dealer believes are Beneficial Owners
                                    as a result of the most recent Auction and
                                    with respect to each such Person, the number
                                    of shares of Preferred Shares of such series
                                    such Broker-Dealer believes are owned by
                                    such Person after such redemption. In the
                                    absence of receiving any such information
                                    from any Broker-Dealer, the Auction Agent
                                    may continue to treat the Persons listed in
                                    its registry of Existing Holders as the
                                    beneficial owner of the number of shares of
                                    Preferred Shares of such series shown in
                                    such registry.

                           (iii)    The Auction Agent shall be required to
                                    register a transfer of shares of Preferred
                                    Shares of any series from an Existing Holder
                                    of such shares of Preferred Shares only if
                                    such transfer is to another Existing Holder,
                                    or other Person if permitted by the Fund,
                                    and only if such transfer is made (A)
                                    pursuant to an Auction, (B) the Auction
                                    Agent has been notified in writing (I) in a
                                    notice



                                       4
<PAGE>

                                    substantially in the form of Exhibit C to
                                    the Broker-Dealer Agreements by a
                                    Broker-Dealer of such transfer or (II) in a
                                    notice substantially in the form of Exhibit
                                    D to the Broker-Dealer Agreements by the
                                    Broker-Dealer of any Existing Holder, or
                                    other Person if permitted by the Fund, that
                                    purchased or sold such shares of Preferred
                                    Shares in an Auction of the failure of such
                                    shares of Preferred Shares to be transferred
                                    as a result of such Auction or (C) pursuant
                                    to procedures approved by the Fund that have
                                    been devised for the purpose of determining
                                    the identities of Existing Holders in
                                    situations where shares of Preferred Shares
                                    may have been transferred without compliance
                                    with any restriction on the transfer thereof
                                    set forth in the Auction Procedures. The
                                    Auction Agent is not required to accept any
                                    such notice for an Auction unless it is
                                    received by the Auction Agent by 3:00 P.M.
                                    on the Business Day preceding such Auction.

                  (d)      The Auction Agent may, but shall not be obligated to,
                           request the Broker-Dealers, as set forth in the
                           Broker-Dealer Agreements, to provide the Auction
                           Agent with a list of Persons who such Broker-Dealer
                           believes should be Existing Holders based upon
                           inquiries of those Persons such Broker-Dealer
                           believes are Beneficial Owners as a result of the
                           most recent Auction and with respect to each such
                           Person, the number of shares of such series of
                           Preferred Shares such Broker-Dealer believes to be
                           owned by such Person. The Auction Agent shall keep
                           confidential such registry of Existing Holders and
                           shall not disclose the identities of the Existing
                           Holders of such shares of Preferred Shares to any
                           Person other than the Fund and the Broker-Dealer that
                           provided such information; provided, however, that
                           the Auction Agent reserves the right and is
                           authorized to disclose any such information if (a) it
                           is ordered to do so by a court of competent
                           jurisdiction or a regulatory body, judicial or
                           quasi-judicial agency or authority having the
                           authority to compel such disclosure, (b) it is
                           advised by its counsel that its failure to do so
                           would be unlawful or (c) failure to do so would
                           expose the Auction Agent to loss, liability, claim,
                           damage or expense for which it has not received
                           indemnity or security satisfactory to it.

         2.3      Information Concerning Rates.

                  (a)      On each Auction Date, the Auction Agent shall
                           determine the AA Financial Commercial Paper Rate or
                           the Treasury Index Rate, as the case may be, and the
                           Maximum Rate. If the AA Financial Commercial Paper
                           Rate or the Treasury Index Rate, as the case may be,
                           is not quoted on an interest basis, if the rate
                           obtained by the Auction Agent is quoted on a discount
                           basis, or if the rate obtained by the Auction Agent
                           is quoted on another basis the Auction Agent shall
                           convert the quoted rate to an interest rate after
                           consultation with the Fund as to the method of such
                           conversion. Not later than 9:30 A.M. on each Auction
                           Date the Auction Agent shall




                                       5
<PAGE>

                           notify the Fund and the Broker-Dealers of the Maximum
                           Rate so determined and the AA Financial Commercial
                           Paper Rate or the Treasury Index Rate, as the case
                           may be, used to make such determination.

                  (b)      If any AA Financial Commercial Paper Rate is to be
                           based on rates supplied by Commercial Paper Dealers
                           and one or more of the Commercial Paper Dealers shall
                           not provide a quotation for the determination of such
                           AA Financial Commercial Paper Rate, the Auction Agent
                           shall promptly notify the Fund so that the Fund can
                           determine whether to select a substitute Commercial
                           Paper Dealer or substitute Commercial Paper Dealers
                           to provide the quotation or quotations not being
                           supplied by any Commercial Paper Dealer or Commercial
                           Paper Dealers. The Fund shall promptly advise the
                           Auction Agent of any such selection.

                  (c)      If any Treasury Index Rate is to be based on rates
                           supplied by U.S. Government Securities Dealers and
                           one or more of the U.S. Government Securities Dealers
                           shall not provide a quotation for the determination
                           of such Treasury Rate, the Auction Agent shall
                           promptly notify the Fund so that the Fund can
                           determine whether to select a Substitute U.S.
                           Government Securities Dealer or Substitute U.S.
                           Government Securities Dealers to provide the
                           quotation or quotations not being supplied by any
                           U.S. Government Securities Dealers. The Fund shall
                           promptly advise the Auction Agent of any such
                           selection.

                  (d)      In the case of a Dividend Default, the Applicable
                           Rate for each Dividend Period commencing during a
                           Default Period will be equal to the Default Rate.

         2.4      Auction Schedule. The Auction Agent shall conduct Auctions for
                  each series of Preferred Shares in accordance with the
                  schedule set forth below. Such schedule may be changed by the
                  Auction Agent with the consent of the Fund, which consent
                  shall not be unreasonably withheld or delayed. The Auction
                  Agent shall give written notice of any such change to each
                  Broker-Dealer. Such notice shall be given prior to the close
                  of business on the Business Day next preceding the first
                  Auction Date on which any such change shall be effective.

<TABLE>
<CAPTION>
                        Time                                        Event
                  -------------------            ---------------------------------------
                  <S>                            <C>
                  By 9:30 A.M.                   Auction Agent advises the Fund and Broker-Dealers
                                                 of the applicable Maximum Rate and the AA Financial
                                                 Commercial Paper Rate used in determining such
                                                 Maximum Rate as set forth in Section 2.3(a) hereof.

                  9:30 A.M. - 1:00 P.M.          Auction Agent assembles information communicated
                                                 to it by Broker-Dealers as provided in Section 2(a)
                                                 of the Auction
</TABLE>



                                                 6
<PAGE>

<TABLE>
<CAPTION>
                        Time                                        Event
                  -------------------            ---------------------------------------
                  <S>                            <C>
                                                 Procedures. Submission Deadline is 1:00 P.M.

                  Not earlier than 1:00 P.M.     Auction Agent makes determinations pursuant to
                                                 Section 3(a) of the Auction Procedures.

                  By approximately 3:00 P.M.     Auction Agent advises Fund of results of
                                                 Auction as provided in Section 3(b) of the Auction
                                                 Procedures. Submitted Bids and Submitted Sell
                                                 Orders are accepted and rejected and shares of
                                                 Preferred Shares allocated as provided in Section 4
                                                 of the Auction Procedures. Auction Agent gives
                                                 notice of Auction results as set forth in paragraph
                                                 (a) of the Settlement Procedures.
</TABLE>

The Auction Agent shall follow the notification procedures set forth in
paragraph (a) of the Settlement Procedures.

         2.5      Designation of Dividend Period.

                  (a)      The Statement provides that the Fund will designate
                           the duration of subsequent Dividend Periods;
                           provided, however, that no such designation is
                           necessary for a Standard Dividend Period; provided,
                           however, 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 Auction
                           Agent the full amount of any dividend on, or the
                           redemption price of, the Preferred Shares shall have
                           been cured, (iii) Sufficient Clearing Bids shall have
                           existed in an Auction held on the Auction Date
                           immediately preceding the first day of such proposed
                           Dividend Period other than a Standard Dividend
                           Period, and (iv) if the Fund shall have mailed a
                           Notice of Redemption with respect to any shares, the
                           Redemption Price with respect to such shares shall
                           have been deposited with the Paying Agent.

                  (b)      Pursuant to the Statement, the Fund may, at its
                           option, designate a Special Dividend Period for any
                           series of Preferred Shares in the manner described


                                       7
<PAGE>
                           below and in Section 4 of Part I of the Statement. If
                           the Fund proposes to designate any succeeding Special
                           Dividend Period the Fund shall deliver to the Auction
                           Agent:
                           (i)      A notice of such proposed Special Dividend
                                    Period in the form of Exhibit D hereto not
                                    less than 7 (or 2 in the event the duration
                                    of the Dividend Period is fewer than 8 days)
                                    nor more than 30 Business Days prior to the
                                    first day of such proposed Special Dividend
                                    Period. The Auction Agent on behalf of the
                                    Fund shall deliver such notice by First
                                    Class Mail or by facsimile to each Existing
                                    Holder of shares of such series of Preferred
                                    Shares at the address or facsimile number
                                    set forth for such Existing Holder in the
                                    records of the Auction Agent and to the
                                    Broker-Dealers for such series as promptly
                                    as practicable after its receipt of such
                                    notice from the Fund.

                           (ii)     A notice in the form of Exhibit E or F
                                    hereto not later than 11:00 A.M. on the
                                    second Business Day next preceding the first
                                    day of such proposed Special Dividend
                                    Period, of either (x) its determination,
                                    subject to certain conditions, to proceed
                                    with such Special Dividend Period, in which
                                    case the Fund shall specify the terms of the
                                    Specific Redemption Provisions, if any, or
                                    (y) its determination not to proceed with
                                    such Special Dividend Period in which latter
                                    event the succeeding Dividend Period shall
                                    be a Standard Dividend Period. The Auction
                                    Agent shall promptly deliver such notice to
                                    the Broker-Dealers, but in no event later
                                    than 3:00 P.M. on the date of such notice.

                           (iii)    If the Fund fails to deliver either such
                                    notice with respect to any designation of
                                    any proposed Special Dividend Period to the
                                    Auction Agent by 11:00 A.M., New York City
                                    time, on the second Business Day next
                                    preceding the first day of such proposed
                                    Special Dividend Period, the Fund shall be
                                    deemed to have delivered a notice to the
                                    Auction Agent with respect to such Dividend
                                    Period to the effect that it has determined
                                    not to proceed with the designation of a
                                    Special Dividend Period, thereby resulting
                                    in a Standard Dividend Period.

         2.6      Notice of Auction Results. On each Auction Date for any series
                  of Preferred Shares, the Auction Agent shall notify
                  Broker-Dealers of the results of the Auction held on such date
                  by telephone (or by other electronic means acceptable to the
                  parties) as set forth in paragraph (a) of the Settlement
                  Procedures.

         2.7      Broker-Dealers.

                  (a)      Not later than 12:00 Noon on each Auction Date for
                           any series of Preferred Shares, the Fund shall pay to
                           the Auction Agent an amount in cash equal to the
                           aggregate fees payable to the Broker-Dealers for such



                                       8
<PAGE>

                           series pursuant to Section 2.6 of the Broker-Dealer
                           Agreement for such series. The Auction Agent shall
                           apply such moneys as set forth in Section 2.6 of each
                           such Broker-Dealer Agreement.

                  (b)      The Fund shall obtain the consent of the Auction
                           Agent prior to selecting any Person to act as a
                           Broker-Dealer, which consent shall not be
                           unreasonably withheld.

                  (c)      The Auction Agent shall terminate any Broker-Dealer
                           Agreement as set forth therein if so directed in
                           writing by the Fund.

                  (d)      Subject to the Auction Agent's having consented to
                           the selection of the relevant Broker-Dealer pursuant
                           to Section 2.7(b) hereof, the Auction Agent shall
                           from time to time enter into such Broker-Dealer
                           Agreements with one or more Broker-Dealers as the
                           Fund shall request, and shall enter into such
                           schedules to any such Broker-Dealer Agreements as the
                           Fund shall request, which schedules, among other
                           things, shall set forth the series of Preferred
                           Shares to which such Broker-Dealer Agreement relates.

         2.8      Ownership of Preferred Shares. The Fund shall notify the
                  Auction Agent if the Fund or any affiliate of the Fund
                  acquires any shares of Preferred Shares of any series. Neither
                  the Fund nor any affiliate of the Fund shall submit any Order
                  in any Auction for Preferred Shares, except as set forth in
                  the next sentence. Any Broker-Dealer that is an affiliate of
                  the Fund may submit Orders in Auctions, but only if such
                  Orders are not for its own account. For purposes of this
                  Section 2.8, a Broker-Dealer shall not be deemed to be an
                  affiliate of the Fund solely because one or more of the
                  directors or executive officers of such Broker-Dealer or of
                  any Person controlled by, in control of or under common
                  control with such Broker-Dealer is also a Trustee of the Fund.
                  The Auction Agent shall have no duty or liability with respect
                  to enforcement of this Section 2.8.

         2.9      Access to and Maintenance of Auction Records. The Auction
                  Agent shall, upon the receipt of prior written notice from the
                  Fund, afford to the Fund, at no cost to the Auction Agent,
                  access at reasonable times during normal business hours to all
                  books, records, documents and other information concerning the
                  conduct and results of Auctions. The Auction Agent shall
                  maintain records relating to an Auction for a period of six
                  years after such Auction and such records shall, in reasonable
                  detail, accurately and fairly reflect the actions taken by the
                  Auction Agent hereunder.

         2.10     Dividend and Redemption Price Deposit. The Fund shall pay to
                  the Auction Agent, not later than 12:00 noon, New York City
                  time, on each Dividend Payment Date for any series of
                  Preferred Shares, an aggregate amount of immediately available
                  funds equal to the dividends to be paid on such Dividend
                  Payment Date. The Fund will deposit with the Auction Agent
                  funds sufficient to redeem the specified number of Preferred
                  Shares with respect to a redemption required under
                  subparagraph (a)(ii) of Section 3 of the Statement, by 1:00
                  P.M., New York City



                                       9
<PAGE>

                  time, of the Business Day immediately preceding the Mandatory
                  Redemption Date.

3.       The Auction Agent as Dividend and Redemption Price Disbursing Agent

         The Auction Agent, as dividend and redemption price disbursing agent,
shall pay to the Holders of shares of Preferred Shares of any series (i) on each
Dividend Payment Date for such series, dividends on the shares of Preferred
Shares of such series, (ii) on any date fixed for redemption of shares of
Preferred Shares of any series, the Redemption Price of any shares of such
series called for redemption and (iii) any late charge related to any payment of
dividends or Redemption Price, in each case after receipt of the necessary funds
from the Fund with which to pay such dividends, Redemption Price or late charge.
The amount of dividends for any Dividend Period for any series of Preferred
Shares to be paid by the Auction Agent to the Holders of such shares of such
series will be determined by the Fund as set forth in Section 2 of Part I of the
Statement with respect to such series. The Redemption Price of any shares to be
paid by the Auction Agent to the Holders will be determined by the Fund as set
forth in Section 3 of Part I of the Statement with respect to such series. The
Fund shall notify the Auction Agent in writing of a decision to redeem shares of
any series of Preferred Shares as provided in paragraph (b) of Section 3 of Part
I of the Statement. Such notice by the Fund to the Auction Agent shall contain
the information required by paragraph (b) of Section 3 of Part I of the
Statement to be stated in the notice of redemption required to be mailed by the
Auction Agent to such Holders.

4.       The Auction Agent as Transfer Agent and Registrar

         4.1      Issue of Share Certificates. Upon the Date of Original Issue
                  of each series of Preferred Shares, one certificate
                  representing all of the shares of each series issued on such
                  date shall be issued by the Fund and, at the request of the
                  Fund, registered in the name of Cede & Co. and countersigned
                  by the Auction Agent.

         4.2      Registration of Transfer of Shares. Shares of each series of
                  Preferred Shares shall be registered solely in the name of the
                  Securities Depository or its nominee.

         4.3      Removal of Legend on Restricted Shares. All requests for
                  removal of legends on shares of any series of Preferred Shares
                  indicating restrictions on transfer shall be accompanied by an
                  opinion of counsel stating that such legends may be removed
                  and such shares freely transferred, such opinion to be
                  delivered under cover of a letter from a Fund Officer
                  authorizing the Auction Agent to remove the legend on the
                  basis of said opinion.

         4.4      Lost Share Certificates. The Auction Agent shall register
                  replacement certificates for certificates represented to have
                  been lost, stolen or destroyed upon the fulfillment of such
                  requirements as shall be deemed appropriate by the Fund and
                  the Auction Agent, subject at all times to provisions of law,
                  the By-Laws of the Fund governing such matters and resolutions
                  adopted by the Fund with respect to lost securities. The
                  Auction Agent may issue new certificates in exchange for and
                  upon the cancellation of mutilated certificates. Any request
                  by the Fund to the Auction Agent to issue a replacement or new
                  certificate pursuant to this

                                       10
<PAGE>

                  Section 4.4 shall be deemed to be a representation and
                  warranty by the Fund to the Auction Agent that such issuance
                  will comply with such provisions of law and the By-Laws and
                  resolutions of the Fund.

         4.5      Disposition of Canceled Certificates; Record Retention. The
                  Auction Agent shall retain all share certificates which have
                  been cancelled in transfer or exchange and all accompanying
                  documentation in accordance with applicable rules and
                  regulations of the Securities and Exchange Commission for two
                  calendar years. The Fund also shall undertake to furnish to
                  the Securities and Exchange Commission and to the Board of
                  Governors of the Federal Reserve System, upon demand, at
                  either the principal office or at any regional office,
                  complete, correct and current hard copies of any and all such
                  records. Thereafter such records shall not be destroyed by the
                  Fund without the concurrence of the Auction Agent.

         4.6      Share Transfer Books. For so long as the Auction Agent is
                  acting as the transfer agent for any series of Preferred
                  Shares pursuant to this Agreement, it shall maintain a share
                  transfer book containing a list of the Holders of the shares
                  of each series of Preferred Shares, the number of shares of
                  each series held by such Holders and the address of each
                  Holder based upon information provided to it by
                  Broker-Dealers. The Auction Agent shall record in such share
                  transfer books any change of address of a Holder upon notice
                  by such Holder. In case of any request or demand for the
                  inspection of the share transfer books of the Fund or any
                  other books in the possession of the Auction Agent, the
                  Auction Agent will notify the Fund and secure instructions as
                  to permitting or refusing such inspection; provided, however,
                  that the Auction Agent, in its capacity as transfer agent,
                  reserves the right and is authorized to disclose any such
                  information if (a) it is ordered to do so by a court of
                  competent jurisdiction or a regulatory body, judicial or
                  quasi-judicial agency or authority having the authority to
                  compel such disclosure, (b) it is advised by its counsel that
                  its failure to do so would be unlawful or (c) failure to do so
                  would expose the Auction Agent to loss, liability, claim,
                  damage or expense for which it has not received indemnity or
                  security satisfactory to it.

         4.7      Return of Funds. Any funds deposited with the Auction Agent
                  hereunder by the Fund for any reason, including but not
                  limited to redemption of shares of Preferred Shares of any
                  series, that remain unpaid after 90 days shall be repaid to
                  the Fund upon the written request of the Fund.

5.       Representations and Warranties of the Fund

         The Fund represents and warrants to the Auction Agent that:

                  (a)      the Fund is a duly organized and existing business
                           trust in good standing under the laws of the State of
                           Delaware and has full corporate power or all
                           requisite power to execute and deliver the Agreement
                           and to authorize, create and issue the shares of
                           Preferred Shares of each series and the

                                       11
<PAGE>

                           shares of Preferred Shares of each series when
                           issued, will be duly authorized, validly issued,
                           fully paid and nonassessable;

                  (b)      the Agreement has been duly and validly authorized,
                           executed and delivered by the Fund and constitutes
                           the legal, valid and binding obligation of the Fund;

                  (c)      the form of the certificate evidencing the shares of
                           Preferred Shares of each series complies or will
                           comply with all applicable laws of the State of
                           Delaware;

                  (d)      when issued, the shares of Preferred Shares of each
                           series will have been duly registered under the
                           Securities Act of 1933, as amended, and no further
                           action by or before any governmental body or
                           authority of the United States or of any state
                           thereof is required in connection with the execution
                           and delivery of the Agreement or will have been
                           required in connection with the issuance of the
                           shares of Preferred Shares of each series; and

                  (e)      the execution and delivery of the Agreement and the
                           issuance and delivery of the shares of Preferred
                           Shares of each series do not and will not conflict
                           with, violate or result in a breach of, the terms,
                           conditions or provisions of, or constitute a default
                           under, the Agreement and Declaration of Trust (as
                           amended by one or more Statements) or the By-Laws of
                           the Fund, any law or regulation, any order or decree
                           of any court or public authority having jurisdiction,
                           or any mortgage, indenture, contract, agreement or
                           undertaking to which the Fund is a party or by which
                           it is bound the effect of which conflict, violation,
                           default or breach would be material to the Fund or
                           the Fund and its subsidiaries taken as a whole.

6.       The Auction Agent

         6.1      Duties and Responsibilities.

                  (a)      The Auction Agent is acting solely as non-fiduciary
                           agent for the Fund hereunder and owes no duties,
                           fiduciary or otherwise, to any other Person by reason
                           of this Agreement.

                  (b)      The Auction Agent undertakes to perform such duties
                           and only such duties as are specifically set forth in
                           this Agreement and the Broker-Dealer Agreements, and
                           no implied covenants or obligations shall be read
                           into this Agreement against the Auction Agent.

                  (c)      In the absence of willful misconduct or gross
                           negligence on its part, the Auction Agent shall not
                           be liable for any action taken, suffered, or omitted
                           or for any error of judgment made by it in the
                           performance of its duties under this Agreement except
                           that the Auction Agent shall be liable for any



                                       12
<PAGE>

                           error of judgment made in good faith if the Auction
                           Agent shall have been grossly negligent in
                           ascertaining the pertinent facts.

                  (d)      Any funds deposited with the Auction Agent hereunder
                           by the Fund for any reason, including the payment of
                           dividends or the redemption of shares of Preferred
                           Shares of any series, that remain with the Auction
                           Agent after 90 days shall be repaid to the Fund as
                           provided in Section 4.7 hereof.

         6.2      Rights of the Auction Agent.

                  (a)      The Auction Agent may conclusively rely and shall be
                           protected in acting or refraining from acting upon
                           any communication authorized hereby and upon any
                           written instruction, notice, request, direction,
                           consent, report, certificate, share certificate or
                           other instrument, paper or document believed in good
                           faith by it to be genuine. The Auction Agent shall
                           not be liable for acting upon any telephone
                           communication authorized hereby which the Auction
                           Agent believes in good faith to have been given by
                           the Fund or by any Broker-Dealer. The Auction Agent
                           may record telephone communications with the Fund or
                           with any Broker-Dealer.

                  (b)      The Auction Agent may consult with counsel and the
                           reasonable advice of such counsel shall be full and
                           complete authorization and protection in respect of
                           any action taken, suffered or omitted by it hereunder
                           in good faith and in reliance thereon.

                  (c)      The Auction Agent shall not be required to advance,
                           expend or risk its own funds or otherwise incur or
                           become exposed to financial liability in the
                           performance of its duties hereunder.

                  (d)      The Auction Agent may perform its duties and exercise
                           its rights hereunder either directly or by or through
                           agents or attorneys and shall not be responsible for
                           any misconduct or negligence on the part of any agent
                           or attorney appointed by it with due care hereunder.

                  (e)      The Auction Agent shall not be responsible or liable
                           for any failure or delay in the performance of its
                           obligations under this agreement arising out of or
                           caused, directly or indirectly, by circumstances
                           beyond its reasonable control, including, without
                           limitation, acts of God; earthquakes; fires, floods;
                           wars; civil or military disturbances; sabotage; act
                           of terrorism; epidemics; riots; interruptions, loss
                           or malfunctions of utilities; computer (hardware or
                           software) or communications services; accidents;
                           labor disputes; acts of civil or military authority
                           or governmental actions; it being understood that the
                           Auction Agent shall use reasonable efforts which are
                           consistent with accepted practices in the banking
                           industry to resume performance as soon as practicable
                           under the circumstances.



                                       13
<PAGE>

                  (f)      In no event shall the Auction Agent be responsible or
                           liable for special, indirect or consequential loss or
                           damage of any kind whatsoever (including, but not
                           limited to, loss of profit), even if the Auction
                           Agent has been advised of the likelihood of such loss
                           or damage and regardless of the form of action.

         6.3      Auction Agent's Disclaimer. The Auction Agent makes no
                  representation as to the validity or adequacy of this
                  Agreement (except as to the Auction Agent's duties hereunder
                  and that the Auction Agent hereby represents that this
                  Agreement has been duly authorized, executed and delivered by
                  the Auction Agent and (if and when signed and delivered by the
                  Fund) constitutes a legal and binding obligation of the
                  Auction Agent), the Preferred Shares, or any other document
                  related to the Preferred Shares.

         6.4      Compensation, Expenses and Indemnification.

                  (a)      The Fund shall pay the Auction Agent from time to
                           time reasonable compensation for all services
                           rendered by it under this Agreement and the
                           Broker-Dealer Agreement in such amounts as may be
                           agreed to by the Fund and the Auction Agent from time
                           to time.

                  (b)      The Fund shall reimburse the Auction Agent upon its
                           request for all reasonable out-of-pocket expenses,
                           disbursements and advances incurred or made by the
                           Auction Agent in accordance with any provision of
                           this Agreement and the Broker-Dealer Agreements
                           (including the reasonable compensation and the
                           expenses and disbursements of its agents and
                           counsel), except any expense or disbursement
                           attributable to its gross negligence or willful
                           misconduct.

                  (c)      The Fund shall indemnify the Auction Agent for and
                           hold it harmless against, any loss, liability or
                           expense incurred without gross negligence or willful
                           misconduct on its part, arising out of or in
                           connection with its agency under this Agreement and
                           the Broker-Dealer Agreements, including the costs and
                           expenses of defending itself against any claim or
                           liability in connection with its exercise or
                           performance of its duties hereunder and thereunder.

7.       Miscellaneous

         7.1      Term of Agreement.

                  (a)      The term of this Agreement is unlimited unless it
                           shall be terminated as provided in this Section 7.1.
                           The Fund may terminate this Agreement any time by so
                           notifying the Auction Agent, provided that the Fund
                           has entered into an agreement in substantially the
                           form of this Agreement with a successor auction
                           agent. The Auction Agent may terminate this Agreement
                           upon written notice to the Fund, such termination to
                           be effective on the earlier of (i) the date specified
                           in such notice which shall not be earlier than 45
                           days after the giving of such notice or (ii) the date
                           on




                                       14
<PAGE>


                           which a successor Auction Agent is appointed by the
                           Fund pursuant to an agreement containing
                           substantially the same terms and conditions as this
                           Agreement.

                  (b)      Except as otherwise provided in this paragraph (b),
                           the respective rights and duties of the Fund and the
                           Auction Agent under this Agreement shall cease upon
                           termination of this Agreement. The Fund's obligations
                           under Section 6.4 hereof and its representations and
                           warranties contained in Section 5 hereof and the
                           Auction Agent's obligations and liabilities under
                           Sections 2.9 and 4.5 hereof shall survive the
                           termination hereof with respect to any Series of
                           Preferred Shares. Upon termination of this Agreement,
                           the Auction Agent shall, at the Fund's request,
                           promptly deliver to the Fund copies of all books and
                           records maintained by it in connection with its
                           duties hereunder.

         7.2      Force Majeure. Neither party to this Agreement shall be
                  responsible or liable for any failure or delay in the
                  performance of its obligations under this Agreement arising
                  out of or caused, directly or indirectly, by circumstances
                  beyond its reasonable control, including, without limitation,
                  acts of God; earthquakes; fires; floods; wars; civil or
                  military disturbances; sabotage; epidemics; riots;
                  interruptions, loss or malfunctions or utilities; computer
                  (hardware or software) or communications services; accidents;
                  labor disputes; acts of civil or military authority or
                  governmental actions; it being understood that the parties
                  shall use reasonable efforts which are consistent with
                  accepted practices in the banking industry to resume
                  performance as soon as practicable under the circumstances.

         7.3      Communications. Except for (a) communications authorized to be
                  by telephone pursuant to this Agreement or the Auction
                  Procedures and (b) communications in connection with Auctions
                  (other than those expressly required to be in writing) and
                  unless otherwise specified by the terms of this Agreement, all
                  notices, requests and other communications to any party
                  hereunder shall be in writing (including telecopy or similar
                  writing) given to such person at its address or telecopy
                  number set forth below:

         If to the Fund, addressed:

                  [Name of Fund]
                  1111 East Warrenville Road
                  Naperville, Illinois  60563-1493

                  Attention:  James S. Hamman, Jr.

                  Telephone No.:  (630) 245-7296

                  If to the Auction Agent, to the address or telecopy number set
                  forth in the Request and Acceptance Letter.


                                       15
<PAGE>

or to such other address as the party to whom the communication is addressed
shall have previously communicated in writing to the other party. Communications
shall be given on behalf of the Fund by a Fund Officer and on behalf of the
Auction Agent by an Authorized Officer. Communications shall be effective when
received at the proper address.

         7.4      Entire Agreement. This Agreement contains the entire agreement
                  among the parties relating to the subject matter hereof, and
                  there are no other representations, endorsements, promises,
                  agreements or understandings, oral, written or inferred,
                  between the parties relating to the subject matter hereof
                  except for agreements relating to compensation of the Auction
                  Agent. This Agreement supersedes all prior agreements between
                  the parties relating to the subject matter of this Agreement.

         7.5      Benefits. Nothing herein, express or implied, shall give to
                  any Person, other than the Fund, the Auction Agent and their
                  respective successors and assigns, any benefit of any legal or
                  equitable right, remedy or claim hereunder.

         7.6      Amendment; Waiver.

                  (a)      This Agreement shall not be deemed or construed to be
                           modified, amended, rescinded, cancelled or waived, in
                           whole or in part, except by a written instrument
                           signed by a duly authorized representative of the
                           party to be charged.

                  (b)      Failure of either party hereto to exercise any right
                           or remedy hereunder in the event of a breach hereof
                           by the other party shall not constitute a waiver of
                           any such rights or remedies with respect to any
                           subsequent breach.

         7.7      Successors and Assigns. This Agreement shall be binding upon,
                  inure to the benefit of, and be enforceable by, the respective
                  successors of each of the Fund and the Auction Agent.

         7.8      Severability. If any clause, provision or section hereof shall
                  be ruled invalid or unenforceable by any court of competent
                  jurisdiction, the invalidity or unenforceability of such
                  clause, provision or section shall not affect any of the
                  remaining clauses, provisions or sections hereof.

         7.9      Execution in Counterparts. This Agreement may be executed in
                  several counterparts, each of which shall be an original and
                  all of which shall constitute but one and the same instrument.

         7.10     Governing Law. This Agreement shall be governed by and
                  construed in accordance with the laws of the State of New
                  York.


                                       16
<PAGE>

                                                                       EXHIBIT A

                             BROKER-DEALER AGREEMENT

                            [INTENTIONALLY OMITTED]

                                       A-1

<PAGE>




                                                                       EXHIBIT B

                              SETTLEMENT PROCEDURES

                            [INTENTIONALLY OMITTED]

                                       B-1

<PAGE>




                                                                       EXHIBIT C


                                 [NAME OF FUND]
        NOTICE OF AUCTION DATE FOR PREFERRED SHARES ("Preferred Shares")

         NOTICE IS HEREBY GIVEN that the Auction Date of the next Auction for
the Preferred Shares Series ___ of the [Name of Fund] (the "Fund") is scheduled
to be ____________ and the next Dividend Payment Date for Series ____ of the
Fund's Preferred Shares will be _______________.

Dated:                                  [Name of Fund]
      -----------------

                                       C-1
<PAGE>




                                                                       EXHIBIT D


                                 [NAME OF FUND]
                        NOTICE OF PROPOSED DESIGNATION OF
                           SPECIAL DIVIDEND PERIOD FOR
                      PREFERRED SHARES ("Preferred Shares")

         NOTICE IS HEREBY GIVEN that [Name of Fund] (the "Fund") proposes to
exercise its option to designate the Dividend Period of its Series __ Preferred
Shares commencing [the first day of the proposed Special Dividend Period] and
ending [the last day of the proposed Special Dividend Period] as a Special
Dividend Period and the Maximum Rate for such Special Dividend Period is
proposed to be ___________.

         By 3:00 P.M., New York City time, on the second Business Day next
preceding the first day of such proposed Special Dividend Period, the Fund will
notify the Auction Agent for the Preferred Shares of either (a) its
determination to exercise such option, designating the length of such Special
Dividend Period and the terms of the Specific Redemption Provisions, if any, or
(b) its determination not to exercise such option.

Dated:                                  [Name of Fund]
      ---------------------


                                       D-1


<PAGE>


                                                                       EXHIBIT E


                                 [NAME OF FUND]
               NOTICE OF DESIGNATION OF SPECIAL DIVIDEND PERIOD OF
                      PREFERRED SHARES ("Preferred Shares")

         NOTICE IS HEREBY GIVEN that [Name of Fund] (the "Fund") has determined
to designate the Dividend Period of its Series __ Preferred Shares commencing on
[the first day of the Special Dividend Period] and ending on [the last day of
the Special Dividend Period] as a Special Dividend Period.

         The Special Dividend Period will be _____ [days] [year(s)].

         The Auction Date for the Special Dividend Period is (the Business Day
next preceding the first day of such Special Dividend Period].

         The scheduled Dividend Payment Dates for such series of Preferred
Shares during such Special Dividend Period will be ____________________.

         [Specific Redemption Provisions, if applicable.]

         [The Special Dividend Period shall not commence if on such Auction Date
Sufficient Clearing Bids shall not exist.]

Dated:                                [Name of Fund]
      -----------------------

                                       E-1

<PAGE>



                                                                       EXHIBIT F


                                 [NAME OF FUND]
                    NOTICE OF DETERMINATION NOT TO DESIGNATE
                           SPECIAL DIVIDEND PERIOD OF
                      PREFERRED SHARES ("Preferred Shares")

NOTICE IS HEREBY GIVEN that [Name of Fund] (the "Fund") has determined not to
exercise its option to designate a Special Dividend Period of its Series __
Preferred Shares Accordingly, the next succeeding Dividend Period of such series
will be a Standard Dividend Period.

Dated:                                  [Name of Fund]
      -----------------

                                       F-1




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K5
<SEQUENCE>8
<FILENAME>c82676a1exv99wk5.txt
<DESCRIPTION>FORM OF BROKER-DEALER AGREEMENT
<TEXT>
<PAGE>
                                                                     EXHIBIT k.5


                         CALAMOS BROKER-DEALER AGREEMENT

                    BASIC TERMS FOR ACTING AS A BROKER-DEALER

                                   RELATING TO

                                PREFERRED SHARES

                                 July 31, 2003



<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                               PAGE
<S>                                                                                                            <C>
1.       Definitions and Rules of Construction...................................................................1
         1.1      Terms Defined by Reference to Statement........................................................1
         1.2      Terms Defined Herein...........................................................................1
         1.3      Rules of Construction..........................................................................2

2.       The Auction.............................................................................................3
         2.1      Purposes; Incorporation by Reference of Auction Procedures and Settlement Procedures...........3
         2.2      Preparation of Each Auction....................................................................3
         2.3      Auction Schedule; Method of Submission of Order................................................5
         2.4      Notices........................................................................................7
         2.5      Designation of Special Rate Period.............................................................7
         2.6      Service Charge to be Paid to BD................................................................8
         2.7      Settlement.....................................................................................8

3.       The Auction Agent......................................................................................10
         3.1      Duties and Responsibilities...................................................................10
         3.2      Rights of the Auction Agent...................................................................10
         3.3      Auction Agent's Disclaimer....................................................................11

4.       Miscellaneous..........................................................................................11
         4.1      Termination...................................................................................11
         4.2      Force Majeure.................................................................................11
         4.3      Participant in Securities Depository..........................................................11
         4.4      Payment of Dividends in Same-Day Funds........................................................11
         4.5      Communications................................................................................12
         4.6      Entire Agreement..............................................................................12
         4.7      Benefits......................................................................................12
         4.8      Amendment; Waiver.............................................................................12
         4.9      Successors and Assigns........................................................................13
         4.10     Severability..................................................................................13
         4.11     Execution in Counterparts.....................................................................13
         4.12     Governing Law.................................................................................13
</TABLE>

                                                      EXHIBITS
EXHIBIT A  - Settlement Procedures
EXHIBIT B  - Calamos Preferred Shares, Series___ Order Form
EXHIBIT C  - Calamos Preferred Shares, Series___ Transfer Form
EXHIBIT D  - Calamos Preferred Shares, Series___ Notice of a Failure to Deliver
EXHIBIT E  - Form of Acceptance Letter


                                       i

<PAGE>

         These basic terms ("Basic Terms") set forth the general terms and
conditions pursuant to which a broker-dealer identified in a Acceptance Letter
(together with its successors and assigns, a "BD") will act as a Broker-Dealer
for Preferred Shares ("Preferred Shares") issued by investment companies, now or
hereafter organized, registered under the Investment Company Act of 1940, as
amended (the "Funds"), for which Calamos Asset Management, Inc. (the "Adviser")
is the investment adviser.

         Each Fund has issued or may issue shares of Preferred Shares, pursuant
to its Agreement and Declaration of Trust, as amended or supplemented by the
Statement of such Fund. A bank or trust company specified in the Request and
Acceptance Letter will act as the auction agent (the "Auction Agent") of such
Fund pursuant to authority granted it in the Auction Agency Agreement.

         The Statement of each Fund will provide that, for each Rate Period of
any series of Preferred Shares of such Fund then outstanding, the Applicable
Rate for such series for such Rate Period shall, except under certain
conditions, be the rate per annum that the Auction Agent of such Fund advises
results from implementation of the Auction Procedures for such series. The Board
of Trustees of each Fund will adopt a resolution appointing the Auction Agent as
auction agent for purposes of the Auction Procedures for each series of
Preferred Shares of such Fund.

         The Auction Procedures of each Fund will require the participation of
one or more Broker-Dealers for each series of Preferred Shares of such Fund. BD
will act as a Broker-Dealer for each series of Preferred Shares of each Fund.

1.       Definitions and Rules of Construction

         1.1      Terms Defined by Reference to Statement. Capitalized terms not
                  defined herein shall have the respective meanings specified in
                  the Statement of the relevant Fund.

         1.2      Terms Defined Herein. As used herein and in the Settlement
                  Procedures, the following terms shall have the following
                  meanings, unless the context otherwise requires:

                  (a)      "Acceptance Letter" shall mean the letter from the
                           Fund, Adviser and Auction Agent to BD pursuant to
                           which the BD is appointed as a Broker-Dealer for each
                           series of Preferred Shares issued by any Fund that
                           has executed a Request Letter.

                  (b)      "Agreement", with respect to any Fund, shall mean the
                           Basic Terms, together with the Acceptance Letter and
                           Request Letter relating to one or more series of
                           Preferred Shares of such Fund.

                  (c)      "Auction" shall have the meaning specified in Section
                           2.1 hereof.



<PAGE>

                  (d)      "Auction Agency Agreement" shall mean the Auction
                           Agent Agreement between a Fund and the Auction Agent
                           relating to one or more series of Preferred Shares of
                           such Fund.

                  (e)      "Auction Procedures" shall mean the auction
                           procedures constituting Part II of the Statement.

                  (f)      "Authorized Officer" shall mean each Vice President,
                           Assistant Vice President and Assistant Treasurer of
                           the Auction Agent assigned to the Dealing and Trading
                           Group of its Corporate Trust Division and every other
                           officer or employee of the Auction Agent designated
                           as an "Authorized Officer" for purposes of this
                           Agreement in a communication to the BD.

                  (g)      "BD Officer" shall mean each officer or employee of
                           BD designated as a "BD Officer" for purposes of this
                           Agreement in a communication to the Auction Agent.

                  (h)      "Broker-Dealer Agreement" shall mean this Agreement
                           and any substantially similar agreement between the
                           Auction Agent and a Broker-Dealer.

                  (i)      "Existing Holder" shall have the meaning set forth in
                           the Statement, and for purposes of this Broker-Dealer
                           Agreement and with respect to the Auction Procedures
                           as referred to in this Agreement, shall also include,
                           as the circumstances may require, a Person who is
                           listed as the beneficial owner of Preferred Shares in
                           the records of a Broker-Dealer.

                  (j)      "Potential Holder" shall have the meaning set forth
                           in the Statement, and for purposes of this
                           Broker-Dealer Agreement and with respect to the
                           Auction Procedures as referred to in this Agreement,
                           shall also include, as the circumstances may require,
                           any other Person, including any Existing Holder of
                           shares of Preferred Shares, who may be interested in
                           acquiring shares of Preferred Shares (or, in the case
                           of an Existing Holder, additional shares of Preferred
                           Shares).

                  (k)      "Request Letter" with respect to any Fund, shall mean
                           the letter from such Fund to the Adviser and the
                           Auction Agent for such Fund pursuant to which such
                           Fund appoints BD as a Broker-Dealer for each series
                           of Preferred Shares of such Fund.

                  (l)      "Settlement Procedures" shall mean the Settlement
                           Procedures attached hereto as Exhibit A.

                  (m)      "Statement" shall mean the Statement of Preferences
                           of Auction Market Preferred Shares and authorizing
                           the issuance of, one or more series of Preferred
                           Shares.

                                       2
<PAGE>

         1.3      Rules of Construction. Unless the context or use indicates
                  another or different meaning or intent, the following rules
                  shall apply to the construction of this Agreement:

                  (a)      Words importing the singular number shall include the
                           plural number and vice versa.

                  (b)      The captions and headings herein are solely for the
                           convenience of reference and shall not constitute a
                           part of this Agreement nor shall they affect its
                           meaning, construction or effect.

                  (c)      The words "hereof", "herein", "hereto", and other
                           words of similar import refer to this Agreement as a
                           whole.

                  (d)      All references herein to a particular time of day
                           shall be to New York City time.

2.       The Auction

         2.1      Purposes; Incorporation by Reference of Auction Procedures and
                  Settlement Procedures.

                  (a)      The provisions of the Auction Procedures will be
                           followed by the Auction Agent for the purpose of
                           determining the Applicable Rate for any Dividend
                           Period of any series of Preferred Shares for which
                           the Applicable Rate is to be determined by an
                           Auction. Each periodic operation of such procedures
                           is hereinafter referred to as an "Auction."

                  (b)      All of the provisions contained in the Auction
                           Procedures and the Settlement Procedures are
                           incorporated herein by reference in their entirety
                           and shall be deemed to be a part hereof to the same
                           extent as if such provisions were fully set forth
                           herein.

                  (c)      The BD agrees to act as, and assumes the obligations
                           of, and limitations and restrictions placed upon, a
                           Broker-Dealer under this Agreement for each series of
                           Preferred Shares. The BD understands that other
                           Persons meeting the requirements specified in the
                           definition of "Broker-Dealer" contained in the
                           Auction Procedures may execute Broker-Dealer
                           Agreements and participate as Broker-Dealers in
                           Auctions.

         2.2      Preparation of Each Auction.

                  (a)      Not later than 9:30 A.M. on each Auction Date for any
                           series of Preferred Shares, the Auction Agent shall
                           advise the Broker-Dealers for such series by
                           telephone of the Maximum Rate therefor and the AA
                           Composite Commercial Paper Rate(s) and the Treasury
                           Index Rate(s), as the case may be, used in
                           determining the Maximum Rate.

                                       3
<PAGE>

                  (b)      In the event that any Auction Date for any series of
                           Preferred Shares shall be changed after the Auction
                           Agent has given the notice referred to in clause (vi)
                           of paragraph (a) of the Settlement Procedures, or
                           after the notice referred to in Section 2.5(a)
                           hereof, if applicable, the Auction Agent, by such
                           means as the Auction Agent deems practicable shall
                           give notice of such change to the BD, if it is a
                           Broker-Dealer for such series, not later than the
                           earlier of 9:15 A.M. on the new Auction Date or 9:15
                           A.M. on the original Auction Date. Thereafter, the BD
                           shall notify customers of the BD who the BD believes
                           are Existing Holders of shares of Preferred Shares of
                           such change in the Auction Date.

                  (c)      For purposes of maintaining its list of Existing
                           Holders, the Auction Agent for any series of
                           Preferred Shares from time to time may but shall have
                           no obligation to request any Broker-Dealer to provide
                           such Auction Agent with a list of Persons who such
                           Broker-Dealer believes should be Existing Holders
                           based upon inquiries of those Persons such
                           Broker-Dealer believes are Beneficial Owners as a
                           result of the most recent Auction and with respect to
                           each such Person, the number of shares of such series
                           of Preferred Shares such Broker-Dealer believes are
                           owned by such Person. BD shall comply with any such
                           request relating to a series of Preferred Shares in
                           respect of which BD was named a Broker-Dealer, and
                           the Auction Agent shall keep confidential any such
                           information so provided by BD and shall not disclose
                           any information so provided by BD to any Person other
                           than the Fund and BD; provided, however, that the
                           Auction Agent reserves the right and is authorized to
                           disclose any such information if (a) it is ordered to
                           do so by a court of competent jurisdiction or a
                           regulatory body, judicial or quasi-judicial agency or
                           authority having the authority to compel such
                           disclosure, (b) it is advised by its counsel that its
                           failure to do so would be unlawful or (c) failure to
                           do so would expose the Auction Agent to loss,
                           liability, claim, damage or expense for which it has
                           not received indemnity or security satisfactory to
                           it. In the event the Auction Agent is required to
                           disclose information in accordance with the foregoing
                           sentence, it shall provide written notice of such
                           requirement to the Broker-Dealer as promptly as
                           practicable.

                  (d)      In the event the Auction Agent is required to
                           disclose information in accordance with the foregoing
                           sentence, it shall provide written notice of such
                           requirement to the Broker-Dealer as promptly as
                           possible.

                  (e)      BD agrees to maintain a list of customers relating to
                           a series of Preferred Shares and to use its best
                           efforts, subject to existing laws and regulations, to
                           contact the customers on such list whom BD believes
                           may be interested in participating in the Auction on
                           each Auction Date, as a Potential Holder or a
                           Potential Beneficial Owner, for the purposes set
                           forth in the Auction Procedures. Nothing herein shall
                           require BD to submit an Order for any customer in any
                           Auction.

                                       4
<PAGE>

                  (f)      The Auction Agent's registry of Existing Holders of
                           shares of a series of Preferred Shares shall be
                           conclusive and binding on BD. BD may inquire of the
                           Auction Agent between 3:00 P.M. on the Business Day
                           preceding an Auction for shares of a series of
                           Preferred Shares and 9:30 A.M. on the Auction Date
                           for such Auction to ascertain the number of shares of
                           such series in respect of which the Auction Agent has
                           determined BD to be an Existing Holder. If BD
                           believes it is the Existing Holder of fewer shares of
                           such series than specified by the Auction Agent in
                           response to BD's inquiry, BD may so inform the
                           Auction Agent of that belief. BD shall not, in its
                           capacity as Existing Holder of shares of such series,
                           submit Orders in such Auction in respect of shares of
                           such series covering in the aggregate more than the
                           number of shares of such series specified by the
                           Auction Agent in response to BD's inquiry.

         2.3      Auction Schedule; Method of Submission of Order.

                  (a)      The Auction Agent shall conduct Auctions for
                           Preferred Shares in accordance with the schedule set
                           forth below. Such schedule with respect to any series
                           of Preferred Shares of the Fund may be changed by the
                           Auction Agent for such series with the consent of the
                           Fund, which consent shall not be unreasonably
                           withheld. The Auction Agent shall give written notice
                           of any such change to each Broker-Dealer of such
                           series. Such notice shall be given prior to the close
                           of business on the Business Day next preceding the
                           first Auction Date on which such change shall be
                           effective.

<TABLE>
<CAPTION>
                   Time                                                 Event
         -----------------------------             -------------------------------------------------
         <S>                                       <C>
         By 9:30 A.M.                              Auction Agent for such series advises the Fund
                                                   and the Broker-Dealers for such series of the
                                                   applicable Maximum Rate and the Reference Rate(s)
                                                   used in determining such Maximum Rate as set
                                                   forth in Section 2.2(a) hereof.

         9:30 A.M.  - 1:00 P.M.                    Auction Agent assembles information communicated
                                                   to it by Broker-Dealers as provided in Section
                                                   2(a) of the Auction Procedures of the Fund.
                                                   Submission Deadline is 1:00 P.M.

         Not earlier than 1:00 P.M.                Auction Agent makes determinations pursuant to
                                                   Section 3(a) of the Auction Procedures.

         By approximately 3:00 P.M.                Auction Agent advises the Fund of results of
                                                   Auction as provided in Section 3(b) of the
                                                   Auction Procedures.

                                                   Submitted Bids and Submitted Sell Orders are
                                                   accepted and rejected and shares of such series
                                                   of Preferred Shares allocated as provided in
                                                   Section 4 of the Auction Procedures.
</TABLE>


                                                 5
<PAGE>

<TABLE>
<CAPTION>
                   Time                                                 Event
         -----------------------------             -------------------------------------------------
         <S>                                       <C>
                                                   Auction Agent gives notice of
                                                   Auction results as set forth
                                                   in Section 2.4(a) hereof.
</TABLE>

                  (b)      BD shall submit Orders to the appropriate Auction
                           Agent in writing substantially in the form attached
                           hereto as Exhibit B. BD shall submit a separate Order
                           to such Auction Agent for each Potential Holder or
                           Existing Holder with respect to whom BD is submitting
                           an Order and shall not otherwise net or aggregate
                           such Orders prior to their submission to such Auction
                           Agent.

                  (c)      BD shall deliver to the appropriate Auction Agent (i)
                           a written notice in substantially the form attached
                           hereto as Exhibit C of transfers of shares of
                           Preferred Shares to BD from another Person other than
                           pursuant to an Auction and (ii) a written notice
                           substantially in the form attached hereto as Exhibit
                           D, of the failure of any shares of Preferred Shares
                           to be transferred to or by any Person that purchased
                           or sold shares of Preferred Shares through BD
                           pursuant to an Auction. Such Auction Agent is not
                           required to accept any such notice described in
                           clause (i) for an Auction unless it is received by
                           the Auction Agent by 3:00 P.M. on the Business Day
                           preceding such Auction.

                  (d)      BD and other Broker-Dealers may submit Orders in
                           Auctions for their own accounts (including Orders for
                           their own accounts where the Order is placed
                           beneficially for a customer) unless the relevant Fund
                           shall have notified BD and all other Broker-Dealers
                           that they may no longer do so, in which case
                           Broker-Dealers may continue to submit Hold Orders and
                           Sell Orders for their own accounts.

                  (e)      BD agrees to handle its customers' orders in
                           accordance with its duties under applicable
                           securities laws and rules.

                  (f)      To the extent that pursuant to Section 4 of the
                           Auction Procedures of any Fund, BD continues to hold,
                           sells, or purchases a number of shares that is fewer
                           than the number of shares in an Order submitted by BD
                           to the Auction Agent in which BD designated itself as
                           an Existing Holder or Potential Holder in respect of
                           customer Orders, BD shall make appropriate pro rata
                           allocations among its customers for which it
                           submitted Orders of similar tenor. If as a result of
                           such allocations, any Beneficial Owner would be
                           entitled or required to sell, or any Potential
                           Beneficial Owner would be entitled or required to
                           purchase, a fraction of a share of Preferred Shares
                           on any Auction Date, BD shall, in such manner as it
                           shall determine in its sole discretion, round up or
                           down the number of shares of Preferred Shares to be
                           purchased or sold on such Auction Date by any

                                       6
<PAGE>

                           Beneficial Owner or Potential Beneficial Owner on
                           whose behalf BD submitted an Order so that the number
                           of shares so purchased or sold by each such
                           Beneficial Owner or Potential Beneficial Owner on
                           such Auction Date shall be whole shares of Preferred
                           Shares.

         2.4      Notices.

                  (a)      On each Auction Date for any series of Preferred
                           Shares, the Auction Agent shall notify BD, if BD is a
                           Broker-Dealer of such series, by telephone or other
                           electronic means acceptable to the parties of the
                           results of the Auction as set forth in paragraph (a)
                           of the Settlement Procedures. By approximately 11:30
                           a.m., on the Business Day next succeeding such
                           Auction Date, the Auction Agent shall confirm to BD
                           in writing the disposition of all Orders submitted by
                           BD in such Auction.

                  (b)      BD shall notify each Existing Holder, Potential
                           Holder, Beneficial Owner or Potential Beneficial
                           Owner on whose behalf BD has submitted an Order as
                           set forth in paragraph (a) of the Settlement
                           Procedures and take such other action as is required
                           of BD pursuant to the Settlement Procedures.

         2.5      Designation of Special Rate Period.

                  (a)      If any Fund delivers to the Auction Agent a notice of
                           the Auction Date for any series of Preferred Shares
                           for a Dividend Period thereof that next succeeds a
                           Dividend Period that is not a Standard Rate Period in
                           the form of Exhibit C to the Auction Agency
                           Agreement, the Auction Agent shall deliver such
                           notice to BD as promptly as practicable after its
                           receipt of such notice from such Fund.

                  (b)      If the Board of Trustees proposes to designate any
                           succeeding Dividend Period of any series of Preferred
                           Shares as a Special Rate Period and such Fund
                           delivers to the Auction Agent a notice of such
                           proposed Special Rate Period in the form of Exhibit D
                           to the Auction Agency Agreement, the Auction Agent
                           shall deliver such notice to BD as promptly as
                           practicable after its receipt of such notice from the
                           Fund.

                  (c)      If the Board of Trustees determines to designate such
                           succeeding Dividend Period as a Special Rate Period
                           and such Fund delivers to the Auction Agent a notice
                           of such Dividend Period in the form of Exhibit E to
                           the Auction Agency Agreement not later than 3:00 p.m.
                           on the second Business Day next preceding the first
                           day of such proposed Special Rate Period, the Auction
                           Agent shall deliver such notice to BD not later than
                           3:00 p.m. on the next succeeding Business Day.

                  (d)      If the Fund shall deliver to the Auction Agent a
                           notice not later than 3:00 p.m. on the second
                           Business Day next preceding the first day of any
                           Dividend Period stating that the Fund has determined
                           not to exercise its option to designate such
                           succeeding Dividend Period as a Special Rate

                                       7
<PAGE>

                           Period, in the form of Exhibit F to the Auction Agent
                           Agreement, or shall fail to timely deliver either
                           such notice or a notice in the form of Exhibit E to
                           the Auction Agency Agreement, the Auction Agent shall
                           deliver a notice in the form of Exhibit F to the
                           Auction Agency Agreement to BD not later than 3:00
                           p.m. on such Business Day.

         2.6      Service Charge to be Paid to BD.

                  On the Business Day next succeeding each Auction Date for any
series of Preferred Shares of any Fund specified in the Request Letter of any
Fund, the Auction Agent for such series shall pay to BD from moneys received
from such Fund an amount equal to the product of (a) (i) in the case of any
Auction Date immediately preceding a Rate Period of such series consisting of
364 Rate Period Days or fewer, 1/4 of 1%, or (ii) in the case of any Auction
Date immediately preceding a Rate Period of such series consisting of more than
364 Rate Period Days, such percentage as may be agreed upon by such Fund and BD
with respect to such Rate Period, times (b) a fraction, the numerator of which
is the number of Rate Period Days in the Rate Period therefor beginning on such
Business Day and the denominator of which is 365 if such Rate Period consists of
7 Rate Period Days and 360 for all other Rate Periods, times (c) $25,000 times
(d) the sum of (i) the aggregate number of shares of such series placed by BD in
such Auction that were (A) the subject of Submitted Bids of Existing Holders
submitted by BD and continued to be held as a result of such submission and (B)
the subject of Submitted Bids of Potential Holders submitted by BD and purchased
as a result of such submission plus (ii) the aggregate number of shares of such
series subject to valid Hold Orders (determined in accordance with paragraph (d)
of Section 2 of the Auction Procedures) submitted to the Auction Agent by BD
plus (iii) the number of shares of Preferred Shares deemed to be subject to Hold
Orders of Existing Holders pursuant to paragraph (c) of Section 2 of the Auction
Procedures of such Fund that were acquired by BD for its own account or were
acquired by BD for its customers who are Beneficial Owners.

                  For purposes of subclause (d)(iii) of the foregoing paragraph,
if any Existing Holder or Beneficial Owner who acquired shares of any series of
Preferred Shares through BD transfers those shares to another Person other than
pursuant to an Auction, then the Broker-Dealer for the shares so transferred
shall continue to be BD; provided, however, that if the transfer was effected
by, or if the transferee is, a Broker-Dealer other than BD, then such
Broker-Dealer shall be the Broker-Dealer for such shares.

         2.7      Settlement.

                  (a)      If any Existing Holder or Beneficial Owner with
                           respect to whom BD has submitted a Bid or Sell Order
                           for shares of Preferred Shares of any series that was
                           accepted in whole or in part fails to instruct its
                           Agent Member to deliver the shares of Preferred
                           Shares subject to such Bid or Sell Order against
                           payment therefor, BD, if it knows the identity of
                           such Agent Member, shall instruct such Agent Member
                           to deliver such shares against payment therefor and,
                           if such Agent Member fails to comply with such
                           instructions, BD may deliver to the Potential Holder
                           or Potential Beneficial Owner with respect to whom BD
                           submitted a Bid for shares of

                                       8
<PAGE>

                           Preferred Shares of such series that was accepted in
                           whole or in part a number of shares of Preferred
                           Shares of such series that is less than the number of
                           shares of Preferred Shares of such series specified
                           in such Bid to be purchased by such Potential Holder
                           or Potential Beneficial Owner.

                  (b)      Neither the Auction Agent nor the Fund shall have any
                           responsibility or liability with respect to the
                           failure of an Existing Holder, Beneficial Owner,
                           Potential Holder or Potential Beneficial Owner or its
                           respective Agent Member to deliver shares of
                           Preferred Shares of any series or to pay for shares
                           of Preferred Shares of any series sold or purchased
                           pursuant to the Auction Procedures or otherwise.

                  (c)      Notwithstanding any provision of the Auction
                           Procedures or the Settlement Procedures to the
                           contrary, in the event BD is an Existing Holder with
                           respect to shares of a series of Preferred Shares and
                           the Auction Procedures provide that BD shall be
                           deemed to have submitted a Sell Order in an Auction
                           with respect to such shares if BD fails to submit an
                           Order in that Auction with respect to such shares, BD
                           shall have no liability to any Person for failing to
                           sell such shares pursuant to such a deemed Sell Order
                           if (i) such shares were transferred by the beneficial
                           owner thereof without notification of such transfer
                           in compliance with the Auction Procedures or (ii) BD
                           has indicated to the Auction Agent pursuant to
                           Section 2.2(e) of this Agreement that, according BD's
                           records, BD is not the Existing Holder of such
                           shares.

                  (d)      Notwithstanding any provision of the Auction
                           Procedures or the Settlement Procedures to the
                           contrary, in the event an Existing Holder or
                           Beneficial Owner of shares of a series of Preferred
                           Shares with respect to whom a Broker-Dealer submitted
                           a Bid to the Auction Agent for such shares that was
                           accepted in whole or in part, or submitted or is
                           deemed to have submitted a Sell Order for such shares
                           that was accepted in whole or in part, fails to
                           instruct its Agent Member to deliver such shares
                           against payment therefor, partial deliveries of
                           shares of Preferred Shares that have been made in
                           respect of Potential Holders, or Potential Beneficial
                           Owners' Submitted Bids for shares of such series that
                           have been accepted in whole or in part shall
                           constitute good delivery to such Potential Holders
                           and Potential Beneficial Owners.

                  (e)      Notwithstanding the foregoing terms of this Section,
                           any delivery or non-delivery of shares of Preferred
                           Shares of any series which represents any departure
                           from the results of an Auction for shares of such
                           series, as determined by the Auction Agent, shall be
                           of no effect for purposes of the registry of Existing
                           Holders maintained by the Auction Agent pursuant to
                           the Auction Agency Agreement unless and until the
                           Auction Agent shall have been notified of such
                           delivery or non-delivery.

                                       9
<PAGE>

                  (f)      The Auction Agent shall have no duty or liability
                           with respect to enforcement of this Section 2.7.

3.       The Auction Agent

         3.1      Duties and Responsibilities.

                  (a)      The Auction Agent is acting solely as agent for the
                           Funds with whom such Auction Agent has entered into
                           Request Letters hereunder and owes no duties,
                           fiduciary or otherwise, to any other Person.

                  (b)      The Auction Agent undertakes to perform such duties
                           and only such duties as are specifically set forth in
                           such agreements to which it is a party, and no
                           implied covenants or obligations shall be read into
                           the agreements against the Auction Agent.

                  (c)      In the absence of willful misconduct or gross
                           negligence on its part, the Auction Agent shall not
                           be liable for any action taken, suffered, or omitted
                           or for any error of judgment made by it in the
                           performance of its duties under this agreements. The
                           Auction Agent shall not be liable for any error of
                           judgment made in good faith unless the Auction Agent
                           shall have been grossly negligent in ascertaining the
                           pertinent facts.

         3.2      Rights of the Auction Agent.

                  (a)      The Auction Agent may conclusively rely and shall be
                           protected in acting or refraining from acting upon
                           any communication authorized hereby and upon any
                           written instruction, notice, request, direction,
                           consent, report, certificate, share certificate or
                           other instrument, paper or document believed in good
                           faith by it to be genuine. The Auction Agent shall
                           not be liable for acting upon any telephone
                           communication authorized hereby which the Auction
                           Agent believes in good faith to have been given by
                           the Fund or by a Broker-Dealer. The Auction Agent may
                           record telephone communications with the
                           Broker-Dealers.

                  (b)      The Auction Agent may consult with counsel of its
                           choice and the advice of such counsel shall be full
                           and complete authorization and protection in respect
                           of any action taken, suffered or omitted by it
                           hereunder in good faith and in reliance thereon.

                  (c)      The Auction Agent shall not be required to advance,
                           expend or risk its own funds or otherwise incur or
                           become exposed to financial liability in the
                           performance of its duties hereunder.

                  (d)      The Auction Agent shall not be responsible or liable
                           for any failure or delay in the performance of its
                           obligations under this agreement arising out of or
                           caused, directly or indirectly, by circumstances
                           beyond its reasonable control, including, without
                           limitation, acts of God;

                                       10
<PAGE>

                           earthquakes; fires, floods; wars; civil or military
                           disturbances; sabotage; acts of terrorism; epidemics;
                           riots; interruptions, loss or malfunctions of
                           utilities; computer (hardware or software) or
                           communications services; accidents; labor disputes;
                           acts of civil or military authority or governmental
                           actions; it being understood that the Auction Agent
                           shall use reasonable efforts which are consistent
                           with accepted practices in the banking industry to
                           resume performance as soon as practicable under the
                           circumstances.

                  (e)      In no event shall the Auction Agent be responsible or
                           liable for special, indirect or consequential loss or
                           damage of any kind whatsoever (including, but not
                           limited to, loss of profit), even if the Auction
                           Agent has been advised of the likelihood of such loss
                           or damage and regardless of the form of action.

         3.3      Auction Agent's Disclaimer. The Auction Agent makes no
                  representation as to the validity or adequacy of this
                  Agreement, the Auction Agency Agreement or the shares of
                  Preferred Shares of any series.

4.       Miscellaneous

         4.1      Termination. Any party to this Agreement may terminate the
                  Agreement at any time on five days' notice to the other
                  parties to such Agreement, provided that the Fund party to the
                  Agreement shall not terminate the Agreement unless at least
                  one Broker-Dealer Agreement would be in effect for each series
                  of Preferred Shares of the Fund after such termination. Each
                  Agreement shall automatically terminate with respect to any
                  series of Preferred Shares with respect to which the Auction
                  Agency Agreement has terminated.

         4.2      Force Majeure. Neither party to this Agreement shall be
                  responsible or liable for any failure or delay in the
                  performance of its obligations under this Agreement arising
                  out of or caused, directly or indirectly, by circumstances
                  beyond its reasonable control, including, without limitation,
                  acts of God; earthquakes; fires; floods; wars; civil or
                  military disturbances; sabotage; epidemics; riots;
                  interruptions, loss or malfunctions or utilities; computer
                  (hardware or software) or communications services; accidents;
                  labor disputes; acts of civil or military authority or
                  governmental actions; it being understood that the parties
                  shall use reasonable efforts which are consistent with
                  accepted practices in the banking industry to resume
                  performance as soon as practicable under the circumstances.

         4.3      Participant in Securities Depository. BD is, and shall remain
                  for the term of this Agreement, a member of, or participant
                  in, the Securities Depository (or an affiliate of such a
                  member participant).

         4.4      Payment of Dividends in Same-Day Funds. BD represents that it
                  (or if BD does not act as Agent Member, one of its affiliates)
                  shall make all dividend payments

                                       11
<PAGE>

                  on the Preferred Shares available in same-day funds on each
                  Dividend Payment Date to customers that use BD or affiliate as
                  Agent Member.

         4.5      Communications. Except (i) communications authorized to be by
                  telephone by this Agreement or the Auction Procedures and (ii)
                  communications in connection with Auctions (other than those
                  expressly required to be in writing), all notices, requests
                  and other communications to any party hereunder shall be in
                  writing (including telecopy or similar writing) and shall be
                  given to such party, addressed to it, at its addressed or
                  telecopy number set forth below:

         If to BD, to the address or telecopy number as set forth in the
Acceptance Letter.

         If to the Auction Agent, to the address or telecopy number as set forth
in the Request Letter.

         If to the Fund, addressed:

                  Calamos Strategic Total Return Fund
                  1111 East Warrenville Road
                  Naperville, Illinois  60563-1493
                  Attention:  James S. Hamman, Jr.
                  Telephone No.:  (630) 245-7296

or such other address or telecopy number as such party may hereafter specify for
such purpose by notice to the other parties. Each such notice, request or
communication shall be effective when delivered at the address specified herein.
Communications shall be given on behalf of BD by a BD Officer and on behalf of
the Auction Agent by an Authorized Officer. BD may record telephone
communications with the Auction Agent.

         4.6      Entire Agreement. This Agreement contains the entire agreement
                  among the parties hereto relating to the subject matter
                  hereof, and there are no other representations, endorsements,
                  promises, agreements or understandings, oral, written or
                  implied, among the parties hereto relating to the subject
                  matter hereof. This Agreement supersedes and terminates all
                  prior Broker-Dealer Agreements between the parties.

         4.7      Benefits. Nothing in this Agreement, express or implied, shall
                  give to any person, other than the Fund, the Auction Agent, BD
                  and their respective successors and assigns, any benefit of
                  any legal or equitable right, remedy or claim hereunder.

         4.8      Amendment; Waiver.

                  (a)      This Agreement shall not be deemed or construed to be
                           modified, amended, rescinded, canceled or waived, in
                           whole or in part, except by a written instrument
                           signed by a duly authorized representative of the
                           party to be charged.

                                       12
<PAGE>

                  (b)      Failure of any party hereto to exercise any right or
                           remedy hereunder in the event of a breach hereof by
                           any other party shall not constitute a waiver of any
                           such right or remedy with respect to any subsequent
                           breach.

         4.9      Successors and Assigns. This Agreement shall be binding upon,
                  inure to the benefit of, and be enforceable by, the respective
                  successors and assigns of each of the Auction Agent and BD.
                  This Agreement may not be assigned by either party hereto
                  absent the prior written consent of the other party; provided,
                  however, that this Agreement may be assigned by the Auction
                  Agent to a successor Auction Agent selected by the Fund
                  without the consent of BD.

         4.10     Severability. If any clause, provision or section hereof shall
                  be ruled invalid or unenforceable by any court of competent
                  jurisdiction, the invalidity or unenforceability of such
                  clause, provision or section shall not affect any of the
                  remaining clauses, provisions or sections thereof.

         4.11     Execution in Counterparts. This Agreement may be executed in
                  several counterparts, each of which shall be an original and
                  all of which shall constitute but one and the same instrument.

         4.12     Governing Law. This Agreement shall be governed by and
                  construed in accordance with the laws of the State of New York
                  applicable to agreements made and to be performed in said
                  State.

                                       13


<PAGE>


                                                                       EXHIBIT A

                              SETTLEMENT PROCEDURES


                                       A-1

<PAGE>

EXHIBIT B


                                 [Name of Fund]


                         $_____ ______ PREFERRED SHARES


                                   Series ____


                           AUCTION DATE: _____________


<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
ISSUE: ___________________     SERIES: _________
- ------------------------------------------------------------------------------------------------------------------------------------
THE UNDERSIGNED Broker-Dealer SUBMITS THE FOLLOWING ORDERS ON BEHALF OF THE BIDDER(S) LISTED BELOW:
- ------------------------------------------------------------------------------------------------------------------------------------
ORDERS BY EXISTING HOLDERS-                          NUMBER OF SHARES OF             ORDERS BY                    NUMBER OF SHARES
                                                      PREFERRED SHARES           POTENTIAL HOLDERS-             OF PREFERRED SHARES
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                  POTENTIAL HOLDER              BID/RATE
- ------------------------------------------------------------------------------------------------------------------------------------
<S>                            <C>        <C>        <C>                 <C>     <C>                  <C>       <C>

EXISTING HOLDER                          HOLD        BID/RATE             SELL   1.                                      /
                                                                                    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1.                                                            /                  2.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------

- ------------------------------------------------------------------------------------------------------------------------------------
2.                                                            /                  3.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
3.                                                            /                  4.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
4.                                                            /                  5.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
5.                                                            /                  6.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
6.                                                            /                  7.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
7.                                                            /                  8.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
8.                                                            /                  9.                                      /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
9.                                                            /                  10.                                     /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
10.                                                           /                  11.                                     /
   ------                      ------    ---------   ------------------  -------    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                 12.                                     /
                                                                                    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
NOTES:                                                                           13.                                     /
                                                                                    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                 14.                                     /
                                                                                    ------            -------    ------------------
- ------------------------------------------------------------------------------------------------------------------------------------
1.   If one or more Orders covering in the aggregate  more than the number of
     outstanding  shares of                                                      15.                                     /
                                                                                    ------            -------    ------------------
     Preferred  Shares held by any Existing holder are submitted, such Orders
     shall be considered  valid in the order of priority set forth in the
     Auction Procedures.

- ------------------------------------------------------------------------------------------------------------------------------------
2.   A Hold Order or Sell Order may be placed only by an Existing Holder
     covering a number of shares of Preferred Shares not greater than the
     number of shares of Preferred Shares currently held by such Existing
     Holder.

- ------------------------------------------------------------------------------------------------------------------------------------
3.   Potential Holders may make Bids only, each of which must specify a rate. If
     more than one Bid is submitted on behalf of any Potential Holder, each Bid
     submitted shall be a separate Bid with the rate specified.

4.   Bids may contain no more than three figures to the right of the decimal
     point (.001 of 1%).
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                       B-1


<PAGE>



<TABLE>
<S>                                                              <C>
- ------------------------------------------------------------------------------------------------------------------------------------

[AUCTION AGENT] AUCTION BID FORM                                 NAME OF Broker-Dealer:
                                                                 AUTHORIZED
Submit to:                                                       SIGNATURE:

                                                                 TOTAL NUMBER OF ORDERS ON THIS BID FORM:  ____________________
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>


                                      B-2


<PAGE>



                                                                       EXHIBIT C

                       (To be used only for transfers made
                       other than pursuant to in Auction)

                                 [NAME OF FUND]
                                PREFERRED SHARES,
                              SERIES -- ("______")
                                  TRANSFER FORM

We are (check one):

          The Existing Holder named below;
- ---------

          The Broker-Dealer for such Existing Holding; or
- ---------

          The Agent Member for such Existing Holder.
- ---------

We hereby notify you that such Existing Holder has transferred _____ shares of
the above series of Preferred Shares to __________________________.


                                           -------------------------------------
                                          (Name of Existing Holder)

                                           -------------------------------------
                                          (Name of Broker-Dealer)

                                           -------------------------------------
                                          (Name of Agent Member)


                                          By:
                                             -----------------------------------
                                               Printed Name:


                                      C-1



<PAGE>


                                                                       EXHIBIT D

                        (To be used only for failures to
                       deliver shares of PREFERRED SHARES
                          sold pursuant to an Auction)

                                 [NAME OF FUND]

                       PREFERRED SHARES, SERIES____ ("_____")


                         NOTICE OF A FAILURE TO DELIVER

Complete either I or II

I.       We are a Broker-Dealer for _______________ (the "Purchaser"), which
         purchased ____ shares of the above series of Preferred Shares in the
         Auction held on _______________ from the seller of such shares.


II.      We are a Broker-Dealer for ________________ (the "Seller"), which sold
         _____ shares of the above series of Preferred Shares in the Auction
         held on _______________ to the purchaser of such shares.

         We hereby notify you that (check one) --

         [ ]      the Seller failed to deliver such shares of
                  Preferred Shares to the Purchaser

         [ ]      the Purchaser failed to make payment to the Seller
                  upon delivery of such shares of Preferred Shares

                                          Name:
                                               ---------------------------------
                                               (Name of Broker-Dealer)
                                          By:
                                               ---------------------------------
                                               Printed Name:
                                               Title:


                                      D-1


<PAGE>
                                                                       EXHIBIT E

                    [Form of Broker-Dealer Acceptance Letter]

                         Calamos Asset Management, Inc.

                                                          ________________, 2004

[Broker-Dealer]
[Address]

Ladies and Gentlemen:

         Reference is made to the Calamos Broker-Dealer Agreement-Basic Terms
for Acting as a Broker-Dealer Relating to Preferred Shares ("Preferred Shares")
dated         , 2004, receipt of which is hereby acknowledged by you (the "Basic
Terms"). For purposes of this letter ("Acceptance Letter") (a) "Fund" shall mean
any closed-end investment company registered under the Investment Company Act of
1940, as amended, for which Calamos Asset Management, Inc. acts as investment
adviser; (b) except as otherwise provided below, the Basic Terms are
incorporated herein by reference, you shall be considered BD for all purposes
thereof, The Bank of New York shall be considered the Auction Agent for all
purposes thereof, and each Fund shall be considered a Fund for all purposes
thereof.

         We hereby request that you act as a Broker-Dealer for the Preferred
Shares of each series, of each Fund that executes a letter, substantially in the
form attached hereto as Exhibit A or Exhibit B, as appropriate, appointing you
as a Broker-Dealer ("Request Letter"). You hereby (a) accept such appointment as
a Broker-Dealer for each series of Preferred Shares of each Fund identified in a
Request Letter and (b) agree to act as BD in accordance with the Basic Terms;
provided, however, that:

                  (1) for purposes of the Basic Terms, and notwithstanding any
provision to the contrary, your address, telecopy number and telephone number
for communications pursuant to the Basic Terms shall be as follows:





and the address, telecopy number and telephone number of the Auction Agent for
communications pursuant to the Basic Terms shall be as follows:



                                      E-1

<PAGE>



                  (2) notwithstanding any provisions of the Basic Terms to the
contrary, except as otherwise set forth herein, your appointment as
Broker-Dealer extends to each series of Preferred Shares issued by a Fund.

         You hereby acknowledge that, notwithstanding any provision of the Basic
Terms to the contrary, the Fund may (a) upon five business days' notice to the
Auction Agent and you, amend, alter or repeal any of the provisions contained in
the Basic Terms, it being understood and agreed that you shall be deemed to have
accepted any such amendment, alteration or repeal if, after the expiration of
such five business day period, you submit an Order to the Auction Agent in
respect of the shares of Preferred Shares of a Fund or Funds to which such
amendment, alteration or repeal relates, and (b) upon two business days' notice
to the Auction Agent and you, exclude you from participating as a Broker-Dealer
in any particular Auction for any particular series of Preferred Shares.

         This Acceptance Letter shall be deemed to form part of the Basic Terms.

         Capitalized Terms not defined in this Acceptance Letter shall have the
meanings ascribed to them in the Basic Terms.

                            [Signature Page Follows]


                                      E-2


<PAGE>

         If the foregoing terms are acceptable to you, please so indicate in the
space provided below. This Acceptance Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.



                                        CALAMOS ASSET MANAGEMENT, INC.

                                        By:
                                           ------------------------------------
                                             Name:
                                             Title:

Accepted by and Agreed to as of
the date first written above:

                                        THE BANK OF NEW YORK

- -------------------------------
[Broker-Dealer]

                                        By:
                                           ------------------------------------
By:                                        Name:
   ----------------------------            Title:
   Name:
   Title:


                                      E-3


<PAGE>


                         EXHIBIT A TO ACCEPTANCE LETTER

                            [Form of Request Letter]

                                                         ----------------, -----

FROM:    All investment companies registered under the Investment Company Act of
         1940, as amended, for which Calamos Asset Management, Inc. acts as
         investment adviser and whose registration statements relating to shares
         of Preferred Shares have been declared effective by the Securities and
         Exchange Commission on or prior to the date hereof.

TO:      Calamos Asset Management, Inc.
         The Bank of New York

Ladies and Gentlemen:

         Reference is made to (a) the Calamos Broker-Dealer Agreement -- Basic
Terms for Acting as a Broker-Dealer relating to Preferred Shares ("Preferred
Shares") dated ____________ __, 2004, receipt of which is hereby acknowledged by
you (the "Broker-Dealer Basic Terms"); and (b) the Calamos Auction Agency
Agreement -- Basic Terms for Acting as Auction Agent relating to Preferred
Shares dated ____________ __, 2004, receipt of which is hereby acknowledged by
you (the "Auction Agency Basic Terms"). For purposes of this letter ("Request
Letter"), (a) "Fund" shall mean any closed-end investment company registered
under the Investment Company Act of 1940, as amended, for which Calamos Asset
Management, Inc. acts as investment adviser; (b) the Broker-Dealer Basic Terms
are incorporated herein by reference, each Broker-Dealer listed on Exhibit A
hereto shall be considered BD for all purposes thereof, The Bank of New York
shall be considered the Auction Agent for all purposes thereof, and each Fund
referred to on Exhibit B hereto shall be considered a Fund for all purposes
thereof; (c) the Auction Agency Basic Terms are incorporated herein by
reference, The Bank of New York shall be considered the Auction Agent for all
purposes thereof, and each Fund referred to on Exhibit B hereto shall be
considered a Fund for all purposes thereof.

         We hereby appoint the Broker-Dealers listed on Exhibit A hereto as
Broker-Dealers for the Preferred Shares of each series of each Fund referred to
on Exhibit B hereto. Each such Broker-Dealer will act as BD in respect of such
series in accordance with the Broker-Dealer Basic Terms; provided, however, that
for purposes of any such Broker-Dealer Agreement or the Broker-Dealer Basic
Terms, and notwithstanding any provision of any Broker-Dealer Agreement to the
contrary, The Bank of New York's address, telecopy number and telephone number
for communications pursuant to such Broker-Dealer Agreement or the Broker-Dealer
Basic Terms shall be as follows:


                                      A-1


<PAGE>


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

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

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

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

         The Bank of New York agrees to act as Auction Agent with respect to
shares of each series of Preferred Shares of each Fund referred to on Exhibit B
hereto in accordance with the Auction Agency Basic Terms.

         This Request Letter shall be deemed to form part of the Auction Agency
Basic Terms.

         Capitalized terms not defined in this Request Letter shall have the
meanings ascribed to them in the relevant Broker-Dealer Basic Terms or Auction
Agency Basic Terms, as the case may be.

                            [Signature Page Follows]

                                      A-2


<PAGE>


         If the foregoing terms are acceptable to you, please so indicate in the
space provided below. This Request Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.

                                    All investment companies registered under
                                    the Investment Company Act of 1940, as
                                    amended, for which Calamos Asset Management,
                                    Inc. acts as investment adviser and whose
                                    registration statements relating to shares
                                    of Preferred Shares have been declared
                                    effective by the Securities and Exchange
                                    Commission on or prior to the date hereof.


                                    By:
                                       ----------------------------------------
                                       Name:
                                       Title:


Accepted and Agreed to as of
the date first written above:


CALAMOS ASSET MANAGEMENT, INC.      THE BANK OF NEW YORK

By:                                 By:
   ----------------------------        ----------------------------------------
     Name:                             Name:
     Title:                            Title:


cc: [Broker-Dealers]


                                      A-3
<PAGE>



                           EXHIBIT A TO REQUEST LETTER

                            [LIST OF BROKER-DEALERS]



                                       A-1


<PAGE>



                           EXHIBIT B TO REQUEST LETTER

         Each Fund whose registration statement relating to shares of Preferred
Shares has been declared effective by the Securities and Exchange Commission on
or prior to the date of the Request Letter to which this Exhibit B is attached.

                                       B-1

<PAGE>





                         EXHIBIT B TO ACCEPTANCE LETTER

                            [Form of Request Letter]

                              [Name(s) of Fund(s)]

                                                           --------------, -----

Ladies and Gentlemen:

         Reference is made to (a) the Calamos Broker-Dealer Agreement -- Basic
Terms for Acting as a Broker-Dealer relating to Preferred Shares ("Preferred
Shares") dated ____________ __, 2004, receipt of which is hereby acknowledged by
you (the "Broker-Dealer Basic Terms") and (b) the Calamos Auction Agency
Agreement -- Basic Terms for Acting as Auction Agent dated ____________ __,
2003, receipt of which is hereby acknowledged by you (the "Auction Agency Basic
Terms"). For purposes of this letter ("Request Letter"), (a) "Fund" shall mean
each undersigned closed-end investment company registered under the Investment
Company Act of 1940, as amended, for which Calamos Asset Management, Inc. acts
as investment adviser; (b) the Broker-Dealer Basic Terms are incorporated herein
by reference, each Broker-Dealer listed on Exhibit A hereto shall be considered
Broker-Dealer for all purposes thereof, The Bank of New York shall be considered
the Auction Agent for all purposes thereof, and each Fund shall be considered a
Fund for all purposes thereof; and (c) the Auction Agency Basic Terms are
incorporated herein by reference, The Bank of New York shall be considered the
Auction Agent for all purposes thereof, and each Fund shall be considered a Fund
for all purposes thereof.

         Each Fund hereby appoints the Broker-Dealers listed on Exhibit A hereto
as Broker-Dealers for each series of Preferred Shares of such Fund. Each such
Broker-Dealer will act as Broker-Dealer in respect of each such series in
accordance with the Broker-Dealer Basic Terms; provided, however, that for
purposes of the Broker-Dealer Basic Terms, The Bank of New York's address,
telecopy number and telephone number for communications pursuant to the
Broker-Dealer Basic Terms shall be as follows:

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

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

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

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

         The Bank of New York agrees to act as Auction Agent with respect to
shares of each series of Preferred Shares of each Fund in accordance with the
Auction Agency Basic Terms.

         This Request Letter shall be deemed to form part of the Auction Agency
Basic Terms.

                                       B-1


<PAGE>

         Capitalized terms not defined in this Request Letter shall have the
meanings ascribed to them in the Broker-Dealer Basic Terms or Auction Agency
Basic Terms, as the case may be.

         If the foregoing terms are acceptable to you, please so indicate in the
space provided below. This Request Letter may be executed in any number of
counterparts, each of which shall be an original, but all of which shall
constitute one and the same instrument.

                                             [NAME(S) OF FUND(S)]


                                             By:
                                                --------------------------------
                                                Name:
                                                Title:


Accepted and Agreed to as of
the date first written above:


CALAMOS ASSET MANAGEMENT, INC.                THE BANK OF NEW YORK


By:                                           By:
   -------------------------------               -------------------------------
   Name:                                         Name:
   Title:                                        Title:


cc: [Broker-Dealers listed on Exhibit A]


                                      B-2


<PAGE>



                           EXHIBIT A TO REQUEST LETTER

                            [LIST OF BROKER-DEALERS]



                                       A-1

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.K6
<SEQUENCE>9
<FILENAME>c82676a1exv99wk6.txt
<DESCRIPTION>FORM OF DTC REPRESENTATIONS LETTER
<TEXT>
<PAGE>
                                                                     EXHIBIT k.6


              Book Entry Only Auction-Rate/Money Market Preferred/
                      and Remarketed Preferred Securities

                           LETTER OF REPRESENTATIONS
                 [To be Completed by Issuer and Trust Company]


                    ---------------------------------------
                                [Name of Issuer]

                    ---------------------------------------
                            [Name of Trust Company]

                                                          ----------------------
                                                                   [Date]


Attention:  General Counsel's Office
THE DEPOSITORY TRUST COMPANY
55 Water Street 49th Floor
New York, NY 10041-0099

     Re:
        ------------------------------------------------------------------

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

        ------------------------------------------------------------------
          [Issue description, including CUSIP number (the "Securities")]



Ladies and Gentlemen:

     This letter sets forth our understanding with respect to certain matters
relating to the Securities. Trust Company shall act as transfer agent,
registrar, dividend disbursing agent, redemption agent or other such agent with
respect to the Securities. The Securities have been issued pursuant to a
prospectus, private placement memorandum, or other such document authorizing the
issuance of the Securities dated ________________________ (the "Document").
_______________________________ is distributing the Securities through the
["Underwriter/Placement Agent"]



<PAGE>
Depository Trust Company ("DTC").

     To induce DTC to accept the Securities as eligible for deposit at DTC, and
to act in accordance with its Rules with respect to the Securities, Issuer and
Trust Company make the following representations to DTC:

     1.   Prior to closing on the Securities on _______________ there shall be
deposited with DTC one or more Security certificates registered in the name of
DTC's nominee, Cede & Co., which represents 100% of the offering value of the
Securities. Said certificate(s) shall remain in DTC's custody as provided in
the Document. If, however, the aggregate principal amount of the Securities
exceeds $400 million, one certificate shall be issued with respect to each $400
million of principal amount and an additional certificate shall be issued with
respect to any remaining principal amount. Each Security certificate shall bear
the following legend:


          Unless this certificate is presented by an authorized representative
     of The Depository Trust Company, a New York corporation ("DTC"), to Issuer
     or its agent for registration of transfer, exchange, or payment, and any
     certificate issued  is registered in the name of Cede & Co. or in such
     other name as is requested by an authorized representative of DTC (and any
     payment is made to Cede & Co. or to such other entity as is requested by an
     authorized representative of DTC), ANY TRANSFER, PLEDGE, OR OTHER USE
     HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as
     the registered owner hereof, Cede & Co., has an interest herein.

     2.   Issuer represents: [NOTE: ISSUER MUST REPRESENT ONE OF THE
FOLLOWING, AND SHALL CROSS OUT THE OTHER.]

     [The Security certificate(s) shall be custodied with DTC.]

     [The Security certificate(s) shall remain in Agent's custody as a
"Balance Certificate" subject to the provisions of the Balance Certificate
Agreement between Agent and DTC currently in effect.

     On each day on which Agent is open for business and on which it
receives an instruction originated by a DTC participant ("Participant") through
DTC's Deposit/Withdrawal at Custodian ("DWAC") system to increase the
Participant's account by a specified number of Securities (a "Deposit
Instruction"), Agent shall, no later than 6:30 p.m. (Eastern Time) that day,
either approve or cancel the Deposit Instruction through the DWAC system.

     On each day on which Agent is open for business and on which it
receives an instruction originated by a Participant through the DWAC system to
decrease the Participant's account by a specified number of Securities (a
"Withdrawal Instruction"), Agent shall, no later than 6:30 p.m. (Eastern Time)
that day, either approve or cancel the Withdrawal Instruction through the DWAC
system.

     Agent agrees that its approval of a Deposit or Withdrawal Instruction
shall be deemed to be the receipt by DTC of a new reissued or reregistered
certificated Security on registration of transfer to the name of Cede & Co. for
the quantity of Securities evidenced by the Balance Certificate after the
Deposit or Withdrawal Instruction is effected.]

     3.   Issuer: (a) understands that DTC has no obligation to, and will not,
communicate to its participants ("Participants") or to any person having an
interest in the Securities any information contained in the Security
certificate(s); and (b) acknowledges that neither DTC's Participants nor any
person having an interest in the Securities shall be deemed to have notice of
the provisions of the Security certificate(s) by virtue of submission of such
certificate(s) to DTC.

     4.   In the event of any solicitation of consents from or voting by
holders of the Securities, Issuer shall establish a record date for such
purposes (with no provision for revocation of consents or votes by subsequent
holders) and shall send notice of such record date to DTC no fewer than 15
calendar days in advance of such record date. Notices to DTC pursuant to this
Paragraph by telecopy shall be directed to DTC's Reorganization Department,
Proxy Unit at (212) 855-5181 or (212) 855-5182. If the party sending the notice
does not receive a telecopy receipt from DTC confirming that the notice has
been received, such party shall telephone (212) 855-5202. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:

                         Supervisor, Proxy Unit
                         Reorganization Department
                         The Depository Trust Company
                         55 Water Street 50th Floor
                         New York, NY 10041-0099


                                      -2-
<PAGE>
     5.   In the event of a full or partial redemption of the Securities,
Issuer or Trust Company shall send a notice to DTC specifying: (a) the number
of Securities to be redeemed; and (b) the date such notice is to be distributed
to Security holders (the "Publication Date"). Such notice shall be sent to DTC
by a secure means (e.g., legible telecopy, registered or certified mail,
overnight delivery) in a timely manner designed to assure that such notice is
in DTC's possession no later than the close of business on the business day
before or, if possible, two business days before the Publication Date. Issuer
or Trust Company shall forward such notice either in a separate secure
transmission for each CUSIP number or in a secure transmission for multiple
CUSIP numbers (if applicable) which includes a manifest or list of each CUSIP
number submitted in that transmission. (The party sending such notice shall
have a method to verify subsequently the use of such means and the timeliness
of such notice.) The Publication Date shall be no fewer than 30 days nor more
than 60 days prior to the redemption date. Notices to DTC pursuant to this
Paragraph by telecopy shall be directed to DTC's Call Notification Department
at (516) 227-4164 or (516) 227-4190. If the party sending the notice does not
receive a telecopy receipt from DTC confirming that the notice has been
received, such party shall telephone (516) 227-4070. Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:

                         Manager, Call Notification Department
                         The Depository Trust Company
                         711 Stewart Avenue
                         Garden City, NY 11530-4719

     6.   In the event of an invitation to tender the Securities (including
mandatory tenders, exchanges, and capital changes), notice by Issuer or Trust
Company to Security holders specifying the terms of the tender and the
Publication Date of such notice shall be sent to DTC by a secure means in the
manner set forth in the preceding Paragraph. Notices to DTC pursuant to this
Paragraph and notices of other corporate actions by telecopy shall be directed
to DTC's Reorganization Department at (212) 855-5488. If the party sending the
notice does not receive a telecopy receipt from DTC confirming that the notice
has been received, such party shall telephone (212) 855-5290. Notices to DTC
pursuant to this Paragraph, by mail or by any other means, shall be sent to:

                         Manager, Reorganization Department
                         Reorganization Window
                         The Depository Trust Company
                         55 Water Street 50th Floor
                         New York, NY 10041-0099

     7.   All notices and payment advices sent to DTC shall contain the CUSIP
number of the Securities.

     8.   The Document indicates that the dividend rate for the Securities may
vary from time to time. Absent other existing arrangements with DTC, Issuer or
Trust Company shall give DTC notice of each such change in the dividend rate,
on the same day that the new rate is determined, by telephoning DTC's Dividend
Announcement Section at (212) 855-4550, or by telecopy sent to (212) 855-4555.
Such verbal or telecopy notice shall be followed by prompt written confirmation
sent by

                                      -3-

<PAGE>
a secure means (e.g., legible telecopy, registered or certified mail, overnight
delivery) in a timely manner designed to assure that such notice is in DTC's
possession no later than the close of business on the business day before or,
if possible, two business days before the Publication Date. Issuer or Agent
shall forward such notice either in a separate secure transmission for each
CUSIP number or in a secure transmission for multiple CUSIP numbers (if
applicable) which includes a manifest or list of each CUSIP number submitted in
that transmission. (The party sending such notice shall have a method to verify
subsequently the use and timeliness of such notice.) Notices to DTC pursuant to
this Paragraph, by mail or by any other means, shall be sent to:

                    Manager, Announcements
                    Dividend Department
                    The Depository Trust Company
                    55 Water Street 25th Floor
                    New York, NY 10041-0099

     9.   The Document indicates that each purchaser of Securities must sign a
purchaser's letter which contains provisions restricting transfer of the
Securities purchased. Issuer and Trust & Co. shall be entitled to all voting
rights applicable to the Securities and to receive the full amount of all
dividends, liquidation proceeds, and redemption proceeds payable with respect
to the Securities, even if the credits of Securities to the DTC accounts of any
DTC Participant result from transfers or failures to transfer in violation of
the provisions of the purchaser's letter. Issuer and Trust Company acknowledge
that DTC shall treat any Participant having Securities credited to its DTC
accounts as entitled to the full benefits of ownership of such Securities.
Without limiting the generality of the preceding sentence, Issuer and Trust
Company acknowledge that DTC shall treat any Participant having Securities
credited to its DTC accounts as entitled to receive dividends, distributions,
and voting rights, if any, in respect of Securities and, subject to Paragraphs
12 and 13, to receive certificates evidencing Securities if such certificates
are to be issued in accordance with Issuer's certificate of incorporation. (The
treatment by DTC of the effects of the crediting by it of Securities to the
accounts of Participants described in the preceding two sentences shall not
affect the rights of Issuer, participants in auctions relating to the
Securities, purchasers, sellers, or holders of Securities against any
Participant.) DTC shall not have any responsibility to ascertain whether any
transfer of Securities is made in accordance with the provisions of the
purchaser's letter.

    10.   Issuer or Trust Company shall provide a written notice of dividend
payment and distribution information to DTC as soon as the information is
available. Issuer or Trust Company shall provide this information to DTC
electronically, as previously arranged by Issuer or Trust Company and DTC, as
soon as the information is available. If electronic transmission has not been
arranged, absent any other arrangements between Issuer or Trust Company and
DTC, such information shall be sent by telecopy to DTC's Dividend Department at
(212) 855-4555 or (212) 855-4556, and receipt of such notices shall be
confirmed by telephoning (212) 855-4550. Notices to DTC pursuant to this
Paragraph, by mail or by any other means, shall be addressed as indicated in
Paragraph 8.


                                      -4-
<PAGE>
     11.  Dividend payments and distributions shall be received by Cede & Co.,
as nominee of DTC, or its registered assigns, in same-day funds no later than
3:00 p.m. (Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m.
(Eastern Time) on the payment date, dividend and distribution payments due Trust
Company, or at such earlier time as may be required by Trust Company to
guarantee that DTC shall receive payment in same-day funds no later than 3:00
p.m. (Eastern Time) on the payment date. Absent any other arrangements between
Issuer or Trust Company and DTC, such funds shall be wired to the Dividend
Deposit Account number that will be stamped on the signature page hereof at the
time DTC executes this Letter of Representations.

     12.  Issuer or Trust Company shall provide DTC, no later than 2:50 p.m.
(Eastern Time) on each payment date, automated notification of balanced
CUSIP-specific detail. Reconciliation must be provided by either automated
means or written format. Such reconciliation notice, if sent by telecopy,
shall be directed to DTC's Dividend Department at (212) 855-4633, and receipt
of such reconciliation notice shall be confirmed by telephoning (212) 855-4430.

     13.  Redemption payments shall be received by Cede & Co., as nominee of
DTC, or its registered assigns, in same-day funds no later than 3:00 p.m.
(Eastern Time) on the payment date. Issuer shall remit by 1:00 p.m. (Eastern
Time) on the payment date all such redemption payments due Trust Company, or at
such earlier time as required by Trust Company to guarantee that DTC shall
receive payment in same-day funds no later that 3:00 p.m. (Eastern Time) on the
payment date. Absent any other arrangements between Issuer or Trust Company and
DTC, such funds shall be wired to the Redemption Deposit Account number that
will be stamped on the signature page hereof at the time DTC executes this
Letter of Representations.

     14.  Reorganization payments and balanced CUSIP-specific detail resulting
from corporate actions (such as tender offers, remarketings, or mergers) shall
be received by Cede & Co., as nominee of DTC, or its registered assigns, in
same-day funds no later than 3:00 p.m. (Eastern Time) on the payment date.
Issuer shall remit by 1:00 p.m. (Eastern Time) on the payment date all such
reorganization payments due Trust Company, or at such earlier time as required
by Trust Company to guarantee that DTC shall receive payment in same-day funds
no later than 3:00 p.m. (Eastern Time) on the payment date. Absent any other
arrangements between Issuer or Trust Company and DTC, such funds shall be wired
to the Reorganization Deposit Account number that will be stamped on the
signature page hereof at the time DTC executes this Letter of Representations.

     15.  DTC my direct Issuer or Trust Company to use any other number or
address as the number or address to which notices or payments may be sent.

     16.  In the event of a redemption acceleration, or any similar transaction
(e.g., tender made and accepted in response to Issuer's or Trust Company's
invitation) necessitating a reduction in the number of Securities outstanding,
or an advance refunding of part of the Securities outstanding DTC, in its
discretion: (a) may request Issuer or Trust Company to issue and authenticate a
new Security certificate; or (b) may make an appropriate notation on the
Security certificate indicating the date and amount of such reduction in the
number of Securities outstanding, except in the case of final

                                      -5-
<PAGE>
redemption, in which case the certificate will be presented to Issuer and Trust
Company prior to payment, if required.

     17.  In the event that Issuer determines that beneficial owners of
Securities shall be able to obtain certificated Securities, Issuer or Trust
Company shall notify DTC of the availability of certificates. In such event,
Issuer or Trust Company shall issue, transfer, and exchange certificates in
appropriate amounts, as required by DTC and others.

     18.  DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Trust Company (at which time DTC will confirm with Issuer or Trust
Company the aggregate principal amount of Securities outstanding). Under such
circumstances, at DTC's request, Issuer and Trust Company shall cooperate fully
with DTC by taking appropriate action to make available one or more separate
certificates evidencing Securities to any DTC Participant having Securities
credited to its DTC accounts.

     19.  Issuer herby authorizes DTC to provide to Trust Company listings of
Participants' holdings, known as Security Position Listings ("SPLs") with
respect to the Securities from time to time at the request of Trust Company.
Issuer also authorizes DTC, in the event of a partial redemption of Securities,
to provide Trust Company, upon request, with the names of those Participants
whose positions in Securities have been selected for redemption by DTC. DTC will
use its best efforts to notify Trust Company of those Participants whose
positions in Securities have been selected for redemption by DTC. Issuer
authorizes and instructs Trust Company to provide DTC with such signatures,
examples of signatures, and authorizations to act as may be deemed necessary or
appropriate by DTC to permit DTC to discharge its obligations to its
Participants and appropriate regulatory authorities. DTC charges a customary fee
for such SPLs. This authorization, unless revoked by Issuer, shall continue with
respect to the Securities while any Securities are on deposit at DTC, until and
unless Trust Company shall no longer be acting. In such event, Issuer shall
provide DTC with similar evidence, satisfactory to DTC, of the authorization of
any successor thereto so to act. Requests for SPLs shall be directed to the
Proxy Unit of DTC's Reorganization Department at (212) 855-5181 or (212)
855-5812. Receipt of such requests shall be confirmed by telephoning (212)
855-5202. Delivery by mail or by any other means, with respect to such SPL
request, shall be directed to the address indicated in Paragraph 4.

     20.  Nothing herein shall be deemed to require Trust Company to advance
funds on behalf of Issuer.

     21.  This Letter of Representations may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original,
but all such counterparts together shall constitute but one and the same
instrument.

     22.  This Letter of Representations shall be governed by, and construed
in accordance with, the laws of the State of New York, without giving effect
to principles of conflicts of law.

     23.  The sender of each notice delivered to DTC pursuant to this Letter of
Representations is responsible for confirming that such notice was properly
received by DTC.

                                      -6-
<PAGE>
     24.  Issuer recognizes that DTC does not in any way undertake to, and
shall not have any responsibility to, monitor or ascertain the compliance of
any transactions in the Securities with the following, as amended from time to
time: (a) any exemptions from registration under the Securities Act of 1933;
(b) the Investment Company Act of 1940; (c) the Employee Retirement Income
Security Act of 1974; (d) the Internal Revenue Code of 1986; (e) any rules of
any self-regulatory organizations (as defined under the Securities Exchange Act
of 1934); or (f) any other local, state, or federal laws or regulations
thereunder.

     25.  Issuer and Trust Company shall comply with the applicable
requirements stated in DTC's Operational Arrangements, as they may be amended
from time to time. DTC's Operational Arrangements are posted on DTC's website
at "www.DTC.org."

     26.  The following rider(s), attached hereto, are hereby incorporated into
this Letter of Representations:


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

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




                                      -7-
<PAGE>

NOTES:

A. IF THERE IS A TRUST COMPANY (AS DEFINED IN
THIS LETTER OF REPRESENTATIONS), TRUST
COMPANY, AS WELL AS ISSUER, MUST SIGN THIS
LETTER. IF THERE IS NO TRUST COMPANY, IN
SIGNING THIS LETTER ISSUER ITSELF UNDERTAKES
TO PERFORM ALL OF THE OBLIGATIONS SET FORTH
HEREIN.

B. SCHEDULE B CONTAINS STATEMENTS THAT DTC
BELIEVES ACCURATELY DESCRIBE DTC, THE METHOD
OF EFFECTING BOOK-ENTRY TRANSFERS OF
SECURITIES DISTRIBUTED THROUGH DTC, AND
CERTAIN RELATED MATTERS.

                                            Very truly yours,



                                            ____________________________________
                                                          [Issuer]


                                            By: ________________________________
                                                [Authorized Officer's Signature]


                                            ___________________________________
                                                      [Trust Company]


                                            By: ________________________________
                                                [Authorized Officer's Signature]


Received and Accepted:
THE DEPOSITORY TRUST COMPANY






cc:  Underwriter
     Underwriter's Counsel


                                      -8-


<PAGE>
                                                                      SCHEDULE A


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

           --------------------------------------------------------
                                [Describe Issue]


CUSIP Number             Share Total              Value ($Amount)
- ------------             -----------              --------------















                                      -9-
<PAGE>
                                                                      SCHEDULE B


                       SAMPLE OFFERING DOCUMENT LANGUAGE
                      DESCRIBING BOOK-ENTRY-ONLY ISSUANCE
                      -----------------------------------
 (Prepared by DTC-bracketed material may be applicable only to certain issues)


     1.   The Depository Trust Company ("DTC"), New York, NY, will act as
securities depository for the securities (the "Securities"). The Securities
will be issued as fully-registered securities registered in the name of Cede
& Co. (DTC's partnership nominee) or such other name as may be requested by an
authorized representative of DTC. One fully-registered Security certificate
will be issued for [each issuer of] the Securities, [each] in the aggregate
principal amount of such issue, and will be deposited with DTC. [If, however,
the aggregate principal amount of [any] issue exceeds $400 million, one
certificate will be issued with respect to each $400 million of principal
amount and an additional certificate will be issued with respect to any
remaining principal amount of such issue.]

     2.   DTC is a limited-purpose trust company organized under the New York
Banking Law, a "banking organization" within the meaning of the New York Banking
Law, a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934. DTC holds securities that its participants ("Direct Participants")
deposit with DTC. DTC also facilitates the settlement among Direct Participants
of securities transactions, such as transfers and pledges, in deposited
securities through electronic computerized book-entry changes in Direct
Participants' accounts, thereby eliminating the need for physical movement of
securities certificates. Direct Participants include securities brokers and
dealers, banks, trust companies, clearing corporations, and certain other
organizations. DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange LLC, and the National
Association of Securities Dealers, Inc. Access to the DTC system is also
available to others such as securities brokers and dealers, banks, and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The Rules
applicable to DTC and its Direct and Indirect Participants are on file with the
Securities and Exchange Commission.

     3.   Purchases of Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Securities on
DTC's records. The ownership interest of each actual purchaser of each Security
("Beneficial Owner") is in turn to be recorded on the Direct and Indirect
Participants' records. Beneficial Owners will not receive written confirmation
from DTC of their purchase, but Beneficial Owners are expected to receive
written confirmations providing details of the transaction, as well as periodic
statements of their holdings, from the Direct or Indirect Participant through
which the Beneficial Owner entered into the transaction. Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books
of Direct and Indirect Participants acting on behalf of Beneficial Owners.
Beneficial Owners will not receive certificates representing their ownership
interests in Securities, except in the event that use of the book-entry system
for the Securities is discontinued.


                                      -10-
<PAGE>
     4.   To facilitate subsequent transfers, all Securities deposited by
Direct Participants with DTC are registered in the name of DTC's partnership
nominee, Cede & Co. or such other name as may be requested by an authorized
representative of DTC. The deposit of Securities with DTC and their
registration in the name of Cede & Co. or such other nominee do not effect any
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the Securities; DTC's records reflect only the identity of the Direct
Participants to whose accounts such Securities are credited, which may or may
not be the Beneficial Owners. The Direct and Indirect Participants will remain
responsible for keeping account of their holdings on behalf of their customers.

     5.   Conveyance of notices and other communications by DTC to Direct
Participants, by Direct Participants to Indirect Participants, and by Direct
Participants and Indirect Participants to Beneficial Owners will be governed by
arrangements among them, subject to any statutory or regulatory requirements as
may be in effect from time to time. [Beneficial Owners of Securities may wish to
take certain steps to augment transmission to them of notices of significant
events with respect to the Securities, such as redemptions, tenders, defaults,
and proposed amendments to the security documents. Beneficial Owners of
Securities may wish to ascertain that the nominee holding the Securities for
their benefit has agreed to obtain and transmit notices to Beneficial Owners, or
in the alternative, Beneficial Owners may wish to provide their names and
addresses to the registrar and request that copies of the notices be provided
directly to them.]

     [6.  Redemption notices shall be sent to DTC. If less than all of the
Securities within an issue are being redeemed, DTC's practice is to determine by
lot the amount of the interest of each Direct Participant in such issue to be
redeemed.]

     7.   Neither DTC nor Cede & Co. (nor such other DTC nominee) will consent
or vote with respect to the Securities. Under its usual procedures, DTC mails an
Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus
Proxy assigns Cede & Co.'s consenting or voting rights to those Direct
Participants to whose accounts the Securities are credited on the record date
(identified in a listing attached to the Omnibus Proxy).

     8.   Redemption proceeds, distributions, and dividend payments on the
Securities will be made to Cede & Co., or such other nominee as may be requested
by an authorized representative of DTC. DTC's practice is to credit Direct
Participants' accounts, upon DTC's receipt of funds and corresponding detail
information from Issuer or Agent on payable date in accordance with their
respective holdings shown on DTC's records. Payments by Participants to
Beneficial Owners will be governed by standing instructions and customary
practices, as is the case with securities held for the accounts of customers in
bearer form or registered in "street name," and will be the responsibility of
such Participant and not of DTC, Agent, or Issuer, subject to any statutory or
regulatory requirements as may be in effect from time to time. Payment of
redemption proceeds, distributions, and dividends to Cede & Co. (or such other
nominee as may be requested by an authorized representative of DTC) is the
responsibility of Issuer or Agent, disbursement of such payments to Direct
Participants shall be the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners shall be the responsibility of Direct and
Indirect Participants.


                                      -11-
<PAGE>
     [9.  A Beneficial owner shall give notice to elect to have the Securities
purchased or tendered, through its Participant, to [Tender/Remarketing] Agent,
and shall effect delivery of such Securities by causing the Direct Participant
to transfer the Participant's interest in the Securities, on DTC's records, to
[Tender/Remarketing] Agent. The requirement for physical delivery of Securities
in connection with an optional tender or a mandatory purchase will be deemed
satisfied when the ownership rights in the Securities are transferred by Direct
Participants on DTC's records and followed by a book-entry credit of tendered
Securities to [Tender/Remarketing] Agent's DTC account.]

     10.  DTC may discontinue providing its services as securities depository
with respect to the Securities at any time by giving reasonable notice to
Issuer or Agent. Under such circumstances, in the event that a successor
securities depository is not obtained, Security certificates are required to be
printed and delivered.

     11.  Issuer may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depository). In that event,
Security certificates will be printed and delivered.

     12.  The information in this section concerning DTC and DTC's book-entry
system has been obtained from sources that Issuer believes to be reliable, but
Issuer takes no responsibility for the accuracy thereof.




                                      -12-

</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.L1
<SEQUENCE>10
<FILENAME>c82676a1exv99wl1.txt
<DESCRIPTION>OPINION OF VEDDER PRICE KAUFMAN & KAMMHOLZ, P.C.
<TEXT>
<PAGE>


                                                                     EXHIBIT L.1

                                         VEDDER, PRICE, KAUFMAN & KAMMHOLZ, P.C.
[VEDDERPRICE LOGO]                       222 NORTH LASALLE STREET
                                         CHICAGO, ILLINOIS 60661
                                         312-609-7500
                                         FACSIMILE: 312-609-5005

                                         OFFICES IN CHICAGO, NEW YORK CITY, AND
                                         LIVINGSTON, NEW JERSEY




                                         April 28, 2004



Calamos Strategic Total Return Fund
1111 East Warrenville Road
Naperville, IL  60563-1493

         Re:    Calamos Strategic Total Return Fund

Ladies and Gentlemen:

         We are acting as special counsel to Calamos Strategic Total Return
Fund, a Delaware statutory trust (the "Fund"), in connection with the Fund's
filing of a registration statement on Form N-2 under the Securities Act of 1933
(File No. 333-113439) and the Investment Company Act of 1940 (File No.
811-21484) (the "Registration Statement") with the Securities and Exchange
Commission (the "SEC") covering the registration and proposed issuance of
preferred shares of beneficial interest (the "Shares") of the Calamos Strategic
Total Return Fund Series M ("Series M"), Series TU ("Series TU"), Series W
("Series W"), Series TH ("Series TH"), Series F ("Series F"), Series A
("Series A") and Series B ("Series B" and collectively with Series M,
Series TU, Series W, Series TH, Series F and Series A, the "Series").

         In rendering this opinion, we have examined:

                  (a) the form of Underwriting Agreement (the "Underwriting
Agreement"), substantially in the form filed as an exhibit to the Registration
Statement, proposed to be entered into among the Fund, Calamos Asset Management,
Inc. and Citigroup Global Markets Inc. as representative of the several
underwriters named therein;

                  (b) the Registration Statement;

                  (c) the Certificate of Trust and the Agreement and Declaration
of Trust of the Fund;

                  (d) the By-Laws of the Fund;

                  (e) resolutions of the Board of Trustees in connection with
the proposed issuance of the Shares and resolutions of the Board of Trustees
prepared for adoption at a meeting held on March 12, 2004;

                  (f) a Certificate of Good Standing as of a recent date from
the Secretary of State of the State of Delaware; and



<PAGE>

VEDDERPRICE

Calamos Strategic Total Return Fund
April 28, 2004
Page 2



                  (g) such other documents as we, in our professional judgment,
have deemed necessary or appropriate as a basis for the opinions set forth below
(items b-e above are referred to herein as the "Governing Documents").

         In examining the documents referred to above, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of documents purporting to be originals and the conformity to
originals of all documents submitted to us as copies. As to questions of fact
material to our opinion, we have relied (without investigation or independent
confirmation) upon the representations contained on certificates and other
communications from public officials and officers of the Fund. We have assumed
that the Registration Statement and the Underwriting Agreement will be duly
completed, executed and delivered. With respect to the opinions expressed below,
we note that, pursuant to Section 2 of Article VIII of the Agreement and
Declaration of Trust, the Trustees have the power to cause each shareholder, or
each shareholder of a particular series, to pay directly, in advance or arrears,
for charges of the Fund's custodian or transfer, shareholder servicing or
similar agent, an amount fixed from time to time by the Trustees, by setting off
such charges due from such shareholder from declared but unpaid dividends owed
such shareholder and/or by reducing the number of shares in the account of such
shareholder by that number of full and/or fractional shares which represents the
outstanding amount of such charges due from such shareholder.

         We express no opinion as to the laws of any jurisdiction other than
Title 12, Chapter 38 (Treatment of Delaware Statutory Trusts) of the Code of the
State of Delaware, and we are relying, with your consent, solely upon the
opinion of Morris, Nichols, Arsht & Tunnell, special Delaware counsel to the
Fund, dated April 28, 2004.

         Based on the foregoing, and subject to the qualifications, exceptions
and limitations set forth herein and in the opinion of Morris, Nichols, Arsht &
Tunnell referred to above, we are of the opinion that:

         (1) The Fund is a duly formed and validly existing statutory trust in
             good standing under the laws of the State of Delaware; and

         (2) The Shares, when issued to shareholders in accordance with the
             terms, conditions, requirements and procedures set forth in the
             Governing Documents and delivered by the Fund pursuant to the
             Underwriting Agreement against payment of the consideration set
             forth in the Underwriting Agreement, will constitute legally
             issued, fully paid and non-assessable Shares of beneficial interest
             in the Series.

         We hereby consent to the filing of this opinion as Exhibit l.1 to the
Registration Statement and to the reference to us under the caption "Legal
Opinions" in the prospectus contained in the Registration Statement. In giving
our consent, we do not thereby admit that we

<PAGE>


VEDDERPRICE

Calamos Strategic Total Return Fund
April 28, 2004
Page 2



are in the category of persons whose consent is required under Section 7 of the
1933 Act or the rules and regulations of the SEC thereunder. The opinions
expressed herein are matters of professional judgment and are not a guarantee of
result.

                                     Very truly yours,


                                     /s/ Vedder, Price, Kaufman & Kammholz, P.C.

                                     Vedder, Price, Kaufman & Kammholz, P.C.




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.L2
<SEQUENCE>11
<FILENAME>c82676a1exv99wl2.txt
<DESCRIPTION>OPINION OF MORRIS NICHOLS ARSHT & TUNNELL
<TEXT>
<PAGE>


                                                                     EXHIBIT L.2

                {LETTERHEAD OF MORRIS, NICHOLS, ARSHT & TUNNELL]





                                 April 28, 2004



Calamos Strategic Total Return Fund
1111 East Warrenville Road
Naperville, Illinois  60563-1493

Vedder, Price, Kaufman & Kammholz, P.C.
222 North LaSalle Street
Chicago, Illinois  60601

                  Re:  Calamos Strategic Total Return Fund

Ladies and Gentlemen:

                  We have acted as special Delaware counsel to Calamos Strategic
Total Return Fund, a Delaware statutory trust (the "Trust"), in connection with
certain matters relating to the formation of the Trust and the issuance of
shares of beneficial interest in the Series M Preferred Shares ("Series M"),
Series T Preferred Shares ("Series T"), Series W Preferred Shares ("Series W"),
Series TH Preferred Shares ("Series TH"), Series F Preferred Shares ("Series
F"), Series A Preferred Shares ("Series A") and Series B Preferred Shares
("Series B" and collectively with Series M, Series T, Series W, Series TH,
Series F and Series A, the "Series") of the Trust. Such preferred shares are
referred to herein as the "Shares". Capitalized terms used herein and not
otherwise herein defined are used as defined in the Agreement and Declaration of
Trust of the Trust dated as of December 31, 2003 (the "Governing Instrument").

                  In rendering this opinion, we have examined and relied on
copies of the following documents, each in the form provided to us: the
Certificate of Trust of the Trust as filed in the Office of the Secretary of
State of the State of Delaware (the "State Office") on December 31, 2003 (the
"Certificate of Trust"); the Governing Instrument; resolutions prepared for
adoption at an organizational meeting (the "Organizational Meeting") of the
Board of Trustees (the "Board") of the Trust (the "Organizational Resolutions");
the Statement of Preferences of Auction Rate Cumulative Preferred Shares in the
form presented to the Board at the Organizational Meeting (the "Preliminary
Statement"); resolutions of the Board prepared for adoption at a meeting held on
March 12, 2004 (the "March Resolutions" and collectively with the Organizational
Resolutions, the "Resolutions"); the By-laws of the Trust (the "By-laws"); the
Trust's Pre-Effective Amendment No. 1 to Registration Statement No. 333-113439
under the Securities Act of 1933 and Amendment No. 5 to Registration Statement
No. 811-21484 under the Investment Company Act of 1940 on Form N-2 as filed with
the Securities and Exchange Commission on or about the date hereof (the
"Registration Statement" and, together with the

<PAGE>


Calamos Strategic Total Return Fund
Vedder, Price, Kaufman & Kammholz, P.C.
April 28, 2004
Page 2



Governing Instrument, the By-laws, the Final Statement (as defined below), the
Resolutions and the Executive Committee Action (as defined below), the
"Governing Documents"); and a certification of good standing of the Trust
obtained as of a recent date from the State Office. In such examinations, we
have assumed the genuineness of all signatures, the conformity to original
documents of all documents submitted to us as copies or drafts of documents to
be executed, and the legal capacity of natural persons to complete the execution
of documents. We have further assumed for the purpose of this opinion: (i) the
due authorization, adoption, execution and delivery by, or on behalf of, each of
the parties thereto of the above-referenced instruments, certificates and other
documents (including the due adoption by the Trustees of the Resolutions), and
of all documents contemplated by either the Governing Documents or any
applicable resolutions of the Trustees to be executed by investors desiring to
become Shareholders; (ii) the payment of consideration for Shares, and the
application of such consideration, as provided in the Governing Documents, and
compliance with the other terms, conditions and restrictions set forth in the
Governing Documents and all applicable resolutions of the Trustees of the Trust
in connection with the issuance of Shares (including, without limitation, the
taking of all appropriate action by the Trustees to designate Series and Classes
of Shares and the rights and preferences attributable thereto as contemplated by
the Governing Instrument); (iii) that appropriate notation of the names and
addresses of, the number of Shares held by, and the consideration paid by,
Shareholders will be maintained in the appropriate registers and other books and
records of the Trust in connection with the issuance, redemption or transfer of
Shares; (iv) that the number of Shares issued will be the number of Shares
determined by the Executive Committee of the Board so that the aggregate
liquidation preference of the Shares equals approximately 33% of the Trust's
total assets shortly before the commencement of the marketing of the offering of
the Shares (such number of Shares, the "Preferred Shares"); (v) that no event
has occurred subsequent to the filing of the Certificate of Trust that would
cause a termination or reorganization of the Trust or a Series or Class of the
Trust under Sections 4 or 6 of Article IX of the Governing Instrument; (vi) that
the Trust became or will become, in each case prior to or within 180 days
following the first issuance of beneficial interests therein, a registered
investment company under the Investment Company Act of 1940; (vii) that the
activities of the Trust have been and will be conducted in accordance with the
terms of the Governing Instrument and the Delaware Statutory Trust Act, 12 Del.
C. Sections 3801 et seq. (the "Delaware Act"); (viii) that, in accordance with
and pursuant to the Resolutions, the Executive Committee of the Board will
approve the issuance of the Preferred Shares in the Series, at such amount per
Preferred Share with a liquidation preference of $25,000 per Preferred Share and
with such title, rate period and designation as are consistent with the relevant
provisions of the Registration Statement relating to the Preferred Shares and
will approve a completed final form of the Preliminary Statement that specifies
the preferences, voting powers, restrictions, limitations as to dividends,
qualifications and terms and conditions of redemption with respect to the
Preferred Shares, substantially in the form set forth in the Preliminary
Statement, and that incorporates the relevant provisions of the Registration
Statement relating to the Preferred Shares (including without limitation
designation of the Series as Series M Preferred Shares, Series T Preferred
Shares, Series W Preferred Shares, Series TH Preferred Shares, Series F
Preferred

<PAGE>


Calamos Strategic Total Return Fund
Vedder, Price, Kaufman & Kammholz, P.C.
April 28, 2004
Page 3



Shares, Series A Preferred Shares and Series B Preferred Shares) and complies in
all respects with the provisions of the Delaware Act (the "Final Statement"), in
each case prior to the first issuance of Preferred Shares (the "Executive
Committee Action"); and (ix) that each of the documents examined by us is in
full force and effect and has not been modified, supplemented or otherwise
amended, except as herein referenced. No opinion is expressed herein with
respect to the requirements of, or compliance with, federal or state securities
or blue sky laws. Further, we express no opinion with respect to, and we assume
no responsibility for, any offering documentation relating to the Trust or the
Preferred Shares. As to any facts material to our opinion, other than those
assumed, we have relied without independent investigation on the
above-referenced documents and on the accuracy, as of the date hereof, of the
matters therein contained.

                  Based on and subject to the foregoing, and limited in all
respects to matters of Delaware law, it is our opinion that:

                  1. The Trust is a duly formed and validly existing statutory
trust in good standing under the laws of the State of Delaware.

                  2. The Preferred Shares, when issued to Shareholders in
accordance with the terms, conditions, requirements and procedures set forth in
the Governing Documents, will constitute legally issued, fully paid and
non-assessable Preferred Shares of beneficial interest in the Series.

                  With respect to the opinion expressed in paragraph 2 above, we
note that, pursuant to Section 2 of Article VIII of the Governing Instrument,
the Trustees have the power to cause each Shareholder, or each Shareholder of
any particular Series, to pay directly, in advance or arrears, for charges of
the Trust's custodian or transfer, shareholder servicing or similar agent, an
amount fixed from time to time by the Trustees, by setting off such charges due
from such Shareholder from declared but unpaid dividends owed such Shareholder
and/or by reducing the number of Shares in the account of such Shareholder by
that number of full and/or fractional Shares which represents the outstanding
amount of such charges due from such Shareholder.

                  We hereby consent to the filing of a copy of this opinion with
the Securities and Exchange Commission as part of the Registration Statement. In
giving this consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder. Except as provided in this paragraph, the opinions set
forth above are expressed solely for the benefit of the addressees hereof and
may not be relied upon by any other person or entity for any purpose without our
prior written consent. This opinion speaks only as of the date hereof and is
based on our understandings and assumptions as to present facts and our review
of the above-referenced documents and certificates and the application of
Delaware law as the same exists on the date hereof, and we undertake no
obligation to update or supplement

<PAGE>


Calamos Strategic Total Return Fund
Vedder, Price, Kaufman & Kammholz, P.C.
April 28, 2004
Page 4



this opinion after the date hereof for the benefit of any person or entity with
respect to any facts or circumstances that may hereafter come to our attention
or any changes in facts or law that may hereafter occur or take effect.

                                         Sincerely,

                                         MORRIS, NICHOLS, ARSHT & TUNNELL


                                         /s/ Louis G. Hering

                                         Louis G. Hering




</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-99.N
<SEQUENCE>12
<FILENAME>c82676a1exv99wn.txt
<DESCRIPTION>CONSENT OF AUDITORS
<TEXT>
<PAGE>

                                                                       EXHIBIT n



                          INDEPENDENT AUDITORS' CONSENT



To the Board of Directors and Shareholders of
Calamos Strategic Total Return Fund:

We consent to the use in this Pre-Effective Amendment No. 1 to Registration
Statement No. 333-113439 of Calamos Strategic Total Return Fund on Form N-2 of
our report dated March 24, 2004, appearing in the Statement of Additional
Information, which is part of such Registration Statement. We also consent to
the reference to us under the caption "Experts" in the Statement of Additional
Information.



/S/ DELOITTE & TOUCHE LLP
Chicago, Illinois
April 28, 2004



</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
-----END PRIVACY-ENHANCED MESSAGE-----
