Commentary

Last week, we saw the market overreact to a small uptick in inflation, which heightened fears that the Fed will continue to raise rates and send the U.S. and global economy into recession. In our view, this is a case where isolated economic statistics are given much more importance than is warranted by the larger macro picture. Yet we appreciate that investors hear such speculation and become frustrated and unnerved by a volatile market.

We are providing this explanation of our current positioning of the Calamos Growth Fund to help investors better understand the recent volatility of the Fund's near term performance.

First, the economic backdrop is strong. Recent first quarter earning reports were stronger than forecasted. The tax bill signed this past week by the President extends lower dividends and capital gains rates through 2010. GDP numbers continue to be positive and we believe will most likely be revised upward. All these factors are positive for the equity markets. In our opinion, a small uptick in inflation should not derail the economy.

Second, we are confident in the positioning of the Fund's holdings. As we have outlined in previous reports, the Fund is positioned for an economy entering into its mid-phase. We believe this part of the economic cycle will favor growth companies. Valuations of companies are compelling in this area, as earnings continue to be strong, which can lead to increasing stock prices. In our opinion, this phase has the potential of producing a double positive: increasing stock prices due to increasing earnings and PE expansion adding to further increase in stock prices.

The natural question for an investor is when will this occur and bereflected in increasing stock prices?

We believe that when the Fed stops raising rates it will serve as a catalyst for this positive stock market action. Because of the uncertainty and confusion surrounding recent Fed communications, the stock market has entered into a nervous saw tooth pattern these past few months. We see one month up, signaling that the mid-phase cycle has begun, followed by a month down, on fears that the economic expansion is nearing its end, as a result of continued interest rate increases. These concerns accelerated last week, sparking a fear in inflation that spooked the equities markets around the world.

The Fund's recent performance is mirroring this saw tooth pattern.

We have not changed our position. Because of the strong economic factors we have outlined in previous reports we feel the economic breakout will be on the upside. Our strategy has been to position the portfolio before the event and not wait for the event and chase it. We feel that trying to time the upside breakout exactly is extremely difficult if not impossible. This is a time to review longer term factors as these short term market fears whipsaw investors. Over the years we have positioned the portfolios looking out over the next six to 12 months to anticipate market moves. This strategy has produced good long term results for the Fund.

We feel the fears that have built up in investors' minds are unwarranted and we would encourage investors to focus on the longer term positives while this short term volatility runs its course. We strongly believe that the flip side of volatility is opportunity, and that the current market action presents an opportunity.