CALVERT IMPACT FUND, INC.
Calvert Large Cap Growth Fund
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
October 31, 2000
New Account (800) 368-2748 Shareholder
Information: (301) 951-4820 Services: (800) 368-2745
Broker (800) 368-2746 TDD for the Hearing-
Services: (301) 951-4850 Impaired: (800) 541-1524
This Statement of Additional Information ("SAI") is not a prospectus.
Investors should read the SAI in conjunction with the Fund's Prospectus, dated
October 31, 2000. The prospectus may be obtained free of charge by writing the
Fund at the above address or calling the Fund, or by visiting our website at
www.calvert.com.
TABLE OF CONTENTS
Investment Policies and Risks 2
Investment Restrictions 7
Investment Selection Process 8
Dividends, Distributions and Taxes 9
Net Asset Value 10
Calculation of Total Return 10
Purchase and Redemption of Shares 10
Advertising 11
Directors and Officers 11
Investment Advisor and Subadvisor 13
Administrative Services Agent 14
Method of Distribution 14
Transfer and Shareholder Servicing Agents 15
Portfolio Transactions 15
Personal Securities Transactions 16
Independent Accountant and Custodians 16
Financial Statements 16
General Information 16
Appendix 18
Schedule A 21
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INVESTMENT POLICIES AND RISKS
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FOREIGN SECURITIES
Investments in foreign securities may present risks not typically involved
in domestic investments. The Fund may purchase foreign securities directly, on
foreign markets, or those represented by American Depositary Receipts ("ADRs"),
or other receipts evidencing ownership of foreign securities, such as
International Depository Receipts and Global Depositary Receipts. ADRs are U.S.
dollar-denominated and traded in the U.S. on exchanges or over the counter. By
investing in ADRs rather than directly in foreign issuers' stock, the Fund may
possibly avoid some currency and some liquidity risks. The information available
for ADRs is subject to the more uniform and more exacting accounting, auditing
and financial reporting standards of the domestic market or exchange on which
they are traded.
Additional costs may be incurred in connection with international
investment since foreign brokerage commissions and the custodial costs
associated with maintaining foreign portfolio securities are generally higher
than in the United States. Fee expense may also be incurred on currency
exchanges when the Fund changes investments from one country to another or
converts foreign securities holdings into U.S. dollars.
United States Government policies have at times, in the past, through
imposition of interest equalization taxes and other restrictions, discouraged
certain investments abroad by United States investors. In addition, foreign
countries may impose withholding and taxes on dividends and interest.
Since investments in securities of issuers domiciled in foreign countries
usually involve currencies of the foreign countries, and since the Fund may
temporarily hold funds in foreign currencies during the completion of investment
programs, the value of the assets of the Fund as measured in United States
dollars may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations. For example, if the value of
the foreign currency in which a security is denominated increases or declines in
relation to the value of the U.S. dollar, the value of the security in U.S.
dollars will increase or decline correspondingly. The Fund will conduct its
foreign currency exchange transactions either on a spot (i.e., cash) basis at
the spot rate prevailing in the foreign exchange market, or through entering
into forward contracts to purchase or sell foreign currencies. A forward foreign
currency contract involves an obligation to purchase or sell a specific currency
at a future date which may be any fixed number of days from the date of the
contract agreed upon by the parties, at a price set at the time of the contract.
These contracts are traded in the interbank market conducted directly between
currency traders (usually large, commercial banks) and their customers. A
forward foreign currency contract generally has no deposit requirement, and no
commissions are charged at any stage for trades.
The Fund may enter into forward foreign currency contracts for two reasons.
First, the Fund may desire to preserve the United States dollar price of a
security when it enters into a contract for the purchase or sale of a security
denominated in a foreign currency. The Fund may be able to protect themselves
against possible losses resulting from changes in the relationship between the
United States dollar and foreign currencies during the period between the date
the security is purchased or sold and the date on which payment is made or
received by entering into a forward contract for the purchase or sale, for a
fixed amount of dollars, of the amount of the foreign currency involved in the
underlying security transactions.
Second, when the Advisor or Subadvisor believes that the currency of a
particular foreign country may suffer a substantial decline against the United
States dollar, the Fund enter into a forward foreign currency contract to sell,
for a fixed amount of dollars, the amount of foreign currency approximating the
value of some or all of the Fund's securities denominated in such foreign
currency. The precise matching of the forward foreign currency contract amounts
and the value of the Fund's securities involved will not generally be possible
since the future value of the securities will change as a consequence of market
movements between the date the forward contract is entered into and the date it
matures. The projection of short-term currency market movement is difficult, and
the successful execution of this short-term hedging strategy is uncertain.
Although forward foreign currency contracts tend to minimize the risk of loss
due to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain which might result should the value of such currency
increase. The Fund does not intend to enter into such forward contracts under
this circumstance on a regular or continuous basis.
SMALL CAP ISSUERS
The securities of small cap issuers may be less actively traded than the
securities of larger issuers, may trade in a more limited volume, and may change
in value more abruptly than securities of larger companies.
Information concerning these securities may not be readily available so
that the companies may be less actively followed by stock analysts. Small-cap
issuers do not usually participate in market rallies to the same extent as more
widely-known securities, and they tend to have a relatively higher percentage of
insider ownership.
Investing in smaller, new issuers generally involves greater risk than
investing in larger, established issuers. Companies in which the Fund is likely
to invest may have limited product lines, markets or financial resources and may
lack management depth. The securities in such companies may also have limited
marketability and may be subject to more abrupt or erratic market movements than
securities of larger, more established companies or the market averages in
general.
TEMPORARY DEFENSIVE POSITIONS
For temporary defensive purposes, the Fund may invest in cash or cash
equivalents. Cash equivalents include instruments such as, but not limited to,
U.S. government and agency obligations, certificates of deposit, banker's
acceptances, time deposits commercial paper, short-term corporate debt
securities, and repurchase agreements. The Fund may invest in money market
instruments of banks, whether foreign or domestic, including obligations of U.S.
branches of foreign banks ("Yankee" instruments) and obligations of foreign
branches of U.S. banks ("Eurodollar" instruments). All such instruments must be
high-quality, US dollar-denominated obligations. Although not subject to foreign
currency risk since they are US dollar-denominated, investments in foreign money
market instruments may involve risks that are different than investments in
securities of U.S. issuers. See "Foreign Securities" above. The Fund's
investments in temporary defensive positions are generally not FDIC insured,
even though a bank may be the issuer.
REPURCHASE AGREEMENTS
The Fund may purchase debt securities subject to repurchase agreements,
which are arrangements under which the Fund buys a security, and the seller
simultaneously agrees to repurchase the security at a specified time and price
reflecting a market rate of interest. The Fund engages in repurchase agreements
in order to earn a higher rate of return than it could earn simply by investing
in the obligation which is the subject of the repurchase agreement. Repurchase
agreements are not, however, without risk. In the event of the bankruptcy of a
seller during the term of a repurchase agreement, a legal question exists as to
whether the Fund would be deemed the owner of the underlying security or would
be deemed only to have a security interest in and lien upon such security. The
Fund will only engage in repurchase agreements with recognized securities
dealers and banks determined to present minimal credit risk by the Advisor. In
addition, the Fund will only engage in repurchase agreements reasonably designed
to secure fully during the term of the agreement the seller's obligation to
repurchase the underlying security and will monitor the market value of the
underlying security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase price
due the Fund pursuant to the agreement, the Fund will require the seller to
pledge additional securities or cash to secure the seller's obligations pursuant
to the agreement. If the seller defaults on its obligation to repurchase and the
value of the underlying security declines, the Fund may incur a loss and may
incur expenses in selling the underlying security. Repurchase agreements are
always for periods of less than one year. The Fund may have a decreased return
in a repurchase agreement if the repurchase rate is less than the return the
Fund might have received if it bought the instrument directly, although any cash
position invested in a repurchase agreement will not be exposed to market and
interest rate risk that the direct investment would have had. Repurchase
agreements not terminable within seven days are considered illiquid.
REVERSE REPURCHASE AGREEMENTS
The Fund may also engage in reverse repurchase agreements. Under a reverse
repurchase agreement, the Fund sells portfolio securities to a bank or
securities dealer and agrees to repurchase those securities from such party at
an agreed upon date and price reflecting a market rate of interest. The Fund
invests the proceeds from each reverse repurchase agreement in obligations in
which it is authorized to invest. The Fund intends to enter into a reverse
repurchase agreement only when the interest income provided for in the
obligation in which the Fund invests the proceeds is expected to exceed the
amount the Fund will pay in interest to the other party to the agreement plus
all costs associated with the transactions. The Fund does not intend to borrow
for leverage purposes. The Fund will only be permitted to pledge assets to the
extent necessary to secure borrowings and reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, the Fund
will maintain in a segregated custodial account an amount of cash, U.S.
Government securities or other liquid, high-quality debt securities equal in
value to the repurchase price. The Fund will mark to market the value of assets
held in the segregated account, and will place additional assets in the account
whenever the total value of the account falls below the amount required under
applicable regulations.
The Fund's use of reverse repurchase agreements involves the risk that the
other party to the agreements could become subject to bankruptcy or liquidation
proceedings during the period the agreements are outstanding. In such event, the
Fund may not be able to repurchase the securities it has sold to that other
party. Under those circumstances, if at the expiration of the agreement such
securities are of greater value than the proceeds obtained by the Fund under the
agreements, the Fund may have been better off had it not entered into the
agreement. However, the Fund will enter into reverse repurchase agreements only
with banks and dealers which the Advisor believes present minimal credit risks
under guidelines adopted by the Fund's Board of Directors. In addition, the Fund
bears the risk that the market value of the securities it sold may decline below
the agreed-upon repurchase price, in which case the dealer may request the Fund
to post additional collateral.
HIGH SOCIAL IMPACT AND SPECIAL EQUITIES INVESTMENTS
The Fund will not purchase debt securities other than High Social Impact
Investments (or money market instruments). The High Social Impact Investments
program targets a percentage of the Fund's assets to directly support the growth
of community-based organizations for the purposes of promoting business
creation, housing development and economic and social development of urban and
rural communities. These securities are unrated - they are expected to be the
equivalent of non-investment grade debt securities - that is, lower quality
debt securities (generally those rated BB or lower by S&P or Ba or lower by
Moody's, known as "junk bonds"). These securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. See Appendix for a description of the ratings.) The annual
return on High Social Impact Investments is between 0% and 4%. Thus, rather than
earning a higher rate, as would be expected, to compensate for higher the risk
(i.e., lower credit quality), they earn a rate of return that is lower than the
rate currently earned by high quality U.S. Treasury securities. There is no
secondary market for these securities.
The Fund expects to purchase all of its High Social Impact Investments in
notes issued by the Calvert Social Investment Foundation, a non-profit
organization, legally distinct from Calvert Group, organized as a charitable and
educational foundation for the purpose of increasing public awareness and
knowledge of the concept of socially responsible investing. The Foundation
prepares its own careful credit analysis to attempt to identify those community
development issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced, although
there can be no assurance that losses will not occur. The Foundation maintains a
certain required level of capital upon which the Fund could rely if a note were
ever to default.
With respect to the Special Equities program, the Fund has not set a
specific investment restriction or limit although, as an illiquid security, the
Fund will only make such investments within the 15% limit on illiquid securities
(See, "Investment Restrictions" below), and in fact, expects any such
investments to be far below this limit.
NON-INVESTMENT GRADE DEBT SECURITIES
Non-investment grade debt securities are lower quality debt securities
(generally those rated BB or lower by S&P or Ba or lower by Moody's, known as
"junk bonds." These securities have moderate to poor protection of principal and
interest payments and have speculative characteristics. See Appendix for a
description of the ratings.) These securities involve greater risk of default or
price declines due to changes in the issuer's creditworthiness than
investment-grade debt securities. Because the market for lower-rated securities
may be thinner and less active than for higher-rated securities, there may be
market price volatility for these securities and limited liquidity in the resale
market. Market prices for these securities may decline significantly in periods
of general economic difficulty or rising interest rates. Unrated debt securities
may fall into the lower quality category. Unrated securities usually are not
attractive to as many buyers as rated securities are, which may make them less
marketable.
The quality limitation set forth in the Fund's investment policy is
determined immediately after the Fund's acquisition of a given security.
Accordingly, any later change in ratings will not be considered when determining
whether an investment complies with the Fund's investment policy.
When purchasing non-investment grade debt securities, rated or unrated, the
Advisor and/or Subadvisor prepares its own careful credit analysis to attempt to
identify those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced, although
there can be no assurance that losses will not occur.
DERIVATIVES
The Fund can use various techniques to increase or decrease its exposure to
changing security prices, interest rates, or other factors that affect security
values. These techniques may involve derivative transactions such as buying and
selling options and futures contracts and leveraged notes, entering into swap
agreements, and purchasing indexed securities. The Fund can use these practices
either as substitution or as protection against an adverse move in the Fund to
adjust the risk and return characteristics of the Fund. If the Advisor and/or
Subadvisor judges market conditions incorrectly or employs a strategy that does
not correlate well with a Fund's investments, or if the counterparty to the
transaction does not perform as promised, these techniques could result in a
loss. These techniques may increase the volatility of a Fund and may involve a
small investment of cash relative to the magnitude of the risk assumed.
Derivatives are often illiquid.
OPTIONS AND FUTURES CONTRACTS
The Fund may, in pursuit of its investment objective, purchase put and call
options and engage in the writing of covered call options and secured put
options on securities, and employ a variety of other investment techniques.
Specifically, the Fund may also engage in the purchase and sale of stock index
future contracts, foreign currency futures contracts, interest rate futures
contracts, and options on such futures, as described more fully below.
The Fund may engage in such transactions only to hedge the existing
positions. They will not engage in such transactions for the purposes of
speculation or leverage. Such investment policies and techniques may involve a
greater degree of risk than those inherent in more conservative investment
approaches.
The Fund may write "covered options" on securities in standard contracts
traded on national securities exchanges. The Fund may write such options in
order to receive the premiums from options that expire and to seek net gains
from closing purchase transactions with respect to such options.
Put and Call Options. The Fund may purchase put and call options, in standard
contracts traded on national securities exchanges. The Fund will purchase such
options only to hedge against changes in the value of securities the Fund holds
and not for the purposes of speculation or leverage. By buying a put, a Fund has
the right to sell the security at the exercise price, thus limiting its risk of
loss through a decline in the market value of the security until the put
expires. The amount of any appreciation in the value of the underlying security
will be partially offset by the amount of the premium paid for the put option
and any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and any profit or loss from the sale will
depend on whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs.
The Fund may purchase call options on securities which they may intend to
purchase. Such transactions may be entered into in order to limit the risk of a
substantial increase in the market price of the security which the Fund intends
to purchase. Prior to its expiration, a call option may be sold in a closing
sale transaction. Any profit or loss from such a sale will depend on whether the
amount received is more or less than the premium paid for the call option plus
the related transaction costs.
Covered Options. The Fund may write only covered options on equity and debt
securities in standard contracts traded on national securities exchanges. This
means that, in the case of call options, so long as a Fund is obligated as the
writer of a call option, that Fund will own the underlying security subject to
the option and, in the case of put options, that Fund will, through its
custodian, deposit and maintain either cash or securities with a market value
equal to or greater than the exercise price of the option.
When a Fund writes a covered call option, the Fund gives the purchaser the
right to purchase the security at the call option price at any time during the
life of the option. As the writer of the option, the Fund receives a premium,
less a commission, and in exchange foregoes the opportunity to profit from any
increase in the market value of the security exceeding the call option price.
The premium serves to mitigate the effect of any depreciation in the market
value of the security. Writing covered call options can increase the income of
the Fund and thus reduce declines in the net asset value per share of the Fund
if securities covered by such options decline in value. Exercise of a call
option by the purchaser however will cause the Fund to forego future
appreciation of the securities covered by the option.
When a Fund writes a covered put option, it will gain a profit in the
amount of the premium, less a commission, so long as the price of the underlying
security remains above the exercise price. However, the Fund remains obligated
to purchase the underlying security from the buyer of the put option (usually in
the event the price of the security falls below the exercise price) at any time
during the option period. If the price of the underlying security falls below
the exercise price, the Fund may realize a loss in the amount of the difference
between the exercise price and the sale price of the security, less the premium
received.
The Fund may purchase securities which may be covered with call options
solely on the basis of considerations consistent with the investment objectives
and policies of the Fund. The Fund's turnover may increase through the exercise
of a call option; this will generally occur if the market value of a "covered"
security increases and the Fund has not entered into a closing purchase
transaction.
Risks Related to Options Transactions. There can be no assurance that either a
closing purchase or sale transaction can be effected when the Fund so desires.
The Fund can close out its positions in exchange-traded options only on an
exchange which provides a secondary market in such options. Although the Fund
intends to acquire and write only such exchange-traded options for which an
active secondary market appears to exist, there can be no assurance that such a
market will exist for any particular option contract at any particular time.
This might prevent the Fund from closing an options position, which could impair
the Fund's ability to hedge effectively. The inability to close out a call
position may have an adverse effect on liquidity because the Fund may be
required to hold the securities underlying the option until the option expires
or is exercised. Other principal factors affecting the market value of a put or
a call option include supply and demand, interest rates, the current market
price and price volatility of the underlying security and the time remaining
until the expiration date.
Futures Transactions. The Fund may purchase and sell futures contracts, but
only when, in the judgment of the Advisor, such a position acts as a hedge
against market changes which would adversely affect the securities held by
the Fund. These futures contracts may include, but are not limited to, market
index futures contracts and futures contracts based on U.S. Government
obligations.
A futures contract is an agreement between two parties to buy and sell a
security on a future date which has the effect of establishing the current price
for the security. Although futures contracts by their terms require actual
delivery and acceptance of securities, in most cases the contracts are closed
out before the settlement date without the making or taking of delivery of
securities. Upon buying or selling a futures contract, the Fund deposits initial
margin with its custodian, and thereafter daily payments of maintenance margin
are made to and from the executing broker. Payments of maintenance margin
reflect changes in the value of the futures contract, with the Fund being
obligated to make such payments if its futures position becomes less valuable
and entitled to receive such payments if its positions become more valuable.
The Fund may only invest in futures contracts to hedge its existing
investment positions and not for income enhancement, speculation or leverage
purposes.
Futures contracts are designed by boards of trade which are designated
"contracts markets" by the Commodity Futures Trading Commission ("CFTC"). As
series of a registered investment company, the Fund is eligible for exclusion
from the CFTC's definition of "commodity pool operator," meaning that the Fund
may invest in futures contracts under specified conditions without registering
with the CFTC. Futures contracts trade on contracts markets in a manner that is
similar to the way a stock trades on a stock exchange and the boards of trade,
through their clearing corporations, guarantee performance of the contracts.
Options on Futures Contracts. The Fund may purchase and write put or call
options and sell call options on futures contracts in which a fund could
otherwise invest and which are traded on a U.S. exchange or board of trade. The
Fund may also enter into closing transactions with respect to such options to
terminate an existing position; that is, to sell a put option already owned and
to buy a call option to close a position where the Fund has already sold a
corresponding call option.
The Fund may only invest in options on futures contracts to hedge its
existing investment positions and not for income enhancement, speculation or
leverage purposes.
An option on a futures contract gives the purchaser the right, in return
for the premium paid, to assume a position in a futures contract-a long position
if the option is a call and a short position if the option is a put-at a
specified exercise price at any time during the period of the option. The Fund
will pay a premium for such options purchased or sold. In connection with such
options bought or sold, the Fund will make initial margin deposits and make or
receive maintenance margin payments which reflect changes in the market value of
such options. This arrangement is similar to the margin arrangements applicable
to futures contracts described above.
Put Options on Futures Contracts. The purchase of put options on futures
contracts is analogous to the sale of futures contracts and is used to protect
the Fund against the risk of declining prices. The Fund may purchase put options
and sell put options on futures contracts that are already owned by the Fund.
The Fund will only engage in the purchase of put options and the sale of covered
put options on market index futures for hedging purposes.
Call Options on Futures Contracts. The sale of call options on futures contracts
is analogous to the sale of futures contracts and is used to protect the Fund
against the risk of declining prices. The purchase of call options on futures
contracts is analogous to the purchase of a futures contract. The Fund may only
buy call options to close an existing position where the Fund has already sold a
corresponding call option, or for a cash hedge. The Fund will only engage in the
sale of call options and the purchase of call options to cover for hedging
purposes.
Writing Call Options on Futures Contracts. The writing of call options on
futures contracts constitutes a partial hedge against declining prices of the
securities deliverable upon exercise of the futures contract. If the futures
contract price at expiration is below the exercise price, the Fund will retain
the full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Fund's securities holdings.
Risks of Options and Futures Contracts. If the Fund has sold futures or takes
options positions to hedge its portfolio against decline in the market and the
market later advances, the Fund may suffer a loss on the futures contracts or
options which it would not have experienced if it had not hedged. Correlation is
also imperfect between movements in the prices of futures contracts and
movements in prices of the securities which are the subject of the hedge. Thus
the price of the futures contract or option may move more than or less than the
price of the securities being hedged. Where a Fund has sold futures or taken
options positions to hedge against decline in the market, the market may advance
and the value of the securities held in the Fund may decline. If this were to
occur, the Fund might lose money on the futures contracts or options and also
experience a decline in the value of its portfolio securities. However, although
this might occur for a brief period or to a slight degree, the value of a
diversified portfolio will tend to move in the direction of the market
generally.
The Fund can close out futures positions only on an exchange or board of
trade which provides a secondary market in such futures. Although the Fund
intends to purchase or sell only such futures for which an active secondary
market appears to exist, there can be no assurance that such a market will exist
for any particular futures contract at any particular time. This might prevent
the Fund from closing a futures position, which could require the Fund to make
daily cash payments with respect to its position in the event of adverse price
movements.
Options on futures transactions bear several risks apart from those
inherent in options transactions generally. The Fund's ability to close out its
options positions in futures contracts will depend upon whether an active
secondary market for such options develops and is in existence at the time the
Fund seeks to close its positions. There can be no assurance that such a market
will develop or exist. Therefore, the Fund might be required to exercise the
options to realize any profit.
INVESTMENT RESTRICTIONS
-----------------------
Fundamental Investment Restrictions
The Fund has adopted the following fundamental investment restrictions.
These restrictions cannot be changed without the approval of the holders of a
majority of the outstanding shares of the Fund.
(1) The Fund may not make any investment inconsistent with its
classification as a diversified investment company under the 1940 Act.
(2) The Fund may not concentrate its investments in the securities of issuers
primarily engaged in any particular industry (other than securities issued or
guaranteed by the US Government or its agencies or instrumentalities and
repurchase agreements secured thereby.)
(3) The Fund may not issue senior securities or borrow money, except from banks
for temporary or emergency purposes and then only in an amount up to 33 1/3% of
the value of the Fund's total assets and except by engaging in reverse
repurchase agreements. In order to secure any permitted borrowings and reverse
repurchase agreements under this section, the Fund may pledge, mortgage or
hypothecate its assets.
(4) The Fund may not underwrite the securities of other issuers, except as
allowed by law or to the extent that the purchase of obligations in accordance
with the Fund's investment objective and policies, either directly from the
issuer, or from an underwriter for an issuer, may be deemed an underwriting.
(5) The Fund may not invest directly in commodities or real estate, although the
Fund may invest in financial futures, and in securities which are secured by
real estate or real estate mortgages and securities of issuers which invest or
deal in commodities, commodity futures, real estate or real estate mortgages.
(6) The Fund may not make loans, other than through the purchase of money market
instruments and repurchase agreements or by the purchase of bonds, debentures or
other debt securities. The purchase of all or a portion of an issue of publicly
or privately distributed debt obligations in accordance with the Fund's
investment objective, policies and restrictions, shall not constitute the making
of a loan.
Under current law, a diversified investment company, with respect to 75% of its
assets, can invest no more than 5% of its assets in the securities of any one
issuer, and may not acquire more than 10% of the voting securities of any
issuer. Under current law, "concentrate" means the Fund cannot invest 25% or
more in the securities of issuers primarily engaged in any one industry. Under
current law the Fund may underwrite securities only in compliance with the
conditions of Sections 10(f) and 12(c) of the Investment Company Act and the
rules thereunder wherein the Fund may underwrite securities to the extent that
the Fund may be considered an underwriter within the meaning of the Securities
Act of 1933 in selling a portfolio security.
Nonfundamental Investment Restrictions
The Fund has adopted the following nonfundamental investment restrictions.
A nonfundamental investment restriction can be changed by the Board at any time
without a shareholder vote.
(1) The Fund may not purchase securities on margin, except such short-term
credits as may be necessary for the clearance of transactions.
(2) The Fund may not make short sales of securities or maintain a short position
if such sales or positions exceed 20% of total assets under management.
(3) The Fund may not enter into a futures contract or an option on a futures
contract if the aggregate initial margins and premiums required to establish
these positions would exceed 5% of the Fund's net assets.
(4) The Fund may not invest in options or futures on individual commodities if
the aggregate initial margins and premiums required to establish such positions
exceed 2% of the Fund's net assets.
(5) The Fund may not invest in more than 5% of the value of its net assets in
warrants (included in that amount, but not to exceed 2% of the value of the
Fund's net assets, may be warrants which are not listed on the New York or
American Stock Exchange).
(6) The Fund may not purchase illiquid securities if more than 15% of the value
of the Fund's net assets would be invested in such securities.
(7) The Fund may not enter into reverse repurchase agreements if the aggregate
proceeds from outstanding reverse repurchase agreements, when added to other
outstanding borrowings permitted by the 1940 Act, would exceed 33 1/3% of the
Fund's total assets. The Fund does not intend to make any purchases of
securities if borrowing exceeds 15% of its total assets.
(8) The Fund may not purchase a put or call option on a security (including a
straddle or spread) if the value of that option premium, when aggregated with
the premiums on all other options on securities held by the Fund, would exceed
5% of the Fund's total assets.
(9) The Fund may not purchase the obligations of foreign issuers, if as a
result, foreign securities would exceed 10% of the value of the Fund's net
assets.
Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the applicable percentage occurs immediately after an acquisition of
securities or utilization of assets and results therefrom.
investment selection process
----------------------------
Investments in the Fund are selected on the basis of their ability to
contribute to the dual objective of the Fund, (i.e., those that satisfy the
Fund's investment and social criteria). The Fund has developed a number of
techniques for evaluating the performance of issuers in each of these areas. The
primary sources of information are reports published by the issuers themselves,
the reports of public agencies, and the reports of groups which monitor
performance in particular areas. These sources of information are sometimes
augmented with direct interviews or written questionnaires addressed to the
issuers. It should be recognized, however, that there are few generally accepted
measures by which achievement in these areas can be readily distinguished;
therefore, the development of suitable measurement techniques is largely within
the discretion and judgment of the Advisor.
Candidates for inclusion in any particular class of assets are then
examined according to the social criteria. Issuers are classified into three
categories of suitability under the social criteria. In the first category are
those issuers, which exhibit unusual positive accomplishment with respect to
some of the criteria and do not fail to meet minimum standards with respect to
the remaining criteria. To the greatest extent possible, investment selections
are made from this group. In the second category are those issuers, which meet
minimum standards with respect to all the criteria but do not exhibit
outstanding accomplishment with respect to any criterion. This category includes
issuers which may lack an affirmative record of accomplishment in these areas
but which are not known by the Advisor to violate any of the social criteria.
The third category under the social criteria consists of issuers who flagrantly
violate, or have violated, one or more of those values, for example, a company,
which repeatedly engages in unfair labor practices. The Fund will not knowingly
purchase the securities of issuers in this third category.
It should be noted that the Fund's social criteria tend to limit the
availability of investment opportunities more than is customary with other
investment companies. The Advisor, however, believe that within the first and
second categories there are sufficient investment opportunities to permit full
investment among issuers, which satisfy the Fund's social investment objective.
To the greatest extent possible, the Advisor applies the same social
criteria to the purchase of non-equity securities as it applies to equity
investments. With respect to government securities, the Fund invests primarily
in debt obligations issued or guaranteed by agencies or instrumentalities of the
Federal Government whose purposes further or are compatible with the Fund's
social criteria, such as obligations of the Bank for Cooperatives and the
Student Loan Marketing Association, rather than general obligations of the
Federal Government, such as Treasury securities. Bank certificates of deposit,
commercial paper, repurchase agreements, and corporate bonds are judged in the
same way as a prospective purchase of the bank's or issuing company's common
stock.
DIVIDENDS, DISTRIBUTIONS AND TAXES
----------------------------------
The Fund intends to qualify as regulated investment companies under
Subchapter M of the Internal Revenue Code. If for any reason the Fund should
fail to qualify, it would be taxed as a corporation at the Fund level and pay
taxes on its income and gains, rather than passing through its income and gains
to shareholders so that shareholders also would pay taxes on these same income
and gains.
Distributions of realized net capital gains, if any, are normally paid once
a year; however, the Fund does not intend to make any such distributions unless
available capital loss carryovers, if any, have been used or have expired.
Generally, dividends (including short-term capital gains) and distributions
are taxable to the shareholder in the year they are paid. However, any dividends
and distributions paid in January but declared during the prior three months are
taxable in the year declared.
The Fund is required to withhold 31% of any reportable dividends and
long-term capital gain distributions paid and 31% of each reportable redemption
transaction if: (a) the shareholder's social security number or other taxpayer
identification number ("TIN") is not provided or an obviously incorrect TIN is
provided; (b) the shareholder does not certify under penalties of perjury that
the TIN provided is the shareholder's correct TIN and that the shareholder is
not subject to backup withholding under section 3406(a)(1)(C) of the Internal
Revenue Code because of underreporting (however, failure to provide
certification as to the application of section 3406(a)(1)(C) will result only in
backup withholding on dividends, not on redemptions); or (c) the Fund is
notified by the Internal Revenue Service that the TIN provided by the
shareholder is incorrect or that there has been underreporting of interest or
dividends by the shareholder. Affected shareholders will receive statements at
least annually specifying the amount withheld.
In addition, the Fund is required to report to the Internal Revenue Service
the following information with respect to each redemption transaction occurring
in the Fund: (a) the shareholder's name, address, account number and taxpayer
identification number; (b) the total dollar value of the redemptions; and (c)
the Fund's identifying CUSIP number.
Certain shareholders are, however, exempt from the backup withholding and
broker reporting requirements. Exempt shareholders include: corporations;
financial institutions; tax-exempt organizations; individual retirement plans;
the U.S., a State, the District of Columbia, a U.S. possession, a foreign
government, an international organization, or any political subdivision, agency
or instrumentality of any of the foregoing; U.S. registered commodities or
securities dealers; real estate investment trusts; registered investment
companies; bank common trust funds; certain charitable trusts; foreign central
banks of issue. Non-resident aliens, certain foreign partnerships and foreign
corporations are generally not subject to either requirement but may instead be
subject to withholding under sections 1441 or 1442 of the Internal Revenue Code.
Shareholders claiming exemption from backup withholding and broker reporting
should call or write the Fund for further information.
Many states do not tax the portion of the Fund's dividends which is derived
from interest on U.S. Government obligations. State law varies considerably
concerning the tax status of dividends derived from U.S. Government obligations.
Accordingly, shareholders should consult their tax advisors about the tax status
of dividends and distributions from the Fund in their respective jurisdictions.
Dividends paid by the Fund may be eligible for the dividends received
deduction available to corporate taxpayers. Corporate taxpayers requiring this
information may contact Calvert.
net asset value
---------------
The public offering price of the shares of the Fund is the respective net
asset value per share (plus, for Class A shares, the applicable sales charge).
The net asset value fluctuates based on the respective value of the Fund's
investments. The net asset value per share for each class is determined every
business day at the close of the regular session of the New York Stock Exchange
(normally 4:00 p.m. Eastern time) and at such other times as may be necessary or
appropriate. The Fund does not determine net asset value on certain national
holidays or other days on which the New York Stock Exchange is closed: New
Year's Day, Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The Fund's net
asset value per share is determined by dividing total net assets (the value of
its assets net of liabilities, including accrued expenses and fees) by the
number of shares outstanding for that class.
The assets of the Fund are valued as follows: (a) securities for which
market quotations are readily available are valued at the most recent closing
price, mean between bid and asked price, or yield equivalent as obtained from
one or more market makers for such securities; (b) securities maturing within 60
days may be valued at cost, plus or minus any amortized discount or premium,
unless the Board of Directors determines such method not to be appropriate under
the circumstances; and (c) all other securities and assets for which market
quotations are not readily available will be fairly valued by the Advisor in
good faith under the supervision of the Board of Directors.
Calculation of total return
---------------------------
Total Return and Other Quotations
The Fund may advertise "total return." Total return is calculated
separately for each class. Total return differs from yield in that yield figures
measure only the income component of the Fund's investments, while total return
includes not only the effect of income dividends but also any change in net
asset value, or principal amount, during the stated period. Total return is
computed by taking the total number of shares purchased by a hypothetical $1,000
investment after deducting any applicable sales charge, adding all additional
shares purchased within the period with reinvested dividends and distributions,
calculating the value of those shares at the end of the period, and dividing the
result by the initial $1,000 investment. For periods of more than one year, the
cumulative total return is then adjusted for the number of years, taking
compounding into account, to calculate average annual total return during that
period.
Total return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000; T = total return; n = number
of years; and ERV = the ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the period.
Total return is historical in nature and is not intended to indicate future
performance. All total return quotations reflect the deduction of the maximum
sales charge ("return with maximum load"), except quotations of return "without
maximum load," or "at NAV" (or "without CDSC") which do not deduct sales charge.
Thus, in the formula above, for return without maximum load, P = the entire
$1,000 hypothetical initial investment and does not reflect the deduction of any
sales charge; for return with maximum load, P = a hypothetical initial
investment of $1,000 less any sales charge actually imposed at the beginning of
the period for which the performance is being calculated. Class I shares do not
have a sales charge.
purchase and redemption of shares
---------------------------------
Share certificates will not be issued unless requested in writing by the
investor. If share certificates have been issued, then the certificate must be
delivered to the Fund's transfer agent with any redemption request. This could
result in delays. If the certificates have been lost, the shareholder will have
to pay to post an indemnity bond in case the original certificates are later
presented by another person. No certificates will be issued for fractional
shares.
The Fund has filed a notice of election under Rule 18f-1 with the
Commission. The notice states that the Fund may honor redemptions that, during
any 90-day period, exceed $250,000 or 1% of the nest assets value of the Fund,
whichever is less, by redemptions-in-kind (distributions of a pro rata share of
the portfolio securities, rather than cash.)
Fund shares shall be distributed through third party brokers. See the
prospectus for more details on purchases and redemptions.
advertising
-----------
The Fund or its affiliates may provide information such as, but not limited
to, the economy, investment climate, investment principles, sociological
conditions and political ambiance. Discussion may include hypothetical scenarios
or lists of relevant factors designed to aid the investor in determining whether
the Fund is compatible with the investor's goals. The Fund may list its holdings
or give examples of securities that may have been considered for inclusion in
the Fund, whether held or not.
The Fund or its affiliates may supply comparative performance data and
rankings from independent sources such as Donoghue's Money Fund Report, Bank
Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Wiesenberger Investment Companies Service, Mutual Fund
Values Morningstar Ratings, Mutual Fund Forecaster, Barron's, Nelson's, The Wall
Street Journal. The Fund may also cite to any source, whether in print or
on-line, such as Bloomberg, in order to acknowledge origin of information, and
may provide biographical information on, or quote, portfolio managers or Fund
officers. The Fund may compare itself or its portfolio holdings to other
investments, whether or not issued or regulated by the securities industry,
including, but not limited to, certificates of deposit and Treasury notes.
Calvert Group is the nation's leading family of socially responsible mutual
funds, both in terms of socially responsible mutual fund assets under
management, and number of socially responsible mutual fund portfolios offered
(source: Social Investment Forum, December 31, 1999). Calvert Group was also the
first to offer a family of socially responsible mutual fund portfolios.
DIRECTORS AND OFFICERS
----------------------
The Fund's Board of Directors supervises the Fund's activities and reviews
its contracts with companies that provide it with services. Business information
is provided below about the Fund's Directors and Officers.
PRINCIPAL
OCCUPATION(S) DURING
NAME, ADDRESS & DATE OF BIRTH POSITION WITH FUND LAST 5 YEARS
REBECCA ADAMSON, DIRECTOR PRESIDENT OF THE NATIONAL
DOB: 09/10/47 NON-PROFIT, FIRST NATIONS
FINANCIAL PROJECT.
MILES DOUGLAS HARPER, III DIRECTOR PARTNER
DOB: 10/16/62 GAINER DONNELLY & DESROCHES
SINCE JANUARY 1999. PRIOR
TO THAT MR. HARPER WAS
VICE PRESIDENT, WOOD,
HARPER, PC.
JOY V. JONES, ESQ., DIRECTOR ATTORNEY AND ENTERTAINMENT
DOB: 07/02/50 MANAGER IN NEW YORK CITY.
*BARBARA J. KRUMSIEK, DIRECTOR PRESIDENT, CHIEF EXECUTIVE
DOB: 08/09/52 OFFICER AND VICE CHAIRMAN
OF CALVERT GROUP, LTD. PRIOR
TO JOINING CALVERT GROUP,IN
1997, MS. KRUMSIEK HAD SERVED
AS A MANAGING DIRECTOR OF
ALLIANCE FUND DISTRIBUTORS,
INC. SINCE 1974.
*D. WAYNE SILBY, DIRECTOR PRESIDENT OF CALVERT SOCIAL
DOB: 07/20/48 INVESTMENT FUND. MR. SILBY IS
ALSO EXECUTIVE CHAIRMAN OF
GROUP SERVE, INC., AN INTERNET
COMPANY FOCUSED ON COMMUNITY
BUILDING COLLABORATIVE TOOLS.
RENO J. MARTINI, DIRECTOR SENIOR VICE PRESIDENT OF
DOB: 01/13/50 CALVERT GROUP. LTD., SENIOR
VICE PRESIDENT AND CHIEF
INVESTMENT OFFICER OF CALVERT
ASSET MANAGEMENT COMPANY, INC.,
AND DIRECTOR AND PRESIDENT OF
CALVERT-SLOAN ADVISERS, L.L.C.
RONALD M. WOLFSHEIMER, CPA, OFFICER SENIOR VICE PRESIDENT AND
DOB: 07/24/52 CHIEF FINANCIAL OFFICER OF
CALVERT GROUP, LTD.
--------------------------------------------------------------------------------
WILLIAM M. TARTIKOFF, ESQ., OFFICER SENIOR VICE PRESIDENT,
DOB: 08/12/47 SECRETARY, AND GENERAL COUNSEL
OF CALVERT GROUP, LTD.
--------------------------------------------------------------------------------
SUSAN WALKER BENDER, ESQ., OFFICER ASSOCIATE GENERAL COUNSEL
DOB: 01/29/59 OF CALVERT GROUP, LTD.
--------------------------------------------------------------------------------
IVY WAFFORD DUKE, ESQ., OFFICER ASSOCIATE GENERAL COUNSEL
DOB: 09/07/68 OF CALVERT GROUP, LTD. PRIOR TO
JOINING CALVERT GROUP IN 1996,
MS. DUKE HAD BEEN AN ASSOCIATE
IN THE INVESTMENT MANAGEMENT
GROUP OF THE BUSINESS AND
FINANCE DEPARTMENT AT DRINKER
BIDDLE & REATH SINCE 1993.
--------------------------------------------------------------------------------
VICTOR FRYE, ESQ., OFFICER COUNSEL AND COMPLIANCE OFFICER
DOB: 10/15/58 OF CALVERT GROUP, LTD. PRIOR TO
WORKING AT CALVERT GROUP IN
1999, MR. FRYE HAD BEEN COUNSEL
AND MANAGER OF THE COMPLIANCE
DEPARTMENT AT THE ADVISORS
GROUP SINCE 1986.
--------------------------------------------------------------------------------
JENNIFER STREAKS, ESQ., OFFICER ASSISTANT GENERAL COUNSEL OF
DOB: 08/02/71 CALVERT GROUP, LTD. PRIOR TO
WORKING AT CALVERT GROUP IN
1999, MS. STREAKS HAD BEEN A
REGULATORY ANALYST IN THE
MARKET REGULATION DEPARTMENT
OF THE NATIONAL ASSOCIATION
OF SECURITIES DEALERS SINCE
1997. PRIOR TO THIS,
MS. STREAKS HAD BEEN A LAW
CLERK TO THE HONORABLE
MAURICE FOLEY AT THE U.S.
TAX COURT FOR THE YEAR SINCE
GRADUATING FROM HOWARD
UNIVERSITY SCHOOL OF LAW,
WHERE SHE WAS A STUDENT
1993-1996.
--------------------------------------------------------------------------------
MICHAEL V. YUHAS JR., CPA, OFFICER DIRECTOR OF FUND
DOB: 08/04/61 ADMINISTRATION OF
CALVERT GROUP, LTD.
--------------------------------------------------------------------------------
The address of Director and Officers, unless otherwise noted, is 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Directors marked with
an *, above, are "interested persons" of the Fund, under the Investment Company
Act of 1940.
Directors of the Fund not affiliated with the Advisor presently receive an
annual fee of $5,000 for service as a member of the Fund's Board of Directors.
Directors of the Fund who are not affiliated with the Fund's Advisor may elect
to defer receipt of all or a percentage of their fees and invest them in any
fund in the Calvert Family of Funds through the Directors' Deferred Compensation
Plan. Deferral of the fees is designed to maintain the parties in the same
position as if the fees were paid on a current basis. Management believes this
will have a negligible effect on the Fund's assets, liabilities, net assets, and
net income per share.
Investment Advisor and Subadvisor
---------------------------------
The Fund's Investment Advisor is Calvert Asset Management Company, Inc.,
4550 Montgomery Avenue, 1000N, Bethesda, Maryland 20814, a subsidiary of Calvert
Group Ltd., which is a subsidiary of Acacia Life Insurance Company of
Washington, D.C. ("Acacia"). Acacia is a subsidiary of Ameritas Acacia Mutual
Holding Company. Under the Advisory Contract, the Advisor provides investment
advice to the Fund and oversees its day-to-day operations, subject to direction
and control by the Fund's Board of Directors. The Advisor provides the Fund with
investment supervision and management, and office space; furnishes executive and
other personnel to the Fund; and pays the salaries and fees of all Directors who
are employees of the Advisor or its affiliates. The Fund pays all other
administrative and operating expenses, including: custodial, registrar, dividend
disbursing and transfer agency fees; administrative service fees; fund
accounting fees; federal and state securities registration fees; salaries, fees
and expenses of Directors, executive officers and employees of the Fund, who are
not employees of the Advisor or of its affiliates; insurance premiums; trade
association dues; legal and audit fees; interest, taxes and other business fees;
expenses of printing and mailing reports, notices, prospectuses, and proxy
material to shareholders; annual shareholders' meeting expenses; and brokerage
commissions and other costs associated with the purchase and sale of portfolio
securities.
The Advisor has agreed to limit annual fund operating expenses (net of any
expense offset arrangements and exclusive of any performance fee adjustment)
through November 1, 2001. The contractual expense cap is 1.50% for Class A,
2.50% for Class B, 2.50% for Class C and 0.90% for Class I. For the purposes of
this expense limit, operating expenses do not include interest expense,
brokerage commissions, extraordinary expenses, taxes and capital items. The Fund
has an offset arrangement with the custodian bank whereby the custodian and the
transfer agent fees may be paid indirectly by credits on the Fund's uninvested
cash balances. These credits are used to reduce the Fund's expenses.
For its services, the Advisor receives an annual fee, payable monthly, of
0.25% of the Fund's average daily net assets. Advisory fees are allocated among
classes as a Portfolio-level expense based on net assets.
Subadvisor
Bridgeway Capital Management Inc. is controlled by John Montgomery and his
family. The Subadvisor receives a subadvisory fee, paid by the Fund. The
investment subadvisory agreement between Bridgeway Capital Management and the
Fund provides that the Subadvisor is entitled to a base annual fee ("Base Fee"),
payable monthly, of 0.45% of the Fund's average daily net assets. The
Subadvisor may earn (or have its base fee reduced by) a performance fee
adjustment ("Performance Fee"), which shall vary with the Fund's performance
over a "performance period" as compared to a "benchmark index" and will range
from a minimum of -0.25% to a maximum of +0.25% based on the extent to which
performance exceeds or trails the S&P 500 Index, the Fund's benchmark index
until such time as the Securities and Exchange Commission permits use of the
Lipper indices as appropriate index benchmarks; such permission cannot be
guaranteed. The performance rate adjustment will be 1.67% times the difference
between the
performance of the Fund and that of the benchmark index, except that there will
be no performance adjustment if the difference between the Fund performance and
the benchmark Index performance is less than or equal to 2%. The performance
period would be the most recent one-year period ending on the last day of the
previous month that the New York Stock Exchange was open for trading. For
purposes of calculating the base fee, net assets would be averaged over the most
recent month, and for purposes of calculating the performance fee, net assets
would be averaged over the rolling one-year performance period.
The Subadvisor is seeking permission (in the form of a "no action
letter") from the Securities and Exchange Commission with respect to the
accounting methodology to be applied to the calculation of the performance fee.
If the Subadvisor receives such no action letter acceptable to the Advisor (at
its sole discretion and determination), the performance period will be five
years and the benchmark index used will be the S&P 500 Index with dividends
reinvested. The performance rate adjustment would then be 1.67% times the
difference between the performance of the Fund and that of the benchmark index,
except that there will be no performance adjustment if the difference between
the Fund performance and the benchmark Index performance is less than or equal
to 2%. The performance period would be the most recent five-year period ending
on the last day of the previous quarter (March, June, September, or December)
that the New York Stock Exchange was open for trading. For purposes of
calculating the performance fee, the performance rate would be multiplied times
the current net assets. Thus, the net assets used to calculate the performance
fee and the base fee would be the same.
The Fund has received an exemptive order to permit the Fund and the Advisor
to enter into and materially amend the Investment Subadvisory Agreement without
shareholder approval. Within 90 days of the hiring of any Subadvisor or the
implementation of any proposed material change in the Investment Subadvisory
Agreement, the Fund will furnish its shareholders information about the new
Subadvisor or Investment Subadvisory Agreement that would be included in a proxy
statement. Such information will include any change in such disclosure caused by
the addition of a new Subadvisor or any proposed material change in the
Investment Subadvisory Agreement of the Fund. The Fund will meet this condition
by providing shareholders, within 90 days of the hiring of the Subadvisor or
implementation of any material change to the terms of an Investment Subadvisory
Agreement, with an information statement to this effect.
<PAGE>
administrative services agent
-----------------------------
Calvert Administrative Services Company ("CASC"), an affiliate of the
Advisor, has been retained by the Fund to provide certain administrative
services necessary to the conduct of its affairs, including the preparation of
regulatory filings and shareholder reports. For providing such services, CASC
receives an annual administrative service fee payable monthly (as a percentage
of net assets) as follows:
Class A, B, and C Class I
0.20% 0.10%
Administrative services fee are allocated among classes as a class-level
expense based on net assets.
method of distribution
----------------------
Calvert Distributors, Inc. ("CDI") is the principal underwriter and
distributor for the Fund. CDI is an affiliate of the Fund's Advisor. Under the
terms of its underwriting agreement with the Fund, CDI markets and distributes
the Fund's shares and is responsible for preparing advertising and sales
literature, and printing and mailing prospectuses to prospective investors.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the Fund
has adopted Distribution Plans (the "Plans") which permit the Fund to pay
certain expenses associated with the distribution of its shares. Such expenses
may not exceed, on an annual basis, 0.25% of the Fund's Class A average daily
net assets.
Expenses under the Fund's Class B and Class C Plans may not exceed, on an annual
basis, 1.00% of the average daily net assets of Class B and Class C,
respectively. Class I has no Distribution Plan. Class A Distribution Plans
reimburse CDI only for expenses it incurs, while the Class B and C Distribution
Plans compensate CDI at a set rate regardless of CDI's expenses. Distribution
Plan expenses may be spent for advertising, printing and mailing of prospectuses
to persons who are not already Fund shareholders, compensation to
broker/dealers, underwriters, and salespersons, and, for Class B, interest and
finance charges.
The Fund's Distribution Plans were approved by the Board of Directors,
including the Directors who are not "interested persons" of the Fund (as that
term is defined in the Investment Company Act of 1940) and who have no direct or
indirect financial interest in the operation of the Plans or in any agreements
related to the Plans. The selection and nomination of the Directors who are not
interested persons of the Fund is committed to the discretion of such
disinterested Directors. In establishing the Plans, the Directors considered
various factors including the amount of the distribution expenses. The Directors
determined that there is a reasonable likelihood that the Plans will benefit the
Fund and its shareholders, including economies of scale at higher asset levels,
better investment opportunities and more flexibility in managing a growing
portfolio.
The Plans may be terminated by vote of a majority of the non-interested
Directors who have no direct or indirect financial interest in the Plans, or by
vote of a majority of the outstanding shares of the Fund. If the Fund should
ever switch to a new principal underwriter without terminating the Class B Plan,
the fee would be prorated between CDI and the new principal underwriter. Any
change in the Plans that would materially increase the distribution cost to a
Class requires approval of the shareholders of the affected class; otherwise,
the Plans may be amended by the Directors, including a majority of the
non-interested Directors as described above. The Plans will continue in effect
for successive one-year terms provided that such continuance is specifically
approved by: (i) the vote of a majority of the Directors who are not parties to
the Plans or interested persons of any such party and who have no direct or
indirect financial interest in the Plans, and (ii) the vote of a majority of the
entire Board of Directors.
Apart from the Plans, the Advisor and CDI, at their own expense, may incur
costs and pay expenses associated with the distribution of shares of the Fund.
The Advisor and/or CDI may pay certain firms compensation based on sales of Fund
shares or on assets held in those Firm's accounts for their marketing and
distribution of the Fund shares, above the usual sales charges and service fees.
CDI makes a continuous offering of the Fund's securities on a "best
efforts" basis. Under the terms of the agreement, CDI is entitled to receive,
pursuant to the Distribution Plans, a distribution fee and a service fee from
the Fund based on the average daily net assets of each class. These fees are
paid pursuant to the Fund's Distribution Plan.
Class A shares are offered at net asset value plus a front-end sales charge as
follows:
As a % of As a % of Allowed to
Amount of offering net amount Brokers as a % of
Investment price invested offering price
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less than $100,000 3.75% 3.90% 3.00%
$100,000 but less than $250,000 2.75% 2.83% 2.25%
$250,000 but less than $500,000 1.75% 1.78% 1.25%
$500,000 but less than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.00%
CDI receives any front-end sales charge or CDSC paid. A portion of the
front-end sales charge may be reallowed to dealers.
Fund Directors and certain other affiliated persons of the Fund are exempt
from the sales charge since the distribution costs are minimal to persons
already familiar with the Fund. Other groups (i.e., group retirement plans) are
exempt due to economies of scale in distribution. See Exhibit A to the
Prospectus.
Transfer and shareholder servicing agentS
-----------------------------------------
National Financial Data Services, Inc. ("NFDS"), a subsidiary of State
Street Bank & Trust, has been retained by the Fund to act as transfer agent and
dividend disbursing agent. These responsibilities include: responding to certain
shareholder inquiries and instructions, crediting and debiting shareholder
accounts for purchases and redemptions of Fund shares and confirming such
transactions, and daily updating of shareholder accounts to reflect declaration
and payment of dividends.
Calvert Shareholder Services, Inc. ("CSSI"), a subsidiary of Calvert Group,
Ltd. and Acacia, has been retained by the Fund to act as shareholder servicing
agent. Shareholder servicing responsibilities include responding to shareholder
inquiries and instructions concerning their accounts, entering any telephoned
purchases or redemptions into the NFDS system, maintenance of broker-dealer
data, and preparing and distributing statements to shareholders regarding their
accounts.
For these services, CSSI receives a fee of $6 per shareholder account and
$0.65 per transaction.
portfolio transactions
----------------------
Fund transactions are undertaken on the basis of their desirability from an
investment standpoint. The Fund's Advisor and Subadvisor make investment
decisions and the choice of brokers and dealers under the direction and
supervision of the Fund's Board of Directors.
Broker-dealers who execute portfolio transactions on behalf of the Fund are
selected on the basis of their execution capability and trading expertise
considering, among other factors, the overall reasonableness of the brokerage
commissions, current market conditions, size and timing of the order, difficulty
of execution, per share price, market familiarity, reliability, integrity, and
financial condition, subject to the Advisor/Subadvisor obligation to seek best
execution. The Advisor or Subadvisor may also consider sales of Fund shares as a
factor in the selection of brokers, again, subject to best execution (i.e., the
Fund will not "pay up" for such transactions.)
While the Fund's Advisor and Subadvisor select brokers primarily on the
basis of best execution, in some cases they may direct transactions to brokers
based on the quality and amount of the research and research-related services
which the brokers provide to them. These research services include advice,
either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling securities,
and the availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or industries;
providing information on economic factors and trends; assisting in determining
portfolio strategy; providing computer software used in security analyses;
providing portfolio performance evaluation and technical market analyses; and
providing other services relevant to the investment decision making process.
Other such services are designed primarily to assist the Advisor in monitoring
the investment activities of the Subadvisor of the Fund. Such services include
portfolio attribution systems, return-based style analysis, and trade-execution
analysis.
The Advisor and/or Subadvisor may also direct selling concessions and/or
discounts in fixed-price offerings for research services.
If, in the judgment of the Advisor or Subadvisor, the Fund or other accounts
managed by them will be benefited by supplemental research services, they are
authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. It is the policy of the Advisor that such
research services will be used for the benefit of the Fund as well as other
Calvert Group funds and managed accounts.
Personal securities transactions
--------------------------------
The Fund, its Advisor, and principal underwriter have adopted a Code of
Ethics pursuant to Rule 17j-1 of the Investment Company Act of 1940. The Code of
Ethics is designed to protect the public from abusive trading practices and to
maintain ethical standards for access persons as defined in the rule when
dealing with the public. The Code of Ethics permits the Fund's investment
personnel to invest in securities that maybe purchased or held by the Fund. The
Code of Ethics contains certain conditions such as preclearance and restrictions
on use of material information.
independent accountant and custodians
-------------------------------------
Arthur Andersen LLP has been selected by the Board of Directors to serve as
independent accountants for fiscal year 2000. State Street Bank & Trust Company,
N.A., 225 Franklin Street, Boston, MA 02110, serves as custodian of the Fund's
investments. Allfirst Financial, Inc., 25 South Charles Street, Baltimore,
Maryland 21203 also serves as custodian of certain of the Fund's cash assets.
The custodians have no part in deciding the Fund's investment policies or the
choice of securities that are to be purchased or sold for the Fund.
FINANCIAL STATEMENTS
--------------------
The Fund's audited financial statements are included at Schedule A of this
Statement of Additional Information.
general information
-------------------
The Fund is a series of Calvert Impact Fund, Inc., an open-end management
investment company organized as a Maryland corporation on August 10, 2000. The
Fund is diversified. Each share represents an equal proportionate interest
with each other share and is entitled to such dividends and distributions out of
the income belonging to such class as declared by the Board. The Fund offers
four separate classes of shares: Class A, Class B, Class C, and Class I. Each
class represents interests in the same portfolio of investments but, as further
described in the prospectus, each class is subject to differing sales charges
and expenses, which differences will result in differing net asset values and
distributions. Upon any liquidation of the Fund, shareholders of each class are
entitled to share pro rata in the net assets belonging to that series available
for distribution.
The Fund is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes such as electing Directors, changing
fundamental policies, or approving a management contract. As a shareholder, you
receive one vote for each share of a Fund you own. Matters affecting classes
differently, such as Distribution Plans, will be voted on separately by class.
appendix
--------
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
Corporate Bonds:
Description of Moody's Investors Service Inc.'s/Standard & Poor's bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. This rating indicates an extremely strong capacity to pay principal and
interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree. They are rated lower
than the best bonds because margins of protection may not be as large as in Aaa
securities, fluctuation of protective elements may be of greater amplitude, or
there may be other elements present which make long-term risks appear somewhat
larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to principal
and interest are considered adequate, but elements may be present which make the
bond somewhat more susceptible to the adverse effects of circumstances and
economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay principal and
interest. Whereas they normally exhibit adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to lead to a
weakened capacity to pay principal and interest for bonds in this category than
for bonds in higher rated categories.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is regarded as
predominantly speculative with respect to capacity to pay interest and repay
principal. The higher the degree of speculation, the lower the rating. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C/C: This rating is only for income bonds on which no interest is being
paid.
D: Debt in default; payment of interest and/or principal is in arrears.
Commercial Paper:
MOODY'S INVESTORS SERVICE, INC.:
The Prime rating is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation of
the issuer's products in relation to competition and customer acceptance; (4)
liquidity; (5) amount and quality of long-term debt; (6) trend of earnings over
a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management of
obligations which may be present or may arise as a result of public interest
questions and preparations to meet such obligations. Issuers within this Prime
category may be given ratings 1, 2, or 3, depending on the relative strengths of
these factors.
STANDARD & POOR'S CORPORATION:
Commercial paper rated A by Standard & Poor's has the following
characteristics: (i) liquidity ratios are adequate to meet cash requirements;
(ii) long-term senior debt rating should be A or better, although in some cases
BBB credits may be allowed if other factors outweigh the BBB; (iii) the issuer
should have access to at least two additional channels of borrowing; (iv) basic
earnings and cash flow should have an upward trend with allowances made for
unusual circumstances; and (v) typically the issuer's industry should be well
established and the issuer should have a strong position within its industry and
the reliability and quality of management should be unquestioned. Issuers rated
A are further referred to by use of numbers 1, 2 and 3 to denote the relative
strength within this highest classification.
<PAGE>
LETTER OF INTENT
----------------
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the Letter of
Intent option on my Fund Account Application Form, I agree to be bound by the
terms and conditions applicable to Letters of Intent appearing in the Prospectus
and the Statement of Additional Information for the Fund and the provisions
described below as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters of Intent.
I intend to invest in the shares of:_____________________ (Fund name)
during the thirteen (13) month period from the date of my first purchase
pursuant to this Letter (which cannot be more than ninety (90) days prior to the
date of this Letter or my Fund Account Application Form, whichever is
applicable), an aggregate amount (excluding any reinvestments of distributions)
of at least fifty thousand dollars ($50,000) which, together with my current
holdings of the Fund (at public offering price on date of this Letter or my Fund
Account Application Form, whichever is applicable), will equal or exceed the
amount checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms of escrow,
to which I hereby agree, each purchase occurring after the date of this Letter
will be made at the public offering price applicable to a single transaction of
the dollar amount specified above, as described in the Fund's prospectus. "Fund"
in this Letter of Intent shall refer to the Fund. No portion of the sales charge
imposed on purchases made prior to the date of this Letter will be refunded.
I am making no commitment to purchase shares, but if my purchases within
thirteen months from the date of my first purchase do not aggregate the minimum
amount specified above, I will pay the increased amount of sales charges
prescribed in the terms of escrow described below. I understand that 4.75% of
the minimum dollar amount specified above will be held in escrow in the form of
shares (computed to the nearest full share). These shares will be held subject
to the terms of escrow described below.
From the initial purchase (or subsequent purchases if necessary), 4.75% of
the dollar amount specified in this Letter shall be held in escrow in shares of
the Fund by the Fund's transfer agent. For example, if the minimum amount
specified under the Letter is $50,000, the escrow shall be shares valued in the
amount of $2,375 (computed at the public offering price adjusted for a $50,000
purchase). All dividends and any capital gains distribution on the escrowed
shares will be credited to my account.
If the total minimum investment specified under the Letter is completed
within a thirteen month period, escrowed shares will be promptly released to me.
However, shares disposed of prior to completion of the purchase requirement
under the Letter will be deducted from the amount required to complete the
investment commitment.
Upon expiration of this Letter, the total purchases pursuant to the Letter
are less than the amount specified in the Letter as the intended aggregate
purchases, Calvert Distributors, Inc. ("CDI") will bill me for an amount equal
to the difference between the lower load I paid and the dollar amount of sales
charges which I would have paid if the total amount purchased had been made at a
single time. If not paid by the investor within 20 days, CDI will debit the
difference from my account. Full shares, if any, remaining in escrow after the
aforementioned adjustment will be released and, upon request, remitted to me.
I irrevocably constitute and appoint CDI as my attorney-in-fact, with full
power of substitution, to surrender for redemption any or all escrowed shares on
the books of the Fund. This power of attorney is coupled with an interest.
The commission allowed by CDI to the broker-dealer named herein shall be at
the rate applicable to the minimum amount of my specified intended purchases.
The Letter may be revised upward by me at any time during the
thirteen-month period, and such a revision will be treated as a new Letter,
except that the thirteen-month period during which the purchase must be made
will remain unchanged and there will be no retroactive reduction of the sales
charges paid on prior purchases.
In determining the total amount of purchases made hereunder, shares
disposed of prior to termination of this Letter will be deducted. My
broker-dealer shall refer to this Letter of Intent in placing any future
purchase orders for me while this Letter is in effect.
Dealer Name of Investor(s)
By
Authorized Signer Address
Date Signature of Investor(s)
Date Signature of Investor(s)
