<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
____________________, 199___
Acquisition of the Assets of
CALVERT TAX-FREE RESERVES--
NEW JERSEY MONEY MARKET PORTFOLIO
4550 Montgomery Avenue,
Suite 1000N Bethesda,
Maryland 20814
By and in Exchange for Shares of
CALVERT TAX-FREE RESERVES--MONEY MARKET PORTFOLIO
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
This Statement of Additional Information dated _______
___, 199___, relates to the proposed transfer of assets of
Calvert Tax-Free Reserves--New Jersey Money Market Portfolio to
Calvert Tax-Free Reserves Money Market Portfolio. The Statement
consists of this cover page and the Statement of Additional
Information of Calvert Tax-Free Reserves Money Market Portfolio
dated April 30, 1995, and an unaudited balance sheet and
statement of operations for the Calvert Tax-Free Reserves Money
Market Portfolio as of June 30, 1995.
This Statement of Additional information is not a
prospectus.
A Prospectus/Proxy Statement dated ___________ ___, 199___,
relating to the above-referenced matter may be obtained from The
Calvert Group,
Ltd., 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland
20814. This Statement of Additional information relates to, and
should be read in conjunction with, such Prospectus/Proxy
Statement.
The date of this Statement of Information is ____________ ___, 199___.
<PAGE>
Calvert Tax-Free Reserves
Money Market Portfolio
Limited-Term Portfolio
Statement of Additional Information
April 30, 1995
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TRANSFER AGENT
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
217 Redwood Street
Baltimore, Maryland 21202-3316
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 3
Purchases and Redemptions of Shares 4
Reduced Sales Charges (Class A) 5
Dividends and Distributions 5
Tax Matters 6
Valuation of Shares 7
Calculation of Yield and Total Return 8
Advertising 10
Trustees and Officers 10
Investment Advisor 13
Administrative Services 14
Independent Accountants and Custodians 14
Method of Distribution 14
Portfolio Transactions 15
General Information 16
Financial Statements 16
Appendix 16
STATEMENT OF ADDITIONAL INFORMATION-April 30, 1995
CALVERT TAX-FREE RESERVES
Money Market Portfolio
Limited-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account Information: (800) 368-2748
(301) 951-4820
Shareholder Services: (800) 368-2745
(301) 951-4810
Broker Services: (800) 368-2746
(301) 951-4850
TDD for the Hearing-Impaired:
(800) 541-1524
This Statement of Additional Information is not a prospectus.
Investors should read the Statement of Additional Information in
conjunction with the Calvert Tax-Free Reserves Prospectus, dated April
30, 1995, which may be obtained free of charge by writing the Fund at
the above address or calling the telephone numbers listed above.
INVESTMENT OBJECTIVE
The Money Market and Limited-Term Portfolios (the "Portfolios")
are series of Calvert Tax-Free Reserves (the "Fund"), and are designed
to provide individual and institutional investors in higher tax brackets
with the highest level of interest income exempt from federal income
taxes as is consistent with prudent investment management, preservation
of capital, and the quality and maturity characteristics prescribed for
each Portfolio. The Money Market Portfolio further seeks to maintain a
constant net asset value of $1.00 per share. There is, of course, no
assurance that the Portfolios will be successful in meeting their
investment objectives or maintaining the Money Market Portfolio's net
asset value constant at $1.00 per share because there are inherent risks
in the ownership of any investment.
Dividends paid by the Portfolios will fluctuate with income
earned on investments. In addition, the dividends and distributions paid
and the value of each share will vary by class of shares; the value of
the Limited-Term Portfolio's shares will fluctuate to reflect changes in
the market value of the Portfolio's investments. The Portfolios will
attempt, through careful management and diversification, to reduce these
risks and enhance the opportunities for higher income and greater price
stability.
INVESTMENT POLICIES
The Money Market Portfolio and Limited-Term Portfolio each
invest primarily in a diversified portfolio of municipal obligations
whose interest is exempt from federal income tax. The Portfolios differ
in their anticipated income yields, quality, length of average weighted
maturity, and capital value volatility. A complete explanation of
municipal obligations and municipal bond and note ratings is set forth
in the Appendix.
The credit rating of each Portfolio's assets as of its most
recent fiscal year-end appears in the Annual Report to Shareholders,
incorporated by reference herein.
Variable Rate Demand Notes
The Board of Trustees has approved investments in floating and
variable rate demand notes upon the following conditions: the Fund has
right of demand, upon notice not to exceed thirty days, against the
issuer to receive payment; the issuer will be able to make payment upon
such demand, either from its own resources or through an unqualified
commitment from a third party; and the rate of interest payable is
calculated to ensure that the market value of such notes will
approximate par value on the adjustment dates. The remaining maturity of
such demand notes is deemed the period remaining until such time as the
Fund has the right to dispose of the notes at a price which approximates
par and market value.
Municipal Leases
The Portfolio may invest in municipal leases, or structured instruments
where the underlying security is a municipal lease. A municipal lease is
an obligation of a government or governmental authority, not subject to
voter approval, used to finance capital projects or equipment
acquisitions and payable through periodic rental payments. The Portfolio
may purchase unrated leases. The Fund's Advisor, under the supervision
of the Board of Trustees/Directors, is responsible for determining the
credit quality of such leases on an ongoing basis, including an
assessment of the likelihood that the lease will not be canceled.
Certain municipal leases may be considered illiquid and subject to the
Portfolio's limit on illiquid securities. The Board of
Trustees/Directors has directed the Advisor to treat a municipal lease
as a liquid security if it satisfies the following conditions: (A) such
treatment must be consistent with the Portfolio's investment
restrictions; (B) the Advisor should be able to conclude that the
obligation will maintain its liquidity throughout the time it is held by
the Portfolio, based on the following factors: (1) whether the lease may
be terminated by the lessee; (2) the potential recovery, if any, from a
sale of the leased property upon termination of the lease; (3) the
lessee's general credit strength (e.g., its debt, administrative,
economic and financial characteristics and prospects); (4) the
likelihood that the lessee will discontinue appropriating funding for
the leased property because the property is no longer deemed essential
to its operations (e.g., the potential for an "event of
nonappropriation"), and (5) any credit enhancement or legal recourse
provided upon an event of nonappropriation or other termination of the
lease; (C) the Advisor should determine whether the obligation can be
disposed of within seven days in the ordinary course of business at
approximately the amount at which the Portfolio has valued it for
purposes of calculating the Portfolio's net asset value, taking into
account the following factors: (1) the frequency of trades and quotes;
(2) the volatility of quotations and trade prices; (3) the number of
dealers willing to purchase or sell the security and the number of
potential purchasers; (4) dealer undertakings to make a market in the
security; (5) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security,
the method of soliciting offers, and the mechanics of the transfer); (6)
the rating of the security and the financial condition and prospects of
the issuer; and (7) other factors relevant to the Portfolio's ability to
dispose of the security; and (D) the Advisor should have reasonable
expectations that the municipal lease obligation will maintain its
liquidity throughout the time the instrument is held by the Portfolio.
Obligations with Puts Attached
The Fund has authority to purchase securities at a price which
would result in a yield to maturity lower than that generally offered by
the seller at the time of purchase when it can acquire at the same time
the right to sell the securities back to the seller at an agreed upon
price at any time during a stated period or on a certain date. Such a
right is generally denoted as a "put." A Portfolio may not acquire
obligations subject to puts if immediately thereafter, with respect to
75% of the total amortized cost value of its assets, that Portfolio
would have more than 5% of its assets invested in securities underlying
puts from the same institution. A Portfolio may, however, invest up to
10% of its assets in securities underlying unconditional puts from the
same institution. Unconditional puts are readily exercisable in the
event of a default in payment of principal or interest on the underlying
securities. The Money Market Portfolio must limit its portfolio
investments, including puts, to instruments of high quality as
determined by a nationally recognized statistical rating organization.
Temporary Investments
Short-term money market type investments consist of:
obligations of the U.S. Government, its agencies and instrumentalities;
certificates of deposit of banks with assets of one billion dollars or
more; commercial paper or other corporate notes of investment grade
quality; and any of such items subject to short-term repurchase
agreements.
The Fund intends to minimize taxable income through investment,
when possible, in short-term tax-exempt securities. To minimize taxable
income, the Fund may also hold cash which is not earning income. It is a
fundamental policy of the Fund that during normal market conditions the
Fund's assets be invested so that at least 80% of the Fund's annual
income will be tax-exempt. While the Fund has the authority to invest in
short-term taxable obligations, the Fund has not done so since its
inception and, barring unusual market conditions, does not expect in the
future to invest in taxable obligations.
When-Issued Purchases
Securities purchased on a when-issued basis and the securities
held in the Fund's Portfolios are subject to changes in market value
based upon the public's perception of the creditworthiness of the issuer
and changes in the level of interest rates (which will generally result
in both changing in value in the same way, i.e., both experiencing
appreciation when interest rates decline and depreciation when interest
rates rise). Therefore, if in order to achieve higher interest income,
the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility that the market value of the Fund's assets may vary. No new
when-issued commitments will be made by a Portfolio if more than 50% of
that Portfolio's net assets would become so committed.
When the time comes to pay for when-issued securities, the Fund
will meet its obligations from then available cash flow, sale of
securities or, although it would not normally expect to do so, from sale
of the when-issued securities themselves (which may have a market value
greater or less than the Fund's payment obligation). Sale of securities
to meet such obligations carries with it a greater potential for the
realization of capital losses and capital gains which are not exempt
from federal income tax.
INVESTMENT RESTRICTIONS
The foregoing investment objective and policies and the
following investment restrictions and fundamental policies may not be
changed without the consent of the holders of a majority of the Fund's
outstanding shares, including a majority of the shares of each
Portfolio. Shares have equal rights as to voting, except that only
shares of a Portfolio are entitled to vote on matters affecting only
that Portfolio (such as changes in investment objective, policies or
restrictions). A majority of the shares means the lesser of (i) 67% of
the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the
outstanding shares. Neither Portfolio may:
(1) Purchase common stocks, preferred stocks, warrants,
or other equity securities;
(2) Issue senior securities, borrow money, or pledge,
mortgage, or hypothecate its assets, except as may be
necessary to secure borrowings from banks for temporary
or emergency (not leveraging) purposes and then in an
amount not greater than 10% of the value of the
Portfolio's total assets at the time of the borrowing.
Investment securities will not be purchased while any
borrowings are outstanding;
(3) Sell securities short, purchase securities on
margin, or write put or call options. The Fund reserves
the right to purchase securities with puts attached.
See "Obligations with Puts Attached";
(4) Underwrite the securities of other issuers, except
to the extent that the purchase of municipal
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) Purchase securities which are subject to legal or
contractual restrictions on resale, i.e., restricted
securities, or other securities which are not readily
marketable assets, including repurchase agreements not
terminable within seven days, with respect to no more
than 10% of its total assets;
(6) Purchase or sell real estate, real estate
investment trust securities, commodities, or commodity
contracts, or oil and gas interests, but this shall not
prevent the Fund from investing in municipal
obligations secured by real estate or interests therein;
(7) Purchase or retain securities of an issuer if those
trustees of the Fund, each of whom owns more than 1/2
of 1% of the outstanding securities of such issuer,
together own more than 5% of such outstanding
securities;
(8) Make loans to others, except in accordance with the
Fund's investment objective and policies or pursuant to
contracts providing for the compensation of service
providers by compensating balances;
(9) Invest in companies for the purpose of exercising
control; or invest in securities of other investment
companies, except as they may be acquired as part of a
merger, consolidation or acquisition of assets, or in
connection with a trustee's/director's deferred
compensation plan, as long as there is no duplication
of advisory fees;
(10) Invest more than 25% of its assets in the
securities of any one issuer or of issuers located
within the same state, except that each Portfolio may
invest more than 25% of its assets in obligations
issued or guaranteed by the U.S. Government, its
agencies or instrumentalities. For purposes of this
limitation, the entity which has the ultimate
responsibility for the payment of principal and
interest on a particular security will be treated as
its issuer;
(11) Invest more than 25% of its assets in any
particular industry or industries, except that either
Portfolio may invest more than 25% of its assets in
obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.
Industrial development bonds, where the payment of
principal and interest is the responsibility of
companies within the same industry, are grouped
together as an "industry";
(12) Invest more than 5% of the value of its total
assets in securities where the payment of principal and
interest is the responsibility of a company or
companies with less than three years' operating history.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will not be issued unless requested in
writing by the investor. No charge will be made for share certificate
requests. No certificates will be issued for fractional shares.
Draft writing is available for the Money Market Portfolio.
Shareholders wishing to use the draft writing service should complete
the signature card enclosed with the Investment Application. This
service will be subject to the customary rules and regulations governing
checking accounts, and the Portfolio reserves the right to change or
suspend the service. Generally, there is no charge to you for the
maintenance of this service or the clearance of drafts, but the
Portfolio reserves the right to charge a service fee for drafts returned
for insufficient funds. As a service to shareholders, the Portfolio may
automatically transfer the dollar amount necessary to cover drafts you
have written on the Portfolio to your account from any other of your
identically registered accounts in Calvert money market funds or Calvert
Insured Plus. The Portfolio may charge a fee for this service.
Drafts presented to the Custodian for payment which would
require the redemption of shares purchased by check or electronic funds
transfer within the previous 10 business days will not be honored.
When a payable through draft ("check") is presented for
payment, a sufficient number of full and fractional shares from the
shareholder's account to cover the amount of the draft will be redeemed
at the net asset value next determined. If there are insufficient shares
in the shareholder's account, the draft will be returned.
To change redemption instructions already given, shareholders
must send a written notice to Calvert Group, c/o NFDS, 6th Floor, 1004
Baltimore, Kansas City, MO 64105, with a voided copy of a check for the
bank wiring instructions to be added. If a voided check does not
accompany the request, then the request must be signature guaranteed by
a commercial bank, savings and loan association, trust company, member
firm of any national securities exchange, or credit union. Further
documentation may be required from corporations, fiduciaries, and
institutional investors.
The right of redemption may be suspended or the date of payment
postponed for any period during which the New York Stock Exchange is
closed (other than customary weekend and holiday closings), when trading
on the New York Stock Exchange is restricted, or an emergency exists, as
determined by the SEC, or if the Commission has ordered such a
suspension for the protection of shareholders. Redemption proceeds are
normally mailed or wired the next business day after a proper redemption
request has been received, unless redemptions have been suspended or
postponed as described above.
REDUCED SALES CHARGES (CLASS A)
The Limited-Term Portfolio imposes reduced sales charges for
Class A shares in certain situations in which the Principal Underwriter
(which offers the Portfolio's shares continuously and on a "best
efforts" basis) and the dealers selling Limited-Term Portfolio shares
may expect to realize significant economies of scale with respect to
such sales. Generally, sales costs do not increase in proportion to the
dollar amount of the shares sold; the per-dollar transaction cost for a
sale to an investor of shares worth, say, $5,000 is generally much
higher than the per-dollar cost for a sale of shares worth $1,000,000.
Thus, the applicable sales charge declines as a percentage of the dollar
amount of shares sold as the dollar amount increases.
When a shareholder agrees to make purchases of shares over a
period of time totaling a certain dollar amount pursuant to a Letter of
Intent, the Underwriter and selling dealers can expect to realize the
economies of scale applicable to that stated goal amount. Thus the
Portfolio imposes the sales charge applicable to the goal amount.
Similarly, the Underwriter and selling dealers also experience cost
savings when dealing with existing Portfolio shareholders, enabling the
Portfolio to afford existing shareholders the Right of Accumulation. The
Underwriter and selling dealers can also expect to realize economies of
scale when making sales to the members of certain qualified groups which
agree to facilitate distribution of Portfolio shares to their members.
See "Exhibit A - Reduced Sales Charges" in the Limited-Term Prospectus.
DIVIDENDS AND DISTRIBUTIONS
The Money Market Portfolio declares daily and pays monthly
dividends of its daily net income to shareholders of record as of the
close of business each business day, thus allowing daily compounding of
dividends. The Limited-Term Portfolio declares and pays monthly
dividends of its net income to shareholders of record as of the close of
business on each designated monthly record date. Dividends and
distributions paid by the Limited-Term Portfolio may differ among the
classes. Net investment income consists of the interest income earned on
investments (adjusted for amortization of original issue discounts or
premiums or market premiums), less estimated expenses. Capital gains, if
any, are normally paid once a year and will be automatically reinvested
at net asset value in additional shares. Dividends and any distributions
are automatically reinvested in additional shares of the Fund, unless
you elect to have the dividends of $10 or more paid in cash (by check or
by Calvert Money Controller). You may also request to have your
dividends and distributions from the Portfolio invested in shares of any
other Calvert Group Fund, subject to the applicable sales charge for
that Fund or Portfolio. If you elect to have dividends and/or
distributions paid in cash, and the U.S. Postal Service cannot deliver
the check, or if it remains uncashed for six months, it, as well as
future dividends and distributions, will be reinvested in additional
shares.
Purchasers of shares of the Money Market Portfolio will begin
receiving dividends upon the date federal funds are received by the
Fund. Purchases by bank wire received by 12:30 p.m., Eastern time are
immediately available federal funds; purchases by domestic check may
take one day to convert into federal funds for the Money Market
Portfolio. Shareholders redeeming shares by telephone electronic funds
transfer or written request will receive dividends through the date that
the redemption request is received; Money Market Portfolio shareholders
redeeming shares by draft will receive dividends up to the date such
draft is presented to the Portfolio for payment.
TAX MATTERS
In 1994 the Fund did qualify and in 1995 the Fund intends to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code as amended (the "Code"). By so qualifying, the
Fund will not be subject to federal income tax, nor to the federal
excise tax imposed by the Tax Reform Act of 1986 (the "Act"), to the
extent that it distributes its net investment income and realized
capital gains.
The Fund's dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally
subject to federal income tax; however under the Act, dividends
attributable to interest on certain private activity bonds must be
included in federal alternative minimum taxable income for the purpose
of determining liability (if any) for individuals and for corporations.
Each Portfolio's dividends derived from taxable interest and
distributions of net short-term capital gains, whether taken in cash or
reinvested in additional shares, are taxable to shareholders as ordinary
income and do not qualify for the dividends received deduction for
corporations.
A shareholder may also be subject to state and local taxes on
dividends and distributions from the Fund. The Fund will notify
shareholders annually about the federal tax status of dividends and
distributions paid by the Fund and the amount of dividends withheld, if
any, during the previous year.
The Code provides that interest on indebtedness incurred or
continued in order to purchase or carry shares of a regulated investment
company which distributes exempt-interest dividends during the year is
not deductible. Furthermore, entities or persons who are "substantial
users" (or persons related to "substantial users") of facilities
financed by private activity bonds should consult their tax advisors
before purchasing shares of the Fund. "Substantial user" is generally
defined as including a "non-exempt person" who regularly uses in trade
or business a part of a facility financed from the proceeds of private
activity bonds.
Investors should note that the Code may require investors to
exclude the initial sales charge, if any, paid on the purchase of
Limited-Term Portfolio shares from the tax basis of those shares if the
shares are exchanged for shares of another Calvert Group Fund within 90
days of purchase. This requirement applies only to the extent that the
payment of the original sales charge on the shares of the Portfolio
causes a reduction in the sales charge otherwise payable on the shares
of the Calvert Group Fund acquired in the exchange, and investors may
treat sales charges excluded from the basis of the original sales as
incurred to acquire the new shares.
The Fund is required to withhold 31% of any long-term capital
gain dividends and 31% of each redemption transaction occurring in the
Limited-Term Portfolio 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 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 capital gain 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 Limited-Term Portfolio is required to report
to the Internal Revenue Service the following information with respect
to redemption transactions in the Portfolio: (a) the shareholder's name,
address, account number and taxpayer identification number; (b) the
total dollar value of the redemptions; and (c) the Portfolio'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; and foreign central
banks of issue. Non-resident aliens also are generally not subject to
either requirement but, along with certain foreign partnerships and
foreign corporations, may instead be subject to withholding under
section 1441 of the Code. Shareholders claiming exemption from backup
withholding and broker reporting should call or write the Fund for
further information.
VALUATION OF SHARES
Money Market Portfolio
The Money Market Portfolio's assets, including commitments to
purchase securities on a when-issued basis, are normally valued at their
amortized cost, which does not take into account unrealized capital
gains or losses. This involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on
the market value of the instrument. While this method provides certainty
in valuation, it may result in periods during which value, as determined
by amortized cost, is higher or lower than the price that would be
received upon sale of the instrument. During periods of declining
interest rates, the daily yield on shares of the Money Market Portfolio
may tend to be higher than a like computation made by a fund with
identical investments utilizing a method of valuation based upon market
prices and estimates of market prices for all of its portfolio
instruments. Thus, if the use of amortized cost by the Money Market
Portfolio resulted in a lower aggregate portfolio value on a particular
day, a prospective investor in the Portfolio would be able to obtain a
somewhat higher yield than would result from investment in a fund
utilizing solely market values, and existing investors in the Portfolio
would receive less investment income. The converse would apply in a
period of rising interest rates.
Rule 2a-7 under the Investment Company Act of 1940 permits the
Fund to value the assets of the Money Market Portfolio at amortized cost
if the Money Market Portfolio maintains a dollar-weighted average
maturity of 90 days or less and only purchases obligations having
remaining maturities of one year or less. Rule 2a-7 requires, as a
condition of its use, that the Money Market Portfolio invest only in
obligations determined by the Trustees to be of high quality with
minimal credit risks and further requires the Trustees to establish
procedures designed to stabilize, to the extent reasonably possible, the
Portfolio's price per share as computed for the purpose of sales and
redemptions at $1.00. Such procedures include review of the Portfolio's
investment holdings by the Trustees, at such intervals as they may deem
appropriate, to determine whether the Portfolio's net asset value
calculated by using available market quotations or equivalents deviates
from $1.00 per share based on amortized cost. If such deviation exceeds
0.50%, the Trustees will promptly consider what action, if any, will be
initiated. In the event the Trustees determine that a deviation exists
which may result in material dilution or other unfair results to
investors or existing shareholders, the Trustees will take such
corrective action as they regard as necessary and appropriate,
including: the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; the withholding of dividends or payment of distributions from
capital or capital gains; redemptions of shares in kind; or the
establishment of a net asset value per share based on available market
quotations.
Limited-Term Portfolio
The Limited-Term Portfolio's assets are valued, utilizing the
average bid dealer market quotation as furnished by an independent
pricing service. Securities and other assets for which market quotations
are not readily available are valued based on the current market for
similar securities or assets, as determined in good faith by the Fund's
Advisor under the supervision of the Board of Trustees.
Valuations, market quotations and market equivalents are
provided the Portfolio by Kenny S&P Evaluation Services, a subsidiary of
McGraw-Hill. The use of Kenny as a pricing service by the Portfolio has
been approved by the Board of Trustees. Valuations provided by Kenny are
determined without exclusive reliance on quoted prices and take into
consideration appropriate factors such as institution-size trading in
similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
Each Portfolio determines the net asset value of its shares
every business day at the close of the regular session of the New York
Stock Exchange (generally, 4:00 p.m. Eastern time), and at such other
times as may be necessary or appropriate. The Portfolios do 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, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
CALCULATION OF YIELD AND TOTAL RETURN
Money Market Portfolio
From time to time the Money Market Portfolio advertises its
"yield" and "effective yield." Both yield figures are based on
historical earnings and are not intended to indicate future performance.
The "yield" of the Money Market Portfolio refers to the income generated
by an investment in the Portfolio over a particular base period of time.
The length and closing date of the base period will be stated in the
advertisement. If the base period is less than one year, the yield is
then "annualized." That is, the net change, exclusive of capital
changes, in the value of a share during the base period is divided by
the net asset value per share at the beginning of the period, and the
result is multiplied by 365 and divided by the number of days in the
base period. Capital changes excluded from the calculation of yield are:
(1) realized gains and losses from the sale of securities, and (2)
unrealized appreciation and depreciation. The Money Market Portfolio's
"effective yield" for a seven-day period is its annualized compounded
yield during the period calculated according to the following formula:
Effective yield = (base period return + 1)365/7 - 1
For the seven-day period ended December 31, 1994, the Money Market
Portfolio's yield was 4.86% and its effective yield was 4.98%.
The Money Market Portfolio also may advertise, from time to
time, its "tax equivalent yield." The tax equivalent yield is the yield
an investor would be required to obtain from taxable investments to
equal the Portfolio's yield, all or a portion of which may be exempt
from federal income taxes. The tax equivalent yield is computed by
taking the portion of the Portfolio's effective yield exempt from
regular federal income tax and multiplying the exempt yield by a factor
based upon a stated income tax rate, then adding the portion of the
yield that is not exempt from regular federal income tax. The factor
which is used to calculate the tax equivalent yield is the reciprocal of
the difference between 1 and the applicable income tax rate, which will
be stated in the advertisement. For the seven-day period ended December
31, 1994, the Money Market Portfolio's tax equivalent yield, for an
investor in the 36% federal income tax bracket, was 7.78%, and, for the
39.6% federal income tax bracket, 8.25%.
Limited-Term Portfolio
From time to time, the Limited-Term Portfolio advertises its
"total return." Total return is calculated separately for each class.
Total return is historical in nature and is not intended to indicate
future performance. Total return will be quoted for the most recent
one-year period, five-year period, and period from inception of the
Portfolio's offering of shares. Total return quotations for periods in
excess of one year represent the average annual total return for the
period included in the particular quotation. Total return is a
computation of the Portfolio's dividend yield, plus or minus realized or
unrealized capital appreciation or depreciation, less fees and expenses.
All total return quotations reflect the deduction of the Portfolio's
maximum sales charge for Class A shares, except quotations of "overall
return" which do not deduct the sales charge and "actual return," which
reflect deduction of the sales charge only for those periods when a
sales charge was actually imposed. Thus, in the formula below, for
overall return, P = the entire $1,000 hypothetical initial investment
and does not reflect the deduction of any sales charge; for actual
return, P = a hypothetical initial payment of $1,000. Note: "Total
Return" as quoted in the Financial Highlights section of the Fund's
Prospectus and Annual Report to Shareholders, per SEC instructions, does
not reflect deduction of the sales charge, and corresponds to "overall"
return as referred to herein. Overall return should be considered only
by investors, such as participants in certain pension plans, to whom the
sales charge does not apply, or for purposes of comparison only with
comparable figures which also do not reflect sales charges, such as
Lipper averages. 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 1, 5 or 10 year
periods at the end of such periods (or portions thereof, if applicable).
The Limited-Term Portfolio also advertises, from time to time,
its "yield" and "tax equivalent yield." As with total return, both yield
figures are historical and are not intended to indicate future
performance.
Unlike the yield quotations for the Money Market Portfolio,
"yield" quotations for each class of the Limited-Term Portfolio refer to
the aggregate imputed yield-to-maturity of each of the Portfolio's
investments based on the market value as of the last day of a given
thirty-day or one-month period less accrued expenses (net of
reimbursement), divided by the average daily number of outstanding
shares entitled to receive dividends times the maximum offering price on
the last day of the period (so that the effect of the sales charge is
included in the calculation), compounded on a "bond equivalent," or
semi-annual, basis. The Limited-Term Portfolio's yield is computed
according to the following formula:
Yield = 2[(a-b/cd +1)6 - 1]
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursement); c = the average daily
number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the
last day of the period.
The tax equivalent yield is the yield an investor would be
required to obtain from taxable investments to equal the Limited-Term
Portfolio's yield, all or a portion of which may be exempt from federal
income taxes. The tax equivalent yield is computed for each class by
taking the portion of the yield exempt from regular federal income tax
and multiplying the exempt yield by a factor based upon a stated income
tax rate, then adding the portion of the yield that is not exempt from
regular federal income tax. The factor which is used to calculate the
tax equivalent yield is the reciprocal of the difference between 1 and
the applicable income tax rate, which will be stated in the
advertisement. For the thirty-day period ended December 31, 1994, the
Portfolio's yield for Class A Shares was 4.41% and its tax equivalent
yield was 6.89% for an investor in the 36% federal income tax bracket,
and 7.30% for an investor in the 39.6% federal income tax bracket. For
the same period. the yield for Class C Shares was 3.76% and its tax
equivalent yield was 5.88% for an investor in the 36% federal income tax
bracket. and 6.23% for an investor in the 39.6% federal income tax
bracket.
Periods Ended Class A Shares Class A Shares
December 31, 1994 Overall Return SEC Total Return
One Year 2.42% 0.36%
Five Years 4.87% 4.44%
Ten Years 5.87% 5.66%
Total return for the Fund's Class C shares from March 1, 1994
to December 31, 1994 was 1.43%.
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 portfolio holdings or give examples
or securities that may have been considered for inclusion in the
Portfolio, 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, Russell 2000/Small Stock Index, Mutual Fund Values
Morningstar Ratings, Mutual Fund Forecaster, Barron's, The Wall Street
Journal, and Schabacker Investment Management, Inc. Such averages
generally do not reflect any front- or back-end sales charges that may
be charged by Funds in that grouping. The Fund may also cite to any
source, whether in print or on-line, such as Bloomberg, in order to
acknowledge origin of information. 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. The Fund, its Advisor, and
its affiliates reserve the right to update performance rankings as new
rankings become available.
TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird age 48 is Director of
Finance for the Family Health Council, Inc. in Pittsburgh, Pennsylvania,
a non-profit corporation which provides family planning services,
nutrition, maternal/child health care, and various health screening
services. Mr. Baird is a trustee/director of each of the investment
companies in the Calvert Group of Funds, except for Acacia Capital
Corporation, Calvert New World Fund and Calvert World Values Fund.
Address: 211 Overlook Drive, Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz age 61 is a partner in
the law firm of Abrams, Blatz, Gran, Hendricks & Reina, P.A. Address:
900 Oak Tree Road, South Plainfield, New Jersey 07080.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts age 47 is a radiologist
with Kaiser Permanente. Prior to that, he was a radiologist at Bethlehem
Medical Imaging in Allentown, Pennsylvania. Address: 2040 Nuuanu Avenue
#1805, Honolulu, Hawaii 96817.
<F1>CHARLES E. DIEHL, Trustee. Mr. Diehl age 74 is Vice President and
Treasurer Emeritus of the George Washington University, and has retired
from University Support Services, Inc. of Herndon, Virginia. He is also
a Director of Acacia Mutual Life Insurance Company. Address: 1658 Quail
Hollow Court, McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman age 48 practices head
and neck reconstructive surgery in the Washington, D.C., metropolitan
area. Address: 7536 Pepperell Drive, Bethesda, Maryland 20817.
1. Officers and trustees deemed to be "interested persons" of the Fund
under the Investment Company Act of 1940, by virtue of of their
affiliation with the Fund's Advisor.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian age 64 is a principal of
Gavian De Vaux Associates, an investment banking firm. He was formerly
President of Corporate Finance of Washington, Inc. Address: 1953 Gallows
Road, Suite 130, Vienna, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey age 48 is chairman of the
Calvert Social Investment Foundation, organizing director of the
Community Capital Bank in Brooklyn, New York, and a financial consultant
to various organizations. In addition, he is a Director of the Community
Bankers Mutual Fund of Denver, Colorado, and the Treasurer and Director
of Silby, Guffey, and Co., Inc., a venture capital firm. Mr. Guffey is a
trustee/director of each of the other investment companies in the
Calvert Group of Funds, except for Acacia Capital Corporation and
Calvert New World Fund. Address: 7205 Pomander Lane, Chevy Chase,
Maryland 20815.
ARTHUR J. PUGH, Trustee. Mr. Pugh age 59 serves as a Director of
Acacia Federal Savings Bank. Address: 4823 Prestwick Drive, Fairfax,
Virginia 22030.
<F1>DAVID R. ROCHAT, Senior Vice President and Trustee. Mr.
Rochat age 59 is Executive Vice President of Calvert Asset Management Company,
Inc., Director and Secretary of Grady, Berwald and Co., Inc., and
Director and President of Chelsea Securities, Inc. Address: Box 93,
Chelsea, Vermont 05038.
<F1>D. WAYNE SILBY, Esq., Trustee. Mr. Silby age 48 is a
trustee/director of each of the investment companies in the Calvert
Group of Funds, except for Acacia Capital Corporation and Calvert New
World Fund. Mr. Silby is an officer, director and shareholder of Silby,
Guffey & Company, Inc., which serves as general partner of Calvert
Social Venture Partners ("CSVP"). CSVP is a venture capital firm
investing in socially responsible small companies. He is also a Director
of Acacia Mutual Life Insurance Company. Address: 1715 18th Street,
N.W., Washington, D.C. 20009.
<F1>CLIFTON S. SORRELL, JR., President and Trustee. Mr.
Sorrell age 55 serves as President, Chief Executive Officer and Vice Chairman
of Calvert Group, Ltd. and as an officer and director of each of its
affiliated companies. He is a director of Calvert-Sloan Advisers.
L.L.C., and a trustee/director of each of the investment companies in
the Calvert Group of Funds.
<F1>RENO J. MARTINI, Senior Vice President. Mr. Martini age 46 is
Senior Vice President of Calvert Group, Ltd., and Senior Vice President
and Chief Investment Officer of Calvert Asset Management Company, Inc.
Mr. Martini is also a director and President of Calvert-Sloan Advisers
L.L.C., and a director and officer of Calvert New World Fund.
<F1>ROBERT L. BENNETT, Vice President. Mr. Bennett age 55 is a
Director of Calvert Group, Ltd. and its subsidiaries, President of
Calvert Shareholder Services, Inc., and Executive Vice President of
Calvert Group, Ltd. He is an officer of each of the investment companies
in the Calvert Group of Funds, except for Calvert New World Fund.
<F1>RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer age 44 is
Senior Vice President and Controller of Calvert Group, Ltd. and its
subsidiaries and an officer of each of the other investment companies in
the Calvert Group of Funds. Mr. Wolfsheimer is Vice President and
Treasurer of Calvert-Sloan Advisers. L.L.C., and a director of Calvert
Distributors. Inc.
<F1>WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary.
Mr. Tartikoff age 49 is an officer of each of the investment companies in the
Calvert Group of Funds, and is Senior Vice President, Secretary, and
General Counsel of Calvert Group, Ltd., and each of its subsidiaries.
Mr. Tartikoff is Vice President and Secretary of Calvert-Sloan Advisers.
L.L.C., and is an officer of Acacia National Life Insurance Company.
<F1>EVELYNE S. STEWARD, Vice President. Ms. Steward age 44 is Senior
Vice President of Calvert Group, Ltd., and a director of Calvert-Sloan
Advisers. L.L.C.
<F1>DANIEL K. HAYES, Vice President. Mr. Hayes age 46 is Vice
President of Calvert Asset Management Company, Inc., and is an officer
of each of the other investment companies in the Calvert Group of Funds,
except for Calvert New World Fund.
<F1>Officers and trustees deemed to be "interested persons" of the Fund
under the Investment Company Act of 1940, by virtue of of their
affiliation with the Fund's Advisor.
<F1>SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender age 37
is Associate General Counsel of Calvert Group, Ltd., and an officer of
each of its subsidiaries and Calvert-Sloan Advisers. L.L.C. She is also
an officer of each of the other investment companies in the Calvert
Group of Funds.
<F1>BETH-ANN ROTH, Esq., Assistant Secretary. Ms. Roth age 42 is
Associate General Counsel of Calvert Group, Ltd., and an officer of each
of its subsidiaries and Calvert-Sloan Advisers. L.L.C. She is also an
officer of each of the other investment companies in the Calvert Group
of Funds.
<F1>Officers and trustees deemed to be "interested persons" of the Fund
under the Investment Company Act of 1940, by virtue of of their
affiliation with the Fund's Advisor.
Each of the above named trustees and officers is a trustee or
officer of each of the investment companies in the Calvert Group of
Funds with the exception of Calvert Social Investment Fund, of which
only Messrs. Baird, Guffey, Silby and Sorrell are among the Trustees,
Acacia Capital Corporation, of which only Messrs. Sorrell, Blatz, Diehl
and Pugh are among the Directors, Calvert World Values Fund, Inc., of
which only Messrs. Guffey, Silby, and Sorrell are among the Directors,
and Calvert New World Fund, Inc., of which only Messrs. Martini and
Sorrell are among the Directors. The address of Trustees and Officers,
unless otherwise noted, is 4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland 20814. Trustees and Officers as a group own less than
1% of the Portfolio's outstanding shares.
The Board's Audit Committee is composed of Messrs. Baird,
Blatz, Feldman, Guffey and Pugh. The Investment Policy Committee is
composed of Messrs. Borts, Diehl, Gavian, Rochat, Silby and Sorrell.
During 1994, Trustees of the Fund not affiliated with the
Fund's Advisor were paid $124,364 and $55,034 by the Money Market and
Limited-Term Portfolios, respectively. Trustees of the Fund not
affiliated with the Advisor currently receive an annual fee of $20,250
for service as a member of the Board of Trustees of the Calvert Group of
Funds plus a fee of $750 to $1200 for each Board and Committee meeting
attended; such fees are allocated among the Funds on the basis of their
net assets.
Trustees of the Fund 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 Trustees
Deferred Compensation Plan (shown as "Pension or Retirement Benefits
Accrued as part of Fund Expenses," below). 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, and will ensure that there is no duplication of
advisory fees.
Trustee Compensation Table
Fiscal Year 19995
(unaudited numbers)
Name of Trustee Aggregate Pension or Total Compensation
Compensation Retirement Benefits from Registrant
from Fund for Accrued as part of and Fund Complex
service as Fund Expenses<F2> paid to
Trustee Trustees<F3>
Richard L. Baird, Jr. $25,831 $0 $33,450
Frank H. Blatz, Jr. $23,265 $23,265 $26,042
Frederick T. Borts $20,135 $0 $25,050
Charles E. Diehl $22,365 $22,365 $25,058
Douglas E. Feldman $24,494 $0 $30,600
Peter W. Gavian $17,404 $7,458 $21,736
John G. Guffey, Jr. $24,861 $0 $40,450
Arthur J. Pugh $26,792 $0 $33,300
D. Wayne Silby $23,878 $0 $47,965
<F2> Messrs. Blatz, Diehl, Gavian, and Pugh have chosen to defer a portion
of their compensation. As of December 31, 1995, total deferred
compensation, including dividends and capital appreciation, was
$415,719, $337,395, $89,054, and $150,841, for each trustee, respectively.
<F3> As of December 31, 1995. The Fund Complex consists of eight (9)
registered investment companies.
INVESTMENT ADVISOR
The Fund's Investment Advisor is Calvert Asset Management
Company, Inc., 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland
20814, a subsidiary of Calvert Group, Ltd., which is a subsidiary of
Acacia Mutual Life Insurance Company of Washington, D.C. ("Acacia
Mutual").
The Advisory Contract between the Fund and the Advisor will
remain in effect indefinitely, provided continuance is approved at least
annually by the vote of the holders of a majority of the outstanding
shares of the Fund, or by the Trustees of the Fund; and further provided
that such continuance is also approved annually by the vote of a
majority of the Trustees of the Fund who are not parties to the Contract
or interested persons of such parties, cast in person at a meeting
called for the purpose of voting on such approval. The Contract may be
terminated without penalty by either party on 60 days' prior written
notice; it automatically terminates in the event of its assignment.
Under the Contract, the Advisor manages the investment and
reinvestment of the Fund's assets, subject to the direction and control
of the Fund's Board of Trustees. For its services, the Advisor receives
an annual fee of:
i) with respect to the Money Market Portfolio, 0.50% of the
first $500 million of such Portfolio's average daily net assets, 0.45%
of the next $500 million of such assets, and 0.40% of all such assets
over $1 billion; and
ii) with respect to the Limited-Term Portfolio, 0.60% of the
first $500 million of the Portfolio's average daily net assets, 0.50% of
the next $500 million of such assets, and 0.40% of all such assets over
$1 billion.
The advisory fee is payable monthly. The Advisor reserves the
right (i) to waive all or a part of its fee and (ii) to compensate, at
its expense, broker-dealers in consideration of their promotional and
administrative services.
The Advisor provides the Fund with investment advice and
research, pays the salaries and fees of all Trustees and executive
officers of the Fund who are principals of the Advisor, and pays certain
Fund advertising and promotional expenses. The Fund pays all other
administrative and operating expenses, including: custodial fees;
shareholder servicing, dividend disbursing and transfer agency fees;
administrative service fees; federal and state securities registration
fees; insurance premiums; trade association dues; interest, taxes and
other business fees; legal and audit fees; and brokerage commissions and
other costs associated with the purchase and sale of portfolio
securities.
The Advisor has agreed to reimburse the Money Market and
Limited-Term Portfolios for all expenses, excluding brokerage, taxes,
interest, and extraordinary items exceeding, on a pro rata basis, the
most restrictive expense limitation of those states in which the
Portfolios' shares are qualified for sale (currently, 2.50% of the first
$30 million of the Portfolio's average net assets, 2.0% of the next $70
million, and 1.50% of all such assets in excess of $100 million). The
advisory fees paid by the Money Market Portfolio to Calvert Asset
Management Company were $7,464,335, $7,093,465, and $6,636,334, for
years 1992, 1993, and 1994, respectively. The advisory fees paid by the
Limited-Term Portfolio to Calvert Asset Management Company were
$2,708,196, $3,527,101, and $3,863,616, for years 1992, 1993, and 1994,
respectively.
ADMINISTRATIVE SERVICES
Calvert Shareholder Services, Inc., a wholly-owned subsidiary
of Calvert Group, Ltd., has been retained by the Fund to act as transfer
agent, dividend disbursing agent and shareholder servicing agent. These
responsibilities include: responding to shareholder inquiries and
instructions concerning their accounts; crediting and debiting
shareholder accounts for purchases and redemptions of Fund shares and
confirming such transactions; daily updating of shareholder accounts to
reflect declaration and payment of dividends; and preparing and
distributing quarterly statements to shareholders regarding their
accounts. For such services, Calvert Shareholder Services, Inc.,
receives compensation based on the number of shareholder accounts and
the number of transactions.
Calvert Administrative Services Company, a wholly-owned
subsidiary of Calvert Group, Ltd., has been retained by the Fund to
provide certain administrative services necessary to the conduct of the
Fund's affairs. Such services include the preparation of corporate and
regulatory reports and filings, portfolio accounting, and the daily
determination of net investment income and net asset value per share.
Calvert Administrative Services Company receives a fee of $200,000 per
year for providing such services, allocated among Portfolios based on
assets. The service fees paid by the Money Market Portfolio to Calvert
Administrative Services Company were $125,449, $115,912, and $110,396,
for years 1992, 1993, and 1994, respectively. The service fees paid by
the Limited-Term Portfolio to Calvert Administrative Services Company
were $33,636, $44,251, and $50,942, for years 1992, 1993, and 1994,
respectively.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers & Lybrand, L.L.P. has been selected by the Board of
Trustees to serve as independent accountants for fiscal year 1995. State
Street Bank & Trust Company, N.A., 225 Franklin Street, Boston, MA
02110, currently serves as custodian of the Portfolio's investments.
First National Bank of Maryland, 25 South Charles Street, Baltimore,
Maryland 21203 also serves as custodian of certain of the Portfolio's
cash assets. Neither custodian has any part in deciding the Portfolio's
investment policies or the choice of securities that are to be purchased
or sold for the Portfolio.
METHOD OF DISTRIBUTION
The Portfolio has entered into a principal underwriting
agreement with Calvert Distributors Inc. ("CDI"). Pursuant to the
agreement, CDI serves as distributor and principal underwriter for the
Portfolio. Prior to April 1, 1995, Calvert Securities Corporation
("CSC") was the principal underwriter. CDI bears all its expenses of
providing services pursuant to the agreement, including payment of any
commissions and service fees. CDI is entitled to receive a service fee
and a distribution fee for Class C shares, payable monthly pursuant to
the Limited Term Portfolio's Distribution Plan, of 0.25%, respectively,
of the Portfolio's average daily net assets. For the ten months ended
December 31. 1994, the Distribution Plan expenses totaled $101,723 for
Class C Shares of the Limited-Term Portfolio. CDI also receives all
sales charges imposed on Limited-Term Portfolio Class A shares and
compensates broker-dealer firms for sales of shares at a maximum
commission rate of 1.50%, as specified in the table of applicable sales
charges (see "Alternative Sales Options" in the Prospectus). For the
fiscal years ended December 31, 1992, 1993, and 1994, CSC received sales
charges in excess of the dealer reallowance of $634,439, $3,275, and $0,
respectively.
The Limited-Term Portfolio's Class C Distribution Plan was
approved by the Board of Trustees, including the Trustees 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 Plan or in any agreements
related to the Plan. The selection and nomination of the Trustees who
are not interested persons of the Fund is committed to the discretion of
such disinterested Trustees. In establishing the Plan, the Trustees
considered various factors including the amount of the distribution fee.
The Trustees determined that there is a reasonable likelihood that the
Plan will benefit the Portfolio and its shareholders.
The Plan may be terminated by vote of a majority of the
non-interested Trustees who have no direct or indirect financial
interest in the Plan, or by vote of a majority of the outstanding shares
of the Fund. Any change in the Plan that would materially increase the
distribution cost to the Fund requires approval of the shareholders of
the affected class; otherwise, the Plan may be amended by the Trustees,
including a majority of the non-interested Trustees as described above.
The Plan will continue in effect indefinitely, if not sooner
terminated in accordance with its terms. Thereafter, the Plan will
continue in effect for successive one year periods provided that such
continuance is annually approved by (i) the vote of a majority of the
Trustees who are not parties to the Plan or interested persons of any
such party and who have no direct or indirect financial interest in the
Plan, and (ii) the vote of a majority of the entire Board of Trustees.
Apart from the Plan, the Advisor, at its expense, may incur
costs and pay expenses associated with the distribution of shares of the
Portfolio. The Portfolio paid no expenses pursuant to the Plan during
fiscal 1992, 1993, and 1994.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. Investment decisions and the
choice of brokers and dealers are made by the Fund's Advisor under the
direction and supervision of the Fund's Board of Trustees.
For the fiscal years ended December 31, 1992, 1993, and 1994,
the portfolio turnover rates of the Limited-Term Portfolio were 5%, 14%,
and 27%, respectively. Broker-dealers who execute portfolio transactions
on behalf of the Fund are selected on the basis of their professional
capability and the value and quality of their services. The Advisor
reserves the right to place orders for the purchase or sale of portfolio
securities with broker-dealers who have sold shares of the Fund or who
provide the Fund with statistical, research, or other information and
services. Although any statistical research or other information and
services provided by broker-dealers may be useful to the Advisor, the
dollar value of such information and services is generally
indeterminable, and its availability or receipt does not serve to
materially reduce the Advisor's normal research activities or expenses.
No brokerage commissions have been paid to any officer, trustee or
Advisory Council member of the Fund or any of their affiliates, or
broker-dealers for the years ended December 31, 1992, 1993, and 1994.
The Advisor may also execute portfolio transactions with or
through broker-dealers who have sold shares of the Fund. However, such
sales will not be a qualifying or disqualifying factor in a
broker-dealer's selection nor will the selection of any broker-dealer be
based on the volume of Fund shares sold. The Advisor may compensate, at
its expense, such broker-dealers in consideration of their promotional
and administrative services.
GENERAL INFORMATION
The Fund was organized as a Massachusetts business trust on
October 20, 1980. The other series of the Fund include the Long-Term
Portfolio, Money Management Plus Tax-Free Portfolio, California Money
Market Portfolio, New Jersey Money Market Portfolio, and the Vermont
Municipal Portfolio. The Fund's Declaration of Trust contains an express
disclaimer of shareholder liability for acts or obligations of the Fund.
The shareholders of a Massachusetts business trust might, however, under
certain circumstances, be held personally liable as partners for its
obligations. The Declaration of Trust provides for indemnification and
reimbursement of expenses out of Fund assets for any shareholder held
personally liable for obligations of the Fund. The Declaration of Trust
provides that the Fund shall, upon request, assume the defense of any
claim made against any shareholder for any act or obligation of the Fund
and satisfy any judgment thereon. The Declaration of Trust further
provides that the Fund may maintain appropriate insurance (for example,
fidelity bonding and errors and omissions insurance) for the protection
of the Fund, its shareholders, Trustees, officers, employees, and agents
to cover possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which both inadequate insurance exists
and the Fund itself is unable to meet its obligations.
Each share of each series represents an equal proportionate
interest in that series with each other share and is entitled to such
dividends and distributions out of the income belonging to such series
as declared by the Board. The Portfolios offer two separate classes of
shares. The Money Market Portfolio offers Class O (offered in the
Calvert Tax-Free Reserves Money Market Prospectus) and Class MMP
(offered in the Money Management Plus Prospectus). Class A and Class C
is offered by the Limited-Term Portfolio. 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 Funds, shareholders of
each class are entitled to share pro rata in the net assets belonging to
that series available for distribution.
General costs, expenses, and liabilities of the Fund
attributable to a particular Portfolio are borne by that Portfolio;
costs, expenses, and liabilities not attributable to a particular
Portfolio are allocated between the Fund's Portfolios on the basis of
the respective net assets of each Portfolio.
The Portfolios will send their shareholders unaudited
semi-annual and audited annual reports that will include the Portfolios'
net asset value per share, portfolio securities, income and expenses,
and other financial information.
This Statement of Additional Information does not contain all
the information in the Fund's registration statement. The registration
statement is on file with the Securities and Exchange Commission and is
available to the public.
FINANCIAL STATEMENTS
The audited financial statements in the Portfolios' Annual
Report to Shareholders dated December 31, 1994, are expressly
incorporated by reference and made a part of this Statement of
Additional Information. A copy of the Annual Report may be obtained free
of charge by writing or calling the Portfolios.
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states,
cities, municipalities, and their agencies to obtain funds for various
public purposes. Such purposes include the construction of a wide range
of public facilities, the refunding of outstanding obligations, the
obtaining of funds for general operating expenses, and the lending of
funds to other public institutions and facilities. In addition, certain
types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds for many types of local, privately
operated facilities. Such debt instruments are considered municipal
obligations if the interest paid on them is exempt from federal income
tax in the opinion of bond counsel to the issuer. Although the interest
paid on the proceeds from private activity bonds used for the
construction, equipment, repair or improvement of privately operated
industrial or commercial facilities may be exempt from federal income
tax, current federal tax law places substantial limitations on the size
of such issues.
Municipal obligations are generally classified as either
"general obligation" or "revenue'' bonds. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power for
the payment of principal and interest. Revenue bonds are payable from
the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other
specific revenue source, but not from the general taxing power.
Tax-exempt industrial development bonds are in most cases revenue bonds
and do not generally carry the pledge of the credit of the issuing
municipality. There are, of course, variations in the security of
municipal obligations, both within a particular classification and among
classifications.
Municipal obligations are generally traded on the basis of a
quoted yield to maturity, and the price of the security is adjusted so
that relative to the stated rate of interest it will return the quoted
rate to the purchaser.
Short-term and limited-term municipal obligations include Tax
Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes, and Discount Notes. The maturities of these
instruments at the time of issue generally will range between three
months and one year. Pre-Refunded Bonds with longer nominal maturities
that are due to be retired with the proceeds of an escrowed subsequent
issue at a date within one year and three years of the time of
acquisition are also considered short-term and limited-term municipal
obligations.
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc.'s ratings of state and
municipal notes:
Moody's ratings for state and municipal notes and other
short-term obligations are designated Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences between short-term
credit risk and long-term risk.
MIG 1: Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market
for refinancing, or both.
MIG2: Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding
group.
MIG3: Notes bearing this designation are of favorable quality,
with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Market access for refinancing, in
particular, is likely to be less well established.
MIG4: Notes bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
Description of Moody's Investors Service Inc.'s/Standard & Poor's
municipal 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 the
A category.
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. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
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 or Portfolio 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. 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 Calvert Distributors, Inc. 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)
- --------
*"Fund" in this Letter of Intent shall refer to the Fund or Portfolio,
as the case may be, here indicated.
