PROSPECTUS-April 30, 1998
CALVERT TAX-FREE RESERVES
VERMONT MUNICIPAL PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814
Investment Objective
Calvert Tax-Free Reserves Vermont Municipal Portfolio (the "Portfolio") seeks
to earn the highest level of interest income exempt from federal and Vermont
state income taxes as is consistent with prudent investment management,
preservation of capital, and its stated quality and maturity characteristics.
Calvert Tax-Free Reserves (the "Fund") is an open-end investment company that
consists of several portfolios, each of which has distinct investment
objectives and programs. The Vermont Municipal Portfolio is nondiversified,
and invests in investment grade municipal obligations with durations generally
averaging between four and nine years, though the Portfolio's holdings may at
any time have longer or shorter durations. There can be, of course, no
assurance that the Portfolio will be successful in meeting its investment
objective.
To Open An Account
To open an account, call your broker, or complete and return the enclosed
Account Application. Minimum initial investment is $2,000.
About This Prospectus
Please read this Prospectus before investing. It is designed to provide you
with information you ought to know before investing and to help you decide if
the Portfolio's goals match your own. Keep this document for future reference.
A Statement of Additional Information (dated April 30, 1998) for the Portfolio
has been filed with the Securities and Exchange Commission and is incorporated
by reference. This free Statement is available upon request from the Fund:
800.368.2748.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE FEDERAL OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. WHEN INVESTORS SELL SHARES OF THE
FUND, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY PAID.
FUND EXPENSES
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases Class A
(as a percentage of offering price) 3.75%
Maximum Contingent Deferred Sales Charge None
(as a percentage of purchase price or
redemption proceeds, as applicable)
B. Annual Fund Operating Expenses - Fiscal year 1997
(as a percentage of average net assets)
Management Fees 0.61%
Rule 12b-1 Service and Distribution Fees None
Other Expenses 0.15%
Total Fund Operating Expenses1 0.76%
C. Example:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return; (2) redemption at the end of each period; and (3) for
Class A shares, payment of maximum initial sales charge at time of
purchase.
1 Year 3 Years 5 Years 10 Years
Class A $45 $61 $78 $128
The example, which is hypothetical, should not be considered a
representation of past or future expenses. Actual expenses and return may be
higher or lower than those shown.
Explanation of Table: The purpose of the table is to assist you in
understanding the various costs and expenses that an investor in the Portfolio
may bear directly (shareholder transaction costs) or indirectly (annual fund
operating expenses).
1 Net Fund Operating Expenses after reduction for fees paid indirectly were
0.73% (Class A).
Shareholder Transaction Costs
are charges you pay when you buy or sell shares of the Portfolio. See "Reduced
Sales Charges" at Exhibit A to see if you qualify for possible reductions in
the sales charge. If you request a wire redemption of less than $1,000, you
will be charged a $5 wire fee.
Annual Fund Operating Expenses
are based on the Portfolio's historical expenses, Management Fees are paid by
the Fund to Calvert Asset Management Company, Inc. ("Investment Advisor") for
managing the Portfolio's investments and business affairs, and include an
administrative service fee paid to Calvert Administrative Services Company, Inc.
The Portfolio incurs Other Expenses for maintaining shareholder records,
furnishing shareholder statements and reports, and other services. Management
Fees and Other Expenses have already been reflected in the Portfolio's share
price and are not charged directly to individual shareholder accounts.
The Portfolio's Rule 12b-1 fees include an asset-based sales charge. Thus, it
is possible that long-term shareholders in the Portfolio may pay more in total
sales charges than the economic equivalent of the maximum front-end sales
charge permitted by rules of the National Association of Securities Dealers,
Inc. In addition to the compensation itemized above (sales charge and Rule
12b-1 service and distribution fees), certain broker/dealers and/or their
salespersons may receive certain compensation for the sale and distribution of
the securities or for services to the Fund. See the Statement of Additional
Information, "Method of Distribution."
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's financial
history. It expresses the information in terms of a single Class A share
outstanding for the Portfolio throughout each period. The table has been
audited by those independent accountants whose report is included in the
Calvert Tax-Free Reserves Annual Report to Shareholders of the Fund for the
periods presented. The table should be read in conjunction with the financial
statements and their related notes. The current Annual Report is incorporated
by reference into the Statement of Additional Information.
Year Ended December 31,
Vermont Municipal 1997 1996 1995
Net asset value, beginning $16.33 $16.62 $15.34
Income from investment operations
Net investment income .82 .88 .87
Net realized and unrealized gain (loss)
on investments .26 (.25) 1.35
Total from investment operations 1.08 .63 2.22
Distributions from
Net investment income (.82) (.85) (.85)
Net realized gains (.14) (.07) (.09)
Total distributions (.96) (.92) (.94)
Total increase (decrease) in net asset value .12
(.29) 1.28
Net asset value, ending $16.45 $16.33 $16.62
Total return2 6.90% 3.98% 14.86%
Ratio to average net assets
Net investment income 5.11% 5.27% 5.35%
Total expenses3 .76% .77% .76%
Net expenses .73% .73% .75%
Expenses reimbursed - - -
Portfolio turnover 14% 24% 12%
Net assets, ending (in thousands) $50,194 $49,774 $60,203
Number of shares outstanding
ending (in thousands) 3,052 3,048 3,621
From Inception
(Apr. 1,1991)
Year Ended December 31, to Dec. 31,
1994 1993 199 1991
Net asset value, beginning $16.66 $15.83 $15.5 $15.00
Income from investment operations
Net investment income .87 .86 .84 .68
Net realized and unrealized gain
(loss)on investments (1.35) .82 .31 .58
Total from investment operations (.48) 1.68 1.15 1.26
Distributions from
Net investment income (.84) (.85) (.84) (.66)
Net realized gains - - (.06) (.02)
Total distributions (.84) (.85) (.90) (.68)
Total increase (decrease) in net
asset value (1.32) .83 .25 .58
Net asset value, ending $15.34 $16.66 $15.83 $15.58
Total return2 (2.88%) 10.84% 4.99 11.43% (a)
Ratio to average net assets
Net investment income 5.47% 5.25% 5.41% 5.97%(a)
Total expenses3 - - - -
Net expenses .73% .72% .62% .28% (a)
Expenses reimbursed - - - .06% (a)
Portfolio turnover 11% 5% 11% 8%
Net assets, ending (in thousands) $64,215 $67,634 $53,179 $38,828
Number of shares outstanding
ending (in thousands) 4,185 4,060 3,359 2,492
(a) Annualized
2 Total return does not reflect deduction of front-end sales charge.
3 Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly;
such reductions are included in the ratio of net expenses.
INVESTMENT OBJECTIVE AND POLICIES
Investment Objective
The Portfolio seeks to earn the highest level of interest income exempt from
Vermont and federal income taxes as is consistent with prudent investment
management, preservation of capital, and the quality characteristics of the
Portfolio. The Portfolio invests primarily in tax-exempt investment-grade
municipal obligations of the State of Vermont and its political subdivisions
("Vermont Municipal Obligations"). The Portfolio has no duration restrictions,
but the average portfolio duration is expected to be between four and nine
years, although it may vary significantly.
Under normal market conditions, the Portfolio attempts to invest at least 65%
of the value of its assets in Vermont Municipal Obligations. The Portfolio
will also attempt to invest the remaining 35% of its total assets in these
obligations, but may invest it in municipal obligations of other states,
territories, and possessions of the United States, the District of Columbia,
and their respective authorities, agencies, instrumentalities, and political
subdivisions. Dividends you receive from the Portfolio that are derived from
interest on tax-exempt obligations of other governmental issuers will be
exempt from federal tax, but may be subject to Vermont state income taxes.
Nondiversified
There may be risks associated with the Portfolio being nondiversified.
Specifically, since a relatively high percentage of the assets of the
Portfolio may be invested in the obligations of a limited number of issuers, the
value of the shares of the Portfolio may be more susceptible to any single
economic, political or regulatory event than the shares of a diversified fund.
Municipal Obligations
Municipal obligations in which the Portfolio may invest include, but are not
limited to general obligation bonds and notes of state and local issuers,
revenue bonds of various transportation, housing, utilities (e.g. water and
sewer), hospital and other state and local government authorities, tax and
revenue anticipation notes and bond anticipation notes, municipal leases, and
certificates of participation therein, and private activity bonds. See further
description below and the Statement of Additional Information.
Credit Quality
The credit quality of municipal obligations is determined by reference to a
commercial credit rating service, such as Moody's Investors Service, Inc.
or Standard & Poor's Corporation. In the case of any instrument that is not
rated, credit quality is determined by the Advisor under the supervision of the
Board of Trustees. Investment grade, as determined by a NRSRO, currently defined
as the top four rating categories, i.e., AAA, AA, A and BBB. Though still
investment grade, securities rated BBB/Baa possess certain speculative elements
and are generally more susceptible to changing market conditions. There is no
limitation on the percentage of the Portfolio's assets that may be invested in
unrated obligations. Such obligations may be less liquid than rated obligations
of comparable quality. Please refer to the Appendix in the Statement of
Additional Information for a description of the ratings used by these services.
Floating and Variable Rate Obligations
The Portfolio may invest in variable rate obligations. Variable rate
obligations have a yield that is adjusted periodically based on changes in
the level of prevailing interest rates. Floating rate obligations have an
interest rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate obligations
lessen the capital fluctuations usually inherent in fixed income investments,
which diminishes the risk of capital depreciation of investment securities in
the Portfolio and Portfolio shares. However, should interest rates decline, the
yield of the Portfolio will decline and the Portfolio and its shareholders will
forego the opportunity for capital appreciation of its portfolio investments and
of their shares.
Demand Notes
The Portfolio may invest in floating rate and variable rate demand notes.
Demand notes provide that the holder may demand payment of the note at its
par value plus accrued interest by giving notice to the issuer. To ensure the
ability of the issuer to make payment on demand, the note may be supported by an
unconditional bank letter of credit.
Interest-Rate Risk
All fixed income instruments are subject to interest-rate risk; that is, if
the market interest rates rise, the current principal value of a bond will
decline. In general, the longer the maturity of the bond, the greater the
decline in value. Because the Portfolio's average duration is between 4 and 9
years, it would be expected to be more affected by a rise in market interest
rates than a short-term money market fund, but less adversely affected by a rise
in market interest rates than a fund which invests in longer-term bonds.
Municipal Leases
The Portfolio may invest in municipal leases. 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. There are additional risks inherent in
investing in this type of municipal security. Unlike municipal notes and bonds,
where a municipality is obligated by law to make interest and principal payments
when due, funding for lease payments needs to be appropriated each fiscal year
in the budget. It is possible that a municipality will not appropriate funds for
lease payments. The Advisor considers risk of cancellation in its investment
analysis. The Portfolio may purchase unrated municipal leases. The Fund's
Advisor, under supervision of the Board of Trustees/Directors, is responsible
for determining the credit quality of such leases on an ongoing basis. The Fund
will invest only in municipal leases that meet its credit quality restrictions.
Certain municipal leases may be considered illiquid and subject to the Fund's
limit on illiquid investments. The Board of Trustees/Directors has established
guidelines for determining whether a lease is illiquid. See the Statement of
Additional Information for the factors considered by the Board in determining
liquidity and valuation of leases.
When-Issued Purchases
New issues of municipal obligations are offered on a when-issued basis;
that is, delivery and payment for the securities normally take place 15 to 45
days after the date of the transaction. The payment obligation and the yield
that will be received on the securities are each fixed at the time the buyer
enters into the commitment. The Portfolio will only make commitments to purchase
such securities with the intention of actually acquiring the securities, but the
Portfolio may sell these securities before the settlement date if it is deemed
advisable as a matter of investment strategy.
Temporary Investments
From time to time for liquidity purposes or pending the investment of the
proceeds of the sale of Portfolio shares, the Portfolio may invest in and derive
up to 20% of its income from taxable short-term obligations of the US
Government, its agencies and instrumentalities. Interest earned from such
taxable investments will be taxable as ordinary income unless you are otherwise
exempt from taxation.
To minimize taxable income, the Portfolio may also hold cash which is not
earning income. It is a fundamental policy of the Portfolio that during normal
market conditions the Portfolio's assets will be invested so that at least 80%
of the Portfolio's annual income will be federally tax-exempt.
Financial Futures, Options, and Other Investment Techniques The Portfolio
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 Portfolio can use these
practices either as substitution or as protection against an adverse move in the
Portfolio to adjust the risk and return characteristics of the Portfolio. If the
Advisor judges market conditions incorrectly or employs a strategy that does not
correlate well with the Portfolio'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. Any
instruments determined to be illiquid are subject to the Portfolio's 10%
restriction on illiquid securities. See below and the Statement of Additional
Information for more details about these strategies.
The Portfolio may buy certain financial futures contracts to hedge its
investments in municipal bonds.
Under certain circumstances, the Portfolio may purchase and sell certain
financial futures contracts and certain options on futures contracts. A
financial futures contract obligates the seller of a contract to deliver - and
the purchaser of a contract to take delivery of - the type of financial
instrument covered by the contract. In the case of index-based futures
contracts, the obligation is in the form of a cash settlement at a specific time
for a specific price.
The Portfolio may only engage in futures transactions for the purpose of
hedging its investments in municipal bonds against declines in value and to
hedge against increases in the cost of securities the Portfolio intends to
purchase. A sale of financial futures contracts may provide a hedge against a
decline in the value of portfolio securities because such depreciation may be
offset, in whole or in part, by an increase in the value of the position in
the futures contracts. Similarly, a purchase of financial futures contracts
may provide a hedge against an increase in the cost of securities intended to
be purchased, because such appreciation may be offset, in whole or in part, by
an increase in the value of the position in the futures contracts.
Types of futures contracts purchased The Portfolio intends to deal in
futures contracts based upon The Bond Buyer Municipal Bond Index, a
price-weighted measure of the market value of 40 large, recently-issued
tax-exempt bonds, and to engage in transactions in exchange-listed futures
contracts on US Treasury securities. The Portfolio may also engage in
transactions in other futures contracts, such as futures contracts on other
municipal bond indexes that become available, if the investment advisor believes
such contracts would be appropriate for hedging the Portfolio's investments in
municipal bonds.
When the Portfolio purchases a futures contract, it will maintain an amount of
cash, cash equivalents (for example, commercial paper and daily tender
adjustable notes) or short-term high grade fixed income securities in a
segregated account with the Portfolio's custodian, so that the segregated
amount plus the amount of initial and variation margin held in the account of
its broker equals the market value of the futures contract, thereby ensuring
that the use of such futures contract is unleveraged. It is not anticipated
that transactions in futures will have the effect of increasing portfolio
turnover.
Closing out a futures position - Risks The Portfolio may close out its
position in a futures contract or an option on a futures contract only by
entering into an offsetting transaction on the exchange on which the position
was established and only if there is a liquid secondary market for the futures
contract. If it is not possible to close a futures position entered into by the
Portfolio, the Portfolio could be required to make continuing daily cash
payments of variation margin in the event of adverse price movements. In such
situations, if the Portfolio has insufficient cash, it may have to sell
portfolio securities to meet daily variation margin requirements at a time when
it would be disadvantageous to do so. The inability to close futures or options
positions could have an adverse effect on the Portfolio's ability to hedge
effectively. There is also risk of loss by the Portfolio of margin deposits in
the event of bankruptcy of a broker with whom the Portfolio has an open position
in a futures contract. The success of a hedging strategy depends on the
Advisor's ability to predict the direction of interest rates and other economic
factors. The correlation is imperfect between movements in the prices of futures
or options contracts, and the movements of prices of the securities which are
subject to the hedge. If the Portfolio used a futures or options contract to
hedge against a decline in the market, and the market later advances (or
vice-versa), the Portfolio may suffer a greater loss than if it had not hedged.
Other Policies The Portfolio may temporarily borrow money from banks to
meet redemption requests, but such borrowing may not exceed 10% of the value of
the Portfolio's total assets. The Portfolio has adopted certain fundamental
investment restrictions which are discussed in detail in the Statement of
Additional Information.
YIELD AND TOTAL RETURN
Yield refers to income generated by an investment over a period of time.
Yield measures the current investment performance that is, the rate of income on
the Portfolio's investments divided by the share price. Yield is computed by
annualizing the result of dividing the net investment income per share over a 30
day period by the maximum offering price per share on the last day of that
period. Yields are calculated according to accounting methods that are
standardized for all stock and bond funds.
Taxable Equivalent Yield
The Portfolio may advertise its "taxable equivalent yield" The taxable
equivalent yield is the yield that you 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 taxable equivalent yield is computed by
taking the portion of the Portfolio's yield exempt from regular federal income
tax and multiplying the exempt yield by a factor based on a stated income tax
rate, then adding the portion of the yield that is not exempt from regular
federal income tax. The factor used to calculate the taxable equivalent yield is
the reciprocal of the difference between one and the applicable income tax rate,
which will be stated in the advertisement.
The Portfolio may advertise its total return. Total return is based on
historical results and is not intended to indicate future performance. 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. The total return
of a class shows its overall change in value, including changes in share price
and assuming all of the dividends and capital gain distributions are reinvested.
A cumulative total return reflects the performance over a stated period of time.
An average annual total return reflects the hypothetical annual compounded
return that would have produced the same cumulative total return if the
performance had been constant over the entire period. Because average annual
returns tend to smooth out variations in the returns, you should recognize that
they are not the same as actual year-by-year results. Both types of total return
usually will include the effect of paying the sales charge. Of course, total
returns will be higher if sales charges are not taken into account. Quotations
of "return without maximum load" do not reflect deduction of the sales charge.
You should consider return without maximum load figures only if you qualify for
a reduced sales charge, or for purposes of comparison with comparable figures
which also do not reflect sales charges, such as mutual fund averages compiled
by Lipper Analytical Services, Inc. Further information about the Portfolio's
performance is contained in its Annual Report to Shareholders, which may be
obtained without charge.
MANAGEMENT OF THE FUND
The Board of Trustees supervises the Portfolio's activities and reviews its
contracts with companies that provide it with services. The Portfolio is a
series of Calvert Tax-Free Reserves (the "Fund"), an open-end management
investment company, organized as a Massachusetts business trust on October 20,
1980. The other series of the Fund include the Money Market Portfolio,
Limited-Term Portfolio, Long-Term Portfolio, and the California Money Market
Portfolio.
The Fund is not required to hold annual shareholder meetings for the
Portfolio, but special meetings may be called for such purposes as electing
Trustees, changing fundamental policies, and approving management contracts.
As a shareholder, you receive one vote for the share of a Portfolio you own.
For matters affecting Portfolios differently, only shares of that
Portfolio are entitled to vote.
Portfolio Managers
Investment selections for the Portfolio are made by David R. Rochat and
Reno J. Martini. Mr.Rochat is a Director and Senior Vice President of Calvert
Asset Management Company, Inc. He is a Trustee/Director and Senior Vice
President of First Variable Rate Fund, Calvert Tax-Free Reserves, Money
Management Plus, The Calvert Fund, and Calvert Municipal Fund, Inc., and is
primarily responsible for setting the investment strategy of the trading
department, utilizing over 20 years' experience in the securities and investment
community. Mr. Rochat joined Calvert Group in 1981 after establishing and
managing the municipal bond department at Donaldson, Lufkin, & Jenrette
Securities Corporation. Mr. Martini, a Director of Calvert Group, Ltd., and
Senior Vice President and Chief Investment Officer of Calvert Asset Management
Company, Inc., oversees management of all Calvert Group portfolios. He has
extensive experience in evaluating and purchasing municipal securities.
Calvert Group is one of the largest investment management firms in the
Washington, DC area.
Calvert Group, Ltd., parent of the Fund's investment advisor, transfer
agent, and distributor, is a subsidiary of Acacia Mutual Life Insurance Company
of Washington, DC Calvert Group is one of the largest investment management
firms in the Washington, DC area. Calvert Group, Ltd. and its subsidiaries are
located at 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. As of
December 31, 1997, Calvert Group managed and administered assets in excess of
$5.0 billion and more than 200,000 shareholder and depositor accounts.
Calvert Asset Management serves as Advisor to the Fund.
Calvert Asset Management Company, Inc. (the "Advisor") is the Fund's
investment advisor. The Advisor provides the Fund with investment supervision
and management, administrative services and office space; furnishes executive
and other personnel to the Fund; and pays the salaries and fees of all Trustees
who are affiliated persons of the Advisor. The Advisor may also assume and pay
certain advertising and promotional expenses of the Fund and reserves the right
to compensate broker/dealers in return for their promotional or administrative
services. For its services during fiscal year 1997, the Advisor received a fee
equal to 0.60% of the Portfolio's average net assets.
Calvert Administrative Services Company provides administrative services for
the Fund.
Calvert Administrative Services Company ("CASC"), an affiliate of the
Advisor, has been retained by Calvert Tax-Free Reserves to provide certain
administrative services necessary to the conduct of its affairs, including the
preparation of regulatory filings and shareholder reports, the daily
determination of its net asset value per share and dividends, and the
maintenance of its portfolio and general accounting records. For providing such
services, prior to August 1, 1997, CASC received a total fee from Calvert
Tax-Free Reserves of $200,000 per year, allocated among the Portfolios based on
assets. Effective August 1, 1997, the fee structure changed. Exclusive of the
CTFR Money Market Portfolio, the Fund pays an annual fee of $80,000, allocated
among the remaining portfolios based on assets.
Calvert Distributors, Inc. serves as underwriter to market the Portfolio's
shares. Calvert Distributors, Inc. ("CDI") is the Fund's principal underwriter
and distributor. Under the terms of its underwriting agreement with the Fund,
CDI markets and distributes the Fund's shares and is responsible for payment of
commissions and service fees to broker/dealers, banks, and financial services
firms, preparation of advertising and sales literature, and printing and mailing
of prospectuses to prospective investors.
The transfer agent keeps your account records. Calvert Shareholder
Services, Inc. is the Fund's dividend disbursing and shareholder servicing
agent. National Financial Data Services, Inc. ("NFDS"), 1004 Baltimore, Kansas
City, Missouri 64105, is the transfer and dividend disbursing agent for the
Fund.
SHAREHOLDER GUIDE
Opening An Account You can buy shares of the Portfolio in several ways. An
account application accompanies this prospectus. A completed and signed
application is required for each new account you open, regardless of the method
you choose for making your initial investment. Additional forms may be required
from corporations, associations, and certain fiduciaries. If you have any
questions or need extra applications, call your broker, or Calvert Group at
800.368.2748.
Shares are offered at net asset value plus a front-end sales charge as follows:
Amount of As a % of As a % of Allowed
to Dealers
Investment offering net amount as a %
of offering
price invested price
Less than $50,000 3.75% 3.90% 3.00%
$50,000 but less than $100,000 3.00% 3.09% 2.25%
$100,000 but less than $250,000 2.25% 2.30% 1.75%
$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 reserves the right to recoup any portion of the amount paid to the
dealer if the investor redeems some or all of the shares from the Funds within
twelve months of the time of purchase.
Sales charges may be reduced or eliminated in certain cases. See Exhibit A to
this prospectus.
The sales charge is paid to CDI, which in turn normally reallows a portion to
your
broker/dealer. Upon written notice to dealers with whom it has dealer
agreements, CDI may reallow up to the full applicable sales charge. Dealers to
whom 90% or more of the entire sales charge is reallowed may be deemed to be
underwriters under the Securities Act of 1933.
In addition to any sales charge reallowance, your broker/dealer, or other
financial service firm through which your account is held, currently will be
paid periodic service fees at an annual rate of up to 0.15% of the average daily
net asset value of the shares held in accounts maintained by that firm.
Arrangements with Broker/Dealers and Others
CDI may also pay additional concessions, including non-cash promotional
incentives, such as merchandise or trips, to dealers employing registered
representatives who have sold or are expected to sell a minimum dollar amount
of shares of the Fund and/or shares of other Funds underwritten by CDI. CDI
may make expense reimbursements for special training of a dealer's registered
representatives, advertising or equipment, or to defray the expenses of sales
contests. Eligible marketing and distribution expenses for Class B and C may
be paid pursuant to the Portfolio's Distribution Plan, and in compliance with
the rules of the NASD.
HOW TO BUY SHARES
Method New Accounts Additional Investments
By Mail $2,000 minimum $250 minimum
Please make your check Please make your check
payable to the Portfolio payable to the Portfolio
and mail it with your and mail it with your
application to: investment slip to:
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas City, MO Kansas City, MO
64141-6544 64141-6739
By Registered, Calvert Group Calvert Group
Certified, or c/o NFDS, 6th Floor c/o NFDS, 6th Floor
Overnight Mail: 1004 Baltimore 1004 Baltimore
Kansas City, MO Kansas City, MO
64105-1807 64105-1807
Through Your $2,000 minimum $250 minimum
Financial Professional
At the Visit the Calvert Office to make investments by
check.
Calvert Office
FOR ALL OPTIONS BELOW, PLEASE CALL YOUR FINANCIAL PROFESSIONAL, OR
CALVERT GROUP AT 800.368.2745
By Exchange $2,000 minimum $250 minimum
(From your account When opening an account by exchange, your new
in another Calvert account must be established with the same name(s),
taxpayer address and identification number as your existing
Group Fund) Calvert account.
By Bank Wire $2,000 minimum $250 minimum
By Calvert Money Not Available for $50 minimum
Controller* Initial Investment
*Please allow sufficient time for Calvert Group to process your initial
request for this service, normally 10 business days. The maximum transaction
amount is $300,000, and your purchase request must be received by 4:00 p.m.
Eastern time.
NET ASSET VALUE
Net asset value per share ("NAV") refers to the worth of one share. NAV is
computed by adding the value of all portfolio holdings, plus other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding. This value is calculated at the close of the Portfolio's business
day, which coincides with the closing of the regular session of the New York
Stock Exchange (normally 4:00 p.m. Eastern time). The Portfolio is open for
business each day the New York Stock Exchange is open.
Portfolio securities and other assets are valued based on market quotations,
except that securities maturing within 60 days are valued at amortized cost.
If quotations are not available, securities are valued by a method that the
Board of Trustees believes accurately reflects fair value.
All purchases of Portfolio shares will be confirmed and credited to your
account in full and fractional shares (rounded to the nearest 1/1000 of a
share).
WHEN YOUR ACCOUNT WILL BE CREDITED
Before you buy shares, please read the following information to make sure
your investment is accepted and credited properly. Your purchase will be
processed at the offering price based on the next net asset value calculated
after your order is received and accepted. If your purchase is received by 4:00
p.m. Eastern time, your account will be credited on the day of receipt. If your
purchase is received after 4:00 p.m. Eastern time, it will be credited the next
business day. Any check purchase receiving without an investment slip may cause
delaying crediting. Your purchases must be made in US dollars and checks must be
drawn on US banks. No cash will be accepted. The Portfolio reserves the right to
suspend the offering of shares for a period of time or to reject any specific
purchase order. If your check is not paid, your purchase will be canceled and
you will be charged a $10 fee plus costs incurred by the Portfolio. When you
purchase by check or with Calvert Money Controller, those funds will be on hold
for up to 10 business days from the date of receipt. During that period,
redemptions against those funds will not be honored. To avoid this collection
period, you can wire federal funds from your bank, which may charge you a fee.
As a convenience, check purchases can be received at Calvert's offices for
overnight mail delivery to the transfer agent and will be credited the next
business day.
Certain financial institutions or broker/dealers which have entered into a
sales agreement with the Distributor may enter confirmed purchase orders on
behalf of customers by phone, with payment to follow within a number of days
of the order as specified by the program. If payment is not received in the
time specified, the financial institution could be held liable for resulting
fees or losses.
EXCHANGES
You may exchange shares of the Portfolio for shares of other Calvert Group
Funds. Each exchange represents the sale of shares of one Portfolio and the
purchase of shares of another. Therefore, you could realize a taxable gain or
loss on the transaction.
If your investment goals change, the Calvert Group Funds has a variety of
investment alternatives that includes common stock funds, tax-exempt and
corporate bond funds, and money market funds. The exchange privilege is a
convenient way to buy shares in other Calvert Group Funds in order to respond to
changes in your goals or in market conditions. However, the Portfolio is
intended as a long-term investment and not for frequent short-term trades. To
protect performance and to minimize costs, Calvert Group discourages frequent
exchanges and may prohibit additional purchases of Portfolio shares by persons
engaged in too many short-term trades. Shareholders (and those managing multiple
accounts) who make two purchases and two exchange redemptions of shares of the
same Fund or Portfolio during any 6-month period will be given written notice
that they may be prohibited from making additional investments. These policies
do not prohibit you from redeeming shares of the Funds and do not apply to
trades solely among money market funds. Before you make an exchange from a Fund
or Portfolio, please note the following:
Call your broker or a Calvert representative for information and a
prospectus for any of Calvert's other Funds registered in your state. Read the
prospectus of the Fund or Portfolio into which you want to exchange for
relevant information, including class offerings.
Complete and sign an application for an account in that Fund or
Portfolio, taking care to register your new account in the same name and
taxpayer identification number as your existing Calvert account(s). Exchange
instructions may then be given by telephone if telephone redemptions have been
authorized and the shares are not in certificate form.
You may exchange shares on which you have already paid a sales charge at
Calvert Group and shares acquired by reinvestment of dividends and
distributions may be exchanged into another Fund at no additional charge.
Shares may only be exchanged for shares of the same class of another Calvert
Group Fund.
The Portfolio reserves the right to terminate or modify the exchange privilege
in the future upon 60 days written notice.
OTHER CALVERT GROUP SERVICES
Calvert Information Network 24 hour total return quotations and prices
Calvert Group has a round-the-clock telephone service that lets existing
customers obtain prices, performance information, account balances, and
authorize certain transactions.
Calvert Money Controller Calvert Money Controller eliminates the delay of
mailing a check or the expense of wiring funds. You can request this free
service on your application. This service allows you to authorize electronic
transfers of money to purchase or sell shares. You use Calvert Money Controller
like an "electronic check" to move money ($50 to $300,000) between your bank
account and your Calvert Group account with one phone call. Allow two business
days after the call for the transfer to take place; for money recently invested,
allow normal check clearing time (up to 10 business days) before redemption
proceeds are sent to your bank.
You may also arrange systematic monthly or quarterly investments (minimum $50)
into your Calvert Group account. After you give us proper authorization, your
bank account will be debited to purchase Fund shares. A debit entry will
appear on your bank statement. Share purchases made through Calvert Money
Controller will be subject to the applicable sales charge. If you would like
to make arrangements for systematic monthly or quarterly redemptions from your
Calvert Group account, call your broker or Calvert Group for more information.
Telephone Transactions Calvert may record all telephone calls. You may
purchase, redeem, or exchange shares, wire funds and use Calvert Money
Controller by telephone if you have pre-authorized service instructions. You
automatically have telephone privileges unless you elect otherwise. The Fund,
the transfer agent and their affiliates are not liable for acting in good faith
on telephone instructions relating to your account, so long as they follow
reasonable procedures to determine that the telephone instructions are genuine.
Such procedures may include recording the telephone calls and requiring some
form of personal identification. You should verify the accuracy of telephone
transactions immediately upon receipt of your confirmation statement.
Optional Services Complete the application for the easiest way to establish
services. The easiest way to establish optional services on your Calvert Group
account is to select the options you desire when you complete your account
application. If you wish to add other options later, you may have to provide
Calvert Group with additional information and a signature guarantee. Please call
Calvert Investor Relations at 800.368.2745 for further assistance. For our
mutual protection, we may require a signature guarantee on certain written
transaction requests. A signature guarantee verifies the authenticity of your
signature, and may be obtained from any bank, trust company, savings and loan
association, credit union, broker/dealer firm or member of a domestic stock
exchange. A signature guarantee cannot be provided by a notary public.
Householding of General Mailings Householding reduces Fund expenses while
saving paper and postage. If you have multiple accounts with Calvert, you may
receive combined mailings of some shareholder information, such as statements,
confirms, prospectuses, semi-annual and annual reports. Please contact Calvert
Investor Relations at 800.368.2745 to receive additional copies of information.
Special Services and Charges The Portfolio pays for shareholder services
but not for special services that are required by a few shareholders, such as a
request for a historical transcript of an account. You may be required to pay a
research fee for these special services.
If you are purchasing shares of the Portfolio through a program of services
offered by a securities dealer or financial institution, you should read the
program materials in conjunction with this Prospectus. Certain features of the
Portfolio may be modified in these programs, and administrative charges may be
imposed by the broker/dealer or financial institution for the services rendered.
SELLING YOUR SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next net asset value calculated after your
redemption request is received and accepted. See below for specific
requirements necessary to make sure your redemption request is accepted (less
any applicable CDSC). Remember that the Portfolio may hold payment on the
redemption of your shares until it is reasonably satisfied that investments
made by check or by Calvert Money Controller have been collected (normally up
to 10 business days).
Redemption Requirements To Remember
To ensure acceptance of your redemption request, please follow the procedures
described here and below.
Once your shares are redeemed, the proceeds will normally be sent to you on
the next business day, but if making immediate payment could adversely affect
the Portfolio, it may take up to seven (7) days. Calvert Money Controller
redemptions generally will be credited to your bank account on the second
business day after your phone call. When the New York Stock Exchange is closed
(or when trading is restricted) for any reason other than its customary weekend
or holiday closings, or under any emergency circumstances as determined by the
Securities and Exchange Commission, redemptions may be suspended or payment
dates postponed.
Minimum account balance is $1,000. Please maintain a balance in each of
your fund accounts of at least $1,000. Funds with a fluctuating net asset value
and a balance of less than $1,000 may be closed and the proceeds mailed to the
address of record. You will be given a notice that your account is below the
minimum and closed after 30 days if the balance is not brought up to the
required minimum amount.
HOW TO SELL YOUR SHARES
By Mail To: Calvert Group, P.O. Box 419544, Kansas City, MO 64141-6544 You
may redeem available shares from your account at any time by sending a letter of
instruction, including your name, account and Fund number, the number of shares
or dollar amount, and where you want the money to be sent. Additional
requirements, below, may apply to your account. The letter of instruction must
be signed by all required authorized signers. If you want the money to be wired
to a bank not previously authorized, then a voided bank check must be enclosed
with your letter. To add instructions to wire to a destination that has not been
previously established, or if you would like funds sent to a different address
or another person, your letter must be signature guaranteed.
Type of
Registration Requirements
Corporations, Letter of instruction and a corporate resolution, signed by
person(s)
Associations authorized to act on the account, accompanied by signature
guarantee(s).
Trusts Letter of instruction signed by the Trustee(s) (as Trustee),
with a signature guarantee. (If the Trustee's name is not
registered on your account, provide a copy of the trust
document, certified within the last 60 days.)
By Telephone
Please call 800.368.2745. You may redeem shares from your account by
telephone and have your money mailed to your address of record or wired to a
bank you have previously authorized. A charge of $5 is imposed on wire transfers
of less than $1,000.
Calvert Money Controller
Please allow sufficient time for Calvert Group to process your initial
request for this service (normally 10 business days). You may also authorize
automatic fixed amount redemptions by Calvert Money Controller. All requests
must be received by 4:00 p.m. Eastern time. Accounts cannot be closed by this
service. Unless they otherwise qualify for a waiver, Class B or Class C shares
of the Portfolio redeemed by Calvert Money Controller will be subject to the
Contingent Deferred Sales Charge.
Exchange to Another Calvert Group Fund
You must meet the minimum investment requirement of the other Calvert Group
Fund or Portfolio. You can only exchange between accounts with identical names,
addresses and taxpayer identification number, unless previously authorized with
a signature-guaranteed letter.
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may have
up to two (2) redemption checks for a fixed amount sent to you on the 15th of
the month, simply by sending a letter with all information, including your
account number, and the dollar amount ($100 minimum). If you would like a
regular check mailed to another person or place, your letter must be signature
guaranteed. Unless they otherwise qualify for a waiver, Class B or Class C
shares of the Portfolio redeemed by Systematic Check Redemption will be subject
to the Contingent Deferred Sales Charge.
Through your Broker
If your account is held in your broker's name ("street name"), you should
contact your broker directly to transfer, exchange or redeem shares.
DIVIDENDS, CAPITAL GAINS AND TAXES
Dividends from the Portfolio's net investment income are declared and paid
monthly.
Net investment income consists of the interest income, net short-term
capital gains, if any, and dividends declared and paid on investments, less
expenses. Distributions of the Portfolio's net short-term capital gains (treated
as dividends for tax purposes) and its net long-term capital gains, if any, are
normally declared and paid by the Fund once a year; however, the Portfolio does
not anticipate making any such distributions unless available capital loss
carryovers have been used or have expired. Dividend and distribution payments
will vary between classes; dividend payments are anticipated to be generally
higher for Class A shares.
Dividend Options
Dividends and any distributions are automatically reinvested in the same
Portfolio at net asset value (no sales charge), unless you elect to have the
dividends of $10 or more paid in cash (by check or by Calvert Money Controller).
Dividends and distributions may be automatically invested in an identically
registered account with the same account number in any other Calvert Group Fund
or Portfolio at net asset value. If reinvested in the same Fund account, new
shares will be purchased at net asset value on the reinvestment date, which is
generally 1 to 3 days prior to the payment date. You must be a shareholder on
the record date to receive dividends. You must notify the Fund in writing prior
to the record date to change your payment options. If you elect to have
dividends and/or distributions paid in cash, and the US Postal Service cannot
deliver the check, or if it remains uncashed for an extended period, it, as well
as future dividends and distributions, will be reinvested in additional shares.
No dividends will accrue on amounts represented by uncashed distribution or
redemption checks.
"Buying a Dividend"
At the time of purchase, the share price of the Portfolio may reflect
undistributed income, capital gains or unrealized appreciation of securities.
Any capital gains from these amounts which are later distributed to you are
fully taxable. On the record date for a distribution, the Portfolio's share
value is reduced by the amount of the distribution. If you buy shares just
before the record date ("buying a dividend") you will pay the full price for the
shares and then receive a portion of the price back as a taxable distribution.
Federal Taxes
Dividends derived from interest on municipal obligations constitute
exempt-interest dividends, on which you are not subject to federal income tax.
However, dividends which are from taxable interest and any distributions of
short-term capital gain are taxable to you as ordinary income. If the Portfolio
makes any distributions of long-term capital gains, then these are taxable to
you as long-term capital gains, regardless of how long you held your shares of
the Portfolio. Dividends attributable to interest on certain private activity
bonds must be included in federal alternative minimum tax for individuals and
for corporations.
If any taxable income or gains are paid, in January, the Portfolio will mail
you Form 1099-DIV indicating the federal tax status of dividends paid to you
by the Portfolio during the past year.
You may realize a capital gain or loss when you redeem (sell) or exchange
shares.
If you sell or exchange your Fund shares you will have a short or long-term
capital gain or loss, depending on how long you owned the shares which were
sold. In January, the Fund will mail you Form 1099-B indicating the proceeds
from all sales, including exchanges. You should keep your annual year-end
account statements to determine the cost (basis) of the shares to report on your
tax returns.
State and Local Taxes
Dividends derived from interest on Vermont state or local obligations are
exempt from Vermont personal income tax, as are dividends from obligations
issued by certain territories, such as Puerto Rico. The Portfolio will advise
you each January of the percent of dividends qualifying for this exemption. You
should consult your tax advisor with regard to how certain dividends affect you.
Taxpayer Identification Number
If we do not have your correct Social Security or Taxpayer Identification
Number ("TIN") and a signed certified application or Form W-9, Federal law may
require the Portfolio to withhold 31% of your dividends and certain redemptions.
In addition, you may be subject to a fine. You will also be prohibited from
opening another account by exchange. If this TIN information is not received
within 60 days after your account is established, your account may be redeemed
at the current NAV on the date of redemption. The Portfolio reserves the right
to reject any new account or any purchase order for failure to supply a
certified TIN.
EXHIBIT A - REDUCED SALES CHARGES
You may qualify for a reduced sales charge through several purchase plans
available. You must notify the Fund at the time of purchase to take advantage
of the reduced sales charge.
Right of Accumulation
The sales charge is calculated by taking into account not only the dollar
amount of a new purchase of shares, but also the higher of cost or current
value of shares previously purchased in Calvert Group Funds that impose sales
charges. This automatically applies to your account for each new purchase.
Letter of Intent
If you plan to purchase $50,000 or more of Fund shares over the next 13
months, your sales charge may be reduced through a "Letter of Intent." You pay
the lower sales charge applicable to the total amount you plan to invest over
the 13-month period, excluding any money market fund purchases. Part of your
shares will be held in escrow, so that if you do not invest the amount
indicated, you will have to pay the sales charge applicable to the smaller
investment actually made. For more information, see the Statement of
Additional Information.
Group Purchases
If you are a member of a qualified group, you may purchase shares of the Fund
at the reduced sales charge applicable to the group taken as a whole. The
sales charge is calculated by taking into account not only the dollar amount
of the shares you purchase, but also the higher of cost or current value of
shares previously purchased and currently held by other members of your group.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount, and
(iii) satisfies uniform criteria which enable CDI and dealers offering Fund
shares to realize economies of scale in distributing such shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of CDI or dealers distributing the Fund's
shares, must agree to include sales and other materials related to the Fund in
its publications and mailings to members at reduced or no cost to CDI or
dealers. Members of a group are not eligible for a Letter of Intent.
Other Circumstances
There is no sales charge on shares of any fund or portfolio of the Calvert
Group of Funds sold to (i) current or retired Directors, Trustees, or Officers
of the Calvert Group of Funds, employees of Calvert Group, Ltd. and its
affiliates, or their family members; (ii) CSIF Advisory Council Members,
directors, officers, and employees of any subadvisor for the Calvert Group of
Funds, employees of broker/dealers distributing the Fund's shares and
immediate family members of the Council, subadvisor, or broker/dealer; (iii)
Purchases made through a Registered Investment Advisor, (iv) Trust departments
of banks or savings institutions for trust clients of such bank or
institution, (v) Purchases through a broker maintaining an omnibus account
with the fund or portfolio, provided the purchases are made by (a) investment
advisors or financial planners placing trades for their own accounts (or the
accounts of their clients) and who charge a management, consulting, or other
fee for their services; or (b) clients of such investment advisors or
financial planners who place trades for their own accounts if such accounts
are linked to the master account of such investment advisor or financial
planner on the books and records of the broker or agent; or (c) retirement and
deferred compensation plans and trusts, including, but not limited to, those
defined in section 401(a) or section 403(b) of the I.R.C., and "rabbi trusts."
Dividends and Capital Gain Distributions from other Calvert Group Funds
You may prearrange to have your dividends and capital gain distributions from
another Calvert Group Fund automatically invested in another account with no
additional sales charge.
Reinstatement Privilege
If you redeem Fund shares and then within 30 days decide to reinvest in the
same Fund, you may do so at the net asset value next computed after the
reinvestment order is received, without a sales charge. You may use the
reinstatement privilege only once. The Fund reserves the right to modify or
eliminate this privilege.
Prospectus
April 30, 1998
calvert tax-free reserves
vermont municipal portfolio
To Open an Account:
800.368.2748
Performance and Prices:
Calvert Information Network
24 hours, 7 days a week
800.368.2745
Service for Existing Accounts:
Shareholders 800.368.2745
Brokers 800.368.2746
TDD for Hearing-Impaired:
800.541.1524
Calvert Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o NFDS, 6th Floor
1004 Baltimore
Kansas City, MO 64105
Calvert Group Website
http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
PROSPECTUS - April 30, 1998
CALVERT TAX-FREE RESERVES
CALIFORNIA MONEY MARKET PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814
Investment Objectives and Policies
Calvert Tax-Free Reserves California Money Market Portfolio seeks to earn the
highest interest income exempt from federal and California state income taxes
as is consistent with prudent investment management, preservation of capital,
and the quality and maturity characteristics of the Portfolio. The Portfolio
seeks to maintain a constant net asset value of $1.00 per share. There can be
no assurance that the Portfolio will be successful in maintaining a constant
net asset value of $1.00 per share. An investment in the Portfolio is neither
insured nor guaranteed by the US Government.
The Portfolio invests substantially all of its assets in Municipal Obligations
of the State of California. It may invest up to 25% of its assets in a single
issuer. Therefore, investment in the Portfolio may be riskier than an
investment in another type of money market fund.
To Open An Account
Call your broker, or complete and return the enclosed Account Application.
Minimum initial investment is $2,000.
About This Prospectus
Please read this Prospectus before investing. It is designed to provide you
with information you ought to know before investing and to help you decide if
the Portfolio's goals match your own. Keep this document for future reference.
A Statement of Additional Information (dated April 30, 1998) for the Portfolio
has been filed with the Securities and Exchange Commission and is incorporated
by reference. This free Statement is available upon request from the
Portfolio: 800.368.2748.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
The SEC maintains a Website at http://www.sec.gov that contains the Statement
of Additional Information, material incorporated by reference, and other
information regarding the Fund.
FUND EXPENSES
A. Shareholder Transaction Costs
Sales Load on Purchases None
Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fees None
B. Annual Fund Operating Expenses - Fiscal Year 1997
(as a percentage of average net assets)
Management Fees 0.51%
Rule 12b-1 Service and Distribution Fees None
Other Expenses 0.15%
Total Fund Operating Expenses 1 0.66%
1 Net Fund Operating Expenses after reduction for fees paid indirectly were
0.65%.
C. Example:
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return and (2) redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
$7 $21 $37 $82
The example, which is hypothetical, should not be considered a representation
of past or future expenses. Actual expenses may be higher or lower than those
shown.
Explanation of Table: The purpose of the table is to assist you in
understanding the various costs and expenses that an investor in the Portfolio
may bear directly (shareholder transaction costs) or indirectly (annual fund
operating expenses).
Shareholder Transaction Costs
are charges you pay when you buy or sell shares of the Portfolio. If you
request a wire redemption of less than $1,000, you will be charged a $5 wire
fee.
Annual Fund Operating Expenses
are based on the Portfolio's historical expenses. Management Fees are paid by
the Portfolio to Calvert Asset Management Company, Inc. ("Investment Advisor")
for managing the Portfolio's investments and business affairs, and include an
administrative service fee paid to Calvert Administrative Services Company,
Inc. The Portfolio incurs Other Expenses for maintaining shareholder records,
furnishing shareholder statements and reports, and other services. Management
Fees and Other Expenses have already been reflected in the Portfolio's yield
and are not charged directly to individual shareholder accounts. Please refer
to "Management of the Fund" for further information.
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's financial
history. It expresses the information in terms of a single share outstanding
throughout the period. The table has been audited by those independent
accountants whose report is included in the Annual Report to Shareholders for
the periods presented. The table should be read in conjunction with the
financial statements and their related notes. The current Annual Report to
Shareholders is incorporated by reference into the Statement of Additional
Information.
Year Ended December 31,
California Portfolio 1997 1996 1995
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .032 .031 .037
Distributions from
Net investment income (.032) (.031) (.037)
Net asset value, ending $1.00 $1.00 $1.00
Total return 3.28% 3.17% 3.78%2
Ratio to average net assets
Net investment income 3.22% 3.14% 3.69%
Total expenses3 .66% .69% .76%
Net expenses .65% .68% .75%
Expenses reimbursed .05% .03% -
Net assets, ending (in thousands) $321,001 $346,008 $300,351
Number of shares outstanding,
ending (in thousands) 321,126 346,124 300,544
2 Total return numbers do not reflect the Tender Option Agreement. On December
15, 1994, the Portfolio entered into a Tender Option Agreement with the
Advisor valued at $600,000 to secure payment of an "at risk" investment. On
June 30, 1995, the investment paid the Portfolio in full and the option
expired unused. The expiration loss was applied against the Advisor's capital
contribution of the Option.
3 Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio
of net expenses.
<PAGE>
Year Ended December 31,
California Portfolio 1994 1993 1992
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .026 .022 .030
Distributions from
Net investment income (.026) (.022) (.030)
Net asset value, ending $1.00 $1.00 $1.00
Total return4 2.62%5 2.26% 3.08%
Ratio to average net assets
Net investment income 2.55% 2.22% 3.01%
Total expenses6 - - -
Net expenses .69% .69% .68%
Expenses reimbursed - - -
Net assets, ending (in thousands) $260,719 $296,984 $323,928
Number of shares outstanding,
ending (in thousands) 260,716 296,984 323,928
4 Total return has not been audited prior to 1994.
6 Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio
of net expenses.
<PAGE>
From Inception
Oct. 16, 1989
Year Ended December 31, to Dec. 31,
1991 1990 1989
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .045 .059 .018
Distributions from
Net investment income (.045) (.059) (.018)
Net asset value, ending $1.00 $1.00 $1.00
Total return4 4.64% 6.04% 6.51% (a)
Ratio to average net assets
Net investment income 4.51% 5.83% 6.13% (a)
Total expenses6 - - -
Net expenses .60% .31% .12% (a)
Expenses reimbursed - .02% -
Net assets, ending (in thousands) $287,984 $240,469 $35,662
Number of shares outstanding,
ending (in thousands) 287,984 240,468 35,661
(a) Annualized
4 Total return has not been audited prior to 1994.
5 Total return numbers do not reflect the Tender Option Agreement. On December
15, 1994, the Portfolio entered into a Tender Option Agreement with the
Advisor valued at $600,000 to secure payment of an "at risk" investment. On
June 30, 1995, the investment paid the Portfolio in full and the option
expired unused. The expiration loss was applied against the Advisor's capital
contribution of the Option.
6 Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio
of net expenses.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The California Money Market Portfolio seeks to earn the highest level of
interest income exempt from federal and California state income taxes as is
consistent with prudent investment management, preservation of capital, and
the quality and maturity characteristics of the Portfolio.
The Portfolio invests primarily in a diversified portfolio of municipal
obligations whose interest is exempt from federal and California state income
tax. Municipal obligations in which the Portfolio invests are short-term,
fixed and variable rate instruments of minimal credit risk and of high
quality. Short-term obligations have remaining maturities of one year or less.
The Portfolio maintains an average weighted maturity of 90 days or less.
California Money Market Portfolio invests at least 80% of its assets in debt
obligations issued by or on behalf of the State of California.
Under normal market conditions, the California Money Market Portfolio will
invest at least 80% of its total assets in municipal obligations whose
interest is exempt from federal and California state income tax, including
those issued by or on behalf of the State of California and its political
subdivisions ("Municipal Obligations"). The Portfolio will also attempt to
invest the remaining 20% of its total assets in such obligations, but may
invest it in municipal obligations of other states, territories and
possessions of the United States, the District of Columbia and their
respective authorities, agencies, instrumentalities and political subdivisions
or in short-term taxable money market-type instruments. See "Temporary
Investments" below. Dividends paid by the Portfolio which are derived from
interest attributable to California Municipal Obligations will be exempt from
federal and California state personal income taxes. Dividends derived from
interest on tax-exempt obligations of other governmental issuers will be
exempt from federal income tax, but will be subject to California state income
taxes.
Credit Quality
The Portfolio invests in municipal bonds and notes and tax-exempt commercial
paper within the two highest credit ratings categories: for example, AA and
AAA (or Aa and Aaa) for municipal bonds, and A-l and A-2 (or P-l and P-2) for
tax-exempt commercial paper. Municipal obligations rated within these
categories are judged to be of high quality by all standards.
The credit quality of municipal obligations is determined by reference to a
commercial credit rating service, such as Moody's Investors Service, Inc. or
Standard & Poor's Corporation. In the case of any instrument that is not
rated, credit quality is determined by the Advisor under the supervision of
the Board of Trustees. There is no limitation on the percentage of the
Portfolio's assets which may be invested in unrated obligations; such
obligations may be less liquid than rated obligations of comparable quality.
Please refer to the Appendix in the Statement of Additional Information for a
description of the ratings used by these services.
Floating and Variable Rate Obligations
The Portfolio may invest in variable rate obligations. Variable rate
obligations have a yield which is adjusted periodically based on changes in
the level of prevailing interest rates. Floating rate obligations have an
interest rate fixed to a known lending rate, such as the prime rate, which
automatically adjusts when the known rate changes. Variable rate obligations
lessen the capital fluctuations usually inherent in fixed income investments,
which diminishes the risk of capital depreciation of portfolio investments and
Portfolio shares; but this also means that should interest rates decline, the
yield of the Portfolio will decline, causing the Portfolio and its
shareholders to forego the opportunity for capital appreciation of the
portfolio investments.
Demand Notes
The Portfolio may invest in floating rate and variable rate demand notes.
Demand notes provide that the holder may demand payment of the note at its par
value plus accrued interest by giving notice to the issuer. To ensure the
ability of the issuer to make payment upon such demand, the note may be
supported by an unconditional bank letter of credit.
The Portfolio may invest in structured money market instruments, where the
underlying security is a municipal lease. Generally, such instruments are
structured as tax-exempt commercial paper or variable rate demand notes, and
are typically secured by an unconditional letter of credit. In the unlikely
event that the letter of credit is not honored, the lease would present
special risks, such as the chance that the municipality might not appropriate
funding for the lease payments. Thus, the Advisor considers risk of
cancellation in its investment analysis. Certain leases may be considered
illiquid. In all cases, the Portfolio invests only in high-quality instruments
(rated in one of the two highest rating categories, or if unrated, of
comparable credit quality) that meet the requirements of SEC Rule 2a-7
regarding credit quality and maturity. See the Statement of Additional
Information.
When-Issued Purchases
New issues of Municipal Obligations are offered on a when-issued basis; that
is, delivery and payment for the securities normally take place 15 to 45 days
after the date of the transaction. The payment obligation and the yield that
will be received on the securities are fixed at the time the buyer enters into
the commitment. The Portfolio will only make commitments to purchase such
securities with the intention of actually acquiring the securities, but the
Portfolio may sell these securities before the settlement date if it is deemed
advisable as a matter of investment strategy.
Temporary Investments
For liquidity purposes or pending the investment of the proceeds of the sale
of its shares, the Portfolio may invest in and derive up to 20% of its income
from taxable short-term money market type investments. Interest earned from
such taxable investments will be taxable to you as ordinary income unless you
are otherwise exempt from taxation.
Other Policies
The Portfolio may temporarily borrow money from banks to meet redemption
requests, but such borrowing may not exceed 10% of the value of the
Portfolio's total assets. The Portfolio has adopted certain fundamental
investment restrictions which are discussed in detail in the Statement of
Additional Information.
YIELD
Yield refers to income generated by an investment over a period of time.
The Portfolio may advertise "yield" and "effective yield." Yield figures are
based on historical earnings and are not intended to indicate future
performance. The "yield" of a Portfolio refers to the actual income generated
by an investment in the Portfolio over a particular base period, stated in the
advertisement. If the base period is less than one year, the yield will be
"annualized." That is, the amount of income generated by the investment during
the base period is assumed to be generated over a one-year period and is shown
as a percentage of the investment. The "effective yield" is calculated like
yield, but assumes reinvestment of earned income. The effective yield will be
slightly higher than the yield because of the compounding effect of this
assumed reinvestment.
Taxable Equivalent Yield
The Portfolio may also advertise its "taxable equivalent yield." The taxable
equivalent yield is the yield you would have 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 taxable equivalent yield for the
Portfolio is computed by taking the portion of the Portfolio's yield exempt
from regular federal income tax and multiplying the exempt yield by a factor
based on a stated income tax rate, then adding the portion of the yield that
is not exempt from regular federal income tax. The factor used to calculate
the taxable equivalent yield is the reciprocal of the difference between one
and the applicable income tax rate, which will be stated in the advertisement.
MANAGEMENT OF THE FUND
The Board of Trustees supervises the activities and reviews its contracts with
companies that provide the Fund with services.
The Portfolio is a series of Calvert Tax-Free Reserves (the "Fund"), an
open-end management investment company, organized as a Massachusetts business
trust on October 20, 1980. The series of the Fund include the Money Market
Portfolio, Limited-Term Portfolio, Long-Term Portfolio, California Money
Market Portfolio, and the Vermont Municipal Portfolio.
The Fund is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes such as electing Trustees,
changing fundamental policies, or approving a management contract. As a
shareholder, you receive one vote for the share of a Portfolio you own. For
matters affecting only one Portfolio, only shares of that Portfolio are
entitled to vote.
Calvert Group is one of the largest investment management firms in the
Washington, DC area.
Calvert Group, Ltd., parent of the Portfolio's investment advisor, transfer
agent, and distributor, is a subsidiary of Acacia Mutual Life Insurance
Company of Washington, DC Calvert Group is one of the largest investment
management firms in the Washington, DC area. Calvert Group, Ltd. and its
subsidiaries are located at 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814. As of December 31, 1997, Calvert Group managed and
administered assets in excess of $5.0 billion and more than 200,000
shareholder and depositor accounts.
Calvert Asset Management serves as Advisor.
Calvert Asset Management Company, Inc. (the "Advisor") is the Portfolio's
investment advisor. The Advisor provides the Portfolio with investment
supervision and management; administrative services and office space;
furnishes executive and other personnel to the Portfolio; and pays the
salaries and fees of all Trustees who are affiliated persons of the Advisor.
The Advisor may also assume and pay certain advertising and promotional
expenses of the Portfolio and reserves the right to compensate broker/dealers
in return for their promotional or administrative services. For fiscal year
1997, pursuant to the Investment Advisory Agreement, the Advisor received a
fee of 0.50% of the Portfolio's average daily net assets.
Calvert Administrative Services Company provides administrative services for
the Fund.
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, the daily determination of its net
asset value per share and dividends, and the maintenance of its portfolio and
general accounting records. For providing such services, prior to August 1,
1997 CASC received a total fee from the Fund of $200,000 per year, allocated
among the Portfolios based on assets. Effective August 1, 1997, the fee
structure changed, and the Fund (exclusive of CTFR Money Market Portfolio)
pays an annual fee of $80,000, allocated between the Portfolios based on
assets.
Calvert Distributors, Inc. serves as underwriter to market the Portfolio's
shares.
Calvert Distributors, Inc. ("CDI") is the Fund's principal underwriter and
distributor. Under the terms of its underwriting agreement with the Portfolio,
CDI markets and distributes the Portfolio's shares and is responsible for
payment of commissions and service fees to broker/dealers, banks, and
financial services firms, preparing advertising and sales literature, and
printing and mailing prospectuses to prospective investors.
CDI currently compensates broker/dealer firms at rates up to 0.20% of the
average daily net assets maintained in Portfolio accounts administered by the
respective firms. CDI may also pay additional concessions, including non-cash
promotional incentives such as merchandise or trips, to dealers employing
registered representatives who sell a minimum dollar amount of shares of the
Fund and/or shares of other Funds underwritten by CDI. CDI may make expense
reimbursements for special training of a dealer's registered representatives,
advertising and equipment, or to defray the expenses of sales contests.
The transfer agent keeps your account records.
Calvert Shareholder Services, Inc. is the Fund's shareholder servicing agent.
National Financial Data Services, Inc. ("NFDS"), 1004 Baltimore, Kansas City,
Missouri 64105, is the transfer and dividend disbursing agent for the Fund.
SHAREHOLDER GUIDE
How to Open An Account
Getting Started
Regardless of the investment option you choose (see below), the enclosed
application must be completed and signed for each new account. When multiple
classes of shares ore offered, please specify which class you which to
purchase. Additional documents may be required for corporations, associations
and certain fiduciaries, and for investments in Calvert's tax-deferred
retirement plans. For more information about account options mentioned below,
contact your broker or our shareholder services department at 800.368.2748.
HOW TO BUY SHARES
CTFR California Money Market Portfolio shares are sold without a sales charge.
Method New Accounts Additional Investments
By Mail $2,000 minimum $250 minimum
Please make your check Please make your check
payable to the Portfolio payable to the Portfolio
and mail it with your and mail it with your
application to: investment slip to:
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas City, MO Kansas City, MO
64141-6544 64141-6739
By Registered, Calvert Group Calvert Group
Certified, or c/o NFDS, 6th Floor c/o NFDS, 6th Floor
Overnight Mail: 1004 Baltimore 1004 Baltimore
Kansas City, MO Kansas City, MO
64105-1807 64105-1807
At the Calvert Visit the Calvert Office to make investments by check.
Office
WHEN YOUR ACCOUNT WILL BE CREDITED
Your purchase will be processed at the next NAV calculated after your order is
received and accepted. All of your purchases must be made in US dollars and
checks must be drawn on US banks. No cash will be accepted. The Portfolio
reserves the right to suspend the offering of shares for a period for time or
to reflect any specific purchase order. If your check does not clear the bank,
your purchase will be canceled and you will be charged a $10 fee plus costs
incurred by the Portfolio.
When you purchase by check or with Calvert Money Controller, the purchase will
be on hold for up to 10 business days from the date of receipt. During the
hold period, any redemptions will be held until the Transfer Agent is
reasonably satisfied that the purchase payment has been collected. Drafts
written on a money market portfolio during the hold period will be returned
for uncollected funds. To avoid this hold period, you can wire federal funds
from your bank, which may charge you a fee. As a convenience, check purchases
can be received at Calvert's offices for overnight mail delivery to the
Transfer Agent and will be credited the next business day. Any check purchase
received without an investment slip may cause delayed crediting.
Money Market Dividends
If your wire purchase is received by 5 p.m. ET, your account will begin
earning dividends on the next business day. Exchanges begin earning dividends
the next business day after the exchange request is received by mail or
telephone. Purchases received by check will begin earning dividends the next
business day after they are credited to the account.
OTHER CALVERT GROUP FEATURES
Calvert Information Network
For 24 hour performance and account information call 800.368.2745 or visit
http://www.calvertgroup.com.
You can obtain current performance and pricing information, verify account
balances, and authorize certain transactions with the convenience of one phone
call, 24 hours a day.
Account Services
By signing up for services when you open your account, you avoid having to
obtain a signature guarantee. If you wish to add services at a later date, a
signature guarantee to verify your signature may be obtained from any bank,
trust company and savings and loan association, credit union, broker/dealer
firm or member of a domestic stock exchange. A notary public cannot provide a
signature guarantee.
Calvert Money Controller
Calvert Money Controller allows you to purchase or sell shares anytime from
anywhere with ease, without the time delay of mailing a check or the added
expense of wiring funds. Use this service to transfer up to $300,000
electronically. Allow one or two business days after you place your request
for the transfer to take place. Money transferred to purchase new shares will
be subject to a hold of up to 10 business days before redemption requests will
be honored. Transaction requests must be received by 4 p.m. ET. You may
request this service on your initial account application.
Telephone Transactions
You may purchase, redeem, or exchange shares, wire funds and use Calvert Money
Controller by telephone if you have pre-authorized service instructions. You
receive telephone privileges automatically when you open your account unless
you elect otherwise. For our mutual protection, the Fund, the shareholder
servicing agent and their affiliates use precautions such as verifying
shareholder identity and recording telephone calls to confirm instructions
given by phone. A confirmation statement is sent for most transactions; please
review this statement and verify the accuracy of your transaction immediately.
Exchanges
Calvert Group of Funds offers a wide variety of investment options that
includes common stock funds, tax-exempt and corporate bond funds, and money
market funds (call your broker or Calvert representative for more
information). We make it easy for you to purchase shares in other funds should
your investment goals change with changes in market conditions. The exchange
privilege offers flexibility, by allowing you to exchange shares on which you
have already paid a sales charge from one mutual fund to another at no
additional charge.
Complete and sign an account application, taking care to register your new
account in the same name and taxpayer identification number as your existing
Calvert account(s). Exchange instructions may then be given by telephone if
telephone redemptions have been authorized and the shares are not in
certificate form.
Before you make an exchange, please note the following:
Each exchange represents the sale of shares of one portfolio and the purchase
of shares of another. Therefore, you could realize a taxable gain or loss.
Shareholders (and those managing multiple accounts) who make two purchases and
two exchange redemptions of shares of the same Portfolio during a six month
period will be given written notice and may be prohibited from placing
additional investments. This policy does not prohibit a shareholder from
redeeming shares of any Portfolio, and does not apply to trades solely among
money market funds.
The Fund reserves the right to terminate or modify the exchange privilege with
60 days written notice.
Combined General Mailings
Join us in our efforts to conserve paper and save on postage.
If you have multiple accounts with Calvert, you may receive combined mailings
of shareholder information, such as account statements, confirmations of
transactions, prospectuses and semi-annual and annual reports.
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may have up
to two (2) redemption checks for a fixed amount sent to you on the 15th of the
month, simply by sending a letter with all information, including your account
number, and the dollar amount. If you would like a regular check mailed to
another person or place, your letter must be signature guaranteed.
Special Services and Charges
The Funds pay for shareholder services but not for special services that are
required by a few shareholders, such as a request for a historical transcript
of an account or a stop payment on a draft. You may be required to pay a fee
for these special services; for example, the fee for stop payments is $25.
If you are purchasing shares through a program of services offered by a
broker/dealer or financial institution, you should read the program materials
in conjunction with this Prospectus. Certain features may be modified in these
programs, and administrative charges may be imposed by the broker/dealer or
financial institution for the services rendered.
Minimum Account Balance is $1,000 per Fund, per Class
Please maintain a balance in each of your Fund accounts of at least $1,000. If
the balance in your account falls below the $1,000 minimum during a month, a
$3 fee will be charged to your account, or the account may be closed and the
proceeds mailed to the address of record. You will receive a notice that your
account is below the minimum, and will be closed or charged if the balance is
not brought up to the required minimum amount within 30 days.
DIVIDENDS, CAPITAL GAINS AND TAXES
Dividends from the Portfolio's net investment income are accrued daily and
paid monthly. Net investment income consists of interest income, net
short-term capital gains, if any, and dividends declared and paid on
investments, less expenses. Distributions of net short-term capital gains
(treated as dividends for tax purposes) and net long-term capital gains, if
any, are normally paid once a year; however, the Portfolio does not anticipate
making any such distributions unless available capital loss carryovers have
been used or have expired.
Dividend Payment Options (available monthly or quarterly)
Dividends and any distributions are automatically reinvested in the same
Portfolio at NAV (no sales charge), unless you elect to have the dividends of
$10 or more paid in cash, (by check or by Calvert Money Controller). Dividends
and distributions from any Calvert Group Fund or Portfolio may be
automatically invested in an identically registered account in any other
Calvert Group Fund at NAV. If reinvested in the same Fund account, new shares
will be purchased at NAV on the reinvestment date, which is generally 1 to 3
days prior to the payment date. You must notify the Funds in writing to change
your payment options. If you elect to have dividends and/or distributions paid
in cash, and the US Postal Service cannot deliver the check, or if it remains
uncashed for an extended period, it, as well as future dividends and
distributions, will be reinvested in additional shares. No dividends will
accrue on amounts represented by uncashed distribution or redemption checks.
Federal Taxes
In January, your Fund will mail you Form 1099-DIV indicating the federal tax
status of any reportable dividends and capital gain distributions paid to you
during the past year. Generally, dividends and distributions are taxable 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. Dividends and distributions are taxable to you regardless of whether
they are taken in cash or reinvested. Dividends, including short-term capital
gains, are taxable as ordinary income. Distributions from long-term capital
gains are taxable as long-term capital gains, regardless of how long you have
owned shares.
Other Tax Information
To the extent that exempt-interest dividends are derived from earnings
attributable to California Municipal Obligations, they will also be exempt
from state and local personal income tax in California. The dividends may be
subject to California franchise taxes and corporate income taxes if received
by a corporation subject to such taxes. A letter will be mailed to you in
January detailing the percentage invested in California the previous tax year.
Taxpayer Identification Number
If we do not have your correct Social Security or Taxpayer Identification
Number ("TIN") and a signed certified application or Form W-9, Federal law
requires us to withhold 31% of your reportable dividends, and possibly 31% of
certain redemptions. In addition, you may be subject to a fine. You will also
be prohibited from opening another account by exchange. If this TIN
information is not received within 60 days after your account is established,
your account may be redeemed (closed) at the current NAV on the date of
redemption. Calvert Group reserves the right to reject any new account or any
purchase order for failure to supply a certified TIN.
HOW TO SELL SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received. The proceeds will normally be sent to you on the next
business day, but if making immediate payment could adversely affect the
Portfolio, it may take up to seven (7) days. Calvert Money Controller
redemptions generally will be credited to your bank account on the second
business day after your phone call. Remember, investment made by check or
Calvert Money Controller may be subject to a hold before shares can be
redeemed. When the New York Stock Exchange is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday
closings, or under any emergency circumstances as determined by the Securities
and Exchange Commission, redemptions may be suspended or payment dates
postponed.
Net Asset Value - "NAV"
NAV refers to the worth of one share. NAV is computed by adding the value of
all portfolio holdings, plus other assets, deducting liabilities and then
dividing the result by the number of shares outstanding. For Portfolios with
more than one class of shares, the NAVs of each class will vary daily
depending on the number of shares outstanding for each class.
Portfolio securities and other assets are valued based on market quotations,
except that securities maturing within 60 days are valued at amortized cost.
Money Market securities are valued according to the "amortized cost" method,
which is intended to stabilize the NAV at $1 per share. If quotations are not
available, securities are valued by a method that the particular Fund's Board
of Trustees/Directors believes accurately reflects fair value.
The NAV is calculated at the close of each business day, which coincides with
the closing of the regular session of the New York Stock Exchange (normal 4
p.m. ET). Each Fund is open for business each day the New York Stock Exchange
is open. All purchases will be confirmed and credited to your account in full
and fractional shares (rounded to the nearest 1/1000 of a share). A money
market portfolio may send monthly statements in lieu of immediate
confirmations for purchases and redemptions.
Follow these suggestions to ensure timely processing of your redemption request
By Telephone
You may redeem shares from your account by telephone and have your money
mailed to your address of record or electronically transferred or wired to a
bank you have previously authorized. A charge of $5 may be imposed on wire
transfers of less than $1,000.
Written Requests
Calvert Group, PO Box 419544, Kansas City MO 64141-6544
Your letter should include your account number and fund and the number of
shares or the dollar amount your are redeeming. Please provide a daytime
telephone number, if possible, for us to call if we have questions. If the
money is being sent to a new bank, person, or address other than the address
of record, your letter must be signature guaranteed.
The following requirements may also apply to your account:
Type of Registration Requirements
Corporations, Letter of instruction and corporate resolution,
signed
Associations by person(s) authorized to act on the account,
accompanied by signature guarantee(s).
Trusts Letter of instruction signed by the Trustee(s) (as
Trustees), with a signature guarantee. (If the
Trustee's name is not registered on your account,
provide a copy of the trust document, certified within
the last 60 days.)
<PAGE>
Prospectus
April 30, 1998
CALVERT TAX-FREE RESERVES
CALIFORNIA MONEY MARKET PORTFOLIO
To Open an Account:
800.368.2748
Performance and Prices:
Calvert Information Network
24 hours, 7 days a week
800.368.2745
Service for Existing Account:
Shareholders 800.368.2745
Brokers 800.368.2746
TDD for Hearing-Impaired:
800.541.1524
Branch Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o NFDS, 6th Floor
1004 Baltimore
Kansas City, MO 64105
Calvert Group Website
http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
Prospectus April 30, 1998
Calvert Tax-Free Reserves Money Market
Portfolio Institutional Class
4550 Montgomery Avenue, Bethesda, Maryland 20814
Investment Objective and Policies
Calvert Tax-Free Reserves (the "Fund") Money Market Portfolio (the
"Portfolio") seeks to earn the highest interest income exempt from federal
income taxes as is consistent with prudent investment management, preservation
of capital, and the quality and maturity characteristics of the Portfolio.
The Money Market Portfolio seeks to maintain a constant net asset value of
$1.00 per share. There can be no assurance that the Portfolio will be
successful in maintaining a constant net asset value of $1.00 per share. An
investment in the Portfolio is neither insured nor guaranteed by the U.S.
Government.
Purchase Information
The Money Market Portfolio offers two classes of shares, Class O, described in
and offered by another Calvert Tax-Free Prospectus, and the Institutional
Class (the "Class"), offered by this Prospectus. The Limited-Term and Long-Term
each offer one class of shares.
To Open An Account
Complete and return the enclosed Account Application. Minimum initial
investment is $1,000,000.
About This Prospectus
Please read this Prospectus before investing. It is designed to provide you
with information you ought to know before investing
and to help you decide if the Portfolio's goals match your own. Keep this
document for future reference.
A Statement of Additional Information ("SAI") (dated April 30, 1998) for the
Fund has been filed with the Securities and Exchange Commission and is
incorporated by reference. This free Statement is available upon request from
the Fund: 800.317.2274.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE FEDERAL OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY.
The SEC maintains a Web site at http://www.sec.gov that contains the Statement
of Additional Information, material incorporated by reference, and other
information regarding the Fund.
Table of Contents
Fund Expenses 2
Financial Highlights 2
Investment Objective and Policies 3
Yield 4
Management of the Fund 5
Shareholder Guide
How to Buy Shares 6
When Your Account Will be Credited 6
Exchanges 7
Other Calvert Group Services 7
How to Sell Your Shares 7
Dividends and Taxes 8
<PAGE>
FUND EXPENSES
A. Shareholder Transaction Expenses Institutional Class
Sales Load on Purchases None
Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees $5 for wire under $50,000
Exchange Fee None
B. Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.30%
Rule 12b-1 Fees None
Other Expenses 0.05%
Total Fund Operating Expenses 0.35%
C. Example:
You would pay the following expenses on a $1,000 investment, assuming (1) 5%
annual return; and (2) redemption at the end of each period:
1 Year 3 Years 5 Years 10 Years
$4 $11 $20 $44
The example, which is hypothetical, should not be considered a representation
of past or future expenses. Actual expenses may be higher or lower than those
shown.
Explanation of Table: The purpose of the table is to assist you in
understanding the various costs and expenses that an investor in the Class may
bear directly (shareholder transaction costs) or indirectly (annual class
operating expenses).
Shareholder Transaction Expenses
are charges you pay when you buy or sell shares of the Class.
Annual Fund Operating Expenses
have been restated to reflect expenses anticipated in the current fiscal year.
Management Fees include the advisory fee paid by the Portfolio to Calvert
Asset Management Company, Inc. (the "Advisor") for managing its investments
and business affairs, and the administrative service fee paid to Calvert
Administrative Services Company. The Portfolio incurs Other Expenses for
maintaining shareholder records, furnishing shareholder statements and
reports, and other services. Management Fees and Other Expenses have already
been reflected in the yield of the Class and are not charged directly to
individual shareholder accounts. Please refer to the section "Management of
the Fund" for further information.
FINANCIAL HIGHLIGHTS
The following table provides information about financial history. It expresses
the information in terms of a single share outstanding throughout each period
for Class MMP (the predecessor class to the Institutional Class). The table
has been audited by those independent accountants whose reports are included
in the Annual Reports to Shareholders. The table should be read in conjunction
with the financial statements and their related notes. The current Annual
Report to Shareholders is incorporated by reference into the SAI.
October 2,
Year Ended 1995 through
December 31, December 31,
1997 1996 1995
Net asset value,
beginning of period $1.00 $1.00 $1.00
Income from investment operations
Net investment income .031 .030 .008
Distributions from
Net investment income (.031) (.030) (.008)
Net asset value, end of period $1.00 $1.00 $1.00
Total return 1 3.12% 2.68% .79%
Ratio to average net assets:
Net investment income 3.37% 2.65% 3.19%(a)
Total expenses 2 .63% 1.29% 1.35%(a)
Net expenses .62% 1.28% 1.34%(a)
Expenses reimbursed (.04%) - -
Net assets, end of period
(in thousands) $51,087 $33,160 $41,736
Number of shares outstanding
at end of period (in thousands) 51,084 33,153 41,732
(a) annualized
1 Total return is not annualized.
2 Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio
of net expenses.
INVESTMENT OBJECTIVE AND POLICIES AND RISKS
Calvert Tax-Free Reserves Money Market Portfolio seeks to earn 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 of the Portfolio.
The Money Market Portfolio invests primarily in a diversified portfolio of
municipal obligations whose interest is exempt from federal income tax.
Municipal obligations in which the Portfolio invests are short-term, fixed and
variable rate instruments of minimal credit risk and of high quality. The
Portfolio invests in municipal bonds and notes and tax-exempt commercial paper
within the two highest credit ratings categories or, if unrated, are
determined by the Advisor to be of comparable quality. Short-term obligations
have remaining maturities of one year or less. The Portfolio maintains an
average weighted maturity of 90 days or less. During normal market conditions,
the Portfolio's assets will be invested so that at least 80% of its annual
income will be tax-exempt.
Credit Quality
The credit quality of municipal obligations is determined by reference to a
commercial credit rating service, such as Moody's Investors Service, Inc. or
Standard & Poor's Corporation. If an instrument is not rated, credit quality
is determined by the Advisor under the supervision of the Board of Trustees.
High grade, as determined by a NRSRO, is currently defined as the top two
rating categories, i.e., AAA/Aaa, and AA/Aa. There is no limitation on the
percentage of the Portfolio's assets that may be invested in unrated
obligations; such obligations may be less liquid than rated obligations of
comparable quality. The ratings used by these services are described in the
Appendix to the Statement of Additional Information.
Variable Rate Obligations
The Portfolio may invest in variable rate obligations. Variable rate
obligations have a yield that is adjusted periodically based on changes in the
level of prevailing interest rates. Floating rate obligations have an interest
rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate obligations
lessen the capital fluctuations usually inherent in fixed income investments.
This diminishes the risk of capital depreciation of investment securities in a
Portfolio and, consequently, of Portfolio shares. However, if interest rates
decline, the yield of the Portfolio will decline, causing the Portfolio and
its shareholders to forego the opportunity for capital appreciation of the
Portfolio investments and of their shares.
Demand Notes
The Portfolio may invest in floating rate and variable rate demand notes.
Demand notes provide that the holder may demand payment of the note at its par
value plus accrued interest by giving notice to the issuer. To ensure the
ability of the issuer to make payment on demand, the note may be supported by
an unconditional bank letter of credit.
Interest-Rate Risk
All fixed income instruments are subject to interest-rate risk; that is, if
the market interest rates rise, the current price or value of a bond will
decline.
Municipal Leases
The Money Market Portfolio may invest in structured money market instruments,
where the underlying security is a municipal lease. Generally, such
instruments are structured as tax-exempt commercial paper or variable rate
demand notes, and are typically secured by an unconditional letter of credit.
In the unlikely event that the letter of credit is not honored, the lease
would present special risks, such as the chance that the municipality might
not appropriate funding for the lease payments. Thus, the Advisor considers
risk of cancellation in its investment analysis. Certain leases may be
considered illiquid. In all cases, the Portfolio invests only in high-quality
instruments (rated in one of the two highest rating categories, or if unrated,
of comparable credit quality) that meet the requirements of SEC Rule 2a-7
regarding credit quality and maturity. See the Statement of Additional
Information.
When-Issued Purchases
New issues of municipal obligations are offered on a when-issued basis; that
is, delivery and payment for the securities normally take place 15 to 45 days
after the date of the transaction. The payment obligation and the yield that
will be received on the securities are each fixed at the time the buyer enters
into the commitment. The Portfolio will only make commitments to purchase
these securities with the intention of actually acquiring them, but may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy.
Temporary Investments
For liquidity purposes or pending the investment of the proceeds of the sale
of its shares, the Portfolio may invest in and derive up to 20% of its income
from taxable short-term money market type investments. Interest earned from
such taxable investments will be taxable to you as ordinary income unless you
are otherwise exempt from taxation.
Other Policies
The Portfolio may temporarily borrow money from banks to meet redemption
requests, but such borrowing may not exceed 10% of the value of its total
assets. The Portfolio has adopted certain fundamental investment restrictions
which are discussed in detail in its Statement of Additional Information.
Unless specifically noted otherwise, the investment objective, policies and
restrictions of the Portfolio are fundamental and may not be changed without
shareholder approval.
YIELD
Yield refers to income generated by an investment over a period of time for
each class.
From time to time, the Money Market Portfolio Institutional Class may
advertise "yield" and "effective yield." Yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of
the Class refers to the actual income generated by an investment in
Institutional Class over a particular base period, stated in the
advertisement. If the base period is less than one year, the yield will be
"annualized." That is, the amount of income generated by the investment during
the base period is assumed to be generated over a one-year period and is shown
as a percentage of the investment. The "effective yield" is calculated
similarly, but, when annualized, the income earned by an investment in
Institutional Class shares is assumed to be reinvested. The "effective yield"
will be slightly higher than the "yield" because of the compounding effect of
this assumed reinvestment.
"Tax Equivalent Yield"
Money Market Portfolio Institutional Class may also advertise its "tax
equivalent yield." The tax equivalent yield is the yield an investor would be
required to obtain from taxable investments to equal the 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 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.
MANAGEMENT OF THE FUND
The Board of Trustees supervises the activities and reviews its contracts with
companies that provide the Fund with services.
Calvert Tax-Free Reserves Money Market Portfolio Institutional Class is a
class of Calvert Tax-Free Reserves Money Market Portfolio ("CTFRMM"), a series
of Calvert Tax-Free Reserves, a Massachusetts business trust organized on
October 20, 1980. Prior to July 31, 1997, CTFRMM offered Class MMP, which has
been discontinued. The original class of CTFRMM (Class O) and the CTFRMM
Institutional Class shares represent interests in the same portfolio of
investments and are identical in all respects, except:
(a) the classes may have different transfer agency and administrative
service fees;
(b) postage and delivery, printing and stationery expenses will be
separately allocated;
(c) the classes will have different dividend rates due solely to the
effects of (a) and (b) above.
The Fund is an open-end diversified management investment company. The Fund is
not required to hold annual shareholder meetings, but special meetings may be
called for certain purposes such as electing Trustees, changing fundamental
policies, or approving a management contract. As a shareholder, you receive
one vote for each share of the Portfolio you own. For matters affecting only
one Portfolio, only shares of that Portfolio are entitled to vote. For matters
affecting only one class, only shares of that class are entitled to vote.
Calvert Group is one of the largest investment management firms in the
Washington, DC area.
Calvert Group, Ltd., parent of the Portfolio's investment advisor, shareholder
servicing agent, and distributor, is a subsidiary of Acacia Mutual Life
Insurance Company of Washington, DC Calvert Group is one of the largest
investment management firms in the Washington, DC area. Calvert Group, Ltd.
and its subsidiaries are located at 4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland 20814. As of December 31, 1997, Calvert Group managed and
administered assets in excess of $5.0 billion and more than 200,000
shareholder and depositor accounts.
Calvert Asset Management serves as Advisor to the Portfolio.
Calvert Asset Management Company, Inc. (the "Advisor") is the Portfolio's
investment advisor. The Advisor provides the Portfolio with investment
supervision and management; administrative services and office space;
furnishes executive and other personnel to the Portfolio; and pays the
salaries and fees of all Trustees who are affiliated persons of the Advisor.
The Advisor may also assume and pay certain advertising and promotional
expenses of the Portfolio and reserves the right to compensate broker-dealers
in return for their promotional or administrative services.
The Advisor receives a fee based on a percentage of the Portfolio's assets.
Pursuant to the Investment Advisory Agreement, the Advisor is entitled to
receive an annual advisory fee of 0.25% of the first $500 million of average
daily net assets, 0.20% of the next $500 million, and 0.15% on assets of $1
billion or more.
Calvert Administrative Services Company provides administrative services for
the Portfolio.
Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor,
has been retained by Calvert Tax-Free Reserves to provide certain
administrative services necessary to the conduct of its affairs, including the
preparation of regulatory filings and shareholder reports, the daily
determination of its net asset value per share and dividends, and the
maintenance of its portfolio and general accounting records. For providing
such services to the Institutional Class, CASC receives 0.05% of the average
daily net assets of the Class.
Calvert Distributors, Inc. serves as underwriter to market the Money Market
Portfolio's shares.
Calvert Distributors, Inc. ("CDI") is the Fund's principal underwriter and
distributor. Under the terms of its underwriting agreement with the Fund, CDI
markets and distributes the Portfolio's shares and is responsible for
preparation of advertising and sales literature, and printing and mailing of
prospectuses to prospective investors.
The transfer agent keeps your account records.
Calvert Shareholder Services, Inc. is the Fund's shareholder servicing agent.
National Financial Data Services, Inc. ("NFDS"), 1004 Baltimore, Kansas City,
Missouri 64105, is the transfer and dividend disbursing agent for the Fund.
SHAREHOLDER GUIDE
Opening An Account
You can buy shares of the Class in several ways which are described here and
in the chart below.
An account application accompanies this prospectus. A completed and signed
application is required for each new account you open. Additional forms may be
required from corporations, associations, and certain fiduciaries. If you have
any questions or need extra applications, call Calvert Group at 800.317.2274.
Share Price
The Portfolio's shares are sold without a sales charge.
The price of one share is its "net asset value," or NAV. NAV is computed by
adding the value of a Portfolio's investments plus cash and other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding. The NAV is calculated at the close of the Portfolio's business
day, which coincides with the closing of the regular session of the New York
Stock Exchange (normally 4:00 p.m. Eastern time). The Portfolio is open for
business each day the New York Stock Exchange is open. The Portfolio's
securities are valued according to the "amortized cost" method, which is
intended to stabilize the NAV at $1.00 per share.
All purchases of Portfolio shares will be confirmed and credited to your
account in full and fractional shares (rounded to the nearest 1/100 of a
share). The Portfolio may send monthly statements in lieu of immediate
confirmations of purchases and redemptions.
HOW TO BUY SHARES
Method Initial investment Additional Investments
By wire $1,000,000 minimum $25,000 minimum
Wire investments to:
State Street Bank and State Street Bank and
Trust Company Trust Company
Boston MA Boston MA
ABA# 011000028 ABA# 011000028
FBO: CTFRMM FBO: CTFRMM
Institutional Fund 718 Institutional Fund 718
Wire Account Wire Account
#9903-765-7 #9903-765-7
Your name and Your name and
account number account number
By Exchange $1,000,000 minimum $25,000 minimum
(From your account in another Calvert Group fund)
When opening an account by exchange, your new account must be established with
the same name(s), address and taxpayer identification number as your existing
Calvert account.
WHEN YOUR ACCOUNT WILL BE CREDITED
Before you buy shares, please read the following information to make sure your
investment is accepted and credited properly.
Your purchase will be processed at the NAV calculated after your order is
received and accepted. A telephone order placed to Calvert Institutional
Marketing Group by 11:00 a.m. Eastern time will receive the dividend on Class
shares declared that day if federal funds are received by the custodian by 5
p.m. Eastern time. Telephone orders placed after 11:00 a.m. will begin earning
dividends on Class shares the next business day. If no telephone order is
placed, investments begin earning dividends the next business day. Exchanges
begin earning dividends the next business day after the exchange request is
received by mail or telephone.
All of your purchases must be made by wire. No cash or checks will be
accepted. The Fund reserves the right to suspend the offering of shares for a
period of time or to reject any specific purchase order.
EXCHANGES
Each exchange represents the sale of shares of one Fund and the purchase of
shares of another.
If your investment goals change, the Calvert Group Family of Funds has a
variety of investment alternatives that includes common stock funds,
tax-exempt and corporate bond funds, and money market funds. The exchange
privilege is a convenient way to buy shares in other Calvert Group Funds in
order to respond to changes in your goals or in market conditions. Before you
make an exchange from a Fund or Portfolio, please note the following:
Call the Calvert Institutional Marketing Group for information and a
prospectus for any of Calvert's other Funds registered in your state. Read the
prospectus of the Fund or Portfolio into which you want to exchange for
relevant information.
Complete and sign an application for an account in that Fund or Portfolio,
taking care to register your new account in the same name and taxpayer
identification number as your existing Calvert account(s). Exchange
instructions may then be given by telephone if telephone redemptions have been
authorized and the shares are not in certificate form.
Shares on which you have already paid a sales charge at Calvert Group may be
exchanged into another Fund at no additional charge. Shares acquired by
reinvestment of dividends or distributions may be exchanged into another Fund
at no additional charge. Except for money market funds, if you make a purchase
at NAV, you may exchange that amount to another fund at no additional sales
charge.
The Fund reserves the right to terminate or modify the exchange privilege with
60 days written notice.
OTHER CALVERT GROUP SERVICES
Calvert Information Network
For 24 hour performance and account information call 800.368.2745 or visit
http://www.calvertgroup.com.
You can obtain current performance and pricing information, verify account
balances, and authorize certain transactions with the convenience of one phone
call, 24 hours a day.
Telephone Transactions
You may purchase, redeem, exchange shares, or wire funds by telephone if you
have pre-authorized service instructions. You receive telephone privileges
automatically when you open your account unless you elect otherwise. For our
mutual protection, the Fund, the shareholder servicing agent and their
affiliates use precautions such as verifying shareholder identity and
recording telephone calls to confirm instructions given by phone. A
confirmation statement is sent for most transactions; please review this
statement and verify the accuracy of your transaction immediately.
Combined General Mailings
Join us in our efforts to conserve paper and save on postage.
If you have multiple accounts with Calvert, you may receive combined mailings
of shareholder information, such as account statements, confirmations of
transactions, prospectuses and semi-annual and annual reports.
Special Services and Charges
The Fund pays for shareholder services but not for special services that are
required by a few shareholders, such as a request for a historical transcript
of an account or a stop payment on a draft. You may be required to pay a fee
for these special services.
HOW TO SELL YOUR SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next NAV calculated after your redemption
request is received in good order.
Redemption Requirements To Remember
To ensure that your redemption request is in good order (acceptable), please
follow the procedures described here and below.
Once your shares are redeemed, the proceeds will normally be sent to you on
the next business day, but if making immediate payment could adversely affect
the Portfolio, it may take up to seven (7) days. When the New York Stock
Exchange is closed (or when trading is restricted) for any reason other than
its customary weekend or holiday closings, or under any emergency
circumstances as determined by the Securities and Exchange Commission,
redemptions may be suspended or payment dates postponed.
Redemption proceeds are normally paid in cash. However, at the sole discretion
of the Portfolio, the Portfolio has the right to redeem shares in assets other
than cash for redemption amounts exceeding, in any 90 day period, $250,000 or
1% of the NAV of the Portfolio, whichever is less, or as allowed by law.
If you sell shares by telephone or written request, you will receive dividends
through the date the request is received and processed. Calvert encourages you
to notify the Institutional Marketing Group for any redemption over $10
million per day.
Telephone
Please call the Institutional Marketing Group at 800.317.2274. You may redeem
shares from your account by telephone and have your money mailed to your
address of record or wired to a bank you have previously authorized. Same-day
wire redemptions may be ordered by calling the Institutional Marketing Group
by 11:00 a.m. Eastern time. All other wires will be transmitted the next
business day. A charge of $5 may be imposed on wire transfers of less than
$50,000. See "Telephone Transactions."
Minimum account balance
Please maintain a balance in your account of at least $1,000,000. If, due to
exchanges or other redemptions, the account falls below $1,000,000, or you
fail to invest at least $1,000,000, it may be closed and the proceeds mailed
to you at the address of record. You will be given notice that your account
will be closed after 30 days unless you make an additional investment to
increase your account balance to the $1,000,000 minimum.
Exchange to Another Calvert Group Fund
You must meet the minimum investment requirement of the other Calvert Group
Fund or Portfolio. You can only exchange between accounts with identical
names, addresses and taxpayer identification number, unless previously
authorized with a signature-guaranteed letter.
Mail To: Calvert Institutional Marketing Group, 4550 Montgomery Avenue,
Bethesda, Maryland 20814
You may redeem available shares from your account at any time by sending a
letter of instruction, including your name, account and Fund number, the
number of shares or dollar amount, and where you want the money to be sent.
The letter of instruction must be signed by all required authorized signers.
If you want the money to be wired to a bank not previously authorized, then a
voided bank check must be enclosed with your letter. If you do not have a
voided check, you must enclose a letter on corporate letterhead, signed by one
or more authorized signers.
DIVIDENDS AND TAXES
Each year, the Portfolio distributes substantially all of its net investment
income to shareholders.
Dividends from the Portfolio's net investment income are declared daily and
paid monthly. Net investment income consists of interest income, net
short-term capital gains, if any, and dividends declared and paid on
investments, less expenses.
Dividend payment options
Dividends and any distributions are automatically reinvested in additional
shares of the same Portfolio, unless you elect to have the dividends of $10 or
more paid in cash (by check). Dividends and distributions from the Portfolio
may be invested in shares of any other Calvert Group Fund or Portfolio with no
additional sales charge. You must notify the Portfolio in writing to change
your payment options. If you elect to have dividends and/or distributions paid
in cash, and the US 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. No dividends will accrue on amounts
represented by uncashed distribution or redemption checks.
Federal Taxes
In January, the Portfolio will mail you Form 1099-DIV indicating the federal
tax status of dividends and any capital gain distributions paid to you by the
Portfolio during the past year. Dividends and distributions are taxable to you
regardless of whether they are taken in cash or reinvested. Dividends,
including short-term capital gains, are taxable as ordinary income.
Distributions from long-term capital gains are taxable as long-term capital
gains, regardless of how long you have owned Portfolio shares. A portion of
the Portfolio's dividends may qualify for the dividends received deduction for
corporations.
Other Tax Information
In addition to federal taxes, you may be subject to state or local taxes on
your investment, depending on the laws in your area. You will be notified to
the extent, if any, that dividends reflect interest received from US
government securities. Such dividends may be exempt from certain state income
taxes.
Taxpayer Identification Number
If we do not have your correct Social Security or Taxpayer Identification
Number ("TIN") and a signed certified application or Form W-9, Federal law may
require the Portfolio to withhold 31% of your dividends. In addition, you may
be subject to a fine. You will also be prohibited from opening another account
by exchange. If this TIN information is not received within 60 days after your
account is established, your account may be redeemed at the current NAV on the
date of redemption. The Fund reserves the right to reject any new account or
any purchase order for failure to supply a certified TIN.
CALVERT TAX-FREE RESERVES MONEY MARKET PORTFOLIO OVERVIEW
The Calvert Advantage
An investment in the Calvert Tax-Free Reserves Money Market Portfolio relieves
institutional investors of a variety of management and administrative burdens
associated with the direct purchase and sale of money market instruments.
Calvert's experienced Portfolio Management Team will select the appropriate
investments; survey the market for the best buy and sell terms; schedule and
monitor maturities and reinvestments; conduct ongoing credit analysis; record
all portfolio transactions; and oversee receipt, delivery and safekeeping of
securities.
And when interest rates are stagnant or declining, Calvert's staff of seasoned
research analysts and network of traders know how to use the yield curve to
help you seek a higher rate of return.
Profile
The Portfolio is a no-load, open-end diversified tax-exempt money fund
designed for institutional and individual investors. It consists of two
classes; O Shares and Institutional Class. An investment in the Portfolio is
neither insured nor guaranteed by the US Government and there can be no
assurance that the Portfolio will be able to maintain a stable net asset value
of $1.00 per share.
Investment Objective
The Portfolio seeks to earn the highest level of interest income exempt from
federal income tax as is consistent with preservation of capital and liquidity.
Investment Policy
The Portfolio invests in high quality municipal obligations with maturities of
one year or less and maintains an average maturity of 90 days or less.
Investment Quality
The Portfolio invests in short-term municipal securities eligible under Rule
2a-7 of the Investment Company Act of 1940.
Dividends
Dividends are declared daily and paid monthly (on the next to last day of each
month). Our system provides complete access to all invested principal plus
dividends on a same-day basis. Income derived from certain portfolio holdings
may subject certain investors to the Alternative Minimum Tax.
Purchases
Purchases made for same-day credit must be received by 5:00 p.m. E.T.
Notification must be made to the Institutional Marketing Group by 11:00 a.m.
E.T. on the day the funds will be received. Normally, purchases received will
be credited to earn dividends the following business day. Maximum purchase
without prior notification is $10 million per day.
Redemptions
Shares of the Portfolio may be redeemed for same-day payment until 11:00 a.m.
E.T. Otherwise, redemption proceeds will be sent the next business day.
Maximum redemption without prior notification is $10 million per day.
Please read the prospectus carefully before investing. Institutional investors
who wish to obtain more information and a prospectus about Calvert Tax-Free
Reserves Money Market Portfolio (Class O and Institutional Class) can call
toll-free at 800.317.2274, or write to:
Calvert Group
Attn.: Institutional Marketing Group
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
<PAGE>
PROSPECTUS - April 30, 1998
Calvert Tax-Free Reserves
Money Market Portfolio
Limited-Term Portfolio
Long-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
Investment Objectives
Calvert Tax-Free Reserves Money Market Portfolio seeks to earn the highest
interest income exempt from federal income taxes as is consistent with prudent
investment management, preservation of capital, and the quality and maturity
characteristics of the Portfolio.
The Money Market Portfolio seeks to maintain a constant net asset value of
$1.00 per share. There can be no assurance that the Portfolio will be
successful in maintaining a constant net asset value of $1.00 per share. An
investment in the Portfolio is neither insured nor guaranteed by the US
Government.
Calvert Tax-Free Reserves Limited-Term Portfolio seeks to earn 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 of the Portfolio.
Calvert Tax-Free Reserves Long-Term Portfolio seeks to earn 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 of the Portfolio.
Purchase Information
The Money Market Portfolio offers two classes of shares, Class O, described in
and offered by this Prospectus, and Institutional Class, offered by another
Calvert Tax-Free Reserves Prospectus. The Long-Term Portfolio offers three
classes of shares, (i) Class A shares, with a sales charge imposed at the time
you purchase the shares ("front-end sales charge"), (ii) Class B shares, which
impose no front-end sales charge, but will impose a deferred sales charge at
the time of redemption, depending on how long you have owned the shares
("contingent deferred sales charge, " or "CDSC"), and (iii) Class C shares
which impose no front-end sales charge but will impose a CDSC on shares
purchased after May 31, 1998 if sold within one year. See "Alternative Sales
Options." The Limited-Term Portfolio offers only Class A shares, with a
front-end sales charge.
About This Prospectus
Please read this Prospectus before investing. It is designed to provide you
with information you ought to know before investing and to help you decide if
the goals of a Portfolio match your own. Keep this document for future
reference.
A Statement of Additional Information (dated April 30, 1998) for each
Portfolio has been filed with the Securities and Exchange Commission and is
incorporated by reference. This free Statement is available upon request from
the Fund: 800.368.2748. The Commission maintains a web site
(http://www.sec.gov) that contains the SAI, material incorporated by
reference, and other information regarding registrants that file
electronically with the Commission.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE FEDERAL OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, any bank, and are not federally insured by the FDIC, the Federal
Reserve Board, or any other agency. When investors sell shares of the Fund,
the value may be higher or lower than the amount originally paid.
FUND EXPENSES
A. Shareholder Transaction Costs Calvert Money Market Portfolio
Class O
Sales Load on Purchases None
Sales Load on Reinvested Dividends None
Deferred Sales Load None
Redemption Fees None
Exchange Fee None
B. Annual Fund Operating - Expenses -Fiscal Year 1997
(as a percentage of average net assets)
Management Fees 0.45%
Rule 12b-1 Fees None
All Other Expenses 0.20%
Total Fund Operating Expenses1 0.65%
A. Shareholder Transaction Costs Limited-Term Long-Term
Portfolio Portfolio
Maximum Sales Charge on Purchases Class A Class A
(as a percentage of offering price) 1.00% 3.75%
Maximum Contingent Deferred Sales Charge None None
(as a percentage of purchase price or redemption proceeds, as applicable).
1Net Fund Operating Expenses after reduction for fees paid indirectly were: MM
Class O - 0.64%, Limited-Term Class A - 0.69% and Long-Term Class A - 0.85%.
Example: You would pay the following expenses on a $1,000 investment, assuming
(1) 5% annual return; (2) redemption at the end of each period; (3) for Class
A shares, payment of maximum initial sales charge at time of purchase.
Fund 1 Year 3 Years
Money Market
Class O $7 $21
Limited-Term
Class A $17 $32
Long-Term
Class A $46 $64
Fund 5 Years 10 Years
Money Market
Class O $36 $81
Limited-Term
Class A $49 $96
Long-Term
Class A $84 $141
The example, which is hypothetical, should not be considered a representation
of past or future expenses. Actual expenses may be higher or lower than those
shown.
Explanation of Table: The purpose of the table is to assist you in
understanding the various costs and expenses that an investor in the
Portfolios may bear directly (shareholder transaction costs) or indirectly
(annual fund operating expenses).
Shareholder Transaction Costs
are charges you pay when you buy or sell shares of a Portfolio. If you request
a wire redemption of less than $1,000, you will be charged a $5 wire fee. See
"Reduced Sales Charges" at Exhibit A to see if you qualify for possible
reductions in the sales charge for the Limited- or Long-Term Portfolios.
Annual Fund Operating Expenses
are based on historical expenses. Management Fees are paid by the
Fund to Calvert Asset Management Company, Inc. ("Investment Advisor") for
managing each Portfolio's investments and business affairs, and include an
administrative service fee paid to Calvert Administrative Services Company,
Inc. Each Portfolio incurs Other Expenses for maintaining shareholder records,
furnishing shareholder statements and reports, and other services. Management
Fees and Other Expenses have already been reflected in the share price for the
Limited- and Long-Term Portfolios, and in the yield for the Money Market
Portfolio and are not charged directly to individual shareholder accounts.
The Rule 12b-1 fees of the Long-Term Portfolio include an asset-based sales
charge. Thus, long-term shareholders in the Portfolio may pay more in total
sales charges than the economic equivalent of the maximum front-end sales
charge permitted by rules of the National Association of Securities Dealers,
Inc. In addition to the compensation itemized above (sales charge and Rule
12b-1 service and distribution fees), certain broker/dealers and/or their
salespersons may receive certain compensation of the sale and distribution of
the securities or for services to the Fund. See the Statement of Additional
Information, "Method of Distribution."
Financial Highlights
The following tables provide information about the financial history of the
Class O shares of the Money Market Portfolio and the Class A shares of
Limited- and Long-Term Portfolios. They express the information in terms of a
single share outstanding for the respective Portfolio throughout each period.
The tables have been audited by those independent accountants whose report is
included in Calvert Tax-Free Reserves Annual Report to Shareholders for the
periods presented. The tables should be read in conjunction with the financial
statements and their related notes. The current Annual Report to Shareholders
is incorporated by reference into the Statement of Additional Information.
Class O Shares
Year Ended December 31,
Money Market Portfolio 1997 1996
Net asset value,
beginning of year $1.00 $1.00
Income from investment operations
Net investment income 0.33 .033
Distributions from
Net investment income (0.33) (.033)
Net asset value, end of year $1.00 $1.00
Total return2 3.38% 3.33%
Ratio to average net assets:
Net investment income 3.32% 3.28%
Total expenses3 .65% .65%
Net expenses .64% .64%
Net assets, end of year
(in thousands) $1,405,350 $1,550,731
Number of shares outstanding at
end of year (in thousands) 1,405,404 1,550,724
Money Market Portfolio 1995 1994
Net asset value,
beginning of year $1.00 $1.00
Income from investment operations
Net investment income .040 .028
Distributions from
Net investment income (.040) (.028)
Net asset value, end of year $1.00 $1.00
Total return2 4.02% 2.81%
Ratio to average net assets:
Net investment income 3.93% 2.75%
Total expenses3 .62% -
Net expenses .61% .62%
Net assets, end of year
(in thousands) $1,740,839 $1,344,595
Number of shares outstanding at
end of year (in thousands) 1,740,948 1,344,668
2 Total return prior to 1994 is not audited.
3 Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly; such reductions are included in
the ratio of net expenses.
Year Ended December 31,
Limited-Term Portfolio 1997 1996
Net asset value, beginning of year $10.69 $10.72
Income from investment operations
Net investment income .42 .44
Net realized and unrealized gain
(loss) on investments .01 (.03)
Total from investment operations .43 .41
Distributions from
Net investment income (.42) (.44)
Total increase (decrease) in net asset value .01 (.03)
Net asset value, end of year $10.70 $10.69
Total return4 4.07% 3.94
Ratio to average net assets:
Net investment income 3.91% 4.12%
Total expenses5 .70% .71%
Net expenses .69% .70%
Portfolio turnover 52% 45%
Net assets, end of year (in thousands) $490,180 $512,342
Number of shares outstanding at
end of year (in thousands) 45,808 47,922
Year Ended December 31,
Limited-Term Portfolio 1995 1994
Net asset value, beginning of year $10.59 $10.72
Income from investment operations
Net investment income .45 .39
Net realized and unrealized gain
(loss) on investments .13 (.13)
Total from investment operations .58 .26
Distributions from
Net investment income (.45) (.39)
Total increase (decrease) in
net asset value .13 (.13)
Net asset value, end of year $10.72 $10.59
Total return4 5.55% 2.42%
Ratio to average net assets:
Net investment income 4.21% 3.60%
Total expenses5 .71% -
Net expenses .70% .66%
Portfolio turnover 33% 27%
Net assets, end of year (in thousands) $457,707 $544,822
Number of shares outstanding at
end of year (in thousands) 42,690 51,424
4 Total return is not annualized and does not reflect deduction of
front-end sales charges.
Total return prior to 1989 is not audited.
5 Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly;
such reductions are included in the ratio of net expenses.
Year Ended December 31,
1993 1992
$10.68 $10.65
.38 .49
.04 .03
.42 .52
(.38) (.49)
.04 .03
$10.72 $10.68
4.02% 4.99%
3.59% 4.58%
- -
.67% .71%
14% 5%
$663,305 $567,419
61,861 53,140
Year Ended December 31,
1991 1990
$10.61 $10.61
.64 .67
.03 .00
.67 .67
(.63) (.67)
.04 .00
$10.65 $10.61
6.46% 6.50%
5.99% 6.35%
- - -
.73% .77%
1% 12%
$294,308 $151,580
27,644 14,286
Year Ended December 31,
Limited-Term Portfolio 1989 1988
Net asset value, beginning $10.55 $10.45
Income from investment operations
Net investment income .67 .60
Net realized and unrealized gain
(loss) on investments .06 .10
Total from investment operations .73 .70
Distributions from
Net investment income (.67) (.60)
Total increase (decrease) in
net asset value .06 .10
Net asset value, ending $10.61 $10.55
Total return6 7.12% 6.82%
Ratio to average net assets:
Net investment income 6.35% 5.71%
Total expenses7 - -
Net expenses .78% .81%
Portfolio turnover 21% 68%
Net assets, ending (in thousands) $132,510 $145,305
Number of shares outstanding,
ending (in thousands) 12,487 13,771
6 Total return is not annualized and does not reflect deduction of
front-end sales charges.
Total return prior to 1989 is not audited.
7 Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly;
such reductions are included in the ratio of net expenses.
Year Ended December 31,
Long-Term Portfolio 1997 1996
Net asset value, beginning of year $16.81 $17.31
Income from investment operations
Net investment income .87 .93
Net realized and unrealized gain
(loss) on investments .50 (.46)
Total from investment operations 1.37 .47
Distributions from
Net investment income (.87) (.95)
Net realized gains (.03) (.02)
Total distributions (.90) (.97)
Total increase (decrease) in net asset value .47 (.50)
Net asset value, end of year $17.28 $16.81
Total return6 8.41% 2.89%
Ratio to average net assets:
Net investment income 5.16% 5.50%
Total expenses7 .87% .89%
Net expenses .85% .86%
Expenses reimbursed - -
Portfolio turnover 41% 41%
Net assets, end of year (in thousands) $50,966 $52,945
Number of shares outstanding at
end of year (in thousands) 2,950 3,149
Year Ended December 31,
(Cont'd)
Long-Term Portfolio 1995 1994
Net asset value, beginning of year $15.83 $17.15
Income from investment operations
Net investment income .95 .93
Net realized and unrealized gain
(loss) on investments 1.53 (1.33)
Total from investment operations 2.48 (.40)
Distributions from
Net investment income (.91) (.92)
Net realized gains (.09) -
Total distributions (1.00) (.92)
Total increase (decrease) in net asset value (1.48) (1.32)
Net asset value, end of year $17.31 $15.83
Total return6 16.05% (2.30)%
Ratio to average net assets:
Net investment income 5.71% 5.73%
Total expenses7 .87% -
Net expenses .85% .81%
Expenses reimbursed - -
Portfolio turnover 58% 98%
Net assets, end of year (in thousands) $57,359 $47,267
Number of shares outstanding at
end of year (in thousands) 3,314 2,985
Year Ended December 31,
Long-Term Portfolio 1993 1992
Net asset value, beginning $16.32 $16.11
Income from investment operations
Net investment income .94 .98
Net realized and unrealized gain
(loss) on investments .83 .20
Total from investment operations 1.77 1.18
Distributions from
Net investment income (.94) (.97)
Net realized gains - -
Total distributions (.94) (.97)
Total increase (decrease) in net asset value .83 .21
Net asset value, ending $17.15 $16.32
Total return8 11.12% 7.60%
Ratio to average net assets:
Net investment income 5.59% 6.06%
Total expenses9 - -
Net expenses .78% .82%
Expenses reimbursed - -
Portfolio turnover 97% 196%
Net assets, ending (in thousands) $55,204 $45,665
Number of shares outstanding,
ending (in thousands) 3,219 2,799
Year Ended December 31,
(Cont'd)
Long-Term Portfolio 1991
Net asset value, beginning $15.35
Income from investment operations
Net investment income .97
Net realized and unrealized gain
(loss) on investments .78
Total from investment operations 1.75
Distributions from
Net investment income (.99)
Net realized gains -
Total distributions (.99)
Total increase (decrease)
in net asset value .76
Net asset value, ending $16.11
Total return8 11.77%
Ratio to average net assets:
Net investment income 6.39%
Total expenses9 -
Net expenses .78%
Expenses reimbursed -
Portfolio turnover 276%
Net assets, ending (in thousands) $43,774
Number of shares outstanding,
ending (in thousands) 2,718
8 Total return is not annualized and does not reflect deduction of
front-end sales charges.
Total return prior to 1989 is not audited.
9 Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly;
such reductions are included in the ratio of net expenses.
Year Ended December 31,
1990 1989 1988
$15.64 $15.20 $14.75
.97 1.03 1.01
(.27) .41 .46
.70 1.44 1.47
(.99) (1.00) (1.02)
- - -
(.99) (1.00) (1.02)
(.29) .44 .45
$15.35 $15.64 $15.20
4.74% 9.81% 10.27%
6.60% 6.66% 6.78%
- - -
.82% .85% .85%
- - .04%
264% 284% 553%
$40,182 $46,402 $43,101
2,618 2,967 2,835
INVESTMENT OBJECTIVE AND POLICIES
Money Market Portfolio
The Money Market Portfolio seeks to earn 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 of the Portfolio.
The Money Market Portfolio invests primarily in a diversified portfolio of
municipal obligations whose interest is exempt from federal income tax.
Municipal obligations in which the Portfolio invests are short-term, fixed and
variable rate instruments of minimal credit risk and of high quality. The
Portfolio invests in municipal bonds and notes and tax-exempt commercial paper
within the two highest credit ratings categories or, if unrated, are
determined by the Advisor to be of comparable quality. Short-term obligations
have remaining maturities of one year or less. The Portfolio maintains an
average weighted maturity of 90 days or less.
Limited-Term Portfolio
The Limited-Term Portfolio seeks to earn 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 of the Portfolio.
The Limited-Term Portfolio invests primarily in a diversified portfolio of
municipal obligations with interest exempt from federal income tax. Municipal
obligations in which the Portfolio invests are fixed and variable rate
investment-grade (medium and higher) obligations. Fixed rate investments are
limited to obligations with remaining maturities of 3 years or less; variable
rate investments may have longer maturities.
Long-Term Portfolio
The Long-Term Portfolio seeks to earn 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 of the Portfolio.
The Long-Term Portfolio invests primarily in a diversified portfolio of long
term, investment-grade municipal obligations, the interest of which is exempt
from federal income tax. Investments by the Portfolio are not limited as to
remaining maturities.
Municipal Obligations
Municipal obligations in which the Limited- and Long-Term Portfolios may
invest include, but are not limited to general obligation bonds and notes of
state and local issuers, revenue bonds of various transportation, housing,
utilities (e.g. water and sewer), hospital and other state and local
government authorities, tax and revenue anticipation notes and bond
anticipation notes, municipal leases, and certificates of participation
therein, and private activity bonds. See further description below and the
Statement of Additional Information.
Credit Quality
The credit quality of municipal obligations is determined by reference to a
commercial credit rating service, such as Moody's Investors Service, Inc. or
Standard & Poor's Corporation. If an instrument is not rated, credit quality
is determined by the Advisor under the supervision of the Board of Trustees.
Investment grade, as determined by a NRSRO, is currently defined as the top
four rating categories, i.e., AAA/Aaa, AA/Aa, A and BBB/Baa. Though still
investment grade, securities rated BBB/Baa possess certain speculative
elements and are generally more susceptible to changing market conditions.
There is no limitation on the percentage of each Portfolio's assets that may
be invested in unrated obligations; such obligations may be less liquid than
rated obligations of comparable quality. The ratings used by these services
are described in the Appendix to the Statement of Additional Information.
Variable Rate Obligations
Each Portfolio may invest in variable rate obligations. Variable rate
obligations have a yield that is adjusted periodically based on changes in the
level of prevailing interest rates. Floating rate obligations have an interest
rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate obligations
lessen the capital fluctuations usually inherent in fixed income investments.
This diminishes the risk of capital depreciation of investment securities in a
Portfolio and, consequently, of Portfolio shares. However, if interest rates
decline, the yield of the invested Portfolio will decline, causing the
Portfolio and its shareholders to forego the opportunity for capital
appreciation of the Portfolio's investments and of their shares.
Demand Notes
Each Portfolio may invest in floating rate and variable rate demand notes.
Demand notes provide that the holder may demand payment of the note at its par
value plus accrued interest by giving notice to the issuer. To ensure the
ability of the issuer to make payment on demand, the note may be supported by
an unconditional bank letter of credit.
Interest-Rate Risk
All fixed income instruments are subject to interest-rate risk; that is, if
the market interest rates rise, the current principal value of a bond will
decline.
Municipal Leases - Money Market Portfolio
The Money Market Portfolio may invest in structured money market instruments,
where the underlying security is a municipal lease. Generally, such
instruments are structured as tax-exempt commercial paper or variable rate
demand notes, and are typically secured by an unconditional letter of credit.
In the unlikely event that the letter of credit is not honored, the lease
would present special risks, such as the chance that the municipality might
not appropriate funding for the lease payments. Thus, the Advisor considers
risk of cancellation in its investment analysis. Certain leases may be
considered illiquid. In all cases, the Money Market Portfolio invests only in
high-quality instruments (rated in one of the two highest rating categories,
or if unrated, of comparable credit quality) that meet the requirements of SEC
Rule 2a-7 regarding credit quality and maturity. See the Statement of
Additional Information.
Municipal Leases - Limited-Term and Long-Term Portfolios
The Limited-Term and Long-Term Portfolios may invest in municipal leases. 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. There are
additional risks inherent in investing in this type of municipal security.
Unlike municipal notes and bonds, where a municipality is obligated by law to
make interest and principal payments when due, funding for lease payments
needs to be appropriated each fiscal year in the budget. It is possible that a
municipality will not appropriate funds for lease payments. The Advisor
considers risk of cancellation in its investment analysis. The Portfolio may
purchase unrated municipal leases. The Advisor, under supervision of the Board
of Trustees, is responsible for determining the credit quality of such leases,
on an ongoing basis. The Limited- and Long-Term Portfolios will invest only in
municipal leases that meet its credit quality restrictions. Certain municipal
leases may be considered illiquid and subject to the Portfolios' limit on
illiquid investments. The Board of Trustees has established guidelines for
determining whether a lease is illiquid. See the Statement of Additional
Information for the factors considered by the Board in determining liquidity
and valuation of leases.
When-Issued Purchases
New issues of municipal obligations are offered on a when-issued basis; that
is, delivery and payment for the securities normally take place 15 to 45 days
after the date of the transaction. The payment obligation and the yield that
will be received on the securities are each fixed at the time the buyer enters
into the commitment. The Portfolios will only make commitments to purchase
these securities with the intention of actually acquiring them, but may sell
these securities before the settlement date if it is deemed advisable as a
matter of investment strategy.
Temporary Investments
For liquidity purposes or pending the investment of the proceeds of the sale
of its shares, the Portfolios may invest in and derive up to 20% of its income
from taxable short-term money market type investments. Interest earned from
such taxable investments will be taxable to you as ordinary income unless you
are otherwise exempt from taxation.
Financial Futures, Options, and Other Investment Techniques
The Long-Term Portfolio 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
Portfolio can use these practices either as substitution or as protection
against an adverse move in the Long-Term Portfolio to adjust the risk and
return characteristics of the Portfolio. If the Advisor judges market
conditions incorrectly or employs a strategy that does not correlate well with
the Portfolio'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. Any
instruments determined to be illiquid are subject to the Long-Term Portfolio's
10% restriction on illiquid securities. See below and the Statement of
Additional Information for more details about these strategies.
The Long-Term Portfolio buys certain financial futures contracts to hedge its
investments in municipal bonds.
Under certain circumstances, the Long-Term Portfolio may purchase and sell
certain financial futures contracts and certain options on futures contracts.
A financial futures contract obligates the seller of a contract to deliver -
and the purchaser of a contract to take delivery of - the type of financial
instrument covered by the contract. In the case of index-based futures
contracts, the obligation is in the form of a cash settlement at a specific
time for a specific price.
The Long-Term Portfolio may only engage in futures transactions for the
purpose of hedging its investments in municipal bonds against declines in
value and to hedge against increases in the cost of securities it intends to
purchase. A sale of financial futures contracts may provide a hedge against a
decline in the value of portfolio securities because such depreciation may be
offset, in whole or in part, by an increase in the value of the position in
the futures contracts. Similarly, a purchase of financial futures contracts
may provide a hedge against an increase in the cost of securities intended to
be purchased, because such appreciation may be offset, in whole or in part, by
an increase in the value of the position in the futures contracts.
Types of futures contracts purchased
The Long-Term Portfolio intends to deal in futures contracts based upon The
Bond Buyer Municipal Bond Index, a price-weighted measure of the market value
of 40 large, recently-issued tax-exempt bonds, and to engage in transactions
in exchange-listed futures contracts on US Treasury securities. The Long-Term
Portfolio may also engage in transactions in other futures contracts, such as
futures contracts on other municipal bond indexes that become available, if
the investment advisor believes such contracts would be appropriate for
hedging its investments in municipal bonds.
When the Long-Term Portfolio purchases a futures contract, it will maintain an
amount of cash, cash equivalents (for example, commercial paper and daily
tender adjustable notes) or short-term high grade fixed income securities in a
segregated account with its custodian, so that the segregated amount plus the
amount of initial and variation margin held in the account of its broker
equals the market value of the futures contract, thereby ensuring that the use
of such futures contract is unleveraged. It is not anticipated that
transactions in futures will have the effect of increasing portfolio turnover.
Closing out a futures position - Risks
The Long-Term Portfolio may close out its position in a futures contract or an
option on a futures contract only by entering into an offsetting transaction
on the exchange on which the position was established and only if there is a
liquid secondary market for the futures contract. If it is not possible to
close a futures position entered into by the Long-Term Portfolio, it could be
required to make continuing daily cash payments of variation margin in the
event of adverse price movements. In such situations, if the Long-Term
Portfolio has insufficient cash, it may have to sell portfolio securities to
meet daily variation margin requirements at a time when it would be
disadvantageous to do so. The inability to close futures or options positions
could have an adverse effect on the Long-Term Portfolio's ability to hedge
effectively. There is also risk of loss by the Portfolio of margin deposits in
the event of bankruptcy of a broker with whom the Long-Term Portfolio has an
open position in a futures contract. The success of a hedging strategy depends
on the Advisor's ability to predict the direction of interest rates and other
economic factors. The correlation is imperfect between movements in the prices
of futures or options contracts, and the movements of prices of the securities
which are subject to the hedge. If the Long-Term Portfolio used a futures or
options contract to hedge against a decline in the market, and the market
later advances (or vice-versa), the Portfolio may suffer a greater loss than
if it had not hedged.
Please refer to the Long-Term Portfolio's Statement of Additional Information
for further information on financial futures contracts.
Other Policies - Money Market, Limited- and Long-Term Portfolios
Each Portfolio may temporarily borrow money from banks to meet redemption
requests, but such borrowing may not exceed 10% of the value of its total
assets. Each Portfolio has adopted certain fundamental investment restrictions
which are discussed in detail in its Statement of Additional Information.
Unless specifically noted otherwise, the investment objective, policies and
restrictions of each Portfolio are fundamental and may not be changed without
shareholder approval.
YIELD AND TOTAL RETURN
Yield refers to income generated by an investment over a period of time.
The Money Market Portfolio may advertise "yield" and "effective yield" for
each class. 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 actual income generated by an investment in the
Portfolio over a particular base period, stated in the advertisement. If the
base period is less than one year, the yield will be "annualized." That is,
the amount of income generated by the investment during the base period is
assumed to be generated over a one-year period and is shown as a percentage of
the investment. The "effective yield" is calculated like yield, but assumes
reinvestment of earned income. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed reinvestment.
Limited- and Long-Term Portfolios
Yield measures the current investment performance that is, the rate of
income on a Portfolio's investments divided by the share price. Yield is
computed by annualizing the result of dividing the net investment income per
share over a 30 day period by the maximum offering price per share on the last
day of that period. Yields are calculated according to accounting methods that
are standardized for all stock and bond funds.
Taxable Equivalent Yield - Money Market, Limited- and Long-Term Portfolios
Each Portfolio may advertise its "taxable equivalent yield" The taxable
equivalent yield is the yield that you 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 taxable equivalent yield is computed by
taking the portion of the Portfolio's yield exempt from regular federal income
tax and multiplying the exempt yield by a factor based on a stated income tax
rate, then adding the portion of the yield that is not exempt from regular
federal income tax. The factor used to calculate the taxable equivalent yield is
the reciprocal of the difference between one and the applicable income tax rate,
which will be stated in the advertisement.
The Limited- and Long-Term Portfolios may advertise total return Total
return is based on historical results and is not intended to indicate future
performance. 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. The total return of a class shows its overall change in value, including
changes in share price and assuming all of the dividends and capital gain
distributions are reinvested. A cumulative total return reflects the performance
over a stated period of time. An average annual total return ("return without
maximum load") reflects the hypothetical annual compounded return that would
have produced the same cumulative total return if the performance had been
constant over the entire period. Because average annual returns tend to smooth
out variations in the returns, you should recognize that they are not the same
as actual year-by-year results. Both types of total return usually will include
the effect of paying the sales charge. Of course, total returns will be higher
if sales charges are not taken into account. Quotations of "return without
maximum load" do not reflect deduction of the sales charge. You should consider
these return figures only if you qualify for a reduced sales charge, or for
purposes of comparison with comparable figures which also do not reflect sales
charges, such as mutual fund averages compiled by Lipper Analytical Services,
Inc. Further information about the Portfolio's performance is contained in its
Annual Report to Shareholders, which may be
obtained without charge.
MANAGEMENT OF THE FUND
The Board of Trustees supervises Portfolio activities and reviews its
contracts with companies that provide it with services.
The Portfolios are series of Calvert Tax-Free Reserves (the "Fund"), an
open-end management investment company, organized as a Massachusetts business
trust on October 20, 1980. The series of the Fund include the Money Market
Portfolio, Limited-Term Portfolio, Long-Term Portfolio, California Money
Market Portfolio, and the Vermont Municipal Portfolio.
The Money Market Portfolio offer two classes of shares, Class O and the
Institutional Class. The Long-Term Portfolio offers three classes of shares -
Class A, Class B, and Class C. The Classes have different sales charges and
other expenses which will result in different performance. They also have
different shareholder servicing, conversion and exchange privileges. For
information on the Institutional Class, contact Calvert at 1-800-317-2274. The
Money Market Portfolio Institutional Class is not offered by this prospectus.
The Fund is not required to hold annual shareholder meetings for any of the
Portfolios, but special meetings may be called for such purposes as electing
Trustees, changing fundamental policies, and approving management contracts.
As a shareholder, you receive one vote for each share of a Portfolio you own.
Matters affecting Portfolios or classes differently, such as Distribution
Plans, will be voted on separately by the affected Portfolio(s) or class(es).
Portfolio Managers
Investment selections for the Limited- and Long-Term Portfolios are made by
David R. Rochat and Reno J. Martini. Mr. Rochat is a Director and Senior Vice
President of Calvert Asset Management Company, Inc. He is a Trustee/Director
and Senior Vice President of First Variable Rate Fund, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund, and Calvert Municipal Fund,
Inc., and is primarily responsible for setting the investment strategy of the
trading department, utilizing over 20 years' experience in the securities and
investment community. Mr. Rochat joined Calvert Group in 1981 after
establishing and managing the municipal bond department at Donaldson, Lufkin,
& Jenrette Securities Corporation. Mr. Martini, a Director of Calvert Group,
Ltd., and Senior Vice President and Chief Investment Officer of Calvert Asset
Management Company, Inc., oversees management of all Calvert Group portfolios.
He has extensive experience in evaluating and purchasing municipal securities.
Calvert Group is one of the largest investment management firms in Washington,
DC area.
Calvert Group, Ltd., parent of the Fund's investment advisor, shareholder
servicing agent, and distributor, is a subsidiary of Acacia Mutual Life
Insurance Company of Washington, DC Calvert Group is one of the largest
investment management firms in the Washington, DC area. Calvert Group, Ltd.
and its subsidiaries are located at 4550 Montgomery Ave., Suite 1000N,
Bethesda, MD 20814. As of December 31, 1997, Calvert Group managed and
administered assets in excess of $5.0 billion and more than 200,000
shareholder and depositor accounts.
Calvert Asset Management serves as Advisor to the Fund.
Calvert Asset Management Company, Inc. (the "Advisor") is the Fund's
investment advisor. The Advisor provides the Fund with investment supervision
and management, administrative services and office space; furnishes executive
and other personnel to the Fund; and pays the salaries and fees of all
Trustees who are affiliated persons of the Advisor. The Advisor may also
assume and pay certain advertising and promotional expenses of the Fund and
reserves the right to compensate broker/dealers in return for their
promotional or administrative services. For its services during fiscal year
1997, the Advisor received a fee equal to 0.59% of the Limited-Term
Portfolio's average net assets, and 0.60% of the Long-Term Portfolio's average
net assets. The Advisor received a fee of 0.45% from the Money Market
Portfolio until August 1, 1997, at which time the fee changed to 0.20%.
Calvert Administrative Services Company provides administrative services for
the Fund.
Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor,
has been retained by Calvert Tax-Free Reserves to provide certain
administrative services necessary to the conduct of its affairs, including the
preparation of regulatory filings and shareholder reports, the daily
determination of its net asset value per share and dividends, and the
maintenance of its portfolio and general accounting records. For providing
such services, prior to August 1, 1997, CASC received a total fee from Calvert
Tax-Free Reserves of $200,000 per year, allocated among the Portfolios based
on assets. Effective August 1, 1997, the fee structure changed. Class O of the
Money Market Portfolio pays an annual rate of 0.26%. The remaining Portfolios
of the Fund pay an annual fee of $80,000, allocated among the Portfolios based
on assets.
Calvert Distributors, Inc. serves as underwriter to market the Fund's shares.
Calvert Distributors, Inc. ("CDI") is the Fund's principal underwriter and
distributor. Under the terms of its underwriting agreement with the Fund, CDI
markets and distributes the Fund's shares and is responsible for preparation
of advertising and sales literature, and printing and mailing of prospectuses
to prospective investors.
The transfer agent keeps your account records.
Calvert Shareholder Services, Inc. is the Fund's shareholder servicing agent.
National Financial Data Services, Inc. ("NFDS") 1004 Baltimore, Kansas City,
Missouri 64105, is the transfer and dividend disbursing agent for the Fund.
SHAREHOLDER GUIDE
Opening An Account
You can buy shares of the Portfolios in several ways which are described here.
An account application accompanies this prospectus. A completed and signed
application is required for each new account you open, regardless of the
method you choose for making your initial investment. Additional forms may be
required from corporations, associations, and certain fiduciaries. If you have
any questions or need extra applications, call your broker, or Calvert Group
at 800.368.2748.
Limited-Term Portfolio -
Shares are offered at net asset value plus a front-end sales charge as follows:
Allowed to
As a % of As a % of Brokers as a
Amount of offering net amount % of offering
Investment price invested price
Less than $50,000 1.00% 1.01% 1.00%
$50,000 but less than
$100,000 0.75% 0.76% 0.75%
$100,000 but less than
$250,0000 .50% 0.50% 0.50%
$250,000 and over 0.00% 0.00% 0.00%*
CDI reserves the right to recoup any portion of the amount paid to the
dealer if the investor redeems some or all of the shares from the Funds within
twelve months of the time of purchase.
Sales charges may be reduced or eliminated in certain cases. See Exhibit A to
this prospectus.
The sales charge is paid to CDI, which in turn normally reallows a portion to
your broker/dealer. Upon written notice to dealers with whom it has dealer
agreements, CDI may reallow up to the full applicable sales charge. Dealers to
whom 90% or more of the entire sales charge is reallowed may be deemed to be
underwriters under the Securities Act of 1933.
In addition to any sales charge reallowance, your broker/dealer, or other
financial service firm through which your account is held, currently will be
paid periodic service fees at an annual rate of up to 0.15% for the
Limited-Term Portfolio of the average daily net asset value of the Class A
shares held in accounts maintained by that firm.
Long-Term Portfolio
Class A Shares of the Long-Term Portfolio are offered at net asset value plus
a front-end sales charge as follows:
Allowed to
As a % of As a % of Brokers as a
Amount of offering net amount % of offering
Investment price invested price
Less than $50,000 3.75% 3.90% 3.00%
$50,000 but less than
$100,000 3.00% 3.09% 2.25%
$100,000 but less than
$250,000 2.25% 2.30% 1.75%
$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 reserves the right to recoup any portion of the amount paid to the
dealer if the investor redeems some or all of the shares from the Funds within
twelve months of the time of purchase.
Sales charges may be reduced or eliminated in certain cases. See Exhibit A to
this prospectus.
The sales charge is paid to CDI, which in turn normally reallows a portion to
your broker/dealer. Upon written notice to dealers with whom it has dealer
agreements, CDI may reallow up to the full applicable sales charge. Dealers to
whom 90% or more of the entire sales charge is reallowed may be deemed to be
underwriters under the Securities Act of 1933.
In addition to any sales charge reallowance, your broker/dealer, or other
financial service firm through which your account is held, currently will be
paid periodic service fees at an annual rate of up to, up to 0.25% for the
Long-Term Portfolio of the average daily net asset value of the Class A shares
held in accounts maintained by that firm.
Distribution Plan
The Long-Term Portfolio has adopted a Distribution Plan (the Distribution
Plan"), which provides for payments, which are currently limited by the Fund's
Underwriting Agreement to 0.25% annually of the average daily net asset value to
pay expenses associated with the distribution and servicing of shares. Amounts
paid by the Fund to CDI under the Distribution Plan are used to pay to dealers
and others, including CDI salespersons who service accounts, service fees at an
annual rate of up to 0.25% of the average daily net asset value and to pay CDI
for its marketing and distribution expenses, including, but not limited to,
preparation of advertising and sales literature and the printing and mailing of
prospectuses to prospective investors. For fiscal year 1997, the Long-Term
Portfolio paid 0.09% in Distribution Plan expenses.
Arrangements with Broker/Dealers and Others
CDI may also pay additional concessions, including non-cash promotional
incentives, such as merchandise or trips, to dealers employing registered
representatives who have sold or are expected to sell a minimum dollar amount
of shares of the Fund and/or shares of other Funds underwritten by CDI. CDI
may make expense reimbursements for special training of a dealer's registered
representatives, advertising or equipment, or to defray the expenses of sales
contests. Eligible marketing and distribution expenses may be paid pursuant to
the Fund's Rule 12b-1 Distribution Plan, and in accordance with the rules of
the NASD.
Each of the Distribution Plans may be terminated at any time by a vote of the
Independent Trustees or by vote of a majority of the outstanding voting shares
of the respective class.
How to buy shares
(be sure to specify which class you are buying)
Method New Accounts Additional Investments
By Mail $2,000 minimum $250 minimum
Please make your check Please make your check
payable to the appropriate payable to the appropriate
Portfolio and mail it with Portfolio and mail it with
your application to: your investment slip to:
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas City, MO Kansas City, MO
64141-6544 64141-6739
By Registered, Calvert Group Calvert Group
Certified, or c/o NFDS, 6th Floor c/o NFDS, 6th Floor
Overnight Mail: 1004 Baltimore 1004 Baltimore
Kansas City, MO Kansas City, MO
64105-1807 64105-1807
Through Your $2,000 minimum $250 minimum
Financial Professional
At the Calvert Visit the Calvert Office to make investments by check.
Office
FOR ALL OPTIONS BELOW, PLEASE CALL YOUR FINANCIAL PROFESSIONAL, OR CALVERT
GROUP AT 800.368.2745
By Exchange $2,000 minimum $250 minimum
(From your account in another Calvert Group Fund)
When opening an account by exchange, your new account must be established with
the same name(s), address and taxpayer identification number as your existing
Calvert account.
By Bank Wire $2,000 minimum $250 minimum
By Calvert Money Not Available for $50 minimum
Controller* Initial Investment
*Please allow sufficient time for Calvert Group to process your initial
request for this service, normally 10 business days. The maximum transaction
amount is $300,000, and your purchase request must be received by 4:00 p.m.
Eastern time.
NET ASSET VALUE
Net asset value per share ("NAV") refers to the worth of one share. NAV is
calculated at the close of each business day, which coincides with the closing
of the regular session of the New York Stock Exchange (normally 4:00 p.m.
Eastern time). The Portfolios are open for business each day the New York
Stock Exchange is open. All purchases of Portfolio shares will be confirmed
and credited to your account in full and fractional shares (rounded to the
nearest 1/100 of a share for the Money Market Portfolio and to 1/1000 of a
share for the Limited- and Long-Term Portfolios). The Money Market Portfolio
may send monthly statements in lieu of immediate confirmations of purchases
and redemptions.
The Money Market Portfolio shares are sold without a sales charge.
Money Market Portfolio: NAV is computed by adding the value of the Money
Market Portfolio's investments plus cash and other assets, deducting
liabilities and then dividing the result by the number of shares outstanding.
The Portfolio's securities are valued according to the "amortized cost"
method, which is intended to stabilize the NAV at $1.00 per share.
Limited-Term and Long-Term Portfolios: NAV is computed by adding the value of
all portfolio holdings, plus other assets, deducting liabilities and then
dividing the result by the number of shares outstanding. Portfolio securities
and other assets are valued based on market quotations, except that securities
maturing within 60 days are valued at amortized cost. If quotations are not
available, securities are valued by a method that the Board of Trustees
believes accurately reflects fair value. For the Long-Term Portfolio, the NAVs
of each class will vary depending on the number of shares outstanding for each
class.
When Your Account will be Credited
Before you buy shares, please read the following information to make sure your
investment is accepted and credited properly.
All of your purchases must be made in US dollars and checks must be drawn on
US banks. No cash will be accepted. The Fund reserves the right to suspend the
offering of shares for a period of time or to reject any specific purchase
order. If your check is not paid, your purchase will be canceled and you will
be charged a $10 fee plus costs incurred by the Portfolio. When you purchase
by check or with Calvert Money Controller, those funds will be on hold for up
to 10 business days from the date of receipt. During that period, the proceeds
of redemptions against those funds will be held until the transfer agent is
reasonably satisfied that the purchase payment has been collected. Drafts
written on the Money Market Portfolio against such funds will be returned for
uncollected funds. To avoid this collection period, you can wire federal funds
from your bank, which may charge you a fee. As a convenience, check purchases
can be received at Calvert's offices for overnight mail delivery to the
transfer agent and will be credited the next business day. Any check purchase
received without an investment slip may cause delayed crediting.
Money Market Portfolio
Your purchase will be processed at the net asset value calculated after your
order is received and accepted. If your wire purchase is received after 5:00
p.m. Eastern time, your account will begin earning dividends on the next
business day. Exchanges begin earning dividends the next business day after
the exchange request is received by mail or telephone. Purchases received by
check will begin earning dividends the next business day after they are
processed to the account.
Limited-Term and Long-Term Portfolios
Your purchase will be processed at the next offering price based on the next
net asset value calculated for each class after your order is received and
accepted.
Certain financial institutions or broker/dealers that have entered into a
sales agreement with the Distributor may enter confirmed purchase orders on
behalf of customers by phone, with payment to follow within a number of days
of the order as specified by the program. If payment is not received in the
time specified, the financial institution could be held liable for resulting
fees or losses.
Exchanges
Each exchange represents the sale of shares of one Portfolio and the purchase
of shares of another. Therefore, you could realize a taxable gain or loss on
the transaction.
If your investment goals change, the Calvert Group of Funds has a variety of
investment alternatives that includes common stock funds, tax-exempt and
corporate bond funds, and money market funds. The exchange privilege is a
convenient way to buy shares in other Calvert Group Funds in order to respond
to changes in your goals or in market conditions. Before you make an exchange
from a Fund or Portfolio, please note the following:
Call your broker or a Calvert representative for information and a prospectus
for any of Calvert's other Funds registered in your state. Read the prospectus
of the Fund or Portfolio into which you want to exchange for relevant
information, including class offerings.
Complete and sign an application for an account in that Fund or Portfolio,
taking care to register your new account in the same name and taxpayer
identification number as your existing Calvert account(s). Exchange
instructions may then be given by telephone if telephone redemptions have been
authorized and the shares are not in certificate form.
Shares on which you have already paid a sales charge at Calvert Group and
shares acquired by reinvestment of dividends and distributions may be
exchanged into another Fund at no additional charge. Shares may only be
exchanged for shares of the same class of another Calvert Group Fund.
No CDSC is imposed on exchanges of shares subject to a CDSC at the time of the
exchange. The applicable CDSC is imposed at the time the shares acquired by
the exchange are redeemed.
Limited-Term and Long-Term Portfolios: Shareholders (and those managing
multiple accounts) who make two purchases and two exchange redemptions of
shares of the same Fund or Portfolio during any 6-month period will be given
written notice that they may be prohibited from making additional investments.
This policy does not prohibit you from redeeming shares of the Funds and do
not apply to trades solely among money market funds.
Each Portfolio reserves the right to terminate or modify the exchange
privilege in the future with 60 days written notice.
Other Calvert Group Services
Calvert Information Network
24 hour yield and prices
Calvert Group has a round-the-clock telephone service that lets existing
customers obtain prices, yields, performance information, account balances,
and authorize certain transactions.
Calvert Money Controller eliminates the delay of mailing a check or the
expense of wiring funds. You can request this free service on your
application. This service allows you to authorize electronic transfers of money
to purchase or sell shares. You use Calvert Money Controller like an
"electronic check" to move money ($50 to $300,000) between your bank account
and your Calvert Group account with one phone call. Allow two business days
after the call for the transfer to take place; for money recently invested,
allow normal check clearing time (up to 10 business days) before redemption
proceeds are sent to your bank.
You may also arrange systematic monthly or quarterly investments (minimum $50)
into your Calvert Group account. After you give us proper authorization, your
bank account will be debited to purchase Portfolio shares. A debit entry will
appear on your bank statement. If you would like to make arrangements for
systematic monthly or quarterly redemptions from your Calvert account, call
your broker or Calvert for more information.
Telephone Transactions
Calvert may record all telephone calls.
You may purchase, redeem, or exchange shares, wire funds and use Calvert Money
Controller by telephone if you have pre-authorized service instructions. You
automatically have telephone privileges unless you elect otherwise. The Fund,
the transfer agent and their affiliates are not liable for acting in good
faith on telephone instructions relating to your account, so long as they
follow reasonable procedures to determine that the telephone instructions are
genuine. Such procedures may include recording the telephone calls and
requiring some form of personal identification. You should verify the accuracy
of telephone transactions immediately upon receipt of your confirmation
statement.
Optional Services
Complete the account application for the easiest way to establish services.
The easiest way to establish optional services on your Calvert Group account
is to select the options you desire when you complete your account
application. If you wish to add other options later, you may have to provide
us with additional information and a signature guarantee. Please call your
broker or Calvert Investor Relations at 800.368.2745 for further assistance.
For our mutual protection, we may require a signature guarantee on certain
written transaction requests. A signature guarantee verifies the authenticity
of your signature, and may be obtained from any bank, savings and loan
association, credit union, trust company, broker/dealer firm or member of a
domestic stock exchange. A signature guarantee cannot be provided by a notary
public.
Householding
Householding reduces Fund expenses while saving paper and postage expense.
If you have multiple accounts with Calvert, you may receive combined mailings
of some shareholder information, such as statements, confirms, prospectuses,
semi-annual and annual reports. Please contact Calvert Investor Relations at
800.368.2745 to receive additional copies of information.
Special Services and Charges
The Portfolios pay for shareholder services but not for special services that
are required by a few shareholders, such as a request for a historical
transcript of an account. You may be required to pay a research fee for these
special services.
If you are purchasing shares of a Portfolio through a program of services
offered by a securities dealer or financial institution, you should read the
program materials in conjunction with this Prospectus. Certain features may be
modified in these programs, and administrative charges may be imposed by the
broker/dealer or financial institution for the services rendered.
SELLING YOUR SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next net asset value calculated after your
redemption request is received and accepted. See below for specific
requirements necessary to make sure your redemption request is acceptable.
Remember that your Portfolio may hold payment on the redemption of your shares
until it is reasonably satisfied that investments made by check or by Calvert
Money Controller have been collected (normally up to 10 business days).
Redemption Requirements to Remember
To ensure acceptance of your redemption request, please follow the procedures
described here and below.
Once your shares are redeemed, the proceeds will normally be sent to you on
the next business day, but if making immediate payment could adversely affect
a Portfolio, it may take up to seven (7) days. Calvert Money Controller
redemptions generally will be credited to your bank account on the second
business day after your phone call. When the New York Stock Exchange is closed
(or when trading is restricted) for any reason other than its customary
weekend or holiday closings, or under any emergency circumstances as
determined by the Securities and Exchange Commission, redemptions may be
suspended or payment dates postponed.
Minimum account balance is $1,000.
Please maintain a balance in each of your fund accounts of at least $1,000. If
the balance in your money market account falls below the $1,000 minimum during
a month, a $3 fee will be charged to your account. This fee is paid to the
portfolio to offset the generally higher costs of small dollar accounts. Funds
with a fluctuating net asset value and a balance of less than $1,000 may be
closed and the proceeds mailed to the address of record. You will be given a
notice that your account is below the minimum and closed after 30 days if the
balance is not brought up to the required minimum amount.
How to Sell Your Shares
Draftwriting (Money Market Portfolio only)
You may redeem shares in your Money Market Portfolio account by writing a
draft for at least $250. If you complete and return the signature card for
Draftwriting, the Portfolio will mail bank drafts to you, printed with your
name and address. Generally, there is no charge to you for the maintenance of
this service or the clearance of drafts, but the Fund will charge a service
fee for drafts returned for insufficient funds. The Fund will charge $25 for
any stop payment on drafts. As a service to shareholders, shares may be
automatically transferred between your Calvert accounts to cover drafts you
have written. The signature of only one authorized signer is required to honor
a draft.
By Mail To: Calvert Group, PO Box 419544, Kansas City MO 64141-6544
You may redeem available shares from your account at any time by sending a
letter of instruction, including your name, account and Fund number, the
number of shares or dollar amount, and where you want the money to be sent.
Additional requirements, below, may apply to your account. The letter of
instruction must be signed by all required authorized signers. If you want the
money to be wired to a bank not previously authorized, then a voided bank
check must be enclosed with your letter. To add instructions to wire to a
destination that has not been previously established, or if you would like
funds sent to a different address or another person, your letter must be
signature guaranteed.
Type of
Registration Requirements
Corporations, Letter of instruction and a corporate resolution, signed by
Associations person(s) authorized to act on the account, accompanied by
signature guarantee(s).
Trusts Letter of instruction signed by the Trustee(s) (as Trustee),
with a signature guarantee. (If the Trustee's name is not
registered on your account, provide a copy of the trust
document, certified within the last 60 days.)
By Telephone
Please call 800.368.2745. You may redeem shares from your account by telephone
and have your money mailed to your address of record or wired to a bank you
have previously authorized. A charge of $5 is imposed on wire transfers of
less than $1,000.
Calvert Money Controller
Please allow sufficient time for Calvert Group to process your initial request
for this service (normally 10 business days). You may also authorize automatic
fixed amount redemptions by Calvert Money Controller. All requests must be
received by 4:00 p.m. Eastern time. Accounts cannot be closed by this service.
Exchange to Another Calvert Group Fund
You must meet the minimum investment requirement of the other Calvert Group
Fund or Portfolio. You can only exchange between accounts with identical
names, addresses and taxpayer identification number, unless previously
authorized with a signature-guaranteed letter.
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may have up
to two (2) redemption checks for a fixed amount sent to you on the 15th of the
month, simply by sending a letter with all information, including your account
number, and the dollar amount. If you would like a regular check mailed to
another person or place, your letter must be signature guaranteed.
Through your Broker
If your account is held in your broker's name ("street name"), you should
contact your broker directly to transfer, exchange or redeem shares.
DIVIDENDS AND TAXES
Each year, the Portfolio distributes substantially all of its net investment
income to shareholders.
Dividends from the Money Market Portfolio's net investment income are declared
daily and paid monthly. Net investment income consists of interest income, net
short-term capital gains, if any, and dividends declared and paid on
investments, less expenses.
Dividends from the Limited- and Long-Term Portfolios' net investment income
are paid monthly.
Net investment income consists of interest income, net short-term capital
gains, if any, and dividends declared and paid on investments, less expenses.
Each year, the Portfolios distribute substantially all of their net investment
income to shareholders. Dividend and distribution payments will vary between
classes.
Dividend Options
Dividends and any distributions are automatically reinvested in the same
Portfolio at net asset value (no sales charge), unless you elect to have the
dividends of $10 or more paid in cash (by check or by Calvert Money
Controller). Dividends and distributions may be automatically invested in an
identically registered account with the same account number in any other
Calvert Group Fund or Portfolio at net asset value. If reinvested in the same
Fund account, new shares will be purchased at net asset value on the
reinvestment date, which is generally 1 to 3 days prior to the payment date.
You must be a shareholder on the record date to receive dividends. You must
notify the Fund in writing prior to the record date to change your payment
options. If you elect to have dividends and/or distributions paid in cash, and
the US Postal Service cannot deliver the check, or if it remains uncashed for
an extended period, it, as well as future dividends and distributions, will be
reinvested in additional shares. No dividends will accrue on amounts
represented by uncashed distribution or redemption checks.
"Buying a Dividend"
At the time of purchase, the share price of the Limited- or Long-Term
Portfolios may reflect undistributed income, capital gains or unrealized
appreciation of securities. Any capital gains from these amounts which are
later distributed to you are fully taxable. On the record date for a
distribution, a Portfolio's share value is reduced by the amount of the
distribution. If you buy shares just before the record date ("buying a
dividend") you will pay the full price for the shares and then receive a
portion of the price back as a taxable distribution.
Federal Taxes
Dividends derived from interest on municipal obligations constitute
exempt-interest dividends, on which you are not subject to federal income tax.
However, dividends which are from taxable interest and any distributions of
short-term capital gain are taxable to you as ordinary income. If the
Portfolio makes any distributions of long-term capital gains, then these are
taxable to you as long-term capital gains, regardless of how long you held
your shares of the Portfolio. Dividends attributable to interest on certain
private activity bonds must be included in federal alternative minimum tax for
individuals and for corporations.
If any taxable income or gains are paid, in January, the Portfolio will mail
you Form 1099-DIV indicating the federal tax status of dividends paid to you
by the Portfolio during the past year.
You may realize a capital gain or loss when you redeem (sell) or exchange
shares of the Limited-Term or Long-Term Portfolios.
If you sell or exchange your Limited-Term or Long-Term Portfolio shares you
will have a short or long-term capital gain or loss, depending on how long you
owned the shares which were sold. In January, the Fund will mail you Form
1099-B indicating the proceeds from all sales, including exchanges. You should
keep your annual year-end account statements to determine the cost (basis) of
the shares to report on your tax returns.
Other Tax Information
You may be subject to state or local taxes on your investment, depending on
the laws in your area. A letter will be mailed to you in January detailing the
percentage invested in your state the previous tax year. Such dividends may be
exempt from certain state income taxes.
Taxpayer Identification Number
Federal law requires that you provide your correct Social Security or Taxpayer
Identification Number ("TIN") on a signed certified application or Form W-9.
If not provided, the Portfolios may be required to withhold 31% of any
dividends or redemptions, and you may be subject to a fine. You will also be
prohibited from opening another account by exchange. If this TIN information
is not received within 60 days after your account is established, your account
may be redeemed at the current NAV on the date of redemption. The Portfolios
reserve the right to reject any new account or any purchase order for failure
to supply a certified TIN.
Exhibit a - Limited-Term and Long-Term Portfolios
You may qualify for a reduced sales charge through several purchase plans
available. You must notify the Fund at the time of purchase to take advantage
of the reduced sales charge.
Right of Accumulation
The sales charge is calculated by taking into account not only the dollar
amount of a new purchase of shares, but also the higher of cost or current
value of shares previously purchased in Calvert Group Funds that impose sales
charges. This automatically applies to your account for each new purchase.
Letter of Intent
If you plan to purchase $50,000 or more of Fund shares over the next 13
months, your sales charge may be reduced through a "Letter of Intent." You pay
the lower sales charge applicable to the total amount you plan to invest over
the 13-month period, excluding any money market fund purchases. Part of your
shares will be held in escrow, so that if you do not invest the amount
indicated, you will have to pay the sales charge applicable to the smaller
investment actually made. For more information, see the Statement of
Additional Information.
Group Purchases
If you are a member of a qualified group, you may purchase shares of the Fund
at the reduced sales charge applicable to the group taken as a whole. The
sales charge is calculated by taking into account not only the dollar amount
of the shares you purchase, but also the higher of cost or current value of
shares previously purchased and currently held by other members of your group.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount, and
(iii) satisfies uniform criteria which enable CDI and dealers offering Fund
shares to realize economies of scale in distributing such shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of CDI or dealers distributing the Fund's
shares, must agree to include sales and other materials related to the Fund in
its publications and mailings to members at reduced or no cost to CDI or
dealers. Members of a group are not eligible for a Letter of Intent.
Other Circumstances
There is no sales charge on shares of any fund or portfolio of the Calvert
Group of Funds sold to (i) current or retired Directors, Trustees, or Officers
of the Calvert Group of Funds, employees of Calvert Group, Ltd. and its
affiliates, or their family members; (ii) CSIF Advisory Council Members,
directors, officers, and employees of any subadvisor for the Calvert Group of
Funds, employees of broker/dealers distributing the Fund's shares and
immediate family members of the Council, subadvisor, of broker/dealer; (iii)
Purchases made through a Registered Investment Advisor, (iv) Trust departments
of banks or savings institutions for trust clients of such bank or
institution, (v) Purchases through a broker maintaining an omnibus account
with the fund or portfolio, provided the purchases are made by (a) investment
advisors or financial planners placing trades for their own accounts (or the
accounts of their clients) and who charge a management, consulting, or other
fee for their services; or (b) clients of such investment advisors or
financial planners who place trades for their own accounts if such accounts
are linked to the master account of such investment advisor or financial
planner on the books and records of the broker or agent; or (c) retirement and
deferred compensation plans and trusts, including, but not limited to, those
defined in section 401(a) or section 403(b) of the I.R.C., and "rabbi trusts."
Established Accounts
Shares of the Long-Term Portfolio may be sold at net asset value to you if
your account was established on or before September 15, 1987, or April 30,
1988 for the Limited-Term Portfolio.
Dividends and Capital Gain Distributions from other Calvert Group Funds
You may prearrange to have your dividends and capital gain distributions from
another Calvert Group Fund with a sales charge automatically invested in
another account with no additional sales charge. Purchases made at net asset
value ("NAV"). Except for money market funds, if you make a purchase at NAV,
you may exchange that amount to another fund at no additional sales charge.
Reinstatement Privilege
If you redeem Fund shares and then within 30 days decide to reinvest in the
same Fund, you may do so at the net asset value next computed after the
reinvestment order is received, without a sales charge. You may use the
reinstatement privilege only once. The Fund reserves the right to modify or
eliminate this privilege.
Prospectus
April 30, 1998
Calvert Tax-Free Reserves
Money Market Portfolio
Limited-Term Portfolio
Long-Term Portfolio
To Open an Account:
800.368.2748
Performance and Prices:
Calvert Information Network
24 hours, 7 days a week
800.368.2745
Service for Existing Accounts:
Shareholders 800.368.2745
Brokers 800.368.2746
TDD for Hearing-Impaired:
800.541.1524
Calvert Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o NFDS, 6th Floor
1004 Baltimore
Kansas City, MO 64105
Calvert Group Website
http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
Calvert Tax-Free Reserves
California Money Market Portfolio
Statement of Additional Information
April 30, 1998
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE TRANSFER AGENT
Calvert Shareholder Services, Inc. National Financial Data
Services, Inc.
4550 Montgomery Avenue 1004 Baltimore
Suite 1000N 6th Floor
Bethesda, Maryland 20814 Kansas City, Missouri 64105
PRINCIPAL UNDERWRITER INDEPENDENT ACCOUNTANTS
Calvert Distributors, Inc. Coopers & Lybrand, L.L.P.
4550 Montgomery Avenue 250 West Pratt Street
Suite 1000N Baltimore, Maryland 21201
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 2
Purchases and Redemptions of Shares 3
Dividends and Distributions 4
Tax Matters 4
Valuation of Shares 5
Calculation of Yield 5
Advertising 6
Trustees and Officers 6
Investment Advisor 8
Administrative Services 8
Transfer and Shareholder Servicing Agents 9
Independent Accountants and Custodians 9
Portfolio Transactions 9
General Information 9
Financial Statements 10
Appendix 10
Investors must reside in California to purchase shares of the
Portfolio.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION -April 30, 1998
CALVERT TAX-FREE RESERVES
CALIFORNIA MONEY MARKET PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748 Shareholder
Information: (301) 951-4820 Services: (800) 368-2745
Broker (800) 368-2746 TDD for the
Services: (301) 951-4850 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 Portfolio's Prospectus, dated
April 30, 1998, which may be obtained free of charge by writing the
Portfolio at the above address or calling the telephone numbers
listed above.
INVESTMENT OBJECTIVE
The California Money Market Portfolio (the "Portfolio") is a
series of Calvert Tax-Free Reserves (the "Fund"), designed to provide
individual and institutional investors in higher tax brackets with
the highest level of interest income exempt from federal and
California state income taxes as is consistent with prudent
investment management, preservation of capital, and the quality and
maturity characteristics prescribed for the Portfolio. The Portfolio
invests in high quality municipal obligations with maturities of one
year or less and maintains an average maturity of 90 days or less.
The Portfolio further seeks to maintain a constant net asset value of
$1.00 per share. There is, of course, no assurance that the Portfolio
will be successful in meeting its investment objective or maintaining
the 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 Portfolio will fluctuate with income earned on
investments.
INVESTMENT POLICIES
The Portfolio seeks to earn the highest level of interest
income exempt from federal and California state income taxes as is
consistent with prudent investment management, preservation of
capital, and the quality and maturity characteristics of the
Portfolio.
The Portfolio invests primarily in a diversified portfolio
of municipal obligations whose interest is exempt from federal and
California state income tax. Municipal obligations in which the
Portfolio invests are short-term, fixed and variable rate instruments
of minimal credit risk and of high quality. Short-term obligations
have remaining maturities of one year or less. The Portfolio
maintains an average weighted maturity of 90 days or less.
Under normal market conditions, the Portfolio attempts to
invest 100%, and will invest at least 80%, of its total assets in
debt obligations issued by or on behalf of the State of California
and its political subdivisions ("California Municipal Obligations").
Dividends paid by the Portfolio which are derived from interest
attributable to California Municipal Obligations will be exempt from
federal and California state income taxes. Dividends derived from
interest on tax-exempt obligations of other governmental issuers will
be exempt from federal income tax, but will be subject to California
state income taxes.
The credit rating of the 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
Portfolio 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 Portfolio 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 Portfolio 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." The
Portfolio may not acquire obligations subject to puts if immediately
thereafter, with respect to 75% of the total amortized cost value of
its assets, the Portfolio would have more than 5% of its assets
invested in securities underlying puts from the same institution. The
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
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 Portfolio intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities. To
minimize taxable income, the Portfolio may also hold cash which is
not earning income. It is a fundamental policy of the Portfolio that
during normal market conditions the Portfolio's assets be invested so
that at least 80% of the Portfolio's annual income will be
tax-exempt. While the Portfolio has the authority to invest in
short-term taxable obligations, the Portfolio 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 Portfolio 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-both
experiencing appreciation when interest rates decline and
depreciation when interest rates rise). Therefore, if in order to
achieve higher interest income, the Portfolio 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 Portfolio's assets may vary. No new when-issued
commitments will be made by the Portfolio if more than 50% of the
Portfolio's net assets would become so committed.
When the time comes to pay for when-issued securities, the
Portfolio 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 Portfolio'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
Portfolio's outstanding shares. Shares have equal rights as to
voting. 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. The Portfolio may not:
(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 Portfolio reserves the right to
purchase securities with demand features. See "Variable Rate Demand
Notes" and "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 Portfolio'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 Portfolio 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 Portfolio, 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
Portfolio'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, except that the 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 the Portfolio may invest more
than 25% of its assets in obligations issued or guaranteed by the
U.S. Government, its agencies or instrumentalities. Private activity
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 (see
Prospectus, "How to Sell Your Shares").
Shareholders wishing to use the draft writing service should
complete the signature card enclosed with the Investment Application.
This draft writing 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 uncollected or insufficient funds, and will
charge $25 for stop payments. As a service to shareholders, the Fund
may automatically transfer the dollar amount necessary to cover
drafts you have written on the Fund to your Fund account from any
other of your identically registered accounts in Calvert money market
funds or Calvert Insured Plus. The Fund may charge a fee for this
service.
When a payable through draft 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. Drafts presented to the bank for payment which would
require the redemption of shares purchased by check or electronic
funds transfer within the previous 10 business days may not be
honored.
Amounts redeemed by check redemption may be mailed to the
investor without charge. Amounts of up to $300,000 may be transferred
electronically at no charge to the investor. Amounts of $1,000 or
more will be transmitted by wire, without charge, to the investor's
account at a domestic commercial bank that is a member of the Federal
Reserve System or to a correspondent bank. A charge of $5 is imposed
on wire transfers of less than $1,000. If the investor's bank is not
a Federal Reserve System member, failure of immediate notification to
that bank by the correspondent bank could result in a delay in
crediting the funds to the investor's bank account.
Telephone redemption requests which would require the
redemption of shares purchased by check or electronic funds transfer
within the previous 10 business days may not be honored. The Fund
reserves the right to modify the telephone redemption privilege.
To change redemption instructions already given,
shareholders must send a written notice to Calvert Group, P.O. Box
419544, Kansas City, MO 64141-6544, 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 certain credit
unions. 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.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Portfolio's net investment income are
declared daily and paid monthly. 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, at no additional charge. 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 Portfolio will begin receiving
dividends upon the date federal funds are received by the Portfolio.
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. Shareholders redeeming
shares by telephone, electronic funds transfer, or written request
will receive dividends through the date that the redemption request
is processed; shareholders redeeming shares by draft will receive
dividends up to the date such draft is presented to the Portfolio for
payment.
TAX MATTERS
The Portfolio intends to qualify and has, since inception,
so qualified, as a "regulated investment company" under Subchapter M
of the Internal Revenue Code (the "Code"), as amended. By so
qualifying, the Portfolio 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 Portfolio's dividends of net investment income
constitute exempt-interest dividends on which shareholders are not
generally subject to federal income tax; in addition, to the extent
that income dividends are derived from earnings attributable to
obligations of California and its political subdivisions, they will
also be exempt from state and local personal income tax in California.
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. The
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.
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 Portfolio. "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.
VALUATION OF SHARES
The Portfolio's assets, including commitments to purchase
securities on a when-issued basis, are 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 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 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 Portfolio to value its assets at amortized cost if the 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
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.
The 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 Portfolio 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.
Net Asset Value and Offering Price Per Share, 12/31/97
$321,001,295/321,125,930 shares $1.00
CALCULATION OF YIELD
From time to time the 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 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 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, 1997, the yield was 3.49%
and its effective yield 3.55%.
The 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
federal income taxes 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 federal income taxes. The factor which
is used to calculate the tax equivalent yield is the reciprocal of
the difference between 1 and the applicable income tax rates, which
will be stated in the advertisement. For the seven-day period ended
December 31, 1997, the federal tax equivalent yield for an investor
in the 36% income tax bracket was 5.54%, and 5.88% for an investor in
the 39.6% tax bracket.
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.
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, November 30, 1997). Calvert Group was also the first to offer
a family of socially responsible mutual fund portfolios.
TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice
President 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
Calvert Variable Series, Inc., Calvert New World Fund and Calvert
World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive,
Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner
in the law firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was
formerly a partner with Abrams, Blatz, Gran, Hendricks & Reina, P.A.
He is also a director of Calvert Variable Series, Inc. DOB: 10/29/35.
Address: 308 East Broad Street, Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a
radiologist with Kaiser Permanente. Prior to that, he was a
radiologist at Bethlehem Medical Imaging in Allentown, Pennsylvania.
DOB: 07/23/49. Address: 16 Iliahi Street, Honolulu, Hawaii, 96817.
*CHARLES E. DIEHL, Trustee. Mr. Diehl 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. DOB: 10/13/22.
Address: 1658 Quail Hollow Court, McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices
head and neck reconstructive surgery in the Washington, D.C.,
metropolitan area. DOD: 05/23/48. Address: 7536 Pepperell Drive,
Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian is President of
Corporate Finance of Washington, Inc. Formerly, he was a principal of
Gavian De Vaux Associates, an investment banking firm. DOB: 12/08/32.
Address: 3005 Franklin Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey 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, a director of
Ariel Funds, 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 Calvert Variable Series, Inc. and Calvert New World
Fund. DOB: 05/15/48. Address: 7205 Pomander Lane, Chevy Chase,
Maryland 20815.
*BARBARA J. KRUMSIEK, President and Trustee. Ms. Krumsiek 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. She 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. Prior to joining Calvert Group, Ms. Krumsiek served
as Senior Vice President of Alliance Capital LP's Mutual Fund
Division. DOB: 08/09/52.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President and
CEO of Creative Associates International, Inc., a firm that
specializes in human resources development, information management,
public affairs and private enterprise development. She is also a
director of Acacia Federal Savings Bank. DOB: 12/08/45. Address: 5301
Wisconsin Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh is a Director of Calvert
Variable Series, Inc., and serves as a director of Acacia Federal
Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive, Fairfax,
Virginia 22030.
*DAVID R. ROCHAT, Senior Vice President and Trustee. Mr.
Rochat 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. DOB:
10/07/37. Address: Box 93, Chelsea, Vermont 05038.
*D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a
trustee/director of each of the investment companies in the Calvert
Group of Funds, except for Calvert Variable Series, Inc. and Calvert
New World Fund. Mr. Silby is Executive Chairman of GroupServe, an
internet company focused on community building collaborative tools,
and 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. DOB: 07/20/48. Address: 1715 18th
Street, N.W., Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a
director and 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. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is
Senior Vice President and Chief Financial Officer 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. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary.
Mr. Tartikoff 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 also Vice President and Secretary of
Calvert-Sloan Advisers, L.L.C., a director of Calvert Distributors,
Inc., and is an officer of Acacia National Life Insurance Company.
DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes 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, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender
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. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group 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. DOB: 10/21/56.
LISA CROSSLEY NEWTON, Esq., Assistant Secretary and
Compliance Officer. Ms. Newton is Associate General Counsel of
Calvert Group 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. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is
Assistant Counsel of Calvert Group 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. Prior to working at Calvert Group, Ms. Duke was an
Associate in the Investment Management Group of the Business and
Finance Department at Drinker Biddle & Reath. DOB: 09/07/68.
The address of directors and officers, unless otherwise noted, is
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
Trustees and officers of the Fund as a group own less than 1% of the
Fund's outstanding shares. Trustees marked with an *, above, are
"interested persons" of the Fund, under the Investment Company Act of
1940.
Each of the above directors/trustees and officers is a
director/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 and Silby and
Ms. Krumsiek are among the trustees, Calvert Variable Series, Inc.,
of which only Messrs. Blatz, Diehl and Pugh and Ms. Krumsiek are
among the directors, Calvert World Values Fund, Inc., of which only
Messrs. Guffey and Silby and Ms. Krumsiek are among the directors,
and Calvert New World Fund, Inc., of which only Ms. Krumsiek and Mr.
Martini are among the directors.
The Audit Committee of the Board is composed of Messrs.
Baird, Blatz, Feldman, Guffey and Pugh. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat and
Silby and Ms. Krumsiek.
During fiscal 1997, trustees of the Fund not affiliated with
the Fund's Advisor were paid $45,564. Trustees of the Fund not
affiliated with the Advisor presently receive an annual fee of
$20,500 for service as a member of the Board of Trustees of the
Calvert Group of Funds, and a fee of $750 to $1500 for each regular
Board or Committee meeting attended; such fees are allocated among
the respective Funds on the basis of 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 1997 Aggregate Compensation Pension or Total
(unaudited Numbers) from Registant Retirement Benefits Compensation
for Service as Trustee Accrued as part of from Registrant
Registrant Expenses* and Fund
Complex paid to
Trustee **
Name of Trustee
Richard L. Baird, Jr. $24,466 $0 $34,450
Frank H. Blatz, Jr. $31,031 $31,031 $46,000
Frederick T. Borts $23,515 $0 $32,500
Charles E. Diehl $29,959 $29,959 $44,500
Douglas E. Feldman $23,462 $0 $32,500
Peter W. Gavian $27,736 $12,668 $38,500
John G. Guffey, Jr. $30,451 $0 $61,615
M. Charito Kruvant $26,145 $0 $36,250
Arthur J. Pugh $32,589 $1,038 $48,250
D. Wayne Silby $25,072 $0 $62,830
*Messrs. Blatz, Diehl, Gavian and Pugh have chosen to defer a portion
of their compensation. As of December 31, 1997, total deferred
compensation, including dividends and capital appreciation, was
$555,901.79, $545,259.10, $137,436.70 and $187,735.55, for each
trustee, respectively.
**As of December 31, 1997. The Fund Complex consists of nine (9)
registered investment companies.
INVESTMENT ADVISOR
The Portfolio'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 Portfolio 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 Portfolio, or by the Trustees of the
Portfolio; and further provided that such continuance is also
approved annually by the vote of a majority of the Trustees of the
Portfolio 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
Portfolio's assets, subject to the direction and control of the
Portfolio's Board of Trustees. For its services, the Advisor receives
an annual fee of 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.
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 Portfolio with investment advice
and research, pays the salaries and fees of all Trustees and
executive officers of the Portfolio who are principals of the
Advisor, and pays certain Portfolio advertising and promotional
expenses. The Portfolio 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
advisory fees paid to the Advisor under the advisory contract for the
1995, and 1997 fiscal years were $1,426,938, $1,691,140, and
$1,643,147, respectively.
The Advisor may voluntarily reimburse the Portfolio for
expenses. For 1995 there was no reimbursement of expenses; for 1996,
$117,823 in expenses was reimbursed, and, for 1997, $164,315.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company ("CASC"), 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. Prior to August 1, 1997, CASC received a
fee of $200,000 per year for providing such services, allocated among
Portfolios based on assets. Effective August 1, 1997, the fee
structure changed. Exclusive of the CTFR Money Market Portfolio, the
Fund pays an annual fee of $80,000, allocated between the remaining
Portfolios based on assets. The service fees paid by the Portfolio to
CASC for 1995, 1996, and 1997, were $21,183, $24,770, and $26,655,
respectively.
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, offering shares on a continuous, "best efforts" basis.
CDI bears all its expenses of providing services pursuant to the
agreement, including payment of any commissions and service fees.
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., a subsidiary of Calvert
Group, Ltd., and Acacia Mutual, 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. Calvert Shareholder Services,
Inc. was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services,
Inc. receive a fee based on the number of shareholder accounts and
transactions.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers & Lybrand, L.L.P. has been selected by the Board of
Trustees to serve as independent auditors for fiscal year 1998. 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.
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.
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 amount 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.
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 Portfolio is a series of Calvert Tax-Free Reserves, an
open-end diversified investment management company which was
organized as a Massachusetts business trust on October 20, 1980. The
other series of the Fund include the Money Market Portfolio,
Limited-Term Portfolio, Long-Term 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.
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 Fund will send its shareholders unaudited semi-annual
and audited annual reports that will include the Fund's 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 Portfolio's Annual
Report to Shareholders dated December 31, 1997, 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 Portfolio.
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 private activity 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 private activity 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.
<PAGE>
Calvert Tax-Free Reserves
Long-Term Portfolio
Statement of Additional Information
April 30, 1998
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE TRANSFER AGENT
Calvert Shareholder Services, Inc. National Financial Data
Services, Inc.
4550 Montgomery Avenue 1004 Baltimore
Suite 1000N 6th Floor
Bethesda, Maryland 20814 Kansas City, Missouri
64105
PRINCIPAL UNDERWRITER INDEPENDENT ACCOUNTANTS
Calvert Distributors, Inc. Coopers & Lybrand, L.L.P.
4550 Montgomery Avenue 250 West Pratt Street
Suite 1000N Baltimore, Maryland 21201
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 5
Purchases and Redemptions of Shares 6
Reduced Sales Charges 6
Dividends and Distributions 7
Tax Matters 7
Valuation of Shares 8
Calculation of Yield and Total Return 8
Advertising 9
Trustees and Officer 9
Investment Advisor 11
Administrative Services 12
IndependentAccountants andCustodians 12
Method of Distribution 12
Portfolio Transactions 12
General Information 13
Financial Statements 14
Appendix 14
<PAGE>
Calvert Tax-Free Reserves
Vermont Municipal Portfolio
Statement of Additional Information
April 30, 1998
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE TRANSFER AGENT
Calvert Shareholder Services, Inc. National Financial Data Services,
Inc.
4550 Montgomery Avenue 1004 Baltimore
Suite 1000N 6th Floor
Bethesda, Maryland 20814 Kansas City, Missouri 64105
PRINCIPAL UNDERWRITER INDEPENDENT ACCOUNTANTS
Calvert Distributors, Inc. Coopers & Lybrand, L.L.P.
4550 Montgomery Avenue 250 West Pratt Street
Suite 1000N Baltimore, Maryland 21201
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 5
Purchases and Redemptions of Shares 6
Reduced Sales Charges 7
Dividends and Distributions 7
Tax Matters 7
Valuation of Shares 8
Calculation of Yield and Total Return 8
Advertising 9
Trustees and Officers 10
Investment Advisor 12
Administrative Services 12
Transfer and Shareholder Servicing Agents 12
Independent Accountants and Custodians 12
Method of Distribution 13
Portfolio Transactions 13
General Information 13
Financial Statements 14
Appendix 14
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION- April 30, 1998
CALVERT TAX-FREE RESERVES
VERMONT MUNICIPAL PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814
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 is not a prospectus.
Investors should read the Statement of Additional Information in conjunction
with the Portfolio's Prospectus, dated April 30, 1998, which may be obtained
free of charge by writing the Portfolio at the above address or calling the
telephone numbers listed above.
INVESTMENT OBJECTIVE
The Vermont Municipal Portfolio (the "Portfolio") is a series of
Calvert Tax-Free Reserves (the "Fund"). It is a nondiversified bond fund
designed to provide individual and institutional investors in higher tax
brackets with the highest level of interest income exempt from federal and
Vermont state income taxes as is consistent with prudent investment
management, preservation of capital, and the quality and maturity
characteristics of the Portfolio. It invests in investment grade municipal
obligations with durations generally averaging between four and nine years,
though the Portfolio's holdings may at any time have longer or shorter
durations. There is, of course, no assurance that the Portfolio will be
successful in meeting its investment objective because there are inherent
risks in the ownership of any investment.
Dividends paid by the Portfolio will fluctuate with income earned on
investments, and will vary by class of shares. In addition, the value of each
class of the Portfolio's shares will fluctuate to reflect changes in the
market value of the Portfolio's investments. The Portfolio will attempt,
through careful management, to reduce these risks and enhance the
opportunities for higher income and greater price stability.
INVESTMENT POLICIES
The Portfolio invests primarily in a nondiversified portfolio of
municipal obligations of the state of Vermont and its political subdivisions
("Vermont Municipal Obligations"). Under normal market conditions, the
Portfolio attempts to invest at least 65% of the value of its assets in
Vermont Municipal Obligations. The Portfolio will also attempt to invest the
remaining 35% of its total assets in these obligations, but may invest it in
municipal obligations of other states, territories, and possessions of the
United States, the District of Columbia, and their respective authorities,
agencies, instrumentalities, and political subdivisions. Dividends you receive
from the Portfolio that are derived from interest on tax-exempt obligations of
other governmental issuers will be exempt from federal tax, but may be subject
to Vermont state income taxes.
Since the Portfolio is nondiversified, it may invest its assets in
fewer issuers than if it were diversified. As a result, the Portfolio's
performance may be more directly impacted by changes in conditions affecting
those issuers than it would be if the Portfolio were investing in a greater
number of issuers. A complete explanation of municipal obligations and
municipal bond and note ratings is set forth in the Appendix.
The credit rating of the 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 Portfolio 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 Portfolio 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 Portfolio 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." The Portfolio may not acquire obligations subject to puts if
immediately thereafter with respect to 75% of the total amortized cost value
of its short-term assets, the Portfolio would have more than 5% of such assets
invested in securities underlying puts from the same institution. The
Portfolio may, however, invest up to 10% of its short-term 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.
Temporary Investments
From time to time for liquidity purposes or pending the investment of
the proceeds of the sale of Portfolio shares, the Portfolio may invest in and
derive up to 20% of its income from taxable short-term obligations of the U.S.
Government, its agencies and instrumentalities. Interest earned from such
taxable investments will be taxable to investors as ordinary income unless the
investors are otherwise exempt from taxation.
The Portfolio intends to minimize taxable income through investment,
when possible, in short-term tax-exempt securities. To minimize taxable
income, the Portfolio may also hold cash which is not earning income. It is a
fundamental policy of the Portfolio that during normal market conditions the
Portfolio's assets be invested so that at least 80% of the Portfolio's annual
income will be tax-exempt. While the Portfolio has the authority to invest in
short-term taxable obligations, the Portfolio 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 Portfolio 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 Portfolio 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
Portfolio's assets may vary. No new when-issued commitments will be made by
the Portfolio if more than 50% of the Portfolio's net assets would become so
committed.
When the time comes to pay for when-issued securities, the Portfolio
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 Portfolio'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.
Transactions in Futures Contracts
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal bonds or on U.S. Treasury securities, or
options on such futures contracts, for hedging purposes only. The Portfolio
may sell such futures contracts in anticipation of a decline in the cost of
municipal bonds it holds or may purchase such futures contracts in
anticipation of an increase in the value of municipal bonds the Portfolio
intends to acquire. The Portfolio also is authorized to purchase and sell
other financial futures contracts which in the opinion of the Investment
Advisor provide an appropriate hedge for some or all of the Portfolio's
securities.
Because of low initial margin deposits made upon the opening of a
futures position, futures transactions involve substantial leverage. As a
result, relatively small movements in the price of the futures contract can
result in substantial unrealized gains or losses. Because the Portfolio will
engage in the purchase and sale of financial futures contracts solely for
hedging purposes, however, any losses incurred in connection therewith should,
if the hedging strategy is successful, be offset in whole or in part by
increases in the value of securities held by the Portfolio or decreases in the
price of securities the Portfolio intends to acquire.
Municipal bond index futures contracts commenced trading in June
1985, and it is possible that trading in such futures contracts will be less
liquid than that in other futures contracts. The trading of futures contracts
and options thereon is subject to certain market risks, such as trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention or other disruptions of normal trading activity, which could at
times make it difficult or impossible to liquidate existing positions.
The liquidity of a secondary market in futures contracts may be
further adversely affected by "daily price fluctuation limits" established by
contract markets, which limit the amount of fluctuation in the price of a
futures contract or option thereon during a single trading day. Once the daily
limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open positions.
Prices of existing contracts have in the past moved the daily limit on a
number of consecutive trading days. The Portfolio will enter into a futures
position only if, in the judgment of the Investment Advisor, there appears to
be an actively traded secondary market for such futures contracts.
The successful use of transactions in futures contracts and options
thereon depends on the ability of the Investment Advisor to correctly forecast
the direction and extent of price movements of these instruments, as well as
price movements of the securities held by the Portfolio within a given time
frame. To the extent these prices remain stable during the period in which a
futures or option contract is held by the Portfolio, or move in a direction
opposite to that anticipated, the Portfolio may realize a loss on the hedging
transaction which is not fully or partially offset by an increase in the value
of the Portfolio's securities. As a result, the Portfolio's total return for
such period may be less than if it had not engaged in the hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller of a
contract to deliver and the purchaser of a contract to take delivery of the
type of financial instrument called for in the contract or, in some instances,
to make a cash settlement, at a specified future time for a specified price.
Although the terms of a contract call for actual delivery or acceptance of
securities, or for a cash settlement, in most cases the contracts are closed
out before the delivery date without the delivery or acceptance taking place.
The Portfolio intends to close out its futures contracts prior to the delivery
date of such contracts.
The Portfolio may sell futures contracts in anticipation of a decline
in the value of its investments in municipal bonds. The loss associated with
any such decline could be reduced without employing futures as a hedge by
selling long-term securities and either reinvesting the proceeds in securities
with shorter maturities or by holding assets in cash. This strategy, however,
entails increased transaction costs in the form of brokerage commissions and
dealer spreads and will typically reduce the Portfolio's average yields as a
result of the shortening of maturities.
The purchase or sale of a futures contract differs from the purchase
or sale of a security, in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the Portfolio's futures
commission merchant and the relevant contract market, which varies but is
generally about 5% or less of the contract amount, must be deposited with the
broker. This amount is known as "initial margin," and represents a "good
faith" deposit assuring the performance of both the purchaser and the seller
under the futures contract. Subsequent payments to and from the broker, known
as "variation margin," are required to be made on a daily basis as the price
of the futures contract fluctuates, making the long or short positions in the
futures contract more or less valuable, a process known as "marking to the
market." Prior to the settlement date of the futures contract, the position
may be closed out by taking an opposite position which will operate to
terminate the position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid to or
released by the broker, and the purchaser realizes a loss or gain. In
addition, a commission is paid on each completed purchase and sale transaction.
The sale of financial futures contracts provides an alternative means
of hedging the Portfolio against declines in the value of its investments in
municipal bonds. As such values decline, the value of the Portfolio's position
in the futures contracts will tend to increase, thus offsetting all or a
portion of the depreciation in the market value of the Portfolio's fixed
income investments which are being hedged. While the Portfolio will incur
commission expenses in establishing and closing out futures positions,
commissions on futures transactions may be significantly lower than
transaction costs incurred in the purchase and sale of fixed income
securities. In addition, the ability of the Portfolio to trade in the
standardized contracts available in the futures market may offer a more
effective hedging strategy than a program to reduce the average maturing of
portfolio securities, due to the unique and varied credit and technical
characteristics of the municipal debt instruments available to the Portfolio.
Employing futures as a hedge may also permit the Portfolio to assume a hedging
posture without reducing the yield on its investments, beyond any amounts
required to engage in futures trading.
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal securities. These instruments provide for
the purchase or sale of a hypothetical portfolio of municipal bonds at a fixed
price in a stated delivery month. Unlike most other futures contracts,
however, a municipal bond index futures contract does not require actual
delivery of securities but results in a cash settlement based upon the
difference in value of the index between the time the contract was entered
into and the time it is liquidated.
The municipal bond index underlying the futures contracts traded by
the Portfolio is The Bond Buyer Municipal Bond Index, developed by The Bond
Buyer and the Chicago Board of Trade ("CBT"), the contract market on which the
futures contracts are traded. As currently structured, the index is comprised
of 40 tax-exempt term municipal revenue and general obligation bonds. Each
bond included in the index must be rated either A- or higher by Standard &
Poor's or A or higher by Moody's Investors Service and must have a remaining
maturity of 19 years or more. Twice a month new issues satisfying the
eligibility requirements are added to, and an equal number of old issues will
be deleted from, the index. The value of the index is computed daily according
to a formula based upon the price of each bond in the index, as evaluated by
four dealer-to-dealers brokers.
The Portfolio may also purchase and sell futures contracts on U.S.
Treasury bills, notes and bonds for the same types of hedging purposes. Such
futures contracts provide for delivery of the underlying security at a
specified future time for a fixed price, and the value of the futures contract
therefore generally fluctuates with movements in interest rates.
The municipal bond index futures contract, futures contracts on U.S.
Treasury securities and options on such futures contracts are traded on the
CBT, which, like other contract markets, assures the performance of the
parties to each futures contract through a clearing corporation, a nonprofit
organization managed by the exchange membership, which is also responsible for
handling daily accounting of deposits or withdrawals of margin.
The Portfolio may also purchase financial futures contracts when it
is not fully invested in municipal bonds in anticipation of an increase in the
cost of securities the Portfolio intends to purchase. As such securities are
purchased, an equivalent amount of futures contracts will be closed out. In a
substantial majority of these transactions, the Portfolio will purchase
municipal bonds upon termination of the futures contracts. Due to changing
market conditions and interest rate forecasts, however, a futures position may
be terminated without a corresponding purchase of securities. Nevertheless,
all purchases of futures contracts by the Portfolio will be subject to certain
restrictions, described below.
Options on Futures Contracts. An option on a futures contract
provides the purchaser with the right, but not the obligation, to enter into a
long position in the underlying futures contract (that is, purchase the
futures contract), in the case of a "call" option, or a short position (sell
the futures contract), in the case of a "put" option, for a fixed price up to
a stated expiration date. The option is purchased for a non-refundable fee,
known as the "premium." Upon exercise of the option, the contract market
clearing house assigns each party to the option an opposite position in the
underlying futures contract. In the event of exercise, therefore, the parties
are subject to all of the risks of futures trading, such as payment of initial
and variation margin. In addition, the seller, or "writer," of the option is
subject to margin requirements on the option position. Options on futures
contracts are traded on the same contract markets as the underlying futures
contracts.
The Portfolio may purchase options on futures contracts for the same
types of hedging purposes described above in connection with futures
contracts. For example, in order to protect against an anticipated decline in
the value of securities it holds, the Portfolio could purchase put options on
futures contracts, instead of selling the underlying futures contracts.
Conversely, in order to protect against the adverse effects of anticipated
increases in the costs of securities to be acquired, the Portfolio could
purchase call options on futures contracts, instead of purchasing the
underlying futures contracts. The Portfolio generally will sell options on
futures contracts only to close out an existing position.
The Portfolio will not engage in transactions in such instruments
unless and until the Investment Advisor determines that market conditions and
the circumstances of the Portfolio warrant such trading. To the extent the
Portfolio engages in the purchase and sale of futures contracts or options
thereon, it will do so only at a level which is reflective of the Investment
Advisor's view of the hedging needs of the Portfolio, the liquidity of the
market for futures contracts and the anticipated correlation between movements
in the value of the futures or option contract and the value of securities
held by the Portfolio.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Under regulations of the Commodity Futures Trading Commission
("CFTC"), the futures trading activities described herein will not result in
the Portfolio being deemed to be a "commodity pool," as defined under such
regulations, provided that certain trading restrictions are adhered to. In
particular, CFTC regulations require that all futures and option positions
entered into by the Portfolio qualify as bona fide hedge transactions, as
defined under CFTC regulations, or, in the case of long positions, that the
value of such positions not exceed an amount of segregated funds determined by
reference to certain cash and securities positions maintained by the Portfolio
and accrued profits on such positions. In addition, the Portfolio may not
purchase or sell any such instruments if, immediately thereafter, the sum of
the amount of initial margin deposits on the Portfolio's existing futures
positions would exceed 5% of the market value of its net assets.
When the Portfolio purchases a futures contract, it will maintain an
amount of cash, cash equivalents (for example, commercial paper and daily
tender adjustable notes) or short-term high-grade fixed income securities in a
segregated account with the Portfolio's custodian, so that the amount so
segregated plus the amount of initial and variation margin held in the account
of its broker equals the market value of the futures contract, thereby
ensuring that the use of such futures is unleveraged.
Risk Factors in Transactions in Futures Contracts. The particular
municipal bonds comprising the index underlying the municipal bond index
futures contract may vary from the bonds held by the Portfolio. In addition,
the securities underlying futures contracts on U.S. Treasury securities will
not be the same as securities held by the Portfolio. As a result, the
Portfolio's ability effectively to hedge all or a portion of the value of its
municipal bonds through the use of futures contracts will depend in part on
the degree to which price movements in the index underlying the municipal bond
index futures contract, or the U.S. Treasury securities underlying other
futures contracts trade, correlate with price movements of the municipal bonds
held by the Portfolio.
For example, where prices of securities in the Portfolio do not move
in the same direction or to the same extent as the values of the securities or
index underlying a futures contract, the trading of such futures contracts may
not effectively hedge the Portfolio's investments and may result in trading
losses. The correlation may be affected by disparities in the average
maturity, ratings, geographical mix or structure of the Portfolio's
investments as compared to those comprising the index, and general economic or
political factors. In addition, the correlation between movements in the value
of the index underlying a futures contract may be subject to change over time,
as additions to and deletions from the index alter its structure. In the case
of futures contracts on U.S. Treasury securities and options thereon, the
anticipated correlation of price movements between the U.S. Treasury
securities underlying the futures or options and municipal bonds may be
adversely affected by economic, political, legislative or other developments
that have a disparate impact on the respective markets for such securities. In
the event that the Investment Advisor determines to enter into transactions in
financial futures contracts other than the municipal bond index futures
contract or futures on U.S. Treasury securities, the risk of imperfect
correlation between movements in the prices of such futures contracts and the
prices of municipal bonds held by the Portfolio may be greater.
The trading of futures contracts on an index also entails the risk of
imperfect correlation between movements in the price of the futures contract
and the value of the underlying index. The anticipated spread between the
prices may be distorted due to differences in the nature of the markets, such
as margin requirements, liquidity and the participation of speculators in the
futures markets. The risk of imperfect correlation, however, generally
diminishes as the delivery month specified in the futures contract approaches.
Prior to exercise or expiration, a position in futures contracts or
options thereon may be terminated only by entering into a closing purchase or
sale transaction. This requires a secondary market to the relevant contract
market. The Portfolio will enter into a futures or option position only if
there appears to be a liquid secondary market therefor, although there can be
no assurance that such a liquid secondary market will exist for any particular
contract at any specific time. Thus, it may not be possible to close out a
position once it has been established. Under such circumstances, the Portfolio
could be required to make continuing daily cash payments of variation margin
in the event of adverse price movements. In such situation, if the Portfolio
has insufficient cash, it may be required to sell portfolio securities to meet
daily variation margin requirements at a time when it may be disadvantageous
to do so. In addition, the Portfolio may be required to perform under the
terms of the futures or option contracts it holds. The inability to close out
futures or options positions also could have an adverse impact on the
Portfolio's ability effectively to hedge its portfolio.
When the Portfolio purchases an option on a futures contract, its
risk is limited to the amount of the premium, plus related transaction costs,
although this entire amount may be lost. In addition, in order to profit from
the purchase of an option on a futures contract, the Portfolio may be required
to exercise the option and liquidate the underlying futures contract, subject
to the availability of a liquid secondary market. The trading of options on
futures contracts also entails the risk that changes in the value of the
underlying futures contract will not be fully reflected in the value of the
option, although the risk of imperfect correlation generally tends to diminish
as the maturity date of the futures contract or expiration date of the option
approaches.
"Trading Limits" or "Position Limits" may also be imposed on the
maximum number of contracts which any person may hold at a given time. A
contract market may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
The Investment Advisor does not believe that trading limits will have any
adverse impact on the strategies for hedging the Portfolio's investments.
Further, the trading of futures contracts is subject to the risk of
the insolvency of a brokerage firm or clearing corporation, which could make
it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.
In addition to the risks of imperfect correlation and lack of a
liquid secondary market for such instruments, transactions in futures
contracts involve risks related to leveraging and the potential for incorrect
forecasts of the direction and extent of interest rate movements within a
given time frame.
INVESTMENT RESTRICTIONS
Fundamental 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 outstanding shares of the Vermont
Municipal Portfolio. 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. The
Vermont Municipal Portfolio may not:
(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, except as permitted in connection with transactions in futures
contracts and options thereon. See "Transactions in Futures Contracts." The
Portfolio 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 Portfolio's
investment objective and policies, either directly from the issuer, or from an
underwriter for an issuer, may be deemed an underwriting;
(5) Borrow money, except from banks for temporary or emergency purposes and
then only in an amount up to 10% of the value of the Portfolio's total assets
and except by engaging in reverse repurchase agreements; provided, however,
that the Portfolio may only engage in reverse repurchase agreements so long
as, at the time it enters into a reverse repurchase agreement, the aggregate
proceeds from outstanding reverse repurchase agreements, when added to other
outstanding borrowings permitted by this section, do not exceed 33 1/3% of the
Portfolio's total assets. In order to secure any permitted borrowings and
reverse repurchase agreements under this section, the Portfolio may pledge,
mortgage or hypothecate its 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 Portfolio from investing in municipal obligations secured by
real estate or interests therein;
(7) Make loans to others, except in accordance with the Portfolio's investment
objective and policies or pursuant to contracts providing for the compensation
of service providers by compensating balances;
(8) 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;
(9) Invest more than 25% of its assets in any particular industry or
industries, except that the 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";
(10) 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.
Non-Fundamental Investment Restrictions
The following operating (i.e., non-fundamental) investment policies
and restrictions may be changed by the Board of Trustees without shareholder
approval. The Portfolio may not:
(1) Purchase illiquid securities if more than 10% of the value of the
Portfolio's net assets would be invested in such securities.
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. Amounts redeemed by check redemption may
be mailed to the investor. Amounts of more than $50 and less than $300,000 may
be transferred electronically to the investor. Amounts of $1,000 or more will be
transmitted by wire, to the investor's account at a domestic commercial bank
that is a member of the Federal Reserve System or to a correspondent bank. A
charge of $5 is imposed on wire transfers of less than $1,000. If the investor's
bank is not a Federal Reserve System member, failure of immediate notification
to that bank by the correspondent bank could result in a delay in crediting the
funds to the investor's bank account. Telephone redemption requests which would
require the redemption of shares purchased by check or electronic funds transfer
within the previous 10 business days may not be honored. The Fund reserves the
right to modify the telephone redemption privilege. 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 certain credit unions. 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. Redemption proceeds are normally
paid in cash. However, the Portfolio has the right to redeem shares in assets
other than cash for redemption amounts exceeding, in any 90-day period, $250,000
or 1% of the net asset value of the Portfolio, whichever is less.
REDUCED SALES CHARGES
The Portfolio imposes reduced sales charges in certain situations in
which the Principal Underwriter and the dealers selling 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 Fund
shareholders, enabling the Fund 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 Prospectus.
DIVIDENDS AND DISTRIBUTIONS
The 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. 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. Dividends and
distributions paid may differ among the classes.
Dividends are automatically reinvested at net asset value in
additional shares. Shareholders may elect to have their dividends and
distributions paid out monthly in cash. Capital gains, if any, are normally
paid once a year and will be automatically reinvested at net asset value in
additional shares, unless you choose otherwise. You may elect to have your
dividends and distributions paid out monthly in cash. You may also request to
have your dividends and distributions from the Portfolio invested in shares of
any other Calvert Group Fund, to be invested in that Fund or Portfolio without
a sales charge. 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.
TAX MATTERS
In 1997, the Portfolio did qualify and in 1998, the Portfolio intends
to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code, as amended (the "Code"). By so qualifying, the
Portfolio will not be subject to federal income tax, nor to the federal excise
tax imposed by the Code, to the extent that it distributes its net investment
income and realized capital gains.
The Portfolio's dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally subject to
federal or Vermont state income tax; however, under the Code, 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. The 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.
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 advisers before purchasing shares of the
Portfolio. "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 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
shares as incurred to acquire the new shares.
The Portfolio is required to withhold 31% of any long-term capital
gain dividends and 31% of each redemption transaction occurring in the
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 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 Portfolio for further information.
VALUATION OF SHARES
The Portfolio's assets are normally 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 Portfolio's Advisor under the
supervision of the Board of Trustees. The 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 Portfolio 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.
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.
Net Asset Value and Offering Price Per Share
Net asset value per share
($50,193,852/3,052,118 shares) $16.45
Maximum sales charge
(3.75% of offering price) 0.64
Offering price per share $17.09
CALCULATION OF YIELD AND TOTAL RETURN
From time to time, the 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 and the 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
shares, except quotations of "return without maximum load," which do not
deduct the sales charge. Thus, in the formula below, for return without
maximum load, P = the entire $1,000 hypothetical initial investment and does
not reflect the deduction of any sales charge. Note: "Total Return" as quoted
in the Financial Highlights section of the Fund's Prospectus and Annual Report
to Shareholders, however, per SEC instructions, does not reflect deduction of
the sales charge, and corresponds to "return without maximum load" as referred
to herein. Return without maximum load 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 (less the maximum sales
charge imposed during the period); T = average annual 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).
Returns for the periods indicated are as follows:
Periods Ended
December 31, 1997 with Max Load w/o Max Load
One Year 2.87% 6.90%
Five Years 5.66% 6.47%
From Inception 6.59% 7.19%
(April 1, 1991)
The 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. "Yield"
quotations for each class 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 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
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.
Using this calculation, the Portfolio's yield for the month ended December 31,
1997 was 4.32%.
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 per class by taking the portion of the yield exempt from
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 federal income taxes. The factor which is used to calculate the
tax equivalent yield is the reciprocal of the difference between 1 and the
applicable income tax rates, which will be stated in the advertisement.
For the thirty-day period ended December 31, 1997, the Portfolio
yield was 4.32% and its federal tax equivalent yield was 6.75% for an investor
in the 36% federal income tax bracket, and 7.15% for an investor in the 39.6%
federal income tax bracket.
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.
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, November 30, 1997). Calvert Group was also
the first to offer a family of socially responsible mutual fund portfolios.
TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice President
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 Calvert Variable Series, Inc., Calvert New World Fund and
Calvert World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive,
Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner in the law
firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was formerly a partner
with Abrams, Blatz, Gran, Hendricks & Reina, P.A. He is also a director of
Calvert Variable Series, Inc. DOB: 10/29/35. Address: 308 East Broad Street,
Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a radiologist with
Kaiser Permanente. Prior to that, he was a radiologist at Bethlehem Medical
Imaging in Allentown, Pennsylvania. DOB: 07/23/49. Address: 16 Iliahi Street,
Honolulu, Hawaii, 96817.
*CHARLES E. DIEHL, Trustee. Mr. Diehl 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. DOB: 10/13/22. Address: 1658 Quail Hollow Court,
McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices head and
neck reconstructive surgery in the Washington, D.C., metropolitan area. DOD:
05/23/48. Address: 7536 Pepperell Drive, Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian is President of Corporate
Finance of Washington, Inc. Formerly, he was a principal of Gavian De Vaux
Associates, an investment banking firm. DOB: 12/08/32. Address: 3005 Franklin
Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey 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, a director of Ariel Funds, 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 Calvert Variable Series, Inc. and Calvert New World
Fund. DOB: 05/15/48. Address: 7205 Pomander Lane, Chevy Chase, Maryland 20815.
*BARBARA J. KRUMSIEK, President and Trustee. Ms. Krumsiek 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. She 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. Prior to joining Calvert
Group, Ms. Krumsiek served as Senior Vice President of Alliance Capital LP's
Mutual Fund Division. DOB: 08/09/52.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President and CEO of
Creative Associates International, Inc., a firm that specializes in human
resources development, information management, public affairs and private
enterprise development. She is also a director of Acacia Federal Savings Bank.
DOB: 12/08/45. Address: 5301 Wisconsin Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh is a Director of Calvert Variable
Series, Inc., and serves as a director of Acacia Federal Savings Bank. DOB:
09/24/37. Address: 4823 Prestwick Drive, Fairfax, Virginia 22030.
*DAVID R. ROCHAT, Senior Vice President and Trustee. Mr. Rochat 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. DOB: 10/07/37. Address: Box 93, Chelsea, Vermont
05038.
*D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a trustee/director of
each of the investment companies in the Calvert Group of Funds, except for
Calvert Variable Series, Inc. and Calvert New World Fund. Mr. Silby is
Executive Chairman of GroupServe, an internet company focused on community
building collaborative tools, and 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. DOB: 07/20/48. Address: 1715 18th Street, N.W.,
Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a director and
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. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior Vice
President and Chief Financial Officer 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.
DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary. Mr.
Tartikoff 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 also
Vice President and Secretary of Calvert-Sloan Advisers, L.L.C., a director of
Calvert Distributors, Inc., and is an officer of Acacia National Life
Insurance Company. DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes 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, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender 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. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is Associate
General Counsel of Calvert Group 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. DOB: 10/21/56.
LISA CROSSLEY NEWTON, Esq., Assistant Secretary and Compliance
Officer. Ms. Newton is Associate General Counsel of Calvert Group 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. DOB: 12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is Assistant
Counsel of Calvert Group 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. Prior to working at
Calvert Group, Ms. Duke was an Associate in the Investment Management Group of
the Business and Finance Department at Drinker Biddle & Reath. DOB: 09/07/68.
The address of directors and officers, unless otherwise noted, is 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Trustees and
officers of the Fund as a group own less than 1% of the Fund's outstanding
shares. Trustees marked with an *, above, are "interested persons" of the
Fund, under the Investment Company Act of 1940.
Each of the above directors/trustees and officers is a
director/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 and Silby and Ms. Krumsiek are among the trustees,
Calvert Variable Series, Inc., of which only Messrs. Blatz, Diehl and Pugh and
Ms. Krumsiek are among the directors, Calvert World Values Fund, Inc., of
which only Messrs. Guffey and Silby and Ms. Krumsiek are among the directors,
and Calvert New World Fund, Inc., of which only Ms. Krumsiek and Mr. Martini
are among the directors.
The Audit Committee of the Board is composed of Messrs. Baird, Blatz,
Feldman, Guffey and Pugh. The Board's Investment Policy Committee is composed
of Messrs. Borts, Diehl, Gavian, Rochat and Silby and Ms. Krumsiek.
During fiscal 1997, trustees of the Fund not affiliated with the
Fund's Advisor were paid $6,803 by the Portfolio. Trustees of the Fund not
affiliated with the Advisor presently receive an annual fee of $20,500 for
service as a member of the Board of Trustees of the Calvert Group of Funds,
and a fee of $750 to $1500 for each regular Board or Committee meeting
attended; such fees are allocated among the respective Funds on the basis of
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 1997 Aggregate Compensation Pension or Total
(unaudited Numbers) from Registant Retirement Benefits Compensation
for Service as Trustee Accrued as part of from Registrant
Registrant Expenses* and Fund
Complex paid to
Trustee **
Name of Trustee
Richard L. Baird, Jr. $24,466 $0 $34,450
Frank H. Blatz, Jr. $31,031 $31,031 $46,000
Frederick T. Borts $23,515 $0 $32,500
Charles E. Diehl $29,959 $29,959 $44,500
Douglas E. Feldman $23,462 $0 $38,500
John G. Guffey, Jr. $30,451 $0 $61,615
M. Charito Kruvant $26,145 $0 $36,250
Arthur J. Pugh $32,589 $1,038 $48,250
D. Wayne Silby $25,072 $0 $62,830
*Messrs. Blatz, Diehl, Gavian and Pugh have chosen to defer a portion of their
compensation. As of December 31, 1997, total deferred compensation, including
dividends and capital appreciation, was $555,901.79, $545,259.10, $137,436.70
and $187,735.55, for each trustee, respectively.
**As of December 31, 1997. The Fund Complex consists of nine (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.
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 from the
Portfolio an annual fee of 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 gross advisory fees paid to the Advisor under the
advisory contract for the 1995, 1996, and 1997 fiscal years were $374,867,
$340,885, and $296,024, respectively.
The Advisor may voluntarily reimburse the Portfolio for expenses. For
the 1995, 1996, and 1997 fiscal years, the reimbursement was $4,473, $18,498,
and $0, respectively.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company ("CASC"), 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. Prior to August 1, 1997, CASC
received a fee of $200,000 per year for providing such services, allocated
among Portfolios based on assets. Effective August 1, 1997, the fee structure
changed. Exclusive of the CTFR Money Market Portfolio, the Fund pays an annual
fee of $80,000, allocated between the remaining Portfolios based on assets.
The service fees paid by the Portfolio to CASC for fiscal years 1995, 1996,
and 1997 were $4,647, $4,156, and $4,004, respectively.
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., a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, 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. Calvert Shareholder Services, Inc. was the sole
transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services, Inc.
receive a fee based on the number of shareholder accounts and shareholder
transactions.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers & Lybrand, L.L.P. has been selected by the Board of Trustees
to serve as independent accountants of the Fund for fiscal year 1998. State
Bank and Trust Company, N.A., 225 Franklin Street, Boston, MA 02110, acts 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 Fund'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 by the Portfolio.
METHOD OF DISTRIBUTION
The Portfolio has entered into a principal underwriting agreement with
Calvert Distributors, Inc. ("CDI"). CDI serves as distributor and principal
underwriter for the Portfolio. CDI bears all its expenses of providing services
pursuant to the agreement, including payment of any commissions and service
fees. CDI also receives all sales charges imposed on Portfolio shares and
compensates broker-dealer firms for sales of shares at a maximum commission rate
of 3.0%, as specified in the table of applicable sales charges (see "Alternative
Sales Options" in the Prospectus). For the fiscal years ended December 31, 1995,
1996, and 1997, CDI received sales charges in excess of the dealer reallowance
of $16,150, $28,339, and $25,821, respectively. For Class B and Class C shares,
CDI receives any CDSC paid. The Portfolio's Distribution Plans were 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 Plans
or in any agreements related to the Plans. 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 Plans, the
Trustees considered various factors including the amount of the distribution
fee. The Trustees determined that there is a reasonable likelihood that the
Plans will benefit the Portfolio and its shareholders. The Plans may be
terminated by vote of a majority of the non-interested Trustees who have no
direct or indirect financial interest in the Plans or by vote of a majority of
the outstanding shares of the Portfolio. Any change in the Plans that would
materially increase the distribution cost to the Portfolio requires approval of
the shareholders of the affected class; otherwise, the Plans may be amended by
the Trustees, including a majority of the non-interested Trustees as described
above. The Plans will continue in effect indefinitely, if not sooner terminated
in accordance with its terms. Thereafter, the Plans 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 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 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
1995, 1996, and 1997. Certain broker-dealers, and/or other persons may receive
compensation from the investment advisor, underwriter, or their affiliates for
the sale and distribution of the securities or for services to the Fund. Such
compensation may include additional compensation based on assets held through
that firm beyond the regularly scheduled rates, and finder's fees payments to
firms whose representatives are responsible for soliciting a new account where
the accountholder does not choose to purchase through that firm.
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 1996 and 1997 fiscal years, the portfolio turnover rates were
24% and 14%, 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. During the 1995, 1996, and 1997 fiscal years, no
brokerage commissions were paid by the Portfolio to broker-dealers. No
brokerage commissions were paid to any officer, trustee or Advisory Council
member of the Fund or any of their affiliates.
GENERAL INFORMATION
The Portfolio is a series of Calvert Tax-Free Reserves (the "Fund")
which was organized as a Massachusetts business trust on October 20, 1980. The
other series of the Fund include the Money Market Portfolio, Limited-Term
Portfolio, Long-Term Portfolio, and the California Money Market 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.
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 Portfolio will send its shareholders unaudited semi-annual and
audited annual reports that will include the Portfolio's 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 Portfolio's Annual Report to
Shareholders dated December 31, 1997, 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 Fund.
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 private activity
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 private activity 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.
<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
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. "Fund" in this Letter of Intent shall refer to the Fund or
Portfolio, as the case may be. 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)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION-April 30, 1998
CALVERT TAX-FREE RESERVES
LONG-TERM PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748 Shareholder(800) 368-2745
Information: (301) 951-4820 Services: (301) 951-4810
Broker (800) 368-2746 TDD for the Hearing-
Services: (301) 951-4850 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 Portfolio's Prospectus dated
April 30, 1998, which may be obtained free of charge by writing the
Portfolio at the above address or calling the Portfolio at the
telephone numbers listed above.
INVESTMENT OBJECTIVE
The Long-Term Tax-Free Portfolio (the "Portfolio") is a
series of Calvert Tax-Free Reserves (the "Fund"). The Portfolio is
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 of the Portfolio. There is, of course, no assurance
that the Portfolio will be successful in meeting its investment
objective because there are inherent risks in the ownership of any
investment.
Dividends paid by the Portfolio will fluctuate with income
earned on investments and will vary by class of shares. In addition,
the value of each class of the Portfolio's shares will fluctuate to
reflect changes in the market value of the Portfolio's investments.
The Portfolio 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 Portfolio invests primarily in a diversified portfolio
of municipal obligations whose interest is exempt from federal income
tax. A complete explanation of municipal obligations and municipal
bond and note ratings is set forth in the Appendix.
The credit rating of the 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
Portfolio 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 Portfolio 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 Portfolio 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." The
Portfolio may not acquire obligations subject to puts if immediately
thereafter with respect to 75% of the total amortized cost value of
its short-term assets, the Portfolio would have more than 5% of such
assets invested in securities underlying puts from the same
institution. The Portfolio may, however, invest up to 10% of its
short-term 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.
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 Portfolio intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities. To
minimize taxable income, the Portfolio may also hold cash which is
not earning income. It is a fundamental policy of the Portfolio that
during normal market conditions the Portfolio's assets be invested so
that at least 80% of the Portfolio's annual income will be
tax-exempt. While the Portfolio has the authority to invest in
short-term taxable obligations, the Portfolio 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 Portfolio 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 Portfolio 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 Portfolio's assets may vary. No new when-issued
commitments will be made by the Portfolio if more than 50% of the
Portfolio's net assets would become so committed.
When the time comes to pay for when-issued securities, the
Portfolio 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 Portfolio'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.
Transactions in Futures Contracts
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal bonds or on U.S. Treasury
securities, or options on such futures contracts, for hedging
purposes only. The Portfolio may sell such futures contracts in
anticipation of a decline in the cost of municipal bonds it holds or
may purchase such futures contracts in anticipation of an increase in
the value of municipal bonds the Portfolio intends to acquire. The
Portfolio also is authorized to purchase and sell other financial
futures contracts which in the opinion of the Investment Advisor
provide an appropriate hedge for some or all of the Portfolio's
securities.
Because of low initial margin deposits made upon the opening
of a futures position, futures transactions involve substantial
leverage. As a result, relatively small movements in the price of the
futures contract can result in substantial unrealized gains or
losses. Because the Portfolio will engage in the purchase and sale of
financial futures contracts solely for hedging purposes, however, any
losses incurred in connection therewith should, if the hedging
strategy is successful, be offset in whole or in part by increases in
the value of securities held by the Portfolio or decreases in the
price of securities the Portfolio intends to acquire.
Municipal bond index futures contracts commenced trading in
June 1985, and it is possible that trading in such futures contracts
will be less liquid than that in other futures contracts. The trading
of futures contracts and options thereon is subject to certain market
risks, such as trading halts, suspensions, exchange or clearing house
equipment failures, government intervention or other disruptions of
normal trading activity, which could at times make it difficult or
impossible to liquidate existing positions.
The liquidity of a secondary market in futures contracts may
be further adversely affected by "daily price fluctuation limits"
established by contract markets, which limit the amount of
fluctuation in the price of a futures contract or option thereon
during a single trading day. Once the daily limit has been reached in
the contract, no trades may be entered into at a price beyond the
limit, thus preventing the liquidation of open positions. Prices of
existing contracts have in the past moved the daily limit on a number
of consecutive trading days. The Portfolio will enter into a futures
position only if, in the judgment of the Investment Advisor, there
appears to be an actively traded secondary market for such futures
contracts.
The successful use of transactions in futures contracts and
options thereon depends on the ability of the Investment Advisor to
correctly forecast the direction and extent of price movements of
these instruments, as well as price movements of the securities held
by the Portfolio within a given time frame. To the extent these
prices remain stable during the period in which a futures or option
contract is held by the Portfolio, or move in a direction opposite to
that anticipated, the Portfolio may realize a loss on the hedging
transaction which is not fully or partially offset by an increase in
the value of the Portfolio's securities. As a result, the Portfolio's
total return for such period may be less than if it had not engaged
in the hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller
of a contract to deliver and the purchaser of a contract to take
delivery of the type of financial instrument called for in the
contract or, in some instances, to make a cash settlement, at a
specified future time for a specified price. Although the terms of a
contract call for actual delivery or acceptance of securities, or for
a cash settlement, in most cases the contracts are closed out before
the delivery date without the delivery or acceptance taking place.
The Portfolio intends to close out its futures contracts prior to the
delivery date of such contracts.
The Portfolio may sell futures contracts in anticipation of
a decline in the value of its investments in municipal bonds. The
loss associated with any such decline could be reduced without
employing futures as a hedge by selling long-term securities and
either reinvesting the proceeds in securities with shorter maturities
or by holding assets in cash. This strategy, however, entails
increased transaction costs in the form of brokerage commissions and
dealer spreads and will typically reduce the Portfolio's average
yields as a result of the shortening of maturities.
The purchase or sale of a futures contract differs from the
purchase or sale of a security, in that no price or premium is paid
or received. Instead, an amount of cash or securities acceptable to
the Portfolio's futures commission merchant and the relevant contract
market, which varies but is generally about 5% or less of the
contract amount, must be deposited with the broker. This amount is
known as "initial margin," and represents a "good faith" deposit
assuring the performance of both the purchaser and the seller under
the futures contract. Subsequent payments to and from the broker,
known as "variation margin," are required to be made on a daily basis
as the price of the futures contract fluctuates, making the long or
short positions in the futures contract more or less valuable, a
process known as "marking to the market." Prior to the settlement
date of the futures contract, the position may be closed out by
taking an opposite position which will operate to terminate the
position in the futures contract. A final determination of variation
margin is then made, additional cash is required to be paid to or
released by the broker, and the purchaser realizes a loss or gain. In
addition, a commission is paid on each completed purchase and sale
transaction.
The sale of financial futures contracts provides an
alternative means of hedging the Portfolio against declines in the
value of its investments in municipal bonds. As such values decline,
the value of the Portfolio's position in the futures contracts will
tend to increase, thus offsetting all or a portion of the
depreciation in the market value of the Portfolio's fixed income
investments which are being hedged. While the Portfolio will incur
commission expenses in establishing and closing out futures
positions, commissions on futures transactions may be significantly
lower than transaction costs incurred in the purchase and sale of
fixed income securities. In addition, the ability of the Portfolio to
trade in the standardized contracts available in the futures market
may offer a more effective hedging strategy than a program to reduce
the average maturing of portfolio securities, due to the unique and
varied credit and technical characteristics of the municipal debt
instruments available to the Portfolio. Employing futures as a hedge
may also permit the Portfolio to assume a hedging posture without
reducing the yield on its investments, beyond any amounts required to
engage in futures trading.
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal securities. These instruments
provide for the purchase or sale of a hypothetical portfolio of
municipal bonds at a fixed price in a stated delivery month. Unlike
most other futures contracts, however, a municipal bond index futures
contract does not require actual delivery of securities but results
in a cash settlement based upon the difference in value of the index
between the time the contract was entered into and the time it is
liquidated.
The municipal bond index underlying the futures contracts
traded by the Portfolio is The Bond Buyer Municipal Bond Index,
developed by The Bond Buyer and the Chicago Board of Trade ("CBT"),
the contract market on which the futures contracts are traded. As
currently structured, the index is comprised of 40 tax-exempt term
municipal revenue and general obligation bonds. Each bond included in
the index must be rated either A- or higher by Standard & Poor's or A
or higher by Moody's Investors Service and must have a remaining
maturity of 19 years or more. Twice a month new issues satisfying the
eligibility requirements are added to, and an equal number of old
issues will be deleted from, the index. The value of the index is
computed daily according to a formula based upon the price of each
bond in the index, as evaluated by four dealer-to-dealers brokers.
The Portfolio may also purchase and sell futures contracts
on U.S. Treasury bills, notes and bonds for the same types of hedging
purposes. Such futures contracts provide for delivery of the
underlying security at a specified future time for a fixed price, and
the value of the futures contract therefore generally fluctuates with
movements in interest rates.
The municipal bond index futures contract, futures contracts
on U.S. Treasury securities and options on such futures contracts are
traded on the CBT, which, like other contract markets, assures the
performance of the parties to each futures contract through a
clearing corporation, a nonprofit organization managed by the
exchange membership, which is also responsible for handling daily
accounting of deposits or withdrawals of margin.
The Portfolio may also purchase financial futures contracts
when it is not fully invested in municipal bonds in anticipation of
an increase in the cost of securities the Portfolio intends to
purchase. As such securities are purchased, an equivalent amount of
futures contracts will be closed out. In a substantial majority of
these transactions, the Portfolio will purchase municipal bonds upon
termination of the futures contracts. Due to changing market
conditions and interest rate forecasts, however, a futures position
may be terminated without a corresponding purchase of securities.
Nevertheless, all purchases of futures contracts by the Portfolio
will be subject to certain restrictions, described below.
Options on Futures Contracts. An option on a futures
contract provides the purchaser with the right, but not the
obligation, to enter into a long position in the underlying futures
contract (that is, purchase the futures contract), in the case of a
"call" option, or a short position (sell the futures contract), in the
case of a "put" option, for a fixed price up to a stated expiration
date. The option is purchased for a non-refundable fee, known as the
"premium." Upon exercise of the option, the contract market clearing
house assigns each party to the option an opposite position in the
underlying futures contract. In the event of exercise, therefore, the
parties are subject to all of the risks of futures trading, such as
payment of initial and variation margin. In addition, the seller, or
"writer," of the option is subject to margin requirements on the
option position. Options on futures contracts are traded on the same
contract markets as the underlying futures contracts.
The Portfolio may purchase options on futures contracts for
the same types of hedging purposes described above in connection with
futures contracts. For example, in order to protect against an
anticipated decline in the value of securities it holds, the
Portfolio could purchase put options on futures contracts, instead of
selling the underlying futures contracts. Conversely, in order to
protect against the adverse effects of anticipated increases in the
costs of securities to be acquired, the Portfolio could purchase call
options on futures contracts, instead of purchasing the underlying
futures contracts. The Portfolio generally will sell options on
futures contracts only to close out an existing position.
The Portfolio will not engage in transactions in such
instruments unless and until the Investment Advisor determines that
market conditions and the circumstances of the Portfolio warrant such
trading. To the extent the Portfolio engages in the purchase and sale
of futures contracts or options thereon, it will do so only at a
level which is reflective of the Investment Advisor's view of the
hedging needs of the Portfolio, the liquidity of the market for
futures contracts and the anticipated correlation between movements
in the value of the futures or option contract and the value of
securities held by the Portfolio.
Restrictions on the Use of Futures Contracts and Options on
Futures Contracts. Under regulations of the Commodity Futures Trading
Commission ("CFTC"), the futures trading activities described herein
will not result in the Portfolio being deemed to be a "commodity
pool," as defined under such regulations, provided that certain
trading restrictions are adhered to. In particular, CFTC regulations
require that all futures and option positions entered into by the
Portfolio qualify as bona fide hedge transactions, as defined under
CFTC regulations, or, in the case of long positions, that the value
of such positions not exceed an amount of segregated funds determined
by reference to certain cash and securities positions maintained by
the Portfolio and accrued profits on such positions. In addition, the
Portfolio may not purchase or sell any such instruments if,
immediately thereafter, the sum of the amount of initial margin
deposits on the Portfolio's existing futures positions would exceed
5% of the market value of its net assets.
When the Portfolio purchases a futures contract, it will
maintain an amount of cash, cash equivalents (for example, commercial
paper and daily tender adjustable notes) or short-term high-grade
fixed income securities in a segregated account with the Portfolio's
custodian, so that the amount so segregated plus the amount of
initial and variation margin held in the account of its broker equals
the market value of the futures contract, thereby ensuring that the
use of such futures is unleveraged.
Risk Factors in Transactions in Futures Contracts. The
particular municipal bonds comprising the index underlying the
municipal bond index futures contract may vary from the bonds held by
the Portfolio. In addition, the securities underlying futures
contracts on U.S. Treasury securities will not be the same as
securities held by the Portfolio. As a result, the Portfolio's
ability effectively to hedge all or a portion of the value of its
municipal bonds through the use of futures contracts will depend in
part on the degree to which price movements in the index underlying
the municipal bond index futures contract, or the U.S. Treasury
securities underlying other futures contracts trade, correlate with
price movements of the municipal bonds held by the Portfolio.
For example, where prices of securities in the Portfolio do
not move in the same direction or to the same extent as the values of
the securities or index underlying a futures contract, the trading of
such futures contracts may not effectively hedge the Portfolio's
investments and may result in trading losses. The correlation may be
affected by disparities in the average maturity, ratings,
geographical mix or structure of the Portfolio's investments as
compared to those comprising the index, and general economic or
political factors. In addition, the correlation between movements in
the value of the index underlying a futures contract may be subject
to change over time, as additions to and deletions from the index
alter its structure. In the case of futures contracts on U.S.
Treasury securities and options thereon, the anticipated correlation
of price movements between the U.S. Treasury securities underlying
the futures or options and municipal bonds may be adversely affected
by economic, political, legislative or other developments that have a
disparate impact on the respective markets for such securities. In
the event that the Investment Advisor determines to enter into
transactions in financial futures contracts other than the municipal
bond index futures contract or futures on U.S. Treasury securities,
the risk of imperfect correlation between movements in the prices of
such futures contracts and the prices of municipal bonds held by the
Portfolio may be greater.
The trading of futures contracts on an index also entails
the risk of imperfect correlation between movements in the price of
the futures contract and the value of the underlying index. The
anticipated spread between the prices may be distorted due to
differences in the nature of the markets, such as margin
requirements, liquidity and the participation of speculators in the
futures markets. The risk of imperfect correlation, however,
generally diminishes as the delivery month specified in the futures
contract approaches.
Prior to exercise or expiration, a position in futures
contracts or options thereon may be terminated only by entering into
a closing purchase or sale transaction. This requires a secondary
market on the relevant contract market. The Portfolio will enter into
a futures or option position only if there appears to be a liquid
secondary market therefor, although there can be no assurance that
such a liquid secondary market will exist for any particular contract
at any specific time. Thus, it may not be possible to close out a
position once it has been established. Under such circumstances, the
Portfolio could be required to make continuing daily cash payments of
variation margin in the event of adverse price movements. In such
situation, if the Portfolio has insufficient cash, it may be required
to sell portfolio securities to meet daily variation margin
requirements at a time when it may be disadvantageous to do so. In
addition, the Portfolio may be required to perform under the terms of
the futures or option contracts it holds. The inability to close out
futures or options positions also could have an adverse impact on the
Portfolio's ability effectively to hedge its portfolio.
When the Portfolio purchases an option on a futures
contract, its risk is limited to the amount of the premium, plus
related transaction costs, although this entire amount may be lost.
In addition, in order to profit from the purchase of an option on a
futures contract, the Portfolio may be required to exercise the
option and liquidate the underlying futures contract, subject to the
availability of a liquid secondary market. The trading of options on
futures contracts also entails the risk that changes in the value of
the underlying futures contract will not be fully reflected in the
value of the option, although the risk of imperfect correlation
generally tends to diminish as the maturity date of the futures
contract or expiration date of the option approaches.
"Trading Limits" or "Position Limits" may also be imposed on
the maximum number of contracts which any person may hold at a given
time. A contract market may order the liquidation of positions found
to be in violation of these limits and it may impose other sanctions
or restrictions. The Investment Advisor does not believe that trading
limits will have any adverse impact on the strategies for hedging the
Portfolio's investments.
Further, the trading of futures contracts is subject to the
risk of the insolvency of a brokerage firm or clearing corporation,
which could make it difficult or impossible to liquidate existing
positions or to recover excess variation margin payments.
In addition to the risks of imperfect correlation and lack
of a liquid secondary market for such instruments, transactions in
futures contracts involve risks related to leveraging and the
potential for incorrect forecasts of the direction and extent of
interest rate movements within a given time frame.
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
outstanding shares of the Portfolio. 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. The Portfolio may not:
(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, except as
permitted in connection with transactions in
futures contracts and options thereon. See
"Transactions in Futures Contracts." The Portfolio
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
Portfolio'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 Portfolio from investing
in municipal obligations secured by real estate or
interests therein;
(7) Purchase or retain securities of an issuer
if those Trustees of Calvert Tax-Free Reserves,
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 Portfolio'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 the 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 the
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.
Amounts redeemed by check redemption may be mailed to the
investor. Amounts of more than $50 and less than $300,000 may be
transferred electronically to the investor. Amounts of $1,000 or more
will be transmitted by wire, to the investor's account at a domestic
commercial bank that is a member of the Federal Reserve System or to
a correspondent bank. A charge of $5 is imposed on wire transfers of
less than $1,000. If the investor's bank is not a Federal Reserve
System member, failure of immediate notification to that bank by the
correspondent bank could result in a delay in crediting the funds to
the investor's bank account.
Telephone redemption requests which would require the
redemption of shares purchased by check or electronic funds transfer
within the previous 10 business days may not be honored. The Fund
reserves the right to modify the telephone redemption privilege.
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 certain credit unions. 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.
Redemption proceeds are normally paid in cash. However, the
Portfolio has the right to redeem shares in assets other than cash
for redemption amounts exceeding, in any 90-day period, $250,000 or
1% of the net asset value of the Portfolio, whichever is less.
REDUCED SALES CHARGES
The Portfolio imposes reduced sales charges for shares in
certain situations in which the Principal Underwriter and the dealers
selling 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 Fund shareholders, enabling the
Fund 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 Prospectus.
DIVIDENDS AND DISTRIBUTIONS
The 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. 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. Dividends and distributions paid may differ among
the classes.
Dividends are automatically reinvested at net asset value in
additional shares. Capital gains, if any, are normally paid once a
year and will be automatically reinvested at net asset value in
additional shares, unless you choose otherwise. You may elect to have
their dividends and distributions paid out monthly in cash. You may
also request to have your dividends and distributions from the
Portfolio invested in shares of any other Calvert Group Fund, to be
invested in that Fund or Portfolio without a sales charge. 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.
TAX MATTERS
In 1997, the Portfolio did qualify and in 1998, the
Portfolio intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code, as amended (the
"Code"). By so qualifying, the Portfolio 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 Portfolio'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. The 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 Portfolio. The Portfolio will
notify shareholders annually about the federal tax status of
dividends and distributions paid by the Portfolio 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 advisers before purchasing shares of the Portfolio. "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
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 shares as incurred to acquire the new shares.
The Portfolio is required to withhold 31% of any long-term
capital gain dividends and 31% of each redemption transaction
occurring in the 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 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 Portfolio for further information.
VALUATION OF SHARES
The Portfolio's assets are normally 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 Portfolio's Advisor under the supervision of the Board of
Trustees. The 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 Portfolio 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.
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.
Net Asset Value and Offering Price Per Share
Net asset value per share
($50,965,605/2,950,226 shares) $17.28
Maximum sales charge
(3.75% of offering price) 0.67
Offering price per share $17.95
CALCULATION OF YIELD AND TOTAL RETURN
From time to time, the 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 the 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, except quotations of "return
without maximum load," 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 return without maximum load, 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
investment of $1,000 less any sales charge actually imposed at the
beginning of the period for which the performance is being
calculated. Note: "Total Return" as quoted in the Financial
Highlights section of the Fund's Prospectus and Annual Report to
Shareholders, however, per SEC instructions, does not reflect
deduction of the sales charge, and corresponds to "return without
maximum load" as referred to herein. Return without maximum load
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 = average
annual 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).
Returns for the periods indicated are as follows:
With Max. Load W/O Max. Load
One Year 4.38% 8.35%
Five Years 6.11% 6.93%
Ten Years 7.46% 7.87%
The 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. "Yield" quotations for each class 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 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 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 Portfolio's
yield, all or a portion of which may be exempt from federal income
taxes. The tax equivalent yield is computed per class by taking the
portion of the class' 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, 1997, the Portfolio yield for shares was 4.17% and its
federal tax equivalent yield was 6.51% for an investor in the 36%
federal income tax bracket, and 6.90% for an investor in the 39.6%
federal income tax bracket.
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.
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, November 30, 1997). Calvert Group was also the first to offer
a family of socially responsible mutual fund portfolios.
TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice
President 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
Calvert Variable Series, Inc., Calvert New World Fund and Calvert
World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive,
Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner
in the law firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was
formerly a partner with Abrams, Blatz, Gran, Hendricks & Reina, P.A.
He is also a director of Calvert Variable Series, Inc. DOB: 10/29/35.
Address: 308 East Broad Street, Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a
radiologist with Kaiser Permanente. Prior to that, he was a
radiologist at Bethlehem Medical Imaging in Allentown, Pennsylvania.
DOB: 07/23/49. Address: 16 Iliahi Street, Honolulu, Hawaii, 96817.
*CHARLES E. DIEHL, Trustee. Mr. Diehl 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. DOB:
10/13/22. Address: 1658 Quail Hollow Court, McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices
head and neck reconstructive surgery in the Washington, D.C.,
metropolitan area. DOD: 05/23/48. Address: 7536 Pepperell Drive,
Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian is President of
Corporate Finance of Washington, Inc. Formerly, he was a principal of
Gavian De Vaux Associates, an investment banking firm. DOB: 12/08/32.
Address: 3005 Franklin Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey 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, a director of
Ariel Funds, 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 Calvert Variable Series, Inc. and Calvert New World
Fund. DOB: 05/15/48. Address: 7205 Pomander Lane, Chevy Chase,
Maryland 20815.
*BARBARA J. KRUMSIEK, President and Trustee. Ms. Krumsiek
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. She 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. Prior to joining Calvert Group, Ms.
Krumsiek served as Senior Vice President of Alliance Capital LP's
Mutual Fund Division. DOB: 08/09/52.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President and
CEO of Creative Associates International, Inc., a firm that
specializes in human resources development, information management,
public affairs and private enterprise development. She is also a
director of Acacia Federal Savings Bank. DOB: 12/08/45. Address: 5301
Wisconsin Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh is a Director of Calvert
Variable Series, Inc., and serves as a director of Acacia Federal
Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive, Fairfax,
Virginia 22030.
*DAVID R. ROCHAT, Senior Vice President and Trustee. Mr.
Rochat 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. DOB:
10/07/37. Address: Box 93, Chelsea, Vermont 05038.
*D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a
trustee/director of each of the investment companies in the Calvert
Group of Funds, except for Calvert Variable Series, Inc. and Calvert
New World Fund. Mr. Silby is Executive Chairman of GroupServe, an
internet company focused on community building collaborative tools,
and 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. DOB: 07/20/48. Address: 1715 18th
Street, N.W., Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a
director and 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. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is
Senior Vice President and Chief Financial Officer 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. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary.
Mr. Tartikoff 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 also Vice President and Secretary of
Calvert-Sloan Advisers, L.L.C., a director of Calvert Distributors,
Inc., and is an officer of Acacia National Life Insurance Company.
DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes 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, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender
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. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group 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. DOB: 10/21/56.
LISA CROSSLEY NEWTON, Esq., Assistant Secretary and
Compliance Officer. Ms. Newton is Associate General Counsel of
Calvert Group 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. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is
Assistant Counsel of Calvert Group 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. Prior to working at Calvert Group, Ms. Duke was an
Associate in the Investment Management Group of the Business and
Finance Department at Drinker Biddle & Reath. DOB: 09/07/68.
Each of the above directors/trustees and officers is a
director/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 and Silby are
among the Trustees, Calvert Variable Series, Inc., of which only
Messrs. Blatz, Diehl and Pugh are among the directors, Calvert World
Values Fund, Inc., of which only Messrs. Guffey and Silby are among
the directors, and Calvert New World Fund, Inc., of which only Mr.
Martini is among the directors. The address of directors/trustees and
officers, unless otherwise noted, is 4550 Montgomery Avenue, Suite
1000N, Bethesda, Maryland 20814. Directors/trustees and officers of
the Fund as a group own less than 1% of each Fund's outstanding
shares.
The Audit Committee of the Board is composed of Messrs.
Baird, Blatz, Feldman, Guffey and Pugh. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat and
Silby.
During fiscal 1996, trustees of the Fund not affiliated with
the Fund's Advisor were paid $5,402. Trustees of the Fund not
affiliated with the Advisor presently receive an annual fee of
$20,500 for service as a member of the Board of Trustees of the
Calvert Group of Funds, and a fee of $750 to $1500 for each regular
Board or Committee meeting attended; such fees are allocated among
the respective Funds on the basis of 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 1997 Aggregate Compensation Pension or Total
(unaudited Numbers) from Registant Retirement Benefits Compensation
for Service as Trustee Accrued as part of from Registrant
Registrant Expenses* and Fund
Complex paid to
Trustee **
Name of Trustee
Richard L. Baird, Jr. $24,466 $0 $34,450
Frank H. Blatz, Jr. $31,031 $31,031 $46,000
Frederick T. Borts $23,515 $0 $32,500
Charles E. Diehl $29,959 $29,959 $44,500
Douglas E. Feldman $23,462 $0 $32,500
Peter W. Gavian $27,736 $12,668 $38,500
John G. Guffey, Jr. $30,451 $0 $61,615
M. Charito Kruvant $26,145 $0 $36,250
Arthur J. Pugh $32,589 $1,038 $48,250
D. Wayne Silby $25,072 $0 $62,830
*Messrs. Blatz, Diehl, Gavian and Pugh have chosen to defer
a portion of their compensation. As of December 31, 1997,
total deferred compensation, including dividends and capital
appreciation, was $555,901.79, $545,259.10, $137,436.70 and
$187,735.55, for each trustee, respectively.
**As of December 31, 1997. The Fund Complex consists of nine
(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.
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 from the Portfolio an
annual fee of 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 may voluntarily reimburse the Portfolio
for expenses. The advisory fees paid by the Portfolio to
Calvert Asset Management Company for fiscal years 1995,
1996, and 1997 were $320,128, $322,713, and $307,550,
respectively.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company ("CASC"), 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. Prior to August 1, 1997, CASC
received a fee of $200,000 per year for providing such
services, allocated among Portfolios based on assets.
Effective August 1, 1997, the fee structure changed.
Exclusive of the CTFR Money Market Portfolio, the Fund pays
an annual fee of $80,000, allocated between the remaining
Portfolios based on assets. The service fees paid by the
Portfolio to CASC for fiscal years 1995, 1996, and 1997 were
$3,955, $3,934, and $4,158, respectively.
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., a subsidiary of
Calvert Group, Ltd., and Acacia Mutual, 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. Calvert Shareholder Services, Inc.
was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder
Services, Inc. receive a fee based on the number of
shareholder accounts and transactions.
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 1998. 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. CDI bears all
its expenses of providing services pursuant to the
agreement, including payment of any commissions and service
fees. CDI also receives all sales charges imposed on
Portfolio shares and compensates broker-dealer firms for
sales of shares at a maximum commission rate of 3.0%, as
specified in the table of applicable sales charges (see
"Alternative Sales Options" in the Prospectus). For the
fiscal years ended December 31, 1995 and 1996, CDI received
no distribution service fees under the Distribution Plan for
Class A shares, and received sales charges in excess of the
dealer reallowance of $21,611 and $12,538, respectively. For
the 1997 fiscal year, CDI received distribution service fees
of $46,132 for Class A shares, and received sales charges in
excess of the dealer reallowance of $11,019.
The Portfolio's 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 Portfolio. Any change in the
Plan that would materially increase the distribution cost to
the Portfolio 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 additional distribution expenses during fiscal 1995,
1996, and 1997.
Certain broker-dealers, and/or other persons may
receive compensation from the investment advisor,
underwriter, or their affiliates for the sale and
distribution of the securities or for services to the Fund.
Such compensation may include additional compensation based
on assets held through that firm beyond the regularly
scheduled rates, and finder's fees payments to firms whose
representatives are responsible for soliciting a new account
where the accountholder does not choose to purchase through
that firm.
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, 1996 and
1997, the portfolio turnover was 41% and 41%, 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. During the fiscal years
ended December 31, 1995, 1996, and 1997, no brokerage
commissions were paid by the Portfolio to broker-dealers. No
brokerage commissions were paid to any officer or trustee of
the Fund or any of their affiliates.
GENERAL INFORMATION
The Portfolio is a series of Calvert Tax-Free
Reserves, which was organized as a Massachusetts business
trust on October 20, 1980. The other series of the Fund
include the Money Market Portfolio, Limited-Term Portfolio,
California 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.
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 Portfolio will send its shareholders unaudited
semi-annual and audited annual reports that will include the
Portfolio's 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 Portfolio's
Annual Report to Shareholders dated December 31, 1997, 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 Fund.
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 private activity
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 private activity 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.
<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 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. "Fund" in this Letter of
Intent shall refer to the Fund or Portfolio, as the case may
be. 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)
<PAGE>
Calvert Tax-Free Reserves
Money Market Portfolio
Limited-Term Portfolio
Statement of Additional Information
April 30, 1998
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE TRANSFER AGENT
Calvert Shareholder Services, Inc. National Financial Data
Services, Inc.
4550 Montgomery Avenue 1004 Baltimore
Suite 1000N 6th Floor
Bethesda, Maryland 20814 Kansas City, Missouri 64105
PRINCIPAL UNDERWRITER INDEPENDENT ACCOUNTANTS
Calvert Distributors, Inc. Coopers & Lybrand, L.L.P.
4550 Montgomery Avenue 250 West Pratt Street
Suite 1000N Baltimore, Maryland 21201
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 2
Purchases and Redemptions of Shares 3
Reduced Sales Charges 4
Dividends and Distributions 4
Tax Matters 4
Valuation of Shares 5
Calculation of Yield and Total Return 6
Advertising 7
Trustees and Officers 8
Investment Advisor 10
Administrative Services 10
Transfer and Shareholder Servicing Agents 11
Independent Accountants and Custodians 11
Method of Distribution 11
Portfolio Transactions 11
General Information 12
Control Persons and Principal Holders of Securities 12
Financial Statements 12
Appendix 13
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION-April 30, 1998
CALVERT TAX-FREE RESERVES
Money Market Portfolio
Limited-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
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 is not a
prospectus. Investors should read the Statement of Additional
Information in conjunction with the Calvert Tax-Free Reserves
Prospectus, dated April 30, 1998, 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.
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 net 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 25% or more of its total 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.
Redemption proceeds are normally paid in cash. However, the Portfolio
has the right to redeem shares in assets other than cash for
redemption amounts exceeding, in any 90-day period, $250,000 or 1% of
the net asset value of the Portfolio, whichever is less.
REDUCED SALES CHARGES
The Limited-Term Portfolio imposes reduced sales charges for
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. 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 1997, the Portfolios did qualify and in 1998, the
Portfolios intend 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 Portfolio'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,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Net Asset Value and Offering Price Per Share, 12/31/97
Money Market Portfolio
Class O ($1,405,291,715/1,405,404,125 shares) $1.00
Institutional Class ($51,081,396/51,084,219 shares) $1.00
Limited-Term Portfolio
Net asset value per share
($490,179,704/45,808,410) $10.70
Maximum sales charge
(1.00% of offering price) 0.22
Offering price per share $10.92
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. Yield is calculated separately by class. 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, 1997, the Money Market
Portfolio's yield for Class O shares was 3.66% and its effective
yield was 3.72%. For the seven-day period ended December 31, 1997,
the Money Market Portfolio's yield for the Institutional Class of
shares was 3.94% and its effective yield was 4.02%.
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, 1997, the
Money Market Portfolio's Class O tax equivalent yield, for an
investor in the 36% federal income tax bracket was 5.82% and, for the
39.6% federal income tax bracket, 6.16%. For the seven-day period
ended December 31, 1997, the Money Market Portfolio Institutional
Class' tax equivalent yield, for an investor in the 36% federal
income tax bracket was 6.28% and, for the 39.6% federal income tax
bracket, 6.66%.
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, except quotations of "return
without maximum load" 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 return without maximum load, 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 "return without maximum load" as
referred to herein. Return without maximum load 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).
Returns for the periods indicated are as follows:
With Max. Load W/O Max. Load
One Year 3.01% 4.07%
Five Years 3.73% 3.94%
Ten Years 5.04% 5.15%
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 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. Using this
calculation, the Limited-Term Portfolio's yield for the month ended
December 31, 1997 was 3.54%.
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, 1997, the Portfolio's tax equivalent yield was 5.53% for
an investor in the 36% federal income tax bracket, and 5.86% for an
investor in the 39.6% federal income tax bracket.
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.
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, November 30, 1997). Calvert Group was also the first to offer
a family of socially responsible mutual fund portfolios.
TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice
President 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
Calvert Variable Series, Inc., Calvert New World Fund and Calvert
World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive,
Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner
in the law firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was
formerly a partner with Abrams, Blatz, Gran, Hendricks & Reina, P.A.
He is also a director of Calvert Variable Series, Inc. DOB: 10/29/35.
Address: 308 East Broad Street, Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a
radiologist with Kaiser Permanente. Prior to that, he was a
radiologist at Bethlehem Medical Imaging in Allentown, Pennsylvania.
DOB: 07/23/49. Address: 16 Iliahi Street, Honolulu, Hawaii, 96817.
*CHARLES E. DIEHL, Trustee. Mr. Diehl 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. DOB: 10/13/22.
Address: 1658 Quail Hollow Court, McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices
head and neck reconstructive surgery in the Washington, D.C.,
metropolitan area. DOD: 05/23/48. Address: 7536 Pepperell Drive,
Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian is President of
Corporate Finance of Washington, Inc. Formerly, he was a principal of
Gavian De Vaux Associates, an investment banking firm. DOB: 12/08/32.
Address: 3005 Franklin Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey 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, a director of
Ariel Funds, 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 Calvert Variable Series, Inc. and Calvert New World
Fund. DOB: 05/15/48. Address: 7205 Pomander Lane, Chevy Chase,
Maryland 20815.
*BARBARA J. KRUMSIEK, President and Trustee. Ms. Krumsiek 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. She 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. Prior to joining Calvert Group, Ms. Krumsiek served
as Senior Vice President of Alliance Capital LP's Mutual Fund
Division. DOB: 08/09/52.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President and
CEO of Creative Associates International, Inc., a firm that
specializes in human resources development, information management,
public affairs and private enterprise development. She is also a
director of Acacia Federal Savings Bank. DOB: 12/08/45. Address: 5301
Wisconsin Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh is a Director of Calvert
Variable Series, Inc., and serves as a director of Acacia Federal
Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive, Fairfax,
Virginia 22030.
*DAVID R. ROCHAT, Senior Vice President and Trustee. Mr.
Rochat 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. DOB:
10/07/37. Address: Box 93, Chelsea, Vermont 05038.
*D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a
trustee/director of each of the investment companies in the Calvert
Group of Funds, except for Calvert Variable Series, Inc. and Calvert
New World Fund. Mr. Silby is Executive Chairman of GroupServe, an
internet company focused on community building collaborative tools,
and 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. DOB: 07/20/48. Address: 1715 18th
Street, N.W., Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a
director and 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, Inc. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is
Senior Vice President and Chief Financial Officer 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. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary.
Mr. Tartikoff 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 also Vice President and Secretary of
Calvert-Sloan Advisers, L.L.C., a director of Calvert Distributors,
Inc., and is an officer of Acacia National Life Insurance Company.
DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes 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, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender
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. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group 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. DOB: 10/21/56.
LISA CROSSLEY NEWTON, Esq., Assistant Secretary and
Compliance Officer. Ms. Newton is Associate General Counsel of
Calvert Group 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. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is
Assistant Counsel of Calvert Group 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. Prior to working at Calvert Group, Ms. Duke was an
Associate in the Investment Management Group of the Business and
Finance Department at Drinker Biddle & Reath. DOB: 09/07/68.
The address of directors and officers, unless otherwise noted, is
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
Trustees and officers of the Fund as a group own less than 1% of the
Fund's outstanding shares. Trustees marked with an *, above, are
"interested persons" of the Fund, under the Investment Company Act of
1940.
Each of the above directors/trustees and officers is a
director/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 and Silby and
Ms. Krumsiek are among the trustees, Calvert Variable Series, Inc.,
of which only Messrs. Blatz, Diehl and Pugh and Ms. Krumsiek are
among the directors, Calvert World Values Fund, Inc., of which only
Messrs. Guffey and Silby and Ms. Krumsiek are among the directors,
and Calvert New World Fund, Inc., of which only Ms. Krumsiek and Mr.
Martini are among the directors.
The Audit Committee of the Board is composed of Messrs.
Baird, Blatz, Feldman, Guffey and Pugh. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat and
Silby and Ms. Krumsiek.
During 1997, Trustees of the Fund not affiliated with the
Fund's Advisor were paid $210,221 and $72,792 by the Money Market and
Limited-Term Portfolios, respectively. Trustees of the Fund not
affiliated with the Advisor currently receive an annual fee of
$20,500 for service as a member of the Board of Trustees of the
Calvert Group of Funds plus a fee of $750 to $1500 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 1997 Aggregate Compensation Pension or Total
(unaudited Numbers) from Registant Retirement Benefits Compensation
for Service as Trustee Accrued as part of from Registrant
Registrant Expenses* and Fund
Complex paid to
Trustee **
Richard L. Baird, Jr. $24,466 $0 $34,450
Frank H. Blatz, Jr. $31,031 $31,031 $46,000
Frederick T. Borts $23,515 $0 $32,500
Charles E. Diehl $29,959 $29,959 $44,500
Douglas E. Feldman $23,462 $0 $32,500
Peter W. Gavian $27,736 $12,668 $38,500
John G. Guffey, Jr. $30,451 $0 $61,615
M. Charito Kruvant $26,145 $0 $36,250
Arthur J. Pugh $32,589 $1,038 $48,250
D. Wayne Silby $25,072 $0 $62,830
*Messrs. Blatz, Diehl, Gavian and Pugh have chosen to defer a portion
of their compensation. As of December 31, 1997, total deferred
compensation, including dividends and capital appreciation, was
$555,901.79, $545,259.10, $137,436.70 and $187,735.55, for each
trustee, respectively.
**As of December 31, 1997. The Fund Complex consists of nine (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, prior to
August 1, 1997, the fees were 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.
Effective August 1, 1997, the fees changed to 0.25% of the first $500
million of such Portfolio's average daily net assets, 0.20% of the
next $500 million of such assets, and 0.15% 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 may voluntarily reimburse the Money Market and
Limited-Term Portfolios for expenses. The advisory fees paid by the
Money Market Portfolio to Calvert Asset Management Company were
$7,481,925, $7,776,716, and $5,409,090, for years 1995, 1996, and
1997, respectively. The advisory fees paid by the Limited-Term
Portfolio to Calvert Asset Management Company were $3,149,849,
$3,110,764, and $3,164,772, for years 1995, 1996, and 1997,
respectively.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company ("CASC"), 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. Prior to August 1, 1997, CASC received a
fee of $200,000 per year for providing such services, allocated among
Portfolios based on assets. Effective August 1, 1997, the Money
Market Class O and Institutional Class pay annual rates of 0.26% and
0.05%, respectively, based on average daily net assets. Limited-Term
and other portfolios of CTFR pay an annual fee of $80,000, allocated
among the portfolios based on average daily net assets. The service
fees paid by the Money Market Portfolio to Calvert Administrative
Services Company were $124,836 and $128,255, for years 1995 and 1996,
respectively. The 1997 administrative services fees paid by CTFR
Money Market were $1,682,754 and $24,010 for Class O and the
Institutional Class, respectively. The service fees paid by the
Limited-Term Portfolio to CASC were $39,445, $38,242, and $43,210,
for years 1995, 1996, and 1997, respectively.
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., a subsidiary of Calvert
Group, Ltd., and Acacia Mutual, 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. Calvert Shareholder Services,
Inc. was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services,
Inc. receive a fee based on the number of shareholder accounts and
shareholder transactions, per Portfolio.
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 1998.
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 Portfolios have entered into a principal underwriting
agreement with Calvert Distributors Inc. ("CDI"). Pursuant to the
agreement, CDI serves as distributor and principal underwriter for
the Portfolios. CDI bears all its expenses of providing services
pursuant to the agreement, including payment of any commissions and
service fees. Prior to the termination of Class C shares for the
Limited Term Portfolio, CDI was entitled to receive a service fee and
a distribution fee, payable monthly pursuant to the Limited-Term
Portfolio's Distribution Plan, of 0.25%, respectively, of the
Portfolio's average daily net assets. 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, 1995, 1996, and 1997, CDI
received sales charges in excess of the dealer reallowance of
$10,900, $0, and $0, respectively. CDI paid $48,520 and $101,072 in
addition to commissions charged on sales of Limited-Term Portfolio
during fiscal years 1996 and 1997, respectively.
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, 1996 and 1997, the
portfolio turnover rates of the Limited-Term Portfolio were 45% and
52%, 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. In fiscal years 1995, 1996, and 1997, no commissions
were paid to any officer, trustee or Advisory Council member of the
Fund or any of their affiliates. For the Limited-Term Portfolio,
1995, 1996 and 1997 aggregate brokerage commissions paid to
broker-dealers were $0, $48,520, and $0, respectively.
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, California 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 Money Market Portfolio offers
Class O (offered in the Calvert Tax-Free Reserves Money Market
Prospectus) and the Institutional Class (offered in a separate
prospectus). The two classes represent interests in the same
portfolio of investments and are identical in all respects, except:
(a) the classes may have different transfer agency fees; (b) postage
and delivery, printing and stationery expenses will be separately
allocated; and (c) the classes will have different dividend rates due
solely to the effects of (a) and (b) above. Each class represents
interests in the same portfolio of investments. 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, 1997, 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the following shareholders owned of
record 5% or more of the Institutional Class of CTFR Money Market:
Name and Address % of Ownership
Altera Corporation 11.29%
c/o Jeanne Akimoff
101 Innovation Drive
San Jose, California 95134
Caran Associates 5.71%
c/o Akman Group, Ltd.
5530 Wisconsin Avenue
Suite 1115
Chevy Chase, Maryland 20815
Pennsylvania Power & Light 8.83%
Attn: Dale M. Kleppinger TW-14
2 N. Ninth Street
Allentown, Pennsylvania 18101
Publix Super Markets 13.24%
Attn: Sandy Parkinson - Treasury Dept.
PO Box 407
Lakeland, Florida 33802
Reliable Stores, Inc. 16.40%
6301 Steven's Forest Road
Columbia, Maryland 21046
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.
<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 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. "Fund" in
this Letter of Intent shall refer to the Fund or Portfolio, as the
case may be. 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)
<PAGE>
Calvert Tax-Free Reserves
Money Market Portfolio
Limited-Term Portfolio
Statement of Additional Information
April 30, 1998
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE TRANSFER AGENT
Calvert Shareholder Services, Inc. National Financial Data
Services, Inc.
4550 Montgomery Avenue 1004 Baltimore
Suite 1000N 6th Floor
Bethesda, Maryland 20814 Kansas City, Missouri 64105
PRINCIPAL UNDERWRITER INDEPENDENT ACCOUNTANTS
Calvert Distributors, Inc. Coopers & Lybrand, L.L.P.
4550 Montgomery Avenue 250 West Pratt Street
Suite 1000N Baltimore, Maryland 21201
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 2
Purchases and Redemptions of Shares 3
Reduced Sales Charges 4
Dividends and Distributions 4
Tax Matters 4
Valuation of Shares 5
Calculation of Yield and Total Return 6
Advertising 7
Trustees and Officers 8
Investment Advisor 10
Administrative Services 10
Transfer and Shareholder Servicing Agents 11
Independent Accountants and Custodians 11
Method of Distribution 11
Portfolio Transactions 11
General Information 12
Control Persons and Principal Holders of Securities 12
Financial Statements 12
Appendix 13
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION-April 30, 1998
CALVERT TAX-FREE RESERVES
Money Market Portfolio
Limited-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
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 is not a
prospectus. Investors should read the Statement of Additional
Information in conjunction with the Calvert Tax-Free Reserves
Prospectus, dated April 30, 1998, 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.
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 net 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 25% or more of its total 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.
Redemption proceeds are normally paid in cash. However, the Portfolio
has the right to redeem shares in assets other than cash for
redemption amounts exceeding, in any 90-day period, $250,000 or 1% of
the net asset value of the Portfolio, whichever is less.
REDUCED SALES CHARGES
The Limited-Term Portfolio imposes reduced sales charges for
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. 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 1997, the Portfolios did qualify and in 1998, the
Portfolios intend 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 Portfolio'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,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Net Asset Value and Offering Price Per Share, 12/31/97
Money Market Portfolio
Class O ($1,405,291,715/1,405,404,125 shares) $1.00
Institutional Class ($51,081,396/51,084,219 shares) $1.00
Limited-Term Portfolio
Net asset value per share
($490,179,704/45,808,410) $10.70
Maximum sales charge
(1.00% of offering price) 0.22
Offering price per share $10.92
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. Yield is calculated separately by class. 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, 1997, the Money Market
Portfolio's yield for Class O shares was 3.66% and its effective
yield was 3.72%. For the seven-day period ended December 31, 1997,
the Money Market Portfolio's yield for the Institutional Class of
shares was 3.94% and its effective yield was 4.02%.
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, 1997, the
Money Market Portfolio's Class O tax equivalent yield, for an
investor in the 36% federal income tax bracket was 5.82% and, for the
39.6% federal income tax bracket, 6.16%. For the seven-day period
ended December 31, 1997, the Money Market Portfolio Institutional
Class' tax equivalent yield, for an investor in the 36% federal
income tax bracket was 6.28% and, for the 39.6% federal income tax
bracket, 6.66%.
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, except quotations of "return
without maximum load" 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 return without maximum load, 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 "return without maximum load" as
referred to herein. Return without maximum load 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).
Returns for the periods indicated are as follows:
With Max. Load W/O Max. Load
One Year 3.01% 4.07%
Five Years 3.73% 3.94%
Ten Years 5.04% 5.15%
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 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. Using this
calculation, the Limited-Term Portfolio's yield for the month ended
December 31, 1997 was 3.54%.
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, 1997, the Portfolio's tax equivalent yield was 5.53% for
an investor in the 36% federal income tax bracket, and 5.86% for an
investor in the 39.6% federal income tax bracket.
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.
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, November 30, 1997). Calvert Group was also the first to offer
a family of socially responsible mutual fund portfolios.
TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice
President 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
Calvert Variable Series, Inc., Calvert New World Fund and Calvert
World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive,
Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner
in the law firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was
formerly a partner with Abrams, Blatz, Gran, Hendricks & Reina, P.A.
He is also a director of Calvert Variable Series, Inc. DOB: 10/29/35.
Address: 308 East Broad Street, Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a
radiologist with Kaiser Permanente. Prior to that, he was a
radiologist at Bethlehem Medical Imaging in Allentown, Pennsylvania.
DOB: 07/23/49. Address: 16 Iliahi Street, Honolulu, Hawaii, 96817.
*CHARLES E. DIEHL, Trustee. Mr. Diehl 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. DOB: 10/13/22.
Address: 1658 Quail Hollow Court, McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices
head and neck reconstructive surgery in the Washington, D.C.,
metropolitan area. DOD: 05/23/48. Address: 7536 Pepperell Drive,
Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian is President of
Corporate Finance of Washington, Inc. Formerly, he was a principal of
Gavian De Vaux Associates, an investment banking firm. DOB: 12/08/32.
Address: 3005 Franklin Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey 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, a director of
Ariel Funds, 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 Calvert Variable Series, Inc. and Calvert New World
Fund. DOB: 05/15/48. Address: 7205 Pomander Lane, Chevy Chase,
Maryland 20815.
*BARBARA J. KRUMSIEK, President and Trustee. Ms. Krumsiek 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. She 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. Prior to joining Calvert Group, Ms. Krumsiek served
as Senior Vice President of Alliance Capital LP's Mutual Fund
Division. DOB: 08/09/52.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President and
CEO of Creative Associates International, Inc., a firm that
specializes in human resources development, information management,
public affairs and private enterprise development. She is also a
director of Acacia Federal Savings Bank. DOB: 12/08/45. Address: 5301
Wisconsin Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh is a Director of Calvert
Variable Series, Inc., and serves as a director of Acacia Federal
Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive, Fairfax,
Virginia 22030.
*DAVID R. ROCHAT, Senior Vice President and Trustee. Mr.
Rochat 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. DOB:
10/07/37. Address: Box 93, Chelsea, Vermont 05038.
*D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a
trustee/director of each of the investment companies in the Calvert
Group of Funds, except for Calvert Variable Series, Inc. and Calvert
New World Fund. Mr. Silby is Executive Chairman of GroupServe, an
internet company focused on community building collaborative tools,
and 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. DOB: 07/20/48. Address: 1715 18th
Street, N.W., Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a
director and 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, Inc. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is
Senior Vice President and Chief Financial Officer 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. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary.
Mr. Tartikoff 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 also Vice President and Secretary of
Calvert-Sloan Advisers, L.L.C., a director of Calvert Distributors,
Inc., and is an officer of Acacia National Life Insurance Company.
DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes 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, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender
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. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group 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. DOB: 10/21/56.
LISA CROSSLEY NEWTON, Esq., Assistant Secretary and
Compliance Officer. Ms. Newton is Associate General Counsel of
Calvert Group 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. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is
Assistant Counsel of Calvert Group 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. Prior to working at Calvert Group, Ms. Duke was an
Associate in the Investment Management Group of the Business and
Finance Department at Drinker Biddle & Reath. DOB: 09/07/68.
The address of directors and officers, unless otherwise noted, is
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
Trustees and officers of the Fund as a group own less than 1% of the
Fund's outstanding shares. Trustees marked with an *, above, are
"interested persons" of the Fund, under the Investment Company Act of
1940.
Each of the above directors/trustees and officers is a
director/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 and Silby and
Ms. Krumsiek are among the trustees, Calvert Variable Series, Inc.,
of which only Messrs. Blatz, Diehl and Pugh and Ms. Krumsiek are
among the directors, Calvert World Values Fund, Inc., of which only
Messrs. Guffey and Silby and Ms. Krumsiek are among the directors,
and Calvert New World Fund, Inc., of which only Ms. Krumsiek and Mr.
Martini are among the directors.
The Audit Committee of the Board is composed of Messrs.
Baird, Blatz, Feldman, Guffey and Pugh. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat and
Silby and Ms. Krumsiek.
During 1997, Trustees of the Fund not affiliated with the
Fund's Advisor were paid $210,221 and $72,792 by the Money Market and
Limited-Term Portfolios, respectively. Trustees of the Fund not
affiliated with the Advisor currently receive an annual fee of
$20,500 for service as a member of the Board of Trustees of the
Calvert Group of Funds plus a fee of $750 to $1500 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 1997 Aggregate Compensation Pension or Total
(unaudited Numbers) from Registant Retirement Benefits Compensation
for Service as Trustee Accrued as part of from Registrant
Registrant Expenses* and Fund
Complex paid to
Trustee **
Name of Trustee
Richard L. Baird, Jr. $24,466 $0 $34,450
Frank H. Blatz, Jr. $31,031 $31,031 $46,000
Frederick T. Borts $23,515 $0 $32,500
Charles E. Diehl $29,959 $29,959 $44,500
Douglas E. Feldman $23,462 $0 $32,500
Peter W. Gavian $27,736 $12,668 $38,500
John G. Guffey, Jr. $30,451 $0 $61,615
M. Charito Kruvant $26,145 $0 $36,250
Arthur J. Pugh $32,589 $1,038 $48,250
D. Wayne Silby $25,072 $0 $62,830
*Messrs. Blatz, Diehl, Gavian and Pugh have chosen to defer a portion
of their compensation. As of December 31, 1997, total deferred
compensation, including dividends and capital appreciation, was
$555,901.79, $545,259.10, $137,436.70 and $187,735.55, for each
trustee, respectively.
**As of December 31, 1997. The Fund Complex consists of nine (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, prior to
August 1, 1997, the fees were 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.
Effective August 1, 1997, the fees changed to 0.25% of the first $500
million of such Portfolio's average daily net assets, 0.20% of the
next $500 million of such assets, and 0.15% 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 may voluntarily reimburse the Money Market and
Limited-Term Portfolios for expenses. The advisory fees paid by the
Money Market Portfolio to Calvert Asset Management Company were
$7,481,925, $7,776,716, and $5,409,090, for years 1995, 1996, and
1997, respectively. The advisory fees paid by the Limited-Term
Portfolio to Calvert Asset Management Company were $3,149,849,
$3,110,764, and $3,164,772, for years 1995, 1996, and 1997,
respectively.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company ("CASC"), 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. Prior to August 1, 1997, CASC received a
fee of $200,000 per year for providing such services, allocated among
Portfolios based on assets. Effective August 1, 1997, the Money
Market Class O and Institutional Class pay annual rates of 0.26% and
0.05%, respectively, based on average daily net assets. Limited-Term
and other portfolios of CTFR pay an annual fee of $80,000, allocated
among the portfolios based on average daily net assets. The service
fees paid by the Money Market Portfolio to Calvert Administrative
Services Company were $124,836 and $128,255, for years 1995 and 1996,
respectively. The 1997 administrative services fees paid by CTFR
Money Market were $1,682,754 and $24,010 for Class O and the
Institutional Class, respectively. The service fees paid by the
Limited-Term Portfolio to CASC were $39,445, $38,242, and $43,210,
for years 1995, 1996, and 1997, respectively.
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., a subsidiary of Calvert
Group, Ltd., and Acacia Mutual, 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. Calvert Shareholder Services,
Inc. was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services,
Inc. receive a fee based on the number of shareholder accounts and
shareholder transactions, per Portfolio.
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 1998.
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 Portfolios have entered into a principal underwriting
agreement with Calvert Distributors Inc. ("CDI"). Pursuant to the
agreement, CDI serves as distributor and principal underwriter for
the Portfolios. CDI bears all its expenses of providing services
pursuant to the agreement, including payment of any commissions and
service fees. Prior to the termination of Class C shares for the
Limited Term Portfolio, CDI was entitled to receive a service fee and
a distribution fee, payable monthly pursuant to the Limited-Term
Portfolio's Distribution Plan, of 0.25%, respectively, of the
Portfolio's average daily net assets. 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, 1995, 1996, and 1997, CDI
received sales charges in excess of the dealer reallowance of
$10,900, $0, and $0, respectively. CDI paid $48,520 and $101,072 in
addition to commissions charged on sales of Limited-Term Portfolio
during fiscal years 1996 and 1997, respectively.
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, 1996 and 1997, the
portfolio turnover rates of the Limited-Term Portfolio were 45% and
52%, 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. In fiscal years 1995, 1996, and 1997, no commissions
were paid to any officer, trustee or Advisory Council member of the
Fund or any of their affiliates. For the Limited-Term Portfolio,
1995, 1996 and 1997 aggregate brokerage commissions paid to
broker-dealers were $0, $48,520, and $0, respectively.
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, California 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 Money Market Portfolio offers
Class O (offered in the Calvert Tax-Free Reserves Money Market
Prospectus) and the Institutional Class (offered in a separate
prospectus). The two classes represent interests in the same
portfolio of investments and are identical in all respects, except:
(a) the classes may have different transfer agency fees; (b) postage
and delivery, printing and stationery expenses will be separately
allocated; and (c) the classes will have different dividend rates due
solely to the effects of (a) and (b) above. Each class represents
interests in the same portfolio of investments. 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, 1997, 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.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of March 31, 1998, the following shareholders owned of
record 5% or more of the Institutional Class of CTFR Money Market:
Name and Address % of Ownership
Altera Corporation 11.29%
c/o Jeanne Akimoff
101 Innovation Drive
San Jose, California 95134
Caran Associates 5.71%
c/o Akman Group, Ltd.
5530 Wisconsin Avenue
Suite 1115
Chevy Chase, Maryland 20815
Pennsylvania Power & Light 8.83%
Attn: Dale M. Kleppinger TW-14
2 N. Ninth Street
Allentown, Pennsylvania 18101
Publix Super Markets 13.24%
Attn: Sandy Parkinson - Treasury Dept.
PO Box 407
Lakeland, Florida 33802
Reliable Stores, Inc. 16.40%
6301 Steven's Forest Road
Columbia, Maryland 21046
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.
<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 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. "Fund" in
this Letter of Intent shall refer to the Fund or Portfolio, as the
case may be. 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)
