KS:E:\EE\ClassT497C\CLASTPRO.rtf
PROSPECTUS
February 28, 1999
The Advisors Group Reserve Fund
a class of Calvert First Government Money Market Fund
and
The Advisors Group Tax-Free Reserves
a class of Calvert Tax-Free Reserves Money Market Portfolio
Table of Contents Page
About the Funds
Investment goals 1
Principal Investment Strategies 1
Risks of Investing 2
Performance Chart 3
Fees and Expenses 4
About the Advisor
Management 5
Year 2000 5
Shareholder Guide:
How to Buy Shares 6
Dividends, Capital Gains and Taxes 7
How to Sell Shares 8
These securities have not been approved or disapproved by the Securities and
Exchange Commission ("SEC") or any state securities commission nor has the
SEC or any state securities commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
Fundamental Goals - Investment Objectives
The Advisors Group Reserve Fund
The Advisors Group Reserve Fund (the "Reserve Fund") is a U.S.
Government-only money market fund that seeks to earn the highest possible
yield consistent with safety, liquidity, and preservation of capital. In
pursuing its objective, the Reserve Fund invests only in U.S.
Government-backed obligations, including such obligations subject to
repurchase agreements with recognized securities dealers and banks. The
Reserve Fund seeks to maintain a constant net asset value of $1.00 per share.
The Reserve Fund is offered in this prospectus to investors with brokerage
accounts at The Advisors Group, Inc.
The Advisors Group Tax-Free Reserves
The Advisors Group Tax-Free Reserves ("Tax-Free Reserves") 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 Tax-Free Reserves. Tax-Free Reserves seeks
to maintain a constant net asset value of $1.00 per share.
Tax-Free Reserves is offered in this prospectus to investors with brokerage
accounts at The Advisors Group, Inc.
Principal Investment Strategies
Reserve Fund assets are invested only in short-term money market
instruments, such as:
obligations issued by the U.S. Treasury, such as U.S. Treasury bills,
notes and bonds, supported by the full faith and credit of the U.S.
Government;
Securities issued by the U.S. Government, its agencies and
instrumentalities;
repurchase agreements; and
variable-rate demand notes.
Tax-Free Reserves assets are invested primarily in a diversified portfolio
of municipal obligations whose interest is exempt from federal income tax.
Tax-Free Reserves invests in:
high quality variable and floating rate demand notes and/or municipal
obligations;
municipal bonds and notes and tax-exempt commercial paper; and
short-term fixed-rate obligations with remaining maturities of
thirteen months or less.
The Advisor looks for securities with strong credit quality that are
attractively priced. This may include investments with unusual features or
privately placed issues, that are not widely followed in the fixed income
marketplace. All investments must comply with the SEC money market fund
requirements.
<PAGE>
Risks of investing
The yield of the Reserve Fund and Tax-Free Reserves ("each Fund" or the
"Funds") will change daily, depending on market interest rates, and tends to
follow the same direction as the rates.
Dividends paid by each Fund will fluctuate as interest rates and net
investment income fluctuate.
Investments in obligations not guaranteed by the full faith and credit of
the U.S. Government are subject to the ability of the issuer to make payment
at maturity.
Many of the instruments held by Tax-Free Reserves are supported by letters
of credit issued by banks; thus, it has a wide exposure to the banking
industry.
Tax-Free Reserves may purchase securities that have not been rated by a
rating agency, so long as the Advisor determines they are of comparable
credit quality.
Unrated and privately placed securities may be less liquid than those that
are rated or have an active trading market.
The yield of each Fund will change in response to market interest rates. In
general, as market rates go up so will the Fund's yield, and vice versa.
Although the Fund tries to keep the value of its shares constant at $1.00
per share, extreme changes in market rates, and/or sudden credit
deterioration of a holding could cause the value to decrease. The Funds
limit the amount invested in any one issuer to try to lessen exposure.
An investment in the Funds is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Funds seek to preserve the value of your
investment at $1.00 per share, it is still possible to lose money by
investing in the Funds.
Bar Charts and Performance Tables
The bar charts and tables below show the annual returns and its long-term
performance by calendar year for Class O of each of the Funds, shown as
Calvert First Government for the Reserve Fund and CTFR Money Market for the
Tax-Free Reserves Fund. The charts shows how the performance has varied from
year to year. The tables compare Class O returns over time to the Lipper
U.S. Government Money Market Funds Index for the Reserve Fund, and the
Lipper Tax-Exempt Money Market Funds Index for Tax-Free Reserves. Each index
is a composite index of the annual return of mutual funds that have similar
investment goals. Each Fund's past performance does not necessarily indicate
how it will perform in the future. Please note that performance for the
Reserve Fund and Tax-Free Reserves is not shown since it was not available
for either Fund during the time periods shown.
<PAGE>
Bar Chart - Class O
1989 8.56% 1994 3.65%
1990 7.61% 1995 5.22%
1991 5.65% 1996 4.79%
1992 3.39% 1997 5.00%
1993 2.70% 1998 4.93%
Best Quarter (of periods shown) Q2 '89 2.22%
Worst Quarter (of periods shown) Q2 '93 0.66%
Average annual total returns for the periods ended December 31, 1998
1 year 5 years 10 years
Calvert First Government Class O 4.93% 4.72% 5.13%
Lipper U.S. Government Money
Market Funds Index 4.95% 4.79% 5.19%
Bar Chart - Class O
1989 6.47% 1994 2.81%
1990 6.04% 1995 4.02%
1991 4.96% 1996 3.33%
1992 3.17% 1997 3.38%
1993 2.41% 1998 3.22%
Best Quarter (of periods shown) Q2 '89 1.67%
Worst Quarter (of periods shown) Q1 '93 0.56%
Average annual total returns for the periods ended December 31, 1998
1 year 5 years 10 years
CTFR Money Market Class O 3.23% 3.35% 3.97%
Lipper Tax-Exempt Money
Market Funds Index 3.04% 3.06% 3.58%
For current yield information, call 1-800-777-1500.
<PAGE>
Fees and Expenses of the Funds
These tables describe the fees and expenses you may pay if you buy and hold
shares of each Fund.
A. Shareholder Fees
(fees paid directly from your investment)
Reserve Tax-Free
Fund Reserves
Maximum Sales Load on Purchases None None
Maximum Deferred Sales Load None None
Maximum Sales Load on Reinvested Dividends None None
Redemption Fees None None
Exchange Fee None None
B. Estimated Annual Fund Operating Expenses
(expenses that are deducted from Fund assets)
Reserve Tax-Free
Fund Reserves
Management Fees 0.50% 0.46%
Distribution and service (12b-1) fees 0.25% 0.25%
Other Expenses 0.19% 0.14%
Total Annual Fund Operating Expenses 0.94% 0.85%
C. Example:
This example is intended to help you compare the cost of investing in a Fund
with the cost of investing in other mutual funds. The example assumes that:
You invest $10,000 in a Fund for the time periods indicated;
You redeem all shares at the end of the periods;
Your investment has a 5% return each year; and
The Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these
assumptions your costs would be:
1 Year 3 Years 5 Years 10 Years
Reserve Fund $87 $271 $471 $1,049
Tax-Free Reserves $96 $300 $520 $1,155
<PAGE>
Management and Advisory Fees
Calvert Asset Management Company, Inc. ("CAMCO") is the investment advisor
for each Fund. CAMCO has been managing mutual funds since 1976, and is a
subsidiary of Calvert Group, Ltd. CAMCO currently advises 25 Calvert funds,
including the first and largest family of socially screened funds. CAMCO is
located at 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. As
of December 31, 1998, it had over $6 billion in assets under management.
CAMCO provides the Funds with investment supervision and management;
administrative services and office space; and furnishes executive and other
personnel to the Funds. CAMCO also pays the salaries and fees of all
Trustees who are affiliated persons. CAMCO may pay certain advertising and
promotional expenses of the Funds. Pursuant to the Investment Advisory
Agreement, CAMCO is entitled to an annual advisory fee of 0.25% of the
average daily net assets of the Reserve Fund. The Tax-Free Reserves
Investment Advisory Agreement entitles CAMCO 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. CAMCO may
voluntarily waive a portion of its advisory fee.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, CAMCO and its service providers use computer
systems for all aspects of our business -- processing shareholder and fund
transactions, fund accounting, executing trades, and pricing securities just
to name a few. Many current software programs cannot distinguish between the
year 2000 and the year 1900. This can cause problems with retirement plan
distributions, dividend payment software, transaction software, and numerous
other areas that could impact the Funds. Calvert Group has been reviewing
all of its computer systems for Y2K compliance. Although, at this time,
there can be no assurance that there will be no negative impact on the
Funds, the Advisor, the underwriter, transfer agent and custodian have
advised the Funds that they have been actively working on any necessary
changes to their computer systems to prepare for Y2K and expect that their
systems, and those of their outside service providers, will be adapted in
time for that event.
<PAGE>
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SHAREHOLDER GUIDE
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HOW TO BUY SHARES
Please contact your local office of The Advisors Group, Inc. to open your
money market account. All transactions will be processed electronically
through the National Financial Proprietary Money Market Sweep Program on
behalf of The Advisors Group, Inc.
There is no minimum for initial investments and no minimum for subsequent
investments, provided you have a brokerage account with The Advisors Group,
Inc.
Because you are purchasing shares through a program of services offered by
The Advisors Group, Inc., a registered broker/dealer and investment advisor,
you should read program materials together with this Prospectus. Certain
account features have been modified for this program, and The Advisors
Group, Inc. may impose charges for their services.
Important - How Shares are Priced
The price of shares is based on each Fund's net asset value ("NAV"). NAV is
determined according to the "amortized cost" method. It is computed per
class by adding the value of a Fund's holdings plus other assets,
subtracting liabilities, and then dividing the result by the number of
shares outstanding.
The NAV is calculated as of the close of each business day, which coincides
with the closing of the regular session of the New York Stock Exchange
("NYSE") (normally 4 p.m. ET). Each Fund is open for business each day the
NYSE is open. Please note that there are some federal holidays, such as
Columbus Day and Veterans Day, when the NYSE is open and each Fund is open,
but no purchases may be made due to the closure of the banking system.
When Your Account Will Be Credited
Your purchase will be processed at the NAV next calculated after your order
is received. Electronic sweeps into an account begin earning dividends the
next business day.
Each Fund reserves the right to suspend the offering of shares for a period
of time or to reject any specific purchase order.
<PAGE>
DIVIDENDS, CAPITAL GAINS AND TAXES
Each Fund accrues dividends daily from its net investment income, and pays
the dividends 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 Funds do not anticipate
making any such distributions unless available capital loss carryovers have
been used or have expired.
Dividend payment options
Dividends and any distributions are automatically reinvested in the same
Fund at NAV, unless you elect to have amounts of $10 or more paid in cash
(by check).
Federal Taxes
In January, The Advisors Group, Inc. will mail Form 1099-DIV, indicating
taxable dividends and any 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
In addition to federal taxes for the Reserve Fund, 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
requires us to withhold 31% of your reportable dividends, and possibly 31%
of certain redemptions. In addition, you may be subject to a fine by the
Internal Revenue Service.
<PAGE>
HOW TO SELL SHARES
You may redeem all or a portion of your shares on any day the Funds are open
for business, provided the amount requested is not on hold. Your shares will
be redeemed at the next NAV calculated after your redemption request is
received. You will receive dividends through the date the request is
received and processed. The proceeds will normally be sent to you on the
next business day, but if making immediate payment could adversely affect
your Fund, it may take up to seven (7) days to make payment. The Funds have
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 Fund, whichever is less. When the NYSE 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. Please note that there are some federal holidays such as
Columbus Day and Veterans Day, when the NYSE is open and each Fund is open,
but redemptions cannot be made due to the closure of the banking system.
BY TELEPHONE
You may redeem shares from your account by telephone and have your money
sent by check, electronically transferred, or wired to a bank you have
previously authorized by contacting your local office of The Advisors Group,
Inc.
CHECKWRITING
Checkwriting will be offered through The Advisors Group, Inc. The
checkwriting features vary, depending on what you choose when you open the
money market sweep account with The Advisors Group, Inc. Please see The
Advisors Group, Inc. program materials for information.
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To Open an Account:
800-777-1500
Performance and Prices:
800-777-1500
Service for Existing Accounts:
800-777-1500
Registered, Certified or
Overnight Mail:
The Advisors Group, Inc.
7315 Wisconsin Avenue
Bethesda, Maryland 20814
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
Outside Back Cover Page
Statements of Additional Information ("SAIs") (dated February 28, 1999) for
the Funds have been filed with the Securities and Exchange Commission and is
incorporated by reference. Additional information about each Fund's
investments is available in each Fund's annual and semi-annual reports to
shareholders. The SAIs and each Fund's annual and semi-annual reports are
available, without charge and upon request, from the Funds at 800-777-1500.
Information about the Funds (including the SAIs) can be reviewed at the
Commission's Public Reference Room in Washington, D.C. Information on the
operation of the public reference room may be obtained by calling the
Commission at 1-800-SEC-0330. Reports and other information about the Funds
are available on the Commission's internet site at http://www.sec.gov.
Copies of this information may be obtained, by payment of a duplicating fee,
by writing the Public Reference Section of the Commission, Washington, D.C.
20549-6009.
811-2633 First Variable Rate Fund
811-3101 Calvert Tax-Free Reserves
<PAGE>
Calvert Tax-Free Reserves
Money Market Portfolio
Limited-Term Portfolio
Statement of Additional Information
February 28, 1999
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TRANSFER AGENT
National Financial Data Services, Inc.
1004 Baltimore
6th Floor
Kansas City, Missouri 64105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers
250 West Pratt Street
Baltimore, Maryland 21201
TABLE OF CONTENTS
Investment Objective 2
Investment Policies 2
Investment Restrictions 4
Purchases and Redemptions of Shares 4
Reduced Sales Charges 5
Dividends and Distributions 5
Tax Matters 6
Valuation of Shares 6
Calculation of Yield and Total Return 7
Advertising 9
Trustees and Officers 9
Investment Advisor 11
Administrative Services 12
Transfer and Shareholder Servicing Agents 12
Independent Accountants and Custodians 12
Method of Distribution 13
Portfolio Transactions 13
General Information 13
Control Persons and Principal Holders of Securities 14
Appendix 15
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION-February 28, 1999
CALVERT TAX-FREE RESERVES
Money Market Portfolio
Limited-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
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New Account Information
(800) 368-2748
(301) 951-4820
Shareholder Services
(800) 368-2745
Broker Services
(800) 368-2746
(301) 951-4850
TDD for the Hearing- Impaired
(800) 541-1524
This Statement of Additional Information is not a prospectus.
Investors should read the Statement of Additional Information in conjunction
with the Calvert Tax-Free Reserves Prospectus, dated April 30, 1998 for
Class O and I, and February 28, 1999 for Class T, which may be obtained free
of charge by writing the Fund at the above address or calling the telephone
numbers listed above.
The audited financial statements in the Portfolios' Annual Report
to Shareholders dated December 31, 1998, 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.
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INVESTMENT OBJECTIVE
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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.
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INVESTMENT POLICIES
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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
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 Limited-Term 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.
Securities purchased on a when-issued basis and the securities held
in Limited-Term 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 Limited-Term 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.
When the time comes to pay for when-issued securities, Limited-Term
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 Limited-Term'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. When issued securities do not earn income until they have in fact been
issued.
When Limited-Term purchases a when-issued security, 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 Limited-Term'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 when-issued
purchase, thereby ensuring the transaction is unleveraged.
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INVESTMENT RESTRICTIONS
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Fundamental Investment Restrictions
The Portfolios have adopted the following fundamental investment
restrictions. These restrictions cannot be changed without the approval of
the holders of a majority of the outstanding shares of the Portfolios.
(1) Each Portfolio may not make any investment
inconsistent with its classification as a diversified
investment company under the 1940 Act.
(2) Each Portfolio may not concentrate its investments in
the securities of issuers primarily engaged in any
particular industry (other than securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured
thereby), or domestic bank money market instruments.
(3) Each Portfolio may not issue senior securities or
borrow money, except from banks for temporary or emergency
purposes and then only in an amount up to 33 1/3% of the
value of the affected Portfolio's total assets or as
permitted by law and except by engaging in reverse
repurchase agreements, where allowed. In order to secure
any permitted borrowings and reverse repurchase agreements
under this section, each Portfolio may pledge, mortgage or
hypothecate its assets.
(4) Each Portfolio may not underwrite the securities of
other issuers, except as allowed by law or to the extent
that the purchase of municipal obligations in accordance
with a Portfolio's investment objective and policies,
either directly from the issuer, or from an underwriter
for an issuer, may be deemed an underwriting.
(5) Each Portfolio may not invest directly in commodities
or real estate, although a Portfolio may invest in
securities which are secured by real estate or real estate
mortgages and securities of issuers which invest or deal
in commodities, commodity futures, real estate or real
estate mortgages.
(6) Each Portfolio may not make loans, other than through
the purchase of money market instruments and repurchase
agreements or by the purchase of bonds, debentures or
other debt securities, or as permitted by law. The
purchase of all or a portion of an issue of publicly or
privately distributed debt obligations in accordance with
each Portfolio's investment objective, policies and
restrictions, shall not constitute the making of a loan.
Nonfundamental Investment Restrictions
The Board of Trustees has adopted the following nonfundamental
investment restrictions. A nonfundamental investment restriction can be
changed by the Board at any time without a shareholder vote.
(1) Each Portfolio may not purchase common stocks, preferred
stocks, warrants, or other equity securities.
(2) Each Portfolio does not intend to make any purchases of
securities if borrowing exceeds 5% of the affected Portfolio's
total assets.
(3) Each Portfolio may not sell securities short, purchase
securities on margin, or write put or call options, except as
permitted for Long-Term and Vermont in connection with
transactions in futures contracts and options thereon. Each
Portfolio reserves the right to purchase securities with puts
attached or with demand features.
(4) Each Portfolio may not write or purchase put or call options.
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PURCHASES AND REDEMPTIONS OF SHARES
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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.
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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.
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DIVIDENDS AND DISTRIBUTIONS
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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 each
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 returns the check as undeliverable, 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.
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TAX MATTERS
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The Funds intend to continue to qualify as regulated investment
companies under Subchapter M of the Internal Revenue Code. If for any reason
one of the Funds should fail to qualify, it would be taxed as a corporation
at the Fund level, rather than passing through its income and gains to
shareholders.
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 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.
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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, 12/31/98
Money Market Portfolio
Class O ($1,355,321,661/1,355,203,424 shares) $1.00
Institutional Class ($246,966,868/246,940,916 shares) $1.00
Class T not available on 12/31/98
Limited-Term Portfolio
Net asset value per share
($547,212,080/51,073,163 shares) $10.71
Maximum sales charge
(1.00% of offering price) 0.11
Offering price per share $10.82
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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, 1998, the Money Market
Portfolio's yield for Class O shares was 2.01% and its effective yield was
2.03%. For the seven-day period ended December 31, 1998, the Money Market
Portfolio's yield for the Institutional Class of shares was 2.19% and its
effective yield was 2.22%. Class T was not available on December 31, 1998;
therefore, no yield is presented.
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, 1998, the Money Market Portfolio's Class
O tax equivalent yield, for an investor in the 36% federal income tax
bracket was 3.17% and, for the 39.6% federal income tax bracket, 3.36%. For
the seven-day period ended December 31, 1998, the Money Market Portfolio
Institutional Class' tax equivalent yield, for an investor in the 36%
federal income tax bracket was 3.47% and, for the 39.6% federal income tax
bracket, 3.68%. Class T was not available on December 31, 1998.
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 2.82% 2.04%
Five Years 3.70% 3.91%
Ten Years 4.75% 4.86%
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, 1998 was 3.58%.
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,
1998, the Portfolio's tax equivalent yield was 5.59% for an investor in the
36% federal income tax bracket, and 5.93% for an investor in the 39.6%
federal income tax bracket.
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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, December 31, 1998).
Calvert Group was also the first to offer a family of socially responsible
mutual fund portfolios.
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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, Inc. and Calvert World Values Fund, Inc. 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 & 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 a self-employed consultant
and is Vice President and Treasurer Emeritus of the George Washington
University. He has retired from University Support Services, Inc. of
Herndon, Virginia. Formerly, he was a Director of Acacia Mutual Life
Insurance Company, and is currently a Director of Servus Financial
Corporation. DOB: 10/13/22. Address: 1658 Quail Hollow Court, McLean,
Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman is managing partner
of Feldman Otolaryngology, Head and Neck Surgery in Washington, D.C. A
graduate of Harvard Medical School, he is Associate Professor of
Otolaryngology, Head and Neck Surgery at Georgetown University and George
Washington University Medical School, and past Chairman of the Department of
Otolaryngology, Head and Neck Surgery at the Washington Hospital Center. He
is included in The Best Doctors in America. DOB: 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. He is also a Chartered Financial
Analyst and an accredited senior business appraiser. 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, Inc.
Mr. Guffey has been advised that the Securities and Exchange
Commission ("SEC") has entered an order against him relating to his former
service as a director of Community Bankers Mutual Fund, Inc. This fund is
not connected with any Calvert Fund or the Calvert Group and ceased
operations in September, 1994. Mr. Guffey consented to the entry of the
order without admitting or denying the findings in the order. The order
contains findings (1) that the Community Bankers Mutual Fund's prospectus
and statement of additional information were materially false and misleading
because they misstated or failed to state material facts concerning the
pricing of fund shares and the percentage of illiquid securities in the
fund's portfolio and that Mr. Guffey, as a member of the fund's board,
should have known of these misstatements and therefore violated the
Securities Act of 1933; (2) that the price of the fund's shares sold to the
public was not based on the current net asset value of the shares, in
violation of the Investment Company Act of 1940 (the "Investment Company
Act"); and (3) that the board of the fund, including Mr. Guffey, violated
the Investment Company Act by directing the filing of a materially false
registration statement. The order directed Mr. Guffey to cease and desist
from committing or causing future violations and to pay a civil penalty of
$5,000. The SEC placed no restrictions on Mr. Guffey's continuing to serve
as a Trustee or Director of mutual funds. DOB: 05/15/48. Address: 388 Calli
Calina, Santa Fe, New Mexico 87501.
*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. Ms. Krumsiek is
the President of each of the investment companies, except for Calvert Social
Investment Fund, of which she is the Senior Vice President. Prior to joining
Calvert Group, Ms. Krumsiek served as a Managing Director of Alliance Fund
Distributors, Inc. 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. He is the Senior Vice President of First Variable
Rate Fund, Calvert Tax-Free Reserves, Calvert Municipal Fund, Inc., Calvert
Cash Reserves, and The Calvert Fund. 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 Group Serve, Inc., 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.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke 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 and Secretary and
provides counsel to the Calvert Social Investment Foundation. 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, Ms. Krumsiek and Ms. Kruvant 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 and Ms. Kruvant. The Board's Investment
Policy Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat and
Silby and Ms. Krumsiek.
During 1998, Trustees of the Fund not affiliated with the Fund's
Advisor were paid $169,091 and $57,879 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.
Trustee Compensation Table
Fiscal Year 1998 Aggregate Pension or Total Compensation
Compensation Retirement from Benefits
(unaudited numbers) from Registrant Accrued as Registrant and Fund
for Service part of Complex paid to
as Trustee of Registrant Trustee**
Expenses*
Name of Trustee
Richard L. Baird, Jr. $24,732 $0 $39,550
Frank H. Blatz, Jr. $25,797 $25,797 $42,100
Frederick T. Borts $23,674 $0 $33,250
Charles E. Diehl $25,803 $25,803 $41,500
Douglas E. Feldman $25,797 $0 $36,250
Peter W. Gavian $25,804 $12,902 $36,250
John G. Guffey, Jr. $24,768 $0 $62,665
M. Charito Kruvant $25,797 $15,477 $36,250
Arthur J. Pugh $25,797 $0 $41,500
D. Wayne Silby $24,739 $0 $67,780
*Messrs. Blatz, Diehl, Gavian and Pugh and Ms. Kruvant have chosen to defer
a portion of their compensation. As of December 31, 1998, total deferred
compensation, including dividends and capital appreciation, was $644,247.37,
$672,374.09, $172,445.85, $216,322.53, and $23,295.55, for each trustee,
respectively.
**As of December 31, 1998. 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 controlled subsidiary of
Ameritas Acacia Mutual Holding Company of Lincoln, Nebraska.
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 $7,776,716,
$5,409,090, and $3,109,517 for years 1996, 1997, and 1998, respectively. The
advisory fees paid by the Limited-Term Portfolio to Calvert Asset Management
Company were $3,110,764, $3,164,772, and $3,048,758 for years 1996, 1997,
and 1998, 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, Institutional Class, and Class T pay annual rates of
0.26%, 0.05%, and 0.25% 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 $128,255 for fiscal year 1996. 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 1998 administrative
services fees paid by CTFR Money Market were $1,682,754 and $24,010 for
Class O and the Institutional Class, respectively. Class T was not available
during fiscal year 1998. The service fees paid by the Limited-Term Portfolio
to CASC were $38,242, $43,210, and $41,317, for years 1996, 1997, and 1998,
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., 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
- ------------------------------------------------------------------------------
PricewaterhouseCoopers LLP has been selected by the Board of
Trustees to serve as independent accountants for fiscal year 1999. 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. Under
the terms of the agreement, CDI is entitled to receive a service fee and
distribution fee from the Money Market Portfolio, paid through the
Distribution Plan of Class T.
Pursuant to Rule 12b-1 under the 1940 Act, Class T of the Money
Market Portfolio has adopted a Distribution Plan (the "Plan") which permits
it to pay certain expenses associated with the distribution and servicing of
its shares. Such expenses may not exceed, on an annual basis, 0.25% of the
average daily net assets of Class T.
The 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 1940 Act) 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 is committed to the discretion of such disinterested
Trustees. In establishing the Plan, the Trustees considered various factors
including the amount of the distribution expenses. The Trustees determined
that there is a reasonable likelihood that the Plan will benefit Class T 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 affected
class or Portfolio. Any change in the Plan that would materially increase
the cost to the affected Class of Portfolio requires approval of the
shareholders of that 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 for successive one-year terms
provided that such continuance is specifically 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 and CDI, at their own expense, may
incur costs and pay expenses associated with the distribution of shares of
the Money Market Portfolio.
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, 1996, 1997, and 1998, CDI
received no sales charges in excess of the dealer reallowance. CDI paid
$48,520, $101,072, and $129,017, in addition to commissions charged on sales
of Limited-Term Portfolio, during fiscal years 1996, 1997, and 1998,
respectively.
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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, 1997 and 1998, the
portfolio turnover rates of the Limited-Term Portfolio were 52% and 45%,
respectively. Broker-dealers who execute portfolio transactions on behalf of
Limited-Term 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 Limited-Term or who provide
Limited-Term 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 1996, 1997, and 1998, 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, 1996, 1997, and
1998, aggregate brokerage commissions paid to broker-dealers were $48,520,
$0, and $0, respectively.
The Advisor may also execute portfolio transactions with or through
broker-dealers who have sold shares of Limited-Term. 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 Limited-Term 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), the Institutional
Class (offered in a separate prospectus), and Class T (offered in a separate
prospectus). The three 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.
- ------------------------------------------------------------------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ------------------------------------------------------------------------------
As of February 25, 1999, the following shareholders owned of record
5% or more of the Class or Portfolio shown:
Name and Address % of Ownership
Wilmington Trust Co.
FBO Diebold Inv. Co.
Wilmington, Delaware 19.63%, Money Market
Portfolio, Class I
David Mastran
Arlington, Virginia 16.59%, Money Market
Portfolio, Class I
The Grocers Supply Co., Inc.
Houston, Texas 11.45%, Money Market
Portfolio, Class I
Pennsylvania Power & Light Co.
Allentown, Pennsylvania 11.12%, Money Market
Portfolio, Class I
Analysts International Corporation
Minneapolis, Minnesota 7.27%, Money Market
Portfolio, Class I
Desko Family Limited Partnership
Latrobe, Pennsylvania 6.70%, Money Market
Portfolio, Class I
George and Janet Desko
Latrobe, Pennsylvania 6.69%, Money Market
Portfolio, Class I
Maximus, Inc.
McLean, Virginia 5.89%, Money Market
Portfolio, Class I
- ------------------------------------------------------------------------------
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)
By
Authorized Signer
Address
Signature of Investor(s)
Date
Signature of Investor(s)
Date
