SEC Registration Nos.
2-69565 and 811-3101
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 48 XX
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 48 XX
Calvert Tax-Free Reserves
(Exact Name of Registrant as Specified in Charter)
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Address of Principal Executive Offices)
Registrant's Telephone Number: (301) 951-4881
William M. Tartikoff, Esq.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
__ Immediately upon filing XX on April 30, 1999
pursuant to paragraph (b) pursuant to paragraph (b)
__ 60 days after filing __ on (date)
pursuant to paragraph (a) pursuant to paragraph (a)
of Rule 485.
<PAGE>
PROSPECTUS
April 30, 1999
CALVERT TAX-FREE RESERVES FUND
CTFR Money Market Portfolio
CTFR Limited-Term Portfolio
CTFR Long-Term Portfolio
About the Fund
2 Investment Objective, Strategy, Past Performance
8 Fees and Expenses
10 Principal Investment Practices and Risks
About Your Investment
14 Calvert Group and the Portfolio Management Team
14 Advisory Fees
15 How to Buy Shares (Sales charges, etc.)
17 Important - How Shares are Priced
18 Other Calvert Group Features
(Exchanges, Minimum Account Balance, etc.)
21 Dividends, Capital Gains and Taxes
23 How to Sell Shares
25 Financial Highlights
28 Exhibit A - Reduced Sales Charges
30 Exhibit B - Service Fees and
Other Arrangements with Dealers
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.
CTFR MONEY MARKET
Objective
CTFR Money Market (the "Fund") seeks to earn the highest level of interest
income, exempt from federal income taxes, as is consistent with prudent
investment management, preservation of capital, and the quality and maturity
characteristics of the Fund.
Principal Investment Strategies and Related Risks
CTFR Money Market invests in fixed and floating rate municipal bonds and
notes, variable rate demand notes, tax-exempt commercial paper, and other
high quality, short-term municipal obligations. 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.
Many of the instruments held by the Fund are supported by letters of credit
issued by banks; thus, the Fund has a wide exposure to the banking industry.
The Fund 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.
CTFR Money Market's yield 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 Fund
limits the amount it invests in any one issuer to try to lessen its exposure.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the Fund.
CTFR Money Market Performance
The bar chart and table below show the Fund's annual returns and its
long-term performance. The chart and table provide some indication of the
risks of investing in the Fund. The chart shows how the performance has
varied from year to year. The table compares the Fund's returns over time to
the Lipper Tax-Exempt Money Market Funds Index, a composite index of the
annual return of mutual funds that have an investment goal similar to that
of the Fund. The Fund's past performance does not necessarily indicate how
the Fund will perform in the future.
CTFR Money Market
Year-by-Year Total Return
[BAR CHART]
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 3.32%
Best Quarter (of periods shown) Q2 '89 1.67%
Worst Quarter (of periods shown) Q1 '93 0.56%
Average Annual Total Returns (as of 12.31.98)
1 year 5 years 10 years
CTFR Money Market 3.22% 3.35% 3.97%
Lipper Tax-Exempt
Money Market Funds Index 3.04% 3.06% 3.58%
For current yield information call 800-368-2745, or visit Calvert Group's
website at www.calvertgroup.com
CTFR LIMITED-TERM
Objective
CTFR Limited-Term (the "Fund") seeks to earn the highest level of interest
income exempt from federal income taxes as is consistent with prudent
investment management, preservation of capital, and the quality and maturity
characteristics of the Fund.
Principal Investment Strategies
While seeking to achieve its objective, CTFR Limited-Term strives to
minimize volatility in the net asset value (NAV) per share. The Advisor
intends under normal circumstances to maintain an average portfolio maturity
of three years or less. The Fund typically invests at least 85% of its net
assets in investment grade debt securities. The Advisor looks for securities
with strong credit quality within their rating category 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.
The Fund may invest in a variety of tax-exempt obligations including
tax-supported debt (general obligation bonds and notes of state and local
issuers), various types of revenue debt (transportation, housing, utilities,
hospital), special tax obligations, and qualified private activity bonds and
other state and local government authorities, tax and revenue anticipation
notes and bond anticipation notes, municipal leases, and certificates of
participation in such investments. The obligations may be structured as
variable rate or adjustable rate obligations and are often supported by a
third party letter of credit.
CTFR Limited-Term may purchase unrated securities, so long as the Advisor
determines they are of comparable credit quality. Unrated securities may be
less liquid than those that are rated.
PRINCIPAL RISKS
You could lose money on your investment in the Fund, or the Fund could
underperform, most likely for any of the following reasons:
o The bond market goes down
o The individual bonds in the Fund do not perform as well as expected
o The Advisor's forecast as to interest rates is not correct
o The Advisor's allocation among different sectors of the bond market
does not perform as well as expected
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
CTFR Limited-Term Performance
The bar chart and table below show the Fund's annual returns and its
long-term performance. The chart and table provide some indication of the
risks of investing in the Fund. The chart shows how the performance has
varied from year to year. The table compares the Fund's performance over
time to that of the Lehman Municipal Bond Index. This is a widely
recognized, unmanaged index of bond prices. It also shows the Fund's returns
compared to the Lipper Short Municipal Debt Funds Index, a composite index
of the annual return of mutual funds that have an investment goal similar to
that of the Fund. The Fund's past performance does not necessarily indicate
how the Fund will perform in the future.
The bar chart does not reflect any sales charge that you may be required to
pay upon purchase or redemption of the Fund's shares. Any sales charge will
reduce your return. The average total return table shows returns with the
maximum sales charge deducted. No sales charge has been applied to the index
used for comparison in the table.
CTFR Limited-Term
Year-by-Year Total Return (at NAV)
[BAR CHART]
1989 7.13% 1994 2.42%
1990 6.50% 1995 5.55%
1991 6.46% 1996 3.94%
1992 4.99% 1997 4.07%
1993 4.02% 1998 3.87%
Best Quarter (of periods shown) Q2 '89 2.20%
Worst Quarter (of periods shown) Q1 '93 0.39%
Average Annual Total Returns (as of 12.31.98)
(with maximum sales charge deducted)
1 year 5 years 10 years
CTFR Limited-Term 2.82% 3.70% 4.75%
Lehman Municipal Bond Index TR 5.84% 6.10% 8.15%
Lipper Short Municipal Debt
Funds Index 4.58% N/A N/A
CTFR LONG-TERM
Objective
CTFR Long-Term (the "Fund") seeks to earn the highest level of interest
income exempt from federal income taxes as is consistent with prudent
investment management, preservation of capital, and the quality and maturity
characteristics of the Fund.
Principal Investment Strategies
The Fund typically invests at least 65% of its net assets in investment
grade debt securities. The Advisor looks for securities with strong credit
quality within their rating category 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. To the extent it
may do so consistent with its investment objective, the Fund follows a
strategy to also seek to provide a competitive rate of total return. There
is no limit on the Fund's average portfolio maturity.
The Fund may invest in a variety of tax-exempt obligations including
tax-supported debt (general obligation bonds of state and local issuers),
various types of revenue debt (transportation, housing, utilities,
hospital), special tax obligations, and qualified private activity bonds and
other state and local government authorities, municipal leases, and
certificates of participation in such investments. The obligations may be
structured as variable rate or adjustable rate obligations and are often
supported by a third party letter of credit.
CTFR Long-Term may purchase unrated securities, so long as the Advisor
determines they are of comparable credit quality. Unrated securities may be
less liquid than those that are rated.
PRINCIPAL RISKS
You could lose money on your investment in the Fund, or the Fund could
underperform, most likely for any of the following reasons:
o The bond market goes down
o The individual bonds in the Fund do not perform as well as expected
o The Advisor's forecast as to interest rates is not correct
o The Advisor's allocation among different sectors of the bond market
does not perform as well as expected
o The Fund is non-diversified. Compared to other funds, the Fund may
invest more of its assets in a smaller number of bonds. Gains or losses on a
single bond may have greater impact on the Fund.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
CTFR Long-Term Performance
The bar chart and table below show the Fund's annual returns and its
long-term performance. The chart and table provide some indication of the
risks of investing in the Fund. The chart shows how the performance of the
shares has varied from year to year. The table compares the Fund's
performance over time to that of the Lehman Municipal Bond Index . This is a
widely recognized, unmanaged index of bond prices. It also shows the Fund's
returns compared to the Lipper General Municipal Debt Funds Index, a
composite index of the annual return of mutual funds that have an investment
goal similar to that of the Fund. The Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
The bar chart does not reflect any sales charge that you may be required to
pay upon purchase or redemption of the Fund's shares. Any sales charge will
reduce your return. The average total return table shows returns with the
maximum sales charge deducted. No sales charge has been applied to the index
used for comparison in the table.
CTFR Long-Term
Year-by-Year Total Return (at NAV)
[BAR CHART]
1989 9.82% 1994 -2.30%
1990 4.75% 1995 16.05%
1991 11.77% 1996 2.89%
1992 7.60% 1997 8.35%
1993 11.11% 1998 5.07%
Best Quarter (of periods shown) Q1 '95 5.99%
Worst Quarter (of periods shown) Q1 '94 -3.59%
Average Annual Total Returns (as of 12.31.98)
(with maximum sales charge deducted)
1 year 5 years 10 years
CTFR Long-Term 1.15% 4.94% 6.94%
Lehman Municipal Bond Index TR 5.84% 6.10% 8.15%
Lipper General Municipal Debt
Funds Index 5.64% 5.70% 7.75%
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Fund. Shareholder fees are paid directly from your account;
annual Fund operating expenses are deducted from Fund assets.
Money Limited- Long-
Mkt. Term Term
Maximum sales charge (load) None 1.00% 3.75%
imposed on purchases
(as a percentage of offering price)
Maximum deferred sales charge (load) None None None1
(as a percentage of purchase or
redemption proceeds, whichever is lower)
Maximum Account Fee 2 None None
Annual fund operating expenses
Management fees .46% .61% .61%
Distribution and service (12b-1) fees None None .09%
Other expenses3 .20% .12% .19%
Total annual fund operating expenses .66% .73% .89%
1 Purchases of Long-Term shares for accounts with $1 million or more are not
subject to front-end sales charges, but may be subject to a 1.0% contingent
deferred sales charge on shares redeemed within 1 year of purchase. (See
"How to Buy Shares)
2 For each account with a balance of less than $1000, the Fund charges a
monthly account maintenance fee of $3.00.
3 Expenses have been restated to reflect expenses expected to be incurred in
1999.
Annual Fund Operating Expenses
Expenses are based on expenses for the Fund's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Fund to Calvert Administrative Services Company, an affiliate of
the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
Rule 12b-1 fees include an asset-based sales charge. Thus, long-term
shareholders in those Funds with such fees may pay more in total sales
charges than the economic equivalent of the maximum front-end sales charge
permitted by rules of the National Association of Securities Dealers, Inc.
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:
o You invest $10,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Portfolio Number of Years Investment is Held
1 Year 3 Years 5 Years 10 Years
Money Market $67 $211 $368 $822
Limited-Term $174 $331 $502 $997
Long-Term $462 $648 $850 $1,430
Principal Investment Practices and Risks
The most concise description of the principal investment strategies and
associated risks is under the earlier summary for each Fund. CTFR
Limited-Term and Long-Term are also permitted to invest in certain other
investments and to use certain investment techniques that have higher risks
associated with them. On the following pages are brief descriptions of the
investments and techniques, summarized earlier along with certain additional
investment techniques and their risks.
For each of the investment practices listed, the table below shows the
limitations for Limited -Term and Long-Term as a percentage of assets and
the principal types of risk involved. (See the pages following the table for
a description of the types of risks). Numbers in this table show maximum
allowable amount only; for actual usage, consult the annual/semi-annual
reports.
Key to Table
@ Fund currently uses
0 Permitted, but not typically used
(% of assets allowable, if restricted)
- -- Not permitted
xN Allowed up to x% of fund's net assets
xT Allowed up to x% of Fund's total assets
NA Not applicable to this type of fund
Investment Practices
- ------------------------------------------ -------- --------
Temporary Defensive Positions. 0 0
During adverse market, economic or
political conditions, the Fund may
depart from its principal investment
strategies by increasing its investment
in U.S. government securities and other
short-term interest-bearing securities.
During times of any temporary defensive
positions, a Fund may not be able to
achieve its investment objective Risks:
Opportunity.
- ------------------------------------------ -------- --------
Conventional Securities:
- ------------------------------------------ -------- --------
Investment grade bonds. Bonds rated @ @
BBB/Baa or higher or comparable unrated
bonds. Risks: Interest Rate, Market ,
Credit and Information.
- ------------------------------------------ -------- --------
<PAGE>
- ------------------------------------------ -------- --------
Below-investment grade bonds. Bonds @ @
rated below BBB/Baa or comparable 15N 35N
unrated bonds, also known as high-yield
bonds. They are subject to greater
credit risk than investment grade bonds.
Risks: Credit, Market, Interest Rate,
Liquidity and Information.
- ------------------------------------------ -------- --------
- ------------------------------------------ -------- --------
Unrated debt securities. Bonds that have @ @
not been rated by a recognized rating
agency; the Advisor has determined the
credit quality based on its own
research. Risks: Credit, Market,
Interest Rate, Liquidity and
Information.
- ------------------------------------------ -------- --------
- ------------------------------------------ -------- --------
Illiquid securities. Securities which 15N 15N
cannot be readily sold because there is
no active market. Risks: Liquidity,
Market and Transaction.
- ------------------------------------------ -------- --------
Unleveraged derivative securities
- ------------------------------------------ -------- --------
Asset-backed securities. Securities are @ @
issued by a special purpose entity and
are backed by fixed-income or other
interest bearing assets. Risks: Credit,
Interest Rate and Liquidity.
- ------------------------------------------ -------- --------
- ------------------------------------------ -------- --------
Mortgage-backed securities (typically, @ @
single-family mortgage bonds).
Securities are backed by pools of
mortgages, including passthrough
certificates. Risks: Credit, Extension,
Prepayment, Liquidity and Interest Rate.
- ------------------------------------------ -------- --------
Leveraged derivative instruments
- ------------------------------------------ -------- --------
Options on securities and indices. NA 5N
Contracts giving the holder the right
but not the obligation to purchase or
sell a security (or the cash value, in
the case of an option on an index) at a
specified price within a specified time.
Any options written by the Fund must be
"covered". The limitation is based on
net premium payments. Risks: Interest
Rate, Market, Leverage, Correlation,
Liquidity, Credit and Opportunity.
- ------------------------------------------ -------- --------
<PAGE>
- ------------------------------------------ -------- --------
Futures contract. Agreement to buy or NA 5N
sell a specific amount of a commodity or
financial instrument at a particular
price on a specific future date. Risks:
Interest Rate, Market, Leverage,
Correlation, Liquidity and Opportunity.
- ------------------------------------------ -------- --------
- ------------------------------------------ -------- --------
Structured securities. Inverse floating NA @
rate municipal notes and bonds. These
securities tend to be highly sensitive
to interest rate movements. Risks:
Credit, Interest Rate, Market, Leverage,
Liquidity and Correlation.
- ------------------------------------------ -------- --------
The Funds have additional investment policies and restrictions that are not
principal to their investment strategies (for example, repurchase
agreements, reverse repurchase agreements, borrowing, pledging, and
securities lending, and when-issued securities.) These policies and
restrictions are discussed in the SAI.
Types of Investment Risk
Correlation risk
This occurs when a Fund "hedges"- uses one investment to offset the Fund's
position in another. If the two investments do not behave in relation to one
another the way Fund managers expect them to, then unexpected or undesired
results may occur. For example, a hedge may eliminate or reduce gains as
well as offset losses.
Credit risk
The risk that the issuer of a security or the counterparty to an investment
contract may default or become unable to pay its obligations when due.
Extension risk
The risk that an unexpected rise in interest rates will extend the life of a
mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
Information risk
The risk that information about a security or issuer or the market might not
be available, complete, accurate or comparable.
Interest rate risk
The risk that changes in interest rates will adversely affect the value of
an investor's securities. When interest rates rise, the value of
fixed-income securities will generally fall. Conversely, a drop in interest
rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities and zero coupon/"stripped" coupon
securities ("strips") are subject to greater interest rate risk.
Leverage risk
The risk that occurs in some securities or techniques which tend to magnify
the effect of small changes in an index or a market. This can result in a
loss that exceeds the amount actually invested.
Liquidity risk
The risk that occurs when investments cannot be readily sold. A Fund may
have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
Management risk
The risk that a Fund's portfolio management practices might not work to
achieve their desired result.
Market risk
The risk that securities prices in a market, a sector or an industry will
fluctuate, and that such movements might reduce an investment's value.
Opportunity risk
The risk of missing out on an investment opportunity because the assets
needed to take advantage of it are committed to less advantageous
investments or strategies.
Political risk
The risk that may occur with foreign investments, and means that the value
of an investment may be adversely affected by nationalization, taxation,
war, government instability or other economic or political actions or
factors.
Prepayment risk
The risk that unanticipated prepayments may occur, reducing the value of a
mortgage-backed security. The Fund must then reinvest those assets at the
current, market rate which may be lower.
Transaction risk
The risk that a Fund may be delayed or unable to settle a transaction or
that commissions and settlement expenses may be higher than usual.
CALVERT GROUP AND THE PORTFOLIO MANAGEMENT TEAM
Calvert Asset Management Company, Inc. (4550 Montgomery Avenue, Suite 1000N,
Bethesda, MD 20814) ("CAMCO") is the Funds' investment advisor and provides
day-to-day investment management services to the Funds. It has been managing
mutual funds since 1976. CAMCO is the investment advisor for over 25 mutual
funds, including the first and largest family of socially screened funds. As
of December 31, 1998, CAMCO had $6 billion in assets under management.
CAMCO uses a team approach to its management of the Fund. Since inception,
investment selections for the Fund have been made by a committee of the
Advisor's fixed-income portfolio managers. Reno J. Martini, Senior Vice
President and Chief Investment Officer of CAMCO, heads this team and
oversees the management of all Calvert Funds for CAMCO. Mr. Martini has over
18 years of experience in evaluating and purchasing municipal securities and
has been the head of CAMCO's asset management team since 1985.
ADVISORY FEES
The following table shows the aggregate annual advisory fee paid to CAMCO by
each Fund for the most recent fiscal year as a percentage of that Fund's
average daily net assets.
Fund Advisory Fee
CTFR Money Market .20%
CTFR Limited-Term .60%
CTFR Long Term .60%
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. For more information, please visit our website at
www.calvertgroup.com
HOW TO BUY SHARES
Getting Started - Before You Open an Account
You have a few decisions to make before you open an account in a mutual fund.
First, decide which fund or funds best suits your needs and your goals.
Second, decide what kind of account you want to open. Calvert offers
individual, joint, trust, Uniform Gifts/Transfers to Minor Accounts, and
several other types of accounts.
CTFR Money Market offers three classes of shares, all of which are sold
without a sales charge. Only CTFR Money Market Class O is offered by this
prospectus.
Shares of CTFR Limited-Term and Long-Term are sold with a front-end sales
charge.
Investors pay a sales charge at the time of each purchase. This table shows
the charges both as a percentage of offering price and as a percentage of
the amount you invest. The term "offering price" includes the front-end
sales charge. If you invest more, the sales charge will be lower. For
example, if you invest more than $50,000 in Limited-Term, or if your
cumulative purchases or the value in your account is more than $50,000,4
then the sales charge is reduced to .75%.
Limited-Term
Your investment Sales Charge as % of Amount
% of offering price Invested
Less than $50,000 1.00% 1.01%
$50,000 but less than $100,000 0.75% 0.76%
$100,000 but less than $250,000 0.50% 0.50%
$250,000 and over None None
Long-Term
Your investment Sales Charge % % of Amount
of offering price Invested
Less than $50,000 3.75% 3.90%
$50,000 but less than $100,000 3.00% 3.09%
$100,000 but less than $250,000 2.25% 2.30%
$250,000 but less than $500,000 1.75% 1.78%
$500,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 and over None* None*
4 This is called "Rights of Accumulation." The sales charge is calculated by
taking into account not only the dollar amount of the new purchase of
shares, but also the higher of cost or current value of shares you have
previously purchased in Calvert Group Funds that impose sales charges. This
automatically applies to your account for each new purchase of shares.
* Purchases of CTFR Long-Term shares at NAV for accounts with $1,000,000 or
more are subject to a one year CDSC of 1.00%. See the "Calculation of
Contingent Deferred Sales Charge."
The front-end sales charge may be waived for certain purchases or investors,
such as participants in certain group retirement plans or other qualified
groups and clients of registered investment advisers. For details on these
and other purchases that may qualify for a reduced sales charge, see Exhibit
A.
Calculation of Contingent Deferred Sales Charge
The CDSC will not be charged on shares you received as dividends or from
capital gains distributions or on any capital appreciation (gain in the
value) of shares that are sold.
Shares that are not subject to the CDSC will be redeemed first, followed by
shares you have held the longest. The CDSC is calculated by determining the
share value at both the time of purchase and redemption and then multiplying
whichever value is less by the percentage that applies as shown above. If
you choose to sell only part of your shares, the capital appreciation for
those shares only is included in the calculation, rather than the capital
appreciation for the entire account.
Distribution and Service Fees
CTFR Long-Term has adopted a plan under Rule 12b-1 of the Investment Company
Act of 1940 that allows the Fund to pay distribution fees for the sale and
distribution of its shares. The distribution plan also pays service fees to
persons (such as your financial professional) for services provided to
shareholders. Because these fees are paid out of a Fund's assets on an
ongoing basis, over time, these fees will increase the cost of your
investment and may cost you more than paying other types of sales charges.
Please see Exhibit B for more service fee information.
The table below shows the maximum annual percentage payable under the
distribution plan, and the amount actually paid by each Fund for the most
recent fiscal year. The fees are based on average daily net assets.
Maximum Payable under Plan/Amount Actually Paid
CTFR Money Market None/None
CTFR Limited-Term None/None
CTFR Long-Term 0.35%/0.09%
Next Step- Account Application
Complete and sign an application for each new account. For more information,
contact your broker or our shareholder services department at 800-368-2748.
Minimum To Open an Account Minimum additional
$2,000 investments -$250
Please make your check payable
to the Fund and mail it to:
New Accounts Subsequent Investments
(include application) (include investment slip)
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas, City MO Kansas City, MO
64141-6544 64141-6739
Certified or c/o NFDS
Overnight Mail 330 West 9th St.
Kansas City, MO
64105-1807
At the Calvert Office Visit the Calvert Office to make
investments by check. See the back cover page for the address.
IMPORTANT - HOW SHARES ARE PRICED
The price of shares is based on each Fund's net asset value ("NAV"). NAV is
computed 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. If a Fund has more than one class of shares, the NAV of
each class will be different, depending on the number of shares outstanding
for each class.
Portfolio securities and other assets are valued based on market quotations,
except that securities maturing within 60 days are valued at amortized cost.
If market quotations are not readily available, securities are valued by a
method that the Fund's Board of Trustees/Directors believes accurately
reflects fair value. CTFR Money Market is valued according to the "amortized
cost" method, which is intended to stabilize the NAV at $1 per share.
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, however,
such as Columbus Day and Veterans' Day, when the NYSE is open and the Fund
is open but purchases cannot be received because the banks are closed.
WHEN YOUR ACCOUNT WILL BE CREDITED
Your purchase will be processed at the NAV next calculated after your order
is received in good order. All of your purchases must be made in US dollars.
No cash will be accepted. No credit card or credit loan checks will be
accepted. Each Fund reserves the right to suspend the offering of shares for
a period of time or to reject any specific purchase order. As a convenience,
check purchases received at Calvert's office in Bethesda, Maryland will be
sent by overnight delivery to the Transfer Agent and will be credited the
next business day upon receipt. Any check purchase received without an
investment slip may cause delayed crediting. If your check does not clear
your bank, your purchase will be canceled and you will be charged a $25 fee
plus any costs incurred. All purchases will be confirmed and credited to
your account in full and fractional shares (rounded to the nearest 1/1000th
of a share).
CTFR Money Market
Your purchase will be credited at the net asset value calculated after your
order is received and accepted. If the Transfer Agent receives your wire
purchase by 5 p.m. ET, your account will begin earning dividends on the next
business day. Exchanges begin earning dividends the next business day after
the exchange request is received by mail or telephone. Purchases received by
check will begin earning dividends the next business day after they are
credited to the account.
OTHER CALVERT GROUP FEATURES
Calvert Information Network
For 24 hour performance and account information call 800-368-2745 or visit
http://www.calvertgroup.com
You can obtain current performance and pricing information, verify account
balances, and authorize certain transactions with the convenience of one
phone call, 24 hours a day.
Account Services
By signing up for services when you open your account, you avoid having to
obtain a signature guarantee. If you wish to add services at a later date, a
signature guarantee to verify your signature may be obtained from any bank,
trust company and savings and loan association, credit union, broker-dealer
firm or member of a domestic stock exchange. A notary public cannot provide
a signature guarantee.
Calvert Money Controller
Calvert Money Controller allows you to purchase or sell shares by electronic
funds transfer without the time delay of mailing a check or the added
expense of a wire. Use this service to transfer up to $300,000
electronically. Allow one or two business days after you place your request
for the transfer to take place. Money transferred to purchase new shares
will be subject to a hold of up to 10 business days before redemption
requests will be honored. Transaction requests must be received by 4 p.m.
ET. You may request this service on your initial account application.
Calvert Money Controller transactions returned for insufficient funds will
incur a $25 charge.
Telephone Transactions
You may purchase, redeem, or exchange shares, wire funds and use Calvert
Money Controller by telephone if you have pre-authorized service
instructions. You receive telephone privileges automatically when you open
your account unless you elect otherwise. For our mutual protection, the
Fund, the shareholder servicing agent and their affiliates use precautions
such as verifying shareholder identity and recording telephone calls to
confirm instructions given by phone. A confirmation statement is sent for
most transactions; please review this statement and verify the accuracy of
your transaction immediately.
Exchanges
Calvert Group offers a wide variety of investment options that includes
common stock funds, tax-exempt and corporate bond funds, and money market
funds (call your broker or Calvert representative for more information). We
make it easy for you to purchase shares in other Calvert funds if your
investment goals change. The exchange privilege offers flexibility by
allowing you to exchange shares on which you have already paid a sales
charge from one mutual fund to another at no additional charge.
Complete and sign an account application, taking care to register your new
account in the same name and taxpayer identification number as your existing
Calvert account(s). Exchange instructions may then be given by telephone if
telephone redemptions have been authorized and the shares are not in
certificate form.
Before you make an exchange, please note the following:
Each exchange represents the sale of shares of one Fund and the purchase of
shares of another. Therefore, you could realize a taxable gain or loss.
You may exchange shares acquired by reinvestment of dividends or
distributions into another Calvert Fund at no additional charge.
Shares may only be exchanged for shares of the same class of another Calvert
Fund.
No CDSC is imposed on exchanges of shares subject to a CDSC at the time of
the exchange. The applicable CDSC is imposed at the time the shares acquired
by the exchange are redeemed.
Shareholders (and those managing multiple accounts) who make two purchases
and two redemptions of shares of the same Fund during any six-month period
will be given written notice and may be prohibited from placing additional
investments. This policy does not prohibit a shareholder from redeeming
shares of any Fund, and does not apply to trades solely between money market
funds.
Each Fund reserves the right to terminate or modify the exchange privilege
with 60 days' written notice.
Combined General Mailings (Householding)
Multiple accounts with the same social security number will receive one
mailing per household of information such as prospectuses and semi-annual
and annual reports. You may request further grouping of accounts to receive
fewer mailings. Separate statements will be generated for each separate
account and will be mailed in one envelope for each combination above.
Special Services and Charges
Each Fund pays for shareholder services but not for special services that
are required by a few shareholders, such as a request for a historical
transcript of an account or a stop payment on a draft. You may be required
to pay a fee for these special services; for example, the fee for stop
payments is $25.
If you are purchasing shares through a program of services offered by a
broker/dealer or financial institution, you should read the program
materials together with this Prospectus. Certain features may be modified in
these programs. Investors may be charged a fee if they effect transactions
in Fund shares through a broker or agent.
Minimum Account Balance
Please maintain a balance in each of your accounts of at least $1,000 per
class. If the balance in your CTFR Money Market account falls below the
minimum during a month, a $3.00 monthly fee may be charged to your account.
If the balance in any of your accounts falls below the minimum during a
month, your account may be closed and the proceeds mailed to the address of
record. You will receive notice that your account is below the minimum, and
will be closed if the balance is not brought up to the required minimum
amount within 30 days.
DIVIDENDS, CAPITAL GAINS AND TAXES
Each Fund pays dividends from its net investment income as shown below. 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 and distribution payments will vary between classes.
CTFR Money Market Accrued daily, paid monthly
CTFR Limited-Term Paid monthly
CTFR Long-Term Paid monthly
Dividend payment options
Dividends and any distributions are automatically reinvested in the same
Fund at NAV (without sales charge), unless you elect to have amounts of $10
or more paid in cash (by check or by Calvert Money Controller). Dividends
and distributions from any Calvert Group Fund may be automatically invested
in an identically registered account in any other Calvert Group Fund at NAV.
If reinvested in the same account, new shares will be purchased at NAV on
the reinvestment date, which is generally 1 to 3 days prior to the payment
date. You must notify the Funds in writing to change your payment options.
If you elect to have dividends and/or distributions paid in cash, and the US
Postal Service returns the check as undeliverable, it, as well as future
dividends and distributions, will be reinvested in additional shares. No
dividends will accrue on amounts represented by uncashed distribution or
redemption checks.
Buying a Dividend (Not Applicable to CTFR Money Market)
At the time of purchase, the share price of each class may reflect
undistributed income, capital gains or unrealized appreciation of
securities. Any income or capital gains from these amounts which are later
distributed to you are fully taxable. On the record date for a distribution,
share value is reduced by the amount of the distribution. If you buy shares
just before the record date ("buying a dividend") you will pay the full
price for the shares and then receive a portion of the price back as a
taxable distribution.
Federal Taxes
Dividends derived from interest on municipal obligations constitute
exempt-interest dividends, on which you are not subject to federal income
tax. However, dividends which are from taxable interest and any
distributions of short term capital gain are taxable to you as ordinary
income. If the Fund makes any distributions of long-term capital gains, then
these are taxable to you as long-term capital gains, regardless of how long
you held your shares of the Fund. Dividends attributable to interest on
certain private activity bonds must be included in federal alternative
minimum tax for individuals and for corporations. The Fund may invest in and
derive up to 20% of its income from taxable investments, for liquidity
purposes or pending investment. Interest earned from taxable investments
will be taxable as ordinary income.
If any taxable income or gains are paid, in January, the Fund will mail you
Form 1099-DIV indicating the federal tax status of 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.
CTFR Limited-Term and Long-Term Only:
You may realize a capital gain or loss when you sell or exchange shares.
This capital gain or loss will be short- or long-term, depending on how long
you have owned the shares which were sold. In January, these Funds will mail
you Form 1099-B indicating the total amount of all sales, including
exchanges. You should keep your annual year-end account statements to
determine the cost (basis) of the shares to report on your tax returns.
Other Tax Information
You may be subject to state or local taxes on your investment, depending on
the laws in your area. A letter will be mailed to you in January detailing
the percentage invested in your state the previous tax year. Such dividends
may be exempt from certain state income taxes.
Taxpayer Identification Number
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. You will also be prohibited from opening another
account by exchange. If this TIN information is not received within 60 days
after your account is established, your account may be redeemed (closed) at
the current NAV on the date of redemption. Calvert Group reserves the right
to reject any new account or any purchase order for failure to supply a
certified TIN.
HOW TO SELL SHARES
You may redeem all or a portion of your shares on any day your Fund is open
for business, provided the amount requested is not on hold. When you
purchase by check or with Calvert Money Controller (electronic funds
transfer), the purchase will be on hold for up to 10 business days from the
date of receipt. During the hold period, redemptions proceeds will not be
sent until the Transfer Agent is reasonably satisfied that the purchase
payment has been collected. Drafts written on CTFR Money Market during the
hold period will be returned for uncollected funds.
Your shares will be redeemed at the next NAV calculated after your
redemption request is received (less any applicable CDSC). 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. Calvert Money Controller redemptions generally will be
credited to your bank account by the second business day after your phone
call. 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 affected 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, however, such as Columbus Day and Veterans' Day, when the
NYSE is open and the Fund is open but redemptions cannot be mailed or wired
because the post offices and banks are closed.
Follow these suggestions to ensure timely processing of your redemption
request:
By Telephone
You may redeem shares from your account by telephone and have your money
mailed to your address of record or electronically transferred or wired to a
bank you have previously authorized. A charge of $5 may be imposed on wire
transfers of less than $1,000.
Written Requests
Calvert Group, P.O. Box 419544, Kansas City, MO 64141-6544
Your letter should include your account number and fund and the number of
shares or the dollar amount you are redeeming. Please provide a daytime
telephone number, if possible, for us to call if we have questions. If the
money is being sent to a new bank, person, or address other than the address
of record, your letter must be signature guaranteed.
Draftwriting (CTFR Money Market only)
You may redeem shares in your CTFR Money Market account by writing a draft
for at least $250. If you complete and return the signature card for
Draftwriting, the Fund will mail bank drafts to you, printed with your name
and address. Drafts may not be ordered until your initial purchase has
cleared. Calvert will provide printed drafts (checks). You may not print
your own. Any customer-printed checks will not be honored and will be
returned without notice. The Fund will charge a service fee for drafts
returned for insufficient funds. The Fund will charge $25 for any stop
payment on drafts. The Fund will charge a $25 fee on drafts returned for any
reason. As a service to shareholders, shares may be automatically
transferred between your Calvert accounts to cover drafts you have written.
The signature of only one authorized signer is required to honor a draft.
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may have
up to two (2) redemption checks for a fixed amount sent to you on the 15th
of the month, simply by sending a letter with all information, including
your account number, and the dollar amount ($100 minimum). If you would like
a regular check mailed to another person or place, your letter must be
signature guaranteed. Shares subject to the one-year CDSC which are redeemed
by Systematic Check Redemption will be charged the CDSC.
Corporations and Associations
Your letter of instruction and corporate resolution should be signed by
person(s) authorized to act on the account, accompanied by signature
guarantee(s).
Trusts
Your letter of instruction should be signed by the Trustee(s) (as
Trustee(s)), with a signature guarantee. (If the Trustee's name is not
registered on your account, please provide a copy of the trust document,
certified within the last 60 days.)
Through your Dealer
Your dealer must receive your request before the close of regular trading on
the NYSE to receive that day's NAV. Your dealer will be responsible for
furnishing all necessary documentation to Calvert Group and may charge you
for services provided.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the past 5 years (or if shorter, the period of the
Fund's operations). Certain information reflects financial results for a
single share, by Fund and Class. The total returns in the table represent
the rate that an investor would have earned (or lost) on an investment in a
Fund (assuming reinvestment of all dividends and distributions), and does
not reflect any applicable front- or back-end sales charge. This information
has been audited by PricewaterhouseCoopers LLP whose report, along with a
Fund's financial statements, are included in the Fund's annual report, which
is available upon request.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
Class O Shares 1998 1997 1996
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .032 .033 .033
Distributions from
Net investment income (.032) (.033) (.033)
Net asset value, ending $1.00 $1.00 $1.00
Total return* 3.22% 3.38% 3.33%
Ratios to average net assets:
Net investment income 3.17% 3.32% 3.28%
Total expenses + .65% .65% .65%
Net expenses .64% .64% .64%
Net assets, ending
(in thousands) $1,355,322 $1,405,350 $1,550,731
Number of shares outstanding,
ending (in thousands) 1,355,203 1,405,404 1,550,724
Years Ended
December 31, December 31,
Class O Shares 1995 1994
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .040 .028
Distributions from
Net investment income (.040) (.028)
Net asset value, ending $1.00 $1.00
Total return* 4.02% 2.81%
Ratios to average net assets:
Net investment income 3.93% 2.75%
Total expenses + .62% --
Net expenses .61% .62%
Net assets, ending
(in thousands) $1,740,839 $1,344,595
Number of shares outstanding,
ending (in thousands) 1,740,948 1,344,668
<PAGE>
LIMITED-TERM PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $10.70 $10.69 $10.72
Income from investment operations
Net investment income .40 .42 .44
Net realized and unrealized
gain (loss) .01 .01 (.03)
Total from investment
operations .41 .43 .41
Distributions from
Net investment income (.40) (.42) (.44)
Total increase (decrease)
in net asset value .01 .01 (.03)
Net asset value, ending $10.71 $10.70 $10.69
Total return* 3.87% 4.07% 3.94%
Ratios to average net assets:
Net investment income 3.70% 3.91% 4.12%
Total expenses + .71% .70% .71%
Net expenses .70% .69% .70%
Portfolio turnover 45% 52% 45%
Net assets, ending
(in thousands) $547,212 $490,180 $512,342
Number of shares outstanding,
ending (in thousands) 51,073 45,808 47,922
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $10.59 $10.72
Income from investment operations
Net investment income .45 .39
Net realized and unrealized
gain (loss) .13 (.13)
Total from investment
operations .58 .26
Distributions from
Net investment income (.45) (.39)
Total increase (decrease) in
net asset value .13 (.13)
Net asset value, ending $10.72 $10.59
Total return* 5.55% 2.42%
Ratios to average net assets:
Net investment income 4.21% 3.60%
Total expenses + .71% --
Net expenses .70% .66%
Portfolio turnover 33% 27%
Net assets, ending
(in thousands) $457,707 $544,822
Number of shares outstanding,
ending (in thousands) 42,690 51,424
<PAGE>
LONG-TERM PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $17.28 $16.81 $17.31
Income from investment operations
Net investment income .78 .87 .93
Net realized and unrealized
gain (loss) .06 .50 (.46)
Total from investment
operations .84 1.37 .47
Distributions from
Net investment income (.80) (.87) (.95)
Net realized gains (.51) (.03) (.02)
Total distributions (1.31) (.90) (.97)
Total increase (decrease) in
net asset value (.47) .47 (.50)
Net asset value, ending $16.81 $17.28 $16.81
Total return * 5.01% 8.41% 2.89%
Ratios to average net assets:
Net investment income 4.58% 5.16% 5.50%
Total expenses + .87% .87% .89%
Net expenses .84% .85% .86%
Portfolio turnover 72% 41% 41%
Net assets, ending
(in thousands) $57,677 $50,966 $52,945
Number of shares outstanding,
ending (in thousands) 3,431 2,950 3,149
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $15.83 $17.15
Income from investment operations
Net investment income .95 .93
Net realized and unrealized
gain (loss) 1.53 (1.33)
Total from investments 2.48 (.40)
Distributions from
Net investment income (.91) (.92)
Net realized gains (.09) --
Total distributions (1.00) (.92)
Total increase (decrease) in
net asset value 1.48 (1.32)
Net asset value, ending $17.31 $15.83
Total return * 16.05% (2.30%)
Ratios to average net assets:
Net investment income 5.71% 5.73%
Total expenses + .87% --
Net expenses .85% .81%
Portfolio turnover 58% 98%
Net assets, ending (in thousands)$57,359 $47,267
Number of shares outstanding,
ending (in thousands) 3,314 2,985
(a) Annualized
* Total return does not reflect deduction of Class A front-end sales
charge.
+ Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly; such reductions are included in
the ratio of net expenses. Total expenses are presented net of expense
waivers and reimbursements.
^ From October 2, 1995 inception.
EXHIBIT A
REDUCED SALES CHARGES -- (CTFR Limited-Term and CTFR Long-Term)
You may qualify for a reduced sales charge through several purchase plans
available. You must notify the Fund at the time of purchase to take
advantage of the reduced sales charge.
Rights of Accumulation can be applied to several accounts
The sales charge breakpoints are automatically calculated for each account
based on the higher of cost or current value of shares previously purchased.
This privilege can be applied to a family group or other qualified group*
upon request. Shares could then be purchased at the reduced sales charge
which applies to the entire group; that is, based on the higher of cost or
current value of shares previously purchased and currently held by all the
members of the group.
Letter of Intent
If you (or your group, as described above) plan to purchase $50,000 or more
of Calvert Fund shares over the next 13 months, your sales charge may be
reduced through a "Letter of Intent." You pay the lower sales charge
applicable to the total amount you plan to invest over the 13-month period,
excluding any money market portfolio purchases. Part of your shares will be
held in escrow, so that if you do not invest the amount indicated, you will
have to pay the sales charge applicable to the smaller investment actually
made. For more information, see the SAI.
Neither the Funds, nor Calvert Distributors, Inc. ("CDI"), nor any affiliate
thereof will reimburse a plan or participant for any sales charges paid
prior to receipt of such written communication and confirmation by Calvert
Group. Plan administrators should send requests for the waiver of sales
charges based on the above conditions to: Calvert Group Retirement Plans,
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
* A "qualified group" is one which:
1. has been in existence for more than six months, and
2. has a purpose other than acquiring shares at a discount, and
3. satisfies uniform criteria which enable CDI and brokers offering shares
to realize economies of scale in distributing such shares.
A qualified group must have more than 10 members, must be available to
arrange for group meetings between representatives of CDI or brokers
distributing shares, must agree to include sales and other materials related
to the Funds in its publications and mailings to members at reduced or no
cost to CDI or brokers. A pension plan is not a qualified group for rights
of accumulation.
Other Circumstances
There is no sales charge on shares of any Fund of the Calvert Group of Funds
sold to (i) current or retired Directors, Trustees, or Officers of the
Calvert Group of Funds, employees of Calvert Group, Ltd. and its affiliates,
or their family members; (ii) CSIF Advisory Council Members, directors,
officers, and employees of any subadvisor for the Calvert Group of Funds,
employees of broker/dealers distributing the Fund's shares and immediate
family members of the Council, subadvisor, or broker/dealer; (iii) Purchases
made through a Registered Investment Advisor; (iv) Trust departments of
banks or savings institutions for trust clients of such bank or institution,
(v) Purchases through a broker maintaining an omnibus account with the Fund,
provided the purchases are made by (a) investment advisors or financial
planners placing trades for their own accounts (or the accounts of their
clients) and who charge a management, consulting, or other fee for their
services; or (b) clients of such investment advisors or financial planners
who place trades for their own accounts if such accounts are linked to the
master account of such investment advisor or financial planner on the books
and records of the broker or agent; or (c) retirement and deferred
compensation plans and trusts, including, but not limited to, those defined
in section 401(a) or section 403(b) of the I.R.C., and "rabbi trusts."
Established Accounts
Shares of the Long-Term Portfolio may be sold at net asset value to you if
your account was established on or before September 15, 1987, or April 30,
1988, for the Limited-Term Portfolio.
Dividends and Capital Gain Distributions from other Calvert Group Funds
You may prearrange to have your dividends and capital gain distributions
from another Calvert Group Fund automatically invested in another account
with no additional sales charge.
Purchases made at NAV
Except for money market funds, if you make a purchase at NAV, you may
exchange that amount to another Calvert Group Fund at no additional sales
charge.
Reinstatement Privilege
If you redeem shares and then within 30 days decide to reinvest in the same
Fund, you may do so at the net asset value next computed after the
reinvestment order is received, without a sales charge. You may use the
reinstatement privilege only once. The Funds reserve the right to modify or
eliminate this privilege.
EXHIBIT B
Service Fees and Arrangements With Dealers
Calvert Distributors, Inc., each Fund's underwriter, pays dealers a
commission, or reallowance (expressed as a percentage of the offering price)
when you purchase shares. CDI also pays dealers an ongoing service fee while
you own shares of a Fund (expressed as an annual percentage rate of average
daily net assets held in Calvert accounts by that dealer). The table below
shows the amount of payment which differs depending on the Class.
Maximum Commission/Service Fees
CTFR Money Market None/0.25%
CTFR Limited-Term 1.00%/0.15%
CTFR Long-Term 3.00%/0.25%**
**If finder's fee is paid (see below), CTFR Long-Term Service fee begins
13th month after purchase.
Occasionally, CDI may reallow to dealers the full front-end sales charge.
CDI may also pay additional concessions, including non-cash promotional
incentives, such as merchandise or trips, to brokers employing registered
representatives who have sold or are expected to sell a minimum dollar
amount of shares of the Funds and/or shares of other Funds underwritten by
CDI. CDI may make expense reimbursements for special training of a broker's
registered representatives, advertising or equipment, or to defray the
expenses of sales contests. CAMCO, CDI, or their affiliates may pay certain
broker-dealers and/or other persons, for the sale and distribution of the
securities or for services to the Fund. Payments may include additional
compensation based on assets held through that firm beyond the regularly
scheduled rates, and finder's fees. CDI pays dealers a finder's fee on CTFR
Long-Term shares purchased at NAV in accounts with $1 million or more. The
CTFR Long-Term finder's fee is 1% of the NAV purchase amount on the first $2
million, .80% on $2 to $3 million, .50% on $3 to $50 million, .25% on $50 to
$100 million, and .15 over $100 million. CDI also pays dealers a finder's
fee on CTFR Limited-Term shares purchased at NAV in accounts with $250,000
or more. The CTFR Limited-Term Finder's fee is 0.10% of the NAV purchase
amount. CDI reserves the right to recoup any portion of the amount paid to
the dealer if the investor redeems some or all of the shares from the Funds
within 12 months of the date of purchase. All payments will be in compliance
with the rules of the National Association of Securities Dealers, Inc.
To Open an Account:
800-368-2748
Performance and Prices:
Calvert Information Network
24 hours, 7 days a week
800-368-2745
Service for Existing Accounts:
Shareholders 800-368-2745
Brokers 800-368-2746
TDD for Hearing-Impaired:
800-541-1524
Branch Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o NFDS
330 West 9th Street
Kansas City, MO 64105
Calvert Group Web-Site
Address: http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
For investors who want more information about the Funds, the following
documents are available free upon request:
Annual/Semi-Annual Reports: Additional information about each Fund's
investments is available in the Fund's Annual and Semi-Annual reports to
shareholders. In each Fund's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI for each Fund provides
more detailed information about the Fund and is incorporated into this
prospectus by reference.
You can get free copies of reports and SAIs, request other information and
discuss your questions about the Funds by contacting your broker, or the
Funds at:
Calvert Group
4550 Montgomery Ave, Suite 1000N
Bethesda, Md. 20814
Telephone: 1-800-368-2745
Calvert Group Web-Site
Address: http://www.calvertgroup.com
You can review the Funds' reports and SAIs at the public Reference Room of
the Securities and Exchange Commission. You can get text only copies:
o For a fee, by writing to or calling the Public Reference Room of
the Commission, Washington, D.C. 20549-6009, Telephone: 1-800-SEC-0330.
o Free from the Commission's Internet website at http://www.sec.gov.
Investment Company Act file: no. 811-3101 (CTFR)
<PAGE>
PROSPECTUS
April 30, 1999
CALVERT TAX-FREE RESERVES (CTFR)
Money Market Portfolio Institutional Class
About the Fund
2 Investment objective, strategy, past performance
3 Fees and Expenses
About Your Investment
3 Calvert Group
3 Advisory Fees
4 How to Buy Shares
4 Other Calvert Group Features
(Exchanges, Minimum Account Balance, etc.)
5 Dividends, Capital Gains and Taxes
6 How to Sell Shares
7 Financial Highlights
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 on the accuracy or adequacy of
this prospectus. Any representation to the contrary is a criminal offense.
Investment Objective, Strategy and Past Performance
Objective
CTFR Money Market (the "Fund") seeks to earn the highest level of interest
income, exempt from federal income taxes, as is consistent with prudent
investment management, preservation of capital, and the quality and maturity
characteristics of the Fund.
Principal Investment Strategies and Related Risks
The Fund invests in fixed and floating rate municipal bonds and notes,
variable rate demand notes, tax-exempt commercial paper, and other high
quality, short-term municipal obligations. 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 (Rule 2a-7) requirements.
Many of the instruments held by the Fund are supported by letters of credit
issued by banks; thus, the Fund has a wide exposure to the banking industry.
The Fund 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 Fund's yield 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 Fund
limits the amount it invests in any one issuer to try to lessen its exposure.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $ 1.00 per share, it is possible to lose money by investing in
the Fund.
CTFR Money Market Institutional Class Performance
The bar chart and table below show the Institutional Class' annual returns
and its long-term performance. The chart and table provide some indication
of the risks of investing in the Fund. The chart shows how the performance
has varied from year to year. The table compares its returns over time to
the Lipper Institutional Tax-Exempt Money Market Funds Index, a composite
index of the annual return of mutual funds that have an investment goal
similar to that of the Fund. The Fund's past performance does not
necessarily indicate how the Fund will perform in the future.
[BAR CHART]
1998 3.58%
Average Annual Total Returns (as of 12.31.98)
1 year 5 years Since
Inception*
CTFR Money Market
Institutional 3.58% N/A 3.63%
Lipper Institutional Tax-Exempt
Money Market Funds Index 3.24% N/A 3.31%
Best Quarter (of periods shown) Q2 '98 0.95%
Worst Quarter (of periods shown) Q4 '98 0.85%
*Fund inception 8/31/97.
For current yield information on the Institutional Class call 800-317-2274,
or
visit Calvert Group's website at www.calvertgroup.com/institutional
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Fund. Shareholder fees are paid directly from your account;
annual Fund operating expenses are deducted from Fund assets.
Maximum sales charge (load) None
imposed on purchases
Maximum deferred sales charge (load) None
Annual fund operating expenses
Management fees .25
Distribution and service (12b-1) fees None
Other expenses 1 .06
Total annual fund operating expenses .31
1 Expenses have been restated to reflect expenses expected to be incurred in
1999.
Annual Fund Operating Expenses
Expenses are based on expenses for the Fund's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Fund to Calvert Administrative Services Company, an affiliate of
the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
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:
o You invest $1,000,000 in the Fund for the time periods indicated;
o Your investment has a 5% return each year; and
o The Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Number of Years Investment is Held
1 Year 3 Years 5 Years 10 Years
CTFR Money Market
Institutional Class $3,173 $9,971 $17,423 $39,333
About Calvert Group
CAMCO (4550 Montgomery Avenue, Suite 1000N, Bethesda, MD 20814) is the
Funds' investment advisor and provides day-to-day investment management
services to the Funds. It has been managing mutual funds since 1976. CAMCO
is the investment advisor for over 25 mutual funds. As of December 31, 1998,
CAMCO had $6 billion in assets under management.
Advisory Fees
The aggregate annual advisory fee paid to CAMCO by the Fund for the most
recent fiscal year as a percentage of that Fund's average daily net assets
was 20%.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, Calvert 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 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. For more information, please visit our website at
www.calvertgroup.com
SHAREHOLDER GUIDE
HOW TO BUY SHARES
Complete and sign an application for each new account. For more information,
please contact the Calvert Institutional Marketing Group at 800-317-2274.
The minimum initial investment and minimum balance required is $1,000,000.
The minimum for subsequent investments is $25,000. Investments may be made
by wire or by exchange from another Calvert Group account.
Send your wire to:
ABA#011000028
FBO: CTFR Money Market Instit. Fund 718
Wire Account #9903-765-7
Insert your name and account number here
State Street Bank & Trust Company
Boston, Massachusetts
Important - How Shares are Priced
The price of shares is based on the Fund's net asset value ("NAV"). NAV is
computed by adding the value of the Fund's holdings plus other assets,
subtracting liabilities, and then dividing the result by the number of
shares outstanding.
The Fund is valued according to the "amortized cost" method, which is
intended to stabilize the NAV at $1 per share.
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). The Fund is open for business each day the
NYSE is open. Please note that there are some federal holidays, however,
such as Columbus Day and Veterans' Day, when the NYSE is open and the Fund
is open but purchases cannot be received because the banks are closed.
When Your Account Will Be Credited
Your purchase will be processed at the NAV calculated after your order is
received and accepted. A telephone order placed to Calvert Institutional
Marketing Group by 11:00 a.m. Eastern time will receive the dividend on Fund
shares declared that day if federal funds are received by the custodian by 5
p.m. Eastern time. Telephone orders placed after 11:00 a.m. will begin
earning dividends on Fund shares the next business day. If no telephone
order is placed, investments begin earning dividends the next business day.
Exchanges begin earning dividends the next business day after the exchange
request is received by mail or telephone.
All of your purchases must be made by wire. No cash or checks will be
accepted. The Fund reserves the right to suspend the offering of shares for
a period of time or to reject any specific purchase order.
OTHER CALVERT GROUP FEATURES
Calvert Information Network
For 24 hour performance and account information or visit
http://www.calvertgroup.com /institutional
You can obtain current performance and pricing information, verify account
balances, and authorize certain transactions with the convenience of one
phone call, 24 hours a day.
Account Services
By signing up for services when you open your account, you avoid having to
obtain a signature guarantee. If you wish to add services at a later date, a
signature guarantee to verify your signature may be obtained from any bank,
trust company and savings and loan association, credit union, broker-dealer
firm or member of a domestic stock exchange. A notary public cannot provide
a signature guarantee.
Telephone Transactions
You may redeem by exchange of shares or by wire. Institutional Class
accountholders receive telephone privileges automatically when you open your
account. For our mutual protection, the Fund, the shareholder servicing
agent and their affiliates use precautions such as verifying shareholder
identity and recording telephone calls to confirm instructions given by
phone. A confirmation statement is sent for most transactions; please review
this statement and verify the accuracy of your transaction immediately.
Calvert Money Controller
Calvert Money Controller allows you to purchase or sell shares by electronic
funds transfer without the time delay of mailing a check or the added
expense of a wire. Use this service to transfer up to $300,000
electronically. Allow one or two business days after you place your request
for the transfer to take place. Money transferred to purchase new shares
will be subject to a hold of up to 10 business days before redemption
requests will be honored. Transaction requests must be received by 4 p.m.
ET. You may request this service on your initial account application.
Calvert Money Controller transactions returned for insufficient funds will
incur A $25 charge.
Exchanges
Calvert Group offers a wide variety of investment options that includes
common stock funds, tax-exempt and corporate bond funds, and money market
funds. We make it easy for you to purchase shares in other Calvert funds if
your investment goals change. The exchange privilege offers flexibility by
allowing you to exchange shares on which you have already paid a sales
charge from one mutual fund to another at no additional charge.
Complete and sign an account application, taking care to register your new
account in the same name and taxpayer identification number as your existing
Calvert account(s). Exchange instructions may then be given by telephone if
telephone redemptions have been authorized.
Before you make an exchange, please note the following: Each exchange
represents the sale of shares of one Fund and the purchase of shares of
another.
You may exchange shares acquired by reinvestment of dividends or
distributions into another Calvert Fund at no additional charge.
Shares may only be exchanged for shares of the same class of another Calvert
Fund.
The Fund reserves the right to terminate or modify the exchange privilege
with 60 days' written notice.
Combined General Mailings (Householding)
Multiple accounts with the same tax identification number will receive one
mailing per household of information such as prospectuses and semi-annual
and annual reports. You may request further grouping of accounts to receive
fewer mailings. Separate statements will be generated for each separate
account and will be mailed in one envelope for each combination above.
Special Services and Charges
The Fund pays for shareholder services but not for special services that are
required by a few shareholders, such as a request for a historical
transcript of an account . You may be required to pay a fee for these
special services.
If you are purchasing shares through a program of services offered by a
broker/dealer or financial institution, you should read the program
materials together with this Prospectus. Certain features may be modified in
these programs, and the broker/dealer or financial institution may impose
charges for their services.
Minimum Account Balance
Please maintain a balance in your account of at least $1,000,000 per Fund.
If the account falls below the minimum you may be given a notice that your
account is below the minimum and will be moved to Class O if the balance is
not brought up to the required minimum amount.
DIVIDENDS, CAPITAL GAINS AND TAXES
The 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 Fund does 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 (without sales charge), unless you elect to have amounts of $10
or more paid in cash by wire to a predesignated bank account. Dividends and
distributions from any Calvert Group Fund may be automatically invested in
an identically registered account in any other Calvert Group Fund at NAV. If
reinvested in the same account, new shares will be purchased at NAV on the
reinvestment date, which is generally I to 3 days prior to the payment date.
You must notify the Fund in writing to change your payment options.
Federal Taxes
Dividends derived from interest on municipal obligations constitute
exempt-interest dividends, on which you are not subject to federal income
tax. However, dividends which are from taxable interest and any
distributions of short term capital gain are taxable to you as ordinary
income. If the Fund makes any distributions of long-term capital gains, then
these are taxable to you as long-term capital gains, regardless of how long
you held your shares of the Fund. Dividends attributable to interest on
certain private activity bonds must be included in federal alternative
minimum tax for individuals and for corporations. The Fund may invest in and
derive up to 20% of its income from taxable short-term money market
investments, for liquidity purposes or pending investment. Interest earned
from taxable investments will be taxable as ordinary income.
If any taxable income or gains are paid, in January, the Fund will mail you
Form 1 099-DIV indicating the federal tax status of 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.
Other Tax Information
You may be subject to state or local taxes on your investment, depending on
the laws in your area. A letter will be mailed to you in January detailing
the percentage invested in your state the previous tax year. Such dividends
may be exempt from certain state income taxes.
Taxpayer Identification Number
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. You will also be prohibited from opening another
account by exchange. If this TIN information is not received within 60 days
after your account is established, your account may be redeemed (closed) at
the current NAV on the date of redemption. Calvert Group reserves the right
to reject any new account or any purchase order for failure to supply a
certified TIN.
HOW TO SELL SHARES
You may redeem all or a portion of your shares on any day the Fund is open
for business. Your shares will be redeemed at the next NAV calculated after
your redemption request is received and accepted in good order (see below).
You will receive dividends through the date the request is received and
processed. A telephone order for a redemption must be received by the
Calvert Institutional Marketing Group by 11:00 a.m. Eastern time in order
for the proceeds to be sent to you on the same business day. If making
immediate payment could adversely affect the Fund, it may take up to seven
(7) days to make payment. The Fund 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 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, however, such as Columbus Day and Veterans'
Day, when the NYSE is open and the Fund is open but redemptions cannot be
wired because the banks are closed.
Follow these suggestions to ensure timely processing of your redemption
request:
By Telephone
Institutional Marketing Group 800.317.2274
You may redeem shares from your account by telephone and have your money
electronically transferred or wired to a bank you have previously
authorized. To better enable CAMCO to keep the Fund fully invested, Calvert
requests that you notify the Institutional Marketing Group at least 24 hours
in advance for any redemption over $10 million per day. A charge of $5 may
be imposed on wire transfers of less than $50,000.
Written Requests
Calvert Group, P.O. Box 419544, Kansas City, MO 64141-6544
Your letter should include your account number and fund and the number of
shares or the dollar amount you are redeeming. Please provide a daytime
telephone number, if possible, for us to call if we have questions. If the
money is being sent to a new bank, person, or address other than the address
of record, your letter must be signature guaranteed.
Corporations and Associations
Your letter of instruction and corporate resolution should be signed by
person(s) authorized to act on the account, accompanied by signature
guarantee(s).
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an
investment in the Fund, assuming reinvestment of all dividends and
distributions. Prior to July 1, 1997, the Fund was not an institutional
fund, but was known as Class MMP. This information has been audited by
PricewaterhouseCoopers, LLP, whose report and the Fund's financial
statements are included in the Fund's annual report, available upon request.
Years Ended
December 31, December 31,
Institutional Class/MMP 1998 1997
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .035 .031
Distributions from
Net investment income (.035) (.031)
Net asset value, ending $1.00 $1.00
Total return 3.58% 3.12%
Ratios to average net assets:
Net investment income 3.54% 3.37%
Total expenses + .30% .63%
Net expenses .29% .62%
Expenses reimbursed -- (.04%)
Net assets, ending
(in thousands) $246,967 $51,087
Number of shares outstanding,
ending (in thousands) 246,941 51,084
Periods Ended
December 31, December 31,
Institutional Class/MMP 1996 1995^
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .030 .008
Distributions from
Net investment income (.030) (.008)
Net asset value, ending $1.00 $1.00
Total return 2.68% .79%
Ratios to average net assets:
Net investment income 2.65% 3.19%(a)
Total expenses + 1.29% 1.35%(a)
Net expenses 1.28% 1.34%(a)
Net assets, ending
(in thousands) $33,160 $41,736
Number of shares outstanding,
ending (in thousands) 33,153 41,732
(a) Annualized
+ Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly; such reductions are included in
the ratio of net expenses. Total expenses are presented net of expense
waivers and reimbursements.
^ From October 2, 1995 inception.
To Open an Account:
800-317-2274
Service for Existing Accounts:
800-317-2274
TDD for Hearing-Impaired:
800-541 1524
Branch Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o Institutional Marketing Group
4550 Montgomery Avenue
Suite 1000N
Bethesda, MD 20814
Calvert Group Web-Site
Address: http://www.calvertgroup.com/institutional
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
For investors who want more information about the Funds, the following
documents are available free upon request:
Annual/Semi-Annual Reports: Additional information about each Fund's
investments is available in the Fund's Annual and Semi-Annual reports to
shareholders. In each Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI for each Fund provides
more detailed information about the Fund and is incorporated into this
prospectus by reference.
You can get free copies of reports and SAIs, request other information and
discuss your questions about the Funds at:
Calvert Group
Attn: Institutional Marketing Group
4550 Montgomery Ave. Suite 1000N
Bethesda, Md. 20814
Telephone: 1-800-317-2274
Calvert Group Web-Site
Address: http://www.calvertgroup.com
You can review the Funds' reports and SAIs at the public Reference Room of
the Securities and Exchange Commission. You can get text only copies:
o For a fee, by writing to or calling the Public Reference Room of
the Commission, Washington, D.C. 20549-6009,
Telephone: 1-800-SEC-0330.
o Free from the Commission's Internet website at http://www.sec.gov
Investment Company Act file: no. 81 1-3101 (CTFR)
<PAGE>
PROSPECTUS
April 30, 1999
CALVERT TAX-FREE RESERVES (CTFR)
California Money Market Portfolio
About the Fund
2 Investment Objective, Strategy, Past Performance
5 Fees and Expenses
About Your Investment
6 Management and Advisory Fees
7 How to Buy Shares
7 Important - How Shares are Priced
8 When Your Account Will be Credited
8 Other Calvert Group Features
(Exchanges, Minimum Account Balance, etc.)
10 Dividends, Capital Gains and Taxes
12 How to Sell Shares
14 Financial Highlights
15 Service Fees and Arrangements
with Dealers
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>
INVESTMENT OBJECTIVE, STRATEGY AND PAST PERFORMANCE
Objective
CTFR California Money Market (the "Fund") seeks to earn the highest level of
interest income, exempt from federal and California state income taxes, as
is consistent with prudent investment management, preservation of capital,
and the quality and maturity characteristics of the Fund.
Principal Investment Strategies and Related Risks
CTFR California Money Market invests in fixed and floating rate municipal
bonds and notes, variable rate demand notes, tax exempt commercial paper,
and other high quality, short term municipal obligations. 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.
Under normal market conditions, the Fund will invest at least 80% of its
total assets in municipal obligations whose interest is exempt from federal
and California state income tax. The Fund will also attempt to invest the
remaining 20% of its total assets in such obligations, but may invest it in
municipal obligations of other states, territories and possessions of the
United States, the District of Columbia and their respective authorities,
agencies, instrumentalities and political subdivisions or in short term
taxable money market type instruments. Dividends paid by the Fund which are
derived from interest attributable to California municipal obligations will
be exempt from federal and California state personal income taxes. Dividends
derived from interest on tax exempt obligations of other governmental
issuers will be exempt from federal income tax, but will be subject to
California state income taxes.
Because the Fund invests primarily in California municipal obligations, the
economy and political climate in that state have a great impact on the Fund.
The Fund may invest up to 25% of its assets in a single issuer.
Many of the instruments held by the Fund are supported by letters of credit
issued by banks; thus, the Fund has a wide exposure to the banking industry.
The Fund 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 Fund's yield 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 Fund
limits the amount it invests in any one issuer to try to lessen its exposure.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Fund seeks to preserve the value of your
investment at $1.00 per share, it is possible to lose money by investing in
the Fund.
<PAGE>
CTFR California Money Market Performance
The bar chart and table below show the Fund's annual returns and its long
term performance. The chart and table provide some indication of the risks
of investing in the Fund. The chart shows how the performance has varied
from year to year. The table compares the Fund's returns over time to the
Lipper California Tax Exempt Money Market Funds Index, a composite index of
the annual return of mutual funds that have an investment goal similar to
that of the Fund. The Fund's past performance does not necessarily indicate
how the Fund will perform in the future.
CTFR California Money Market
Year-by-Year Total Return
[BAR CHART]
1990 6.04%
1991 4.64%
1992 3.07%
1993 2.26%
1994 2.62%
1995 3.78%
1996 3.17%
1997 3.28%
1998 3.19%
Best Quarter (of periods shown) Q2 '90 1.52%
Worst Quarter (of periods shown) Q1 '93 0.53%
Average Annual Total Returns (as of 12.31.98)
1 year 5 years Since
Inception*
CTFR California Money Market 3.19% 3.21% 3.61%
Lipper California Tax Exempt
Money Market Funds Index 2.77% 3.00% 3.25%
*The month end date of 10/31/89 is used for comparison purposes only; actual
fund inception is 10/16/89
For current yield information call 800-368-2745, or visit Calvert Group's web
site at www.calvertgroup.com
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of the Fund. Shareholder fees are paid directly from your
account; annual Fund operating expenses are deducted from Fund assets.
Maximum sales charge (load) None
Maximum deferred sales charge (load) None
Maximum Account Fee 1
Annual Fund Operating Expenses
Management fees .51%
Distribution and service (12b-1) fees None
Other expenses2 .18%
Total annual fund operating expenses .69%
Expenses are based on expenses for the Fund's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Fund to Calvert Administrative Services Company, an affiliate of
the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
1 For each account with a balance of less than $1000, the Fund charges a
monthly account maintenance fee of $3.00.
2 Expenses have been restated to reflect expenses expected to be incurred in
1999.
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 the Fund for the time periods indicated;
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
CTFR California
Money Market $70 $221 $384 $859
Management and Advisory Fees
About Calvert Group
CAMCO (4550 Montgomery Avenue, Suite 1000N, Bethesda, MD 20814) is the
Funds' investment advisor and provides day to day investment management
services to the Funds. It has been managing mutual funds since 1976. CAMCO
is the investment advisor for over 25 mutual funds, including the first and
largest family of socially screened funds. As of December 31, 1998, CAMCO
had $6 billion in assets under management.
Advisory Fees
The following table shows the aggregate annual advisory fee paid to CAMCO by
the Fund for the most recent fiscal year as a percentage of the Fund's
average daily net assets.
Fund Advisory Fee
CTFR California Money Market .50%
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. For more information, please visit
our web site at www.calvertgroup.com
How to Buy Shares
Complete and sign an application for each new account. For more information,
contact your broker or our shareholder services department at 800 368 2748.
Minimum To Open an Account Minimum additional investments
$2,000 $250
Please make your check payable
to the Fund and mail it to:
New Accounts Subsequent Investments
(include application) (include investment slip)
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas City, MO Kansas City, MO
64141-6544 64141-6739
By Registered, Calvert Group
Certified, or c/o NFDS,
Overnight Mail 330 West 9th St.
Kansas City, MO 64105-1807
At the Calvert Office: Visit the Calvert Office to make investments by check.
IMPORTANT - HOW SHARES ARE PRICED
The price of shares is based on the Fund's net asset value ("NAV"). NAV is
computed by adding the value of the Fund's holdings plus other assets,
subtracting liabilities, and then dividing the result by the number of
shares outstanding.
CTFR California Money Market is valued according to the "amortized cost"
method, which is intended to stabilize the NAV at $1 per share.
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). The Fund is open for business each day the
NYSE is open. Please note that there are some federal holidays, however,
such as Columbus Day and Veterans' Day, when the NYSE is open and the Fund
is open but purchases cannot be received because the banks are closed.
WHEN YOUR ACCOUNT WILL BE CREDITED
All of your purchases must be made in US dollars. No cash will be accepted.
No credit card or credit loan checks will be accepted. The Fund reserves the
right to suspend the offering of shares for a period of time or to reject
any specific purchase order. As a convenience, check purchases received at
Calvert's office in Bethesda, Maryland will be sent by overnight delivery to
the Transfer Agent and will be credited the next business day upon receipt.
Any check purchase received without an investment slip may cause delayed
crediting. If your check does not clear your bank, your purchase will be
canceled and you will be charged a $25 fee plus any costs incurred.
Your purchase will be credited at the net asset value next calculated after
your order is received and accepted. If the Transfer Agent receives your
wire purchase by 5 p.m. ET, your account will begin earning dividends on the
next business day. Exchanges begin earning dividends the next business day
after the exchange request is received by mail or telephone. Purchases
received by check will begin earning dividends the next business day after
they are credited to the account.
OTHER CALVERT GROUP FEATURES
Calvert Information Network
For 24 hour performance and account information call 800 368 2745 or visit
http://www.calvertgroup.com
You can obtain current performance and pricing information, verify account
balances, and authorize certain transactions with the convenience of one
phone call, 24 hours a day.
Account Services
By signing up for services when you open your account, you avoid having to
obtain a signature guarantee. If you wish to add services at a later date, a
signature guarantee to verify your signature may be obtained from any bank,
trust company and savings and loan association, credit union, broker dealer
firm or member of a domestic stock exchange. A notary public cannot provide
a signature guarantee.
Calvert Money Controller
Calvert Money Controller allows you to purchase or sell shares by electronic
funds transfer without the time delay of mailing a check or the added
expense of a wire. Use this service to transfer up to $300,000
electronically. Allow one or two business days after you place your request
for the transfer to take place. Money transferred to purchase new shares
will be subject to a hold of up to 10 business days before redemption
requests will be honored. Transaction requests must be received by 4 p.m.
ET. You may request this service on your initial account application.
Calvert Money Controller transactions returned for insufficient funds will
incur a $25 charge.
Telephone Transactions
You may purchase, redeem, or exchange shares, wire funds and use Calvert
Money Controller by telephone if you have pre authorized service
instructions. You receive telephone privileges automatically when you open
your account unless you elect otherwise. For our mutual protection, the
Fund, the shareholder servicing agent and their affiliates use precautions
such as verifying shareholder identity and recording telephone calls to
confirm instructions given by phone. A confirmation statement is sent for
most transactions; please review this statement and verify the accuracy of
your transaction immediately.
Exchanges
Calvert Group offers a wide variety of investment options that includes
common stock funds, tax exempt and corporate bond funds, and money market
funds (call your broker or Calvert representative for more information). We
make it easy for you to purchase shares in other Calvert funds if your
investment goals change. The exchange privilege offers flexibility by
allowing you to exchange shares on which you have already paid a sales
charge from one mutual fund to another at no additional charge.
Complete and sign an account application, taking care to register your new
account in the same name and taxpayer identification number as your existing
Calvert account(s). Exchange instructions may then be given by telephone if
telephone redemptions have been authorized and the shares are not in
certificate form.
Before you make an exchange, please note the following:
Each exchange represents the sale of shares of one Fund and the purchase of
shares of another. Therefore, you could realize a taxable gain or loss.
You may exchange shares acquired by reinvestment of dividends or
distributions into another Calvert Fund at no additional charge.
Shares may only be exchanged for shares of the same class of another Calvert
Fund.
The Fund reserves the right to terminate or modify the exchange privilege
with 60 days' written notice.
Combined General Mailings (Householding)
Multiple accounts with the same social security number will receive one
mailing per household of information such as prospectuses and semi annual
and annual reports. You may request further grouping of accounts to receive
fewer mailings.
Separate statements will be generated for each separate account and will be
mailed in one envelope for each combination above.
Special Services and Charges
The Fund pays for shareholder services but not for special services that are
required by a few shareholders, such as a request for a historical
transcript of an account or a stop payment on a draft. You may be required
to pay a fee for these special services; for example, the fee for stop
payments is $25.
If you are purchasing shares through a program of services offered by a
broker/dealer or financial institution, you should read the program
materials together with this Prospectus. Certain features may be modified in
these programs. Investors may be charged a fee if they effect transactions
in Fund shares through a broker or agent.
Minimum Account Balance
Please maintain a balance in your account of at least $1,000. If the balance
in your account falls below the minimum during a month, a $3.00 monthly fee
may be charged to your account.
DIVIDENDS, CAPITAL GAINS AND TAXES
The Fund pays dividends from its net investment income as shown below. 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 Fund does not anticipate making any such distributions
unless available capital loss carryovers have been used or have expired.
Dividends in CTFR California Money Market are accrued daily and paid monthly.
Dividend Payment Options
Dividends and any distributions are automatically reinvested in the same
Fund at NAV (without sales charge), unless you elect to have amounts of $10
or more paid in cash (by check or by Calvert Money Controller). Dividends
and distributions from any Calvert Group Fund may be automatically invested
in an identically registered account in any other Calvert Group Fund at NAV.
If reinvested in the same account, new shares will be purchased at NAV on
the reinvestment date, which is generally 1 to 3 days prior to the payment
date. You must notify the Fund in writing to change your payment options. If
you elect to have dividends and/or distributions paid in cash, and the US
Postal Service returns the check as undeliverable, it, as well as future
dividends and distributions, will be reinvested in additional shares.
Federal Taxes
Dividends derived from interest on municipal obligations constitute exempt
interest dividends, on which you are not subject to federal income tax.
However, dividends which are from taxable interest and any distributions of
short term capital gain are taxable to you as ordinary income. If the Fund
makes any distributions of long term capital gains, then these are taxable
to you as long term capital gains, regardless of how long you held your
shares of the Fund. Dividends attributable to interest on certain private
activity bonds must be included in federal alternative minimum tax for
individuals and for corporations. The Fund may invest in and derive up to
20% of its income from taxable short term money market investments, for
liquidity purposes or pending investment. Interest earned from taxable
investments will be taxable as ordinary income.
If any taxable income or gains are paid, in January, the Fund will mail you
Form 1099-DIV indicating the federal tax status of 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.
Other Tax Information
To the extent that exempt interest dividends are derived from earnings
attributable to California Municipal Obligations, they will also be exempt
from state and local personal income tax in California. The dividends may be
subject to California franchise taxes and corporate income taxes if received
by a corporation subject to such taxes. A letter will be mailed to you in
January detailing the percentage invested in California during the previous
tax year.
Taxpayer Identification Number
If we do not have your correct Social Security or Taxpayer Identification
Number ("TIN") and a signed certified application or Form W-9, Federal law
requires us to withhold 31% of your reportable dividends, and possibly 31%
of certain redemptions. In addition, you may be subject to a fine by the
Internal Revenue Service. You will also be prohibited from opening another
account by exchange. If this TIN information is not received within 60 days
after your account is established, your account may be redeemed (closed) at
the current NAV on the date of redemption. Calvert Group reserves the right
to reject any new account or any purchase order for failure to supply a
certified TIN.
HOW TO SELL SHARES
You may redeem all or a portion of your shares on any day the Fund is open
for business, provided the amount requested is not on hold. When you
purchase by check or with Calvert Money Controller (electronic funds
transfer), the purchase will be on hold for up to 10 business days from the
date of receipt. During the hold period, redemptions proceeds will not be
sent until the Transfer Agent is reasonably satisfied that the purchase
payment has been collected. Drafts written during the hold period will be
returned for uncollected funds.
Your shares will be redeemed at the next NAV calculated after your
redemption request is received. The proceeds will normally be sent to you on
the next business day, but if making immediate payment could adversely
affect your Fund, it may take up to seven (7) days to make payment. Calvert
Money Controller redemptions generally will be credited to your bank account
by the second business day after your phone call. 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 affected
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, however,
such as Columbus Day and Veterans' Day, when the NYSE is open and the Fund
is open but redemptions cannot be mailed or wired because the post offices
and banks are closed.
Follow these suggestions to ensure timely processing of your redemption
request:
By Telephone
You may redeem shares from your account by telephone and have your money
mailed to your address of record or electronically transferred or wired to a
bank you have previously authorized. A charge of $5 may be imposed on wire
transfers of less than $1,000.
Written Requests
Calvert Group, P.O. Box 419544, Kansas City, MO 64141 6544
Your letter should include your account number and fund and the number of
shares or the dollar amount you are redeeming. Please provide a daytime
telephone number, if possible, for us to call if we have questions. If the
money is being sent to a new bank, person, or address other than the address
of record, your letter must be signature guaranteed.
Draftwriting
You may redeem shares in your account by writing a draft for at least $250.
If you complete and return the signature card for Draftwriting, the Fund
will mail bank drafts to you, printed with your name and address. Drafts may
not be ordered until your initial purchase has cleared. Calvert will provide
printed drafts (checks). You may not print your own. Any customer-printed
checks will not be honored and will be returned without notice. The Fund
will charge a service fee for drafts returned for insufficient funds. The
Fund will charge $25 for any stop payment on drafts or for drafts returned
for any reason. As a service to shareholders, shares may be automatically
transferred between your Calvert accounts to cover drafts you have written.
The signature of only one authorized signer is required to honor a draft.
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may have
up to two (2) redemption checks for a fixed amount sent to you on the 15th
of the month, simply by sending a letter with all information, including
your account number, and the dollar amount ($100 minimum). If you would like
a regular check mailed to another person or place, your letter must be
signature guaranteed.
Corporations and Associations
Your letter of instruction and corporate resolution should be signed by
person(s) authorized to act on the account, accompanied by signature
guarantee(s).
Trusts
Your letter of instruction should be signed by the Trustee(s) (as
Trustee(s)), with a signature guarantee. (If the Trustee's name is not
registered on your account, please provide a copy of the trust document,
certified within the last 60 days.)
Through your Dealer
Your dealer must receive your request before the close of regular trading on
the NYSE to receive that day's NAV. Your dealer will be responsible for
furnishing all necessary documentation to Calvert Group and may charge you
for services provided.
<PAGE>
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years (or if shorter, the period of the
Fund's operations). Certain information reflects financial results for a
single share. The total returns in the table represent the rate that an
investor would have earned (or lost) on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by PricewaterhouseCoopers LLP whose report, along with a Fund's
financial statements, are included in the Fund's annual report, which is
available upon request.
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .031 .032 .031
Distributions from
Net investment income (.031) (.032) (.031)
Net asset value, ending $1.00 $1.00 $1.00
Total return 3.19% 3.28% 3.17%
Ratios to average net assets:
Net investment income 3.13% 3.22% 3.14%
Total expenses + .67% .66% .69%
Net expenses .65% .65% .68%
Expenses reimbursed .02% .05% .03%
Net assets, ending
(in thousands) $437,575 $321,001 $346,008
Number of shares outstanding,
ending (in thousands) 437,673 321,126 346,124
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .037 .026
Distributions from
Net investment income (.037) (.026)
Net asset value, ending $1.00 $1.00
Total return 3.78%* 2.62% *
Ratios to average net assets:
Net investment income 3.69% 2.55%
Total expenses + .76% -
Net expenses .75% .69%
Net assets, ending (in thousands) $300,351 $260,719
Number of shares outstanding,
ending (in thousands) 300,544 260,716
* Total return numbers do not reflect the Tender Option Agreement. On
December 15, 1994, the Portfolio entered into a Tendered Option Agreement
with the Advisor valued at $600,000 to secure payment of an "at risk"
investment. On June 30, 1995, the investment paid the Portfolio in full and
the Option expired unused. The expiration loss was applied against the
Advisor's capital contribution of the Option.
+ Effective December 31, 1995, this ratio reflects total expenses
before reduction of fees paid indirectly; such reductions are included in
the ratio of net expenses. Total expenses are presented net of expense
waivers and reimbursements.
<PAGE>
SERVICE FEES AND ARRANGEMENTS WITH DEALERS
Calvert Distributors, Inc., the Fund's underwriter, pays dealers an ongoing
service fee of up to 0.20% while you own shares of a Fund (expressed as an
annual percentage rate of average daily net assets held in Calvert accounts
by that dealer).
To Open an Account:
800-368-2748
Performance and Prices:
Calvert Information Network
24 hours, 7 days a week
800-368-2745
Service for Existing Accounts:
Shareholders 800-368-2745
Brokers 800-368-2746
TDD for Hearing Impaired:
800-541-1524
Calvert Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o NFDS
330 West 9th Street
Kansas City, MO 64105
Calvert Group Web Site
Address: http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
For investors who want more information about the Funds, the following
documents are available free upon request:
Annual/Semi Annual Reports: Additional information about the Fund's
investments is available in the Fund's Annual and Semi Annual reports to
shareholders. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI for the Fund provides
more detailed information about the Fund and is incorporated into this
prospectus by reference.
You can get free copies of reports and SAIs, request other information and
discuss your questions about the Funds by contacting your broker, or the
Funds at:
Calvert Group
4550 Montgomery Ave, Suite 1000N
Bethesda, Md. 20814
Telephone: 800-368-2745
Calvert Group Web Site
Address: http://www.calvertgroup.com
You can review the Funds' reports and SAIs at the public Reference Room of
the Securities and Exchange Commission. You can get text only copies:
o For a fee, by writing to or calling the Public Reference Room of the
Commission, Washington, D.C. 20549 6009, Telephone: 800-SEC-0330.
o Free from the Commission's Internet web site at http://www.sec.gov.
Investment Company Act file: no. 811-3101 (CTFR)
<PAGE>
PROSPECTUS
April 30, 1999
CALVERT TAX-FREE RESERVES FUND
Vermont Municipal Portfolio
About the Fund
2 Investment objective, strategy, past performance
5 Fees and Expenses
6 Principal Investment Practices and Risks
About Your Investment
10 Calvert Group and the Portfolio Management Team
10 Advisory Fees
11 How to Buy Shares (Sales charges, etc.)
13 Important - How Shares are Priced
14 Other Calvert Group Features
(Exchanges, Minimum Account Balance, etc.)
16 Dividends, Capital Gains and Taxes
18 How to Sell Shares
20 Financial Highlights
21 Exhibit A- Reduced Sales Charges
22 Exhibit B- Service Fees and
Arrangements with Dealers
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>
Objective
CTFR Vermont Municipal (the "Fund") seeks to earn the highest level of
interest income exempt from federal and Vermont state income taxes as is
consistent with prudent investment management, preservation of capital, and
the quality and maturity characteristics of the Fund.
Principal Investment Strategies
The Fund typically invests at least 65% of its net assets in investment
grade debt securities. The Advisor looks for securities with strong credit
quality within their rating category 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. To the extent it
may do so consistent with its investment objective, the Fund follows a
strategy to also seek to provide a competitive rate of total return. There
is no limit on the Fund's average portfolio maturity or duration (another
measure of the Fund's interest rate sensitivity), although the average
portfolio duration is expected to be between four and nine years.
The Fund may invest in a variety of tax-exempt obligations including
tax-supported debt (general obligation bonds of state and local issuers),
various types of revenue debt (transportation, housing, utilities,
hospital), special tax obligations, and qualified private activity bonds and
other state and local government authorities, municipal leases, and
certificates of participation in such investments. The obligations may be
structured as variable rate or adjustable rate obligations and are often
supported by a third party letter of credit.
Under normal market conditions, the Fund will invest at least 65% of its
total assets in municipal obligations whose interest is exempt from federal
and Vermont state income tax. The Fund will also attempt to invest the
remaining 35% of its total assets in such obligations, but may invest it in
municipal obligations of other states, territories and possessions of the
United States, the District of Columbia and their respective authorities,
agencies, instrumentalities and political subdivisions or in short-term
taxable money market-type instruments. Dividends paid by the Fund which are
derived from interest attributable to Vermont municipal obligations will be
exempt from federal and Vermont state personal income taxes. Dividends
derived from interest on tax-exempt obligations of other governmental
issuers will be exempt from federal income tax, but will be subject to
Vermont state income taxes.
Because the Fund invests primarily in Vermont municipal obligations, the
economy and political climate in that state have a great impact on the Fund.
The Fund may purchase unrated securities, so long as the Advisor determines
they are of comparable credit quality. Unrated securities may be less liquid
than those that are rated.
Principal Risks
You could lose money on your investment in the Fund, or the Fund could
underperform, most likely for any of the following reasons:
o The bond market goes down
o The individual bonds in the Fund do not perform as well as expected
o The Advisor's forecast as to interest rates is not correct
o The Advisor's allocation among different sectors of the bond market
does not perform as well as expected
o The Fund is non-diversified. Compared to other funds, the Fund may
invest more of its assets in a smaller number of bonds. Gains or losses on a
single bond may have greater impact on the Fund.
An investment in the Fund is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
CTFR Vermont Municipal Performance
The bar chart and table below show the Fund's annual returns and its
long-term performance. The chart and table provide some indication of the
risks of investing in the Fund. The chart shows how the performance of the
shares has varied from year to year. The table compares the Fund's
performance over time to that of the Lehman Municipal Bond Index . This is a
widely recognized, unmanaged index of bond prices. It also shows the Fund's
returns compared to the Lipper Other States Municipal Debt Funds Average, a
composite average of the annual return of mutual funds that have an
investment goal similar to that of the Fund. The Fund's past performance
does not necessarily indicate how the Fund will perform in the future.
The bar chart does not reflect any sales charge that you may be required to
pay upon purchase or redemption of the Fund's shares. Any sales charge will
reduce your return. The average total return table shows returns with the
maximum sales charge deducted. No sales charge has been applied to the index
and average used for comparison in the table.
CTFR Vermont Municipal
Year-by-Year Total Return (at NAV)
[BAR CHART]
1992 7.62%
1993 10.85%
1994 -2.87%
1995 14.87%
1996 3.98%
1997 6.90%
1998 5.67%
Best Quarter (of periods shown) Q1 '95 4.90%
Worst Quarter (of periods shown) Q1 '94 -3.55%
Average Annual Total Returns (as of 12.31.98)
(with maximum sales charge deducted)
1 year 5 years Since
Inception*
CTFR Vermont 1.71% 4.66% 6.36%
Lehman Municipal Bond Index TR 5.84% 6.10% 8.50%
Lipper Other States Municipal
Debt Funds Average 5.18% 5.19% 6.73%
*The month end date of 4/30/91 is used for comparison purposes only, actual
fund inception is 4/1/91
FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Fund. Shareholder fees are paid directly from your account;
annual Fund operating expenses are deducted from Fund assets.
Maximum sales charge (load) 3.75%
(as a percentage of offering price)
Maximum deferred sales charge (load) None1
(as a percentage of purchase or
redemption proceeds, whichever is lower)
Annual Fund Operating Expenses
Management fees .61%
Distribution and service (12b-1) fees None
Other expenses2 .16%
Total annual fund operating expenses .77%
1 Purchases of shares for accounts with $1 million or more are not subject
to front-end sales charges, but may be subject to a 1.0% contingent deferred
sales charge on shares redeemed within 1 year of purchase. (See "How to Buy
Shares)
2 Expenses have been restated to reflect expenses expected to be incurred in
1999.
Annual Fund Operating Expenses
Expenses are based on expenses for the Fund's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Fund to Calvert Administrative Services Company, an affiliate of
the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
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 the Fund for the time periods indicated;
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
CTFR Vermont
Municipal $451 $612 $787 $1,293
Principal Investment Practices and Risks
The most concise description of the principal investment strategies and
associated risks is under the earlier summary. The Fund is also permitted to
invest in certain other investments and to use certain investment techniques
that have higher risks associated with them. On the following pages are
brief descriptions of the investments and techniques, summarized earlier
along with certain additional investment techniques and their risks.
For each of the investment practices listed, the table below shows the
Fund's limitations as a percentage of its assets and the principal types of
risk involved. (See the pages following the table for a description of the
types of risks). Numbers in this table show maximum allowable amount only;
for actual usage, consult the annual/semi-annual reports.
Key to Table
@ Fund currently uses
0 Permitted, but not typically used
(% of assets allowable, if restricted)
- -- Not permitted
xN Allowed up to x% of fund's net assets
xT Allowed up to x% of Fund's total assets
NA Not applicable to this type of fund
Investment Practices
- ------------------------------------------ --------
Temporary Defensive Positions. 0
During adverse market, economic or
political conditions, the Fund may
depart from its principal investment
strategies by increasing its investment
in U.S. government securities and other
short-term interest-bearing securities.
During times of any temporary defensive
positions, a Fund may not be able to
achieve its investment objective Risks:
Opportunity.
- ------------------------------------------ --------
Conventional Securities:
- ------------------------------------------ --------
Investment grade bonds. Bonds rated @
BBB/Baa or higher or comparable unrated
bonds. Risks: Interest Rate, Market ,
Credit and Information.
- ------------------------------------------ --------
<PAGE>
- ------------------------------------------ --------
Below-investment grade bonds. Bonds @
rated below BBB/Baa or comparable 35N
unrated bonds, also known as high-yield
bonds. They are subject to greater
credit risk than investment grade bonds.
Risks: Credit, Market, Interest Rate,
Liquidity and Information.
- ------------------------------------------ --------
- ------------------------------------------ --------
Unrated debt securities. Bonds that have @
not been rated by a recognized rating
agency; the Advisor has determined the
credit quality based on its own
research. Risks: Credit, Market,
Interest Rate, Liquidity and
Information.
- ------------------------------------------ --------
- ------------------------------------------ --------
Illiquid securities. Securities which 15N
cannot be readily sold because there is
no active market. Risks: Liquidity,
Market and Transaction.
- ------------------------------------------ --------
Unleveraged derivative securities
- ------------------------------------------ --------
Asset-backed securities. Securities are @
issued by a special purpose entity and
are backed by fixed-income or other
interest bearing assets. Risks: Credit,
Interest Rate and Liquidity.
- ------------------------------------------ --------
- ------------------------------------------ --------
Mortgage-backed securities (typically,
single-family mortgage bonds). @
Securities are backed by pools of
mortgages, including passthrough
certificates. Risks: Credit, Extension,
Prepayment, Liquidity and Interest Rate.
- ------------------------------------------ --------
Leveraged derivative instruments
- ------------------------------------------ --------
Options on securities and indices. 5N
Contracts giving the holder the right
but not the obligation to purchase or
sell a security (or the cash value, in
the case of an option on an index) at a
specified price within a specified time.
Any options written by the Fund must be
"covered". The limitation is based on
net premium payments. Risks: Interest
Rate, Market, Leverage, Correlation,
Liquidity, Credit and Opportunity.
- ------------------------------------------ --------
<PAGE>
- ------------------------------------------ --------
Futures contract. Agreement to buy or 5N
sell a specific amount of a commodity or
financial instrument at a particular
price on a specific future date. Risks:
Interest Rate, Market, Leverage,
Correlation, Liquidity and Opportunity.
- ------------------------------------------ --------
- ------------------------------------------ --------
Structured securities. Inverse floating @
rate municipal notes and bonds. These
securities tend to be highly sensitive
to interest rate movements. Risks:
Credit, Interest Rate, Market, Leverage,
Liquidity and Correlation.
- ------------------------------------------ --------
The Fund has additional investment policies and restrictions that are not
principal to its investment strategies (for example, repurchase agreements,
reverse repurchase agreements, borrowing, pledging, and securities lending,
and when-issued securities.) These policies and restrictions are discussed
in the SAI.
Types of Investment Risk
Correlation risk
This occurs when a Fund "hedges"- uses one investment to offset the Fund's
position in another. If the two investments do not behave in relation to one
another the way Fund managers expect them to, then unexpected or undesired
results may occur. For example, a hedge may eliminate or reduce gains as
well as offset losses.
Credit risk
The risk that the issuer of a security or the counterparty to an investment
contract may default or become unable to pay its obligations when due.
Extension risk
The risk that an unexpected rise in interest rates will extend the life of a
mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
Information risk
The risk that information about a security or issuer or the market might not
be available, complete, accurate or comparable.
Interest rate risk
The risk that changes in interest rates will adversely affect the value of
an investor's securities. When interest rates rise, the value of
fixed-income securities will generally fall. Conversely, a drop in interest
rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities and zero coupon/"stripped" coupon
securities ("strips") are subject to greater interest rate risk.
<PAGE>
Leverage risk
The risk that occurs in some securities or techniques which tend to magnify
the effect of small changes in an index or a market. This can result in a
loss that exceeds the amount actually invested.
Liquidity risk
The risk that occurs when investments cannot be readily sold. A Fund may
have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
Management risk
The risk that a Fund's portfolio management practices might not work to
achieve their desired result.
Market risk
The risk that securities prices in a market, a sector or an industry will
fluctuate, and that such movements might reduce an investment's value.
Opportunity risk
The risk of missing out on an investment opportunity because the assets
needed to take advantage of it are committed to less advantageous
investments or strategies.
Political risk
The risk that may occur with foreign investments, and means that the value
of an investment may be adversely affected by nationalization, taxation,
war, government instability or other economic or political actions or
factors.
Prepayment risk
The risk that unanticipated prepayments may occur, reducing the value of a
mortgage-backed security. The Fund must then reinvest those assets at the
current, market rate which may be lower.
Transaction risk
The risk that a Fund may be delayed or unable to settle a transaction or
that commissions and settlement expenses may be higher than usual.
About Calvert Group
CAMCO (4550 Montgomery Avenue, Suite 1000N, Bethesda, MD 20814) is the
Fund's investment advisor and provides day-to-day investment management
services to the Fund. It has been managing mutual funds since 1976. CAMCO is
the investment advisor for over 25 mutual funds. As of December 31, 1998,
CAMCO had $6 billion in assets under management.
CAMCO uses a team approach to its management of the Fund. Since inception,
investment selections for the Fund have been made by David R. Rochat and
Reno J. Martini. Mr. Rochat is a Director and Senior Vice President of
Calvert Asset Management Company, Inc. He is a Trustee/Director and Senior
Vice President of First Variable Rate Fund, Calvert Tax-Free Reserves, Money
Management Plus, The Calvert Fund, and Calvert Municipal Fund, Inc., and is
primarily responsible for setting the investment strategy of the trading
department, utilizing over 20 years' experience in the securities and
investment community. Mr. Rochat joined Calvert Group in 1981 after
establishing and managing the municipal bond department at Donaldson,
Lufkin, & Jenrette Securities Corporation. Reno J. Martini, Senior Vice
President and Chief Investment Officer of CAMCO, oversees the management of
all Calvert Funds for CAMCO. Mr. Martini has over 18 years of experience in
evaluating and purchasing municipal securities and has been the head of
CAMCO's asset management team since 1985.
Advisory Fees
The following table shows the aggregate annual advisory fee paid to CAMCO by
the Fund for the most recent fiscal year as a percentage of average daily
net assets.
Fund Advisory Fee
CTFR Vermont .60%
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. For more information, please visit our website at
www.calvertgroup.com.
HOW TO BUY SHARES
Getting Started - Before You Open an Account
You have a few decisions to make before you open an account in a mutual fund.
First, decide which fund or funds best suits your needs and your goals.
Second, decide what kind of account you want to open. Calvert offers
individual, joint, trust, Uniform Gifts/Transfers to Minor Accounts, and
several other types of accounts.
Shares of CTFR Vermont are sold with a front-end sales charge.
You will pay a sales charge at the time of each purchase. This table shows
the charges both as a percentage of offering price and as a percentage of
the amount you invest. The term "offering price" includes the front-end
sales charge. If you invest more, the sales charge will be lower. For
example, if you invest more than $50,000, or if your cumulative purchases or
the value in your account is more than $50,000,4 then the sales charge is
reduced to 3.00%.
Your investment in Sales Charge % % of Amt.
of offering price Invested
Less than $50,000 3.75% 3.90%
$50,000 but less than $100,000 3.00% 3.09%
$100,000 but less than $250,000 2.25% 2.30%
$250,000 but less than $500,000 1.75% 1.78%
$500,000 but less than $1,000,000 1.00% 1.01%
$1,000,000 and over None* None*
4 This is called "Rights of Accumulation." The sales charge is calculated by
taking into account not only the dollar amount of the new purchase of
shares, but also the higher of cost or current value of shares you have
previously purchased in Calvert Group Funds that impose sales charges. This
automatically applies to your account for each new purchase of shares.
* Purchases of shares at NAV for accounts with $1,000,000 or more are
subject to a one year CDSC of 1.00%. See the "Calculation of Contingent
Deferred Sales Charge."
The front-end sales charge may be waived for certain purchases or investors,
such as participants in certain group retirement plans or other qualified
groups and clients of registered investment advisers. For details on these
and other purchases that may qualify for a reduced sales charge, see Exhibit
A.
Calculation of Contingent Deferred Sales Charge
The CDSC will not be charged on shares you received as dividends or from
capital gains distributions or on any capital appreciation (gain in the
value) of shares that are sold.
Shares that are not subject to the CDSC will be redeemed first, followed by
shares you have held the longest. The CDSC is calculated by determining the
share value at both the time of purchase and redemption and then multiplying
whichever value is less by the percentage that applies as shown above. If
you choose to sell only part of your shares, the capital appreciation for
those shares only is included in the calculation, rather than the capital
appreciation for the entire account.
Next Step - Account Application
Complete and sign an application for each new account. For more information,
contact your broker or our shareholder services department at 800-368-2748.
Minimum To Open an Account Minimum additional
$2,000 investments -$250
Please make your check payable
to the Fund and mail it to:
New Accounts: Subsequent Investments:
(include application) (include investment slip)
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas, City MO Kansas City, MO
64141-6544 64141-6739
By Registered, Calvert Group
Certified, or c/o NFDS,
Overnight Mail 330 West 9th St.
Kansas City, MO 64105-1807
At the Calvert Office Visit the Calvert Office to make
investments by check. See the back cover page for the address.
Important - How Shares are Priced
The price of shares is based on the Fund's net asset value ("NAV"). NAV is
computed 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.
Portfolio securities and other assets are valued based on market quotations,
except that securities maturing within 60 days are valued at amortized cost.
If market quotations are not readily available, securities are valued by a
method that the Fund's Board of Trustees/Directors believes accurately
reflects fair value.
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). The Fund is open for business each day the
NYSE is open. Please note that there are some federal holidays, however,
such as Columbus Day and Veterans' Day, when the NYSE is open and the Fund
is open but purchases cannot be received because the banks are closed.
When Your Account Will Be Credited
Your purchase will be processed at the NAV next calculated after your order
is received in good order. All of your purchases must be made in US dollars.
No cash will be accepted. No credit card or credit loan checks will be
accepted. The Fund reserves the right to suspend the offering of shares for
a period of time or to reject any specific purchase order. As a convenience,
check purchases received at Calvert's office in Bethesda, Maryland will be
sent by overnight delivery to the Transfer Agent and will be credited the
next business day upon receipt. Any check purchase received without an
investment slip may cause delayed crediting. If your check does not clear
your bank, your purchase will be canceled and you will be charged a $25 fee
plus any costs incurred. All purchases will be confirmed and credited to
your account in full and fractional shares (rounded to the nearest 1/1000th
of a share).
OTHER CALVERT GROUP FEATURES
Calvert Information Network
For 24 hour performance and account information call 800-368-2745 or visit
http://www.calvertgroup.com
You can obtain current performance and pricing information, verify account
balances, and authorize certain transactions with the convenience of one
phone call, 24 hours a day.
Account Services
By signing up for services when you open your account, you avoid having to
obtain a signature guarantee. If you wish to add services at a later date, a
signature guarantee to verify your signature may be obtained from any bank,
trust company and savings and loan association, credit union, broker-dealer
firm or member of a domestic stock exchange. A notary public cannot provide
a signature guarantee.
Calvert Money Controller
Calvert Money Controller allows you to purchase or sell shares by electronic
funds transfer without the time delay of mailing a check or the added
expense of a wire. Use this service to transfer up to $300,000
electronically. Allow one or two business days after you place your request
for the transfer to take place. Money transferred to purchase new shares
will be subject to a hold of up to 10 business days before redemption
requests will be honored. Transaction requests must be received by 4 p.m.
ET. You may request this service on your initial account application.
Calvert Money Controller transactions returned for insufficient funds will
incur a $25 charge.
Telephone Transactions
You may purchase, redeem, or exchange shares, wire funds and use Calvert
Money Controller by telephone if you have pre-authorized service
instructions. You receive telephone privileges automatically when you open
your account unless you elect otherwise. For our mutual protection, the
Fund, the shareholder servicing agent and their affiliates use precautions
such as verifying shareholder identity and recording telephone calls to
confirm instructions given by phone. A confirmation statement is sent for
most transactions; please review this statement and verify the accuracy of
your transaction immediately.
Exchanges
Calvert Group offers a wide variety of investment options that includes
common stock funds, tax-exempt and corporate bond funds, and money market
funds (call your broker or Calvert representative for more information). We
make it easy for you to purchase shares in other Calvert funds if your
investment goals change. The exchange privilege offers flexibility by
allowing you to exchange shares on which you have already paid a sales
charge from one mutual fund to another at no additional charge.
Complete and sign an account application, taking care to register your new
account in the same name and taxpayer identification number as your existing
Calvert account(s). Exchange instructions may then be given by telephone if
telephone redemptions have been authorized and the shares are not in
certificate form.
Before you make an exchange, please note the following:
Each exchange represents the sale of shares of one Fund and the purchase of
shares of another. Therefore, you could realize a taxable gain or loss.
You may exchange shares acquired by reinvestment of dividends or
distributions into another Calvert Fund at no additional charge.
Shares may only be exchanged for shares of the same class of another Calvert
Fund.
No CDSC is imposed on exchanges of shares subject to a CDSC at the time of
the exchange. The applicable CDSC is imposed at the time the shares acquired
by the exchange are redeemed.
Shareholders (and those managing multiple accounts) who make two purchases
and two redemptions of shares of the same Fund during any six-month period
will be given written notice and may be prohibited from placing additional
investments. This policy does not prohibit a shareholder from redeeming
shares of any Fund, and does not apply to trades solely between money market
funds.
The Fund reserves the right to terminate or modify the exchange privilege
with 60 days' written notice.
Combined General Mailings (Householding)
Multiple accounts with the same social security number will receive one
mailing per household of information such as prospectuses and semi-annual
and annual reports. You may request further grouping of accounts to receive
fewer mailings. Separate statements will be generated for each separate
account and will be mailed in one envelope for each combination above.
Special Services and Charges
The Fund pays for shareholder services but not for special services that are
required by a few shareholders, such as a request for a historical
transcript of an account. You may be required to pay a fee for these special
services.
If you are purchasing shares through a program of services offered by a
broker/dealer or financial institution, you should read the program
materials together with this Prospectus. Certain features may be modified in
these programs. Investors may be charged a fee if they effect transactions
in Fund shares through a broker or agent.
Minimum Account Balance
Please maintain a balance in each of your accounts of at least $1,000 per
class. If the balance in any of your accounts falls below the minimum during
a month, your account may be closed and the proceeds mailed to the address
of record. You will receive notice that your account is below the minimum,
and will be closed if the balance is not brought up to the required minimum
amount within 30 days.
Dividends, Capital Gains, and Taxes
The Fund pays dividends from its net investment income as shown below. 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 Fund does not anticipate making any such distributions
unless available capital loss carryovers have been used or have expired.
CTFR Vermont: paid monthly
Dividend Payment Options
Dividends and any distributions are automatically reinvested in the same
Fund at NAV (without sales charge), unless you elect to have amounts of $10
or more paid in cash (by check or by Calvert Money Controller). Dividends
and distributions from any Calvert Group Fund may be automatically invested
in an identically registered account in any other Calvert Group Fund at NAV.
If reinvested in the same account, new shares will be purchased at NAV on
the reinvestment date, which is generally 1 to 3 days prior to the payment
date. You must notify the Fund in writing to change your payment options. If
you elect to have dividends and/or distributions paid in cash, and the US
Postal Service returns the check as undeliverable, it, as well as future
dividends and distributions, will be reinvested in additional shares. No
dividends will accrue on amounts represented by uncashed distribution or
redemption checks.
Buying a Dividend
At the time of purchase, the share price of each class may reflect
undistributed income, capital gains or unrealized appreciation of
securities. Any income or capital gains from these amounts which are later
distributed to you are fully taxable. On the record date for a distribution,
share value is reduced by the amount of the distribution. If you buy shares
just before the record date ("buying a dividend") you will pay the full
price for the shares and then receive a portion of the price back as a
taxable distribution.
Federal Taxes
Dividends derived from interest on municipal obligations constitute
exempt-interest dividends, on which you are not subject to federal income
tax. However, dividends which are from taxable interest and any
distributions of short term capital gain are taxable to you as ordinary
income. If the Fund makes any distributions of long-term capital gains, then
these are taxable to you as long-term capital gains, regardless of how long
you held your shares of the Fund. Dividends attributable to interest on
certain private activity bonds must be included in federal alternative
minimum tax for individuals and for corporations. The Fund may invest in and
derive up to 20% of its income from taxable short-term money market
investments, for liquidity purposes or pending investment. Interest earned
from taxable investments will be taxable as ordinary income.
If any taxable income or gains are paid, in January, the Fund will mail you
Form 1099-DIV indicating the federal tax status of 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.
You may realize a capital gain or loss when you sell or exchange shares.
This capital gain or loss will be short- or long-term, depending on how long
you have owned the shares which were sold. In January, the Fund will mail
you Form 1099-B indicating the total amount of all sales, including
exchanges. You should keep your annual year-end account statements to
determine the cost (basis) of the shares to report on your tax returns.
Other Tax Information
Dividends derived from interest on Vermont state or local obligations are
exempt from Vermont personal income tax, as are dividends from obligations
issued by certain territories, such as Puerto Rico. The Fund will advise you
each January of the percent of dividends qualifying for this exemption. You
should consult your tax advisor with regard to how certain dividends affect
you.
Taxpayer Identification Number
If we do not have your correct Social Security or Taxpayer Identification
Number ("TIN") and a signed certified application or Form W-9, Federal law
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. You will also be prohibited from opening another
account by exchange. If this TIN information is not received within 60 days
after your account is established, your account may be redeemed (closed) at
the current NAV on the date of redemption. Calvert Group reserves the right
to reject any new account or any purchase order for failure to supply a
certified TIN.
HOW TO SELL SHARES
You may redeem all or a portion of your shares on any day the Fund is open
for business, provided the amount requested is not on hold. When you
purchase by check or with Calvert Money Controller (electronic funds
transfer), the purchase will be on hold for up to 10 business days from the
date of receipt. During the hold period, redemptions proceeds will not be
sent until the Transfer Agent is reasonably satisfied that the purchase
payment has been
collected.
Your shares will be redeemed at the next NAV calculated after your
redemption request is received (less any applicable CDSC). 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. Calvert Money Controller redemptions generally will be
credited to your bank account by the second business day after your phone
call. 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 affected 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, however, such as Columbus Day and Veterans' Day, when the
NYSE is open and the Fund is open but redemptions cannot be mailed or wired
because the post offices and banks are closed.
Follow these suggestions to ensure timely processing of your redemption
request:
By Telephone
You may redeem shares from your account by telephone and have your money
mailed to your address of record or electronically transferred or wired to a
bank you have previously authorized. A charge of $5 may be imposed on wire
transfers of less than $1,000.
Written Requests
Calvert Group, P.O. Box 419544, Kansas City, MO 64141-6544
Your letter should include your account number and fund and the number of
shares or the dollar amount you are redeeming. Please provide a daytime
telephone number, if possible, for us to call if we have questions. If the
money is being sent to a new bank, person, or address other than the address
of record, your letter must be signature guaranteed.
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may have
up to two (2) redemption checks for a fixed amount sent to you on the 15th
of the month, simply by sending a letter with all information, including
your account number, and the dollar amount ($100 minimum). If you would like
a regular check mailed to another person or place, your letter must be
signature guaranteed. Shares subject to the one-year CDSC which are redeemed
by Systematic Check Redemption will be charged the CDSC.
Corporations and Associations
Your letter of instruction and corporate resolution should be signed by
person(s) authorized to act on the account, accompanied by signature
guarantee(s).
Trusts
Your letter of instruction should be signed by the Trustee(s) (as
Trustee(s)), with a signature guarantee. (If the Trustee's name is not
registered on your account, please provide a copy of the trust document,
certified within the last 60 days.)
Through your Dealer
Your dealer must receive your request before the close of regular trading on
the NYSE to receive that day's NAV. Your dealer will be responsible for
furnishing all necessary documentation to Calvert Group and may charge you
for services provided.
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single share. The total returns in the table
represent the rate that an investor would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions), and does not reflect any applicable front- or back-end sales
charge. This information has been audited by PricewaterhouseCoopers LLP,
whose report, along with the Fund's financial statements, are included in
the Fund's annual report, which is available upon request.
Years Ended
December 31, December 31, December 31,
Class A Shares 1998 1997 1996
Net asset value, beginning $16.45 $16.33 $16.62
Income from investment operations
Net investment income .78 .82 .88
Net realized and unrealized
gain (loss) .13 .26 (.25)
Total from investment
operations .91 1.08 .63
Distributions from
Net investment income (.77) (.82) (.85)
Net realized gains (.31) (.14) (.07)
Total distributions (1.08) (.96) (.92)
Total increase (decrease) in
net asset value (.17) .12 (.29)
Net asset value, ending $16.28 $16.45 $16.33
Total return * 5.67% 6.90% 3.98%
Ratios to average net assets:
Net investment income 4.73% 5.11% 5.27%
Total expenses + .75% .76% .77%
Net expenses .72% .73% .73%
Portfolio turnover 32% 14% 24%
Net assets, ending
(in thousands) $51,292 $50,194 $49,774
Number of shares outstanding,
ending (in thousands) 3,150 3,052 3,048
Years Ended
December 31, December 31,
Class A Shares 1995 1994
Net asset value, beginning $15.34 $16.66
Income from investment operations
Net investment income .87 .87
Net realized and unrealized gain (loss) 1.35 (1.35)
Total from investment operations 2.22 (.48)
Distributions from
Net investment income (.85) (.84)
Net realized gains (.09) --
Total distributions (.94) (.84)
Total increase (decrease) in net asset value 1.28 (1.32)
Net asset value, ending $16.62 $15.34
Total return * 14.86% (2.88%)
Ratios to average net assets:
Net investment income 5.35% 5.47%
Total expenses + .76% --
Net expenses .75% .73%
Portfolio turnover 12% 11%
Net assets, ending (in thousands) $60,203 $64,215
Number of shares outstanding,
ending (in thousands) 3,621 4,185
* Total return does not reflect deduction of Class A front-end sales
charge.
+ Effective December 31, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly; such reductions are included in
the ratio of net expenses. Total expenses are presented net of expense
waivers and reimbursements.
<PAGE>
EXHIBIT A
Reduced Sales Charges
You may qualify for a reduced sales charge through several purchase plans
available. You must notify the Fund at the time of purchase to take
advantage of the reduced sales charge.
Rights of Accumulation can be applied to several accounts
The sales charge breakpoints are automatically calculated for each account
based on the higher of cost or current value of shares previously purchased.
This privilege can be applied to a family group or other qualified group*
upon request. Shares could then be purchased at the reduced sales charge
which applies to the entire group; that is, based on the higher of cost or
current value of shares previously purchased and currently held by all the
members of the group.
Letter of Intent
If you (or your group, as described above) plan to purchase $50,000 or more
of Calvert Fund shares over the next 13 months, your sales charge may be
reduced through a "Letter of Intent." You pay the lower sales charge
applicable to the total amount you plan to invest over the 13-month period,
excluding any money market portfolio purchases. Part of your shares will be
held in escrow, so that if you do not invest the amount indicated, you will
have to pay the sales charge applicable to the smaller investment actually
made. For more information, see the SAI.
Neither the Funds, nor Calvert Distributors, Inc. ("CDI"), nor any affiliate
thereof will reimburse a plan or participant for any sales charges paid
prior to receipt of such written communication and confirmation by Calvert
Group. Plan administrators should send requests for the waiver of sales
charges based on the above conditions to: Calvert Group Retirement Plans,
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
* A "qualified group" is one which:
has been in existence for more than six months, and
has a purpose other than acquiring shares at a discount, and
satisfies uniform criteria which enable CDI and brokers offering shares to
realize economies of scale in distributing such shares.
A qualified group must have more than 10 members, must be available to
arrange for group meetings between representatives of CDI or brokers
distributing shares, must agree to include sales and other materials related
to the Funds in its publications and mailings to members at reduced or no
cost to CDI or brokers. A pension plan is not a qualified group for rights
of accumulation.
Other Circumstances
There is no sales charge on shares of any Fund of the Calvert Group of Funds
sold to (i) current or retired Directors, Trustees, or Officers of the
Calvert Group of Funds, employees of Calvert Group, Ltd. and its affiliates,
or their family members; (ii) CSIF Advisory Council Members, directors,
officers, and employees of any subadvisor for the Calvert Group of Funds,
employees of broker/dealers distributing the Fund's shares and immediate
family members of the Council, subadvisor, or broker/dealer; (iii) Purchases
made through a Registered Investment Advisor; (iv) Trust departments of
banks or savings institutions for trust clients of such bank or institution,
(v) Purchases through a broker maintaining an omnibus account with the Fund,
provided the purchases are made by (a) investment advisors or financial
planners placing trades for their own accounts (or the accounts of their
clients) and who charge a management, consulting, or other fee for their
services; or (b) clients of such investment advisors or financial planners
who place trades for their own accounts if such accounts are linked to the
master account of such investment advisor or financial planner on the books
and records of the broker or agent; or (c) retirement and deferred
compensation plans and trusts, including, but not limited to, those defined
in section 401(a) or section 403(b) of the I.R.C., and "rabbi trusts."
Dividends and Capital Gain Distributions from other Calvert Group Funds
You may prearrange to have your dividends and capital gain distributions
from another Calvert Group Fund automatically invested in another account
with no additional sales charge.
Purchases made at NAV
Except for money market funds, if you make a purchase at NAV, you may
exchange that amount to another Calvert Group Fund at no additional sales
charge.
Reinstatement Privilege
If you redeem shares and then within 30 days decide to reinvest in the same
Fund, you may do so at the net asset value next computed after the
reinvestment order is received, without a sales charge. You may use the
reinstatement privilege only once. The Funds reserve the right to modify or
eliminate this privilege.
EXHIBIT B
Service Fees and Arrangements with Dealers
Calvert Distributors, Inc., the Fund's underwriter, pays dealers a
commission, or reallowance (expressed as a percentage of the offering price)
when you purchase shares. CDI also pays dealers an ongoing service fee while
you own shares of a Fund (expressed as an annual percentage rate of average
daily net assets held in Calvert accounts by that dealer). The table below
shows the amount of
payment.
Maximum Commission/Service Fees
CTFR Vermont 3.00%/0.15%**
**If finder's fee is paid (see below), the service fee begins 13th month
after purchase.
Occasionally, CDI may reallow to dealers the full front-end sales charge.
CDI may also pay additional concessions, including non-cash promotional
incentives, such as merchandise or trips, to brokers employing registered
representatives who have sold or are expected to sell a minimum dollar
amount of shares of the Funds and/or shares of other Funds underwritten by
CDI. CDI may make expense reimbursements for special training of a broker's
registered representatives, advertising or equipment, or to defray the
expenses of sales contests. CAMCO, CDI, or their affiliates may pay certain
broker-dealers and/or other persons, for the sale and distribution of the
securities or for services to the Fund. Payments may include additional
compensation based on assets held through that firm beyond the regularly
scheduled rates, and finder's fees. CDI pays dealers a finder's fee on CTFR
Vermont shares purchased at NAV in accounts with $1 million or more. The
CTFR Vermont finder's fee is 1% of the NAV purchase amount on the first $2
million, .80% on $2 to $3 million, .50% on $3 to $50 million, .25% on $50 to
$100 million, and .15 over $100 million. All payments will be in compliance
with the rules of the National Association of Securities Dealers, Inc.
To Open an Account:
800-368-2748
Performance and Prices:
Calvert Information Network
24 hours, 7 days a week
800-368-2745
Service for Existing Accounts:
Shareholders 800-368-2745
Brokers 800-368-2746
TDD for Hearing-Impaired:
800-541-1524
Branch Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Registered, Certified or
Overnight Mail:
Calvert Group
c/o NFDS
330 West 9th Street
Kansas City, MO 64105
Calvert Group Web-Site
Address: http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
For investors who want more information about the Funds, the following
documents are available free upon request:
Annual/Semi-Annual Reports: Additional information about each Fund's
investments is available in the Fund's Annual and Semi-Annual reports to
shareholders. In each Fund's annual report, you will find a discussion of
the market conditions and investment strategies that significantly affected
the Fund's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI for each Fund provides
more detailed information about the Fund and is incorporated into this
prospectus by reference.
You can get free copies of reports and SAIs, request other information and
discuss your questions about the Funds by contacting your broker, or the
Funds at:
Calvert Group
4550 Montgomery Ave, Suite 1000N
Bethesda, Md. 20814
Telephone: 1-800-368-2745
Calvert Group Web-Site
Address: http://www.calvertgroup.com
You can review the Funds' reports and SAIs at the public Reference Room of
the Securities and Exchange Commission. You can get text only copies:
o For a fee, by writing to or calling the Public Reference Room of
the Commission, Washington, D.C. 20549-6009, Telephone: 1-800-SEC-0330.
o Free from the Commission's Internet website at http://www.sec.gov.
Investment Company Act file: no. 811-3101 (CTFR)
<PAGE>
CALVERT TAX-FREE RESERVES
Money Market Portfolio
Limited-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
April 30, 1999
TABLE OF CONTENTS
Investment Policies 1
Investment Restrictions 4
Purchases and Redemptions of Shares 5
Dividends and Distributions 5
Tax Matters 6
Valuation of Shares 6
Calculation of Yield and Total Return 7
Advertising 8
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 14
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, 1999 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.
INVESTMENT POLICIES
The Money Market Portfolio and Limited-Term Portfolio each invest
primarily in a diversified portfolio of municipal obligations whose interest
is exempt from federal income tax. The Portfolios differ in their
anticipated income yields, quality, length of average weighted maturity, and
capital value volatility. The investment objectives may only be changed with
shareholder approval. 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 Obligations and Demand Notes
Each Portfolio may invest in variable rate obligations. Variable
rate obligations have a yield that is adjusted periodically based on changes
in the level of prevailing interest rates. Floating rate obligations have an
interest rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate
obligations lessen the capital fluctuations usually inherent in fixed income
investments. This diminishes the risk of capital depreciation of investment
securities in a Portfolio and, consequently, of Portfolio shares. However,
if interest rates decline, the yield of the invested Portfolio will decline,
causing the Portfolio and its shareholders to forego the opportunity for
capital appreciation of the Portfolio's investments and of their shares.
Each Portfolio may invest in floating rate and variable rate demand
notes. Demand notes provide that the holder may demand payment of the note
at its par value plus accrued interest by giving notice to the issuer. To
ensure the ability of the issuer to make payment on demand, a bank letter of
credit or other liquidity facility may support the note.
The Board of Trustees has approved investments by the Money Market
Portfolio in floating and variable rate demand notes upon the following
conditions: the Portfolio has right of demand, upon notice not to exceed
thirty days, against the issuer to receive payment; the issuer will be able
to make payment upon such demand, either from its own resources or through
an unqualified commitment from a third party; and the rate of interest
payable is calculated to ensure that the market value of such notes will
approximate par value on the adjustment dates. The remaining maturity of
such demand notes is deemed the period remaining until such time as the
Portfolio can recover the principal through demand.
Municipal Leases (Limited Term only)
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. There are additional risks inherent in investing in
this type of municipal security. Unlike municipal notes and bonds, where a
municipality is obligated by law to make interest and principal payments
when due, funding for lease payments needs to be appropriated each fiscal
year in the budget. It is possible that a municipality will not appropriate
funds for lease payments. The Advisor considers risk of cancellation in its
investment analysis. The 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; and (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.
Obligations with Puts Attached
The Portfolios have 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." 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.
Repurchase Agreements
The Portfolios may purchase debt securities subject to repurchase
agreements, which are arrangements under which the Portfolios buys a
security, and the seller simultaneously agrees to repurchase the security at
a specified time and price reflecting a market rate of interest. The
Portfolios engages in repurchase agreements in order to earn a higher rate
of return than they could earn simply by investing in the obligation which
is the subject of the repurchase agreement. Repurchase agreements are not,
however, without risk. In the event of the bankruptcy of a seller during the
term of a repurchase agreement, a legal question exists as to whether the
Portfolios would be deemed the owner of the underlying security or would be
deemed only to have a security interest in and lien upon such security. The
Portfolios will only engage in repurchase agreements with recognized
securities dealers and banks determined to present minimal credit risk by
the Advisor under the direction and supervision of the Portfolios' Board of
Trustees. In addition, the Portfolios will only engage in repurchase
agreements reasonably designed to secure fully during the term of the
agreement the seller's obligation to repurchase the underlying security and
will monitor the market value of the underlying security during the term of
the agreement. If the value of the underlying security declines and is not
at least equal to the repurchase price due the Portfolios pursuant to the
agreement, the Portfolios will require the seller to pledge additional
securities or cash to secure the seller's obligations pursuant to the
agreement. If the seller defaults on its obligation to repurchase and the
value of the underlying security declines, the Portfolios may incur a loss
and may incur expenses in selling the underlying security. Repurchase
agreements are always for periods of less than one year. Repurchase
agreements not terminable within seven days are considered illiquid.
Reverse Repurchase Agreements
The Portfolios may also engage in reverse repurchase agreements.
Under a reverse repurchase agreement, the Portfolios sells securities to a
bank or securities dealer and agrees to repurchase those securities from
such party at an agreed upon date and price reflecting a market rate of
interest. The Portfolios invests the proceeds from each reverse repurchase
agreement in obligations in which it is authorized to invest. The Portfolios
intends to enter into a reverse repurchase agreement only when the interest
income provided for in the obligation in which the Portfolios invests the
proceeds is expected to exceed the amount the Portfolios will pay in
interest to the other party to the agreement plus all costs associated with
the transactions. The Portfolios does not intend to borrow for leverage
purposes. The Portfolios will only be permitted to pledge assets to the
extent necessary to secure borrowings and reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, the
Portfolios will maintain in a segregated account an amount of cash, US
Government securities or other liquid, high-quality debt securities equal in
value to the repurchase price. The Portfolios will mark to market the value
of assets held in the segregated account, and will place additional assets
in the account whenever the total value of the account falls below the
amount required under applicable regulations.
The Portfolios' use of reverse repurchase agreements involves the
risk that the other party to the agreements could become subject to
bankruptcy or liquidation proceedings during the period the agreements are
outstanding. In such event, the Portfolios may not be able to repurchase the
securities it has sold to that other party. Under those circumstances, if at
the expiration of the agreement such securities are of greater value than
the proceeds obtained by the Portfolios under the agreements, the Portfolios
may have been better off had they not entered into the agreement. However,
the Portfolios will enter into reverse repurchase agreements only with banks
and dealers which the Advisor believes present minimal credit risks under
guidelines adopted by the Portfolios' Board of Trustees. In addition, the
Portfolios bear the risk that the market value of the securities they sold
may decline below the agreed-upon repurchase price, in which case the dealer
may request the Portfolios to post additional collateral.
When-Issued Purchases (Limited-Term only)
New issues of municipal obligations are offered on a when-issued
basis; that is, delivery and payment for the securities normally take place
15 to 45 days after the date of the transaction. The payment obligation and
the yield that will be received on the securities are each fixed at the time
the buyer enters into the commitment. The Portfolio will only make
commitments to purchase these securities with the intention of actually
acquiring them, but may sell these securities before the settlement date if
it is deemed advisable as a matter of investment strategy.
Securities purchased on a when-issued basis and the securities held
in the Fund's Portfolios are subject to changes in market value based upon
the public's perception of the creditworthiness of the issuer and changes in
the level of interest rates (which will generally result in both changing in
value in the same way, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, if in
order to achieve higher interest income, the Fund remains substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a greater possibility that the market value
of the Fund's assets may vary.
When the time comes to pay for when-issued securities, the Fund
will meet its obligations from then available cash flow, sale of securities
or, although it would not normally expect to do so, from sale of the
when-issued securities themselves (which may have a market value greater or
less than the Fund's payment obligation). Sale of securities to meet such
obligations carries with it a greater potential for the realization of
capital losses and capital gains which are not exempt from federal income
tax. When issued securities do not earn income until they have in fact been
issued.
When the Portfolio 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 so that the amount so segregated equals
the market value of the when-issued purchase, thereby ensuring the
transaction is unleveraged.
Non-Investment Grade Debt Securities (Limited-Term only)
Non-investment grade debt securities are lower quality debt
securities (generally those rated BB or lower by S&P or Ba or lower by
Moody's, known as "junk bonds." These securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. (See Appendix for a description of the ratings.) These
securities involve greater risk of default or price declines due to changes
in the issuer's creditworthiness than investment-grade debt securities.
Because the market for lower-rated securities may be thinner and less active
than for higher-rated securities, there may be market price volatility for
these securities and limited liquidity in the resale market. Market prices
for these securities may decline significantly in periods of general
economic difficulty or rising interest rates.
The quality limitation set forth in the Portfolio's investment
policy is determined immediately after the Portfolio's acquisition of a
given security. Accordingly, any later change in ratings will not be
considered when determining whether an investment complies with the
Portfolio's investment policy.
When purchasing non-investment grade debt securities, rated or
unrated, the Advisor prepare their own careful credit analysis to attempt to
identify those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur.
INVESTMENT RESTRICTIONS
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 or purchase put or call options.
The Funds reserve the right to purchase securities with puts
attached or with demand features.
(4) The Limited-Term Portfolio may not invest more than 15% of net
assets in non-investment grade debt securities and
the Portfolio does not intend to purchase more than 5% of non-investment
grade securities.
(5) The Limited-Term Portfolio may not maintain an average maturity
of more than three years and the Portfolio does not intend to
maintain an average maturity of more than one year.
(6) The Portfolios may not purchase illiquid securities if
more than 10% of the value of that
Portfolio's net assets would be invested in such
securities.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will not be issued unless requested in writing
by the investor. No charge will be made for share certificate requests. No
certificates will be issued for fractional shares.
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.
DIVIDENDS AND DISTRIBUTIONS
The Money Market Portfolio declares daily and pays monthly
dividends of its daily net income to shareholders of record as of the close
of business each business day, thus allowing daily compounding of dividends.
The Limited-Term Portfolio declares and pays monthly dividends of its net
income to shareholders of record as of the close of business on each
designated monthly record date. Dividends and distributions paid by 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.
Purchasers of shares of the Money Market Portfolio will begin
receiving dividends upon the date federal funds are received by the Fund.
Shareholders redeeming shares by telephone electronic funds transfer or
written request will receive dividends through the date that the redemption
request is received; Money Market Portfolio shareholders redeeming shares by
draft will receive dividends up to the date such draft is presented to the
Portfolio for payment.
TAX MATTERS
The Portfolios intend to continue to qualify as regulated
investment companies under Subchapter M of the Internal Revenue Code. If for
any reason one of the Portfolios 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.
VALUATION OF SHARES
Money Market Portfolio
The Money Market Portfolio's assets 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.
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.
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
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 3.46% and its effective yield was
3.52%. For the seven-day period ended December 31, 1998, the Money Market
Portfolio's yield for the Institutional Class of shares was 3.78% and its
effective yield was 3.86%. 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 5.50% and, for the 39.6% federal income tax bracket, 5.83%. 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 6.03% and, for the 39.6% federal income tax
bracket, 6.39%. 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 (ended 12/31/98) are as follows:
With Max. Load W/O Max. Load
One Year 2.82% 3.87%
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 3.07%.
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 4.80% for an investor in the
36% federal income tax bracket, and 5.08% for an investor in the 39.6%
federal income tax bracket.
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles,
sociological conditions and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Portfolio, whether held
or not.
The Fund or its affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings,
Mutual Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker
Investment Management, Inc. Such averages generally do not reflect any
front- or back-end sales charges that may be charged by Funds in that
grouping. The Fund may also cite to any source, whether in print or on-line,
such as Bloomberg, in order to acknowledge origin of information. The Fund
may compare itself or its portfolio holdings to other investments, whether
or not issued or regulated by the securities industry, including, but not
limited to, certificates of deposit and Treasury notes. The Fund, its
Advisor, and its affiliates reserve the right to update performance rankings
as new rankings become available.
Calvert Group is the nation's leading family of socially
responsible mutual funds, both in terms of socially responsible mutual fund
assets under management, and number of socially responsible mutual fund
portfolios offered (source: Social Investment Forum, December 31, 1998).
Calvert Group was also the first to offer a family of socially responsible
mutual fund portfolios.
TRUSTEES AND OFFICERS
The Fund's Board of Trustees/Directors supervises the Fund's
activities and reviews its contracts with companies that provide it with
services.
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 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 Calvert Variable Series,
Inc., and 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.
VICTOR FRYE, Esq., Assistant Secretary and Compliance Officer. Mr.
Frye is Counsel and Compliance Officer of Calvert Group and an officer of
each of its subsidiaries and Calvert-Sloan Advisers, L.L.C. He is also an
officer of each of the other investment companies in the Calvert Group of
Funds. Prior to working at Calvert Group, Mr. Frye was Counsel and Manager
of the Compliance Department at The Advisors Group. DOB: 10/15/58.
The address of directors and officers, unless otherwise noted, is
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Trustees and
officers of the Fund as a group own less than 1% of the Fund's outstanding
shares. Trustees marked with an *, above, are "interested persons" of the
Fund, under the Investment Company Act of 1940.
Each of the above directors/trustees and officers is a
director/trustee or officer of each of the investment companies in the
Calvert Group of Funds with the exception of Calvert Social Investment Fund,
of which only Messrs. Baird, Guffey and Silby and Ms. Krumsiek are among the
trustees, Calvert Variable Series, Inc., of which only Messrs. Blatz, Diehl
and Pugh and Mmes. Krumsiek and 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.
**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.
For Portfolios with multiple classes, investment advisory fees are
allocated as a Portfolio level expense based on net assets.
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. 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 service fees paid by CTFR Money Market were $1,682,754 and
$24,010 for Class O and the Institutional Class, respectively. The 1998
administrative service 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 administrative 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.
Administrative service fees are allocated as a class-level expense,
again based on net assets.
TRANSFER AND SHAREHOLDER SERVICING AGENTS
National Financial Data Services, Inc. ("NFDS"), 330 W. 9th Street,
Kansas City, Missouri 64105, a subsidiary of State Street Bank & Trust, has
been retained by the Fund to act as transfer agent and dividend disbursing
agent. These responsibilities include: responding to certain shareholder
inquiries and instructions, crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions,
and daily updating of shareholder accounts to reflect declaration and
payment of dividends.
Calvert Shareholder Services, Inc. ("CSSI"), 4550 Montgomery
Avenue, Bethesda, Maryland 20814, 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, 250 West Pratt Street, Baltimore,
Maryland 21201, 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"), 4550 Montgomery Avenue, Bethesda,
Maryland 20814. 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.
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 1.00%.
For the fiscal years ended December 31, 1996, 1997, and 1998, CDI
received no sales charges in excess of the dealer reallowance. CDI paid to
dealers $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.
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 is an open-end investment management investment company,
organized as a Massachusetts business trust on October 20, 1980. The Money
Market and Limited Term Portfolios are diversified. 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).
Each class represents interests in the same portfolio of
investments but, as further described in the prospectus, each class is
subject to differing sales charges and expenses, which differences will
result in differing net asset values and distributions. Upon any liquidation
of the Fund, shareholders of each class are entitled to share pro rata in
the net assets belonging to that series available for distribution.
The Fund is not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes such as electing
Trustees, changing fundamental policies, or approving a management contract.
As a shareholder, you receive one vote for each share you own, except that
matters affecting classes differently, such as Distribution Plans, will be
voted on separately by the affected class(es).
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 20, 1999, the following shareholders owned of record 5%
or more of the Class or Portfolio shown:
Name and Address % of Ownership
Minnesota Mining and Mfg. Co.
St. Paul, Minnesota 15.51%, Money Market Portfolio,
Class I
The Grocers Supply Co., Inc.
Houston, Texas 14.14%, Money Market Portfolio,
Class I
Florida Power & Light Co.
Miami, Florida 14.10%, Money Market Portfolio,
Class I
Mollanvick, Inc.
Wilmington, Delaware 10.43%, Money Market Portfolio,
Class I
David Mastran
Arlington, Virginia 8.42%, Money Market Portfolio,
Class I
Synopsys, Inc.
Mountain View, California 7.24%, 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.
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
<PAGE>
CALVERT TAX-FREE RESERVES
Long-Term Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
April 30, 1999
TABLE OF CONTENTS
Investment Policies 1
Investment Restrictions 8
Purchases and Redemptions of Shares 9
Dividends, Distributions and Tax Matters 9
Valuation of Shares 10
Calculation of Yield and Total Return 10
Advertising 11
Trustees and Officers 12
Investment Advisor 14
Administrative Services 15
Transfer and Shareholder Servicing Agents 15
Independent Accountants and Custodians 15
Method of Distribution 15
Portfolio Transactions 16
General Information 17
Control Persons and Principal Holders of Securities 17
Appendix 17
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 Portfolio's Prospectus, dated April 30, 1999, 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 Portfolio's 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 Portfolio.
INVESTMENT POLICIES
The Portfolio invests primarily in a portfolio of municipal
obligations whose interest is exempt from federal income tax. The investment
objective may only be changed with shareholder approval. A complete
explanation of municipal obligations and municipal bond and note ratings is
set forth in the Appendix.
The credit rating of the Portfolio's assets as of its most recent
fiscal year-end appears in the Annual Report to Shareholders, incorporated
by reference herein.
Variable Rate Obligations and Demand Notes
The Portfolio may invest in variable rate obligations. Variable
rate obligations have a yield that is adjusted periodically based on changes
in the level of prevailing interest rates. Floating rate obligations have an
interest rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate
obligations lessen the capital fluctuations usually inherent in fixed income
investments. This diminishes the risk of capital depreciation of investment
securities in a Portfolio and, consequently, of Portfolio shares. However,
if interest rates decline, the yield of the invested Portfolio will decline,
causing the Portfolio and its shareholders to forego the opportunity for
capital appreciation of the Portfolio's investments and of their shares.
The Portfolio may invest in floating rate and variable rate demand
notes. Demand notes provide that the holder may demand payment of the note
at its par value plus accrued interest by giving notice to the issuer. To
ensure the ability of the issuer to make payment on demand, a bank letter of
credit or other liquidity facility may support the note.
The Board of Trustees has approved investments in floating and
variable rate demand notes upon the following conditions: the Portfolio has
right of demand, upon notice not to exceed thirty days, against the issuer
to receive payment; the issuer will be able to make payment upon such
demand, either from its own resources or through an unqualified commitment
from a third party; and the rate of interest payable is calculated to ensure
that the market value of such notes will approximate par value on the
adjustment dates. The remaining maturity of such demand notes is deemed the
period remaining until such time as the Portfolio can recover the principal
through demand.
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. There are additional risks inherent in investing in
this type of municipal security. Unlike municipal notes and bonds, where a
municipality is obligated by law to make interest and principal payments
when due, funding for lease payments needs to be appropriated each fiscal
year in the budget. It is possible that a municipality will not appropriate
funds for lease payments. The Advisor considers risk of cancellation in its
investment analysis. The 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; and (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.
Obligations with Puts Attached
The Portfolio has authority to purchase securities at a price which
would result in a yield to maturity lower than that generally offered by the
seller at the time of purchase when it can acquire at the same time the
right to sell the securities back to the seller at an agreed upon price at
any time during a stated period or on a certain date. Such a right is
generally denoted as a "put." Unconditional puts are readily exercisable in
the event of a default in payment of principal or interest on the underlying
securities.
Temporary Investments
Short-term money market type investments consist of: obligations of
the U.S. Government, its agencies and instrumentalities; certificates of
deposit of banks with assets of one billion dollars or more; commercial
paper or other corporate notes of investment grade quality; and any of such
items subject to short-term repurchase agreements.
The Portfolio intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities. To minimize
taxable income, the Portfolio may also hold cash which is not earning income.
Repurchase Agreements
The Portfolio may purchase debt securities subject to repurchase
agreements, which are arrangements under which the Portfolio buys a
security, and the seller simultaneously agrees to repurchase the security at
a specified time and price reflecting a market rate of interest. The
Portfolio engages in repurchase agreements in order to earn a higher rate of
return than it could earn simply by investing in the obligation which is the
subject of the repurchase agreement. Repurchase agreements are not, however,
without risk. In the event of the bankruptcy of a seller during the term of
a repurchase agreement, a legal question exists as to whether the Portfolio
would be deemed the owner of the underlying security or would be deemed only
to have a security interest in and lien upon such security. The Portfolio
will only engage in repurchase agreements with recognized securities dealers
and banks determined to present minimal credit risk by the Advisor under the
direction and supervision of the Portfolio's Board of Trustees. In addition,
the Portfolio will only engage in repurchase agreements reasonably designed
to secure fully during the term of the agreement the seller's obligation to
repurchase the underlying security and will monitor the market value of the
underlying security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase
price due the Portfolio pursuant to the agreement, the Portfolio will
require the seller to pledge additional securities or cash to secure the
seller's obligations pursuant to the agreement. If the seller defaults on
its obligation to repurchase and the value of the underlying security
declines, the Portfolio may incur a loss and may incur expenses in selling
the underlying security. Repurchase agreements are always for periods of
less than one year. Repurchase agreements not terminable within seven days
are considered illiquid.
Reverse Repurchase Agreements
The Portfolio may also engage in reverse repurchase agreements.
Under a reverse repurchase agreement, the Portfolio sells securities to a
bank or securities dealer and agrees to repurchase those securities from
such party at an agreed upon date and price reflecting a market rate of
interest. The Portfolio invests the proceeds from each reverse repurchase
agreement in obligations in which it is authorized to invest. The Portfolio
intends to enter into a reverse repurchase agreement only when the interest
income provided for in the obligation in which the Portfolio invests the
proceeds is expected to exceed the amount the Portfolio will pay in interest
to the other party to the agreement plus all costs associated with the
transactions. The Portfolio does not intend to borrow for leverage purposes.
The Portfolio will only be permitted to pledge assets to the extent
necessary to secure borrowings and reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, the
Portfolio will maintain in a segregated account an amount of cash, US
Government securities or other liquid, high-quality debt securities equal in
value to the repurchase price. The Portfolio will mark to market the value
of assets held in the segregated account, and will place additional assets
in the account whenever the total value of the account falls below the
amount required under applicable regulations.
The Portfolio's use of reverse repurchase agreements involves the
risk that the other party to the agreements could become subject to
bankruptcy or liquidation proceedings during the period the agreements are
outstanding. In such event, the Portfolio may not be able to repurchase the
securities it has sold to that other party. Under those circumstances, if at
the expiration of the agreement such securities are of greater value than
the proceeds obtained by the Portfolio under the agreements, the Portfolio
may have been better off had it not entered into the agreement. However, the
Portfolio will enter into reverse repurchase agreements only with banks and
dealers which the Advisor believes present minimal credit risks under
guidelines adopted by the Portfolio's Board of Trustees. In addition, the
Portfolio bears the risk that the market value of the securities it sold may
decline below the agreed-upon repurchase price, in which case the dealer may
request the Portfolio to post additional collateral.
When-Issued Purchases
New issues of municipal obligations are offered on a when-issued
basis; that is, delivery and payment for the securities normally take place
15 to 45 days after the date of the transaction. The payment obligation and
the yield that will be received on the securities are each fixed at the time
the buyer enters into the commitment. The Portfolio will only make
commitments to purchase these securities with the intention of actually
acquiring them, but may sell these securities before the settlement date if
it is deemed advisable as a matter of investment strategy.
Securities purchased on a when-issued basis and the securities held
in the Portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in both changing in
value in the same way, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, if in
order to achieve higher interest income, the Portfolio remains substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a greater possibility that the market value
of the Portfolio's assets may vary.
When the time comes to pay for when-issued securities, the
Portfolio will meet its obligations from then available cash flow, sale of
securities or, although it would not normally expect to do so, from sale of
the when-issued securities themselves (which may have a market value greater
or less than the Portfolio's payment obligation). Sale of securities to meet
such obligations carries with it a greater potential for the realization of
capital losses and capital gains which are not exempt from federal income
tax. When issued securities do not earn income until they have in fact been
issued.
When the Portfolio 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 so that the amount so segregated equals
the market value of the when-issued purchase, thereby ensuring the
transaction is unleveraged.
Non-Investment Grade Debt Securities
Non-investment grade debt securities are lower quality debt
securities (generally those rated BB or lower by S&P or Ba or lower by
Moody's, known as "junk bonds." These securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. (See Appendix for a description of the ratings.) These
securities involve greater risk of default or price declines due to changes
in the issuer's creditworthiness than investment-grade debt securities.
Because the market for lower-rated securities may be thinner and less active
than for higher-rated securities, there may be market price volatility for
these securities and limited liquidity in the resale market. Market prices
for these securities may decline significantly in periods of general
economic difficulty or rising interest rates.
The quality limitation set forth in the Portfolio's investment
policy is determined immediately after the Portfolio's acquisition of a
given security. Accordingly, any later change in ratings will not be
considered when determining whether an investment complies with the
Portfolio's investment policy.
When purchasing non-investment grade debt securities, rated or
unrated, the Advisor prepares its own careful credit analysis to attempt to
identify those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur.
Derivatives
The Portfolio can use various techniques to increase or decrease
its exposure to changing security prices, interest rates, or other factors
that affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts and
leveraged notes, entering into swap agreements, and purchasing indexed
securities. The Portfolio can use these practices either as substitution or
as protection against an adverse move in the Portfolio to adjust the risk
and return characteristics of the Portfolio. If the Advisor judges market
conditions incorrectly or employs a strategy that does not correlate well
with a Portfolio's investments, or if the counterparty to the transaction
does not perform as promised, these techniques could result in a loss. These
techniques may increase the volatility of a Portfolio and may involve a
small investment of cash relative to the magnitude of the risk assumed.
Derivatives are often illiquid.
Options and Futures Contracts
The Portfolio may, in pursuit of its respective investment
objectives, purchase put and call options and engage in the writing of
covered call options and secured put options on securities and employ a
variety of other investment techniques such as interest rate futures
contracts, and options on such futures, as described more fully below.
The Portfolio may engage in such transactions only to hedge the
existing positions in the Portfolio. They will not engage in such
transactions for the purposes of speculation or leverage. Such investment
policies and techniques may involve a greater degree of risk than those
inherent in more conservative investment approaches.
The Portfolio may write "covered options" on securities in standard
contracts traded on national securities exchanges. The Portfolio may write
such options in order to receive the premiums from options that expire and
to seek net gains from closing purchase transactions with respect to such
options.
Put and Call Options. The Portfolio may purchase put and call options, in
standard contracts traded on national securities exchanges. The Portfolio
will purchase such options only to hedge against changes in the value of
securities the Portfolio hold and not for the purposes of speculation or
leverage. By buying a put, a Portfolio has the right to sell the security at
the exercise price, thus limiting its risk of loss through a decline in the
market value of the security until the put expires. The amount of any
appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and any profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the
put option plus the related transaction costs.
The Portfolio may purchase call options on securities which it may
intend to purchase or as an interest rate hedge. Such transactions may be
entered into in order to limit the risk of a substantial increase in the
market price of the security which the Portfolio intends to purchase or in
the level of market interest rates. Prior to its expiration, a call option
may be sold in a closing sale transaction. Any profit or loss from such a
sale will depend on whether the amount received is more or less than the
premium paid for the call option plus the related transaction costs.
Covered Options. The Portfolio may write only covered options on securities
in standard contracts traded on national securities exchanges. This means
that, in the case of call options, so long as a Portfolio is obligated as
the writer of a call option, that Portfolio will own the underlying security
subject to the option and, in the case of put options, that Portfolio will,
through its custodian, deposit and maintain either cash or securities with a
market value equal to or greater than the exercise price of the option.
When a Portfolio writes a covered call option, the Portfolio gives
the purchaser the right to purchase the security at the call option price at
any time during the life of the option. As the writer of the option, the
Portfolio receives a premium, less a commission, and in exchange foregoes
the opportunity to profit from any increase in the market value of the
security exceeding the call option price. The premium serves to mitigate the
effect of any depreciation in the market value of the security. Writing
covered call options can increase the income of the Portfolio and thus
reduce declines in the net asset value per share of the Portfolio if
securities covered by such options decline in value. Exercise of a call
option by the purchaser however will cause the Portfolio to forego future
appreciation of the securities covered by the option.
When a Portfolio writes a covered put option, it will gain a profit
in the amount of the premium, less a commission, so long as the price of the
underlying security remains above the exercise price. However, the Portfolio
remains obligated to purchase the underlying security from the buyer of the
put option (usually in the event the price of the security falls below the
exercise price) at any time during the option period. If the price of the
underlying security falls below the exercise price, the Portfolio may
realize a loss in the amount of the difference between the exercise price
and the sale price of the security, less the premium received.
The Portfolio may purchase securities which may be covered with
call options solely on the basis of considerations consistent with the
investment objectives and policies of the Portfolio. The Portfolio's
turnover may increase through the exercise of a call option; this will
generally occur if the market value of a "covered" security increases and
the portfolio has not entered into a closing purchase transaction.
Risks Related to Options Transactions. The Portfolio can close out
its respective positions in exchange-traded options only on an exchange
which provides a secondary market in such options. Although the Portfolio
intends to acquire and write only such exchange-traded options for which an
active secondary market appears to exist, there can be no assurance that
such a market will exist for any particular option contract at any
particular time. This might prevent the Portfolio from closing an options
position, which could impair the Portfolio's ability to hedge effectively.
The inability to close out a call position may have an adverse effect on
liquidity because the Portfolio may be required to hold the securities
underlying the option until the option expires or is exercised.
Types of Futures Contracts Purchased
The Long-Term Portfolio intends to deal in futures contracts based
upon The Bond Buyer Municipal Bond Index, a price-weighted measure of the
market value of 40 large, recently-issued tax-exempt bonds, and to engage in
transactions in exchange-listed futures contracts on US Treasury securities.
The Long-Term Portfolio may also engage in transactions in other futures
contracts, such as futures contracts on other municipal bond indexes that
become available, if the investment advisor believes such contracts would be
appropriate for hedging its investments in municipal bonds.
Transactions in Futures Contracts
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal bonds or on U.S. Treasury securities, or
options on such futures contracts, for hedging purposes only. The Portfolio
may sell such futures contracts in anticipation of a decline in the cost of
municipal bonds it holds or may purchase such futures contracts in
anticipation of an increase in the value of municipal bonds the Portfolio
intends to acquire. The Portfolio also is authorized to purchase and sell
other financial futures contracts which in the opinion of the Investment
Advisor provide an appropriate hedge for some or all of the Portfolio's
securities.
Because of low initial margin deposits made upon the opening of a
futures position, futures transactions involve substantial leverage. As a
result, relatively small movements in the price of the futures contract can
result in substantial unrealized gains or losses. Because the Portfolio will
engage in the purchase and sale of financial futures contracts solely for
hedging purposes, however, any losses incurred in connection therewith
should, if the hedging strategy is successful, be offset in whole or in part
by increases in the value of securities held by the Portfolio or decreases
in the price of securities the Portfolio intends to acquire.
Municipal bond index futures contracts commenced trading in June
1985, and it is possible that trading in such futures contracts will be less
liquid than that in other futures contracts. The trading of futures
contracts and options thereon is subject to certain market risks, such as
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention or other disruptions of normal trading activity,
which could at times make it difficult or impossible to liquidate existing
positions.
The liquidity of a secondary market in futures contracts may be
further adversely affected by "daily price fluctuation limits" established
by contract markets, which limit the amount of fluctuation in the price of a
futures contract or option thereon during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into
at a price beyond the limit, thus preventing the liquidation of open
positions. Prices of existing contracts have in the past moved the daily
limit on a number of consecutive trading days. The Portfolio will enter into
a futures position only if, in the judgment of the Investment Advisor, there
appears to be an actively traded secondary market for such futures contracts.
The successful use of transactions in futures contracts and options
thereon depends on the ability of the Investment Advisor to correctly
forecast the direction and extent of price movements of these instruments,
as well as price movements of the securities held by the Portfolio within a
given time frame. To the extent these prices remain stable during the period
in which a futures or option contract is held by the Portfolio, or move in a
direction opposite to that anticipated, the Portfolio may realize a loss on
the hedging transaction which is not fully or partially offset by an
increase in the value of the Portfolio's securities. As a result, the
Portfolio's total return for such period may be less than if it had not
engaged in the hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller of a
contract to deliver and the purchaser of a contract to take delivery of the
type of financial instrument called for in the contract or, in some
instances, to make a cash settlement, at a specified future time for a
specified price. Although the terms of a contract call for actual delivery
or acceptance of securities, or for a cash settlement, in most cases the
contracts are closed out before the delivery date without the delivery or
acceptance taking place. The Portfolio intends to close out its futures
contracts prior to the delivery date of such contracts.
The Portfolio may sell futures contracts in anticipation of a
decline in the value of its investments in municipal bonds. The loss
associated with any such decline could be reduced without employing futures
as a hedge by selling long-term securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in cash.
This strategy, however, entails increased transaction costs in the form of
brokerage commissions and dealer spreads and will typically reduce the
Portfolio's average yields as a result of the shortening of maturities.
The purchase or sale of a futures contract differs from the
purchase or sale of a security, in that no price or premium is paid or
received. Instead, an amount of cash or securities acceptable to the
Portfolio's futures commission merchant and the relevant contract market,
which varies but is generally about 5% or less of the contract amount, must
be deposited with the broker. This amount is known as "initial margin," and
represents a "good faith" deposit assuring the performance of both the
purchaser and the seller under the futures contract. Subsequent payments to
and from the broker, known as "variation margin," are required to be made on
a daily basis as the price of the futures contract fluctuates, making the
long or short positions in the futures contract more or less valuable, a
process known as "marking to the market." Prior to the settlement date of
the futures contract, the position may be closed out by taking an opposite
position which will operate to terminate the position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid to or released by the broker, and the purchaser
realizes a loss or gain. In addition, a commission is paid on each completed
purchase and sale transaction.
The sale of financial futures contracts provides an alternative
means of hedging the Portfolio against declines in the value of its
investments in municipal bonds. As such values decline, the value of the
Portfolio's position in the futures contracts will tend to increase, thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's fixed income investments which are being hedged. While the
Portfolio will incur commission expenses in establishing and closing out
futures positions, commissions on futures transactions may be significantly
lower than transaction costs incurred in the purchase and sale of fixed
income securities. In addition, the ability of the Portfolio to trade in the
standardized contracts available in the futures market may offer a more
effective hedging strategy than a program to reduce the average maturing of
portfolio securities, due to the unique and varied credit and technical
characteristics of the municipal debt instruments available to the
Portfolio. Employing futures as a hedge may also permit the Portfolio to
assume a hedging posture without reducing the yield on its investments,
beyond any amounts required to engage in futures trading.
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal securities. These instruments provide for
the purchase or sale of a hypothetical portfolio of municipal bonds at a
fixed price in a stated delivery month. Unlike most other futures contracts,
however, a municipal bond index futures contract does not require actual
delivery of securities but results in a cash settlement based upon the
difference in value of the index between the time the contract was entered
into and the time it is liquidated.
The municipal bond index underlying the futures contracts traded by
the Portfolio is The Bond Buyer Municipal Bond Index, developed by The Bond
Buyer and the Chicago Board of Trade ("CBT"), the contract market on which
the futures contracts are traded. As currently structured, the index is
comprised of 40 tax-exempt term municipal revenue and general obligation
bonds. Each bond included in the index must be rated either A- or higher by
Standard & Poor's or A or higher by Moody's Investors Service and must have
a remaining maturity of 19 years or more. Twice a month new issues
satisfying the eligibility requirements are added to, and an equal number of
old issues will be deleted from, the index. The value of the index is
computed daily according to a formula based upon the price of each bond in
the index, as evaluated by four dealer-to-dealers brokers.
The Portfolio may also purchase and sell futures contracts on U.S.
Treasury bills, notes and bonds for the same types of hedging purposes. Such
futures contracts provide for delivery of the underlying security at a
specified future time for a fixed price, and the value of the futures
contract therefore generally fluctuates with movements in interest rates.
The municipal bond index futures contract, futures contracts on
U.S. Treasury securities and options on such futures contracts are traded on
the CBT, which, like other contract markets, assures the performance of the
parties to each futures contract through a clearing corporation, a nonprofit
organization managed by the exchange membership, which is also responsible
for handling daily accounting of deposits or withdrawals of margin.
The Portfolio may also purchase financial futures contracts when it
is not fully invested in municipal bonds in anticipation of an increase in
the cost of securities the Portfolio intends to purchase. As such securities
are purchased, an equivalent amount of futures contracts will be closed out.
In a substantial majority of these transactions, the Portfolio will purchase
municipal bonds upon termination of the futures contracts. Due to changing
market conditions and interest rate forecasts, however, a futures position
may be terminated without a corresponding purchase of securities.
Nevertheless, all purchases of futures contracts by the Portfolio will be
subject to certain restrictions, described below.
Options on Futures Contracts. An option on a futures contract
provides the purchaser with the right, but not the obligation, to enter into
a long position in the underlying futures contract (that is, purchase the
futures contract), in the case of a "call" option, or a short position (sell
the futures contract), in the case of a "put" option, for a fixed price up
to a stated expiration date. The option is purchased for a non-refundable
fee, known as the "premium." Upon exercise of the option, the contract
market clearing house assigns each party to the option an opposite position
in the underlying futures contract. In the event of exercise, therefore, the
parties are subject to all of the risks of futures trading, such as payment
of initial and variation margin. In addition, the seller, or "writer," of
the option is subject to margin requirements on the option position. Options
on futures contracts are traded on the same contract markets as the
underlying futures contracts.
The Portfolio may purchase options on futures contracts for the
same types of hedging purposes described above in connection with futures
contracts. For example, in order to protect against an anticipated decline
in the value of securities it holds, the Portfolio could purchase put
options on futures contracts, instead of selling the underlying futures
contracts. Conversely, in order to protect against the adverse effects of
anticipated increases in the costs of securities to be acquired, the
Portfolio could purchase call options on futures contracts, instead of
purchasing the underlying futures contracts. The Portfolio generally will
sell options on futures contracts only to close out an existing position.
The Portfolio will not engage in transactions in such instruments
unless and until the Investment Advisor determines that market conditions
and the circumstances of the Portfolio warrant such trading. To the extent
the Portfolio engages in the purchase and sale of futures contracts or
options thereon, it will do so only at a level which is reflective of the
Investment Advisor's view of the hedging needs of the Portfolio, the
liquidity of the market for futures contracts and the anticipated
correlation between movements in the value of the futures or option contract
and the value of securities held by the Portfolio.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Under regulations of the Commodity Futures Trading Commission
("CFTC"), the futures trading activities described herein will not result in
the Portfolio being deemed to be a "commodity pool," as defined under such
regulations, provided that certain trading restrictions are adhered to. In
particular, CFTC regulations require that all futures and option positions
entered into by the Portfolio qualify as bona fide hedge transactions, as
defined under CFTC regulations, or, in the case of long positions, that the
value of such positions not exceed an amount of segregated funds determined
by reference to certain cash and securities positions maintained by the
Portfolio and accrued profits on such positions. In addition, the Portfolio
may not purchase or sell any such instruments if, immediately thereafter,
the sum of the amount of initial margin deposits on the Portfolio's existing
futures positions would exceed 5% of the market value of its net assets.
When the Portfolio purchases a futures contract, it will maintain
an amount of cash, cash equivalents (for example, commercial paper and daily
tender adjustable notes) or securities in a segregated account so that the
amount so segregated plus the amount of initial and variation margin held in
the account of its broker equals the market value of the futures contract,
thereby ensuring the transaction.
Risk Factors in Transactions in Futures Contracts. The particular
municipal bonds comprising the index underlying the municipal bond index
futures contract may vary from the bonds held by the Portfolio. In addition,
the securities underlying futures contracts on U.S. Treasury securities will
not be the same as securities held by the Portfolio. As a result, the
Portfolio's ability effectively to hedge all or a portion of the value of
its municipal bonds through the use of futures contracts will depend in part
on the degree to which price movements in the index underlying the municipal
bond index futures contract, or the U.S. Treasury securities underlying
other futures contracts trade, correlate with price movements of the
municipal bonds held by the Portfolio.
For example, where prices of securities in the Portfolio do not
move in the same direction or to the same extent as the values of the
securities or index underlying a futures contract, the trading of such
futures contracts may not effectively hedge the Portfolio's investments and
may result in trading losses. The correlation may be affected by disparities
in the average maturity, ratings, geographical mix or structure of the
Portfolio's investments as compared to those comprising the index, and
general economic or political factors. In addition, the correlation between
movements in the value of the index underlying a futures contract may be
subject to change over time, as additions to and deletions from the index
alter its structure. In the case of futures contracts on U.S. Treasury
securities and options thereon, the anticipated correlation of price
movements between the U.S. Treasury securities underlying the futures or
options and municipal bonds may be adversely affected by economic,
political, legislative or other developments that have a disparate impact on
the respective markets for such securities. In the event that the Investment
Advisor determines to enter into transactions in financial futures contracts
other than the municipal bond index futures contract or futures on U.S.
Treasury securities, the risk of imperfect correlation between movements in
the prices of such futures contracts and the prices of municipal bonds held
by the Portfolio may be greater.
The trading of futures contracts on an index also entails the risk
of imperfect correlation between movements in the price of the futures
contract and the value of the underlying index. The anticipated spread
between the prices may be distorted due to differences in the nature of the
markets, such as margin requirements, liquidity and the participation of
speculators in the futures markets. The risk of imperfect correlation,
however, generally diminishes as the delivery month specified in the futures
contract approaches.
Prior to exercise or expiration, a position in futures contracts or
options thereon may be terminated only by entering into a closing purchase
or sale transaction. This requires a secondary market on the relevant
contract market. The Portfolio will enter into a futures or option position
only if there appears to be a liquid secondary market therefor, although
there can be no assurance that such a liquid secondary market will exist for
any particular contract at any specific time. Thus, it may not be possible
to close out a position once it has been established. Under such
circumstances, the Portfolio could be required to make continuing daily cash
payments of variation margin in the event of adverse price movements. In
such situation, if the Portfolio has insufficient cash, it may be required
to sell portfolio securities to meet daily variation margin requirements at
a time when it may be disadvantageous to do so. In addition, the Portfolio
may be required to perform under the terms of the futures or option
contracts it holds. The inability to close out futures or options positions
also could have an adverse impact on the Portfolio's ability effectively to
hedge its portfolio.
When the Portfolio purchases an option on a futures contract, its
risk is limited to the amount of the premium, plus related transaction
costs, although this entire amount may be lost. In addition, in order to
profit from the purchase of an option on a futures contract, the Portfolio
may be required to exercise the option and liquidate the underlying futures
contract, subject to the availability of a liquid secondary market. The
trading of options on futures contracts also entails the risk that changes
in the value of the underlying futures contract will not be fully reflected
in the value of the option, although the risk of imperfect correlation
generally tends to diminish as the maturity date of the futures contract or
expiration date of the option approaches.
"Trading Limits" or "Position Limits" may also be imposed on the
maximum number of contracts which any person may hold at a given time. A
contract market may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
The Investment Advisor does not believe that trading limits will have any
adverse impact on the strategies for hedging the Portfolio's investments.
Further, the trading of futures contracts is subject to the risk of
the insolvency of a brokerage firm or clearing corporation, which could make
it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.
In addition to the risks of imperfect correlation and lack of a
liquid secondary market for such instruments, transactions in futures
contracts involve risks related to leveraging and the potential for
incorrect forecasts of the direction and extent of interest rate movements
within a given time frame.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Portfolio has adopted the following fundamental investment
restrictions. These restrictions cannot be changed without the approval of
the holders of a majority of the outstanding shares of the Portfolio.
(1) The Portfolio may not make any investment inconsistent
with its classification as a nondiversified investment
company under the 1940 Act.
(2) The 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) The 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 its 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, the
Portfolio may pledge, mortgage or hypothecate its assets.
(4) The 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 its investment objective and policies, either
directly from the issuer, or from an underwriter for an
issuer, may be deemed an underwriting.
(5) The Portfolio may not invest directly in commodities
or real estate, although it 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) The 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
its 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) The Portfolio may not purchase common stocks,
preferred stocks, warrants, or other equity securities.
(2) The Portfolio does not intend to make any purchases of
securities if borrowing exceeds 5% of its total assets.
(3) The Portfolio may not sell securities short, purchase
securities on margin, or write or purchase put or call
options, except as permitted in connection with
transactions in futures contracts and options thereon. The
Portfolio reserves the right to purchase securities with
puts attached or with demand features.
(4) The Portfolio may not invest more than 35% of net
assets in non-investment grade debt securities. The
Portfolio does not intend to purchase more than 15% of
non-investment grade debt securities.
(5) Though nondiversified, the Portfolio does not intend
to purchase more than 15% of assets in any one issuer.
(6) The Portfolio may not purchase illiquid securities if
more than 10% of the value of the Portfolio's net assets
would be invested in such securities.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will not be issued unless requested in writing
by the investor. No charge will be made for share certificate requests. No
certificates will be issued for fractional shares.
Amounts redeemed by check redemption may be mailed to the investor
without charge. Amounts of more than $50 and less than $300,000 may be
transferred electronically at no charge to the investor. Amounts of $1,000
or more will be transmitted by wire, without charge, to the investor's
account at a domestic commercial bank that is a member of the Federal
Reserve System or to a correspondent bank. A charge of $5 is imposed on wire
transfers of less than $1,000. If the investor's bank is not a Federal
Reserve System member, failure of immediate notification to that bank by the
correspondent bank could result in a delay in crediting the funds to the
investor's bank account.
Telephone redemption requests which would require the redemption of
shares purchased by check or electronic funds transfer within the previous
10 business days may not be honored. The Fund reserves the right to modify
the telephone redemption privilege.
To change redemption instructions already given, shareholders must
send a written notice to Calvert Group, c/o NFDS, 330 West 9th Street,
Kansas City, MO, 64105, with a voided copy of a check for the bank wiring
instructions to be added. If a voided check does not accompany the request,
then the request must be signature guaranteed by a commercial bank, savings
and loan association, trust company, member firm of any national securities
exchange, or certain credit unions. Further documentation may be required
from corporations, fiduciaries, and institutional investors.
The right of redemption may be suspended or the date of payment
postponed for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when trading on the New
York Stock Exchange is restricted, or an emergency exists, as determined by
the SEC, or if the Commission has ordered such a suspension for the
protection of shareholders. Redemption proceeds are normally mailed or wired
the next business day after a proper redemption request has been received,
unless redemptions have been suspended or postponed as described above.
Redemption proceeds are normally paid in cash. However, the
Portfolio has the right to redeem shares in assets other than cash for
redemption amounts exceeding, in any 90-day period, $250,000 or 1% of the
net asset value of the Portfolio, whichever is less.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
The Funds intend to continue to qualify as regulated investment
companies under Subchapter M of the Internal Revenue Code. If for any reason
the Fund should fail to qualify, it would be taxed as a corporation at the
Fund level, rather than passing through its income and gains to shareholders.
The Portfolio declares and pays monthly dividends of its net income
to shareholders of record as of the close of business on each designated
monthly record date. Net investment income consists of the interest income
earned on investments (adjusted for amortization of original issue discounts
or premiums or market premiums), less estimated expenses.
Dividends are automatically reinvested at net asset value in
additional shares. Capital gains, if any, are normally paid once a year and
will be automatically reinvested at net asset value in additional shares,
unless you choose otherwise. You may elect to have their dividends and
distributions paid out monthly in cash. You may also request to have your
dividends and distributions from the Portfolio invested in shares of any
other Calvert Group Fund, to be invested in that Fund or Portfolio without a
sales charge.
The Portfolio's dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally subject to
federal income tax; however, under the Act, dividends attributable to
interest on certain private activity bonds must be included in federal
alternative minimum taxable income for the purpose of determining liability
(if any) for individuals and for corporations. The Portfolio's dividends
derived from taxable interest and distributions of net short-term capital
gains whether taken in cash or reinvested in additional shares, are taxable
to shareholders as ordinary income and do not qualify for the dividends
received deduction for corporations.
A shareholder may also be subject to state and local taxes on
dividends and distributions from the Portfolio. The Portfolio will notify
shareholders annually about the federal tax status of dividends and
distributions paid by the Portfolio and the amount of dividends withheld, if
any, during the previous year.
The Code provides that interest on indebtedness incurred or
continued in order to purchase or carry shares of a regulated investment
company which distributes exempt-interest dividends during the year is not
deductible. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by private
activity bonds should consult their tax advisers before purchasing shares of
the Portfolio. "Substantial user" is generally defined as including a
"non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of private activity bonds.
Investors should note that the Code may require investors to
exclude the initial sales charge, if any, paid on the purchase of Portfolio
shares from the tax basis of those shares if the shares are exchanged for
shares of another Calvert Group Fund within 90 days of purchase. This
requirement applies only to the extent that the payment of the original
sales charge on the shares of the Portfolio causes a reduction in the sales
charge otherwise payable on the shares of the Calvert Group Fund acquired in
the exchange, and investors may treat sales charges excluded from the basis
of the original shares as incurred to acquire the new shares.
The Portfolio is required to withhold 31% of any long-term capital
gain dividends and 31% of each redemption transaction occurring in the
Portfolio if: (a) the shareholder's social security number or other taxpayer
identification number ("TIN") is not provided, or an obviously incorrect TIN
is provided; (b) the shareholder does not certify under penalties of perjury
that the TIN provided is the shareholder's correct TIN and that the
shareholder is not subject to backup withholding under section 3406(a)(1)(C)
of the Code because of underreporting (however, failure to provide
certification as to the application of section 3406(a)(1)(C) will result
only in backup withholding on capital gain dividends, not on redemptions);
or (c) the Fund is notified by the Internal Revenue Service that the TIN
provided by the shareholder is incorrect or that there has been
underreporting of interest or dividends by the shareholder. Affected
shareholders will receive statements at least annually specifying the amount
withheld.
In addition the Portfolio is required to report to the Internal
Revenue Service the following information with respect to redemption
transactions in the Portfolio: (a) the shareholder's name, address, account
number and taxpayer identification number; (b) the total dollar value of the
redemptions; and (c) the Portfolio's identifying CUSIP number.
Certain shareholders are, however, exempt from the backup
withholding and broker reporting requirements. Exempt shareholders include:
corporations; financial institutions; tax-exempt organizations; individual
retirement plans; the U.S., a State, the District of Columbia, a U.S.
possession, a foreign government, an international organization, or any
political subdivision, agency or instrumentality of any of the foregoing
U.S. registered commodities or securities dealers; real estate investment
trusts; registered investment companies; bank common trust funds; certain
charitable trusts; and foreign central banks of issue. Non-resident aliens
also are generally not subject to either requirement but, along with certain
foreign partnerships and foreign corporations, may instead be subject to
withholding under section 1441 of the Code. Shareholders claiming exemption
from backup withholding and broker reporting should call or write the
Portfolio for further information.
VALUATION OF SHARES
The Portfolio's assets are normally valued utilizing the average
bid dealer market quotation as furnished by an independent pricing service.
Securities and other assets for which market quotations are not readily
available are valued based on the current market for similar securities or
assets, as determined in good faith by the Portfolio's Advisor under the
supervision of the Board of Trustees. The Portfolio determines the net asset
value of its shares every business day at the close of the regular session
of the New York Stock Exchange (generally, 4:00 p.m. Eastern time), and at
such other times as may be necessary or appropriate. The Portfolio does not
determine net asset value on certain national holidays or other days on
which the New York Stock Exchange is closed: New Year's Day, Martin Luther
King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Valuations, market quotations and market equivalents are provided
the Portfolio by Kenny S&P Evaluation Services, a subsidiary of McGraw-Hill.
The use of Kenny as a pricing service by the Portfolio has been approved by
the Board of Trustees. Valuations provided by Kenny are determined without
exclusive reliance on quoted prices and take into consideration appropriate
factors such as institution-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data.
Net Asset Value and Offering Price Per Share
Net asset value per share
($57,677,447/3,430,945 shares) $16.81
Maximum sales charge
(3.75% of offering price) 0.65
Offering price per share $17.46
CALCULATION OF YIELD AND TOTAL RETURN
From time to time, the Portfolio advertises its "total return."
Total return is calculated separately for each class. Total return is
historical in nature and is not intended to indicate future performance.
Total return will be quoted for the most recent one-year period, five-year
period and ten-year. Total return quotations for periods in excess of one
year represent the average annual total return for the period included in
the particular quotation. Total return is a computation of the Portfolio's
dividend yield plus or minus realized or unrealized capital appreciation or
depreciation, less fees and expenses. All total return quotations reflect
the deduction of the Portfolio's maximum sales charge, except quotations of
"return without maximum load," which do not deduct the sales charge, and
"actual return," which reflect deduction of the sales charge only for those
periods when a sales charge was actually imposed. Thus, in the formula
below, for return without maximum load, P = the entire $1,000 hypothetical
initial investment and does not reflect the deduction of any sales charge;
for actual return, P = a hypothetical initial investment of $1,000 less any
sales charge actually imposed at the beginning of the period for which the
performance is being calculated. Note: "Total Return" as quoted in the
Financial Highlights section of the Fund's Prospectus and Annual Report to
Shareholders, however, per SEC instructions, does not reflect deduction of
the sales charge, and corresponds to "return without maximum load" as
referred to herein. Return without maximum load should be considered only by
investors, such as participants in certain pension plans, to whom the sales
charge does not apply, or for purposes of comparison only with comparable
figures which also do not reflect sales charges, such as Lipper averages.
Total return is computed according to the following formula:
P(1 +T)n = ERV
where P = a hypothetical initial payment of $1,000; T = average annual total
return; n = number of years and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the 1, 5, or 10 year
periods at the end of such periods (or portions thereof if applicable).
Returns for the periods indicated (ended 12/31/98) are as follows:
With Max. Load W/O Max. Load
One Year 1.15% 5.07%
Five Years 4.94% 5.74%
Ten Years 6.94% 7.35%
The Portfolio also advertises, from time to time, its "yield" and
"tax equivalent yield." As with total return, both yield figures are
historical and are not intended to indicate future performance. "Yield"
quotations for each class refer to the aggregate imputed yield-to-maturity
of each of the Portfolio's investments based on the market value as of the
last day of a given thirty-day or one-month period, less expenses (net of
reimbursement), divided by the average daily number of outstanding shares
entitled to receive dividends times the maximum offering price on the last
day of the period (so that the effect of the sales charge is included in the
calculation), compounded on a "bond equivalent," or semi-annual, basis. The
Portfolio's yield is computed according to the following formula:
Yield = 2[(a-b/cd)+1)6 - 1]
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursement); c = the average daily number
of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of
the period.
The tax equivalent yield is the yield an investor would be required
to obtain from taxable investments to equal the Portfolio's yield, all or a
portion of which may be exempt from federal income taxes. The tax equivalent
yield is computed per class by taking the portion of the class' yield exempt
from regular federal income tax and multiplying the exempt yield by a factor
based upon a stated income tax rate, then adding the portion of the yield
that is not exempt from regular federal income tax. The factor which is used
to calculate the tax equivalent yield is the reciprocal of the difference
between 1 and the applicable income tax rate, which will be stated in the
advertisement. For the thirty-day period ended December 31, 1998, the
Portfolio yield for shares was 4.10% and its federal tax equivalent yield
was 6.41% for an investor in the 36% federal income tax bracket, and 6.79%
for an investor in the 39.6% federal income tax bracket.
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles,
sociological conditions and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Portfolio, whether held
or not.
The Fund or its affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings,
Mutual Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker
Investment Management, Inc. Such averages generally do not reflect any
front- or back-end sales charges that may be charged by Funds in that
grouping. The Fund may also cite to any source, whether in print or on-line,
such as Bloomberg, in order to acknowledge origin of information. The Fund
may compare itself or its portfolio holdings to other investments, whether
or not issued or regulated by the securities industry, including, but not
limited to, certificates of deposit and Treasury notes. The Fund, its
Advisor, and its affiliates reserve the right to update performance rankings
as new rankings become available.
Calvert Group is the nation's leading family of socially
responsible mutual funds, both in terms of socially responsible mutual fund
assets under management, and number of socially responsible mutual fund
portfolios offered (source: Social Investment Forum, December 31, 1998).
Calvert Group was also the first to offer a family of socially responsible
mutual fund portfolios.
TRUSTEES AND OFFICERS
The Fund's Board of Trustees supervises the Fund's activities and
reviews its contracts with companies that provide it with services.
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 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 Calvert Variable Series,
Inc., and 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.
VICTOR FRYE, Esq., Assistant Secretary and Compliance Officer. Mr.
Frye is Counsel and Compliance Officer of Calvert Group and an officer of
each of its subsidiaries and Calvert-Sloan Advisers, L.L.C. He is also an
officer of each of the other investment companies in the Calvert Group of
Funds. Prior to working at Calvert Group, Mr. Frye was Counsel and Manager
of the Compliance Department at The Advisors Group. DOB: 10/15/58.
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, Mmes. Krumsiek and 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 $6,418 by the Long-Term Portfolio. 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 $1,500 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.
**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.
The Advisory Contract between the Fund and the Advisor will remain
in effect indefinitely, provided continuance is approved at least annually
by the vote of the holders of a majority of the outstanding shares of the
Fund, or by the Trustees of the Fund; and further provided that such
continuance is also approved annually by the vote of a majority of the
Trustees of the Fund who are not parties to the Contract or interested
persons of such parties, cast in person at a meeting called for the purpose
of voting on such approval. The Contract may be terminated without penalty
by either party on 60 days' prior written notice; it automatically
terminates in the event of its assignment.
Under the Contract, the Advisor manages the investment and
reinvestment of the Fund's assets, subject to the direction and control of
the Fund's Board of Trustees. For its services, the Advisor receives from
the Portfolio an annual fee of 0.60% of the first $500 million of the
Portfolio's average daily net assets, 0.50% of the next $500 million of such
assets, and 0.40% of all such assets over $1 billion.
The advisory fee is payable monthly. The Advisor reserves the right
(i) to waive all or a part of its fee and (ii) to compensate, at its
expense, broker-dealers in consideration of their promotional and
administrative services.
The Advisor provides the Fund with investment advice and research,
pays the salaries and fees of all Trustees and executive officers of the
Fund who are principals of the Advisor, and pays certain Fund advertising
and promotional expenses. The Fund pays all other administrative and
operating expenses, including: custodial fees; shareholder servicing;
dividend disbursing and transfer agency fees; administrative service fees;
federal and state securities registration fees; insurance premiums; trade
association dues; interest, taxes and other business fees; legal and audit
fees; and brokerage commissions and other costs associated with the purchase
and sale of portfolio securities.
The Advisor may voluntarily reimburse the Portfolio for expenses.
The advisory fees paid by the Portfolio to Calvert Asset Management Company
for fiscal years 1996, 1997, and 1998 were $322,713, $307,550, and $331,988,
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. Prior to August 1, 1997, CASC received a fee of $200,000 per year
for providing such services, allocated among Portfolios based on assets.
Effective August 1, 1997, the fee structure changed. Exclusive of the CTFR
Money Market Portfolio, the Fund pays an annual fee of $80,000, allocated
between the remaining Portfolios based on assets. The administrative service
fees paid by the Portfolio to CASC for fiscal years 1996, 1997, and 1998
were $3,934, $4,158, and $4,476, respectively.
TRANSFER AND SHAREHOLDER SERVICING AGENTS
National Financial Data Services, Inc. ("NFDS"), 330 W. 9th Street,
Kansas City, Missouri 64105, a subsidiary of State Street Bank & Trust, has
been retained by the Fund to act as transfer agent and dividend disbursing
agent. These responsibilities include: responding to certain shareholder
inquiries and instructions, crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions,
and daily updating of shareholder accounts to reflect declaration and
payment of dividends.
Calvert Shareholder Services, Inc. ("CSSI"), 4550 Montgomery
Avenue, Bethesda, Maryland 20814, 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 transactions.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore,
Maryland 21201, 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 Portfolio has entered into a principal underwriting agreement
with Calvert Distributors, Inc. ("CDI"). Pursuant to the agreement, CDI
serves as distributor and principal underwriter for the Portfolio. CDI bears
all its expenses of providing services pursuant to the agreement, including
payment of any commissions and service fees.
CTFR Long-Term
Shares are offered at net asset value plus a front-end sales charge as
follows:
As a % of As a % of Allowed to
Amount of offering net amount Brokers as a %
Investment price invested of offering price
Less than $50,000 3.75% 3.90% 3.00%
$50,000 but
less than $100,000 3.00% 3.09% 2.25%
$100,000 but
less than $250,000 2.25% 2.30% 1.75%
$250,000 but
less than $500,000 1.75% 1.78% 1.25%
$500,000 but
less than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.00%
CDI receives any front-end sales charge. A portion of the front-end
sales charge may be reallowed to dealers. The aggregate amount of sales
charges (gross underwriting commissions) and the net amount retained by CDI
(i.e., not reallowed to dealers) for the last 3 fiscal years are:
Fiscal Year 1996 1997
Gross Net Gross Net
$36,198 $12,538 $35,466 $11,019
1998
Gross Net
$44,897 $0
Fund Trustees and certain other affiliated persons of the Fund are
exempt from the sales charge since the distribution costs are minimal to
persons already familiar with the Fund. Other groups are exempt due to
economies of scale in distribution. See Exhibit A to the Prospectus.
The Portfolio's Distribution Plan was approved by the Board of
Trustees, including the Trustees who are not "interested persons" of the
Fund (as that term is defined in the Investment Company Act of 1940) and who
have no direct or indirect financial interest in the operation of the Plan
or in any agreements related to the Plan. The selection and nomination of
the Trustees who are not interested persons of the Fund is committed to the
discretion of such disinterested Trustees. In establishing the Plan, the
Trustees considered various factors including the amount of the distribution
fee. The Trustees determined that there is a reasonable likelihood that the
Plan will benefit the Portfolio and its shareholders.
The Plan may be terminated by vote of a majority of the
non-interested Trustees who have no direct or indirect financial interest in
the Plan or by vote of a majority of the outstanding shares of the
Portfolio. Any change in the Plan that would materially increase the
distribution cost to the Portfolio requires approval of the shareholders of
the affected class; otherwise, the Plan may be amended by the Trustees,
including a majority of the non-interested Trustees as described above.
The Plan will continue in effect indefinitely, if not sooner
terminated in accordance with its terms. Thereafter, the Plan will continue
in effect for successive one year periods provided that such continuance is
annually approved by (i) the vote of a majority of the Trustees who are not
parties to the Plan or interested persons of any such party and who have no
direct or indirect financial interest in the Plan, and (ii) the vote of a
majority of the entire Board of Trustees.
Apart from the Plan, the Advisor, at its expense, may incur costs
and pay expenses associated with the distribution of shares of the Portfolio.
CDI, makes a continuous offering of the Fund's securities on a
"best efforts" basis. Under the terms of the agreement, CDI is entitled to
receive, pursuant to the Distribution Plans, a distribution fee and a
service fee from the Fund based on the average daily net assets of the
Fund's. These fees are paid pursuant to the Fund's Distribution Plan. The
Distribution Plan Expenses (includes both distribution fees and services
fees) paid by the Fund to CDI for the fiscal year ended December 31, 1998,
is as follows:
Distribution Plan Expenses
CTFR Long Term $49,798
Of the distribution expenses paid in fiscal year 1998, the entire
amount was used to compensate dealers for their share distribution
promotional services.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. The Fund's Advisor makes
investment decisions and the choice of brokers and dealers under the
direction and supervision of the Fund's Board of Trustees.
Broker-dealers who execute portfolio transactions on behalf of the
Fund are selected on the basis of their execution capability and trading
expertise considering, among other factors, the overall reasonableness of
the brokerage commissions, current market conditions, size and timing of the
order, difficulty of execution, per share price, etc.
For the last three fiscal years, total brokerage commissions paid
are as follows:
1996 1997 1998
CTFR Long-Term $0 $0 $0
The Fund did not pay any brokerage commissions to affiliated
persons during the last three fiscal years.
While the Fund's Advisor select brokers primarily on the basis of
best execution, in some cases they may direct transactions to brokers based
on the quality and amount of the research and research-related services
which the brokers provide to them. These services are of the type described
in Section 28(e) of the Securities Exchange Act of 1934 and may include
analyses of the business or prospects of a company, industry or economic
sector, or statistical and pricing services. If, in the judgment of the
Advisor, the Fund or other accounts managed by them will be benefited by
supplemental research services, they are authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or
through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting
in determining portfolio strategy; providing computer software used in
security analyses; providing portfolio performance evaluation and technical
market analyses; and providing other services relevant to the investment
decision making process. It is the policy of the Advisor that such research
services will be used for the benefit of the Fund as well as other Calvert
Group funds and managed accounts.
For the fiscal year ended December 31, 1998, the Fund, through its
Advisor, paid $0 in commission for directed brokerage for research services.
The Portfolio turnover rates for the last two fiscal years are as
follows:
1997 1998
CTFR Long-Term 41% 72%
GENERAL INFORMATION
The Portfolio is an open-end, non-diversified investment management
investment company. It is a series of Calvert Tax-Free Reserves, which was
organized as a Massachusetts business trust on October 20, 1980. The other
series of the Fund include the Money Market Portfolio, Limited-Term
Portfolio, California Money Market Portfolio, and the Vermont Municipal
Portfolio. The Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund. The shareholders
of a Massachusetts business trust might, however, under certain
circumstances, be held personally liable as partners for its obligations.
The Declaration of Trust provides for indemnification and reimbursement of
expenses out of Fund assets for any shareholder held personally liable for
obligations of the Fund. The Declaration of Trust provides that the Fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. The Declaration of Trust further provides that the Fund may
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Fund, its shareholders,
Trustees, officers, employees, and agents to cover possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
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, also known as The
Advisors Group Tax-Free Reserve Fund (offered in a separate prospectus).
The Fund is not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes such as electing
Trustees, changing fundamental policies, or approving a management contract.
As a shareholder, you receive one vote for each share you own.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 20, 1999, the following shareholders owned of record 5%
or more of the Fund:
Name and Address % of Ownership
John Swanson
McMurray, Pennsylvania 7.43%
Harold or Laura Lustig
Weston, Connecticut 7.02%
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states,
cities, municipalities, and their agencies to obtain funds for various
public purposes. Such purposes include the construction of a wide range of
public facilities, the refunding of outstanding obligations, the obtaining
of funds for general operating expenses, and the lending of funds to other
public institutions and facilities. In addition, certain types of private
activity bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on
them is exempt from federal income tax in the opinion of bond counsel to the
issuer. Although the interest paid on the proceeds from private activity
bonds used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities may be exempt from
federal income tax, current federal tax law places substantial limitations
on the size of such issues.
Municipal obligations are generally classified as either "general
obligation" or "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue source but
not from the general taxing power. Tax-exempt private activity bonds are in
most cases revenue bonds and do not generally carry the pledge of the credit
of the issuing municipality. There are, of course, variations in the
security of municipal obligations both within a particular classification
and among classifications.
Municipal obligations are generally traded on the basis of a quoted
yield to maturity, and the price of the security is adjusted so that
relative to the stated rate of interest it will return the quoted rate to
the purchaser.
Short-term and limited-term municipal obligations include Tax
Anticipation Notes, Revenue Anticipation Notes Bond Anticipation Notes,
Construction Loan Notes, and Discount Notes. The maturities of these
instruments at the time of issue generally will range between three months
and one year. Pre-Refunded Bonds with longer nominal maturities that are due
to be retired with the proceeds of an escrowed subsequent issue at a date
within one year and three years of the time of acquisition are also
considered short-term and limited-term municipal obligations.
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc.'s ratings of state and
municipal notes:
Moody's ratings for state and municipal notes and other short-term
obligations are designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit
risk and long-term risk.
MIG 1: Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG2: Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
MIG3: Notes bearing this designation are of favorable quality, with
all security elements accounted for but lacking the undeniable strength of
the preceding grades. Market access for refinancing, in particular, is
likely to be less well established.
MIG4: Notes bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as required
of an investment security and not distinctly or predominantly speculative.
Description of Moody's Investors Service Inc.'s/Standard & Poor's municipal
bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to
pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and in
the majority of instances they differ from AAA issues only in small degree.
They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay
interest and repay principal. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
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
<PAGE>
CALVERT TAX-FREE RESERVES
California Money Market Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
April 30, 1999
TABLE OF CONTENTS
Investment Policies 1
Investment Restrictions 3
Purchases and Redemptions of Shares 4
Dividends and Distributions 4
Tax Matters 4
Valuation of Shares 5
Calculation of Yield 5
Advertising 5
Trustees and Officers 6
Investment Advisor 8
Administrative Services 9
Transfer and Shareholder Servicing Agents 9
Independent Accountants and Custodians 9
Method of Distribution 9
Portfolio Transactions 9
General Information 10
Control Persons and Principal Holders of Securities 10
Appendix 10
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 Portfolio's Prospectus, dated April 30, 1999, 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 Portfolio's 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 Portfolio.
INVESTMENT POLICIES
The Portfolio invests primarily in a diversified portfolio of
municipal obligations whose interest is exempt from federal and California
State Income Tax. Municipal obligations in which the Portfolio invests are
short-term, fixed and variable rate instruments of minimal credit risk and
of high quality. The investment objective may only be changed with
shareholder approval.
Under normal market conditions, the Portfolio attempts to invest
100%, and will invest at least 80%, of its total assets in debt obligations
issued by or on behalf of the State of California and its political
subdivisions ("California Municipal Obligations"). Dividends paid by the
Portfolio which are derived from interest attributable to California
Municipal Obligations will be exempt from federal and California State
Income Taxes. Dividends derived from interest on tax-exempt obligations of
other governmental issuers will be exempt from federal income tax, but will
be subject to California state income taxes.
The credit rating of the Portfolio's assets as of its most recent
fiscal year-end appears in the Annual Report to Shareholders, incorporated
by reference herein.
Variable Rate OBLIGATIONS AND Demand Notes
The Portfolio may invest in variable rate obligations. Variable
rate obligations have a yield that is adjusted periodically based on changes
in the level of prevailing interest rates. Floating rate obligations have an
interest rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate
obligations lessen the capital fluctuations usually inherent in fixed income
investments. This diminishes the risk of capital depreciation of investment
securities in a Portfolio and, consequently, of Portfolio shares. However,
if interest rates decline, the yield of the invested Portfolio will decline,
causing the Portfolio and its shareholders to forego the opportunity for
capital appreciation of the Portfolio's investments and of their shares.
The Portfolio may invest in floating rate and variable rate demand
notes. Demand notes provide that the holder may demand payment of the note
at its par value plus accrued interest by giving notice to the issuer. To
ensure the ability of the issuer to make payment on demand, a bank letter of
credit or other liquidity facility may support the note.
The Board of Trustees has approved investments in floating and
variable rate demand notes upon the following conditions: the Portfolio has
right of demand, upon notice not to exceed thirty days, against the issuer
to receive payment; the issuer will be able to make payment upon such
demand, either from its own resources or through an unqualified commitment
from a third party; and the rate of interest payable is calculated to ensure
that the market value of such notes will approximate par value on the
adjustment dates. The remaining maturity of such demand notes is deemed the
period remaining until such time as the Portfolio can recover the principal
on demand.
Obligations with Puts Attached
The Portfolio has authority to purchase securities at a price which
would result in a yield to maturity lower than that generally offered by the
seller at the time of purchase when it can acquire at the same time the
right to sell the securities back to the seller at an agreed upon price at
any time during a stated period or on a certain date. Such a right is
generally denoted as a "put." Unconditional puts are readily exercisable in
the event of a default in payment of principal or interest on the underlying
securities. The Portfolio must limit its portfolio investments, including
puts, to instruments of high quality as determined by a nationally
recognized statistical rating organization.
Temporary Investments
Short-term money market type investments consist of: obligations of
the U.S. Government, its agencies and instrumentalities; certificates of
deposit of banks with assets of one billion dollars or more; commercial
paper or other corporate notes of investment grade quality; and any of such
items subject to short-term repurchase agreements.
The Portfolio intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities. To minimize
taxable income, the Portfolio may also hold cash which is not earning income.
Repurchase Agreements
The Portfolio may purchase debt securities subject to repurchase
agreements, which are arrangements under which the Portfolio buys a
security, and the seller simultaneously agrees to repurchase the security at
a specified time and price reflecting a market rate of interest. The
Portfolio engages in repurchase agreements in order to earn a higher rate of
return than it could earn simply by investing in the obligation which is the
subject of the repurchase agreement. Repurchase agreements are not, however,
without risk. In the event of the bankruptcy of a seller during the term of
a repurchase agreement, a legal question exists as to whether the Portfolio
would be deemed the owner of the underlying security or would be deemed only
to have a security interest in and lien upon such security. The Portfolio
will only engage in repurchase agreements with recognized securities dealers
and banks determined to present minimal credit risk by the Advisor under the
direction and supervision of the Portfolio's Board of Trustees. In addition,
the Portfolio will only engage in repurchase agreements reasonably designed
to secure fully during the term of the agreement the seller's obligation to
repurchase the underlying security and will monitor the market value of the
underlying security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase
price due the Portfolio pursuant to the agreement, the Portfolio will
require the seller to pledge additional securities or cash to secure the
seller's obligations pursuant to the agreement. If the seller defaults on
its obligation to repurchase and the value of the underlying security
declines, the Portfolio may incur a loss and may incur expenses in selling
the underlying security. Repurchase agreements are always for periods of
less than one year. Repurchase agreements not terminable within seven days
are considered illiquid.
Reverse Repurchase Agreements
The Portfolio may also engage in reverse repurchase agreements.
Under a reverse repurchase agreement, the Portfolio sells securities to a
bank or securities dealer and agrees to repurchase those securities from
such party at an agreed upon date and price reflecting a market rate of
interest. The Portfolio invests the proceeds from each reverse repurchase
agreement in obligations in which it is authorized to invest. The Portfolio
intends to enter into a reverse repurchase agreement only when the interest
income provided for in the obligation in which the Portfolio invests the
proceeds is expected to exceed the amount the Portfolio will pay in interest
to the other party to the agreement plus all costs associated with the
transactions. The Portfolio does not intend to borrow for leverage purposes.
The Portfolio will only be permitted to pledge assets to the extent
necessary to secure borrowings and reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, the
Portfolio will maintain in a segregated account an amount of cash, US
Government securities or other liquid, high-quality debt securities equal in
value to the repurchase price. The Portfolio will mark to market the value
of assets held in the segregated account, and will place additional assets
in the account whenever the total value of the account falls below the
amount required under applicable regulations.
The Portfolio's use of reverse repurchase agreements involves the
risk that the other party to the agreements could become subject to
bankruptcy or liquidation proceedings during the period the agreements are
outstanding. In such event, the Portfolio may not be able to repurchase the
securities it has sold to that other party. Under those circumstances, if at
the expiration of the agreement such securities are of greater value than
the proceeds obtained by the Portfolio under the agreements, the Portfolio
may have been better off had it not entered into the agreement. However, the
Portfolio will enter into reverse repurchase agreements only with banks and
dealers which the Advisor believes present minimal credit risks under
guidelines adopted by the Portfolio's Board of Trustees. In addition, the
Portfolio bears the risk that the market value of the securities it sold may
decline below the agreed-upon repurchase price, in which case the dealer may
request the Portfolio to post additional collateral.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Portfolio has adopted the following fundamental investment
restrictions. These restrictions cannot be changed without the approval of
the holders of a majority of the outstanding shares of the Portfolio.
(1) The Portfolio may not make any investment inconsistent
with its classification as a diversified investment
company under the 1940 Act.
(2) The 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) The 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 its 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, the
Portfolio may pledge, mortgage or hypothecate its assets.
(4) The 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 its investment objective and policies, either
directly from the issuer, or from an underwriter for an
issuer, may be deemed an underwriting.
(5) The Portfolio may not invest directly in commodities
or real estate, although it 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) The 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
its 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) The Portfolio may not purchase common stocks,
preferred stocks, warrants, or other equity securities.
(2) The Portfolio does not intend to make any purchases of
securities if borrowing exceeds 5% of its total assets.
(3) The Portfolio may not sell securities short, purchase
securities on margin, or write or purchase put or call
options. The Portfolio reserves the right to purchase
securities with puts attached or with demand features.
(4) The Portfolio may not purchase illiquid securities if
more than 10% of the value of the Portfolio's net assets
would be invested in such securities.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will not be issued unless requested in writing
by the investor. No charge will be made for share certificate requests. No
certificates will be issued for fractional shares.
Shareholders wishing to use the draft writing service should
complete the signature card enclosed with the Investment Application. This
draft writing service will be subject to the customary rules and regulations
governing checking accounts, and the Portfolio reserves the right to change
or suspend the service. Generally, there is no charge to you for the
maintenance of this service or the clearance of drafts, but the Portfolio
reserves the right to charge a service fee for drafts returned for
uncollected or insufficient funds, and will charge $25 for stop payments. As
a service to shareholders, the Fund may automatically transfer the dollar
amount necessary to cover drafts you have written on the Fund to your Fund
account from any other of your identically registered accounts in Calvert
money market funds or Calvert Insured Plus. The Fund may charge a fee for
this service.
When a payable through draft is presented for payment, a sufficient
number of full and fractional shares from the shareholder's account to cover
the amount of the draft will be redeemed at the net asset value next
determined. If there are insufficient shares in the shareholder's account,
the draft will be returned. Drafts presented to the bank for payment which
would require the redemption of shares purchased by check or electronic
funds transfer within the previous 10 business days may not be honored.
Amounts redeemed by check redemption may be mailed to the investor
without charge. Amounts of up to $300,000 may be transferred electronically
at no charge to the investor. Amounts of $1,000 or more will be transmitted
by wire, without charge, to the investor's account at a domestic commercial
bank that is a member of the Federal Reserve System or to a correspondent
bank. A charge of $5 is imposed on wire transfers of less than $1,000. If
the investor's bank is not a Federal Reserve System member, failure of
immediate notification to that bank by the correspondent bank could result
in a delay in crediting the funds to the investor's bank account.
Telephone redemption requests which would require the redemption of
shares purchased by check or electronic funds transfer within the previous
10 business days may not be honored. The Fund reserves the right to modify
the telephone redemption privilege.
To change redemption instructions already given, shareholders must
send a written notice to Calvert Group, P.O. Box 419544, Kansas City, MO
64141-6544, with a voided copy of a check for the bank wiring instructions
to be added. If a voided check does not accompany the request, then the
request must be signature guaranteed by a commercial bank, savings and loan
association, trust company, member firm of any national securities exchange,
or certain credit unions. Further documentation may be required from
corporations, fiduciaries, and institutional investors.
The right of redemption may be suspended or the date of payment
postponed for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when trading on the New
York Stock Exchange is restricted, or an emergency exists, as determined by
the SEC, or if the Commission has ordered such a suspension for the
protection of shareholders. Redemption proceeds are normally mailed or wired
the next business day after a proper redemption request has been received,
unless redemptions have been suspended or postponed as described above.
DIVIDENDS AND DISTRIBUTIONS
Dividends from the Portfolio's net investment income are declared
daily and paid monthly. Net investment income consists of the interest
income earned on investments (adjusted for amortization of original issue
discounts or premiums or market premiums), less estimated expenses. Capital
gains, if any, are normally paid once a year and will be automatically
reinvested at net asset value in additional shares. Dividends and any
distributions are automatically reinvested in additional shares of the Fund,
unless you elect to have the dividends of $10 or more paid in cash (by check
or by Calvert Money Controller). You may also request to have your dividends
and distributions from the Portfolio invested in shares of any other Calvert
Group Fund, at no additional charge.
Purchasers of shares of the Portfolio will begin receiving
dividends upon the date federal funds are received by the Portfolio.
Purchases by bank wire received by 12:30 p.m., Eastern time are immediately
available federal funds; purchases by domestic check may take one day to
convert into federal funds. Shareholders redeeming shares by telephone,
electronic funds transfer, or written request will receive dividends through
the date that the redemption request is processed; shareholders redeeming
shares by draft will receive dividends up to the date such draft is
presented to the Portfolio for payment.
TAX MATTERS
The Fund intends to continue to qualify as regulated investment
companies under Subchapter M of the Internal Revenue Code ("Code"). If for
any reason the Fund 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; in addition, to the extent that income dividends are
derived from earnings attributable to obligations of California and its
political subdivisions, they will also be exempt from state and local
personal income tax in California.
However, under the Act, dividends attributable to interest on
certain private activity bonds must be included in federal alternative
minimum taxable income for the purpose of determining liability (if any) for
individuals and for corporations. The Portfolio's dividends derived from
taxable interest and distributions of net short-term capital gains, whether
taken in cash or reinvested in additional shares, are taxable to
shareholders as ordinary income and do not qualify for the dividends
received deduction for corporations.
The Code provides that interest on indebtedness incurred or
continued in order to purchase or carry shares of a regulated investment
company which distributes exempt-interest dividends during the year is not
deductible. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by private
activity bonds should consult their tax advisors before purchasing shares of
the Portfolio. "Substantial user" is generally defined as including a
"non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of private activity bonds.
VALUATION OF SHARES
The Portfolio's assets, including commitments to purchase
securities on a when-issued basis, are 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.
The Portfolio determines the net asset value of its shares every
business day at the close of the regular session of the New York stock
exchange (generally, 4:00 p.m. Eastern time), and at such other times as may
be necessary or appropriate. The Portfolio does not determine net asset
value on certain national holidays or other days on which the New York Stock
Exchange is closed: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day.
Net Asset Value and Offering Price Per Share, 12/31/98
$437,575,246/437,673,084 shares $1.00
CALCULATION OF YIELD
From time to time the Portfolio advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings and
are not intended to indicate future performance. The "yield" of the
Portfolio refers to the income generated by an investment in the Portfolio
over a particular base period of time. The length and closing date of the
base period will be stated in the advertisement. If the base period is less
than one year, the yield is then "annualized." That is, the net change,
exclusive of capital changes, in the value of a share during the base period
is divided by the net asset value per share at the beginning of the period,
and the result is multiplied by 365 and divided by the number of days in the
base period. Capital changes excluded from the calculation of yield are: (1)
realized gains and losses from the sale of securities, and (2) unrealized
appreciation and depreciation. The Portfolio's "effective yield" for a
seven-day period is its annualized compounded yield during the period,
calculated according to the following formula:
Effective yield = (base period return + 1)365/7 -1
For the seven-day period ended December 31, 1998, the yield was 3.18% and
its effective yield 3.23%.
The Portfolio also may advertise, from time to time, its "tax
equivalent yield." The tax equivalent yield is the yield an investor would
be required to obtain from taxable investments to equal the Portfolio's
yield, all or a portion of which may be exempt from federal income taxes.
The tax equivalent yield is computed by taking the portion of the
Portfolio's effective yield exempt from federal income taxes and multiplying
the exempt yield by a factor based upon a stated income tax rate, then
adding the portion of the yield that is not exempt from federal income
taxes. The factor which is used to calculate the tax equivalent yield is the
reciprocal of the difference between 1 and the applicable income tax rates,
which will be stated in the advertisement. For the seven-day period ended
December 31, 1998, the federal tax equivalent yield for an investor in the
36% income tax bracket was 5.05%, and 5.35% for an investor in the 39.6% tax
bracket.
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles,
sociological conditions and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Portfolio, whether held
or not.
The Fund or its affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings,
Mutual Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker
Investment Management, Inc. Such averages generally do not reflect any
front- or back-end sales charges that may be charged by Funds in that
grouping. The Fund may also cite to any source, whether in print or on-line,
such as Bloomberg, in order to acknowledge origin of information. The Fund
may compare itself or its portfolio holdings to other investments, whether
or not issued or regulated by the securities industry, including, but not
limited to, certificates of deposit and Treasury notes. The Fund, its
Advisor, and its affiliates reserve the right to update performance rankings
as new rankings become available.
Calvert Group is the nation's leading family of socially
responsible mutual funds, both in terms of socially responsible mutual fund
assets under management, and number of socially responsible mutual fund
portfolios offered (source: Social Investment Forum, December 31, 1998).
Calvert Group was also the first to offer a family of socially responsible
mutual fund portfolios.
TRUSTEES AND OFFICERS
The Fund's Board of Trustees supervises the Fund's activities and
reviews its contracts with companies that provide it with services.
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 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 Calvert Variable Series,
Inc., and 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.
VICTOR FRYE, Esq., Assistant Secretary and Compliance Officer. Mr.
Frye is Counsel and Compliance Officer of Calvert Group and an officer of
each of its subsidiaries and Calvert-Sloan Advisers, L.L.C. He is also an
officer of each of the other investment companies in the Calvert Group of
Funds. Prior to working at Calvert Group, Mr. Frye was Counsel and Manager
of the Compliance Department at The Advisors Group. DOB: 10/15/58.
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, Mmes. Krumsiek and 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 $43,591 by the Portfolio. 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 $1,500 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.
**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.
The Advisory Contract between the Portfolio and the Advisor will
remain in effect indefinitely, provided continuance is approved at least
annually by the vote of the holders of a majority of the outstanding shares
of the Portfolio, or by the Trustees of the Portfolio; and further provided
that such continuance is also approved annually by the vote of a majority of
the Trustees of the Portfolio who are not parties to the Contract or
interested persons of such parties, cast in person at a meeting called for
the purpose of voting on such approval. The Contract may be terminated
without penalty by either party on 60 days' prior written notice; it
automatically terminates in the event of its assignment. Under the Contract,
the Advisor manages the investment and reinvestment of the Portfolio's
assets, subject to the direction and control of the Portfolio's Board of
Trustees. For its services, the Advisor receives an annual fee of 0.50% of
the first $500 million of such Portfolio's average daily net assets, 0.45%
of the next $500 million of such assets, and 0.40% of all such assets over
$1 billion.
The advisory fee is payable monthly. The Advisor reserves the right
(i) to waive all or a part of its fee and (ii) to compensate, at its
expense, broker-dealers in consideration of their promotional and
administrative services.
The Advisor provides the Portfolio with investment advice and
research, pays the salaries and fees of all Trustees and executive officers
of the Portfolio who are principals of the Advisor, and pays certain
Portfolio advertising and promotional expenses. The Portfolio pays all other
administrative and operating expenses, including: custodial fees;
shareholder servicing, dividend disbursing and transfer agency fees;
administrative service fees; federal and state securities registration fees;
insurance premiums; trade association dues; interest, taxes and other
business fees; legal and audit fees; and brokerage commissions and other
costs associated with the purchase and sale of portfolio securities. The
advisory fees paid to the Advisor under the advisory contract for the 1996,
1997, and 1998 fiscal years were $1,691,140, $1,643,147, and $1,866,734,
respectively.
The Advisor may voluntarily reimburse the Portfolio for expenses.
For 1996, $117,823 in expenses was reimbursed, for 1997, $164,315, and for
1998, $84,515.
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. Prior to August 1, 1997, CASC received a fee of $200,000 per year
for providing such services, allocated among Portfolios based on assets.
Effective August 1, 1997, the fee structure changed. Exclusive of the CTFR
Money Market Portfolio, the Fund pays an annual fee of $80,000, allocated
between the remaining Portfolios based on assets. The administrative service
fees paid by the Portfolio to CASC for 1996, 1997, and 1998, were $24,770,
$26,655, and $30,080, respectively.
TRANSFER AND SHAREHOLDER SERVICING AGENTS
National Financial Data Services, Inc. ("NFDS"), 330 W. 9th Street,
Kansas City, Missouri 64105, a subsidiary of State Street Bank & Trust, has
been retained by the Fund to act as transfer agent and dividend disbursing
agent. These responsibilities include: responding to certain shareholder
inquiries and instructions, crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions,
and daily updating of shareholder accounts to reflect declaration and
payment of dividends.
Calvert Shareholder Services, Inc. ("CSSI"), 4550 Montgomery
Avenue, Bethesda, Maryland 20814, 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 transactions.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore,
Maryland 21201, has been selected by the Board of Trustees to serve as
independent auditors 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 Portfolio has entered into a principal underwriting agreement
with Calvert Distributors, Inc. ("CDI") 4550 Montgomery Avenue, Bethesda,
Maryland 20814. Pursuant to the agreement, CDI serves as distributor and
principal underwriter for the Portfolio, offering shares on a continuous,
"best efforts" basis. CDI bears all its expenses of providing services
pursuant to the agreement, including payment of any commissions and service
fees.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. Investment decisions and the
choice of brokers and dealers are made by the Fund's Advisor under the
direction and supervision of the Fund's Board of Trustees.
Broker-dealers who execute portfolio transactions on behalf of the
Fund are selected on the basis of their professional capability and the
value and quality of their services. The Advisor reserves the right to place
orders for the purchase or sale of portfolio securities with broker-dealers
who have sold shares of the Fund or who provide the Fund with statistical,
research, or other information and services. Although any statistical
research or other information and services provided by broker-dealers may be
useful to the Advisor, the dollar amount of such information and services is
generally indeterminable, and its availability or receipt does not serve to
materially reduce the Advisor's normal research activities or expenses. No
brokerage commissions have been paid to any officer, trustee or Advisory
Council member of the Fund or any of their affiliates.
The Advisor may also execute portfolio transactions with or through
broker-dealers who have sold shares of the Fund. However, such sales will
not be a qualifying or disqualifying factor in a broker-dealer's selection
nor will the selection of any broker-dealer be based on the volume of Fund
shares sold. The Advisor may compensate, at its expense, such broker-dealers
in consideration of their promotional and administrative services.
GENERAL INFORMATION
The Portfolio is a series of Calvert Tax-Free Reserves, an open-end
diversified investment management company which was organized as a
Massachusetts business trust on October 20, 1980. The other series of the
Fund include the Money Market Portfolio, Limited-Term Portfolio, Long-Term
Portfolio, and the Vermont Municipal Portfolio. The Fund's Declaration of
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Fund. The shareholders of a Massachusetts business trust
might, however, under certain circumstances, be held personally liable as
partners for its obligations. The Declaration of Trust provides for
indemnification and reimbursement of expenses out of Fund assets for any
shareholder held personally liable for obligations of the Fund. The
Declaration of Trust provides that the Fund shall, upon request, assume the
defense of any claim made against any shareholder for any act or obligation
of the Fund and satisfy any judgment thereon. The Declaration of Trust
further provides that the Fund may maintain appropriate insurance (for
example, fidelity bonding and errors and omissions insurance) for the
protection of the Fund, its shareholders, Trustees, officers, employees, and
agents to cover possible tort and other liabilities. Thus, the risk of a
shareholder incurring financial loss on account of shareholder liability is
limited to circumstances in which both inadequate insurance exists and the
Fund itself is unable to meet its obligations.
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 Fund is not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes such as electing
Trustees, changing fundamental policies, or approving a management contract.
As a shareholder, you receive one vote for each share you own.
CONTROL PERSONS AND PRINCIPAL HOLDERS
OF SECURITIES
As of April 20, 1999, the following shareholders owned of record 5% or more
of the Fund:
Name and Address % of Ownership
Bruce & Betty Walkup Trust
San Francisco, California 17.27%
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states,
cities, municipalities, and their agencies to obtain funds for various
public purposes. Such purposes include the construction of a wide range of
public facilities, the refunding of outstanding obligations, the obtaining
of funds for general operating expenses, and the lending of funds to other
public institutions and facilities. In addition, certain types of private
activity bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on
them is exempt from federal income tax in the opinion of bond counsel to the
issuer. Although the interest paid on the proceeds from private activity
bonds used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities may be exempt from
federal income tax, current federal tax law places substantial limitations
on the size of such issues.
Municipal obligations are generally classified as either "general
obligation" or "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue source, but
not from the general taxing power. Tax-exempt private activity bonds are in
most cases revenue bonds and do not generally carry the pledge of the credit
of the issuing municipality. There are, of course, variations in the
security of municipal obligations, both within a particular classification
and among classifications.
Municipal obligations are generally traded on the basis of a quoted
yield to maturity, and the price of the security is adjusted so that
relative to the stated rate of interest it will return the quoted rate to
the purchaser.
Short-term and limited-term municipal obligations include Tax
Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes, and Discount Notes. The maturities of these
instruments at the time of issue generally will range between three months
and one year. Pre-Refunded Bonds with longer nominal maturities that are due
to be retired with the proceeds of an escrowed subsequent issue at a date
within one year and three years of the time of acquisition are also
considered short-term and limited-term municipal obligations.
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc.'s ratings of state and
municipal notes:
Moody's ratings for state and municipal notes and other short-term
obligations are designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit
risk and long-term risk.
MIG 1: Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG2: Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
MIG3: Notes bearing this designation are of favorable quality, with
all security elements accounted for but lacking the undeniable strength of
the preceding grades. Market access for refinancing, in particular, is
likely to be less well established.
MIG4: Notes bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as required
of an investment security and not distinctly or predominantly speculative.
Description of Moody's Investors Service Inc.'s/Standard & Poor's municipal
bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to
pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and in
the majority of instances they differ from AAA issues only in small degree.
They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay
interest and repay principal. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
<PAGE>
Calvert Tax-Free Reserves
Vermont Municipal Portfolio
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
April 30, 1999
TABLE OF CONTENTS
Investment Policies 1
Investment Restrictions 8
Purchases and Redemptions of Shares 9
Dividends, Distributions and Tax Matters 9
Valuation of Shares 10
Calculation of Yield and Total Return 10
Advertising 11
Trustees and Officers 12
Investment Advisor 14
Administrative Services 15
Transfer and Shareholder Servicing Agents 15
Independent Accountants and Custodians 15
Method of Distribution 15
Portfolio Transactions 16
General Information 16
Control Persons and Principal Holders of Securities 17
Appendix 17
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 Portfolio's Prospectus, dated April 30, 1999, 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 Portfolio's 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 Portfolio.
INVESTMENT POLICIES
The Portfolio invests primarily in a nondiversified portfolio of
municipal obligations of the state of Vermont and its political subdivisions
("Vermont Municipal Obligations"). Under normal market conditions, the
Portfolio attempts to invest at least 65% of the value of its assets in
Vermont Municipal Obligations. The Portfolio will also attempt to invest the
remaining 35% of its total assets in these obligations, but may invest it in
municipal obligations of other states, territories, and possessions of the
United States, the District of Columbia, and their respective authorities,
agencies, instrumentalities, and political subdivisions. Dividends you
receive from the Portfolio that are derived from interest on tax-exempt
obligations of other governmental issuers will be exempt from federal tax,
but may be subject to Vermont state income taxes. The investment objective
may only be changed with shareholder approval.
Since the Portfolio is nondiversified, it may invest its assets in
fewer issuers than if it were diversified. As a result, the Portfolio's
performance may be more directly impacted by changes in conditions affecting
those issuers than it would be if the Portfolio were investing in a greater
number of issuers A complete explanation of municipal obligations and
municipal bond and note ratings is set forth in the Appendix.
The credit rating of the Portfolio's assets as of its most recent
fiscal year-end appears in the Annual Report to Shareholders, incorporated
by reference herein.
Variable Rate Obligations and Demand Notes
The Portfolio may invest in variable rate obligations. Variable
rate obligations have a yield that is adjusted periodically based on changes
in the level of prevailing interest rates. Floating rate obligations have an
interest rate fixed to a known lending rate, such as the prime rate, and are
automatically adjusted when the known rate changes. Variable rate
obligations lessen the capital fluctuations usually inherent in fixed income
investments. This diminishes the risk of capital depreciation of investment
securities in a Portfolio and, consequently, of Portfolio shares. However,
if interest rates decline, the yield of the invested Portfolio will decline,
causing the Portfolio and its shareholders to forego the opportunity for
capital appreciation of the Portfolio's investments and of their shares.
The Portfolio may invest in floating rate and variable rate demand
notes. Demand notes provide that the holder may demand payment of the note
at its par value plus accrued interest by giving notice to the issuer. To
ensure the ability of the issuer to make payment on demand, a bank letter of
credit or other liquidity facility may support the note.
The Board of Trustees has approved investments in floating and
variable rate demand notes upon the following conditions: the Portfolio has
right of demand, upon notice not to exceed thirty days, against the issuer
to receive payment; the issuer will be able to make payment upon such
demand, either from its own resources or through an unqualified commitment
from a third party; and the rate of interest payable is calculated to ensure
that the market value of such notes will approximate par value on the
adjustment dates. The remaining maturity of such demand notes is deemed the
period remaining until such time as the Portfolio can recover the principal
through demand.
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. There are additional risks inherent in investing in
this type of municipal security. Unlike municipal notes and bonds, where a
municipality is obligated by law to make interest and principal payments
when due, funding for lease payments needs to be appropriated each fiscal
year in the budget. It is possible that a municipality will not appropriate
funds for lease payments. The Advisor considers risk of cancellation in its
investment analysis. The 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; and (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.
Obligations with Puts Attached
The Portfolio has authority to purchase securities at a price which
would result in a yield to maturity lower than that generally offered by the
seller at the time of purchase when it can acquire at the same time the
right to sell the securities back to the seller at an agreed upon price at
any time during a stated period or on a certain date. Such a right is
generally denoted as a "put." Unconditional puts are readily exercisable in
the event of a default in payment of principal or interest on the underlying
securities.
Temporary Investments
From time to time for liquidity purposes or pending the investment
of the proceeds of the sale of Portfolio shares, the Portfolio may invest in
and derive up to 20% of its income from taxable obligations of the U.S.
Government, its agencies and instrumentalities. Interest earned from such
taxable investments will be taxable to investors as ordinary income unless
the investors are otherwise exempt from taxation.
The Portfolio intends to minimize taxable income through
investment, when possible, in short-term tax-exempt securities. To minimize
taxable income, the Portfolio may also hold cash which is not earning income.
Repurchase Agreements
The Portfolio may purchase debt securities subject to repurchase
agreements, which are arrangements under which the Portfolio buys a
security, and the seller simultaneously agrees to repurchase the security at
a specified time and price reflecting a market rate of interest. The
Portfolio engages in repurchase agreements in order to earn a higher rate of
return than it could earn simply by investing in the obligation which is the
subject of the repurchase agreement. Repurchase agreements are not, however,
without risk. In the event of the bankruptcy of a seller during the term of
a repurchase agreement, a legal question exists as to whether the Portfolio
would be deemed the owner of the underlying security or would be deemed only
to have a security interest in and lien upon such security. The Portfolio
will only engage in repurchase agreements with recognized securities dealers
and banks determined to present minimal credit risk by the Advisor under the
direction and supervision of the Portfolio's Board of Trustees. In addition,
the Portfolio will only engage in repurchase agreements reasonably designed
to secure fully during the term of the agreement the seller's obligation to
repurchase the underlying security and will monitor the market value of the
underlying security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase
price due the Portfolio pursuant to the agreement, the Portfolio will
require the seller to pledge additional securities or cash to secure the
seller's obligations pursuant to the agreement. If the seller defaults on
its obligation to repurchase and the value of the underlying security
declines, the Portfolio may incur a loss and may incur expenses in selling
the underlying security. Repurchase agreements are always for periods of
less than one year. Repurchase agreements not terminable within seven days
are considered illiquid.
Reverse Repurchase Agreements
The Portfolio may also engage in reverse repurchase agreements.
Under a reverse repurchase agreement, the Portfolio sells securities to a
bank or securities dealer and agrees to repurchase those securities from
such party at an agreed upon date and price reflecting a market rate of
interest. The Portfolio invests the proceeds from each reverse repurchase
agreement in obligations in which it is authorized to invest. The Portfolio
intends to enter into a reverse repurchase agreement only when the interest
income provided for in the obligation in which the Portfolio invests the
proceeds is expected to exceed the amount the Portfolio will pay in interest
to the other party to the agreement plus all costs associated with the
transactions. The Portfolio does not intend to borrow for leverage purposes.
The Portfolio will only be permitted to pledge assets to the extent
necessary to secure borrowings and reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding, the
Portfolio will maintain in a segregated account an amount of cash, US
Government securities or other liquid, high-quality debt securities equal in
value to the repurchase price. The Portfolio will mark to market the value
of assets held in the segregated account, and will place additional assets
in the account whenever the total value of the account falls below the
amount required under applicable regulations.
The Portfolio's use of reverse repurchase agreements involves the
risk that the other party to the agreements could become subject to
bankruptcy or liquidation proceedings during the period the agreements are
outstanding. In such event, the Portfolio may not be able to repurchase the
securities it has sold to that other party. Under those circumstances, if at
the expiration of the agreement such securities are of greater value than
the proceeds obtained by the Portfolio under the agreements, the Portfolio
may have been better off had it not entered into the agreement. However, the
Portfolio will enter into reverse repurchase agreements only with banks and
dealers which the Advisor believes present minimal credit risks under
guidelines adopted by the Portfolio's Board of Trustees. In addition, the
Portfolio bears the risk that the market value of the securities it sold may
decline below the agreed-upon repurchase price, in which case the dealer may
request the Portfolio to post additional collateral.
When-Issued Purchases
New issues of municipal obligations are offered on a when-issued
basis; that is, delivery and payment for the securities normally take place
15 to 45 days after the date of the transaction. The payment obligation and
the yield that will be received on the securities are each fixed at the time
the buyer enters into the commitment. The Portfolio will only make
commitments to purchase these securities with the intention of actually
acquiring them, but may sell these securities before the settlement date if
it is deemed advisable as a matter of investment strategy.
Securities purchased on a when-issued basis and the securities held
in the Portfolio are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in both changing in
value in the same way, i.e., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, if in
order to achieve higher interest income, the Portfolio remains substantially
fully invested at the same time that it has purchased securities on a
when-issued basis, there will be a greater possibility that the market value
of the Portfolio's assets may vary.
When the time comes to pay for when-issued securities, the
Portfolio will meet its obligations from then available cash flow, sale of
securities or, although it would not normally expect to do so, from sale of
the when-issued securities themselves (which may have a market value greater
or less than the Portfolio's payment obligation). Sale of securities to meet
such obligations carries with it a greater potential for the realization of
capital losses and capital gains which are not exempt from federal income
tax. When issued securities do not earn income until they have in fact been
issued.
When the Portfolio 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 so that the amount so segregated equals
the market value of the when-issued purchase, thereby ensuring the
transaction is unleveraged.
Non-Investment Grade Debt Securities
Non-investment grade debt securities are lower quality debt
securities (generally those rated BB or lower by S&P or Ba or lower by
Moody's, known as "junk bonds." These securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. (See Appendix for a description of the ratings.) These
securities involve greater risk of default or price declines due to changes
in the issuer's creditworthiness than investment-grade debt securities.
Because the market for lower-rated securities may be thinner and less active
than for higher-rated securities, there may be market price volatility for
these securities and limited liquidity in the resale market. Market prices
for these securities may decline significantly in periods of general
economic difficulty or rising interest rates.
The quality limitation set forth in the Fund's investment policy is
determined immediately after the Fund's acquisition of a given security.
Accordingly, any later change in ratings will not be considered when
determining whether an investment complies with the Fund's investment policy.
When purchasing non-investment grade debt securities, rated or
unrated, the Advisor prepares its own careful credit analysis to attempt to
identify those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur.
Derivatives
The Portfolio can use various techniques to increase or decrease
its exposure to changing security prices, interest rates, or other factors
that affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts and
leveraged notes, entering into swap agreements, and purchasing indexed
securities. The Portfolio can use these practices either as substitution or
as protection against an adverse move in the Portfolio to adjust the risk
and return characteristics of the Portfolio. If the Advisor judges market
conditions incorrectly or employs a strategy that does not correlate well
with a Portfolio's investments, or if the counterparty to the transaction
does not perform as promised, these techniques could result in a loss. These
techniques may increase the volatility of a Portfolio and may involve a
small investment of cash relative to the magnitude of the risk assumed.
Derivatives are often illiquid.
Options and Futures Contracts
The Portfolio may, in pursuit of its respective investment
objectives, purchase put and call options and engage in the writing of
covered call options and secured put options on securities and employ a
variety of other investment techniques such as interest rate futures
contracts, and options on such futures, as described more fully below.
The Portfolio may engage in such transactions only to hedge the
existing positions in the Portfolio. They will not engage in such
transactions for the purposes of speculation or leverage. Such investment
policies and techniques may involve a greater degree of risk than those
inherent in more conservative investment approaches.
The Portfolio may write "covered options" on securities in standard
contracts traded on national securities exchanges. The Portfolio may write
such options in order to receive the premiums from options that expire and
to seek net gains from closing purchase transactions with respect to such
options.
Put and Call Options. The Portfolio may purchase put and call options, in
standard contracts traded on national securities exchanges. The Portfolio
will purchase such options only to hedge against changes in the value of
securities the Portfolio hold and not for the purposes of speculation or
leverage. By buying a put, a Portfolio has the right to sell the security at
the exercise price, thus limiting its risk of loss through a decline in the
market value of the security until the put expires. The amount of any
appreciation in the value of the underlying security will be partially
offset by the amount of the premium paid for the put option and any related
transaction costs. Prior to its expiration, a put option may be sold in a
closing sale transaction and any profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for the
put option plus the related transaction costs.
The Portfolio may purchase call options on securities which it may
intend to purchase or as an interest rate hedge. Such transactions may be
entered into in order to limit the risk of a substantial increase in the
market price of the security which the Portfolio intends to purchase or in
the level of market interest rates. Prior to its expiration, a call option
may be sold in a closing sale transaction. Any profit or loss from such a
sale will depend on whether the amount received is more or less than the
premium paid for the call option plus the related transaction costs.
Covered Options. The Portfolio may write only covered options on securities
in standard contracts traded on national securities exchanges. This means
that, in the case of call options, so long as a Portfolio is obligated as
the writer of a call option, that Portfolio will own the underlying security
subject to the option and, in the case of put options, that Portfolio will,
through its custodian, deposit and maintain either cash or securities with a
market value equal to or greater than the exercise price of the option.
When a Portfolio writes a covered call option, the Portfolio gives
the purchaser the right to purchase the security at the call option price at
any time during the life of the option. As the writer of the option, the
Portfolio receives a premium, less a commission, and in exchange foregoes
the opportunity to profit from any increase in the market value of the
security exceeding the call option price. The premium serves to mitigate the
effect of any depreciation in the market value of the security. Writing
covered call options can increase the income of the Portfolio and thus
reduce declines in the net asset value per share of the Portfolio if
securities covered by such options decline in value. Exercise of a call
option by the purchaser however will cause the Portfolio to forego future
appreciation of the securities covered by the option.
When a Portfolio writes a covered put option, it will gain a profit
in the amount of the premium, less a commission, so long as the price of the
underlying security remains above the exercise price. However, the Portfolio
remains obligated to purchase the underlying security from the buyer of the
put option (usually in the event the price of the security falls below the
exercise price) at any time during the option period. If the price of the
underlying security falls below the exercise price, the Portfolio may
realize a loss in the amount of the difference between the exercise price
and the sale price of the security, less the premium received.
The Portfolio may purchase securities which may be covered with
call options solely on the basis of considerations consistent with the
investment objectives and policies of the Portfolio. The Portfolio's
turnover may increase through the exercise of a call option; this will
generally occur if the market value of a "covered" security increases and
the portfolio has not entered into a closing purchase transaction.
Risks Related to Options Transactions. The Portfolio can close out its
respective positions in exchange-traded options only on an exchange which
provides a secondary market in such options. Although the Portfolio intends
to acquire and write only such exchange-traded options for which an active
secondary market appears to exist, there can be no assurance that such a
market will exist for any particular option contract at any particular time.
This might prevent the Portfolio from closing an options position, which
could impair the Portfolio's ability to hedge effectively. The inability to
close out a call position may have an adverse effect on liquidity because
the Portfolio may be required to hold the securities underlying the option
until the option expires or is exercised.
Transactions in Futures Contracts
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal bonds or on U.S. Treasury securities, or
options on such futures contracts, for hedging purposes only. The Portfolio
may sell such futures contracts in anticipation of a decline in the cost of
municipal bonds it holds or may purchase such futures contracts in
anticipation of an increase in the value of municipal bonds the Portfolio
intends to acquire. The Portfolio also is authorized to purchase and sell
other financial futures contracts which in the opinion of the Investment
Advisor provide an appropriate hedge for some or all of the Portfolio's
securities.
Because of low initial margin deposits made upon the opening of a
futures position, futures transactions involve substantial leverage. As a
result, relatively small movements in the price of the futures contract can
result in substantial unrealized gains or losses. Because the Portfolio will
engage in the purchase and sale of financial futures contracts solely for
hedging purposes, however, any losses incurred in connection therewith
should, if the hedging strategy is successful, be offset in whole or in part
by increases in the value of securities held by the Portfolio or decreases
in the price of securities the Portfolio intends to acquire.
Municipal bond index futures contracts commenced trading in June
1985, and it is possible that trading in such futures contracts will be less
liquid than that in other futures contracts. The trading of futures
contracts and options thereon is subject to certain market risks, such as
trading halts, suspensions, exchange or clearing house equipment failures,
government intervention or other disruptions of normal trading activity,
which could at times make it difficult or impossible to liquidate existing
positions.
The liquidity of a secondary market in futures contracts may be
further adversely affected by "daily price fluctuation limits" established
by contract markets, which limit the amount of fluctuation in the price of a
futures contract or option thereon during a single trading day. Once the
daily limit has been reached in the contract, no trades may be entered into
at a price beyond the limit, thus preventing the liquidation of open
positions. Prices of existing contracts have in the past moved the daily
limit on a number of consecutive trading days. The Portfolio will enter into
a futures position only if, in the judgment of the Investment Advisor, there
appears to be an actively traded secondary market for such futures contracts.
The successful use of transactions in futures contracts and options
thereon depends on the ability of the Investment Advisor to correctly
forecast the direction and extent of price movements of these instruments,
as well as price movements of the securities held by the Portfolio within a
given time frame. To the extent these prices remain stable during the period
in which a futures or option contract is held by the Portfolio, or move in a
direction opposite to that anticipated, the Portfolio may realize a loss on
the hedging transaction which is not fully or partially offset by an
increase in the value of the Portfolio's securities. As a result, the
Portfolio's total return for such period may be less than if it had not
engaged in the hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller of a
contract to deliver and the purchaser of a contract to take delivery of the
type of financial instrument called for in the contract or, in some
instances, to make a cash settlement, at a specified future time for a
specified price. Although the terms of a contract call for actual delivery
or acceptance of securities, or for a cash settlement, in most cases the
contracts are closed out before the delivery date without the delivery or
acceptance taking place. The Portfolio intends to close out its futures
contracts prior to the delivery date of such contracts.
The Portfolio may sell futures contracts in anticipation of a
decline in the value of its investments in municipal bonds. The loss
associated with any such decline could be reduced without employing futures
as a hedge by selling long-term securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in cash.
This strategy, however, entails increased transaction costs in the form of
brokerage commissions and dealer spreads and will typically reduce the
Portfolio's average yields as a result of the shortening of maturities.
The purchase or sale of a futures contract differs from the
purchase or sale of a security, in that no price or premium is paid or
received. Instead, an amount of cash or securities acceptable to the
Portfolio's futures commission merchant and the relevant contract market,
which varies but is generally about 5% or less of the contract amount, must
be deposited with the broker. This amount is known as "initial margin," and
represents a "good faith" deposit assuring the performance of both the
purchaser and the seller under the futures contract. Subsequent payments to
and from the broker, known as "variation margin," are required to be made on
a daily basis as the price of the futures contract fluctuates, making the
long or short positions in the futures contract more or less valuable, a
process known as "marking to the market." Prior to the settlement date of
the futures contract, the position may be closed out by taking an opposite
position which will operate to terminate the position in the futures
contract. A final determination of variation margin is then made, additional
cash is required to be paid to or released by the broker, and the purchaser
realizes a loss or gain. In addition, a commission is paid on each completed
purchase and sale transaction.
The sale of financial futures contracts provides an alternative
means of hedging the Portfolio against declines in the value of its
investments in municipal bonds. As such values decline, the value of the
Portfolio's position in the futures contracts will tend to increase, thus
offsetting all or a portion of the depreciation in the market value of the
Portfolio's fixed income investments which are being hedged. While the
Portfolio will incur commission expenses in establishing and closing out
futures positions, commissions on futures transactions may be significantly
lower than transaction costs incurred in the purchase and sale of fixed
income securities. In addition, the ability of the Portfolio to trade in the
standardized contracts available in the futures market may offer a more
effective hedging strategy than a program to reduce the average maturing of
portfolio securities, due to the unique and varied credit and technical
characteristics of the municipal debt instruments available to the
Portfolio. Employing futures as a hedge may also permit the Portfolio to
assume a hedging posture without reducing the yield on its investments,
beyond any amounts required to engage in futures trading.
The Portfolio may engage in the purchase and sale of futures
contracts on an index of municipal securities. These instruments provide for
the purchase or sale of a hypothetical portfolio of municipal bonds at a
fixed price in a stated delivery month. Unlike most other futures contracts,
however, a municipal bond index futures contract does not require actual
delivery of securities but results in a cash settlement based upon the
difference in value of the index between the time the contract was entered
into and the time it is liquidated.
The municipal bond index underlying the futures contracts traded by
the Portfolio is The Bond Buyer Municipal Bond Index, developed by The Bond
Buyer and the Chicago Board of Trade ("CBT"), the contract market on which
the futures contracts are traded. As currently structured, the index is
comprised of 40 tax-exempt term municipal revenue and general obligation
bonds. Each bond included in the index must be rated either A- or higher by
Standard & Poor's or A or higher by Moody's Investors Service and must have
a remaining maturity of 19 years or more. Twice a month new issues
satisfying the eligibility requirements are added to, and an equal number of
old issues will be deleted from, the index. The value of the index is
computed daily according to a formula based upon the price of each bond in
the index, as evaluated by four dealer-to-dealers brokers.
The Portfolio may also purchase and sell futures contracts on U.S.
Treasury bills, notes and bonds for the same types of hedging purposes. Such
futures contracts provide for delivery of the underlying security at a
specified future time for a fixed price, and the value of the futures
contract therefore generally fluctuates with movements in interest rates.
The municipal bond index futures contract, futures contracts on
U.S. Treasury securities and options on such futures contracts are traded on
the CBT, which, like other contract markets, assures the performance of the
parties to each futures contract through a clearing corporation, a nonprofit
organization managed by the exchange membership, which is also responsible
for handling daily accounting of deposits or withdrawals of margin.
The Portfolio may also purchase financial futures contracts when it
is not fully invested in municipal bonds in anticipation of an increase in
the cost of securities the Portfolio intends to purchase. As such securities
are purchased, an equivalent amount of futures contracts will be closed out.
In a substantial majority of these transactions, the Portfolio will purchase
municipal bonds upon termination of the futures contracts. Due to changing
market conditions and interest rate forecasts, however, a futures position
may be terminated without a corresponding purchase of securities.
Nevertheless, all purchases of futures contracts by the Portfolio will be
subject to certain restrictions, described below.
Options on Futures Contracts. An option on a futures contract
provides the purchaser with the right, but not the obligation, to enter into
a long position in the underlying futures contract (that is, purchase the
futures contract), in the case of a "call" option, or a short position (sell
the futures contract), in the case of a "put" option, for a fixed price up
to a stated expiration date. The option is purchased for a non-refundable
fee, known as the "premium." Upon exercise of the option, the contract
market clearing house assigns each party to the option an opposite position
in the underlying futures contract. In the event of exercise, therefore, the
parties are subject to all of the risks of futures trading, such as payment
of initial and variation margin. In addition, the seller, or "writer," of
the option is subject to margin requirements on the option position. Options
on futures contracts are traded on the same contract markets as the
underlying futures contracts.
The Portfolio may purchase options on futures contracts for the
same types of hedging purposes described above in connection with futures
contracts. For example, in order to protect against an anticipated decline
in the value of securities it holds, the Portfolio could purchase put
options on futures contracts, instead of selling the underlying futures
contracts. Conversely, in order to protect against the adverse effects of
anticipated increases in the costs of securities to be acquired, the
Portfolio could purchase call options on futures contracts, instead of
purchasing the underlying futures contracts. The Portfolio generally will
sell options on futures contracts only to close out an existing position.
The Portfolio will not engage in transactions in such instruments
unless and until the Investment Advisor determines that market conditions
and the circumstances of the Portfolio warrant such trading. To the extent
the Portfolio engages in the purchase and sale of futures contracts or
options thereon, it will do so only at a level which is reflective of the
Investment Advisor's view of the hedging needs of the Portfolio, the
liquidity of the market for futures contracts and the anticipated
correlation between movements in the value of the futures or option contract
and the value of securities held by the Portfolio.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Under regulations of the Commodity Futures Trading Commission
("CFTC"), the futures trading activities described herein will not result in
the Portfolio being deemed to be a "commodity pool," as defined under such
regulations, provided that certain trading restrictions are adhered to. In
particular, CFTC regulations require that all futures and option positions
entered into by the Portfolio qualify as bona fide hedge transactions, as
defined under CFTC regulations, or, in the case of long positions, that the
value of such positions not exceed an amount of segregated funds determined
by reference to certain cash and securities positions maintained by the
Portfolio and accrued profits on such positions. In addition, the Portfolio
may not purchase or sell any such instruments if, immediately thereafter,
the sum of the amount of initial margin deposits on the Portfolio's existing
futures positions would exceed 5% of the market value of its net assets.
When the Portfolio purchases a futures contract, it will maintain
an amount of cash, cash equivalents (for example, commercial paper and daily
tender adjustable notes) or short-term high-grade fixed income securities in
a segregated account so that the amount so segregated plus the amount of
initial and variation margin held in the account of its broker equals the
market value of the futures contract, thereby ensuring that the use of such
futures is unleveraged.
Risk Factors in Transactions in Futures Contracts. The particular
municipal bonds comprising the index underlying the municipal bond index
futures contract may vary from the bonds held by the Portfolio. In addition,
the securities underlying futures contracts on U.S. Treasury securities will
not be the same as securities held by the Portfolio. As a result, the
Portfolio's ability effectively to hedge all or a portion of the value of
its municipal bonds through the use of futures contracts will depend in part
on the degree to which price movements in the index underlying the municipal
bond index futures contract, or the U.S. Treasury securities underlying
other futures contracts trade, correlate with price movements of the
municipal bonds held by the Portfolio.
For example, where prices of securities in the Portfolio do not
move in the same direction or to the same extent as the values of the
securities or index underlying a futures contract, the trading of such
futures contracts may not effectively hedge the Portfolio's investments and
may result in trading losses. The correlation may be affected by disparities
in the average maturity, ratings, geographical mix or structure of the
Portfolio's investments as compared to those comprising the index, and
general economic or political factors. In addition, the correlation between
movements in the value of the index underlying a futures contract may be
subject to change over time, as additions to and deletions from the index
alter its structure. In the case of futures contracts on U.S. Treasury
securities and options thereon, the anticipated correlation of price
movements between the U.S. Treasury securities underlying the futures or
options and municipal bonds may be adversely affected by economic,
political, legislative or other developments that have a disparate impact on
the respective markets for such securities. In the event that the Investment
Advisor determines to enter into transactions in financial futures contracts
other than the municipal bond index futures contract or futures on U.S.
Treasury securities, the risk of imperfect correlation between movements in
the prices of such futures contracts and the prices of municipal bonds held
by the Portfolio may be greater.
The trading of futures contracts on an index also entails the risk
of imperfect correlation between movements in the price of the futures
contract and the value of the underlying index. The anticipated spread
between the prices may be distorted due to differences in the nature of the
markets, such as margin requirements, liquidity and the participation of
speculators in the futures markets. The risk of imperfect correlation,
however, generally diminishes as the delivery month specified in the futures
contract approaches.
Prior to exercise or expiration, a position in futures contracts or
options thereon may be terminated only by entering into a closing purchase
or sale transaction. This requires a secondary market to the relevant
contract market. The Portfolio will enter into a futures or option position
only if there appears to be a liquid secondary market therefor, although
there can be no assurance that such a liquid secondary market will exist for
any particular contract at any specific time. Thus, it may not be possible
to close out a position once it has been established. Under such
circumstances, the Portfolio could be required to make continuing daily cash
payments of variation margin in the event of adverse price movements. In
such situation, if the Portfolio has insufficient cash, it may be required
to sell portfolio securities to meet daily variation margin requirements at
a time when it may be disadvantageous to do so. In addition, the Portfolio
may be required to perform under the terms of the futures or option
contracts it holds. The inability to close out futures or options positions
also could have an adverse impact on the Portfolio's ability effectively to
hedge its portfolio.
When the Portfolio purchases an option on a futures contract, its
risk is limited to the amount of the premium, plus related transaction
costs, although this entire amount may be lost. In addition, in order to
profit from the purchase of an option on a futures contract, the Portfolio
may be required to exercise the option and liquidate the underlying futures
contract, subject to the availability of a liquid secondary market. The
trading of options on futures contracts also entails the risk that changes
in the value of the underlying futures contract will not be fully reflected
in the value of the option, although the risk of imperfect correlation
generally tends to diminish as the maturity date of the futures contract or
expiration date of the option approaches.
"Trading Limits" or "Position Limits" may also be imposed on the
maximum number of contracts which any person may hold at a given time. A
contract market may order the liquidation of positions found to be in
violation of these limits and it may impose other sanctions or restrictions.
The Investment Advisor does not believe that trading limits will have any
adverse impact on the strategies for hedging the Portfolio's investments.
Further, the trading of futures contracts is subject to the risk of
the insolvency of a brokerage firm or clearing corporation, which could make
it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.
In addition to the risks of imperfect correlation and lack of a
liquid secondary market for such instruments, transactions in futures
contracts involve risks related to leveraging and the potential for
incorrect forecasts of the direction and extent of interest rate movements
within a given time frame.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Portfolio has adopted the following fundamental investment
restrictions. These restrictions cannot be changed without the approval of
the holders of a majority of the outstanding shares of the Portfolio.
(1) The Portfolio may not make any investment inconsistent
with its classification as a nondiversified investment
company under the 1940 Act.
(2) The 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) The 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 its 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, the
Portfolio may pledge, mortgage or hypothecate its assets.
(4) The 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 its investment objective and policies, either
directly from the issuer, or from an underwriter for an
issuer, may be deemed an underwriting.
(5) The Portfolio may not invest directly in commodities
or real estate, although it 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) The 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
its 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) The Portfolio may not purchase common stocks,
preferred stocks, warrants, or other equity securities.
(2) The Portfolio does not intend to make any purchases of
securities if borrowing exceeds 5% of its total assets.
(3) The Portfolio may not sell securities short, purchase
securities on margin, or write or purchase put or call
options, except as permitted in connection with
transactions in futures contracts and options thereon. The
Portfolio reserves the right to purchase securities with
puts attached or with demand features.
(4) The Portfolio may not invest more than 35% of net
assets in non-investment grade debt securities. The
Portfolio does not intend to purchase more than 15% of in
non-investment grade debt securities.
(5) The Portfolio may not purchase illiquid securities if
more than 10% of the value of the Portfolio's net assets
would be invested in such securities.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will not be issued unless requested in writing
by the investor. No charge will be made for share certificate requests. No
certificates will be issued for fractional shares.
Amounts redeemed by check redemption may be mailed to the investor
without charge. Amounts of more than $50 and less than $300,000 may be
transferred electronically at no charge to the investor. Amounts of $1,000
or more will be transmitted by wire, without charge, to the investor's
account at a domestic commercial bank that is a member of the Federal
Reserve System or to a correspondent bank. A charge of $5 is imposed on wire
transfers of less than $1,000. If the investor's bank is not a Federal
Reserve System member, failure of immediate notification to that bank by the
correspondent bank could result in a delay in crediting the funds to the
investor's bank account.
Telephone redemption requests which would require the redemption of
shares purchased by check or electronic funds transfer within the previous
10 business days may not be honored. The Fund reserves the right to modify
the telephone redemption privilege.
To change redemption instructions already given, shareholders must
send a written notice to Calvert Group, c/o NFDS, 330 West 9th Street,
Kansas City, MO 64105, with a voided copy of a check for the bank wiring
instructions to be added. If a voided check does not accompany the request,
then the request must be signature guaranteed by a commercial bank, savings
and loan association, trust company, member firm of any national securities
exchange, or certain credit unions. Further documentation may be required
from corporations, fiduciaries, and institutional investors.
The right of redemption may be suspended or the date of payment
postponed for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when trading on the New
York Stock Exchange is restricted, or an emergency exists, as determined by
the SEC, or if the Commission has ordered such a suspension for the
protection of shareholders. Redemption proceeds are normally mailed or wired
the next business day after a proper redemption request has been received,
unless redemptions have been suspended or postponed as described above.
Redemption proceeds are normally paid in cash. However, the
Portfolio has the right to redeem shares in assets other than cash for
redemption amounts exceeding, in any 90-day period, $250,000 or 1% of the
net asset value of the Portfolio, whichever is less.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
The Portfolio intends to continue to qualify as regulated
investment companies under Subchapter M of the Internal Revenue Code. If for
any reason the Portfolio 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 declares and pays monthly dividends of its net income
to shareholders of record as of the close of business on each designated
monthly record date. Net investment income consists of the interest income
earned on investments (adjusted for amortization of original issue discounts
or premiums or market premiums), less estimated expenses.
Dividends are automatically reinvested at net asset value in
additional shares. Shareholders may elect to have their dividends and
distributions paid out monthly in cash. Capital gains, if any, are normally
paid once a year and will be automatically reinvested at net asset value in
additional shares, unless you choose otherwise. You may elect to have your
dividends and distributions paid out monthly in cash. You may also request
to have your dividends and distributions from the Portfolio invested in
shares of any other Calvert Group Fund, to be invested in that Fund or
Portfolio without a sales charge.
The Portfolio's dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally subject to
federal or Vermont state income tax; however, under the Code, dividends
attributable to interest on certain private activity bonds must be included
in federal alternative minimum taxable income for the purpose of determining
liability (if any) for individuals and for corporations. The Portfolio's
dividends derived from taxable interest and distributions of net short-term
capital gains whether taken in cash or reinvested in additional shares, are
taxable to shareholders as ordinary income and do not qualify for the
dividends received deduction for corporations.
The Code provides that interest on indebtedness incurred or
continued in order to purchase or carry shares of a regulated investment
company which distributes exempt-interest dividends during the year is not
deductible. Furthermore, entities or persons who are "substantial users" (or
persons related to "substantial users") of facilities financed by private
activity bonds should consult their tax advisers before purchasing shares of
the Portfolio. "Substantial user" is generally defined as including a
"non-exempt person" who regularly uses in trade or business a part of a
facility financed from the proceeds of private activity bonds.
Investors should note that the Code may require investors to
exclude the initial sales charge, if any, paid on the purchase of Portfolio
shares from the tax basis of those shares if the shares are exchanged for
shares of another Calvert Group Fund within 90 days of purchase. This
requirement applies only to the extent that the payment of the original
sales charge on the shares of the Portfolio causes a reduction in the sales
charge otherwise payable on the shares of the Calvert Group Fund acquired in
the exchange, and investors may treat sales charges excluded from the basis
of the original shares as incurred to acquire the new shares.
The Portfolio is required to withhold 31% of any long-term capital
gain dividends and 31% of each redemption transaction occurring in the
Portfolio if: (a) the shareholder's social security number or other taxpayer
identification number ("TIN") is not provided, or an obviously incorrect TIN
is provided; (b) the shareholder does not certify under penalties of perjury
that the TIN provided is the shareholder's correct TIN and that the
shareholder is not subject to backup withholding under section 3406(a)(1)(C)
of the Code because of underreporting (however, failure to provide
certification as to the application of section 3406(a)(1)(C) will result
only in backup withholding on capital gain dividends, not on redemptions);
or (c) the Fund is notified by the Internal Revenue Service that the TIN
provided by the shareholder is incorrect or that there has been
underreporting of interest or dividends by the shareholder. Affected
shareholders will receive statements at least annually specifying the amount
withheld.
In addition, the Portfolio is required to report to the Internal
Revenue Service the following information with respect to redemption
transactions in the Portfolio: (a) the shareholder's name, address, account
number and taxpayer identification number; (b) the total dollar value of the
redemptions; and (c) the Portfolio's identifying CUSIP number.
Certain shareholders are, however, exempt from the backup
withholding and broker reporting requirements. Exempt shareholders include:
corporations; financial institutions; tax-exempt organizations; individual
retirement plans; the U.S., a State, the District of Columbia, a U.S.
possession, a foreign government, an international organization, or any
political subdivision, agency or instrumentality of any of the foregoing
U.S. registered commodities or securities dealers; real estate investment
trusts; registered investment companies; bank common trust funds; certain
charitable trusts; and foreign central banks of issue. Non-resident aliens
also are generally not subject to either requirement but, along with certain
foreign partnerships and foreign corporations, may instead be subject to
withholding under section 1441 of the Code. Shareholders claiming exemption
from backup withholding and broker reporting should call or write the
Portfolio for further information.
VALUATION OF SHARES
The Portfolio's assets are normally valued utilizing the average
bid dealer market quotation as furnished by an independent pricing service.
Securities and other assets for which market quotations are not readily
available are valued based on the current market for similar securities or
assets, as determined in good faith by the Portfolio's Advisor under the
supervision of the Board of Trustees. The Portfolio determines the net asset
value of its shares every business day at the close of the regular session
of the New York Stock Exchange (generally, 4:00 p.m. Eastern time), and at
such other times as may be necessary or appropriate. The Portfolio does not
determine net asset value on certain national holidays or other days on
which the New York Stock Exchange is closed: New Year's Day, Martin Luther
King Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Valuations, market quotations and market equivalents are provided
the Portfolio by Kenny S&P Evaluation Services, a subsidiary of McGraw-Hill.
The use of Kenny as a pricing service by the Portfolio has been approved by
the Board of Trustees. Valuations provided by Kenny are determined without
exclusive reliance on quoted prices and take into consideration appropriate
factors such as institution-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data.
Net Asset Value and Offering Price Per Share
Net asset value per share
($51,292,397/3,150,493 shares) $16.28
Maximum sales charge
(3.75% of offering price) 0.63
Offering price per share $16.91
CALCULATION OF YIELD AND TOTAL RETURN
From time to time, the Portfolio advertises its "total return."
Total return is historical in nature and is not intended to indicate future
performance. Total return will be quoted for the most recent one-year
period, five-year period and the period from inception of the Portfolio's
offering of shares. Total return quotations for periods in excess of one
year represent the average annual total return for the period included in
the particular quotation. Total return is a computation of the Portfolio's
dividend yield plus or minus realized or unrealized capital appreciation or
depreciation, less fees and expenses. All total return quotations reflect
the deduction of the Portfolio's maximum sales charge for shares, except
quotations of "return without maximum load," which do not deduct the sales
charge. Thus, in the formula below, for return without maximum load, P = the
entire $1,000 hypothetical initial investment and does not reflect the
deduction of any sales charge. Note: "Total Return" as quoted in the
Financial Highlights section of the Fund's Prospectus and Annual Report to
Shareholders, however, per SEC instructions, does not reflect deduction of
the sales charge, and corresponds to "return without maximum load" as
referred to herein. Return without maximum load should be considered only by
investors, such as participants in certain pension plans, to whom the sales
charge does not apply, or for purposes of comparison only with comparable
figures which also do not reflect sales charges, such as Lipper averages.
Total return is computed according to the following formula:
P(1 +T)n = ERV
where P = a hypothetical initial payment of $1,000 (less the maximum sales
charge imposed during the period); T = average annual total return; n =
number of years and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1, 5, or 10 year periods at the
end of such periods (or portions thereof if applicable).
Returns for the periods indicated are as follows:
Periods Ended
December 31, 1998 with Max Load w/o Max Load
One Year 1.71% 5.67%
Five Years 4.66% 5.46%
From Inception 6.47% N/A
(April 1, 1991)
The Portfolio also advertises, from time to time, its "yield" and
"tax equivalent yield." As with total return, both yield figures are
historical and are not intended to indicate future performance. "Yield"
quotations for each class refer to the aggregate imputed yield-to-maturity
of each of the Portfolio's investments based on the market value as of the
last day of a given thirty-day or one-month period, less expenses (net of
reimbursement), divided by the average daily number of outstanding shares
entitled to receive dividends times the maximum offering price on the last
day of the period (so that the effect of the sales charge is included in the
calculation), compounded on a "bond equivalent," or semi-annual, basis. The
Portfolio's yield is computed according to the following formula:
Yield = 2[(a-b/cd) +1)6 - 1]
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursement); c = the average daily number
of shares outstanding during the period that were entitled to receive
dividends; and d = the maximum offering price per share on the last day of
the period. Using this calculation, the Portfolio's yield for the month
ended December 31, 1998 was 4.12%.
The tax equivalent yield is the yield an investor would be required
to obtain from taxable investments to equal the Portfolio's yield, all or a
portion of which may be exempt from federal income taxes. The tax equivalent
yield is computed per class by taking the portion of the yield exempt from
federal income tax and multiplying the exempt yield by a factor based upon a
stated income tax rate, then adding the portion of the yield that is not
exempt from federal income taxes. The factor which is used to calculate the
tax equivalent yield is the reciprocal of the difference between 1 and the
applicable income tax rates, which will be stated in the advertisement.
For the thirty-day period ended December 31, 1998, based on the
4.12% yield above, the federal tax equivalent yield was 6.44% for an
investor in the 36% federal income tax bracket, and 6.82% for an investor in
the 39.6% federal income tax bracket.
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles,
sociological conditions and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Portfolio, whether held
or not.
The Fund or its affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings,
Mutual Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker
Investment Management, Inc. Such averages generally do not reflect any
front- or back-end sales charges that may be charged by Funds in that
grouping. The Fund may also cite to any source, whether in print or on-line,
such as Bloomberg, in order to acknowledge origin of information. The Fund
may compare itself or its portfolio holdings to other investments, whether
or not issued or regulated by the securities industry, including, but not
limited to, certificates of deposit and Treasury notes. The Fund, its
Advisor, and its affiliates reserve the right to update performance rankings
as new rankings become available.
Calvert Group is the nation's leading family of socially
responsible mutual funds, both in terms of socially responsible mutual fund
assets under management, and number of socially responsible mutual fund
portfolios offered (source: Social Investment Forum, December 31, 1998).
Calvert Group was also the first to offer a family of socially responsible
mutual fund portfolios.
TRUSTEES AND OFFICERS
The Fund's Board of Trustees supervises the Fund's activities and
reviews its contracts with companies that provide it with services.
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 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 Calvert Variable Series,
Inc., and 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.
VICTOR FRYE, Esq., Assistant Secretary and Compliance Officer. Mr.
Frye is Counsel and Compliance Officer of Calvert Group and an officer of
each of its subsidiaries and Calvert-Sloan Advisers, L.L.C. He is also an
officer of each of the other investment companies in the Calvert Group of
Funds. Prior to working at Calvert Group, Mr. Frye was Counsel and Manager
of the Compliance Department at The Advisors Group. DOB: 10/15/58.
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, Mmes. Krumsiek and 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 $5,889 by the Vermont Municipal Portfolio. 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 $1,500 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.
**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.
The Advisory Contract between the Fund and the Advisor will remain
in effect indefinitely, provided continuance is approved at least annually
by the vote of the holders of a majority of the outstanding shares of the
Fund, or by the Trustees of the Fund; and further provided that such
continuance is also approved annually by the vote of a majority of the
Trustees of the Fund who are not parties to the Contract or interested
persons of such parties, cast in person at a meeting called for the purpose
of voting on such approval. The Contract may be terminated without penalty
by either party on 60 days' prior written notice; it automatically
terminates in the event of its assignment.
Under the Contract, the Advisor manages the investment and
reinvestment of the Fund's assets, subject to the direction and control of
the Fund's Board of Trustees. For its services, the Advisor receives from
the Portfolio an annual fee of 0.60% of the first $500 million of the
Portfolio's average daily net assets, 0.50% of the next $500 million of such
assets, and 0.40% of all such assets over $1 billion.
The advisory fee is payable monthly. The Advisor reserves the right
(i) to waive all or a part of its fee and (ii) to compensate, at its
expense, broker-dealers in consideration of their promotional and
administrative services.
The Advisor provides the Fund with investment advice and research,
pays the salaries and fees of all Trustees and executive officers of the
Fund who are principals of the Advisor, and pays certain Fund advertising
and promotional expenses. The Fund pays all other administrative and
operating expenses, including: custodial fees; shareholder servicing;
dividend disbursing and transfer agency fees; administrative service fees;
federal and state securities registration fees; insurance premiums; trade
association dues; interest, taxes and other business fees; legal and audit
fees; and brokerage commissions and other costs associated with the purchase
and sale of portfolio securities. The gross advisory fees paid to the
Advisor under the advisory contract for the 1996, 1997, and 1998 fiscal
years were $340,885, $296,024, and $305,695, respectively.
The Advisor may voluntarily reimburse the Portfolio for expenses.
For the 1996, 1997, and 1998 fiscal years, the reimbursement was $18,498,
$0, and $0, respectively.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company ("CASC"), a wholly-owned
subsidiary of Calvert Group, Ltd., has been retained by the Fund to provide
certain administrative services necessary to the conduct of the Fund's
affairs. Prior to August 1, 1997, CASC received a fee of $200,000 per year
for providing such services, allocated among Portfolios based on assets.
Effective August 1, 1997, the fee structure changed. Exclusive of the CTFR
Money Market Portfolio, the Fund pays an annual fee of $80,000, allocated
between the remaining Portfolios based on assets. The administrative service
fees paid by the Portfolio to CASC for fiscal years 1996, 1997, and 1998
were $4,156, $4,004, and $4,127, respectively.
TRANSFER AND SHAREHOLDER SERVICING AGENTS
National Financial Data Services, Inc. ("NFDS"), 330 W. 9th Street,
Kansas City, Missouri 64105, a subsidiary of State Street Bank & Trust, has
been retained by the Fund to act as transfer agent and dividend disbursing
agent. These responsibilities include: responding to certain shareholder
inquiries and instructions, crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions,
and daily updating of shareholder accounts to reflect declaration and
payment of dividends.
Calvert Shareholder Services, Inc. ("CSSI"), 4550 Montgomery
Avenue, Bethesda, Maryland 20814, 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.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore,
Maryland 21201, has been selected by the Board of Trustees to serve as
independent accountants of the Fund for fiscal year 1998. State Bank and
Trust Company, N.A., 225 Franklin Street, Boston, MA 02110, acts as
custodian of the Portfolio's investments. First National Bank of Maryland,
25 South Charles Street, Baltimore, Maryland 21203 also serves as custodian
of certain of the Fund's cash assets. Neither custodian has any part in
deciding the Portfolio's investment policies or the choice of securities
that are to be purchased or sold by the Portfolio.
METHOD OF DISTRIBUTION
The Portfolio has entered into a principal underwriting agreement
with Calvert Distributors, Inc. ("CDI"). Pursuant to the agreement, CDI
serves as distributor and principal underwriter for the Portfolio. CDI bears
all its expenses of providing services pursuant to the agreement, including
payment of any commissions and service fees.
CTFR Vermont Municipal
Shares are offered at net asset value plus a front-end sales charge as
follows:
As a % of As a % of Allowed to
Amount of offering net amount Brokers as a %
Investment price invested of offering price
Less than $50,000 3.75% 3.90% 3.00%
$50,000 but
less than $100,000 3.00% 3.09% 2.25%
$100,000 but
less than $250,000 2.25% 2.30% 1.75%
$250,000 but
less than $500,000 1.75% 1.78% 1.25%
$500,000 but
less than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.00%
CDI receives any front-end sales charge. A portion of the front-end
sales charge may be reallowed to dealers. The aggregate amount of sales
charges (gross underwriting commissions) and the net amount retained by CDI
(i.e., not reallowed to dealers) for the last 3 fiscal years are:
Fiscal Year 1996 1997
Gross Net Gross Net
$46,256 $28,339 $58,265 $25,820
1998
Gross Net
$63,649 $28,472
Fund Trustees and certain other affiliated persons of the Fund are
exempt from the sales charge since the distribution costs are minimal to
persons already familiar with the Fund. Other groups are exempt due to
economies of scale in distribution. See Exhibit A to the Prospectus.
The Advisor, at its expense, may incur costs and pay expenses
associated with the distribution of shares of the Portfolio. CDI makes a
continuous offering of the Fund's securities on a "best efforts" basis.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. The Fund's Advisor makes
investment decisions and the choice of brokers and dealers under the
direction and supervision of the Fund's Board of Trustees.
Broker-dealers who execute portfolio transactions on behalf of the
Fund are selected on the basis of their execution capability and trading
expertise considering, among other factors, the overall reasonableness of
the brokerage commissions, current market conditions, size and timing of the
order, difficulty of execution, per share price, etc.
For the last three fiscal years, total brokerage commissions paid
are as follows:
1996 1997 1998
CTFR Vermont Municipal $0 $0 $0
The Fund did not pay any brokerage commissions to affiliated
persons during the last three fiscal years.
While the Fund's Advisor select brokers primarily on the basis of
best execution, in some cases they may direct transactions to brokers based
on the quality and amount of the research and research-related services
which the brokers provide to them. These services are of the type described
in Section 28(e) of the Securities Exchange Act of 1934 and may include
analyses of the business or prospects of a company, industry or economic
sector, or statistical and pricing services. If, in the judgment of the
Advisor, the Fund or other accounts managed by them will be benefited by
supplemental research services, they are authorized to pay brokerage
commissions to a broker furnishing such services which are in excess of
commissions which another broker may have charged for effecting the same
transaction. These research services include advice, either directly or
through publications or writings, as to the value of securities, the
advisability of investing in, purchasing or selling securities, and the
availability of securities or purchasers or sellers of securities;
furnishing of analyses and reports concerning issuers, securities or
industries; providing information on economic factors and trends; assisting
in determining portfolio strategy; providing computer software used in
security analyses; providing portfolio performance evaluation and technical
market analyses; and providing other services relevant to the investment
decision making process. It is the policy of the Advisor that such research
services will be used for the benefit of the Fund as well as other Calvert
Group funds and managed accounts.
For the fiscal year ended December 31, 1998, the Fund, through its
Advisor, paid $0 in commissions for directed brokerage for research services.
The Portfolio turnover rates for the last two fiscal years are as
follows:
1997 1998
CTFR Vermont Muni. 14% 32%
GENERAL INFORMATION
The Portfolio is a series of Calvert Tax-Free Reserves (the "Fund")
which was organized as a Massachusetts business trust on October 20, 1980.
The other series of the Fund include the Money Market Portfolio,
Limited-Term Portfolio, Long-Term Portfolio, and the California Money Market
Portfolio. The Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Fund. The shareholders
of a Massachusetts business trust might, however, under certain
circumstances, be held personally liable as partners for its obligations.
The Declaration of Trust provides for indemnification and reimbursement of
expenses out of Fund assets for any shareholder held personally liable for
obligations of the Fund. The Declaration of Trust provides that the Fund
shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the Fund and satisfy any judgment
thereon. The Declaration of Trust further provides that the Fund may
maintain appropriate insurance (for example, fidelity bonding and errors and
omissions insurance) for the protection of the Fund, its shareholders,
Trustees, officers, employees, and agents to cover possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Fund itself is unable to meet its
obligations.
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, also known as The
Advisors Group Tax-Free Reserve Fund (offered in a separate prospectus).
The Fund is not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes such as electing
Trustees, changing fundamental policies, or approving a management contract.
As a shareholder, you receive one vote for each share you own.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of April 20, 1999, the following shareholders owned of record 5%
or more of the Fund:
Name and Address % of Ownership
Merfarm and Co.
Burlington, Vermont 7.75%
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states,
cities, municipalities, and their agencies to obtain funds for various
public purposes. Such purposes include the construction of a wide range of
public facilities, the refunding of outstanding obligations, the obtaining
of funds for general operating expenses, and the lending of funds to other
public institutions and facilities. In addition, certain types of private
activity bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on
them is exempt from federal income tax in the opinion of bond counsel to the
issuer. Although the interest paid on the proceeds from private activity
bonds used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities may be exempt from
federal income tax, current federal tax law places substantial limitations
on the size of such issues.
Municipal obligations are generally classified as either "general
obligation" or "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or, in some cases, from
the proceeds of a special excise tax or other specific revenue source but
not from the general taxing power. Tax-exempt private activity bonds are in
most cases revenue bonds and do not generally carry the pledge of the credit
of the issuing municipality. There are, of course, variations in the
security of municipal obligations both within a particular classification
and among classifications.
Municipal obligations are generally traded on the basis of a quoted
yield to maturity, and the price of the security is adjusted so that
relative to the stated rate of interest it will return the quoted rate to
the purchaser.
Short-term and limited-term municipal obligations include Tax
Anticipation Notes, Revenue Anticipation Notes Bond Anticipation Notes,
Construction Loan Notes, and Discount Notes. The maturities of these
instruments at the time of issue generally will range between three months
and one year. Pre-Refunded Bonds with longer nominal maturities that are due
to be retired with the proceeds of an escrowed subsequent issue at a date
within one year and three years of the time of acquisition are also
considered short-term and limited-term municipal obligations.
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc.'s ratings of state and
municipal notes:
Moody's ratings for state and municipal notes and other short-term
obligations are designated Moody's Investment Grade ("MIG"). This
distinction is in recognition of the differences between short-term credit
risk and long-term risk.
MIG 1: Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds for their
servicing or from established and broad-based access to the market for
refinancing, or both.
MIG2: Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding group.
MIG3: Notes bearing this designation are of favorable quality, with
all security elements accounted for but lacking the undeniable strength of
the preceding grades. Market access for refinancing, in particular, is
likely to be less well established.
MIG4: Notes bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as required
of an investment security and not distinctly or predominantly speculative.
Description of Moody's Investors Service Inc.'s/Standard & Poor's municipal
bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to
pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and in
the majority of instances they differ from AAA issues only in small degree.
They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay
interest and repay principal. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
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
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
1. Underwriting Agreement, filed herewith.
3.(i) Declaration of Trust (incorporated by reference to Registrant's
Initial Registration Statement, October 20, 1980).
3.(ii) By-Laws (incorporated by reference to Registrant's Initial
Registration Statement, October 20, 1980).
23. Opinion and Consent of Counsel as to Legality of Shares Being
Registered, filed herewith.
23A. Consent of Independent Accountants to use of report, filed herewith.
99.B5. Investment Advisory Contract, filed herewith.
99.B7. Trustees' Deferred Compensation Agreement (incorporated by reference
to Registrant's Post-Effective Amendment No. 30, January 31, 1992).
99.B8. Custodial Contract (with respect to all Portfolios except Vermont
Municipal Portfolio, (incorporated by reference to Registrant's Post-Effective
Amendment No. 34, November 30, 1993); with respect to Vermont Municipal
Portfolio, (incorporated by reference to Registrant's Post-Effective Amendment
No. 31, April 30, 1992).
99B9.a. Transfer Agency Contract and Shareholder Servicing Contract,
incorporated by reference to Registrant's Post-Effective Amendment No. 45,
April 30, 1998, accession number 0000319676-98-000007.
99B9.b. Administrative Services Agreement (incorporated by reference to
Registrant's Post-Effective Amendment No. 15, January 30, 1989).
99B9.c. Multiple-class plan pursuant to Investment Company Act of 1940 Rule
18f-3, filed herewith.
99B.15. Plan of Distribution for the Class A Shares of the Long-Term
Portfolio, incorporated by reference to Registrant's Post-Effective Amendment
No. 5, September 13, 1983.
With respect to Class A Shares of the Vermont Municipal Portfolio, the Plan of
Distribution was terminated, and the termination was ratified by the Fund
Trustees on November 6, 1991.
For the Class B and C shares of the Limited-Term, Long-Term, and Vermont
Portfolios, incorporated by reference to Registrant's Post-Effective Amendment
No. 45, April 30, 1998, accession number 0000319676-98-000007.
For Class T, filed herewith.
Item 24. Persons Controlled By or Under Common Control With Registrant
Not applicable.
Item 25. Indemnification
Registrant's Declaration of Trust, which Declaration is Exhibit 1 of
this Registration Statement, provides, in summary, that officers, trustees,
employees, and agents shall be indemnified by Registrant against liabilities
and expenses incurred by such persons in connection with actions, suits, or
proceedings arising out of their offices or duties of employment, except that
no indemnification can be made to such a person if he has been adjudged liable
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
his duties. In the absence of such an adjudication, the determination of
eligibility for indemnification shall be made by independent counsel in a
written opinion or by the vote of a majority of a quorum of trustees who are
neither "interested persons" of Registrant, as that term is defined in Section
2(a)(19) of the Investment Company Act of 1940, nor parties to the proceeding.
Registrant's Declaration of Trust also provides that Registrant may
purchase and maintain liability insurance on behalf of any officer, trustee,
employee or agent against any liabilities arising from such status. In this
regard, Registrant maintains a Directors & Officers (Partners) Liability
Insurance Policy with Chubb Group of Insurance Companies, 15 Mountain View
Road, Warren, New Jersey 07061, providing Registrant with $5 million in
directors and officers liability coverage, plus $5 million in excess directors
and officers liability coverage for the independent trustees/directors only.
Registrant also maintains an $8 million Investment Company Blanket Bond issued
by ICI Mutual Insurance Company, P.O. Box 730, Burlington, Vermont, 05402.
Item 26. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Barbara J. Krumsiek Calvert Variable Series, Inc. Officer
Calvert Municipal Fund, Inc. and
Calvert World Values Fund, Inc. Director
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income and
Calvert Tax-Free Reserves Trustee
Calvert Social Investment Fund
Calvert Cash Reserves
The Calvert Fund
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
----------------
Calvert Group, Ltd. Officer
Holding Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Officer
Broker-Dealer and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert New World Fund, Inc. Director
Investment Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
--------------
Alliance Capital Mgmt. L.P. Sr. Vice President
Mutual Fund Division Director
1345 Avenue of the Americas
New York, NY 10105
--------------
Ronald M. Wolfsheimer First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
--------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Director
Broker-Dealer and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
David R. Rochat First Variable Rate Fund Officer
for Government Income and
Calvert Tax-Free Reserves Trustee
Calvert Cash Reserves
The Calvert Fund
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Municipal Fund, Inc. Officer
Investment Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Chelsea Securities, Inc. Officer
Securities Firm and
Post Office Box 93 Director
Chelsea, Vermont 05038
---------------
Grady, Berwald & Co. Officer
Holding Company and
43A South Finley Avenue Director
Basking Ridge, NJ 07920
---------------
Reno J. Martini Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Director
Holding Company and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
---------------
First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert New World Fund, Inc. Director
Investment Company and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Director
Investment Advisor and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
---------------
Charles T. Nason Ameritas Acacia Mutual Holding Co. Officer
Acacia National Life Insurance and Director
Insurance Companies
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Acacia Financial Corporation Officer
Holding Company and
7315 Wisconsin Avenue Director
Bethesda, Maryland 20814
---------------
Acacia Federal Savings Bank Director
Savings Bank
7600-B Leesburg Pike
Falls Church, Virginia 22043
---------------
Enterprise Resources, Inc. Director
Business Support Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Acacia Realty Square, L.L.C. Director
Realty Investments
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Gardner Montgomery Company Director
Tax Return Preparation Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Director
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Director
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Services, Inc. Director
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Social Investment Fund Trustee
Investment Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
-----------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Robert-John H. Acacia National Life Insurance Officer
Sands Insurance Company and
7315 Wisconsin Avenue Director
Bethesda, Maryland 20814
----------------
Ameritas Acacia Mutual Holding Co. Officer
Insurance Company
7315 Wisconsin Avenue
Bethesda, Maryland 20814
----------------
Acacia Financial Corporation Officer
Holding Company and
7315 Wisconsin Avenue Director
Bethesda, Maryland 20814
----------------
Acacia Federal Savings Bank Officer
Savings Bank
7600-B Leesburg Pike
Falls Church, Virginia 22043
---------------
Enterprise Resources, Inc. Director
Business Support Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Acacia Realty Square, L.L.C. Director
Realty Investments
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Gardner Montgomery Company Director
Tax Return Preparation Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Director
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Director
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management, Co., Inc. Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Services, Inc. Director
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
William M. Tartikoff Acacia National Life Insurance Officer
Insurance Company
7315 Wisconsin Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Officer
Services Company
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co. Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Director
Broker-Dealer and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Susan Walker Bender Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Katherine Stoner Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Ivy Wafford Duke Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Victor Frye Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
The Advisors Group, Inc. Counsel
Broker-Dealer and and
Investment Advisor Compliance
7315 Wisconsin Avenue Manager
Bethesda, Maryland 20814
---------------
Daniel K. Hayes Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Steve Van Order Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
John Nichols Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
David Leach Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Matthew D. Gelfand Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Strategic Investment Management Officer
Investment Advisor
1001 19th Street North
Arlington, Virginia 20009
------------------
Andrea Hagans Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Item 27. Principal Underwriters
(a) Registrant's principal underwriter underwrites shares of
First Variable Rate Fund for Government Income, Calvert Tax-Free Reserves,
Calvert Social Investment Fund, Calvert Cash Reserves, The Calvert Fund,
Calvert Municipal Fund, Inc., Calvert World Values Fund, Inc., Calvert New
World Fund, Inc., and Calvert Variable Series, Inc.
(b) Positions of Underwriter's Officers and Directors
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
Barbara J. Krumsiek Director and President President and Trustee
Ronald M. Wolfsheimer Director, Senior Vice Treasurer
President and Chief Financial Officer
William M. Tartikoff Director, Senior Vice Vice President and
President and Secretary Secretary
Craig Cloyed Senior Vice President None
Karen Becker Vice President, Operations None
Steve Cohen Vice President None
Geoffrey Ashton Regional Vice President None
Martin Brown Regional Vice President None
Bill Hairgrove Regional Vice President None
Janet Haley Regional Vice President None
Steve Himber Regional Vice President None
Ben Ogbogu Regional Vice President None
Tom Stanton Regional Vice President None
Christine Teske Regional Vice President None
Susan Walker Bender Assistant Secretary Assistant Secretary
Katherine Stoner Assistant Secretary Assistant Secretary
Ivy Wafford Duke Assistant Secretary Assistant Secretary
Victor Frye Assistant Secretary Assistant Secretary &
and Compliance Officer Compliance Officer
(c) Inapplicable.
Item 28. Location of Accounts and Records
Ronald M. Wolfsheimer, Treasurer
and
William M. Tartikoff, Secretary
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
Item 29. Management Services
Not Applicable
Item 32. Undertakings
Not Applicable
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Registrant certifies that it meets all of the
requirements for effectiveness of this registration statement under Rule
485(b) under the Securities Act and has duly caused this registration
statement to be signed on its behalf by the undersigned, duly authorized, in
the City of Bethesda, and State of Maryland, on the 27th day of April, 1999.
CALVERT TAX-FREE RESERVES
By:
_________________**_________________
Barbara J. Krumsiek
President and Trustee
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
__________**____________ President and 4/27/99
Barbara J. Krumsiek Trustee (Principal Executive Officer)
__________**____________ Principal Accounting 4/27/99
Ronald M. Wolfsheimer Officer
__________**____________ Trustee 4/27/99
Richard L. Baird, Jr.
__________**____________ Trustee 4/27/99
Frank H. Blatz, Jr., Esq.
__________**____________ Trustee 4/27/99
Frederick T. Borts, M.D.
__________**____________ Trustee 4/27/99
Charles E. Diehl
__________**____________ Trustee 4/27/99
Douglas E. Feldman
__________**____________ Trustee 4/27/99
Peter W. Gavian
__________**____________ Trustee 4/27/99
John G. Guffey, Jr.
__________**____________ Trustee 4/27/99
M. Charito Kruvant
__________**____________ Trustee 4/27/99
Arthur J. Pugh
__________**____________ Trustee 4/27/99
David R. Rochat
__________**____________ Trustee 4/27/99
D. Wayne Silby
**By Susan Walker Bender as Attorney-in-fact, pursuant to Power of Attorney
Forms on file.
EXHIBIT INDEX
Form N-1A
Item No.
Ex-1 Underwriting Agreement
Ex-23 Form of Opinion and Consent of Counsel
Ex-23A Auditors' Consent to file
Ex-24 Power of Attorney
Ex-27 Financial Data Schedules (6)
Ex-99.B5. Investment Advisory Agreement
Ex-99.B9.c. Multiple Class Rule 18f-3 Plan
Ex-99.B15 Distribution Plan for Class T
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Social Investment
Fund, Calvert World Values Fund, Inc., Calvert Variable Series, Inc.,
Calvert New World Fund, Inc., First Variable Rate Fund for Government
Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The Calvert Fund
and Calvert Municipal Fund, Inc. (each, respectively, the "Fund"), hereby
constitute Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker Bender,
Katherine Stoner, Lisa Crossley Newton, and Ivy Wafford Duke my true and
lawful attorneys, with full power to each of them, to sign for me and in my
name in the appropriate capacities, all registration statements and
amendments filed by the Fund with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Fund with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 2, 1998
Date /Signature/
Katherine Stoner Barbara J. Krumsiek
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Social Investment
Fund, First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke my true and lawful attorneys,
with full power to each of them, to sign for me and in my name in the
appropriate capacities, all registration statements and amendments filed by
the Fund with any federal or state agency, and to do all such things in my
name and behalf necessary for registering and maintaining registration or
exemptions from registration of the Fund with any government agency in any
jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 2, 1998
Date /Signature/
Susan Walker Bender Richard L. Baird, Jr.
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Variable Series,
Inc., First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke my true and lawful attorneys,
with full power to each of them, to sign for me and in my name in the
appropriate capacities, all registration statements and amendments filed by
the Fund with any federal or state agency, and to do all such things in my
name and behalf necessary for registering and maintaining registration or
exemptions from registration of the Fund with any government agency in any
jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 3, 1998
Date /Signature/
Frank H. Blatz, Jr. Charles E. Diehl
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund, and Calvert Municipal Fund, Inc. (collectively, the "Funds"),
hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker
Bender, Katherine Stoner, Lisa Crossley, and Ivy Wafford Duke my true and
lawful attorneys, with full power to each of them, to sign for me and in my
name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do
all such things in my name and behalf necessary for registering and
maintaining registration or exemptions from registration of the Funds with
any government agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Funds,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, and all state laws regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Funds in connection
with any transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Funds,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
May 7, 1997
Date /Signature/
Edwidge Saint-Felix Douglas E. Feldman
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund, and Calvert Municipal Fund, Inc. (collectively, the "Funds"),
hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker
Bender, Katherine Stoner, Lisa Crossley, and Ivy Wafford Duke my true and
lawful attorneys, with full power to each of them, to sign for me and in my
name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do
all such things in my name and behalf necessary for registering and
maintaining registration or exemptions from registration of the Funds with
any government agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Funds,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, and all state laws regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Funds in connection
with any transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Funds,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
May 7, 1997
Date /Signature/
Edwidge Saint-Felix Peter W. Gavian
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Social Investment
Fund, Calvert World Values Fund, Inc., First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund and Calvert Municipal Fund, Inc. (each, respectively, the
"Fund"), hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff,
Susan Walker Bender, Katherine Stoner, Lisa Crossley Newton, and Ivy Wafford
Duke my true and lawful attorneys, with full power to each of them, to sign
for me and in my name in the appropriate capacities, all registration
statements and amendments filed by the Fund with any federal or state
agency, and to do all such things in my name and behalf necessary for
registering and maintaining registration or exemptions from registration of
the Fund with any government agency in any jurisdiction, domestic or
foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 2, 1998
Date /Signature/
M. Charito Kruvant John G. Guffey, Jr.
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund, and Calvert Municipal Fund, Inc. (collectively, the "Funds"),
hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker
Bender, Katherine Stoner, Lisa Crossley, and Ivy Wafford Duke my true and
lawful attorneys, with full power to each of them, to sign for me and in my
name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do
all such things in my name and behalf necessary for registering and
maintaining registration or exemptions from registration of the Funds with
any government agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Funds,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, and all state laws regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Funds in connection
with any transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Funds,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
May 7, 1997
Date /Signature/
Edwidge Saint-Felix M. Charito Kruvant
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Variable Series,
Inc., First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke my true and lawful attorneys,
with full power to each of them, to sign for me and in my name in the
appropriate capacities, all registration statements and amendments filed by
the Fund with any federal or state agency, and to do all such things in my
name and behalf necessary for registering and maintaining registration or
exemptions from registration of the Fund with any government agency in any
jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 3, 1998
Date /Signature/
Frank H. Blatz, Jr. Arthur James Pugh
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund, and Calvert Municipal Fund, Inc. (collectively, the "Funds"),
hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker
Bender, Katherine Stoner, Lisa Crossley, and Ivy Wafford Duke my true and
lawful attorneys, with full power to each of them, to sign for me and in my
name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do
all such things in my name and behalf necessary for registering and
maintaining registration or exemptions from registration of the Funds with
any government agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Funds,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, and all state laws regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Funds in connection
with any transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Funds,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
May 7, 1997
Date /Signature/
Katherine Stoner David R. Rochat
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Social Investment
Fund, Calvert World Values Fund, Inc., First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund and Calvert Municipal Fund, Inc. (each, respectively, the
"Fund"), hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff,
Susan Walker Bender, Katherine Stoner, Lisa Crossley Newton, and Ivy Wafford
Duke my true and lawful attorneys, with full power to each of them, to sign
for me and in my name in the appropriate capacities, all registration
statements and amendments filed by the Fund with any federal or state
agency, and to do all such things in my name and behalf necessary for
registering and maintaining registration or exemptions from registration of
the Fund with any government agency in any jurisdiction, domestic or
foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 2, 1998
Date /Signature/
Barbara J. Krumsiek D. Wayne Silby
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The
Calvert Fund and Calvert Municipal Fund, Inc. (each, respectively, the
"Fund"), hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff,
Susan Walker Bender, Katherine Stoner, Lisa Crossley Newton, and Ivy Wafford
Duke my true and lawful attorneys, with full power to each of them, to sign
for me and in my name in the appropriate capacities, all registration
statements and amendments filed by the Fund with any federal or state
agency, and to do all such things in my name and behalf necessary for
registering and maintaining registration or exemptions from registration of
the Fund with any government agency in any jurisdiction, domestic or
foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
September 16, 1998
Date /Signature/
John E. Dudley Frederick Borts, M.D.
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Variable Series,
Inc., First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke my true and lawful attorneys,
with full power to each of them, to sign for me and in my name in the
appropriate capacities, all registration statements and amendments filed by
the Fund with any federal or state agency, and to do all such things in my
name and behalf necessary for registering and maintaining registration or
exemptions from registration of the Fund with any government agency in any
jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 3, 1998
Date /Signature/
Elizabeth G. Murray Frank H. Blatz, Jr.
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned officer of Calvert Social Investment Fund,
Calvert World Values Fund, Inc., Calvert Variable Series, Inc., Calvert New
World Fund, Inc., First Variable Rate Fund for Government Income, Calvert
Tax-Free Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert
Municipal Fund, Inc. (each, respectively, the "Fund"), hereby constitute
Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine
Stoner, Lisa Crossley Newton, and Ivy Wafford Duke my true and lawful
attorneys, with full power to each of them, to sign for me and in my name in
the appropriate capacities, all registration statements and amendments filed
by the Fund with any federal or state agency, and to do all such things in
my name and behalf necessary for registering and maintaining registration or
exemptions from registration of the Fund with any government agency in any
jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in
my name and behalf to comply with the provisions of all federal, state and
foreign laws, regulations, and policy pronouncements affecting the Fund,
including, but not limited to, the Securities Act of 1933, the Securities
Exchange Act of 1934, the Investment Company Act of 1940, the Investment
Advisers Act of 1940, the Internal Revenue Code of 1986, and all state laws
regulating the securities industry.
The same persons are further authorized to sign my name to any
document needed to maintain the lawful operation of the Fund.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the Fund,
the signing is automatically ratified and confirmed by me by virtue of this
Power of Attorney.
WITNESS my hand on the date set forth below.
June 2, 1998
Date /Signature/
Edwidge Saint-Felix Ronald M. Wolfsheimer
Witness Name of Officer
Exhibit 10
April 27, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Exhibit 10, Form N-1A
Calvert Tax-Free Reserves
File numbers 2-69565 and 811-3101
Ladies and Gentlemen:
As counsel to Calvert Group, Ltd., it is my opinion that the
securities being registered by this Post-Effective Amendment No. 48 will
be legally issued, fully paid and non-assessable when sold. My opinion
is based on an examination of documents related to Calvert Tax-Free
Reserves (the "Trust"), including its Declaration of Trust, its By-Laws,
other original or photostatic copies of Trust records, certificates of
public officials, documents, papers, statutes, and authorities as I
deemed necessary to form the basis of this opinion.
I therefore consent to filing this opinion of counsel with the
Securities and Exchange Commission as an Exhibit to the Trust's
Post-Effective Amendment No. 48 to its Registration Statement.
Sincerely,
/s/
Susan Walker Bender
Associate General Counsel
PricewaterhouseCoopers logo
PricewaterhouseCoopers LLP
250 West Pratt Street
Suite 2100
Baltimore MD 21201-2304
Telephone (410) 783 7600
Facsimile (410) 783 7680
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No.
48 to the Registration Statement of Calvert Tax-Free Reserves (comprised of
the Money Market, Limited-Term, Long-Term, Vermont, and California Money
Market Portfolios) on Form N-1A (File Number 2-69565 and 811-3101) of our
reports dated February 10, 1999, on our audit of the financial statements and
financial highlights of the Portfolios, which reports are included in the
Annual Report to Shareholders for the year ended December 31, 1998, which is
incorporated by reference in the Registration Statement. We also consent to
the reference to our firm under the caption "Financial Highlights" in the
Prospectus and "Independent Accountants" in the Statement of Additional
Information.
/s/
PricewaterhouseCoopers LLP
Baltimore, Maryland
April 27, 1999
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<PER-SHARE-DISTRIBUTIONS> 0.0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.29
<AVG-DEBT-OUTSTANDING> 0
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</TABLE>
Exhibit 99.B5
INVESTMENT ADVISORY AGREEMENT
CALVERT TAX-FREE RESERVES
INVESTMENT ADVISORY AGREEMENT, made this 1st day of March, 1999, by
and between CALVERT ASSET MANAGEMENT COMPANY, INC., a Delaware corporation
(the "Advisor"), and CALVERT TAX-FREE RESERVES, a Massachusetts business
trust created pursuant to a Declaration of Trust filed with the Secretary of
State of the Commonwealth of Massachusetts (the "Trust"), both having their
principal place of business at 4550 Montgomery Avenue, Bethesda, Maryland.
WHEREAS, the Trust is registered as an investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"), for the purpose
of investing and reinvesting its assets in securities, and offering separate
series (the Fund(s)"), as set forth in its Declaration of Trust, its By-laws
and its registration statements under the 1940 Act and the Securities Act of
1933 (the "1933 Act"), as amended; and the Trust desires to avail itself of
the services, information, advice, assistance and facilities of an
investment advisor and to have an investment advisor perform for it various
investment advisory, research services and other management services; and
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and is engaged in the business
of rendering management and investment advisory services to investment
companies and desires to provide such services to the Trust;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Advisor. The Trust hereby employs the Advisor to
manage the investment and reinvestment of the Trust assets, subject
to the control and direction of the Trust's Board of Trustees, for
the period and on the terms hereinafter set forth. The Advisor
hereby accepts such employment and agrees during such period to
render the services and to assume the obligations in return for the
compensation provided herein. The Advisor shall for all purposes
herein be deemed to be an independent contractor and shall, except
as expressly provided or authorized (whether herein or otherwise),
have no authority to act for or represent the Trust in any way or
otherwise be deemed an agent of the Trust.
2. Obligations of and Services to be Provided by the Advisor. The
Advisor undertakes to provide the following services and to assume
the following obligations:
a. The Advisor shall manage the investment and reinvestment
of each Fund's assets, subject to and in accordance with
the investment objectives and policies of each Fund and
any directions which the Trust's Board of Trustees may
issue from time to time. In pursuance of the foregoing,
the Advisor shall make all determinations with respect to
the investment of Fund assets and the purchase and sale of
portfolio securities and shall take such steps as may be
necessary to implement the same. Such determination and
services shall also include determining the manner in
which voting rights, rights to consent to corporate
action, any other rights pertaining to the Fund's
portfolio securities shall be exercised. The Advisor shall
render regular reports to the Trust's Board of Trustees
concerning the Trust's investment activities.
b. The Advisor shall, in the name of the Trust on behalf of
each Fund, place orders for the execution of the Trust's
portfolio transactions in accordance with the policies
with respect thereto set forth in the Trust's current
registration statement under the 1940 Act and the 1933
Act. In connection with the placement of orders for the
execution of the Trust's portfolio transactions the
Advisor shall create and maintain all necessary brokerage
records of the Trust in accordance with all applicable
laws, rules and regulations, including but not limited to
records required by Section 31(a) of the 1940 Act. All
records shall be the property of the Trust and shall be
available for inspection and use by the SEC, the Trust or
any person retained by the Trust. Where applicable, such
records shall be maintained by the Advisor for the periods
and the places required by Rule 31a-2 under the 1940 Act.
c. The Advisor shall bear its expenses of providing services
to the Trust pursuant to this Agreement except such
expenses as are undertaken by the Trust. In addition, the
Advisor shall pay the salaries and fees of all Trustees
and executive officers who are employees of the Advisor or
its affiliates ("Advisor Employees").
3. Expenses of The Trust. The Trust shall pay all expenses other than
those expressly assumed by the Advisor herein. Expenses payable by
the Trust shall include, but are not limited to:
a. Fees to the Advisor as provided herein;
b. Legal and audit expenses;
c. Fees and expenses related to the registration and
qualification of the Trust and its shares for distribution
under federal and state securities laws;
d. Expenses of the administrative services agent, transfer
agent, registrar, custodian, dividend disbursing agent and
shareholder servicing agent;
e. Any telephone charges associated with shareholder
servicing or the maintenance of the Funds or Trust;
f. Salaries, fees and expenses of Trustees and executive
officers of the Trust, other than Advisor Employees;
g. Taxes and corporate fees levied against the Trust;
h. Brokerage commissions and other expenses associated with
the purchase and sale of portfolio securities for the
Trust;
i. Expenses, including interest, of borrowing money;
j. Expenses incidental to meetings of the Trust's
shareholders and the maintenance of the Trust's
organizational existence;
k. Expenses of printing stock certificates representing
shares of the Trust and expenses of preparing, printing
and mailing notices, proxy material, reports to regulatory
bodies and reports to shareholders of the Trust;
l. Expenses of preparing and typesetting of prospectuses of
the Trust;
m. Expenses of printing and distributing prospectuses to
shareholders of the Trust;
n. Association membership dues;
o. Insurance premiums for fidelity and other coverage;
p. Distribution Plan expenses, as permitted by Rule 12b-1
under the 1940 Act and as approved by the Board; and
q. Such other legitimate Trust expenses as the Board of
Trustees may from time to time determine are properly
chargeable to the Trust.
4. Compensation of Advisor.
a. As compensation for the services rendered and obligations
assumed hereunder by the Advisor, the Trust shall pay to
the Advisor within ten (10) days after the last day of
each calendar month a fee equal on an annualized basis as
shown on Schedule A. Any amendment to the Schedule
pertaining to any new or existing Fund shall not be deemed
to affect the interest of any other Fund and shall not
require the approval of the shareholders of any other Fund.
b. Such fee shall be computed and accrued daily. Upon
termination of this Agreement before the end of any
calendar month, the fee for such period shall be prorated.
For purposes of calculating the Advisor's fee, the daily
value of a Fund's net assets shall be computed by the same
method as the Fund uses to compute the value of its net
assets in connection with the determination of the net
asset value of its shares.
c. The Advisor reserves the right (i) to waive all or part
of its fee and assume expenses of a Fund and (ii) to make
payments to brokers and dealers in consideration of their
promotional or administrative services.
5. Activities of the Advisor. The services of the Advisor to the Trust
hereunder are not to be deemed exclusive, and the Advisor shall be
free to render similar services to others. It is understood that
Trustees and officers of the Trust are or may become interested in
the Advisor as stockholders, officers, or otherwise, and that
stockholders and officers of the Advisor are or may become
similarly interested in the Trust, and that the Advisor may become
interested in the Trust as a shareholder or otherwise.
6. Use of Names. The Trust shall not use the name of the Advisor in
any prospectus, sales literature or other material relating to the
Trust in any manner not approved prior thereto by the Advisor;
provided, however, that the Advisor shall approve all uses of its
name which merely refer in accurate terms to its appointment
hereunder or which are required by the SEC; and, provided, further,
that in no event shall such approval be unreasonably withheld. The
Advisor shall not use the name of the Trust or any Trust in any
material relating to the Advisor in any manner not approved prior
thereto by the Trust; provided, however, that the Trust shall
approve all uses of its name which merely refer in accurate terms
to the appointment of the Advisor hereunder or which are required
by the SEC; and, provide, further, that in no event shall such
approval be unreasonably withheld.
7. Liability of the Advisor. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties
hereunder on the part of the Advisor, the Advisor shall not be
subject to liability to the Trust or to any shareholder of the
Trust for any act or omission in the course of, or connected with,
rendering services hereunder or for any losses that may be
sustained in the purchase, holding or sale of any security.
8. Force Majeure. The Advisor shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including
but not limited to acts of civil or military authority, national
emergencies, work stoppages, fire, flood, catastrophe, acts of God,
insurrection, war, riot, or failure of communication or power
supply. In the event of equipment breakdowns beyond its control,
the Advisor shall take reasonable steps to minimize service
interruptions but shall have no liability with respect thereto.
9. Renewal, Termination and Amendment. This Agreement shall continue
in effect with respect to the Trust, unless sooner terminated as
hereinafter provided, through December 31, 1999, and indefinitely
thereafter if its continuance shall be specifically approved at
least annually by vote of the holders of a majority of the
outstanding voting securities of the Trust or by vote of a majority
of the Trust's Board of Trustees; and further provided that such
continuance is also approved annually by the vote of a majority of
the Trustees who are not parties to this Agreement or interested
persons of the Advisor, cast in person at a meeting called for the
purpose of voting on such approval, or as allowed by law. This
Agreement may be terminated at any time, without payment of any
penalty, by the Trust's Board of Trustees or by a vote of the
majority of the outstanding voting securities of the Trust upon 60
days' prior written notice to the Advisor and by the Advisor upon
60 days' prior written notice to the Trust. This Agreement may be
amended at any time by the parties, subject to approval by the
Trust's Board of Trustees and, if required by applicable SEC rules
and regulations, a vote of a majority of the Trust's outstanding
voting securities. This Agreement shall terminate automatically in
the event of its assignment. The terms "assignment" and "vote of a
majority of the outstanding voting securities" shall have the
meaning set forth for such terms in the 1940 Act.
10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
11. Miscellaneous. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate
the purposes hereof. This Agreement shall be construed and enforced
in accordance with and governed by the laws of the State of
Maryland. The captions in this Agreement are included for
convenience only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first written above.
CALVERT TAX-FREE RESERVES
By: /s/ Ron Wolfsheimer
Title: Treasurer
CALVERT ASSET MANAGEMENT COMPANY, INC.
By: /s/ Reno Martini
Title: Senior Vice President
Investment Advisory Agreement
Calvert Asset Management Company, Inc.
Calvert Tax-Free Reserves
Schedule A
As compensation pursuant to Section 4 of the Investment Advisory Agreement
between Calvert Asset Management Company, Inc. (the "Advisor") and Calvert
Tax-Free Reserves ("CTFR") dated March 1, 1999, the Advisor is entitled to
receive an annual advisory fee (the "Fee") as shown below. The Fee shall be
computed daily and payable monthly, based on the average daily net assets of
a Fund.
CTFR Money Market: 0.25% to $500 million
0.20% above $500 million
0.15% above $1 billion
CTFR Limited-Term: 0.60% to $500 million
0.50% above $500 million
0.40% above $1 billion
CTFR Long-Term: 0.60% to $500 million
0.50% above $500 million
0.40% above $1 billion
CTFR California Money Market: 0.50% to $500 million
0.45% above $500 million
0.40% above $1 billion
CTFR Vermont Municipal: 0.60% to $500 million
0.50% above $500 million
0.40% above $1 billion
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000319676
<NAME> CALVERT TAX-FREE RESERVES
<SERIES>
<NUMBER> 334
<NAME> CALIFORNIA MONEY MARKET FUND
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 428451
<INVESTMENTS-AT-VALUE> 428451
<RECEIVABLES> 7773
<ASSETS-OTHER> 1906
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 438130
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 555
<TOTAL-LIABILITIES> 555
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 437673
<SHARES-COMMON-STOCK> 437673
<SHARES-COMMON-PRIOR> 362104
<ACCUMULATED-NII-CURRENT> 18
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (115)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 437576
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 14134
<OTHER-INCOME> 0
<EXPENSES-NET> 2444
<NET-INVESTMENT-INCOME> 11690
<REALIZED-GAINS-CURRENT> 16
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 11706
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (11680)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 225959
<NUMBER-OF-SHARES-REDEEMED> (156427)
<SHARES-REINVESTED> 6037
<NET-CHANGE-IN-ASSETS> 75595
<ACCUMULATED-NII-PRIOR> 7
<ACCUMULATED-GAINS-PRIOR> (132)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1867
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2499
<AVERAGE-NET-ASSETS> 373347
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.031
<PER-SHARE-GAIN-APPREC> 0.0
<PER-SHARE-DIVIDEND> (0.031)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.65
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000319676
<NAME> CALVERT TAX-FREE RESERVES
<SERIES>
<NUMBER> 335
<NAME> VERMONT MUNICIPAL PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 49296
<INVESTMENTS-AT-VALUE> 52166
<RECEIVABLES> 1101
<ASSETS-OTHER> 113
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 53380
<PAYABLE-FOR-SECURITIES> 2045
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 43
<TOTAL-LIABILITIES> 2088
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 48275
<SHARES-COMMON-STOCK> 3150
<SHARES-COMMON-PRIOR> 3126
<ACCUMULATED-NII-CURRENT> 207
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (60)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2870
<NET-ASSETS> 51292
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2780
<OTHER-INCOME> 0
<EXPENSES-NET> 368
<NET-INVESTMENT-INCOME> 2412
<REALIZED-GAINS-CURRENT> 697
<APPREC-INCREASE-CURRENT> (259)
<NET-CHANGE-FROM-OPS> 2850
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2385)
<DISTRIBUTIONS-OF-GAINS> (953)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2849
<NUMBER-OF-SHARES-REDEEMED> (3601)
<SHARES-REINVESTED> 1135
<NET-CHANGE-IN-ASSETS> (105)
<ACCUMULATED-NII-PRIOR> 181
<ACCUMULATED-GAINS-PRIOR> 196
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 306
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 382
<AVERAGE-NET-ASSETS> 50949
<PER-SHARE-NAV-BEGIN> 16.45
<PER-SHARE-NII> 0.780
<PER-SHARE-GAIN-APPREC> 0.130
<PER-SHARE-DIVIDEND> (0.769)
<PER-SHARE-DISTRIBUTIONS> (0.031)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.28
<EXPENSE-RATIO> 0.72
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 99.B15
CALVERT TAX-FREE RESERVES MONEY MARKET
and
CALVERT FIRST GOVERNMENT MONEY MARKET FUND
PLAN OF DISTRIBUTION PURSUANT TO RULE 12b-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
Class T
As permitted by Rule 12b-1 under the Investment company Act of 1940 and in
accordance with the terms and conditions of this Distribution Plan ("Plan"),
as hereinafter set forth, the above-referenced funds (each, "Fund") may
incur certain expenditures to promote the Fund and further the distribution
of shares of Fund.
1. Payment of Distribution Expenses. (a) The Fund may incur
expenditures for certain expenses associated with the distribution of its
shares. Such distribution expenses include, but need not be limited to: the
cost of printing and mailing prospectuses, sales literature and other
relevant material to other than current shareholders of the Fund;
advertising and public relations; and payments to sales personnel,
broker-dealers and other third parties in return for distribution
assistance. Payments for distribution expenses incurred by the Fund pursuant
to this Plan may be made directly or indirectly; however, all agreements
with any person relating to the implementation of this Plan shall be in
writing, and such agreements shall be subject to termination, without
penalty, pursuant to the provisions of paragraph 2(c) of this Plan.
(b) Distribution expenses shall be paid according to the attached
Schedule I.
(c) Nothing in this Plan shall operate or be construed to limit the
extent to which the Fund's investment Advisor or any other person, other
than the Fund, at its expense apart from this Plan, may incur costs and pay
expenses associated with the distribution of Fund shares.
2. Effective Date and Term. (a) This Plan shall become effective
upon approval by majority votes of (i) the Board of Trustees of the Fund and
the Trustees who are not interested persons within the meaning of Section
2(a) (19) of the Investment Company Act of 1940 and have no direct or
indirect financial interest in the operation of the Plan or in any
agreements related to the Plan (such trustees are hereinafter referred to as
"Qualified Trustees"), cast in person at a meeting called for the purpose of
voting on this Plan, and (ii) the outstanding voting securities of the Fund.
b) This Plan shall remain in effect for one year from its
adoption date and may continue in effect thereafter if this Plan is approved
at least annually by a majority vote of the trustees of the Fund, including
a majority of the Qualified Trustees, cast in person at a meeting called for
the purpose of voting on the Plan.
c). This Plan may be terminated at any time by a majority vote
of the Qualified Trustees or by vote of a majority of the outstanding voting
securities of the Fund or, with respect to a Portfolio, by a vote of a
majority of the outstanding voting securities of that Portfolio.
3. Reports. The person authorized to direct the disposition of
monies paid or payable by the Fund pursuant to the Plan shall provide, on at
least a quarterly basis, a written report to The Fund's Board of Trustees of
the amounts expended pursuant to this Plan or any related agreement and the
purposes for which such expenditures were made.
4. Selection of Disinterested Trustees. While this Plan is in
effect, the selection and nomination of those trustees who are not
interested persons of the Fund within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940 shall be committed to the discretion of the
trustees then in office who are not interested persons of the Fund.
5. Effect of Plan. This Plan shall not obligate the Fund or any
other person to enter into an agreement with any particular person.
6. Amendment. This Plan may not be amended to increase materially
the amount authorized in paragraph l(b) hereof to be spent for distribution
without approval by a vote of the majority of the outstanding securities of
the Fund or, with respect to a Portfolio, by a vote of a majority of the
outstanding voting securities of the Portfolio. All material amendments to
this Plan must be approved by a majority vote of the Board of Trustees of
the Fund, and of the Qualified Trustees, cast in person at a meeting called
for the purpose of voting thereon.
<PAGE>
SCHEDULE I
CLASS T
PLAN OF DISTRIBUTION PURSUANT TO RULE 12B-1
UNDER THE INVESTMENT COMPANY ACT OF 1940
Class T Distribution Plan expenses incurred by the Funds shall be paid
according to the following annual rate, based on the Class T average daily
net assets in that Fund:
Calvert Tax-Free Reserves
Money Market Portfolio 0.25%
Calvert First Government
Money Market Fund 0.25%
Exhibit 99.B9.c.
THE CALVERT GROUP OF FUNDS
Rule 18f-3 Multiple Class Plan
as approved by the Boards
in January 1996 and as amended and restated
December 1998 Pursuant to Rule 18f-3
Under the Investment Company Act of 1940
Rule 18f-3 under the Investment Company Act of 1940, as amended
(the "1940 Act"), requires that an investment company desiring to offer
multiple classes of shares pursuant to the Rule adopt a plan setting forth
the differences among the classes with respect to shareholder services,
distribution arrangements, expense allocations and any related conversion
features or exchange privileges. Any material amendment to the plan must be
approved by the investment company's Board of Trustees/Directors, including
a majority of the disinterested Board members, who must find that the plan
is in the best interests of each class individually and the investment
company as a whole.
This Rule 18f-3 Multiple Class Plan ("Plan") shall apply to those
funds in the Calvert Group of Funds listed in Exhibit I (each a "Fund" and
collectively, "Funds") and to any future fund for which this Plan has been
approved in accordance with the above paragraph.
The provisions of this Plan are severable for each Fund or Series
thereof ("Series") or Class, and whenever action is to be taken with respect
to this Plan, that action must be taken separately for each Fund, Series or
Class affected by the matter.
1. Class Designation. A Fund may offer shares designated
Class A, Class B, Class C , Class I, and for certain money market
portfolios, Class O and Class T.
2. Differences in Availability. Class A, Class B, Class C,
and Class O shares shall each be available through the same distribution
channels, except that (a) Class B shares may not be available through some
dealers and are not available for purchases of $500,000 or more, (b) Class B
shares of Calvert First Government Money Market Fund are available only
through exchange from Class B or Class C shares of another Calvert Fund, and
(c) Class C shares may not be available through some dealers and are not
available for purchases of $1 million or more. Class I shares are generally
available only directly from Calvert Group and not through dealers, and each
Class I shareholder must maintain a $1 million minimum account balance.
Class T shares are only available through certain dealers.
3. Differences in Services. The services offered to
shareholders of each Class shall be substantially the same, except that the
Rights of Accumulation, Letters of Intent and Reinvestment Privileges shall
be available only to holders of Class A shares. Class I purchases and
redemptions may only be made by bankwire. Class T shares have limited
services by Calvert, rather the services to shareholders are provided by the
dealer offering the Class T shares.
4. Differences in Distribution Arrangements. Class A shares
shall be offered with a front-end sales charge, as such term is defined in
Rule 2830 of the Conduct Rules of the National Association of Securities
Dealers, Inc. The amount of the sales charge on Class A shares is set forth
at Exhibit II. Class A shares shall be subject to a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The amount of the
Distribution Plan expenses for Class A shares, as set forth at Exhibit II,
are used to pay the Fund's principal underwriter for distributing and or
providing services to the Fund's Class A shares. This amount includes a
service fee at the annual rate of .25 of 1% of the value of the average
daily net assets of Class A.
Class B shares shall be offered with a contingent deferred sales
charge ("CDSC") and no front-end sales charge. The amount of the CDSC on
Class B shares is set forth at Exhibit II. Class B shares shall be subject
to a Distribution Plan adopted pursuant to Rule 12b-1 under the 1940 Act.
The amount of the Distribution Plan expenses for Class B shares, as set
forth at Exhibit II, are used to pay each Fund's principal underwriter for
distributing and or providing services to the Fund's Class B shares. This
amount includes a service fee at the annual rate of .25 of 1% of the value
of the average daily net assets of Class B.
Class C shares shall not be subject to a front-end sales charge,
but shall be subject to a 1.00% CDSC if the shares are redeemed within one
year of purchase. Class C shares shall be subject to a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act. The amount of the
Distribution Plan expenses for Class C shares are set forth at Exhibit II.
The Class C Distribution Plan pays each applicable Fund's principal
underwriter for distributing and or providing services to such Fund's Class
C shares. This amount includes a service fee at the annual rate of .25 of
1% of the value of the average daily net assets of Class C.
Class I and Class O shares shall be subject to neither a front-end
sales charge, nor a CDSC, nor are they subject to a Distribution Plan
adopted pursuant to Rule 12b-1 under the 1940 Act.
Class T shares shall be subject to neither a front-end sales
charge, nor a CDSC, but they are subject to a Distribution Plan adopted
pursuant to Rule 12b-1 under the 1940 Act.
5. Expense Allocation. The following expenses shall be
allocated, to the extent practicable, on a Class-by-Class basis: (a)
Distribution Plan fees; (b) transfer agent fees; (c) administrative service
fees; (d) printing and postage expenses payable by a Fund relating to
preparing and distributing materials, such as proxies, reports and
prospectuses to current shareholders of a specific class; (e) class specific
state notification fees; (f) class specific litigation or other legal
expenses; (g) certain class specific reimbursement from the Advisor; and (h)
certain class specific contract services (e.g., proxy solicitation).
6. Conversion Features. Class B shares shall be subject to
an automatic conversion feature into Class A shares after they have been
held for that number of years set forth in Exhibit II. Class A, Class C
,Class I, Class O, and Class T are not subject to automatic conversion.
7. Exchange Privileges. Class A shares shall be exchangeable
only for: (a) Class A shares of other funds managed or administered by the
Calvert Group; (b) shares of funds managed or administered by the Calvert
Group which do not have separate share classes; and (c) shares of certain
other funds specified from time to time.
Class B shares shall be exchangeable only for: (a) Class B shares
of other funds managed or administered by the Calvert Group; (b) Class A
shares of other funds managed or administered by the Calvert Group, if the
front-end load on the Class A shares is paid at the time of the exchange;
and (c) shares of certain other funds specified from time to time.
Class C shares shall be exchangeable only for: (a) Class C shares
of other funds managed or administered by the Calvert Group and Class B
shares of Calvert First Government Money Market Fund; (b) Class A shares of
other funds managed or administered by the Calvert Group, if the front-end
load on the Class A shares is paid at the time of the exchange; and (c)
shares of certain other funds specified from time to time.
Class I shares shall be exchangeable only for: (a) Class I shares
of other funds managed or administered by the Calvert Group; (b) Class A
shares of other funds managed or administered by the Calvert Group, if the
front-end load on the Class A shares is paid at the time of the exchange;
and (c) shares of certain other funds specified from time to time.
Class T shares shall be exchangeable only for: (a) Class T shares
of other funds managed or administered by the Calvert Group; (b) Class A
shares of other funds managed or administered by the Calvert Group, if the
front-end load on the Class A shares is paid at the time of the exchange;
and (c) shares of certain other funds specified from time to time.
Dec. 1998
<PAGE>
Exhibit I
The Calvert Fund
Calvert Tax-Free Reserves
Calvert Municipal Fund
Calvert Social Investment Fund
Calvert World Values Fund
Calvert New World Fund
First Variable Rate Fund
<PAGE>
Calvert Social Investment Fund (CSIF)
Maximum Class A Maximum Maximum
Front-End Sales Class A Class C
Charge 12b-1 Fee 12b-1 Fee
CSIF Managed Growth 4.75% 0.35% 1.00%
CSIF Equity 4.75% 0.35% 1.00%
CSIF Managed Index 4.75% 0.25% 1.00%
CSIF Bond 3.75% 0.35% 1.00%
Class B
Balanced,
Equity, & Max.
Contingent Deferred Sales Charge Managed 12b-1
Index Bond Fee
Shares held less than one year after purchase 5% 4% 1.00%
More than one year but less than two 4% 3%
More than two years but less than three 4% 2%
More than three years but less than four 3% 1%
More than four years but less than five 2%
More than five years but less than six 1%
Converts to Class A after 8 yrs. 6yrs.
February 1998
<PAGE>
Exhibit II
Calvert Tax-Free Reserves (CTFR)
Maximum Class A Maximum Maximum Maximum
Front-End Sales Class A Class C Class T
Charge 12b-1 Fee 12b-1 Fee 12b-1 Fee
CTFR Money Mkt. N/A N/A N/A 0.25%
CTFR Long-Term 3.75% 0.35% 1.00% N/A
CTFR Vermont 3.75% N/A 1.00% N/A
Class B
Long-Term & Maximum
Contingent Deferred Sales Charge Vermont 12b-1 Fee
Shares held less than one year after purchase 4% 1.00%
More than one year but less than two 3%
More than two years but less than three 2%
More than three years but less than four 1%
Converts to Class A after 6yrs.
December 1998
<PAGE>
Calvert Municipal Fund
Maximum Class A Maximum Maximum
Front-End Sales Class A Class C
Charge 12b-1 Fee 12b-1 Fee
National Intermediate 2.75% 0.25% N/A
California Intermediate 2.75% 0.25% N/A
Maryland Intermediate 2.75% 0.25% N/A
Virginia Intermediate 2.75% 0.25% N/A
Class B
Maximum
Contingent Deferred Sales Charge CMF 12b-1 Fee
Shares held less than one year after purchase 3% 1.00%
More than one year but less than two 2%
More than two years but less than three 2%
More than three years but less than four 1%
Converts to Class A after 4 yrs.
<PAGE>
Exhibit II
The Calvert Fund
Maximum Class A Maximum Maximum
Front-End Sales Class A Class C
Charge 12b-1 Fee 12b-1 Fee
New Vision Small Cap 4.75% 0.25% 1.00%
Calvert Income Fund 3.75% 0.50% 1.00%
Class B
Max.
12b-1
Contingent Deferred Sales Charge New Vision Income Fee
Shares held less than one year 5% 4% 1.00%
More than one year but less than two 4% 3%
More than two years but less than three 4% 2%
More than three years but less than four 3% 1%
More than four years but less than five 2%
More than five years but less than six 1%
Converts to Class A after 8 yrs. 6yrs.
<PAGE>
Exhibit II
Calvert World Values Fund
Maximum Class A Maximum Maximum
Front-End Sales Class A Class C
Charge 12b-1 Fee 12b-1 Fee
International Equity 4.75% 0.35% 1.00%
Capital Accumulation 4.75% 0.35% 1.00%
Class B
Maximum
Contingent Deferred Sales Charge CWVF 12b-1 Fee
Shares held less than one year after purchase 5% 1.00%
More than one year but less than two 4%
More than two years but less than three 4%
More than three years but less than four 3%
More than four years but less than five 2%
More than five years but less than six 1%
Converts to Class A after 8 yrs.
February 1998
<PAGE>
Exhibit II
Calvert New World Fund
Maximum Class A Maximum Maximum
Front-End Sales Class A Class C
Charge 12b-1 Fee 12b-1 Fee
Calvert New Africa 4.75% 0.25% 1.00%
Class B
Maximum
Contingent Deferred Sales Charge New Africa 12b-1 Fee
Shares held less than one year after purchase 5% 1.00%
More than one year but less than two 4%
More than two years but less than three 4%
More than three years but less than four 3%
More than four years but less than five 2%
More than five years but less than six 1%
Converts to Class A after 8 yrs.
<PAGE>
Exhibit II
First Variable Rate Fund
Maximum Class A Max. Max. Max.
Front-End Sales Class A Class C Class T
Charge 12b-1 12b-1 12b-1
Fee Fee Fee
Calvert First Gov't.
Money Market N/A N/A 1.00% 0.25%
Class B
Maximum
Contingent Deferred Sales Charge 12b-1 Fee
CDSC of original Class B Fund purchased is applied upon
redemption from Class B of First Government Money Market 1.00%
Conversion period of original Class B Fund purchased is applied.
December 1998
Exhibit 1
DISTRIBUTION AGREEMENT
This DISTRIBUTION AGREEMENT, dated as of December 2, 1998 by and
between EACH CALVERT FUND LISTED IN THE SCHEDULE OF FUNDS ATTACHED HERETO AS
SCHEDULE I (each a "Fund" and together the "Funds"), as such schedule may,
from time to time be amended, and CALVERT DISTRIBUTORS, INC., a Delaware
corporation (the "Distributor").
WHEREAS, each Fund is registered as an open-end investment company
under the Investment Company Act of 1940 (the "1940 Act") and has registered
its shares, including shares of its series portfolios (the "Series"), for
sale to the public under the Securities Act of 1933 (the "1933 Act") and
various state securities laws;
WHEREAS, each Fund wishes to retain the Distributor as the
principal underwriter in connection with the offer and sale of shares of the
Series (the "Shares") and to furnish certain other services to the Series as
specified in this Agreement;
WHEREAS, this contract has been approved and amended and restated
on this day by the Trustees/Directors in anticipation of the Distributor
offering Class T shares;
WHEREAS, the Distributor is willing to act as principal underwriter
and to furnish such services on the terms and conditions hereinafter set
forth;
NOW, THEREFORE, in consideration of the promises and mutual
covenants herein contained, it is agreed as follows:
1. Each Fund hereby appoints the Distributor as principal
underwriter in connection with the offer and sale of its Shares. The
Distributor shall, as agent for each Fund, subject to applicable federal and
state law and the Declaration of Trust or Articles of Incorporation, and
By-laws of the applicable Fund and in accordance with the representations in
the applicable Fund's Registration Statement and Prospectus, as such
documents may be amended from time to time: (a) promote the Series; (b)
enter into appropriate dealer agreements with other registered
broker-dealers to further distribution of the Shares; (c) solicit orders for
the purchase of the Shares subject to such terms and conditions as the
applicable Fund may specify; (d) transmit promptly orders and payments for
the purchase of Shares and orders for redemption of Shares to the applicable
Fund's transfer agent; and (e) provide services agreed upon by the
applicable Fund to Series shareholders; provided, however, that the
Distributor may sell no Shares pursuant to this Agreement until the
Distributor is notified that a Fund's Registration Statement under the 1933
Act, authorizing the sale of such Shares through the Distributor, has become
effective. The Distributor shall comply with all applicable federal and
state laws and offer the Shares on an agency or "best efforts" basis under
which a Fund shall only issue such Shares as are actually sold.
2. The public offering price of the Shares shall be the net
asset value ("NAV") per share (as determined by the applicable Fund) of the
outstanding Shares of the Series, plus the applicable sales charge, if any,
as set forth in the Fund's then current Prospectus. Each Fund shall furnish
the Distributor with a statement of each computation of NAV and of the
details entering into such computation.
3. Compensation.
a. Distribution Fee.
i. Class A. In consideration of the Distributor's services as
distributor for the Class A Shares of a Fund, each Fund may pay to the
Distributor the Distribution Fee as set forth in Schedule II to this
Agreement that is payable pursuant to the Fund's Distribution Plan.
ii. Class B. In consideration of the Distributor's services as
distributor for the Class B Shares of a Fund, each Fund shall pay to the
Distributor (or its designee or transferee) the Distributor's Allocable
Portion of the Distribution Fee; (as set forth in Schedule II to this
Agreement) that is payable pursuant to the Fund's Distribution Plan in
respect of the Class B Shares of a Fund. For purposes of this Agreement, the
Distributor's "Allocable Portion" of the Distribution Fee shall be 100% of
such Distribution Fee unless or until the Fund uses a principal underwriter
other than the Distributor and thereafter the Allocable Portion shall be the
portion of the Distribution Fee attributable to (i) Class B Shares of a Fund
sold by the Distributor ("Commission Shares"), (ii) Class B Shares of the
Fund issued in connection with the exchange of Commission Shares of another
Fund, and (iii) Class B Shares of the Fund issued in connection with the
reinvestment of dividends and capital gains.
The Distributor's Allocable Portion of the Distribution Fee and the
contingent deferred sales charges arising in respect of Class B Shares taken
into account in computing the Distributor's Allocable Portion shall be
limited under Rule 2830 of the Conduct Rules or other applicable regulations
of the NASD as if the Class B Shares taken into account in computing the
Distributor's Allocable Portion themselves constituted a separate class of
shares of a Fund.
The services rendered by the Distributor for which the Distributor
is entitled to receive the Distributor's Allocable Portion of the
Distribution Fee shall be deemed to have been completed at the time of the
initial purchase of the Commission Shares (whether of the Fund or another
Fund in the Calvert Group of Funds) taken into account in computing the
Distributor's Allocable Portion. Notwithstanding anything to the contrary in
this Agreement, the Distributor shall be paid its Allocable Portion of the
Distribution Fee notwithstanding the Distributor's termination as principal
underwriter of the Class B Shares of a Fund, or any termination of this
Agreement other than in connection with a Complete Termination (as defined
in the Distribution Plan) of the Class B Distribution Plan as in effect on
the date of this Agreement. Except as provided in the preceding sentence, a
Fund's obligation to pay the Distribution Fee to the Distributor shall be
absolute and unconditional and shall not be subject to any dispute, offset,
counterclaim or defense whatsoever, (it being understood that nothing in
this sentence shall be deemed a waiver by a Fund of its right separately to
pursue any claims it may have against the Distributor and to enforce such
claims against any assets (other than its rights to be paid its Allocable
Portion of the Distribution Fee and to be paid the contingent deferred sales
charges) of the Distributor.
iii. Class C. In consideration of the Distributor's services as
distributor for the Class C Shares of a Fund, each Fund shall pay to the
Distributor the Distribution Fee as set forth in Schedule II to this
Agreement that is payable pursuant to the Fund's Distribution Plan.
b. Service Fee. As additional compensation, for Class A,
Class B, Class C and Class T Shares of each Series, applicable Funds shall
pay the Distributor a service fee (as that term is defined by the National
Association of Securities Dealers, Inc. ("NASD")) as set forth in Schedule
III to this Agreement that is payable pursuant to the Fund's Distribution
Plan.
c. Front-end Sales Charges. As additional compensation for
the services performed and the expenses assumed by the Distributor under
this Agreement, the Distributor may, in conformity with the terms and
conditions set forth in the then current Prospectus of each Fund, impose and
retain for its own account the amount of the front-end sales charge, if any,
and may reallow a portion of any front-end sales charge to other
broker-dealers, all in accordance with NASD rules.
d. Contingent Deferred Sales Charge. Each Fund will pay to
the Distributor (or its designee or transferee) in addition to the fees set
forth in Section 3 hereof any contingent deferred sales charge imposed on
redemptions of that Fund's Class B and Class C Shares upon the terms and
conditions set forth in the then current Prospectus of that Fund.
Notwithstanding anything to the contrary in this Agreement, the Distributor
shall be paid such contingent deferred sales charges in respect of Class B
Shares taken into account in computing the Distributor's Allocable Portion
of the Distribution Fee notwithstanding the Distributor's termination as
principal underwriter of the Class B shares of a Fund or any termination of
this Agreement other than in connection with a Complete Termination of the
Class B Distribution Plan as in effect on the date of this Agreement. Except
as provided in the preceding sentence, a Fund's obligation to remit such
contingent deferred sales charges to the Distributor shall not be subject to
any dispute, offset, counterclaim or defense whatsoever, it being understood
that nothing in this sentence shall be deemed a waiver by a Fund of its
right separately to pursue any claims it may have against the Distributor
and to enforce such claims against any assets (other than the Distributor's
right to be paid its Allocable Portion of the Distribution Fee and to be
paid the contingent deferred sales charges) of the Distributor. No Fund will
waive any contingent deferred sales charge except under the circumstances
set forth in the Fund's current Prospectus without the consent of the
Distributor (or, if rights to payment have been transferred, the
transferee), which consent shall not be unreasonably withheld.
4. Payments to Distributor's Transferees. The Distributor may
transfer the right to payments hereunder (but not its obligations hereunder)
in order to raise funds to cover distribution expenditures, and any such
transfer shall be effective upon written notice from the Distributor to the
Fund. In connection with the foregoing, the Fund is authorized to pay all or
a part of the Distribution Fee and/or contingent deferred sales charges in
respect of Class B Shares directly to such transferee as directed by the
Distributor.
5. Changes in Computation of Fee, etc. As long as the Class B
Distribution Plan is in effect, a Fund shall not change the manner in which
the Class B Distribution Fee is computed (except as may be required by a
change in applicable law or a change in accounting policy adopted by the
Investment Companies Committee of the AICPA and approved by FASB that
results in a determination by a Fund's independent accountants that any of
the sales charges in respect of such Fund, which are not contingent deferred
sales charges and which are not yet due and payable, must be accounted for
by such Fund as a liability in accordance with GAAP).
6. As used in this Agreement, the term "Registration
Statement" shall mean the registration statement most recently filed by a
Fund with the Securities and Exchange Commission and effective under the
1933 Act, as such Registration Statement is amended by any amendments
thereto at the time in effect, and the term "Prospectus" shall mean the form
of prospectus filed by a Fund as part of the Registration Statement.
7. The Distributor shall print and distribute to prospective
investors Prospectuses, and may print and distribute such other sales
literature, reports, forms, and advertisements in connection with the sale
of the Shares as comply with the applicable provisions of federal and state
law. In connection with such sales and offers of sale, the Distributor shall
give only such information and make only such statements or representations,
and require broker-dealers with whom it enters into dealer agreements to
give only such information and make only such statements or representations,
as are contained in the Prospectus or in information furnished in writing to
the Distributor by a Fund. The Funds shall not be responsible in any way for
any other information, statements or representations given or made by the
Distributor, other broker-dealers, or the representatives or agents of the
Distributor or such broker-dealers. Except as specifically permitted under
the Distribution Plan under Rule 12b-1 under the 1940 Act, as provided in
paragraph 3 of this Agreement, the Funds shall bear none of the expenses of
the Distributor in connection with its offer and sale of the Shares.
8. Each Fund agrees at its own expense to register the Shares
with the Securities and Exchange Commission, state and other regulatory
bodies, and to prepare and file from time to time such Prospectuses,
amendments, reports and other documents as may be necessary to maintain the
Registration Statement. Each Fund shall bear all expenses related to
preparing and typesetting its Prospectus(es) and other materials required by
law and such other expenses, including printing and mailing expenses related
to the Fund's communications with persons who are shareholders of such Fund.
9. Each Fund agrees to indemnify, defend and hold the
Distributor, its several officers and directors, and any person who controls
the Distributor within the meaning of Section 15 of the 1933 Act, free and
harmless from and against any and all claims, demands, liabilities and
expenses (including the cost of investigating or defending such claims,
demands or liabilities and any counsel fees incurred in connection
therewith) which the Distributor, its officers or directors, or any such
controlling person may incur, under the 1933 Act or under common law or
otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in its Registration Statement or Prospectus or
arising out of or based upon any alleged omission to state a material fact
required to be stated in either thereof or necessary to make the statements
in either thereof not misleading, provided that in no event shall anything
contained in this Agreement be construed so as to protect the Distributor
against any liability to a Fund or its shareholders to which the Distributor
would otherwise be subject by reason of willful misfeasance, bad faith, or
gross negligence, in the performance of its duties, or by reason of its
reckless disregard of its obligations and duties under this Agreement.
10. The Distributor agrees to indemnify, defend and hold each
Fund, their several officers and directors, and any person who controls a
Fund within the meaning of Section 15 of the 1933 Act, free and harmless
from and against any and all claims, demands, liabilities and expenses
(including the cost of investigating or defending such claims, demands or
liabilities and any counsel fees incurred in connection therewith) which a
Fund, its officers or directors, or any such controlling person may incur,
under the 1933 Act or under common law or otherwise, arising out of or based
upon any alleged untrue statement or a material fact contained in
information furnished in writing by the Distributor to the Funds for use in
the Registration Statement or Prospectus(es) or arising out of or based upon
any alleged omission to state a material fact in connection with such
information required to be stated in the Registration Statement or
Prospectus(es) or necessary to make such information not misleading.
11. Each Fund reserves the right at any time to withdraw all
offerings of the Shares by written notice to the Distributor at its
principal office.
12. The Distributor is an independent contractor and shall be
agent for a Fund only in respect to the offer, sale and redemption of that
Fund's Shares.
13. The services of the Distributor to a Fund under this
Agreement are not to be deemed exclusive, and the Distributor shall be free
to render similar services or other services to others so long as its
services hereunder are not impaired thereby.
14. The Distributor acknowledges that it has received notice
of and accepts the limitations upon the liability of any Fund organized as a
business trust set forth in such Fund's Declaration of Trust. The
Distributor agrees that the obligations of such Funds hereunder in any case
shall be limited to such Funds and to their assets and that the Distributor
shall not seek satisfaction of any such obligation from the shareholders of
such a Fund nor from any Trustee, officer, employee or agent of such Fund.
15. The Funds shall not use the name of the Distributor in any
Prospectus, sales literature or other material relating to the Funds in any
manner not approved prior thereto by the Distributor; provided, however,
that the Distributor shall approve all uses of its name which merely refer
in accurate terms to its appointment hereunder or which are required by the
Securities and Exchange Commission or a State Securities Commission; and,
provided further, that in no event shall such approval be unreasonably
withheld. The Distributor shall not use the name of any Fund in any material
relating to the Distributor in any manner not approved prior thereto by the
Fund; provided, however that the Funds shall approve all uses of their names
which merely refer in accurate terms to the appointment of the Distributor
hereunder or which are required by the Securities and Exchange Commission or
a State Securities Commission; and, provided further, that in no event shall
such approval be unreasonably withheld.
16. The Distributor shall prepare written reports for the
Board of Trustees/Directors of each Fund on a quarterly basis showing
information concerning services provided and expenses incurred which are
related to this Agreement and such other information as from time to time
shall be reasonably requested by a Fund's Board of Trustees/Directors.
17. As used in this Agreement, the terms "assignment,"
"interested person," and "majority of the outstanding voting securities"
shall have the meaning given to them by Section 2(a) of the 1940 Act,
subject to such exemptions as may be granted by the Securities and Exchange
Commission by any rule, regulation or order; provided, however that, in
order to obtain financing, the Distributor may assign to a lending
institution the payments due to the Distributor under this Agreement without
it constituting an assignment of the Agreement.
18. Subject to the provisions of sections 19 and 20 below,
this Agreement will remain in effect for two years from the date of is
execution and from year to year thereafter, provided that the Distributor
does not notify a Fund in writing at least sixty (60) days prior to the
expiration date in any year that it does not wish continuance of the
Agreement as to such Fund for an additional year.
19. Termination. As to any particular Fund (or Series
thereof), this Agreement shall automatically terminate in the event of its
assignment and may be terminated at any time without the payment of any
penalty by a Fund or by the Distributor on sixty (60) days' written notice
to the other party. A Fund may effect such termination by a vote of (i) a
majority of the Board of Trustees/Directors of the Fund, (ii) a majority of
the Trustees/Directors who are not interested persons of the Fund, who are
not parties to this Agreement or interested persons of such parties, and who
have no direct or indirect financial interest in the operation of the
Distribution Plan, in this Agreement or in any agreement related to such
Fund's Distribution Plan (the "Rule 12b-1 Trustees/Directors"), or (iii) a
majority of the outstanding voting securities of the relevant Series.
20. This Agreement shall be submitted for renewal to the Board
of Trustees/Directors of each Fund at least annually and shall continue in
effect only so long as specifically approved at least annually (i) by a
majority vote of the Fund's Board of Trustees/Directors, and (ii) by the
vote of the majority of the Rule 12b-1 Trustees/Directors of the Fund, cast
in person at a meeting called for the purpose of voting on such approval.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed on the date first above written by their officers thereunto
duly authorized.
Attest: EACH FUND LISTED IN THE
ATTACHED SCHEDULE I
By: /s/ Edwidge Saint-Felix By: /s/ William M. Tartikoff
Vice President
Attest: CALVERT DISTRIBUTORS, INC.
By: /s/ Edwidge Saint-Felix By: /s/ Ronald M. Wolfsheimer
Senior Vice President
<PAGE>
SCHEDULE I
The Calvert Fund
Calvert Tax-Free Reserves
Calvert Municipal Fund
Calvert Social Investment Fund
Calvert World Values Fund
Calvert New World Fund
First Variable Rate Fund
<PAGE>
SCHEDULE II
Fees are expressed as a percentage of average annual daily net assets, and
are payable monthly.
Distribution Fee
Class A* Class B Class C Class I
The Calvert Fund
New Vision
Small Cap Fund N/A 0.75 0.75 N/A
Calvert Income Fund 0.25 0.75 0.75 N/A
Calvert Tax-Free Reserves
Money Market Portfolio N/A N/A N/A N/A
Limited-Term Portfolio N/A N/A N/A N/A
Long-Term Portfolio 0.10 0.75 0.75 N/A
CA. Money Market N/A N/A N/A N/A
Vermont Municipal N/A 0.75 0.75 N/A
Calvert Municipal Fund
National Interm. Fund N/A 0.75 N/A N/A
California Interm. Fund N/A 0.75 N/A N/A
Maryland Interm. Fund N/A 0.75 N/A N/A
Virginia Interm. Fund N/A 0.75 N/A N/A
Calvert Social Investment Fund
Balanced Portfolio 0.10 0.75 0.75 N/A
Equity Portfolio 0.10 0.75 0.75 N/A
Bond Portfolio 0.10 0.75 0.75 N/A
Managed Index N/A 0.75 0.75 N/A
Money Market N/A N/A N/A N/A
Calvert World Values Fund
Capital Accum. Fund 0.10 0.75 0.75 N/A
International Equity Fund 0.10 0.75 0.75 N/A
Calvert New World Fund
Calvert New Africa Fund N/A 0.75 0.75 N/A
First Variable Rate Fund
Calvert First Gov't
Money Mkt N/A 0.75 N/A N/A
*Distributor reserves the right to waive all or a portion of the
distribution fee from time to time.
DATED: February 1998
<PAGE>
SCHEDULE III
Fees are expressed as a percentage of average annual daily net assets and
are payable monthly.
Service Fee (%)
Class Class Class Class Class
A1 B C I T
The Calvert Fund
New Vision
Small Cap Fund 0.25 0.25 0.25 N/A N/A
Calvert Income Fund 0.25 0.25 0.25 N/A N/A
Calvert Tax-Free Reserves
Money Market Portfolio N/A N/A N/A N/A 0.25
Limited-Term Portfolio N/A N/A N/A N/A N/A
Long-Term Portfolio 0.25 0.25 0.25 N/A N/A
CA Money Market N/A N/A N/A N/A N/A
Vermont Municipal N/A 0.25 0.25 N/A N/A
Calvert Municipal Fund
National Interm. Fund 0.25 0.25 N/A N/A N/A
California Interm. Fund 0.25 0.25 N/A N/A N/A
Maryland Interm. Fund 0.25 0.25 N/A N/A N/A
Virginia Interm. Fund 0.25 0.25 N/A N/A N/A
Calvert Social Investment Fund
Balanced Portfolio 0.252 0.25 0.25 N/A N/A
Equity Portfolio 0.25 0.25 0.25 N/A N/A
Bond Portfolio 0.25 0.25 0.25 N/A N/A
Managed Index 0.25 0.25 0.25 N/A N/A
Money Market 0.25 N/A N/A N/A N/A
Calvert World Values Fund
Capital Accum. Fund 0.25 0.25 0.25 N/A N/A
International Equity Fund 0.25 0.25 0.25 N/A N/A
Calvert New World Fund
Calvert New Africa Fund 0.25 0.25 0.25 N/A N/A
First Variable Rate Fund
Calvert First Gov't
Money Mkt N/A 0.25 N/A N/A 0.25
DATED: December 1998
- --------
1 Distributor reserves the right to waive all or a portion of the service
fees from time to time. For money market portfolios, Class A shall refer to
Class O, or if the portfolio does not have multiple classes, then to the
portfolio itself.
2 Distributor charges the service fee only on assets in excess of $30
million.
