CALVERT SOCIAL INVESTMENT FUND
(Balanced, Bond, Equity, Money Market and Managed Index Portfolios)
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
January 31, 1999
As revised April 9, 1999
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 ("SAI") is not a
prospectus. Investors should read the Statement of Additional Information in
conjunction with the Fund's Prospectus, dated January 31, 1999. The Fund's
audited financial statements included in its most recent Annual Report to
Shareholders, are expressly incorporated by reference, and made a part of
this SAI. The prospectus and the most recent shareholder report may be
obtained free of charge by writing the Fund at the above address or calling
the Fund.
TABLE OF CONTENTS
Investment Policies and Risks 2
Investment Restrictions 8
Investment Selection Process 9
Dividends, Distributions and Taxes 10
Net Asset Value 11
Calculation of Yield and Total Return 13
Purchase and Redemption of Shares 15
Advertising 16
Trustees, Officers and Advisory Council 16
Investment Advisor 19
Method of Distribution 21
Transfer and Shareholder Servicing Agents 23
Portfolio Transactions 24
Independent Accountants and Custodians 25
Control Persons and Principal Holders of Securities 25
General Information 26
Appendix 26
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INVESTMENT POLICIES AND RISKS
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Foreign Securities (not applicable to managed index or money market)
Investments in foreign securities may present risks not typically
involved in domestic investments. The Portfolios may purchase foreign
securities directly, on foreign markets, or those represented by American
Depositary Receipts ("ADRs"), or other receipts evidencing ownership of
foreign securities, such as International Depository Receipts and Global
Depositary Receipts. ADRs are US dollar-denominated and traded in the US on
exchanges or over the counter. By investing in ADRs rather than directly in
foreign issuers' stock, the Portfolios may possibly avoid some currency and
some liquidity risks. The information available for ADRs is subject to the
more uniform and more exacting accounting, auditing and financial reporting
standards of the domestic market or exchange on which they are traded.
Additional costs may be incurred in connection with international
investment since foreign brokerage commissions and the custodial costs
associated with maintaining foreign portfolio securities are generally
higher than in the United States. Fee expense may also be incurred on
currency exchanges when the Portfolios change investments from one country
to another or converts foreign securities holdings into US dollars.
United States Government policies have at times, in the past,
through imposition of interest equalization taxes and other restrictions,
discouraged certain investments abroad by United States investors. In
addition, foreign countries may impose withholding and taxes on dividends
and interest.
Investing in emerging markets in particular, those countries whose
economies and capital markets are not as developed as those of more
industrialized nations, carries its own special risks. Among other risks,
the economies of such countries may be affected to a greater extent than in
other countries by price fluctuations of a single commodity, by severe
cyclical climactic conditions, lack of significant history in operating
under a market-oriented economy, or by political instability, including risk
of expropriation.
Since investments in securities of issuers domiciled in foreign
countries usually involve currencies of the foreign countries, and since the
Portfolios may temporarily hold funds in foreign currencies during the
completion of investment programs, the value of the assets of the Portfolios
as measured in United States dollars may be affected favorably or
unfavorably by changes in foreign currency exchange rates and exchange
control regulations. For example, if the value of the foreign currency in
which a security is denominated increases or declines in relation to the
value of the US dollar, the value of the security in US dollars will
increase or decline correspondingly. The Portfolios will conduct their
foreign currency exchange transactions either on a spot (i.e., cash) basis
at the spot rate prevailing in the foreign exchange market, or through
entering into forward contracts to purchase or sell foreign currencies. A
forward foreign currency contract involves an obligation to purchase or sell
a specific currency at a future date which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set at
the time of the contract. These contracts are traded in the interbank market
conducted directly between currency traders (usually large, commercial
banks) and their customers. A forward foreign currency contract generally
has no deposit requirement, and no commissions are charged at any stage for
trades.
The Portfolios may enter into forward foreign currency contracts
for two reasons. First, the Portfolios may desire to preserve the United
States dollar price of a security when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency. The
Portfolios may be able to protect themselves against possible losses
resulting from changes in the relationship between the United States dollar
and foreign currencies during the period between the date the security is
purchased or sold and the date on which payment is made or received by
entering into a forward contract for the purchase or sale, for a fixed
amount of dollars, of the amount of the foreign currency involved in the
underlying security transactions.
Second, when the Advisor or Subadvisor believes that the currency
of a particular foreign country may suffer a substantial decline against the
United States dollar, the Portfolios enter into a forward foreign currency
contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of the Portfolios'
securities denominated in such foreign currency. The precise matching of the
forward foreign currency contract amounts and the value of the Portfolios'
securities involved will not generally be possible since the future value of
the securities will change as a consequence of market movements between the
date the forward contract is entered into and the date it matures. The
projection of short-term currency market movement is difficult, and the
successful execution of this short-term hedging strategy is uncertain.
Although forward foreign currency contracts tend to minimize the risk of
loss due to a decline in the value of the hedged currency, at the same time
they tend to limit any potential gain which might result should the value of
such currency increase. The Portfolios do not intend to enter into such
forward contracts under this circumstance on a regular or continuous basis.
Eurocurrency Conversion Risk. European countries that are members
of the European Monetary Union have agreed to use a common currency unit,
the "euro," beginning in 1999. Currently, each of these countries has its
own currency unit. Although the Advisor and Subadvisors do not anticipate
any problems in conversion from the old currencies to the euro, there may be
issues involved in settlement, valuation, and numerous other areas that
could impact the Portfolios. Calvert has been reviewing all of its computer
systems for Eurocurrency conversion compliance. There can be no assurance
that there will be no negative impact on the Portfolios, however, the
Advisor, Subadvisor and custodian have advised the Portfolios that they have
been actively working on any necessary changes to their computer systems to
prepare for the conversion, and expect that their systems, and those of
their outside service providers, will be adapted in time for that event.
Foreign Money Market Instruments
The Money Market Portfolio may invest without limitation in money
market instruments of banks, whether foreign or domestic, including
obligations of US branches of foreign banks ("Yankee" instruments) and
obligations of foreign branches of US banks ("Eurodollar" instruments). All
such instruments must be high-quality, US dollar-denominated obligations.
Although these instruments are not subject to foreign currency risk since
they are US dollar-denominated, investments in foreign money market
instruments may involve risks that are different than investments in
securities of US issuers. See "Foreign Securities" above.
TRACKING THE INDEX - MANAGED INDEX PORTFOLIO
The Subadvisor expects a tracking error over time of no more than
2.5%, although there can be no guarantee such results will be achieved. The
process used by the Portfolio to attempt to track the Index within this
limit relies on assessing the difference between the Portfolio's exposure to
factors which influence returns and the Index's exposure to those same
factors. The combined variability of these factors and the correlation
between factors are used to estimate the risk in the Portfolio. The extent
to which the total risk characteristics of the Portfolio vary from that of
the Index is active risk or tracking error.
The Portfolio's ability to track the index will be monitored by
analyzing returns to ensure that the returns are reasonably consistent with
Index returns. By regressing Portfolio returns against Index returns, the
Advisor can calculate the goodness of fit, as measured by the Coefficient of
Determination or R -squared. Values in excess of 90% indicate a very high
degree of correlation between the Portfolio and the Index. The Portfolio
will also be monitored to ensure those general characteristics, such as
sector exposures, capitalization and valuation criteria, are relatively
consistent over time.
Any deviations of realized returns from the Index which are in
excess of those expected will be analyzed for sources of variance. Where
variations are deemed to be systematic or associated with a particular
feature of the investment process, the constraints on the Portfolio
associated with that factor may be adjusted to ensure a higher degree of
correlation to the Index.
TEMPORARY DEFENSIVE POSITIONS
For temporary defensive purposes - which may include a lack of
adequate purchase candidates or an unfavorable market environment - the Fund
may invest in cash or cash equivalents. Cash equivalents include instruments
such as, but not limited to, US government and agency obligations,
certificates of deposit, banker's acceptances, time deposits commercial
paper, short-term corporate debt securities, and repurchase agreements.
Repurchase Agreements
The Fund may purchase debt securities subject to repurchase
agreements, which are arrangements under which the Fund buys a security, and
the seller simultaneously agrees to repurchase the security at a specified
time and price reflecting a market rate of interest. The Fund engages in
repurchase agreements in order to earn a higher rate of return than it could
earn simply by investing in the obligation which is the subject of the
repurchase agreement. Repurchase agreements are not, however, without risk.
In the event of the bankruptcy of a seller during the term of a repurchase
agreement, a legal question exists as to whether the Fund would be deemed
the owner of the underlying security or would be deemed only to have a
security interest in and lien upon such security. The Fund will only engage
in repurchase agreements with recognized securities dealers and banks
determined to present minimal credit risk by the Advisor under the direction
and supervision of the Fund's Board of Trustees. In addition, the Fund will
only engage in repurchase agreements reasonably designed to secure fully
during the term of the agreement the seller's obligation to repurchase the
underlying security and will monitor the market value of the underlying
security during the term of the agreement. If the value of the underlying
security declines and is not at least equal to the repurchase price due the
Fund pursuant to the agreement, the Fund will require the seller to pledge
additional securities or cash to secure the seller's obligations pursuant to
the agreement. If the seller defaults on its obligation to repurchase and
the value of the underlying security declines, the Fund may incur a loss and
may incur expenses in selling the underlying security. Repurchase agreements
are always for periods of less than one year. Repurchase agreements not
terminable within seven days are considered illiquid.
Reverse Repurchase Agreements
The Fund may also engage in reverse repurchase agreements. Under a
reverse repurchase agreement, the Fund sells portfolio securities to a bank
or securities dealer and agrees to repurchase those securities from such
party at an agreed upon date and price reflecting a market rate of interest.
The Fund invests the proceeds from each reverse repurchase agreement in
obligations in which it is authorized to invest. The Fund intends to enter
into a reverse repurchase agreement only when the interest income provided
for in the obligation in which the Fund invests the proceeds is expected to
exceed the amount the Fund will pay in interest to the other party to the
agreement plus all costs associated with the transactions. The Fund does not
intend to borrow for leverage purposes. The 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
Fund will maintain in a segregated custodial account an amount of cash, US
Government securities or other liquid, high-quality debt securities equal in
value to the repurchase price. The Fund will mark to market the value of
assets held in the segregated account, and will place additional assets in
the account whenever the total value of the account falls below the amount
required under applicable regulations.
The Fund's use of reverse repurchase agreements involves the risk
that the other party to the agreements could become subject to bankruptcy or
liquidation proceedings during the period the agreements are outstanding. In
such event, the Fund may not be able to repurchase the securities it has
sold to that other party. Under those circumstances, if at the expiration of
the agreement such securities are of greater value than the proceeds
obtained by the Fund under the agreements, the Fund may have been better off
had it not entered into the agreement. However, the Fund will enter into
reverse repurchase agreements only with banks and dealers which the Advisor
believes present minimal credit risks under guidelines adopted by the Fund's
Board of Trustees. In addition, the Fund bears the risk that the market
value of the securities it sold may decline below the agreed-upon repurchase
price, in which case the dealer may request the Fund to post additional
collateral.
Non-Investment Grade Debt Securities
Non-investment grade debt securities are lower quality debt
securities (generally those rated BB or lower by S&P or Ba or lower by
Moody's, known as "junk bonds." These securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. (See Appendix for a description of the ratings.) These
securities involve greater risk of default or price declines due to changes
in the issuer's creditworthiness than investment-grade debt securities.
Because the market for lower-rated securities may be thinner and less active
than for higher-rated securities, there may be market price volatility for
these securities and limited liquidity in the resale market. Market prices
for these securities may decline significantly in periods of general
economic difficulty or rising interest rates. Unrated debt securities may
fall into the lower quality category. Unrated securities usually are not
attractive to as many buyers as rated securities are, which may make them
less marketable.
The quality limitation set forth in the Fund's investment policy is
determined immediately after the Fund's acquisition of a given security.
Accordingly, any later change in ratings will not be considered when
determining whether an investment complies with the Fund's investment policy.
When purchasing non-investment grade debt securities, rated or
unrated, the Advisors 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.
DERIVATIVES
The Fund can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, or other factors that
affect security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts and leveraged
notes, entering into swap agreements, and purchasing indexed securities. The
Fund can use these practices either as substitution or as protection against
an adverse move in the Fund to adjust the risk and return characteristics of
the Fund. If the Advisor and/or Subadvisor judges market conditions
incorrectly or employs a strategy that does not correlate well with a Fund's
investments, or if the counterparty to the transaction does not perform as
promised, these techniques could result in a loss. These techniques may
increase the volatility of a Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. Derivatives are often
illiquid.
Options and Futures Contracts (NOT APPLICABLE TO MONEY MARKET)
The Portfolios may, in pursuit of their respective investment
objectives, purchase put and call options and engage in the writing of
covered call options and secured put options on securities which meet the
Fund's social criteria, and employ a variety of other investment techniques.
Specifically, these Portfolios may also engage in the purchase and sale of
stock index future contracts, foreign currency futures contracts, interest
rate futures contracts, and options on such futures, as described more fully
below.
These Portfolios may engage in such transactions only to hedge the
existing positions in the respective Portfolios (or for Managed Index, for
liquidity or to hedge cash exposure). 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.
These Portfolios may write "covered options" on securities in
standard contracts traded on national securities exchanges. These Portfolios
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. These Portfolios may purchase put and call options, in
standard contracts traded on national securities exchanges, on securities of
issuers which meet the Fund's social criteria. These Portfolios will
purchase such options only to hedge against changes in the value of
securities the Portfolios 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.
These Portfolios may purchase call options on securities which they
may intend to purchase and which meet the Fund's social criteria. 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 Portfolios intends to
purchase. Prior to its expiration, a call option may be sold in a closing
sale transaction. Any profit or loss from such a sale will depend on whether
the amount received is more or less than the premium paid for the call
option plus the related transaction costs.
Covered Options. These Portfolios may write only covered options on equity
and debt securities in standard contracts traded on national securities
exchanges. This means that, in the case of call options, so long as a
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.
These Portfolios may purchase securities which may be covered with
call options solely on the basis of considerations consistent with the
investment objectives and policies of the Fund and the affected 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 Portfolios can close out
their respective positions in exchange-traded options only on an exchange
which provides a secondary market in such options. Although these Portfolios
intend 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 Portfolios from closing an options
position, which could impair the Portfolios' 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.
Futures Transactions. These Portfolios may purchase and sell futures
contracts, but only when, in the judgment of the Advisor, such a position
acts as a hedge against market changes which would adversely affect the
securities held by the Portfolios. These futures contracts may include, but
are not limited to, market index futures contracts and futures contracts
based on US Government obligations.
A futures contract is an agreement between two parties to buy and
sell a security on a future date which has the effect of establishing the
current price for the security. Although futures contracts by their terms
require actual delivery and acceptance of securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery of securities. Upon buying or selling a futures contract,
the Portfolio deposits initial margin with its custodian, and thereafter
daily payments of maintenance margin are made to and from the executing
broker. Payments of maintenance margin reflect changes in the value of the
futures contract, with the Portfolio being obligated to make such payments
if its futures position becomes less valuable and entitled to receive such
payments if its positions become more valuable.
These Portfolios may only invest in futures contracts to hedge
their respective existing investment positions and not for income
enhancement, speculation or leverage purposes. Although some of the
securities underlying a futures contract may not necessarily meet the Fund's
social criteria, any such hedge position taken by these Portfolios will not
constitute a direct ownership interest in the underlying securities.
Futures contracts are designed by boards of trade which are
designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"). As series of a registered investment company, the Portfolios are
eligible for exclusion from the CFTC's definition of "commodity pool
operator," meaning that the Portfolios may invest in futures contracts under
specified conditions without registering with the CFTC. Futures contracts
trade on contracts markets in a manner that is similar to the way a stock
trades on a stock exchange and the boards of trade, through their clearing
corporations, guarantee performance of the contracts.
Options on Futures Contracts. These Portfolios may purchase and write put or
call options and sell call options on futures contracts in which a Portfolio
could otherwise invest and which are traded on a US exchange or board of
trade. The Portfolios may also enter into closing transactions with respect
to such options to terminate an existing position; that is, to sell a put
option already owned and to buy a call option to close a position where the
Portfolio has already sold a corresponding call option.
The Portfolios may only invest in options on futures contracts to
hedge their respective existing investment positions and not for income
enhancement, speculation or leverage purposes. Although some of the
securities underlying the futures contract underlying the option may not
necessarily meet the Fund's social criteria, any such hedge position taken
by these Portfolios will not constitute a direct ownership interest in the
underlying securities.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract-a
long position if the option is a call and a short position if the option is
a put-at a specified exercise price at any time during the period of the
option. The Portfolios will pay a premium for such options purchased or
sold. In connection with such options bought or sold, the Portfolios will
make initial margin deposits and make or receive maintenance margin payments
which reflect changes in the market value of such options. This arrangement
is similar to the margin arrangements applicable to futures contracts
described above.
Put Options on Futures Contracts. The purchase of put options on futures
contracts is analogous to the sale of futures contracts and is used to
protect the portfolios against the risk of declining prices. These
Portfolios may purchase put options and sell put options on futures
contracts that are already owned by that Portfolio. The Portfolios will only
engage in the purchase of put options and the sale of covered put options on
market index futures for hedging purposes.
Call Options on Futures Contracts. The sale of call options on futures
contracts is analogous to the sale of futures contracts and is used to
protect the portfolios against the risk of declining prices. The purchase of
call options on futures contracts is analogous to the purchase of a futures
contract. These Portfolios may only buy call options to close an existing
position where the Portfolio has already sold a corresponding call option,
or for a cash hedge. The Portfolios will only engage in the sale of call
options and the purchase of call options to cover for hedging purposes.
Writing Call Options on Futures Contracts. The writing of call options on
futures contracts constitutes a partial hedge against declining prices of
the securities deliverable upon exercise of the futures contract. If the
futures contract price at expiration is below the exercise price, the
Portfolios will retain the full amount of the option premium which provides
a partial hedge against any decline that may have occurred in the
Portfolio's securities holdings.
Risks of Options and Futures Contracts. If one of these Portfolios has sold
futures or takes options positions to hedge its portfolio against decline in
the market and the market later advances, the Portfolio may suffer a loss on
the futures contracts or options which it would not have experienced if it
had not hedged. Correlation is also imperfect between movements in the
prices of futures contracts and movements in prices of the securities which
are the subject of the hedge. Thus the price of the futures contract or
option may move more than or less than the price of the securities being
hedged. Where a Portfolio has sold futures or taken options positions to
hedge against decline in the market, the market may advance and the value of
the securities held in the Portfolio may decline. If this were to occur, the
Portfolio might lose money on the futures contracts or options and also
experience a decline in the value of its portfolio securities. However,
although this might occur for a brief period or to a slight degree, the
value of a diversified portfolio will tend to move in the direction of the
market generally.
The Portfolios can close out futures positions only on an exchange
or board of trade which provides a secondary market in such futures.
Although the Portfolios intend to purchase or sell only such futures for
which an active secondary market appears to exist, there can be no assurance
that such a market will exist for any particular futures contract at any
particular time. This might prevent the Portfolios from closing a futures
position, which could require a Portfolio to make daily cash payments with
respect to its position in the event of adverse price movements.
Options on futures transactions bear several risks apart from those
inherent in options transactions generally. The Portfolios' ability to close
out their options positions in futures contracts will depend upon whether an
active secondary market for such options develops and is in existence at the
time the Portfolios seek to close their positions. There can be no assurance
that such a market will develop or exist. Therefore, the Portfolios might be
required to exercise the options to realize any profit.
LENDING PORTFOLIO SECURITIES
The Portfolios may lend its securities to member firms of the New
York Stock Exchange and commercial banks with assets of one billion dollars
or more. Any such loans must be secured continuously in the form of cash or
cash equivalents such as US Treasury bills. The amount of the collateral
must on a current basis equal or exceed the market value of the loaned
securities, and the Portfolios must be able to terminate such loans upon
notice at any time. The Portfolios will exercise their right to terminate a
securities loan in order to preserve their right to vote upon matters of
importance affecting holders of the securities.
The advantage of such loans is that the Portfolios continues to
receive the equivalent of the interest earned or dividends paid by the
issuers on the loaned securities while at the same time earning interest on
the cash or equivalent collateral which may be invested in accordance with
the Portfolios' investment objective, policies and restrictions.
Securities loans are usually made to broker-dealers and other
financial institutions to facilitate their delivery of such securities. As
with any extension of credit, there may be risks of delay in recovery and
possibly loss of rights in the loaned securities should the borrower of the
loaned securities fail financially. However, the Portfolios will make loans
of their securities only to those firms the Advisor or Subadvisor deems
creditworthy and only on terms the Advisor believes should compensate for
such risk. On termination of the loan, the borrower is obligated to return
the securities to the Portfolio. The Portfolio will recognize any gain or
loss in the market value of the securities during the loan period. The
Portfolio may pay reasonable custodial fees in connection with the loan.
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INVESTMENT RESTRICTIONS
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Fundamental Investment Restrictions
Each 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 affected
Portfolio.
(1) CSIF Money market, Balanced, Equity, and Managed
Index: Each Portfolio may not make any investment
inconsistent with its classification as a diversified
investment company under the 1940 Act.
(2) CSIF Bond: CSIF Bond Portfolio may not make any
investment inconsistent with its classification as a
nondiversified investment company under the 1940 Act.
(3) No Portfolio may concentrate its investments in the
securities of issuers primarily engaged in any particular
industry (other than securities issued or guaranteed by
the US Government or its agencies or instrumentalities and
repurchase agreements secured thereby), or, for CSIF Money
Market, domestic bank money market instruments.
(4) No Portfolio may 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 a 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, the
affected Portfolio may pledge, mortgage or hypothecate its
assets.
(4) No Portfolio may underwrite the securities of other
issuers, except as allowed by law or to the extent that
the purchase of 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) No Portfolio may 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) No Portfolio may 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
a 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.
Money Market Portfolio may not:
(1) Purchase the obligations of foreign issuers (except
foreign money market instruments that are US dollar
denominated).
(2) Purchase illiquid securities if more than 10% of the
value of the Portfolio's net assets would be invested in
such securities.
(3) Make short sales of securities or purchase any
securities on margin.
(4) Write, purchase or sell puts, calls or combinations
thereof.
(5) Enter into reverse repurchase agreements if the aggregate
proceeds from outstanding reverse repurchase agreements, when added
to other outstanding borrowings permitted by the 1940 Act, would
exceed 33 1/3% of its total assets. CSIF Money Market does not
intend to make any purchases of securities if borrowing exceeds 5%
of its total assets.
Balanced, Equity, and Bond Portfolios may not:
(1) Purchase the obligations of foreign issuers if, as a
result, such securities would exceed 25% of the value of
the Portfolio's assets.
(2) Purchase illiquid securities if more than 15% of the
value of that Portfolio's net assets would be invested in
such securities.
(3) Make short sales of securities or purchase any
securities on margin except as provided with respect to
options, futures contracts, and options on futures
contracts.
(4) Enter into a futures contract or an option on a futures
contract if the aggregate initial margins and premiums required to
establish these positions would exceed 5% of the Portfolio's net
assets.
(5) Enter into reverse repurchase agreements if the aggregate
proceeds from outstanding reverse repurchase agreements, when added
to other outstanding borrowings permitted by the 1940 Act, would
exceed 33 1/3% of a Portfolio's total assets. No Portfolio intends
to make any purchases of securities if borrowing exceeds 5% of its
total assets.
(6) Purchase a put or call option on a security (including a
straddle or spread) if the value of that option premium, when
aggregated with the premiums on all other options on securities
held by the Portfolio, would exceed 5% of the Portfolio's total
assets.
Index Portfolio may not:
(1) Purchase the obligations of foreign issuers.
(2) Purchase illiquid securities if more than 15% of the value of
the Portfolio's net assets would be invested in such securities.
(3) Purchase debt securities (other than money market instruments).
(4) Enter into a futures contract or an option on a futures
contract if the aggregate initial margins and premiums required to
establish these positions would exceed 5% of the Portfolio's net
assets.
(5) Make short sales of securities or purchase any
securities on margin except as provided with respect to
options, futures contracts and options on futures
contracts.
(6) Purchase a put or call option on a security (including a
straddle or spread) if the value of that option premium, when
aggregated with the premiums on all other options on securities
held by the Portfolio, would exceed 5% of the Portfolio's total
assets.
(7) Enter into reverse repurchase agreements if the aggregate
proceeds from outstanding reverse repurchase agreements, when added
to other outstanding borrowings permitted by the 1940 Act, would
exceed 33 1/3% of the Portfolio's total assets. The Portfolio does
not intend to make any purchases of securities if borrowing exceeds
5% of its total assets.
Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the applicable percentage occurs immediately after an acquisition of
securities or utilization of assets and results therefrom.
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INVESTMENT SELECTION PROCESS
- ------------------------------------------------------------------------------
Investments in the Fund are selected on the basis of their ability
to contribute to the dual objective of the Fund, (i.e., those that satisfy
the Fund's investment and social criteria). The Fund has developed a number
of techniques for evaluating the performance of issuers in each of these
areas. The primary sources of information are reports published by the
issuers themselves, the reports of public agencies, and the reports of
groups which monitor performance in particular areas. These sources of
information are sometimes augmented with direct interviews or written
questionnaires addressed to the issuers. It should be recognized, however,
that there are few generally accepted measures by which achievement in these
areas can be readily distinguished; therefore, the development of suitable
measurement techniques is largely within the discretion and judgment of the
Advisors of the Fund.
Candidates for inclusion in any particular class of assets are then
examined according to the social criteria. Issuers are classified into three
categories of suitability under the social criteria. In the first category
are those issuers, which exhibit unusual positive accomplishment with
respect to some of the criteria and do not fail to meet minimum standards
with respect to the remaining criteria. To the greatest extent possible,
investment selections are made from this group. In the second category are
those issuers, which meet minimum standards with respect to all the criteria
but do not exhibit outstanding accomplishment with respect to any criterion.
This category includes issuers which may lack an affirmative record of
accomplishment in these areas but which are not known by Advisors to violate
any of the social criteria. The third category under the social criteria
consists of issuers who flagrantly violate, or have violated, one or more of
those values, for example, a company, which repeatedly engages in unfair
labor practices. The Fund will not knowingly purchase the securities of
issuers in this third category.
It should be noted that the Fund's social criteria tend to limit
the availability of investment opportunities more than is customary with
other investment companies. The Advisors of the Fund, however, believe that
within the first and second categories there are sufficient investment
opportunities to permit full investment among issuers, which satisfy the
Fund's social investment objective.
To the greatest extent possible, the Advisors apply the same social
criteria to the purchase of non-equity securities as it applies to equity
investments. With respect to government securities, the Money Market
Portfolio invests primarily in debt obligations issued or guaranteed by
agencies or instrumentalities of the Federal Government whose purposes
further or are compatible with the Fund's social criteria, such as
obligations of the Bank for Cooperatives and the Student Loan Marketing
Association, rather than general obligations of the Federal Government, such
as Treasury securities. Bank certificates of deposit, commercial paper,
repurchase agreements, and corporate bonds are judged in the same way as a
prospective purchase of the bank's or issuing company's common stock. The
Fund may invest, however, in certificates of deposit of banks and savings
and loan associations in which the Fund would not otherwise invest because
such institutions have assets of $1 billion or less, but generally only to
the extent all such investments are fully insured as to principal by the
Federal Deposit Insurance Corporation.
Obligations issued by the US Treasury, such as US Treasury bills,
notes and bonds, are supported by the full faith and credit of the US
Government. Certain obligations issued or guaranteed by an US Government
agency or instrumentality are supported by the full faith and credit of the
US Government. These include obligations issued by the Export-Import Bank,
Farmers Home Administration, Government National Mortgage Association,
Postal Service, Merchant Marine, and Washington Metropolitan Area Transit
Authority. The Fund may also invest in other US Government agency or
instrumentality obligations, which are supported only by the credit of the
agency or instrumentality and may be further supported by the right of the
issuer to borrow from the US Treasury. Such obligations include securities
issued by the Bank for Cooperatives, Federal Intermediate Credit Bank,
Federal Land Bank, Federal Home Loan Bank, Federal Home Loan Mortgage
Corporation, and Federal National Mortgage Association.
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DIVIDENDS, DISTRIBUTIONS AND TAXES
- ------------------------------------------------------------------------------
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.
Distributions of realized net capital gains, if any, are normally
paid once a year; however, the Fund does not intend to make any such
distributions unless available capital loss carryovers, if any, have been
used or have expired. Capital loss carryforwards as of September 30, 1998,
for the Money Market Portfolio was $29,000, Managed Growth Portfolio was $0,
Bond Portfolio was $0, Equity Portfolio was $0, and Managed Index Portfolio
was $0.
Generally, dividends (including short-term capital gains) and
distributions are taxable to the shareholder in the year they are paid.
However, any dividends and distributions paid in January but declared during
the prior three months are taxable in the year declared.
The Fund is required to withhold 31% of any reportable dividends
and long-term capital gain distributions paid and 31% of each reportable
redemption transaction occurring in the Balanced, Equity, Bond, and Managed
Index Portfolios if: (a) the shareholder's social security number or other
taxpayer identification number ("TIN") is not provided or an obviously
incorrect TIN is provided; (b) the shareholder does not certify under
penalties of perjury that the TIN provided is the shareholder's correct TIN
and that the shareholder is not subject to backup withholding under section
3406(a)(1)(C) of the Internal Revenue Code because of underreporting
(however, failure to provide certification as to the application of section
3406(a)(1)(C) will result only in backup withholding on dividends, not on
redemptions); or (c) the Fund is notified by the Internal Revenue Service
that the TIN provided by the shareholder is incorrect or that there has been
underreporting of interest or dividends by the shareholder. Affected
shareholders will receive statements at least annually specifying the amount
withheld.
In addition, the Fund is required to report to the Internal Revenue
Service the following information with respect to each redemption
transaction occurring in the Fund (not applicable to Money Market
Portfolio): (a) the shareholder's name, address, account number and taxpayer
identification number; (b) the total dollar value of the redemptions; and
(c) the Fund's identifying CUSIP number.
Certain shareholders are, however, exempt from the backup
withholding and broker reporting requirements. Exempt shareholders include:
corporations; financial institutions; tax-exempt organizations; individual
retirement plans; the US, a State, the District of Columbia, a US
possession, a foreign government, an international organization, or any
political subdivision, agency or instrumentality of any of the foregoing; US
registered commodities or securities dealers; real estate investment trusts;
registered investment companies; bank common trust funds; certain charitable
trusts; foreign central banks of issue. Non-resident aliens, certain foreign
partnerships and foreign corporations are generally not subject to either
requirement but may instead be subject to withholding under sections 1441 or
1442 of the Internal Revenue Code. Shareholders claiming exemption from
backup withholding and broker reporting should call or write the Fund for
further information.
Many states do not tax the portion of the Fund's dividends which is
derived from interest on US Government obligations. State law varies
considerably concerning the tax status of dividends derived from US
Government obligations. Accordingly, shareholders should consult their tax
advisors about the tax status of dividends and distributions from the Fund
in their respective jurisdictions.
Dividends paid by the Fund may be eligible for the dividends
received deduction available to corporate taxpayers. Information concerning
the tax status of dividends and distributions and the amount of dividends
withheld, if any, is mailed annually to Fund shareholders.
Investors should note that they may be required to exclude the
initial sales charge, if any, paid on the purchase of Fund 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 Fund 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.
- ------------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------------
Shares of the Money Market Portfolio are issued and redeemed at the
net asset value per share of the Portfolio. The public offering price of the
shares of the Balanced, Equity, Bond, and Managed Index Portfolios is the
respective net asset value per share (plus, for Class A shares, the
applicable sales charge). Shares of the other Portfolios are redeemed at
their respective net asset values per share, less any applicable contingent
deferred sales charge ("CDSC"). The Money Market Portfolio attempts to
maintain a constant net asset value of $1.00 per share; the net asset values
of the other Portfolios fluctuate based on the respective market value of
the Portfolios' investments. The net asset value per share of each of the
Portfolios is determined every business day as of the close of the New York
Stock Exchange (normally 4:00 p.m. Eastern time) and at such other times as
may be necessary or appropriate. The Fund does not determine net asset value
on certain national holidays or other days on which the New York Stock
Exchange is closed: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day,
and Christmas Day. The Portfolio's net asset value per share is determined
by dividing the total net assets (the value of its assets net of
liabilities, including accrued expenses and fees) by the number of shares
outstanding for each class.
The assets of the Balanced, Equity, Bond and Managed Index
Portfolios are valued as follows: (a) securities for which market quotations
are readily available are valued at the most recent closing price, mean
between bid and asked price, or yield equivalent as obtained from one or
more market makers for such securities; (b) securities maturing within 60
days may be valued at cost, plus or minus any amortized discount or premium,
unless the Board of Trustees determines such method not to be appropriate
under the circumstances; and (c) all other securities and assets for which
market quotations are not readily available will be fairly valued by the
Advisor in good faith under the supervision of the Board of Trustees.
The Money Market Portfolio's assets, including securities subject
to repurchase agreements, 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.
Net Asset Value and Offering Price Per Share, as of 9/30/98
CSIF Money Market Portfolio
($172,738,893/172,700,524 shares) $1.00
CSIF Balanced Portfolio
Net asset value per share
($673,906,995/20,768,354 shares) $32.45
Maximum sales charge, Class A
(4.75% of offering price) 1.54
Offering price per share, Class A $33.99
Class B net asset value and offering price per share
($2,540,141/78,440 shares) $32.38
Class C net asset value and offering price per share
($11,482,726/358,253 shares) $32.05
CSIF Bond Portfolio
Net asset value per share
($65,806,586/3,897,466 shares) $16.88
Maximum sales charge
(3.75% of offering price) .63
Offering price per share $17.51
Class B net asset value and offering price per share
($556,972/33,081 shares) $16.84
Class C net asset value and offering price per share
($399,075/23,697 shares) $16.84
CSIF Equity Portfolio
Net asset value per share
($128,683,076/6,319,836 shares) $20.36
Maximum sales charge, Class A
(4.75% of offering price) .97
Offering price per share, Class A $21.33
Class B net asset value and offering price per share
($1,670,337/82,447 shares) $20.26
Class C net asset value and offering price per share
($5,981,089/314,868 shares) $19.00
CSIF Managed Index Portfolio
Net asset value per share
($4,400,710/324,918 shares) $13.54
Maximum sales charge, Class A
(4.75% of offering price) .64
Offering price per share, Class A $14.18
Class B net asset value and offering price per share
($974,587/72,272 shares) $13.48
Class C net asset value and offering price per share
($397,066/29,363 shares) $13.52
Class I net asset value and offering price per share
($14,896,813/1,100,007 shares) $13.54
- ------------------------------------------------------------------------------
CALCULATION OF YIELD AND TOTAL RETURN
- ------------------------------------------------------------------------------
Money Market Portfolio: Yield
From time to time, the Money Market Portfolio advertises its
"yield" and "effective yield." Both yield figures are based on historical
earnings and are not intended to indicate future performance. The "yield" of
the Money Market Portfolio refers to the actual income generated by an
investment in the Portfolio over a particular base period of time. 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
The "effective yield" is calculated like yield, but assumes
reinvestment of earned income. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed
reinvestment. For the seven-day period ended September 30, 1998, the Money
Market Portfolio's yield was 4.78% and its effective yield was 4.90%.
Bond Portfolio: Yield
The Bond Portfolio may also advertise its yield from time to time.
Yield is calculated separately for each Class of the Portfolio. Yield
quotations are historical and are not intended to indicate future
performance. Yield quotations for the Bond 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 semiannual, basis. The Bond 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 using the
aggregate imputed yield-to maturity for each of the Portfolio's investments
as noted above; 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 Bond
Portfolio's yield for the month ended September 30, 1998 was 5.56% for Class
A shares, 4.33% for Class B shares, and 4.56% for Class C shares.
The yield of both the Money Market and Bond Portfolios will
fluctuate in response to changes in interest rates and general economic
conditions, portfolio quality, portfolio maturity, and operating expenses.
Yield is not fixed or insured and therefore is not comparable to a savings
or other similar type of account. Yield during any particular time period
should not be considered an indication of future yield. It is, however,
useful in evaluating a Portfolio's performance in meeting its investment
objective.
Balanced, Equity, Bond, and Managed Index Portfolios: Total Return and Other
Quotations
The Balanced, Equity, Bond, and Managed Index Portfolios may each
advertise "total return." Total return is calculated separately for each
class. Total return differs from yield in that yield figures measure only
the income component of a Portfolio's investments, while total return
includes not only the effect of income dividends but also any change in net
asset value, or principal amount, during the stated period. Total return is
computed by taking the total number of shares purchased by a hypothetical
$1,000 investment after deducting any applicable sales charge, adding all
additional shares purchased within the period with reinvested dividends and
distributions, calculating the value of those shares at the end of the
period, and dividing the result by the initial $1,000 investment. 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" (or "w/o max load") as referred to herein. For periods
of more than one year, the cumulative total return is then adjusted for the
number of years, taking compounding into account, to calculate average
annual total return during that period.
Total return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000; T = total return; n =
number of years; and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period.
Total return is historical in nature and is not intended to
indicate future performance. All total return quotations reflect the
deduction of the Portfolio's maximum sales charge, except quotations of
"return without maximum load" (or "without CDSC") which do not deduct sales
charge, and "actual return," which reflect deduction of the sales charge
only for those periods when a sales charge was actually imposed. Return
without maximum load, which will be higher than total return, should be
considered only by investors, such as participants in certain pension plans,
to whom the sales charge does not apply, or for purposes of comparison only
with comparable figures which also do not reflect sales charges, such as
Lipper averages.
Return for the Balanced, Bond, Equity, and Managed Index
Portfolios' shares for the periods indicated are as follows:
- ------------------------------------------------------------------------------
Periods Ended Class A
September 30, 1998 Total Return
With/Without Maximum Load
- ------------------------------------------------------------------------------
Balanced Portfolio
One Year 0.46% 5.50%
Five Years 8.99% 10.05%
Ten Years 9.63% 10.17%
From Inception 11.15% N/A
(October 21, 1982, for Class A)
- ------------------------------------------------------------------------------
Periods Ended Class B
September 30, 1998 Total Return
With/Without CDSC
- ------------------------------------------------------------------------------
Balanced Portfolio
One Year N/A N/A
Five Years N/A N/A
Ten Years N/A N/A
From Inception -9.85% -5.10%
(March 31, 1998, for Class B)
- ------------------------------------------------------------------------------
Periods Ended Class C
September 30, 1998 Total Return
With/Without CDSC
- ------------------------------------------------------------------------------
Balanced Portfolio
One Year 3.35% 4.35%
Five Years N/A N/A
Ten Years N/A N/A
From Inception 9.70% 9.70%
(March 1, 1994, for Class C)
- ------------------------------------------------------------------------------
Bond Portfolio Class A
One Year 4.38% 8.46%
Five Years 4.84% 5.65%
Ten Years 8.07% 8.48%
From Inception N/A N/A
(August 24, 1987, for Class A)
- ------------------------------------------------------------------------------
Bond Portfolio Class B
One Year N/A N/A
Five Years N/A N/A
Ten Years N/A N/A
From Inception -0.64% 3.36%
(March 31, 1998, for Class B)
- ------------------------------------------------------------------------------
Bond Portfolio Class C
One Year N/A N/A
Five Years N/A N/A
Ten Years N/A N/A
From Inception 0.42% 1.75%
(June 1, 1998, for Class C)
- ------------------------------------------------------------------------------
Equity Portfolio Class A
One Year -19.78% -15.70%
Five Years 5.72% 6.76%
Ten Years 7.73% 8.26%
From Inception N/A N/A
(August 24, 1987, for Class A)
- ------------------------------------------------------------------------------
Equity Portfolio Class B
One Year N/A N/A
Five Years N/A N/A
Ten Years N/A N/A
From Inception -26.11% -22.11
(March 31, 1998, for Class B)
- ------------------------------------------------------------------------------
Equity Portfolio Class C
One Year N/A -16.47
Five Years N/A N/A
Ten Years N/A N/A
From Inception -17.30% 4.97%
(March 1, 1994, for Class C)
- ------------------------------------------------------------------------------
Managed Index Portfolio Class A
One Year N/A N/A
From Inception -14.10% -9.73 -14.63%
(August 15, 1998, for Class A)
- ------------------------------------------------------------------------------
Managed Index Portfolio Class B
One Year N/A N/A
From Inception -14.63% -10.13%
(April 15, 1998, for Class B)
- ------------------------------------------------------------------------------
Managed Index Portfolio Class C
One Year N/A N/A
From Inception -7.82% -6.89%
(June 1, 1998 for Class C)
The Class A total return figures above and the Bond Portfolio yield
figures above were calculated using the maximum sales charge in effect at
that time. CAM assumed active management of the Bond Portfolio effective
March, 1997, new sub-advisors assumed management of the Equity Portfolio
effective September 1998, and new sub-advisors assumed management of the
Balanced Portfolio effective July, 1995. Total return, like yield and net
asset value per share, fluctuates in response to changes in market
conditions. Neither total return nor yield for any particular time period
should be considered an indication of future return.
The Fund may advertise an internal rate of return ("IRR") on direct
company holdings in its special equities program. This is a non-standardized
performance calculation. See the explanation in the "Advertising" portion of
this Statement, below. These direct company holdings represent only a very
small portion of a Portfolio's assets, and the IRR on this part of the
special equities program should not be confused with the yield and total
return of any particular Portfolio.
- ------------------------------------------------------------------------------
PURCHASE AND REDEMPTION 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 of any Portfolio. A
service fee of $10, plus any costs incurred by the Fund, will be charged
investors whose purchase checks are returned for insufficient funds. See the
prospectus for more details on purchases and redemptions.
Shareholders in the Money Market Portfolio wishing to have drafts
should complete the signature card enclosed with the Investment Application.
Existing shareholders may arrange for draft writing by contacting the Fund
for a signature card. Other documentation may be required from corporations,
fiduciaries and institutional investors. This draft writing service will be
subject to the customary rules and regulations governing checking accounts,
and the Fund reserves the right to change or suspend the service. Generally,
there is no charge to you for the maintenance of this service or for the
clearance of drafts, but the Fund reserves the right to charge a service fee
for drafts returned for insufficient or uncollected funds. 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 may be returned. This draft writing procedure for redemption
enables shareholders to receive the daily dividends declared on the shares
to be redeemed until such time as the draft is presented to the custodian
bank for payment. 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.
Redemption proceeds are normally paid in cash. However, at the sole
discretion of the Fund, 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, or as
allowed by law.
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 Securities and Exchange Commission, or if the Commission has ordered
such a suspension for the protection of shareholders.
- ------------------------------------------------------------------------------
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.
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.
The IRR includes direct investments in companies only (no funds,
partnerships, or financial institutions). It is based on annual cash flows
beginning with the first direct investment on December 18, 1992 to the date
shown in the advertisement. Cash outflows include all disbursements to
companies, including follow-ons. The IRR assumes full exercise of warrant
positions in the year of calculation if not previously exercised. Cash
inflows includes all receipts from acquisitions and earnouts. It also
assumes positions are fully liquidated in the year of calculation. Public
company holdings are liquidated at market price, including warrants; others
are liquidated at carrying value whether marked up, down, or at cost. All
but a small portion of these returns are unrealized. The IRR on direct
company holdings in the special equities program of the Fund's Balanced
Portfolio was 4.29% from December 18, 1992 through September 30, 1998. Past
performance is no guarantee of future results.
- ------------------------------------------------------------------------------
TRUSTEES, OFFICERS, AND ADVISORY COUNCIL
- ------------------------------------------------------------------------------
The Fund's Board of Trustees supervises the Fund's activities and
reviews its contracts with companies that provide it with services. Business
information is provided below about the trustees.
REBECCA ADAMSON, Trustee. Since 1983, Ms. Adamson has served as
President of the national non-profit, First Nations Financial Project.
Founded by her in 1980, First Nations is the only American Indian
alternative development institute in the country. She is on the Board of
Directors of the Calvert Social Investment Foundation. DOB: 9/10/47.
Address: First Nations Development Institute, 11917 Main Street,
Fredericksburg, Virginia 22408.
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice
President for the Family Health Council, Inc. in Pittsburgh, Pennsylvania, a
non-profit corporation that 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: 5/9/48. Address: 211
Overlook Drive, Pittsburgh, Pennsylvania 15216.
*JOHN G. GUFFEY, JR., Trustee. Executive Vice President and
Trustee. Mr. Guffey is Executive Vice President of Calvert Social Investment
Fund. He is on the Board of Directors of the Calvert Social Investment
Foundation, organizing director of the Community Capital Bank in Brooklyn,
New York, and a financial consultant to various organizations. In addition,
he is a director of the Community Bankers Mutual Fund of Denver, Colorado, a
director of Ariel Funds, and the Treasurer and Director of Silby, Guffey,
and Co., Inc., a venture capital firm. Mr. Guffey is a trustee/director of
each of the other investment companies in the Calvert Group of Funds, except
for Calvert Variable Series, Inc. and Calvert New World Fund, Inc.
Mr. Guffey has been advised that the Securities and Exchange
Commission ("SEC") has entered an order against him relating to his former
service as a director of Community Bankers Mutual Fund, Inc. This fund is
not connected with any Calvert Fund or the Calvert Group and ceased
operations in September, 1994. Mr. Guffey consented to the entry of the
order without admitting or denying the findings in the order. The order
contains findings (1) that the Community Bankers Mutual Fund's prospectus
and statement of additional information were materially false and misleading
because they misstated or failed to state material facts concerning the
pricing of fund shares and the percentage of illiquid securities in the
fund's portfolio and that Mr. Guffey, as a member of the fund's board,
should have known of these misstatements and therefore violated the
Securities Act of 1933; (2) that the price of the fund's shares sold to the
public was not based on the current net asset value of the shares, in
violation of the Investment Company Act of 1940 (the "Investment Company
Act"); and (3) that the board of the fund, including Mr. Guffey, violated
the Investment Company Act by directing the filing of a materially false
registration statement. The order directed Mr. Guffey to cease and desist
from committing or causing future violations and to pay a civil penalty of
$5,000. The SEC placed no restrictions on Mr. Guffey's continuing to serve
as a Trustee or Director of mutual funds. DOB: 05/15/48. Address: 7205
Pomander Lane, Chevy Chase, Maryland 20815.
JOY V. JONES, Esq., Trustee. Ms. Jones is an attorney and
entertainment manager in New York City. Ms. Jones is also Chairman of the
Board of Ultrafem, Inc. Trustee of Sarah Lawrence College, a member of the
Association of Black Women Attorneys, Inc., and a Trustee of the Community
Service Society of New York. DOB: 7/2/50. Address: 175 West 12th Street, New
York, New York 10011.
*BARBARA J. KRUMSIEK, Senior Vice 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, as well as Senior Vice President of Calvert Social Investment Fund.
Ms. Krumsiek is on the Board of Directors of the Calvert Social Investment
Foundation. Prior to joining Calvert Group, Ms. Krumsiek served as a
Managing Director of Alliance Fund Distributors, Inc. DOB: 08/09/52.
TERRENCE J. MOLLNER, Ed.D., Trustee. Dr. Mollner is Founder,
Chairperson, and President of Trusteeship Institute, Inc., a diverse
foundation known principally for its consultation to corporations converting
to cooperative employee-ownership. He is also a director of Calvert World
Values Fund, Inc. He served as a Trustee of the Cooperative Fund of New
England, Inc., and is now a member of its Board of Advisors. In addition,
Dr. Mollner is a founder and member of the Board of Trustees of the
Foundation for Soviet-American Economic Cooperation and is on the Board of
Directors of the Calvert Social Investment Foundation.
On October 8, 1998, Mr. Mollner declared and filed for personal
bankruptcy protection under Chapter 7 of the Federal Bankruptcy Code. The
cause of Mr. Mollner's financial difficulties was losses sustained in
trading in the options and futures market. DOB: 12/13/44. Address: 15
Edwards Square, Northampton, Massachusetts 01060.
SYDNEY AMARA MORRIS, Trustee. Rev. Morris is Senior Minister of the
Unitarian Church of Vancouver, Canada. She previously served as Minister of
the Unitarian-Universalist Fellowship in Ames, Iowa. Rev. Morris is a
graduate of the Harvard Divinity School. DOB: 9/7/49. Address: 1225 W. 26th
Avenue, Vancouver, British Columbia, Canada V6H2A8.
*CHARLES T. NASON, Trustee. Mr. Nason serves as Chairman, President
and Chief Executive Officer of The Acacia Group, a Washington, D.C.-based
financial services organization, including Acacia Mutual Life Insurance
Company and Calvert Group, Ltd. He is a Director of Calvert Administrative
Services Company, Inc., Calvert Asset Management Company, Inc., Calvert
Shareholder Services, Inc., and The Advisor Group, Inc. DOB: 4/22/46.
Address: 7315 Wisconsin Avenue, Bethesda, Maryland 20814.
*D. WAYNE SILBY, Esq., President and 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,
Inc. He is the President of Calvert Social Investment 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 and Chairman of the Calvert
Social Investment Foundation. DOB: 7/20/48. Address: 1715 18th Street, N.W.,
Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is Senior Vice
President of Calvert Group, Ltd., and Senior Vice President and Chief
Investment Officer of Calvert Asset Management Company, Inc. Mr. Martini is
also a director and President of Calvert-Sloan Advisers, L.L.C., and a
director and officer of Calvert New World Fund. 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: 7/24/52.
WILLIAM M. TARTIKOFF, Esq., Vice President and Assistant 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: 8/12/47.
CATHERINE S. BARDSLEY, Esq., Secretary. Ms. Bardsley is counsel to
Kirkpatrick & Lockhart, LLP, the Fund's legal counsel. DOB: 10/4/49.
Address: 1800 Massachusetts Avenue, N.W., Washington, D.C. 20036.
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: 9/9/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender 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:
1/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of
each of the other investment companies in the Calvert Group of Funds. DOB:
10/21/56.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is Associate
General Counsel of Calvert Group and an officer of each of its subsidiaries
and Calvert-Sloan Advisers, L.L.C. She is also an officer of each of the
other investment companies in the Calvert Group of Funds and Secretary and
provides counsel to the Calvert Social Investment Foundation. Prior to
working at Calvert Group, Ms. Duke was an Associate in the Investment
Management Group of the Business and Finance Department at Drinker Biddle &
Reath. DOB: 09/07/68.
The address of Trustee 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 each Portfolio's
outstanding shares. Trustees marked with an *, above, are "interested
persons" of the Fund, under the Investment Company Act of 1940.
Mr. Baird and Ms. Adamson serve as the Fund's representatives to
the respective Audit Committees of the other investment companies in the
Calvert Group of Funds; and Rev. Morris, Dr. Mollner, and Ms. Jones serve as
the Fund's representatives to the respective Investment Policy Committees of
the other investment companies in the Calvert Group of Funds. Ms. Adamson,
Dr. Mollner, and Mr. Silby serve on the Fund's High Social Impact
Investments Committee which assists the Fund in identifying, evaluating and
selecting investments in securities that offer a rate of return below the
then-prevailing market rate and that present attractive opportunities for
furthering the Fund's social criteria. Ms. Jones, Rev. Morris, and Messrs.
Guffey and Silby serve on the Fund's Special Equities Committee which
assists the Fund in identifying, evaluating, and selecting appropriate
special equity investment opportunities for the Fund.
The Advisory Council is a resource to the Fund's Board of Trustees
regarding communications networks for the Fund and the application and
refinement of the Fund's social criteria. The Advisory Council has no power,
authority, or responsibility with respect to the management of the Fund or
the conduct of the affairs of the Fund. Messrs. Silby, Guffey, Mollner and
Baird, Ms. Adamson, Ms. Jones, Rev. Morris, and Ms. Krumsiek and Mr. Bynum
of the Advisory Council, serve as directors of Calvert Social Investment
Foundation, a non-profit organization formed to increase awareness and
educate the general public about the benefits of socially conscious
investing. The Foundation is not directly affiliated with Calvert Group.
During fiscal 1998, trustees of the Fund not affiliated with the
Fund's Advisor were paid $43,289 by the Money Market Portfolio, $179,492 by
the Balanced Portfolio, $15,807 by the Bond Portfolio, $45,492 by the Equity
Portfolio, and $943 by the Managed Index Portfolio. Trustees of the Fund not
affiliated with the Advisor presently receive an annual fee of $20,500 for
service as a member of the Board of Trustees of the Calvert Group of Funds,
and a fee of $750 to $1500 for each regular Board or Committee meeting
attended; such fees are allocated among the respective Portfolios based upon
their relative net assets. Trustees who serve only the CSIF Board receive an
annual fee of $15,430, plus $600 for each Board and Committee meeting
attended.
Trustees of the Fund not affiliated with the Fund's Advisor may
elect to defer receipt of all or a percentage of their fees and invest them
in any fund in the Calvert Family of Funds through the Trustees Deferred
Compensation Plan (shown as "Pension or Retirement Benefits Accrued as part
of Fund Expenses," below). Deferral of the fees is designed to maintain the
parties in the same position as if the fees were paid on a current basis.
Management believes this will have a negligible effect on the Fund's assets,
liabilities, net assets, and net income per share.
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
Rebecca Adamson $22,878 $5,317 $24,831
Richard L. Baird, Jr. $1,845 $0 $35,800
John G. Guffey, Jr. $11,252 $0 $54,715
Joy V. Jones $30,081 $0 $30,081
Terrence J. Mollner $34,020 $0 $44,731
Sydney Amara Morris $23,631 $12,000 $23,631
D. Wayne Silby $20,375 $0 $60,831
*Ms. Adamson and Rev. Morris have chosen to defer a portion of their
compensation. As of September 30, 1998, total deferred compensation,
including dividends and capital appreciation, was $48,868.45, and
$11,410.96, for each trustee, respectively.
**As of September 30, 1998. The Fund Complex consists of nine (9) registered
investment companies.
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INVESTMENT ADVISOR
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The Fund's Investment Advisor is Calvert Asset Management Company,
Inc., 4550 Montgomery Avenue, 1000N, Bethesda, Maryland 20814, a subsidiary
of Calvert Group Ltd., which is a subsidiary of Acacia Mutual Life Insurance
Company of Washington, D.C. ("Acacia Mutual"). Effective January 1, 1999,
Acacia merged with and became a subsidiary of Ameritas Acacia Mutual Holding
Company. Under the Advisory Contract, the Advisor provides investment advice
to the Fund and oversees its day-to-day operations, subject to direction and
control by the Fund's Board of Trustees. The Advisor provides the Funds with
investment supervision and management, and office space; furnishes executive
and other personnel to the Funds; and pays the salaries and fees of all
Trustees/Directors who are employees of the Advisor or its affiliates. The
Fund pays all other administrative and operating expenses, including:
custodial, registrar, dividend disbursing and transfer agency fees;
administrative service fees; federal and state securities registration fees;
salaries, fees and expenses of trustees, executive officers and employees of
the Fund, and Advisory Council members, who are not employees of the Advisor
or of its affiliates; insurance premiums; trade association dues; legal and
audit fees; interest, taxes and other business fees; expenses of printing
and mailing reports, notices, prospectuses, and proxy material to
shareholders; annual shareholders' meeting expenses; and brokerage
commissions and other costs associated with the purchase and sale of
portfolio securities.
Under a new advisory agreement approved by shareholders in early
1999, the Advisor receives an annual fee, payable monthly, of 0.425% of the
first $500 million of the Balanced Portfolio's average daily net assets,
0.35% of the next $500 million of such assets, and 0.325% of all assets
above $1 billion; 0.35% of the Bond Portfolio's average daily net assets;
0.50% of the Equity Portfolio's average daily net assets; 0.30% of the Money
Market Portfolio's average daily net assets and 0.60% of the Managed Index
Portfolio's average daily net assets.*
The Advisor reserves the right to (i) waive all or a part of its
fee; (ii) reimburse the Fund for expenses; and (iii) pay broker-dealers in
consideration of their promotional or administrative services.
The Advisor may, but is not required to waive current payment of
its fees, or to reimburse expenses of the Fund. The Advisor has agreed to
reimburse the Money Market, Balanced, and Bond Portfolios for their
respective operating expenses (excluding brokerage, taxes, interest,
Distribution Plan expenses and extraordinary items, and, with respect to the
Balanced Portfolio, performance fees earned) exceeding, on a pro rata basis,
1.5% of the first $30 million of the respective Portfolio's average daily
net assets, and 1% of such assets in excess of $30 million.
Any fees the current payment of which is waived by the Advisor and
any expenses paid on behalf of or reimbursed to the Managed Index Portfolio
by the Advisor through February 29, 2000, may be recaptured by the Advisor
from the Portfolio during the two years beginning March 1, 2000, and ending
February 28, 2002. Such recapture shall only be made to the extent that it
does not result in the Portfolio's Class A aggregate expenses exceeding on
an annual basis 2.00% of Class A average daily net assets, and 3.25%, 3.25%,
and 1.25%, respectively, for Class B, Class C and Class I. The Advisor may
voluntarily make additional fee waivers or expense reimbursements with
respect to the Portfolio from March 1, 2000 through February 28, 2002,
("Additional Period"); provided, however, that (a) any fees the current
payment of which is waived by the Advisor and any expenses paid on behalf of
or reimbursed to the Portfolio by the Advisor during the Additional Period
may be recaptured by the Advisor from the Portfolio during the two years
beginning on March 1, 2002 and ending February 29, 2004 and (b) such
recapture shall only be made to the extent that it does not result in the
Portfolio's Class A aggregate expenses exceeding on an annual basis 2.00% of
Class A average daily net assets, and 3.25%, 3.25% and 1.25%, respectively,
for Class B, Class C and Class I.
Subadvisors
Brown Capital Management, Inc. is controlled by Eddie C. Brown. It
receives a subadvisory fee, paid by the Advisor, of 0.25% of net assets.
NCM Capital Management Group, Inc. is a subsidiary of the North
Carolina Mutual Life Insurance Company. It receives a subadvisory fee, paid
by the Advisor, of 0.25% of net assets.
Atlanta Capital Management Company is owned and operated by six
partners. For its services to CSIF Equity, it receives a subadvisory fee,
paid by the Advisor, of 0.30% of the assets it manages for CSIF Equity.
State Street Global Advisors is a division of State Street Bank and
Trust. It receives a subadvisor fee paid by the Advisor, of 0.35% of the
Portfolio's first $100 million of average net assets and 0.25% of any such
assets over $100 million, subject to a minimum annual fee of $150,000.
The Fund has received an exemptive order to permit the Fund and the
Advisor to enter into and materially amend the Investment Subadvisory
Agreement without shareholder approval. The order is currently applicable to
the Equity and Managed Index Portfolio. Authorization for the Advisor to act
on the order with respect to the other Portfolios is currently pending
shareholder approval. If approved, then within 90 days of the hiring of any
Subadvisor or the implementation of any proposed material change in the
Investment Subadvisory Agreement, the Portfolio will furnish its
shareholders information about the new Subadvisor or Investment Subadvisory
Agreement that would be included in a proxy statement. Such information will
include any change in such disclosure caused by the addition of a new
Subadvisor or any proposed material change in the Investment Subadvisory
Agreement of the Portfolio. The Portfolio will meet this condition by
providing shareholders, within 90 days of the hiring of the Subadvisor or
implementation of any material change to the terms of an Investment
Subadvisory Agreement, with an information statement to this effect.
The advisory fees paid to the Advisor by the Money Market Portfolio
for the fiscal years ended September 30, 1996, 1997, and 1998 were $809,573,
$829,686, and $846,146, respectively. The advisory fees paid to the Advisor
by the Balanced Portfolio for the same years were $4,054,218, $3,739,407,
and $4,374,411, respectively. The advisory fees paid to the Advisor for
these years by the Bond Portfolio were $421,016, $363,612, and $345,357; by
the Equity Portfolio $496,208, $683,046, and $889,599; and by the Managed
Index Portfolio $54,079 (date of inception April 15, 1998).
Calvert Administrative Services Company ("CASC"), an affiliate of
the Advisor, has been retained by the Fund to provide certain administrative
services necessary to the conduct of its affairs, including the preparation
of regulatory filings and shareholder reports. For providing such services,
CASC receives an annual administrative service fee payable monthly (as a
percentage of net assets) as follows:
Class A, B, and C Class I
Balanced 0.275% 0.125%
Bond 0.30% 0.10%
Equity 0.20% 0.10%
Managed Index 0.15% 0.10%
Money Market 0.20% N/A
From its inception through September 30, 1998, Managed Index
Portfolio paid $9,840 to CASC in administrative fees. The other Portfolios
will begin to pay CASC an administrative service fee in 1999. For those
Portfolios with multiple classes, investment advisory fees are allocated as
a Portfolio-level expense based on net assets. Administrative service fees
are allocated as a class-level expense, again based on net assets.
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METHOD OF DISTRIBUTION
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Calvert Distributors, Inc. ("CDI") is the principal underwriter and
distributor for the Fund. Under the terms of its underwriting agreement with
the Funds, CDI markets and distributes the Fund's shares and is responsible
for preparing advertising and sales literature, and printing and mailing
prospectuses to prospective investors.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted Distribution Plans (the "Plans") which permit the Fund
to pay certain expenses associated with the distribution and servicing of
its shares. Such expenses for Class A shares may not exceed, on an annual
basis, 0.35% of the Balanced, Equity and Bond Portfolios' respective average
daily net assets and 0.25% of the Money Market and Managed Index Portfolios'
average daily net assets. However, the Fund's Board of Trustees has
determined that, until further action by the Board, no Portfolio shall pay
Class A distribution expenses in excess of 0.25% of its average daily net
assets; and further, that Class A distribution expenses only be charged on
the average daily net assets of the Balanced Portfolio in excess of
$30,000,000.
Expenses under the Fund's Class B and Class C Plans may not exceed,
on an annual basis, 1.00% of the Balanced, Bond, Equity and Managed Index
Portfolios' Class B and Class C average daily net assets, respectively.
Class A Distribution Plans reimburse CDI only for expenses it incurs, while
the Class B and C Distribution Plans compensate CDI at a set rate regardless
of CDI's expenses.
The Fund's Distribution Plans were approved by the Board of
Trustees, including the Trustees who are not "interested persons" of the
Fund (as that term is defined in the Investment Company Act of 1940) and who
have no direct or indirect financial interest in the operation of the Plans
or in any agreements related to the Plans. The selection and nomination of
the Trustees who are not interested persons of the Fund is committed to the
discretion of such disinterested Trustees. In establishing the Plans, the
Trustees considered various factors including the amount of the distribution
expenses. The Trustees determined that there is a reasonable likelihood that
the Plans will benefit the Fund and its shareholders.
The Plans may be terminated by vote of a majority of the
non-interested Trustees who have no direct or indirect financial interest in
the Plans, or by vote of a majority of the outstanding shares of the
affected class or Portfolio of the Fund. If the Fund should ever switch to a
new principal underwriter without terminating the Class B Plan, the fee
would be prorated between CDI and the new principal underwriter. Any change
in the Plans that would materially increase the distribution cost to a
Portfolio requires approval of the shareholders of the affected class;
otherwise, the Plans may be amended by the Trustees, including a majority of
the non-interested Trustees as described above. The Plans will continue in
effect 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 Plans or interested persons of any such party and who
have no direct or indirect financial interest in the Plans, and (ii) the
vote of a majority of the entire Board of Trustees.
Apart from the Plans, the Advisor and CDI, at their own expense,
may incur costs and pay expenses associated with the distribution of shares
of the Fund.
CDI, makes a continuous offering of the Fund's securities on a
"best efforts" basis. Under the terms of the agreement, CDI is entitled to
receive, pursuant to the Distribution Plans, a distribution fee and a
service fee from the Fund based on the average daily net assets of each
Portfolio's respective Classes. These fees are paid pursuant to the Fund's
Distribution Plan. The Distribution Plan Expenses (includes both
distribution fees and services fees) paid by each fund (all classes) to CDI
for the fiscal year ended September 30, 1998, is as follows:
Distribution Plan Expenses
Money Market $0
Balanced $1,765,329
Bond $127,076
Equity $425,952
Managed Index $6,150
Of the distribution expenses paid by Class A Shares of the
Balanced, Bond, Equity, and Managed Index Portfolios in fiscal year 1998,
$966,729, $123,575, $324,734, and $2,476, respectively, was used to
compensate dealers for their share distribution promotional services.
$686,974, $1,549, $25,536, and $984 was used for the printing and mailing of
prospectuses and sales materials to investors (other than current
shareholders), and the remainder partially financed advertising.
CSIF Balanced, Equity, and Managed Index Portfolios
Class A shares are offered at net asset value plus a front-end sales charge
as follows:
As a % of As a % of Allowed to
Amount of offering net amount Brokers as a %
Investment price invested of offering
price
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less than $100,000 3.75% 3.90% 3.00%
$100,000 but less than $250,000 2.75% 2.83% 2.25%
$250,000 but less than $500,000 1.75% 1.78% 1.25%
$500,000 but less than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.00%
CSIF Bond Portfolio
Class A Shares are offered at net asset value plus a front-end sales charge
as follows:
As a % of As a % of Allowed to
Amount of offering net amount Brokers as a %
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 or CDSC paid. A portion of
the front-end sales charge may be reallowed to dealers. The aggregate amount
of sales charges (gross underwriting commissions) and for Class A only, the
net amount retained by CDI (i.e., not reallowed to dealers) for the last 3
fiscal years are:
Fiscal Years 1996
Class A Gross/Net
Balanced $1,177,181 $405,789
Bond $161,888 $56,699
Equity $365,789 $129,525
Managed Index $0 $0
Fiscal Years 1997
Class A Gross/Net
Balanced $934,782 $331,679
Bond $136,085 $53,362
Equity $557,333 $211,952
Managed Index $0 $0
Fiscal Years 1998
Class A Gross/Net
Balanced $969,119 $356,525
Bond $138,075 $54,024
Equity $585,617 $216,176
Managed Index $32,049 $4,026
Fiscal Year 1996 1997 1998
Class B
Balanced NA NA $309
Bond NA NA $0
Equity NA NA $1,517
Managed Index NA NA $164
Fiscal Year 1996 1997 1998
Class C
Balanced NA NA $36
Bond NA NA $0
Equity NA NA $13
Managed Index NA NA $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 (e.g., group retirement
plans) are exempt due to economies of scale in distribution. See Exhibit A
to the Prospectus.
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TRANSFER AND SHAREHOLDER SERVICING AGENTS
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National Financial Data Services, Inc. ("NFDS"), a subsidiary of
State Street Bank & Trust, has been retained by the Fund to act as transfer
agent and dividend disbursing agent. These responsibilities include:
responding to certain shareholder inquiries and instructions, crediting and
debiting shareholder accounts for purchases and redemptions of Fund shares
and confirming such transactions, and daily updating of shareholder accounts
to reflect declaration and payment of dividends.
Calvert Shareholder Services, Inc., a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, has been retained by the Fund to act as shareholder
servicing agent. Shareholder servicing responsibilities include responding
to shareholder inquiries and instructions concerning their accounts,
entering any telephoned purchases or redemptions into the NFDS system,
maintenance of broker-dealer data, and preparing and distributing statements
to shareholders regarding their accounts. Calvert Shareholder Services, Inc.
was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services, Inc.
receive a fee based on the number of shareholder accounts and transactions.
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PORTFOLIO TRANSACTIONS
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Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. The Fund's Advisor and
Subadvisors make 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
Balanced $693,085 $547,048 $542,108
Equity $352,527 $329,488 $487,723
Bond $0 $0 $0
Managed Index $0 $0 $9,405
The Fund did not pay any brokerage commissions to affiliated
persons during the last three fiscal years.
While the Fund's Advisor and Subadvisor(s) 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. Other such
services are designed primarily to assist the Advisor in monitoring the
investment activities of the Subadvisor(s) of the Fund. Such services
include portfolio attribution systems, return-based style analysis, and
trade-execution analysis.
If, in the judgment of the Advisor or Subadvisor(s), 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 September 30, 1998, the Fund, through its
Advisor and/or Subadvisors, directed brokerage for research services in the
following amounts:
Related
Portfolio Amount of Transactions Commissions
Balanced $484,312,613 $542,108
Equity $313,651,712 $487,723
Bond $0 $0
Managed Index $0 $0
The Portfolio turnover rates for the last two fiscal years are as
follows:
1997 1998
Balanced 215% 185%
Equity 93% 110%
Bond 319% 620%
Managed Index N/A N/A
The turnover of the Bond Portfolio increased significantly from
fiscal year 1997 to 1998. This increase was due to the implementation of the
Advisor's more active trading strategy.
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INDEPENDENT ACCOUNTANTS AND CUSTODIANS
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PricewaterhouseCoopers LLP has been selected by the Board of
Trustees to serve as independent accountants for fiscal year 1999. State
Street Bank & Trust Company, N.A., 225 Franklin Street, Boston, MA 02110,
serves as custodian of the Fund'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. The custodians have no part
in deciding the Fund's investment policies or the choice of securities that
are to be purchased or sold for the Fund's Portfolios.
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CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ------------------------------------------------------------------------------
As of January 19, 1999, the following shareholders owned of record
5% or more of the class of the Fund shown:
Name and Address % of Ownership
Money Market Portfolio
United Mine Workers of America 5.46%
Washington, D.C.
Fleet National Bank 5.13%
Rochester, New York
Bond Portfolio
Prudential Securities 5.11%, Class B
FBO F. Caplan Trust
Amherst, Massachusetts
Prudential Securities 6.01%, Class B
FBO P. Lichterman
Madison, Wisconsin
Beverly Williams Trust 7.62%, Class C
Chesterfield, Missouri
NFSC FEBO W. Wilkie 8.04%, Class C
Honolulu, Hawaii
Managed Index Portfolio
Robert Thompson 6.63%, Class B
Seattle, Washington
General Teamsters Local #174 24.22%, Class C
Seattle, Washington
Resources Trust IRA 11.86%, Class C
FBO M. Akiyama-Worley
Denver, Colorado
Acacia Retirement Plan 100%, Class I
Bethesda, Maryland
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GENERAL INFORMATION
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CSIF is an open-end diversified management investment company,
organized as a Massachusetts business trust on December 14, 1981. Prior to
December 1, 1998, the Balanced Portfolio was named the Managed Growth
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 also 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 Balanced, Equity, and Managed Index Portfolios
each offer four separate classes of shares: Class A, Class B, Class C and
Class I. The Bond Portfolio offers Class A, Class B and Class C. 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).
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APPENDIX
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CORPORATE BOND AND COMMERCIAL PAPER RATINGS
Corporate Bonds:
Description of Moody's Investors Service Inc.'s/Standard & Poor's bond
ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to
pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and in
the majority of instances they differ from AAA issues only in small degree.
They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in higher rated categories.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay
interest and repay principal. The higher the degree of speculation, the
lower the rating. While such debt will likely have some quality and
protective characteristics, these are outweighed by large uncertainties or
major risk exposure to adverse conditions.
C/C: This rating is only for income bonds on which no interest is
being paid.
D: Debt in default; payment of interest and/or principal is in
arrears.
Commercial Paper Ratings:
MOODY'S INVESTORS SERVICE, INC.:
The Prime rating is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are
the following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Issuers within this Prime category may be given ratings 1, 2,
or 3, depending on the relative strengths of these factors.
STANDARD & POOR'S CORPORATION:
Commercial paper rated A by Standard & Poor's has the following
characteristics: (i) liquidity ratios are adequate to meet cash
requirements; (ii) long-term senior debt rating should be A or better,
although in some cases BBB credits may be allowed if other factors outweigh
the BBB; (iii) the issuer should have access to at least two additional
channels of borrowing; (iv) basic earnings and cash flow should have an
upward trend with allowances made for unusual circumstances; and (v)
typically the issuer's industry should be well established and the issuer
should have a strong position within its industry and the reliability and
quality of management should be unquestioned. Issuers rated A are further
referred to by use of numbers 1, 2 and 3 to denote the relative strength
within this highest classification.
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)
Authorized Signer
Address
Date
Signature of Investor(s)
Date
Signature of Investor(s)
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TRANSFER AGENT
National Financial Data Services, Inc.
1004 Baltimore
6th Floor
Kansas City, Missouri 64105
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers
250 West Pratt Street
Baltimore, Maryland 21201
