PROSPECTUS AND PROXY STATEMENT -February 1, 1996
Acquisition of the assets of Calvert U.S. Government Fund
By and in exchange for shares of Calvert Income Fund
4550 Montgomery Avenue, Bethesda, Maryland 20814 - (800) 368-2745
This Prospectus and Proxy Statement relates to the proposed
transfer of all the assets and the assumption of certain identified
liabilities of the Calvert U.S. Government Fund ("Government Fund") to
the Calvert Income Fund ("Income Fund") (collectively, "the Funds") in
exchange for like shares of Income Fund. Following the transfer, Income
Fund shares will be distributed to shareholders of Government Fund in
liquidation of Government Fund, and Government Fund will be dissolved.
As a result of the proposed transaction, each shareholder of Government
Fund will receive that number of like Income Fund shares equal in value
at the date of the exchange to the value of such shareholder's shares of
Government Fund. The transaction will occur if shareholders vote in
favor of the proposed transfer.
Income Fund is a series of The Calvert Fund ("Calvert"), which
is an open-end management investment company. The net assets of Income
Fund were $43,402,592 as of September 30, 1995. Its investment objective
is to maximize long-term income, to the extent consistent with prudent
investment management and preservation of capital, primarily through
investment in investment grade bonds and other income producing
securities. Income Fund is non-diversified. Debt securities may be
long-term, intermediate-term, short-term, or any combination thereof,
depending on the Advisor's evaluation of current and anticipated trends.
Government Fund is also a series of Calvert, with assets of
$9,472,160 as of September 30, 1995. Its investment objective is to seek
to provide high current income consistent with safety of principal by
investing in a professionally managed portfolio consisting primarily of
U.S. Government-backed obligations. There is no limitation on the
maturity of obligations in which Government Fund may invest.
Income Fund and Government Fund both have a 3.75% maximum sales
charge for Class A Shares. The sales charge is added to the purchase
price of shares, but will not be applied to shares issued in the
reorganization (see "Purchase Procedures"). Class C Shares have a level
load charged as higher expenses rather than a front-end sales charge.
Both funds have distribution plans that permit them to pay certain
expenses associated with the distribution of their shares. Calvert Asset
Management Company, Inc. ("Advisor") is the investment advisor for both
Income Fund and Government Fund.
This Prospectus and Proxy Statement is expected to be mailed to
shareholders of record on or about February 12, 1996.
This Prospectus and Proxy Statement, which should be retained
for future reference, sets forth concisely the information about Income
Fund that a prospective investor should know before investing. This
Prospectus and Proxy Statement is accompanied by the Prospectus of
Income Fund dated January 31, 1996 and is incorporated herein by reference.
A Statement of Additional Information dated January 31, 1996 containing
additional information has been filed with the Securities and Exchange
Commission and is incorporated by reference into this Prospectus and
Proxy Statement. A copy of the Statement may be obtained without charge
by writing Income Fund at 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814, or by calling (800) 368-2748.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED ON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE
FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY. WHEN INVESTORS SELL SHARES OF THE
FUND, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY PAID.
<PAGE>
SUMMARY
Reasons for the Reorganization. The Board of Trustees of The
Calvert Fund (the "Trustees") have been considering the problems
inherent in the small size of the Government Fund, and have concluded
that by combining the Government Fund into the larger Income Fund, the
assets could be more efficiently managed in an effort to reduce expenses
and enhance returns. The Income Fund has more than four times the net
assets of Government Fund. At fiscal year-end, on September 30, 1995,
Income Fund had net assets of $43,402,592, compared to $9,472,160 for
Government Fund.
In evaluating the benefits of the proposed transaction, the
Board of Trustees considered the effect of the loss of a portion of the
capital loss carryforwards that might be available to Government Fund.
It has been determined that the benefits of the proposed reorganization
outweigh the uncertain potential detriment resulting from possible
constraints in the use of capital loss carryforwards. See "Information
about the Reorganization."
Proposed Transaction. The Trustees have authorized Calvert, on
behalf of the funds, to enter into an Agreement and Plan of
Reorganization (the "Agreement" or "Plan") providing for the transfer of
all the assets and liabilities of Government Fund to Income Fund in
exchange for like shares of Income Fund. Following the transfer, Income
Fund shares will be distributed to shareholders of Government Fund in
liquidation of Government Fund, and Government Fund will be dissolved.
As a result of the proposed transaction, each shareholder of Government
Fund will receive that number of full and fractional Income Fund shares
equal in class and value at the date of the exchange to the class and
value of such shareholder's shares of Government Fund. For the reasons
stated above, the Trustees, including the independent Trustees, have
concluded that the reorganization would be in the best interests of the
shareholders of Government Fund and recommend shareholder approval.
Tax Consequences. The Plan is conditioned upon receipt by
Government Fund of an opinion of counsel that no gain or loss will be
recognized by Government Fund or Government Fund shareholders as a
result of the reorganization. The tax basis of Income Fund shares
received by a shareholder will be the same as the tax basis of the
shareholder's Government Fund shares. In addition, the tax basis of
Government Fund assets in the hands of Income Fund as a result of the
reorganization will be the same as the tax basis of such assets in the
hands of Government Fund prior to the reorganization. See "Information
about the Reorganization."
Investment Policies. Shareholders should consider the
differences in investment policies between Government Fund and Income
Fund. While both Funds seek income, the Government Fund pursues high
current income, and the Income Fund seeks to maximize long-term income.
Thus, the focus of each investment portfolio is different. Government
Fund invests primarily in U.S. Government obligations. Income Fund
purchases corporate bonds and other income-producing securities,
including U.S. Government obligations. See "Comparison of Investment
Policies."
Advisory Fees, Distribution Fees and Expense Ratios. Income
Fund pays the Advisor a fee computed on average daily net assets at an
annual rate of 0.70%. Government Fund pays the Advisor a fee computed on
average daily net assets at an annual rate of 0.60%. Total Fund Operation
Expenses, however, are less for Income Fund and are not expected to increase
significantly (see "ProForma" on the next page).
<PAGE>
FUND EXPENSES: CURRENT AND PRO FORMA
CURRENT:
A. Shareholder Transaction Costs Income Income
Class A Class C
Maximum Sales Charge on Purchases 3.75% None
(as a percentage of offering price)
Contingent Deferred Sales Charge None None
B. Annual Fund Operating Expenses - Fiscal Year 1995
(as a percentage of average net assets)
Management Fees 0.70% 0.70%
Rule 12b-1 Service
and Distribution Fees 0.15% .90%
All Other Expenses
(after expesnse reimbursements
or waivers) 0.38% 1.64%
Total fund Operating Expeses
(after expense reimbursements or waivers) 1.23% 3.34%
A. Shareholder Transaction Costs U.S. Government U.S. Government
Class A Class C
Maximum Sales Charge on Purchases 3.75% None
(as a percentage of offering price)
Contingent Deferred Sales Charge None None
B. Annual Fund Operating Expenses - Fiscal Year 1995
(as a percentage of average net assets)
Management Fees 0.60% 0.60%
Rule 12b-1 Service
and Distribution Fees 0.23% 1.00%
All Other Expenses
(after expense reimbursements
or waivers) 0.77% 1.90%
Total Fund Operating Expenses
(after expense reimbursements
or waivers) 1.60% 3.50%
PRO FORMA:
A. Shareholder Transaction Costs Income Income
Class A Class C
Maximum Sales Charge on Purchases 3.75% None
(as a percentage of offering price)
Contingent Deferred Sales Charge None None
B. Pro Forma Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.70% 0.70%
Rule 12b-1 Service
and Distribution Fees 0.16% 1.00%
All Other Expenses
(after expense reimbursements
or waivers) 0.45% 1.70%
Total Fund Operating Expenses
(after expense reimbursements
or waivers) 1.31% 3.40%
C. Example: You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return;(2) redemption at the end of
each period; and (3) for Class A, payment of maximum initial sales
charge at time of purchase:
Current 1 Year 3 Years 5 Years 10 Years
Income Fund
Class A $50 $75 $103 $181
Class C $34 $103 $174 $363
Government Fund
Class A $53 $86 $121 $220
Class C $35 $107 $182 $377
PRO FORMA 1 Year 3 Years 5 Years 10 Years
Income Fund
Class A $50 $77 $107 $189
Class C $34 $104 $177 $368
The example, which is hypothetical, should not be considered a
representation of past or future expenses. Actual expenses and return
may be higher or lower than those shown.
Explanation of Table: The purpose of the table is to assist you in
understanding the various costs and expenses that an investor in the
Funds may bear directly (shareholder transaction costs) or indirectly
(annual fund operating expenses).
A. Shareholder Transaction Costs are charges you pay when you buy
or sell shares of a Fund. If you request a wire redemption of less than
$1,000, you will be charged a $5 wire fee.
B. Annual Fund Operating Expenses. Management Fees are paid by the
Funds to Calvert Asset Management Company, Inc. ("Investment Advisor")
for managing the Funds' investments and business affairs. The Funds
incur Other Expenses for maintaining shareholder records, furnishing
shareholder statements and reports, and other services. Management Fees
and Other Expenses have already been reflected in the Funds' share price
and are not charged directly to individual shareholder accounts. If
Management had not paid fees indirectly, the current Other Expenses and
Total Fund Operating Expenses for Class A Shares of Income Fund would have
been 0.41% and 1.26%, respectively. If Management had not reimbursed or
waived fees, for Class C shares of Income Fund, the current Other Expenses
and Total Fund Operating Expenses would have been 1.77% and 3.37%, respectively.
If Management had not paid fees indirectly, the current Other Expenses and
Total Fund Operating Expenses for Class A shares of Government Fund
would have been 0.79% and 1.62%, respectively. If Management had not
reimbursed or waived fees, for Class C shares of Government Fund, the
current Other Expenses and Total Fund Operating Expenses would have been
1.93% and 3.53%, respectively.
The Fund's Rule 12b-1 fees include an asset-based sales charge.
Thus, long-term shareholders in the Fund may pay more in total sales
charges than the economic equivalent of the maximum front-end sales
charge permitted by rules of the National Association of Securities
Dealers, Inc.
Under the terms of their Distribution Plans, the Funds are
permitted to pay annually a percentage of their average daily net assets
for certain expenses associated with the distribution of their shares.
The maximum percentage allowed by contract is 0.50% and 1.00% for Class
A and C Shares of the Income Fund, respectively, and 0.25% and 1.00% for
Class A and C Shares of the Government Fund, respectively. Although the
Income Fund's maximum annual Rule 12b-1 fee for Class A Shares is 0.50%,
the Income Fund currently pays 0.15%. Amounts paid by the funds to
the underwriter/distributor, Calvert Distributors, Inc. ("CDI"), under
the Class A Distribution Plan are used to pay to dealers and others,
including CDI salespersons who service accounts, service fees at an
annual rate of up to 0.25% of the average daily net asset value of Class
A shares, and to pay CDI for its marketing and distribution expenses,
including, but not limited to, preparation of advertising and sales
literature and the printing and mailing of prospectuses to prospective
investors. During the fiscal year ended September 30, 1995, Class A
Distribution Plan expenses for the Income and Government Funds were
0.15% and 0.23%, respectively. Amounts paid by the funds under the Class
C Distribution Plan are currently used by CDI to pay dealers and other
selling firms dealer-paid quarterly compensation at an annual rate of up
to 0.75%, plus a service fee of up to 0.25%, of the average daily net
asset value of each share sold by such others. For the fiscal year ended
September 30, 1995, Class C Distribution Plan expenses were 1.00% and
1.00% for the Income and Government Funds, respectively.
FINANCIAL HIGHLIGHTS
The following tables provide information about the financial history
of each Fund's Class A and C shares. They express the information in
terms of a single share outstanding for the respective Fund throughout
each period. The tables have been audited by those independent
accountants whose reports are included in the respective Annual Reports
to Shareholders of the Funds. The tables should be read in conjunction
with the financial statements and their related notes. The current
Annual Reports to Shareholders are incorporated by reference into the
Statement of Additional Information.
Calvert Income Fund Class A Shares
Year Ended
September 30, 1995
Net asset value, beginning of period $15.68
Income from investment operations
Net investment income 1.11
Net realized and unrealized gain
(loss) on investments 1.14
Total from investment operations 2.25
Distributions to shareholders
Dividends from net investment income (1.11)
Distribution from capital gains --
Total Distributions (1.11)
Total increase (decrease) in
net asset value 1.14
Net asset value, end of period $16.82
Total return<F4> 14.90%
Ratio to average net assets:
Net investment income 6.89%
Total expenses<F5> 1.26%
Net expenses 1.23%
Expenses reimbursed and/or waived --
Portfolio turnover 135%
Net assets, end of period (in thousands) $42,637
Number of shares outstanding
at end of year (in thousands) 2,535
<F4>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
<F5>Effective September 30, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly; previously such reductions
were included in the ratio.
===============================================================================
Calvert Income Fund Class A Shares
Year Ended
September 30, 1994
Net asset value, beginning of period $18.41
Income from investment operations
Net investment income 1.16
Net realized and unrealized gain
(loss) on investments (2.42)
Total from investment operations (1.26)
Distributions to shareholders
Dividends from net investment income (1.16)
Distribution from capital gains (.31)
Total Distributions (1.47)
Total increase (decrease) in
net asset value (2.73)
Net asset value, end of period $15.68
Total return<F4> (6.94)%
Ratio of expenses to average
net assets 1.07%
Ratio of net income to average
net assets 6.86%
Increase reflected in above net
investment income ratios due to
expense reimbursement --
Portfolio turnover 34%
Net assets, end of period $45,935,905
Number of shares outstanding
at end of period (in thousands) 2,929
<F4>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
===============================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1993
Net asset value, beginning of period $17.50
Income from investment operations
Net investment income 1.23
Net realized and unrealized gain
(loss) on investments .91
Total from investment operations 2.14
Distributions to shareholders
Dividends from net investment income (1.23)
Distribution from capital gains --
Total Distributions (1.23)
Total increase (decrease) in
net asset value .91
Net asset value, end of period $18.41
Total return<F5> 12.47%
Ratio of expenses to average
net assets 1.00%
Ratio of net income to average
net assets 6.93%
Increase reflected in above net
investment income ratios due to
expense reimbursement --
Portfolio turnover 25%
Net assets, end of period $53,134,459
Number of shares outstanding
at end of period (in thousands) 2,886
<F5>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1992
Net asset value, beginning of period $16.61
Income from investment operations
Net investment income 1.28
Net realized and unrealized gain
(loss) on investments .89
Total from investment operations 2.17
Distributions to shareholders
Dividends from net investment income (1.28)
Distribution from capital gains --
Total Distributions (1.28)
Total increase (decrease) in
net asset value .89
Net asset value, end of period $17.50
Total return<F5> 13.66%
Ratio of expenses to average
net assets 1.04%
Ratio of net income to average
net assets 7.59%
Increase reflected in above net
investment income ratios due to
expense reimbursement --
Portfolio turnover 18%
Net assets, end of period $43,494,326
Number of shares outstanding
at end of period (in thousands) 2,486
<F5>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1991
Net asset value, beginning of period $15.58
Income from investment operations
Net investment income 1.31
Net realized and unrealized gain
(loss) on investments 1.03
Total from investment operations 2.34
Distributions to shareholders
Dividends from net investment income (1.31)
Distribution from capital gains --
Total Distributions (1.31)
Total increase (decrease) in
net asset value 1.03
Net asset value, end of period $16.61
Total return<F6> 15.72%
Ratio of expenses to average
net assets 1.08%
Ratio of net income to average
net assets 8.22%
Increase reflected in above net
investment income ratios due to
expense reimbursement --
Portfolio turnover 27%
Net assets, end of period $36,412,545
Number of shares outstanding
at end of period (in thousands) 2,193
<F6>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1990
Net asset value, beginning of period $16.36
Income from investment operations
Net investment income 1.36
Net realized and unrealized gain
(loss) on investments (.78)
Total from investment operations .58
Distributions to shareholders
Dividends from net investment income (1.36)
Distribution from capital gains --
Total Distributions (1.36)
Total increase (decrease) in
net asset value (.78)
Net asset value, end of period $15.58
Total return<F6> 3.63%
Ratio of expenses to average
net assets 1.05%
Ratio of net income to average
net assets 8.42%
Increase reflected in above net
investment income ratios due to
expense reimbursement --
Portfolio turnover 5%
Net assets, end of period $32,201,363
Number of shares outstanding
at end of period (in thousands) 2,066
<F6>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1989
Net asset value, beginning of period $15.70
Income from investment operations
Net investment income 1.36
Net realized and unrealized gain
(loss) on investments .71
Total from investment operations 2.07
Distributions to shareholders
Dividends from net investment income (1.41)
Distribution from capital gains --
Total Distributions (1.41)
Total increase (decrease) in
net asset value .66
Net asset value, end of period $16.36
Total return<F7> 13.48%
Ratio of expenses to average
net assets 1.07%
Ratio of net income to average
net assets 8.57%
Increase reflected in above net
investment income ratios due to
expense reimbursement --
Portfolio turnover 19%
Net assets, end of period $22,969,095
Number of shares outstanding
at end of period (in thousands) 1,404
<F7>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30,
1988
Net asset value, beginning of period $15.29
Income from investment operations
Net investment income 1.42
Net realized and unrealized gain
(loss) on investments .71
Total from investment operations 2.13
Distributions to shareholders
Dividends from net investment income (1.42)
Distribution from capital gains (.30)
Total Distributions (1.72)
Total increase (decrease) in
net asset value .41
Net asset value, end of period $15.70
Total return<F7> 14.67%
Ratio of expenses to average
net assets .94%
Ratio of net income to average
net assets 9.07%
Increase reflected in above net
investment income ratios due to
expense reimbursement .25%
Portfolio turnover 37%
Net assets, end of period $20,374,751
Number of shares outstanding
at end of period (in thousands) 1,298
<F7>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1987
Net asset value, beginning of period $17.04
Income from investment operations
Net investment income 1.51
Net realized and unrealized gain
(loss) on investments (1.61)
Total from investment operations (.10)
Distributions to shareholders
Dividends from net investment income (1.47)
Distribution from capital gains (.18)
Total Distributions (1.65)
Total increase (decrease) in
net asset value (1.75)
Net asset value, end of period $15.29
Total return<F8> (.84)%
Ratio of expenses to average
net assets .85%
Ratio of net income to average
net assets 9.06%
Increase reflected in above net
investment income ratios due to
expense reimbursement .25%
Portfolio turnover 42%
Net assets, end of period $20,573,546
Number of shares outstanding
at end of period (in thousands) 1,345
<F8>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
================================================================================
Calvert Income Fund
Class A Shares
Year Ended September 30, 1986
Net asset value, beginning of period $15.78
Income from investment operations
Net investment income 1.57
Net realized and unrealized gain
(loss) on investments 1.26
Total from investment operations 2.83
Distributions to shareholders
Dividends from net investment income (1.57)
Distribution from capital gains --
Total Distributions (1.57)
Total increase (decrease) in
net asset value 1.26
Net asset value, end of period $17.04
Total return<F8> 18.38%
Ratio of expenses to average
net assets .85%
Ratio of net income to average
net assets 9.16%
Increase reflected in above net
investment income ratios due to
expense reimbursement .33%
Portfolio turnover 23%
Net assets, end of period $21,455,859
Number of shares outstanding
at end of period (in thousands) 1,259
<F8>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
===============================================================================
Calvert Income Fund Class C Shares
Year Ended
September 30, 1995
Net asset value, beginning of period $15.63
Income from investment operations
Net investment income .81
Net realized and unrealized gain
(loss) on investments 1.09
Total from investment operations 1.90
Distributions to shareholders
Dividends from net investment income (.97)
Distribution from capital gains --
Total Distributions (.97)
Total increase (decrease) in
net asset value .93
Net asset value, end of period $16.56
Total return<F4> 12.58%
Ratio to average net assets:
Net investment income 4.71%
Total expenses<F5> 3.37%
Net expenses 3.34%
Expenses reimbursed and/or waived .69%
Portfolio turnover 135%
Net assets, end of period (in thousands) $766
Number of shares outstanding
at end of period (in thousands) 46
<F4>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
<F5>Effective September 30, 1995, this ratio reflects total expenses
before reduction for fees paid indirectly; previously such reductions
were included in the ratio.
================================================================================
Calvert Income Fund Class C Shares
From Inception
(March 1, 1994) To
September 30, 1994
Net asset value, beginning of period $17.35
Income from investment operations
Net investment income .57
Net realized and unrealized gain
(loss) on investments (1.67)
Total from investment operations (1.10)
Distributions to shareholders
Dividends from net investment income (.62)
Distribution from capital gains --
Total Distributions (.62)
Total increase (decrease) in
net asset value (1.72)
Net asset value, end of period $15.63
Total return<F4> (5.47)%
Ratio of expenses to average
net assets 2.65%(a)
Ratio of net income to average
net assets 5.62%(a)
Increase reflected in above net
investment income ratios due to
expense reimbursement 7.29%(a)
Portfolio turnover 34%
Net assets, end of period $413,187
Number of shares outstanding
at end of period (in thousands) 26
<F4>Total return does not reflect deduction of Class A front-end sales
charges. Total return prior to 1989 is not audited.
(a) Annualized
================================================================================
Comparative Performance Information. Total return for the
Funds' shares for the periods indicated are as follows:
Average Annual Total Returns
For Periods Ended September 30, 1995
Income Fund Class A Class C
One year 10.59% One Year 12.58%
Five years 8.78% From inception
Ten years 9.23% (March 1, 1994) 3.35%
Government Fund Class A Class C
One year 8.13% One Year 10.21%
Five years 6.54% From inception
From inception (March 1, 1994) 3.27%
(May 22, 1986) 7.15%
The total return figures shown above include the effect of the
maximum sales charge of 3.75% for Class A Shares, changes in share
price, and reinvestment of dividends and distributions. Total return is
based on historical earnings and asset value fluctuations and is not
intended to indicate future performance. No adjustments are made to
reflect any income taxes payable by shareholders.
Krista, drop in line graph and discussion of performance from annual
report here (see marked annual report).
Purchases. Class A Shares of both Government Fund and Income
Fund are sold on a continuous basis at net asset value plus the
appropriate sales charge which is subject to reduction by right of
accumulation, group purchase, and letter of intent. Employee purchases
and certain plans qualified under the Internal Revenue Code may purchase
shares with no sales charge, and all Fund shareholders may reinvest
dividends without paying a sales charge. Class A Shares issued in the
reorganization will not be assessed any sales charge. Class C Shares do
not have a front-end sales charge.
SALES CHARGE TABLE
CLASS A SHARES
Income and Government Funds
Amount of As a % of As a % of Allowed to Dealers
Investment offering net amount as a % of offering
price invested price
Less than $50,000 3.75% 3.90% 3.00%
$50,000 but less
than $100,000 3.00% 3.09% 2.25%
$100,000 but less
than $250,000 2.25% 2.30% 1.75%
$250,000 but less
than $500,000 1.75% 1.78% 1.25%
$500,000 but less
than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.25%*
*For new investments (new purchases but not exchanges) of $1 million or
more a broker-dealer will have the choice of being paid a finder's fee
by CDI in one of the following methods: (1) CDI may pay broker-dealers,
on a monthly basis for 12 months, an annual rate of 0.30%. Payments will
be made monthly at the rate of 0.025% of the amount of the investment,
less redemptions; or (2) CDI may pay broker-dealers 0.25% of the amount
of the purchase; however, CDI reserves the right to recoup any portion
of the amount paid to the dealer if the investor redeems some or all of
the shares from the fund(s) within thirteen months of the time of
purchase.
The minimum initial investment in each fund is $2,000 and the
minimum subsequent investment is $250 (except in the case of certain
retirement plans).
Exchange Privileges. Shareholders of both Government Fund and
Income Fund may exchange fund shares for shares of a variety of other
Calvert Group funds. Each such exchange represents a sale of fund
shares, which may produce a gain or loss for tax purposes. Shares are
exchanged into the same class. There is no additional charge for
exchanges. Calvert Group discourages frequent exchanges and may prohibit
additional purchases of shares by persons who have previously been
advised that their frequent use of the exchange privilege is
inconsistent with the orderly management of the investment portfolio.
Government Fund and Income Fund reserve the right to modify or eliminate
this exchange privilege with 60 days' written notice.
Distribution Procedures. Both Government Fund and Income Fund
distribute dividends monthly and pay out their net realized capital
gains (if any) once each year. Shareholders of both funds may reinvest
distributions. Your existing election in Government Fund with respect to
dividends and/or capital gains will be continued with respect to the
shares of Income Fund you acquire in connection with the reorganization
unless you notify the Fund of a new election.
Redemption Procedures. At any time and in any amount, shares of
Government Fund and Income Fund may be redeemed by submitting a written
request by mail. All written orders for redemption, and all accompanying
certificates, must be signed by the shareholder and may be required to
be signature guaranteed by a commercial bank, savings association, trust
company or member firm of any national securities exchange. Further
documentation may be required from corporations, fiduciaries, pension
plans and institutional investors.
Shares may also be redeemed by telephone or through brokers.
Both funds impose a charge of $5.00 for wire transfers of less than
$1,000. Government Fund and Income Fund may, after 30 days' notice,
close accounts if the value of shares in the account is reduced by
redemptions to less than $1,000, and the investor fails to purchase
sufficient additional shares.
COMPARISON OF INVESTMENT POLICIES
As noted in the "Summary" above, the investment policies of the
two funds are different. While both Funds seek income, the
Government Fund invests only in U.S. Government-backed obligations to
produce high current income. Examples of U.S. Government-backed
obligations include mortgage pass-through certificates, such as GNMAs;
direct obligations of the United States Treasury, such as U.S. Treasury
bills, notes, and bonds; obligations issued or guaranteed by the U.S.
Government, its agencies or its instrumentalities; collateralized
mortgage obligations; and U.S. Government-backed obligations subject to
repurchase agreements. Income Fund can purchase not only U.S.
Government-backed obligations, but also corporate obligations, foreign
securities, and other income-producing securities.
In seeking to maximize long-term income, Income Fund invests
80% of its assets in income-producing corporate obligations and other
fixed-income securities. At least 65% of its assets at the date of investment
are rated within the four highest grades established by Moody's Investor
Services, Inc. ("Moody's"), or by Standard & Poor's Corporation ("S&P")
(grades AAA/Aaa through Baa/BBB). The remaining 35% of assets may consist
of other debt securities, including bonds rated below Baa/BBB, commonly
known as "junk bonds." With lower rated bonds, there is a greater possibility
that an adverse change in the financial condition of the issuer may affect
its ability to pay principal and interest. In addition, to the extent Income
Fund holds such bonds, it may be negatively affected by adverse economic
developments, increased volatility or a lack of liquidity.
Income Fund may also purchase obligations issued or guaranteed
as to principal by the U.S. Government or its agencies or
instrumentalities; certificates of deposit, time deposits, and bankers'
acceptances of U.S. banks and their branches located outside of the U.S.
and of U.S. branches of foreign banks, provided that the bank has total
assets of at least one billion dollars or the equivalent in other
currencies; commercial paper which at the date of investment is rated
Prime-2 or better by Moody's, A-2 or better by S&P, or, if not rated, is
of comparable quality as determined by the Advisor; and any of the above
securities subject to repurchase agreements with recognized securities
dealers and banks. Up to 20% of Income Fund's total assets may consist
of other debt securities, including securities convertible into or
carrying warrants to purchase common stock or other equity securities
and income-producing preferred and common stocks.
Income Fund is a nondiversified fund. There may be risks
associated with nondiversification. Specifically, since a relatively
high percentage of the assets may be invested in the obligations of a
limited number of issuers, the value of the shares may be more
susceptible to any single economic, political, or regulatory event than
the shares of a diversified fund.
Income Fund may invest in options and futures to increase or
decrease its exposure to changing security prices, interest rates,
currency exchange rates, or other factors that affect security value.
These techniques may involve derivative transactions such as buying and
selling options and futures contracts and leveraged notes, entering into
currency exchange contracts, or swap agreements, and purchasing indexed
securities. Income Fund can use these practices either as substitution
or as protection against an adverse move in its portfolio to adjust the
risk and return characteristics. If the Advisor judges market conditions
incorrectly or employs a strategy that does not correlate well with
Income 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 the portfolio and may
involve a small investment of cash relative to the magnitude of the risk
assumed.
INFORMATION ABOUT THE REORGANIZATION
Plan of Reorganization. The proposed Agreement and Plan of
Reorganization (the "Agreement" or "Plan") provides that Income Fund
will acquire all the assets and liabilities of Government Fund in
exchange for shares of Income Fund on the Closing Date (as defined in
Section 2(b) of the Plan). A copy of the Plan is attached as Exhibit A
to this Proxy Statement. The value of full and fractional Income Fund
shares to be issued to shareholders of Government Fund will equal the
value of the shares of Government Fund outstanding immediately prior to
the reorganization. Portfolio securities of Government Fund and Income
Fund will be valued in accordance with the valuation practices of Income
Fund which are described on page 15 of the Income Fund prospectus and on
page 13 of its Statement of Additional Information. At the time of the
reorganization, Income Fund will assume and pay all of Government Fund's
obligations and liabilities. The reorganization will be accounted for by
the method of accounting for tax-free reorganizations of investment
companies, sometimes referred to as the "pooling without restatement"
method. Any reimbursement due from the Advisor to Government Fund under
the expense limitation provision will be paid at, or prior to, the
closing.
As soon as practicable after the Closing Date, Government Fund
will liquidate and distribute pro rata to its shareholders of record as
of the close of business on the Closing Date the full and fractional
shares of Income Fund at an aggregate net asset value equal to the value
of the shareholder's investment in Government Fund next determined after
the effective time of the transaction. This method of valuation is also
consistent with interpretations of Rule 22c-1 under the Investment
Company Act of 1940 by the Securities and Exchange Commission's Division
of Investment Management. Such liquidation and distribution will be
accomplished by the establishment of accounts on the share records of
Income Fund in the name of such Government Fund shareholders, each
representing the respective pro rata number of full and fractional
shares of Income Fund due the shareholder. Certificates representing
shares of Government Fund at the Closing Date will represent the shares
of Income Fund distributed to the recordholder thereof as a result of
the liquidation of Government Fund. New certificates for Income Fund
shares will be issued only upon written request, and only upon tender of
Government Fund certificates.
The consummation of the Plan is subject to the conditions set
forth in the Agreement. The Plan may be terminated and the
reorganization abandoned at any time before or after approval by
Government Fund shareholders, prior to the Closing Date by mutual
consent of Government Fund and Income Fund, or by either if any
condition set forth in the Plan has not been fulfilled or is waived by
the party entitled to its benefits. In accordance with the Plan,
Government Fund and Income Fund will each be responsible for payment of
expenses incurred in connection with the reorganization.
Description of Income Fund Shares. Full and fractional shares
of Income Fund will be issued to Government Fund shareholders per class
in accordance with the procedures under the Plan as described above.
Each share will be fully paid and nonassessable when issued and
transferable without restrictions and will have no preemptive or
conversion rights.
Federal Income Tax Consequences. The Plan is a tax-free
reorganization pursuant to Section 368(a)(1)(C) of the Internal Revenue Code.
The Plan is conditioned upon the issuance of an opinion by outside
counsel to the Fund, to the effect that, on the basis of the existing
provisions of the Internal Revenue Code of 1986, current administrative
rules and court decisions, for federal income tax purposes: (1) No gain
or loss will be recognized by Government Fund or Income Fund upon the
transfer of Government Fund assets to, and the assumption of its
liabilities by, Income Fund in exchange for Income Fund shares (Section
1032(a)); (2) no gain or loss will be recognized by shareholders of
Government Fund upon the exchange of Government Fund shares for Income
Fund shares (Section 361(a)); (3) the basis and holding period immediately
after the reorganization for Income Fund shares received by each
Government Fund shareholder pursuant to the reorganization will be the
same as the basis and holding period of Government Fund shares held
immediately prior to the exchange (Section 354, 356); and (4) the basis and
holding period immediately after the reorganization of Government Fund
assets acquired by Income Fund will be the same as the basis and holding
period of such assets of Government Fund immediately prior to the
reorganization (Section 362(b), 1223(2)).
Opinions of counsel are not binding on the Internal Revenue
Service or the courts. If the reorganization is consummated but does not
qualify as a tax-free reorganization under the Internal Revenue Code,
the consequences described above would not be applicable. Shareholders
of Government Fund should consult their tax advisors regarding the
effect, if any, of the proposed reorganization in light of their
individual circumstances. Since the foregoing discussion relates only to
the federal income tax consequences of the reorganization, shareholders
of the Government Fund should also consult their tax advisors as to the
state and local tax consequences, if any, of the reorganization.
Other Tax Consequences. Many states do not tax income received
from U.S. Government obligations. Because of the diversity of Income Fund
investments, however, the percentage of income a shareholder receives from
U.S. Government obligations may be less than that of Government Fund.
Effect of the Reorganization on Capital Loss Carryforwards. The
following tables provide comparative information regarding realized
capital gains and losses and net unrealized appreciation or depreciation
of portfolio securities of Income Fund and Government Fund as of
September 30, 1995, and the capital loss carryforwards of each at the
end of its last fiscal year.
Income Fund
Capital Loss Carryforward at 9/30/95 $174,409
Realized gains (losses) 10/1/94 - 9/30/95 ($197,657)
Net unrealized appreciation at 9/30/95 $703,207
Government Fund
Capital Loss Carryforward at 9/30/95 $424,163
Realized gains (losses) 10/1/94 - 9/30/95 ($117,178)
Net unrealized appreciation at 9/30/95 $113,449
If the reorganization does not occur, Government Fund's capital
loss carryforwards should be available to offset any net realized
capital gains of Government Fund through 2002 and 2003. It is
anticipated that no distributions of net realized capital gains would be
made by Government Fund until the capital loss carryforwards expire or
are offset by net realized capital gains.
If the reorganization is consummated, Income Fund will be
constrained in the extent to which it can use the capital loss
carryforwards of Government Fund because of limitations imposed by the
Internal Revenue Code on the occurrence of an ownership change. Income
Fund should be able to use in each year a capital loss carryforward in
an amount equal to the value of Government Fund on the date of the
reorganization multiplied by a long-term tax-exempt rate calculated by
the Internal Revenue Service. If the amount of such a loss is not used
in one year, it may be added to the amount available for use in the next
year. For 1995, the amount of capital loss carryforward that may be used
under the formula will be further reduced to reflect the number of days
remaining in the year following the date of the reorganization.
It appears that the anticipated benefits outweigh the uncertain
potential detriment resulting from the partial loss of capital loss
carryforwards, and the differing consequences of federal and various
other income taxation on a distribution received by each shareholder
whose tax liabilities (if any) are determined by the net effect of a
multitude of considerations that are individual to the shareholder.
Government Fund shareholders who need information as to state and local
tax consequences, if any, should consult their tax advisors.
Capitalization. The following table shows the capitalization of
Government Fund and Income Fund as of September 30, 1995, and on a pro
forma basis as of that date of the proposed acquisition of assets at net
asset value:
Government Income Pro Forma
Combined*
Net Assets $9,472,160 $43,402,592 $52,874,752
Net Asset Value
Per Share, Class A $14.61 $16.82 $16.82
Net Asset Value
Per Share, Class C $14.49 $16.56 $16.56
Shares Outstanding
Class A 618,647 2,534,815 3,072,177
Shares Outstanding
Class C 30,048 46,243 72,535
*The Pro Forma combined net assets does not reflect
adjustments with respect to distributions prior to the
reorganization. Total Income Fund Class A shares issued pro
forma to Government Fund shareholders would be 537,362 and
26,292 for Class C. For each Class A share of Government Fund
shares owned, shareholders of Government Fund would receive pro
forma approximately 0.875 Class A shares of Income Fund. For
each Class C share of Government Fund shares owned,
shareholders of Government Fund would receive pro forma
approximately 0.868 Class C shares of Income Fund. The actual
exchange ratio will be determined based on the relative net
asset value per share on the acquisition date.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
Both funds are series of the same open-end management
investment company that is organized as a Massachusetts trust, and as
such share a common Declaration of Trust and Bylaws. After the merger,
the operations of the surviving fund will continue to be governed by
the Declaration of Trust and Bylaws of Calvert as it now exists.
INFORMATION ABOUT THE FUNDS
Information about each fund is included in its separate
prospectus, dated January 31, 1996. A copy of the Income Fund Prospectus
is included with this proxy statement and incorporated by reference into it.
Additional information about Income Fund and Government Fund is included in
the Statement of Additional Information, also dated January 31, 1996,
which has been filed with the Securities
and Exchange Commission and is incorporated by reference in this proxy
statement. The audited Annual Reports to Shareholders of each fund are
also incorporated by reference into this proxy statement. Copies of the
Statement of Additional Information and Annual Reports may be obtained
without charge by writing to Income Fund or Government Fund at 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814 or by calling
(800) 368-2748. Income Fund and Government Fund file proxy material,
reports and other information with the Securities and Exchange
Commission. These reports may be inspected and copied at the Public
Reference facilities maintained by the Securities and Exchange
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
the material may also be obtained from the Office of Consumer Affairs
and Information Services of the Securities and Exchange Commission at
prescribed rates.
OTHER BUSINESS
The Trustees of the Government Fund do not intend to present
any other business at the meeting. If, however, any other matters are
properly brought before the meeting, the persons named in the
accompanying form of proxy will vote thereon in accordance with their
judgment.
VOTING INFORMATION
Proxies from the shareholders of Government Fund are being
solicited by the Trustees of Calvert for the Special Meeting of
Shareholders to be held in the Tenth Floor Conference Room of Calvert
Group Ltd., Air Rights North Tower, 4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland at 10:00 a.m. on tuesday, March 26, 1996 or
at such later time or date made necessary by adjournment. A proxy may be
revoked at any time before the meeting or during the meeting by oral or
written notice to William M. Tartikoff, Esq., Secretary, 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Unless
revoked, all valid proxies will be voted in accordance with the
specification thereon or, in the absence of specification, for approval
of the Plan. Approval of the Plan will require the affirmative vote of
the holders of at least a majority of the outstanding shares of
Government Fund entitled to vote at the meeting.
Proxies are solicited by mail. Additional solicitations may be
made by telephone, computer communications, facsimile or other such
means, or by personal contact by officers or employees of Calvert Group
and its affiliates or by proxy soliciting firms retained for this
purpose. Government Fund and Income Fund will each bear their
appropriate share of solicitation costs.
Shareholders of Government Fund of record at the close of
business on February 7, 1996 ("record date") are entitled to notice
of and to vote at the Special Meeting or any adjournment thereof. The
holders of a majority of the shares of Government Fund outstanding at
the close of business on the record date present in person or
represented by proxy will constitute a quorum for the meeting; however,
as noted above, the affirmative vote of the holders of at least a
majority of the shares outstanding at the close of business on the
record date is required to approve the reorganization. Shareholders are
entitled to one vote for each share held. As of September 30, 1995, as
shown on the books of Government Fund, there were issued and
outstanding 618,647 shares of Government Fund. The votes of the
shareholders of Income Fund are not being solicited since their
approval or consent is not necessary for this transaction.
As ofJanuary 31, 1996, the officers and Trustees of
Government Fund as a group beneficially owned less than 1% of the
outstanding shares of Government Fund. To the best of the knowledge of
Government Fund, no shareholder beneficially owned 5% or more of the
outstanding shares as of January 31, 1996.
ADJOURNMENT
In the event that sufficient votes in favor of the proposals
set forth in the Notice of Meeting and Proxy Statement are not received
by the time scheduled for the meeting, the persons named as proxies may
move one or more adjournments of the meeting to permit further
solicitation of proxies with respect to any such proposals. Any such
adjournment will require the affirmative vote of a majority of the
shares present at the meeting. The persons named as proxies will vote
in favor of such adjournment those shares that they are entitled to
vote which have voted in favor of such proposals. They will vote
against any such adjournment those proxies that have voted against any
such proposals.
By Order of the
Board of Trustees
William M.
Tartikoff, Esq.
Secretary
The Trustees of The Calvert Fund, Including the Independent
Trustees, Recommend a Vote FOR Approval of the Plan.
