The Calvert Fund
Calvert Income Fund
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 1
Investment Restrictions 7
Dividends, Distributions and Taxes 9
Net Asset Value 9
Calculation of Yield and Total Return 10
Purchase and Redemption of Shares 11
Advertising 12
Trustees and Officers 12
Investment Advisor 15
Method of Distribution 16
Transfer and Shareholder Servicing Agents 17
Portfolio Transactions 17
Independent Accountants and Custodians 18
General Information 18
Control Persons and Principal Holders of Securities 18
Appendix 19
<PAGE>
INVESTMENT POLICIES AND RISKS
Foreign Securities
Investments in foreign securities may present risks not typically
involved in domestic investments. The Fund 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 Depositary 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 Fund 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 Fund changes investments from one country to
another or converts foreign securities holdings into U.S. 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.
Since investments in securities of issuers domiciled in foreign
countries usually involve currencies of the foreign countries, and since the
Fund may temporarily hold funds in foreign currencies during the completion
of investment programs, the value of the assets of the Fund 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 U.S.
dollar, the value of the security in U.S. dollars will increase or decline
correspondingly. The Fund will conduct its 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 Fund may enter into forward foreign currency contracts for two
reasons. First, the Fund 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 Fund may be able to
protect itself 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 Fund enters 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 Fund's portfolio
securities denominated in such foreign currency. The precise matching of the
forward foreign currency contract amounts and the value of the portfolio
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 Fund does 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 does 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 Fund. 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 Fund, however, the Advisor and custodian have advised the Fund 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.
INTERNATIONAL MONEY MARKET INSTRUMENTS
Calvert Income Fund may, in pursuit of its investment objective,
invest in U.S. dollar-denominated obligations of foreign branches of U.S.
banks and U.S. branches of foreign banks. Such obligations are not insured
by the Federal Deposit Insurance Corporation. Foreign and domestic bank
reserve requirements may differ. Payment of interest and principal upon
these obligations and the marketability and liquidity of such obligations in
the secondary market may also be affected by governmental action in the
country of domicile of the branch (generally referred to as "sovereign
risk"). Examples of governmental actions would be the imposition of exchange
or currency controls, interest limitations or withholding taxes on interest
income, seizure of assets, or the declaration of a moratorium on the payment
of principal or interest. In addition, evidences of ownership of portfolio
securities may be held outside of the U.S., and the Fund may be subject to
the risks associated with the holding of such property overseas.
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, U.S. 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, in pursuit of its investment objectives, purchase
debt securities subject to repurchase agreements. Repurchase agreements are
transactions in which a person purchases a security and simultaneously
commits to resell that security to the seller at a mutually agreed upon time
and price. The seller's obligation is secured by the underlying security.
The repurchase price reflects the initial purchase price plus an agreed upon
market rate of interest. While an underlying security may bear a maturity in
excess of one year, the term of the repurchase agreement is always less than
one year. Repurchase agreements not terminable within seven days are
considered illiquid. Repurchase agreements are short-term money market
investments, designed to generate current income.
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 to 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 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 Fund 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, U.S.
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.
When purchasing non-investment grade debt securities, rated or
unrated, the Advisor prepare its own careful credit analysis to attempt to
identify those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur.
DERIVATIVES
The 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 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
Covered Options. The Fund may, in pursuit of its investment
objectives, engage in the writing of covered call options in standard
contracts traded on national securities exchanges or quoted on NASDAQ,
provided that: (1) the Fund continues to own the securities covering each
call option until the call option has been exercised or until the Fund has
purchased a closing call to offset its obligation to deliver securities
pursuant to the call option it had written; and (2) the market value of all
securities covering call options in the Fund does not exceed 35% of the
market value of the Fund's net assets. The Fund may also write secured put
options against U.S. Government-backed obligations and uses a variety of
other investment techniques, seeking to hedge against changes in the general
level of interest rates, including the purchase of put and call options on
debt securities and the purchase and sale of interest rate futures contracts
and options on such futures. The Fund will not engage in such transactions
for the purpose of speculation or leverage. Such investment policies and
techniques may involve a greater degree of risk than those inherent in more
conservative investment approaches.
The Fund will not engage in options or futures transactions unless
it receives appropriate regulatory approvals permitting the Fund to engage
in such transactions. The Fund observes the following operating policy,
which may be changed without the approval of a majority of the outstanding
shares: Purchase a futures contract or an option thereon if, with respect to
positions in futures or options on futures which do not represent bonafide
hedging, the aggregate initial margin and premiums on such options would
exceed 5% of the Fund's net asset value. (See non-fundamental investment
restriction number 1.)
Covered Options on Debt Securities. The Fund may write "covered
options" on debt securities in standard contracts traded on national
securities exchanges and in the over-the-counter market. The Fund will 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.
The Fund may write only "covered options." This means that, in the
case of call options, so long as the Fund is obligated as the writer of a
call option, it will own the underlying security subject to the option and,
in the case of put options, the Fund will, through its custodian, deposit
and maintain with a securities depository U.S. Treasury obligations with a
market value equal to or greater than the exercise price of the option.
Characteristics of Covered Options. When a Fund writes a covered
call option, the Fund 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 Fund 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 Fund and thus
reduce declines in the net asset value per share of the Fund if securities
covered by such options decline in value. Exercise of a call option by the
purchaser however will cause the Fund to forego future appreciation of the
securities covered by the option.
When the Fund 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 Fund
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 Fund may realize a
loss in the amount of the difference between the exercise price and the sale
price of the security, less the premium received.
The Fund 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.
The Fund'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 Fund has not entered into a closing purchase
transaction.
Expiration of a put or call option or entry into a closing purchase
transaction will result in a short-term capital gain, unless the cost of a
closing purchase transaction exceeds the premium the Fund received when it
initially wrote the option, in which case a short-term capital loss will
result. If the purchaser exercises a put or call option, the Fund will
realize a gain or loss from the sale of the security acquired or sold
pursuant to the option, and in determining the gain or loss the premium will
be included in the proceeds of sale. To preserve the Fund's status as a
regulated investment company under Subchapter M of the Internal Revenue
Code, it is the Fund's policy to limit any gains on put or call options and
other securities held less than three months to less than 30% of the Fund's
annual gross income.
Risks Related to Options Transactions. The Fund can close out its
positions in exchange traded options only on an exchange which provides a
secondary market in such options. Although the Fund intends to acquire and
write only such exchange-traded options for which an active secondary market
appears to exist, there can be no assurance that such a market will exist
for any particular option contract at any particular time. It is difficult
to accurately predict the extent of trading interest that may develop with
respect to such options. This might prevent a Fund from closing an options
position, which could impair the Fund's ability to hedge its portfolio
effectively. Also, a Fund's inability to close out a call position may have
an adverse effect on its liquidity because the Fund may be required to hold
the securities underlying the option until the option expires or is
exercised.
The hours of trading for options on U.S. Government securities may
not correspond exactly to the hours of trading for the underlying
securities. To the extent that the options markets close before the U.S.
Government securities markets, significant movements in rates and prices may
occur in the Government securities markets that cannot be reflected in the
options markets.
Interest Rate Futures Transactions. A change in the general level
of interest rates will affect the market value of debt securities in a
Fund's portfolio. The Fund may purchase and sell interest rate futures
contracts ("futures contracts") as a hedge against changes in interest rates
in accordance with the strategies described below. 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 purchasing or selling a futures contract, the Fund 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 Fund
being obligated to make such payments if its futures position becomes less
valuable and entitled to receive such payments if its position becomes more
valuable.
Futures contracts have been designed by boards of trade which have
been designated "contract markets" by the Commodity Futures Trading
Commission ("CFTC"). As a series of a registered investment company, the
Fund is eligible for exclusion from the CFTC's definition of "commodity pool
operator," meaning that the Fund may invest in futures contracts under
specified conditions without registering with the CFTC. Futures contracts
trade on contract 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.
The purchase and sale of futures contracts is for the purpose of
hedging the Fund's holdings of long-term debt securities. Futures contracts
based on U.S. Government securities and GNMA Certificates historically have
reacted to an increase or decrease in interest rates in a manner similar to
the manner in which mortgage-related securities reacted to the change. If
interest rates increase, the value of such securities in the Fund's
portfolio would decline, but the value of a short position in futures
contracts would increase at approximately the same rate, thereby keeping the
net asset value of the Fund from declining as much as it otherwise would
have. Thus, if a Fund owns long-term securities and interest rates were
expected to increase, it might sell futures contracts rather than sell its
holdings of long-term securities. If, on the other hand, the Fund held cash
reserves and interest rates were expected to decline, the Fund might enter
into futures contracts for the purchase of U.S. Government securities or
GNMA certificates and thus take advantage of the anticipated risk in the
value of long-term securities without actually buying them until the market
had stabilized. At that time, the futures contracts could be liquidated and
the Fund's cash reserves could then be used to buy long-term securities in
the cash market. The Fund could accomplish similar results by selling
securities with long maturities and investing in securities with short
maturities when interest rates are expected to increase or by buying
securities with long maturities and selling securities with short maturities
when interest rates are expected to decline. But by using futures contracts
as an investment tool to manage risk it might be possible to accomplish the
same result easily and quickly.
Options on Futures Contracts. The Fund may purchase and write call
and put options on futures contracts which are traded on a U.S. exchange or
board of trade and enter into closing transactions with respect to such
options to terminate an existing position. 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 Fund will pay a premium for such
options which it purchases. In connection with such options which it writes,
the Fund 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.
Purchase of 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 Fund's portfolio of debt securities against the
risk of declining prices.
Purchase of Call Options on Futures Contracts. The purchase of call
options on futures contracts represents a means of obtaining temporary
exposure to market appreciation at limited risk. It is analogous to the
purchase of a futures contract and is used to protect against a market
advance when the Fund is not fully invested.
Writing Call Options on Futures Contracts. The writing of call
options on futures contracts constitutes a partial hedge against declining
prices of the debt securities which are deliverable upon exercise of the
futures contracts. If the futures contract price at expiration is below the
exercise price, the Fund will retain the full amount of the option premium
which provides a partial hedge against any decline that may have occurred in
the Fund's holdings of debt securities.
Writing Put Options on Futures Contracts. The writing of put
options on futures contracts is analogous to the purchase of futures
contracts. If an option is exercised, the net cost to the Fund of the debt
securities acquired by it will be reduced by the amount of the option
premium received. Of course, if market prices have declined, the Fund's
purchase price upon exercise may be greater than the price at which the debt
securities might be purchased in the cash market.
Risks of Options and Futures Contracts. If the Fund has sold
futures or takes options positions to hedge its portfolio against decline in
the market and the market later advances, the Fund may suffer a loss on the
futures contracts or options which it would not have experienced if it had
not hedged. The success of a hedging strategy depends on the Advisor's
ability to predict the direction of interest rates and other economic
factors. Correlation is imperfect between movements in the prices of futures
or options 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. If a
Fund used a futures or options contract to hedge against a decline in the
market, and the market later advances (or vice versa), the Fund may suffer a
greater loss than if it had not hedged.
A Fund can close out its futures positions only on an exchange or
board of trade which provides a secondary market in such futures. Although
the Fund intends 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 Fund from closing a futures position, which
could require the Fund to make daily cash payments with respect to its
position in the event of adverse price movements. In such situations, if the
Fund has insufficient cash, it may have to sell portfolio securities to meet
daily margin requirements at a time when it would be disadvantageous to do
so. The inability to close futures or options positions could have an
adverse effect on the Fund's ability to hedge effectively. There is also
risk of loss by the Fund of margin deposits in the event of bankruptcy of a
broker with whom the Fund has an open position in a futures contract. To
partially or completely offset losses on futures contracts, the Fund will
normally hold the securities against which the futures positions were taken
until the futures positions can be closed out, so that the Fund receives the
gain (if any) from the portfolio securities. This might have an adverse
effect on the Fund's overall liquidity.
Options on futures transactions bear several risks apart from those
inherent in options transactions generally. A Fund's ability to close out
its 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 Fund seeks to close its position. There can be no assurance that
such a market will develop or exist. Therefore, the Fund might be required
to exercise the options to realize any profit.
LENDING PORTFOLIO SECURITIES
The Fund may lend its portfolio 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 Fund must be able to terminate such loans upon notice at
any time. The Fund will exercise its right to terminate a securities loan in
order to preserve its right to vote upon matters of importance affecting
holders of the securities.
The advantage of such loans is that the Fund 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 Fund's
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 Fund will make loans of its
portfolio securities only to those firms the Advisor 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 Fund. The Fund will recognize any gain or loss in the market value of
the securities during the loan period. The Fund may pay reasonable custodial
fees in connection with the loan.
COLLATERALIZED MORTGAGE OBLIGATIONS
The Fund may, in pursuit of its investment objectives, invest in
collateralized mortgage obligations. Collateralized mortgage obligations
("CMOs") are fully-collateralized bonds which are general obligations of the
issuer of the bonds. CMOs are not direct obligations of the U.S. Government.
CMOs generally are secured by collateral consisting of mortgages or a pool
of mortgages. The collateral is assigned to the trustee named in the
indenture pursuant to which the bonds are issued. Payments of principal and
interest on the underlying mortgages are not passed through directly to the
holder of the CMO; rather, payments to the trustee are dedicated to payment
of interest on and repayment of principal of the CMOs. This means that the
character of payments of principal and interest is not passed through, so
that payments to holders of CMOs attributable to interest paid and principal
repaid on the underlying mortgages or pool of mortgages do not necessarily
constitute income and return of capital, respectively, to the CMO holders.
Also, because payments of principal and interest are not passed through,
CMOs secured by the same pool or mortgages may be, and frequently are,
issued with a variety of classes or series, which have different maturities
and are retired sequentially. CMOs are designed to be retired as the
underlying mortgages are repaid. In the event of prepayment on such
mortgages, the class of CMO first to mature generally will be paid down.
Thus there should be sufficient collateral to secure the CMOs that remain
outstanding even if the issuer does not supply additional collateral.
FHLMC has introduced a CMO which is a general obligation of FHLMC.
This requires FHLMC to use its general funds to make payments on the CMO if
payments from the underlying mortgages are insufficient.
U.S. GOVERNMENT-BACKED OBLIGATIONS
The Fund may, in pursuit of its investment objective, invest in
Ginnie Maes, Fannie Maes, Freddie Macs, U.S. Treasury obligations, and other
U.S. Government-backed obligations.
Ginnie Maes. Ginnie Maes, issued by the Government National
Mortgage Association, are typically interests in pools of mortgage loans
insured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled and, after
approval from GNMA, is offered to investors through various securities
dealers. GNMA is a U.S. Government corporation within the Department of
Housing and Urban Development. Ginnie Maes are backed by the full faith and
credit of the United States, which means that the U.S. Government guarantees
that interest and principal will be paid when due.
Fannie Maes and Freddie Macs. Fannie Maes and Freddie Macs are
issued by the Federal National Mortgage Association ("FNMA") and Federal
Home Loan Mortgage Corporation ("FHLMC"), respectively. Unlike GNMA
certificates, which are typically interests in pools of mortgages insured or
guaranteed by government agencies, FNMA and FHLMC certificates represent
undivided interests in pools of conventional mortgage loans. Both FNMA and
FHLMC guarantee timely payment of principal and interest on their
obligations, but this guarantee is not backed by the full faith and credit
of the U.S. Government. FNMA's guarantee is supported by its ability to
borrow from the U.S. Treasury, while FHLMC's guarantee is backed by reserves
set aside to protect holders against losses due to default.
U.S. Treasury Obligations. Direct obligations of the United States
Treasury are backed by the full faith and credit of the United States. They
differ only with respect to their rates of interest, maturities, and times
of issuance. U.S. Treasury obligations consist of: U.S. Treasury bills
(having maturities of one year or less), U.S. Treasury notes (having
maturities of one to ten years ) and U.S. Treasury bonds (generally having
maturities greater than ten years).
Other U.S. Government Obligations. The Fund may invest in other
obligations issued or guaranteed by the U.S. Government, its agencies, or
its instrumentalities. (Certain obligations issued or guaranteed by a U.S.
Government agency or instrumentality may not be backed by the full faith and
credit of the United States.)
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Fund 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 Fund.
(1) The Fund may not make any investment inconsistent with its
classification as a nondiversified investment company under the 1940 Act.
(2) The Fund may not concentrate its investments in the securities of
issuers primarily engaged in any particular industry (other than securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured thereby).
(3) The Fund may not issue senior securities or borrow money, except from
banks for temporary or emergency purposes and then only in an amount up to
33 1/3% of the value of its total assets or as permitted by law and except
by engaging in reverse repurchase agreements, where allowed. In order to
secure any permitted borrowings and reverse repurchase agreements under this
section, the Fund may pledge, mortgage or hypothecate its assets.
(4) The Fund may not underwrite the securities of other issuers, except as
permitted by the Board of Trustees within applicable law, and except to the
extent that in connection with the disposition of its portfolio securities,
the Fund may be deemed to be an underwriter.
(5) The Fund may not invest directly in commodities or real estate, although
it may invest in securities which are secured by real estate or real estate
mortgages and securities of issuers which invest or deal in commodities,
commodity futures, real estate or real estate mortgages and provided that
the Income Fund may purchase or sell stock index futures, foreign currency
futures, interest rate futures and options thereon.
(6) The Fund may not make loans, other than through the purchase of money
market instruments and repurchase agreements or by the purchase of bonds,
debentures or other debt securities, or as permitted by law. The purchase of
all or a portion of an issue of publicly or privately distributed debt
obligations in accordance with the Fund's investment objective, policies and
restrictions, shall not constitute the making of a loan.
Nonfundamental Investment Restrictions
The Board of Trustees has adopted the following nonfundamental
investment restrictions. A nonfundamental investment restriction can be
changed by the Board at any time without a shareholder vote.
(1) The Fund does not intend to make any purchases of securities if
borrowing exceeds 15% of total assets.
(2) The Fund may not purchase a futures contract or an option thereon if,
with respect to positions in futures or options on futures which do not
represent bona fide hedging, the aggregate initial margin and premiums on
such options would exceed 5% of the Fund's net asset value.
(3) The Fund may not invest in puts, calls, straddles, spread, or any
combination thereof, except to the extent permitted by the Prospectus and
Statement of Additional Information, as each may from time to time be
amended.
(4) The Fund may not effect short sales or securities, except (a) if it owns
or has the right to obtain securities equivalent in kind and amount to the
securities sold short, or (b) it may effect short sales of U.S. Treasury
securities for the limited purpose of hedging the duration of the Fund's
portfolio. For purposes of this restriction, transactions in futures
contracts and options are not deemed to constitute selling securities short.
(5) The Fund may not purchase securities on margin, except (1) for use of
short-term credit necessary for clearance of purchases and sales of
portfolio securities and (2) it may make margin deposits in connection with
futures contracts or options on futures or other permissible investments.
(6) The Fund may not invest more than 30% of its assets in the securities of
foreign issuers, including obligations of foreign branches of U.S. banks,
and U.S. branches of foreign banks.
(7) The Fund may not purchase illiquid securities if, as a result, more than
15% of its net assets would be invested in such securities.
Any investment restriction (other than those regarding borrowings and
illiquid holdings) 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.
DIVIDENDS, DISTRIBUTIONS AND TAXES
The Funds intend 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. As of September 30, 1998, the Fund had no tax-loss carryforwards.
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, 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: (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 U.S., a State, the District of Columbia, a U.S
possession, a foreign government, an international organization, or any
political subdivision, agency or instrumentality of any of the foregoing;
U.S. registered commodities or securities dealers; real estate investment
trusts; registered investment companies; bank common trust funds; certain
charitable trusts; foreign central banks of issue. Non-resident aliens also
are generally not subject to either requirement but, along with certain
foreign partnerships and foreign corporations, may instead be subject to
withholding under Section 1441 of the Internal Revenue Code. Shareholders
claiming exemption from backup withholding and broker reporting should call
or write the Fund for further information.
Dividends and distributions are automatically reinvested at net
asset value in additional shares. Shareholders may elect to have their
dividends and distributions paid out in cash, or invested at net asset value
in another Calvert Group Fund.
Distributions from realized net short-term capital gains, as well
as dividends from net investment income, are currently taxable to
shareholders as ordinary income.
Net long-term capital gains distributions, if any, will generally
be includable as long-term capital gain in the gross income of shareholders
who are citizens or residents of the United States. Whether such realized
securities gains and losses are long-term or short-term depends on the
period the securities are held by the Fund, not the period for which the
shareholder holds shares of the Fund.
Dividends and distributions are taxable regardless of whether they
are reinvested in additional shares of a Fund or not. A shareholder may also
be subject to state and local taxes on dividends and distributions from the
Fund. The Fund will notify shareholders each January as to the federal tax
status of dividends and distributions paid by the Fund and the amount of
dividends withheld, if any, during the previous fiscal year.
NET ASSET VALUE
The net asset value per share of the Fund, the price at which
shares are redeemed, is determined every business day as of 4:00 p.m.,
Eastern time, and at such other times as may be appropriate or necessary.
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 Fund'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. Portfolio securities 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.
Net Asset Value and Offering Price Per Share, as of September 30, 1998
Net asset value per share
($41,607,234 / 2,422,690 shares) $17.17
Maximum sales charge, Class A
(3.75% of offering price) 0.67
Offering price per share, Class A $17.84
CALCULATION OF YIELD AND TOTAL RETURN
YIELD
From time to time, the Fund may advertise its "yield". Yield
quotations are historical, and are not intended to indicate future
performance. "Yield" quotations refer to the aggregate imputed
yield-to-maturity of each of the Fund'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 which are entitled to receive dividends, times the
maximum offering price on the last day of the period (so that the effect of
the sales charge is included in the calculation), compounded on a "bond
equivalent," or semi-annual, basis. The Fund'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 Fund'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 Fund's yield for
the month ended September 30, 1998 was 7.51% for Class A shares.
Yield 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 the Fund's performance in
meeting its investment objective.
TOTAL RETURN
The Fund may also advertise "total return." 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. 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 (less the maximum sales
charge imposed during the period calculated); 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 Fund's maximum sales charge "return with maximum load,"
except quotations of "return without maximum load" (or without CDSC") which
do not deduct a sales charge. Thus, in the above formula, for total return,
P = the entire $1,000 hypothetical initial investment and does not reflect
the deduction of any sales charge; for actual return, P = a hypothetical
initial payment of $1,000 less any sales charge actually imposed at the
beginning of the period for which the performance is being calculated.
Return figures should be considered only by investors that qualify for a
reduced sales charge or no sales charge, such as participants in certain
pension plans, to whom the sales charge does not apply. Return figures may
also be considered for purposes of comparison only with comparable figures
which also do not reflect sales charges, such as Lipper averages.
Return for the Fund's shares for the periods indicated are as
follows:
For Periods Ended Class A
September 30, 1998 Total Return
(With/Without Maximum Load)
One Year 5.79%/9.92%
Five Years 5.34%/6.15%
Ten Years 8.54%/8.95%
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.
Amounts redeemed by check redemption may be mailed to the investor
without charge. Amounts of more than $50 and less than $300,000 may be
transferred electronically at no charge to the investor. Amounts of $1,000
or more will be transmitted by wire without charge by the Fund to the
investor's account at a domestic commercial bank that is a member of the
Federal Reserve System or to a correspondent bank. A charge of $5 is imposed
on wire transfers of less than $1,000. If the investor's bank is not a
Federal Reserve System member, failure of immediate notification to that
bank by the correspondent bank could result in a delay in crediting the
funds to the investor's bank account.
Telephone redemption requests which would require the redemption of
shares purchased by check or electronic funds transfer within the previous
10 business days may not be honored. The Fund reserves the right to modify
the telephone redemption privilege.
Existing shareholders who at any time desire to arrange for the
telephone redemption procedure, or to change instructions already given,
must send a written notice either to the broker through which the shares
were purchased or to the Fund with a voided check from the bank account to
receive the redemption proceeds. New wiring instructions may be accompanied
by a voided check in lieu of a signature guarantee. Further documentation
may be required from corporations, fiduciaries, pension plans, and
institutional investors.
The Fund's redemption check normally will be mailed to the investor
on the next business day following the date of receipt by the Fund of the
written or telephone redemption request. If the investor so instructs in the
redemption request, the check will be mailed or the redemption proceeds
wired to a predesignated account at the investor's bank. 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. Redemption proceeds
are normally mailed or wired the next business day but in no event later
than seven days after a proper redemption request has been received, unless
redemptions have been suspended or postponed as described above.
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles,
sociological conditions and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Portfolio, whether held
or not.
The Fund or its affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings,
Mutual Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker
Investment Management, Inc. Such averages generally do not reflect any
front- or back-end sales charges that may be charged by Funds in that
grouping. The Fund may also cite to any source, whether in print or on-line,
such as Bloomberg, in order to acknowledge origin of information. The Fund
may compare itself or its portfolio holdings to other investments, whether
or not issued or regulated by the securities industry, including, but not
limited to, certificates of deposit and Treasury notes. The Fund, its
Advisor, and its affiliates reserve the right to update performance rankings
as new rankings become available.
Calvert Group is the nation's leading family of socially responsible mutual
funds, both in terms of socially responsible mutual fund assets under
management, and number of socially responsible mutual fund portfolios
offered (source: Social Investment Forum, December 31, 1998). Calvert Group
was also the first to offer a family of socially responsible mutual fund
portfolios.
TRUSTEES AND OFFICERS
The Fund's Board of Trustees supervises the Fund's activities and
reviews its contracts with companies that provide it with services.
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Executive Vice
President for the Family Health Council, Inc. in Pittsburgh, Pennsylvania, a
non-profit corporation which provides family planning services, nutrition,
maternal/child health care, and various health screening services. Mr. Baird
is a trustee/director of each of the investment companies in the Calvert
Group of Funds, except for Calvert Variable Series, Inc., Calvert New World
Fund, Inc. and Calvert World Values Fund, Inc. DOB: 05/09/48. Address: 211
Overlook Drive, Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner in the
law firm of Snevily, Ely, Williams & Blatz. He was formerly a partner with
Abrams, Blatz, Gran, Hendricks & Reina, P.A. He is also a director of
Calvert Variable Series, Inc. DOB: 10/29/35. Address: 308 East Broad Street,
Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a radiologist with
Kaiser Permanente. Prior to that, he was a radiologist at Bethlehem Medical
Imaging in Allentown, Pennsylvania. DOB: 07/23/49. Address: 16 Iliahi
Street, Honolulu, Hawaii, 96817.
CHARLES E. DIEHL, Trustee. Mr. Diehl is a self-employed consultant and is
Vice President and Treasurer Emeritus of the George Washington University.
He has retired from University Support Services, Inc. of Herndon, Virginia.
Formerly, he was a Director of Acacia Mutual Life Insurance Company, and is
currently a Director of Servus Financial Corporation. DOB: 10/13/22.
Address: 1658 Quail Hollow Court, McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman is managing partner
of Feldman Otolaryngology, Head and Neck Surgery in Washington, D.C. A
graduate of Harvard Medical School, he is Associate Professor of
Otolaryngology, Head and Neck Surgery at Georgetown University and George
Washington University Medical School, and past Chairman of the Department of
Otolaryngology, Head and Neck Surgery at the Washington Hospital Center. He
is included in The Best Doctors in America. DOB: 05/23/48. Address: 7536
Pepperell Drive, Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian is President of Corporate
Finance of Washington, Inc. Formerly, he was a principal of Gavian De Vaux
Associates, an investment banking firm. He is also a Chartered Financial
Analyst and an accredited senior business appraiser. DOB: 12/08/32. Address:
3005 Franklin Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey is 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.
*BARBARA J. KRUMSIEK, President and Trustee. Ms. Krumsiek serves as
President, Chief Executive Officer and Vice Chairman of Calvert Group, Ltd.
and as an officer and director of each of its affiliated companies. She is a
director of Calvert-Sloan Advisers, L.L.C., and a trustee/director of each
of the investment companies in the Calvert Group of Funds, 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.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President and CEO of
Creative Associates International, Inc., a firm that specializes in human
resources development, information management, public affairs and private
enterprise development. She is also a director of Acacia Federal Savings
Bank. DOB: 12/08/45. Address: 5301 Wisconsin Avenue, N.W., Washington, D.C.
20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh is a Director of Calvert Variable
Series, Inc., and serves as a director of Acacia Federal Savings Bank. DOB:
09/24/37. Address: 4823 Prestwick Drive, Fairfax, Virginia 22030.
*DAVID R. ROCHAT, Senior Vice President and Trustee. Mr. Rochat is
Executive Vice President of Calvert Asset Management Company, Inc., Director
and Secretary of Grady, Berwald and Co., Inc., and Director and President of
Chelsea Securities, Inc. He is the Senior Vice President of First Variable
Rate Fund, Calvert Tax-Free Reserves, Calvert Municipal Fund, Inc., Calvert
Cash Reserves, and The Calvert Fund. DOB: 10/07/37. Address: Box 93,
Chelsea, Vermont 05038.
*D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a trustee/director of
each of the investment companies in the Calvert Group of Funds, except for
Calvert Variable Series, Inc. and Calvert New World Fund, 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 a director
and Senior Vice President of Calvert Group, Ltd., and Senior Vice President
and Chief Investment Officer of Calvert Asset Management Company, Inc. Mr.
Martini is also a director and President of Calvert-Sloan Advisers, L.L.C.,
and a director and officer of Calvert New World Fund. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior
Vice President and Chief Financial Officer of Calvert Group, Ltd. and its
subsidiaries and an officer of each of the other investment companies in the
Calvert Group of Funds. Mr. Wolfsheimer is Vice President and Treasurer of
Calvert-Sloan Advisers, L.L.C., and a director of Calvert Distributors, Inc.
DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary. Mr.
Tartikoff is an officer of each of the investment companies in the Calvert
Group of Funds, and is Senior Vice President, Secretary, and General Counsel
of Calvert Group, Ltd., and each of its subsidiaries. Mr. Tartikoff is also
Vice President and Secretary of Calvert-Sloan Advisers, L.L.C., a director
of Calvert Distributors, Inc., and is an officer of Acacia National Life
Insurance Company. DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of
Calvert Asset Management Company, Inc., and is an officer of each of the
other investment companies in the Calvert Group of Funds, except for Calvert
New World Fund, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is
Associate General Counsel of Calvert Group, Ltd. and an officer of each of
its subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer
of each of the other investment companies in the Calvert Group of Funds.
DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of
each of the other investment companies in the Calvert Group of Funds. DOB:
10/21/56.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is Associate
General Counsel of Calvert Group and an officer of each of its subsidiaries
and Calvert-Sloan Advisers, L.L.C. She is also an officer of each of the
other investment companies in the Calvert Group of Funds and Secretary and
provides counsel to the Calvert Social Investment Foundation. Prior to
working at Calvert Group, Ms. Duke was an Associate in the Investment
Management Group of the Business and Finance Department at Drinker Biddle &
Reath. DOB: 09/07/68.
The address of Trustees and Officers, unless otherwise noted, is 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Trustees and
officers of the Fund as a group own less than 1% of the Fund's outstanding
shares. Trustees marked with an *, above, are "interested persons" of the
Fund, under the Investment Company Act of 1940.
Each of the above trustees and officers is a director/trustee or
officer of each of the investment companies in the Calvert Group of Funds
with the exception of Calvert Social Investment Fund, of which only Messrs.
Baird, Guffey and Silby and Ms. Krumsiek are among the trustees, Calvert
Variable Series, Inc., of which only Messrs. Blatz, Diehl and Pugh and Ms.
Krumsiek are among the directors, Calvert World Values Fund, Inc., of which
only Messrs. Guffey and Silby and Ms. Krumsiek are among the directors, and
Calvert New World Fund, Inc., of which only Ms. Krumsiek and Mr. Martini are
among the directors.
The Audit Committee of the Board is composed of Messrs. Baird,
Blatz, Feldman, Guffey, Pugh, and Ms. Kruvant. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat, Silby, and
Ms. Krumsiek.
During fiscal 1998, trustees of the Fund not affiliated with the
Fund's Advisor were paid $4,696. 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 $1,500 for each regular Board or Committee meeting attended; such
fees are allocated among the respective Funds on the basis of net assets.
Trustees of the Fund not affiliated with the Fund's Advisor may
elect to defer receipt of all or a percentage of their fees and invest them
in any fund in the Calvert Family of Funds through the Trustees Deferred
Compensation Plan (shown as "Pension or Retirement Benefits Accrued as part
of Fund Expenses," below). Deferral of the fees is designed to maintain the
parties in the same position as if the fees were paid on a current basis.
Management believes this will have a negligible effect on the Fund's assets,
liabilities, net assets, and net income per share, and will ensure that
there is no duplication of advisory fees.
Trustee Compensation Table
Fiscal Year 1998 Aggregate Pension or Total Compensation
Compensation Retirement from Benefits
(unaudited numbers) from Registrant Accrued as Registrant and Fund
for Service part of Complex paid to
as Trustee of Registrant Trustee**
Expenses*
Name of Trustee
Richard L. Baird, Jr. $795 $0 $35,800
Frank H. Blatz, Jr. $1,054 $1,054 $40,600
Frederick T. Borts $997 $0 $32,500
Charles E. Diehl $1,035 $1,035 $38,500
Douglas E. Feldman $967 $0 $30,250
Peter W. Gavian $1,034 $517 $35,502
John G. Guffey, Jr. $1,005 $0 $54,715
M. Charito Kruvant $1,026 $536 $34,000
Arthur J. Pugh $1,054 $0 $40,000
D. Wayne Silby $997 $0 $60,831
*Messrs. Blatz, Diehl, Gavian, Pugh, and Ms. Kruvant have chosen to defer a
portion of their compensation. As of September 30, 1998, total deferred
compensation, including dividends and capital appreciation, was $576,605.22,
$544,960.81, $138,513.72, $175,791.63, and $13,006.15, for each trustee,
respectively.
**For the fiscal year ended September 30, 1998. The Fund Complex consists of
nine (9) registered investment companies.
INVESTMENT ADVISOR
The Calvert Fund's Investment Advisor is Calvert Asset Management
Company, Inc., 4550 Montgomery Avenue, 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 Mutual merged with and became a subsidiary of
Ameritas Acacia Mutual Holding Company.
The Advisory Contract between The Calvert Fund and the Advisor will remain
in effect until January 3, 2000, and from year to year thereafter, provided
continuance is approved at least annually by vote of the holders of a
majority of the outstanding shares of the Fund or by the Board of Trustees
of the Fund; and further provided that such continuance is also approved
annually by the vote of a majority of the trustees of the Fund who are not
parties to the Contract or interested persons of parties to the Contract or
interested persons of such parties, cast in person at a meeting called for
the purpose of voting on such approval. The Contract may be terminated
without penalty by either party upon 60 days' prior written notice; it
automatically terminates in the event of its assignment.
Under the Contract, the Advisor provides investment advice to The
Calvert Fund and oversees the day-to-day operations, subject to direction
and control by the Fund's Board of Trustees. For its services, the Advisor
receives an annual fee of 0.35% of the average daily net assets of Calvert
Income Fund.
The Advisor provides the Fund with investment advice and research,
office space, furnishes executive and other personnel to the Fund, pays the
salaries and fees of all trustees who are affiliated persons of the Advisor,
and pays all Fund advertising and promotional expenses. The Advisor reserves
the right to compensate broker-dealers in consideration of their promotional
or administrative services. The Fund pays all other operating expenses,
including custodial and transfer agency fees, federal and state securities
registration fees, legal and audit fees, and brokerage commissions and other
costs associated with the purchase and sale of portfolio securities.
For the fiscal years ended September 30, 1996, 1997, and 1998,
Calvert Income Fund paid advisory fees of $311,154, $29,440, and $278,234
respectively.
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 % of net assets) as follows:
Class A Class I
0.30% 0.10%
METHOD OF DISTRIBUTION
Calvert Distributors, Inc. ("CDI") is the principal underwriter and
distributor for the Fund. Under the terms of its underwriting agreement with
the Fund, 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 a Distribution Plan which permits it 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, 0.50% of the
average daily net assets of the Fund.
The Fund has entered into an agreement with Calvert Distributors,
Inc. ("CDI") whereby CDI, acting as principal underwriter for the Fund,
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 a
distribution fee from Calvert Income Fund of 0.25% of the Fund's average
daily net assets.
The Fund's Distribution Plan was approved by the Board of Trustees,
including the Trustees who are not "interested persons" of the Fund (as that
term is defined in the Investment Company Act of 1940) and who have no
direct or indirect financial interest in the operation of the 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 the Fund's respective
Classes. These fees are paid pursuant to the Fund's Distribution Plan. For
the fiscal year ended September 30, 1998, $59,622 in Distribution Plan
Expenses (includes both distribution fees and services fees) were paid by
the Fund (all classes) to CDI.
Of the distribution expenses paid by Class A Shares in fiscal year 1998,
$59,172 was used to compensate dealers for their share distribution
promotional services, and the remainder was used for the printing and
mailing of prospectuses and sales materials to investors (other than current
shareholders), and to finance advertising.
Dealer Reallowance (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 the net amount
retained by CDI (i.e., not reallowed to dealers) for the last 3 fiscal years
are:
Fiscal Years 1996 1997 1998
Class A Gross/Net Gross/Net Gross/Net
$42,280/$15,770 $31,699/$11,471 $49,042/$20,132
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 (i.e., group retirement
plans) are exempt due to economies of scale in distribution. See Exhibit A
to the Prospectus.
TRANSFER AND SHAREHOLDER SERVICING AGENTS
National Financial Data Services, Inc. ("NFDS"), a subsidiary of
State Street Bank & Trust, has been retained by the Fund to act as transfer
agent and dividend disbursing agent. These responsibilities include:
responding to certain shareholder inquiries and instructions, crediting and
debiting shareholder accounts for purchases and redemptions of Fund shares
and confirming such transactions, and daily updating of shareholder accounts
to reflect declaration and payment of dividends.
Calvert Shareholder Services, Inc., a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, has been retained by the Fund to act as shareholder
servicing agent. Shareholder servicing responsibilities include responding
to shareholder inquiries and instructions concerning their accounts,
entering any telephoned purchases or redemptions into the NFDS system,
maintenance of broker-dealer data, and preparing and distributing statements
to shareholders regarding their accounts. Calvert Shareholder Services, Inc.
was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services, Inc.
receive a fee based on the number of shareholder accounts and transactions.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. The Fund's Advisor makes
investment decisions and the choice of brokers and dealers under the
direction and supervision of the Fund's Board of Trustees.
Broker-dealers who execute portfolio transactions on behalf of the
Fund are selected on the basis of their execution capability and trading
expertise considering, among other factors, the overall reasonableness of
the brokerage commissions, current market conditions, size and timing of the
order, difficulty of execution, per share price, etc.
For the fiscal years ended September 30, 1997 and 1998, no
brokerage commissions were paid by Calvert Income Fund to any broker-dealer,
officers or trustees of The Calvert Fund or any of their affiliates. For
fiscal year 1996, $1,000 in aggregate brokerage commissions were paid to a
broker-dealer.
While the Fund's Advisor select brokers primarily on the basis of best
execution, in some cases the Advisor may direct transactions to brokers
based on the quality and amount of the research and research-related
services which the brokers provide to them. These services are of the type
described in Section 28(e) of the Securities Exchange Act of 1934 and may
include analyses of the business or prospects of a company, industry or
economic sector, or statistical and pricing services.
If, in the judgment of the Advisor, the Fund or other accounts managed by
them will be benefited by supplemental research services, they are
authorized to pay brokerage commissions to a broker furnishing such services
which are in excess of commissions which another broker may have charged for
effecting the same transaction. These research services include advice,
either directly or through publications or writings, as to the value of
securities, the advisability of investing in, purchasing or selling
securities, and the availability of securities or purchasers or sellers of
securities; furnishing of analyses and reports concerning issuers,
securities or industries; providing information on economic factors and
trends; assisting in determining portfolio strategy; providing computer
software used in security analyses; providing portfolio performance
evaluation and technical market analyses; and providing other services
relevant to the investment decision making process. It is the policy of the
Advisor that such research services will be used for the benefit of the Fund
as well as other Calvert Group funds and managed accounts.
For the years ended September 30, 1997 and 1998, the portfolio
turnover rates of the Fund were 2,961% and 3,461% respectively. Increase was
due to the implementation of the Advisor's more active trading strategy.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
PricewaterhouseCoopers LLP has been selected by the Board of
Trustees to serve as independent accountants for fiscal year 1999. State
Street Bank & Trust Company, N.A., 225 Franklin Street, Boston, MA 02110,
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.
GENERAL INFORMATION
The Calvert Fund (the "Trust"), an open-end registered investment
company, was organized as a Massachusetts business trust on March 15, 1982.
The Calvert Fund's Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust. 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 the Trust's assets for any shareholder held personally
liable for obligations of the Trust. The Declaration of Trust also provides
that the Trust shall, upon request, assume the defense of any claim made
against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. The Declaration of Trust further provides that the
Trust may maintain appropriate insurance (for example, fidelity bonding and
errors and omissions insurance) for the protection of the Trust, 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 Trust itself
is unable to meet its obligations.
Each share of each series represents an equal proportionate
interest in that series with each other share and is entitled to such
dividends and distributions out of the income belonging to such series as
declared by the Board. The Fund offers two separate classes of shares: Class
A and Class I. Each class represents interests in the same portfolio of
investments but, as further described in the prospectus, each class is
subject to differing sales charges and expenses, which differences will
result in differing net asset values and distributions. Upon any liquidation
of the Fund, shareholders of each class are entitled to share pro rata in
the net assets belonging to that series available for distribution.
The Fund is not required to hold annual shareholder meetings, but special
meetings may be called for certain purposes such as electing Trustees,
changing fundamental policies, or approving a management contract. As a
shareholder, you receive one vote for each share you own, except that
matters affecting classes differently, such as Distribution Plans, will be
voted on separately by the affected class(es).
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 19, 1999, the following shareholder owned of record 5% or more
of the Class A shares of the Fund:
Name and Address % of Ownership
State of Tennessee 401(k) Plan 6.91%
Nashville, Tennessee
APPENDIX
Corporate Bond Ratings:
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
