CALVERT
INCOME FUND
PROSPECTUS
JANUARY 31, 2000
REVISED JULY 14, 2000
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PROSPECTUS
JANUARY 31, 2000
REVISED JULY 14, 2000
INCOME FUND
ABOUT THE FUND
2 INVESTMENT OBJECTIVE, STRATEGY, PAST PERFORMANCE
4 FEES AND EXPENSES
5 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT YOUR INVESTMENT
10 PORTFOLIO MANAGER
10 ADVISORY FEES
11 HOW TO BUY SHARES/GETTING STARTED
11 CHOOSING A SHARE CLASS
13 CALCULATION OF CDSC/WAIVER
13 DISTRIBUTION AND SERVICE FEES
14 NEXT STEP - ACCOUNT APPLICATION
14 HOW SHARES ARE PRICED
15 WHEN YOUR ACCOUNT WILL BE CREDITED
15 OTHER CALVERT GROUP FEATURES
(EXCHANGES, MINIMUM ACCOUNT BALANCE, ETC.)
18 DIVIDENDS, CAPITAL GAINS AND TAXES
19 HOW TO SELL SHARES
21 FINANCIAL HIGHLIGHTS
23 EXHIBIT A- REDUCED SALES CHARGES (CLASS A)
25 EXHIBIT B- SERVICE FEES AND OTHER ARRANGEMENTS WITH DEALERS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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OBJECTIVE
CALVERT INCOME FUND SEEKS TO MAXIMIZE LONG-TERM INCOME, TO THE EXTENT CONSISTENT
WITH PRUDENT INVESTMENT MANAGEMENT AND PRESERVATION OF CAPITAL, THROUGH
INVESTMENT IN BONDS AND OTHER INCOME PRODUCING SECURITIES.
PRINCIPAL INVESTMENT STRATEGIES
THE FUND USES AN ACTIVE STRATEGY, SEEKING RELATIVE VALUE TO EARN INCREMENTAL
INCOME. THE FUND TYPICALLY INVESTS AT LEAST 65% OF ITS ASSETS IN INVESTMENT
GRADE DEBT SECURITIES.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE FUND, OR THE FUND COULD
UNDERPERFORM, MOST LIKELY FOR ANY OF THE FOLLOWING REASONS:
- THE BOND MARKET GOES DOWN
- THE INDIVIDUAL BONDS IN THE FUND DO NOT PERFORM AS WELL AS EXPECTED
- THE ADVISOR'S FORECAST AS TO INTEREST RATES IS NOT CORRECT
- THE ADVISOR'S ALLOCATION AMONG DIFFERENT SECTORS OF THE BOND MARKET DOES
NOT PERFORM AS WELL AS EXPECTED
- THE FUND IS NON-DIVERSIFIED. COMPARED TO OTHER FUNDS, THE FUND MAY INVEST
MORE OF ITS ASSETS IN A SMALLER NUMBER OF COMPANIES. GAINS OR LOSSES ON A SINGLE
BOND MAY HAVE GREATER IMPACT ON THE FUND.
THE FUND'S ACTIVE TRADING STRATEGY MAY CAUSE THE FUND TO HAVE A RELATIVELY HIGH
AMOUNT OF SHORT-TERM CAPITAL GAINS, WHICH ARE TAXABLE TO YOU AT THE ORDINARY
INCOME TAX RATE.
AN INVESTMENT IN THE FUND IS NOT A BANK DEPOSIT AND IS NOT INSURED OR GUARANTEED
BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY.
BAR CHART AND PERFORMANCE TABLE
THE BAR CHART AND TABLE SHOW THE FUND'S ANNUAL RETURNS AND ITS LONG-TERM
PERFORMANCE. THE CHART AND TABLE PROVIDE SOME INDICATION OF THE RISKS OF
INVESTING IN THE FUND. THE CHART SHOWS HOW THE PERFORMANCE OF THE CLASS A SHARES
HAS VARIED FROM YEAR TO YEAR. THE TABLE COMPARES THE FUND'S PERFORMANCE OVER
TIME TO THAT OF THE LEHMAN AGGREGATE BOND INDEX. THIS IS A WIDELY RECOGNIZED,
UNMANAGED INDEX OF BOND PRICES. IT ALSO SHOWS THE FUND'S RETURNS COMPARED TO THE
LIPPER BBB RATED FUND INDEX, A COMPOSITE INDEX OF THE ANNUAL RETURN OF MUTUAL
FUNDS THAT HAVE AN INVESTMENT GOAL SIMILAR TO THAT OF THE FUND. THE FUND'S PAST
PERFORMANCE DOES NOT NECESSARILY INDICATE HOW THE FUND WILL PERFORM IN THE
FUTURE.
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THE RETURN FOR EACH OF THE FUND'S OTHER CLASSES OF SHARES OFFERED BY THIS
PROSPECTUS WILL DIFFER FROM THE CLASS A RETURNS SHOWN IN THE BAR CHART,
DEPENDING UPON THE EXPENSES OF THAT CLASS. THE BAR CHART DOES NOT REFLECT ANY
SALES CHARGE THAT YOU MAY BE REQUIRED TO PAY UPON PURCHASE OR REDEMPTION OF THE
FUND'S SHARES. ANY SALES CHARGE WILL REDUCE YOUR RETURN. THE AVERAGE TOTAL
RETURN TABLE SHOWS RETURNS WITH THE MAXIMUM SALES CHARGE DEDUCTED. NO SALES
CHARGE HAS BEEN APPLIED TO THE INDEX USED FOR COMPARISON IN THE TABLE.
YEAR-BY-YEAR TOTAL RETURN
(CLASS A RETURN AT NAV)
INSERT BAR CHART HERE
BEST QUARTER (OF PERIODS SHOWN) 2Q '95 7.04%
WORST QUARTER (OF PERIODS SHOWN) 1Q '94 (4.56%)
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED DECEMBER 31, 1999) (WITH
MAXIMUM SALES CHARGE DEDUCTED)
1 YEAR 5 YEAR 10 YEAR
INCOME FUND: CLASS A 3.23% 9.33% 8.09%
INCOME FUND: CLASS B N/A N/A N/A
INCOME FUND: CLASS C N/A N/A N/A
LEHMAN AGGREGATE BOND INDEX TR (0.82%) 7.73% 7.70%
LIPPER BBB RATED FUND INDEX (1.12%) 7.68% 7.72%
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FEES AND EXPENSES
THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
CLASS A CLASS B3 CLASS C3
SHAREHOLDER FEES
(PAID DIRECTLY FROM YOUR ACCOUNT)
MAXIMUM SALES CHARGE (LOAD)
IMPOSED ON PURCHASES 3.75% NONE NONE
(AS A PERCENTAGE OF OFFERING PRICE)
MAXIMUM DEFERRED SALES CHARGE (LOAD)
(AS A PERCENTAGE OF PURCHASE OR NONE2 4.00% 4 1.00%5
REDEMPTION PROCEEDS, WHICHEVER IS LOWER)
ANNUAL FUND OPERATING EXPENSES1
(DEDUCTED FROM FUND ASSETS)
MANAGEMENT FEES .70% .70% .70%
DISTRIBUTION AND SERVICE (12B-1) FEES .15% 1.00% 1.00%
OTHER EXPENSES .47% 1.21% 1.97%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.32% 2.91% 3.67%
FEE WAIVER AND/OR EXPENSE REINBURSEMENT -- -- 0.76%
NET EXPENSES6 -- -- 2.91%
EXPLANATION OF FEES AND EXPENSES TABLE
1 ANNUAL FUND OPERATING EXPENSES ARE BASED ON EXPENSES FOR THE FUND'S MOST
RECENT FISCAL YEAR, UNLESS OTHERWISE INDICATED. MANAGEMENT FEES INCLUDE
ANY ADMINISTRATIVE FEE PAID BY THE FUND TO CALVERT ADMINISTRATIVE
SERVICES COMPANY, AN AFFILIATE OF THE ADVISOR.
2 PURCHASES OF CLASS A SHARES FOR ACCOUNTS WITH $1 MILLION OR MORE ARE NOT
SUBJECT TO FRONT-END SALES CHARGES, BUT MAY BE SUBJECT TO A 1.0%
CONTINGENT DEFERRED SALES CHARGE ON SHARES REDEEMED WITHIN 1 YEAR OF
PURCHASE. (SEE "HOW TO BUY SHARES-CLASS A").
3 EXPENSES ARE BASED ON ESTIMATES FOR THE CURRENT FISCAL YEAR.
4 A CONTINGENT DEFERRED SALES CHARGE IS IMPOSED ON THE PROCEEDS OF CLASS B
SHARES REDEEMED WITHIN 4 YEARS, SUBJECT TO CERTAIN EXCEPTIONS. THE
CHARGE IS A PERCENTAGE OF NET ASSET VALUE AT THE TIME OF PURCHASE OR
REDEMPTION, WHICHEVER IS LESS, AND DECLINES FROM 4% IN THE FIRST YEAR THE SHARES
ARE HELD, TO 3% IN THE SECOND, 2% IN THE THIRD YEAR, AND 1% IN THE
FOURTH YEAR. THERE IS NO CHARGE ON REDEMPTIONS OF CLASS B SHARES HELD
FOR MORE THAN FOUR YEARS. SEE "CALCULATION OF CONTINGENT DEFERRED SALES
CHARGE."
5 A CONTINGENT DEFERRED SALES CHARGE OF 1% IS IMPOSED ON THE PROCEEDS OF
CLASS C SHARES REDEEMED WITHIN ONE YEAR. THE CHARGE IS A PERCENTAGE OF
NET ASSET VALUE AT THE TIME OF PURCHASE OR REDEMPTION, WHICHEVER
IS LESS. SEE"CALCULATION OF CONTINGENT DEFERRED SALES CHARGE."
6 CAMCO HAS AGREED TO LIMIT ANNUAL FUND CLASS C OPERATING EXPENSES (NET OF
EXPENSE OFFSET ARRANGEMENTS) THROUGH SEPTEMBER 30, 2001. THE CONTRACTUAL EXPENSE
CAP IS SHOWN AS "NET EXPENSES," THIS IS THE MAXIMUM AMOUNT OF OPERATING EXPENSES
THAT MAY BE CHARGED TO THE FUND THROUGH SEPTEMBER 30, 2001. FOR THE PURPOSES OF
THIS EXPENSE LIMIT, OPERATING EXPENSES DO NOT INCLUDE INTEREST EXPENSE,
BROKERAGE COMMISSIONS, EXTRAORDINARY EXPENSES, TAXES AND CAPITAL ITEMS. THE FUND
HAS AN OFFSET ARRANGEMENT WITH THE CUSTODIAN BANK WHEREBY THE CUSTODIAN AND
TRANSFER AGENT FEES MAY BE PAID INDIRECTLY BY CREDITS ON THE FUND'S UNINVESTED
CASH BALANCES. THESE CREDITS ARE USED TO REDUCE THE FUND'S EXPENSES.
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EXAMPLE
THIS EXAMPLE IS INTENDED TO HELP YOU COMPARE THE COST OF INVESTING IN A FUND
WITH THE COST OF INVESTING IN OTHER MUTUAL FUNDS. THE EXAMPLE ASSUMES THAT:
- YOU INVEST $10,000 IN THE FUND FOR THE TIME PERIODS INDICATED;
- YOUR INVESTMENT HAS A 5% RETURN EACH YEAR; AND
- THE FUND'S OPERATING EXPENSES REMAIN THE SAME.
ALTHOUGH YOUR ACTUAL COSTS MAY BE HIGHER OR LOWER, UNDER THESE ASSUMPTIONS YOUR
COSTS WOULD BE:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CLASS A $504 $778 $1,071 $1,906
CLASS B (WITH REDEMPTION) $694 $1,101 N/A N/A
CLASS B (NO REDEMPTION) $294 $901 N/A N/A
CLASS C (WITH REDEMPTION) $394 $1,053 N/A N/A
CLASS C (NO REDEMPTION) $294 $1,053 N/A N/A
PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF THE FUND'S RISK PROFILE IS UNDER THE EARLIER
SUMMARY. THE FUND IS ALSO PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND
TO USE CERTAIN INVESTMENT TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH
THEM. ON THE FOLLOWING PAGES ARE BRIEF DESCRIPTIONS OF THESE OTHER PRINCIPAL
INVESTMENTS AND TECHNIQUES, SUMMARIZED EARLIER, ALONG WITH THEIR RISKS.
FOR EACH OF THE INVESTMENT PRACTICES LISTED, THE TABLE BELOW SHOWS THE FUND'S
LIMITATIONS AS A PERCENTAGE OF ITS ASSETS AND THE PRINCIPAL TYPES OF RISK
INVOLVED. (SEE THE PAGES FOLLOWING THE TABLE FOR A DESCRIPTION OF THE TYPES OF
RISKS). NUMBERS IN THIS TABLE SHOW MAXIMUM ALLOWABLE AMOUNT ONLY; FOR ACTUAL
USAGE, CONSULT THE FUND'S ANNUAL/SEMI-ANNUAL REPORTS.
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KEY TO TABLE
J FUND CURRENTLY USES
O PERMITTED, BUT NOT TYPICALLY USED
(% OF ASSETS ALLOWABLE, IF RESTRICTED)
7 NOT PERMITTED
XN ALLOWED UP TO X% OF FUND'S NET ASSETS
XT ALLOWED UP TO X% OF FUND'S TOTAL ASSETS
NA NOT APPLICABLE TO THIS TYPE OF FUND
J
INVESTMENT PRACTICES
ACTIVE TRADING STRATEGY/TURNOVER INVOLVES SELLING A
SECURITY SOON AFTER PURCHASE. AN ACTIVE TRADING STRATEGY CAUSES A FUND TO HAVE
HIGHER PORTFOLIO TURNOVER COMPARED TO OTHER FUNDS AND HIGHER TRANSACTION COSTS,
SUCH AS COMMISSIONS AND CUSTODIAN AND SETTLEMENT FEES, AND MAY INCREASE A FUND'S
TAX LIABILITY. RISKS: OPPORTUNITY, MARKET AND TRANSACTION.
TEMPORARY DEFENSIVE POSITIONS. DURING ADVERSE MARKET,
ECONOMIC OR POLITICAL CONDITIONS, THE FUND MAY DEPART FROM ITS PRINCIPAL
INVESTMENT STRATEGIES BY INCREASING ITS INVESTMENT IN U.S. GOVERNMENT SECURITIES
AND OTHER SHORT-TERM INTEREST-BEARING
SECURITIES. RISKS: OPPORTUNITY.
O
HEDGING STRATEGIES. THE USE OF SHORT SALES OF US TREASURY SECURITIES FOR THE
LIMITED PURPOSE OF HEDGING THE FUND'S DURATION
(DURATION IS A MEASURE OF THE INTEREST RATE-SENSITIVITY OF THE FUND). ANY SHORT
SALES ARE "COVERED" WITH AN EQUIVALENT AMOUNT OF HIGH QUALITY, LIQUID SECURITIES
IN A SEGREGATED ACCOUNT AT THE FUND'S CUSTODIAN. THIS TECHNIQUE IS INTENDED TO
LOWER THE FUND'S INTEREST RATE RISK. RISKS: CORRELATION, MANAGEMENT AND
OPPORTUNITY.
J
CONVENTIONAL SECURITIES
FOREIGN SECURITIES. SECURITIES ISSUED BY COMPANIES LOCATED OUTSIDE THE U.S.
AND/OR TRADED PRIMARILY ON A FOREIGN EXCHANGE. RISKS: MARKET, CURRENCY,
TRANSACTION, LIQUIDITY, INFORMATION AND POLITICAL.
30N
INVESTMENT GRADE BONDS. BONDS RATED BBB/BAA OR HIGHER OR COMPARABLE UNRATED
BONDS. RISKS: INTEREST RATE, MARKET AND CREDIT.
J
BELOW-INVESTMENT GRADE BONDS. BONDS RATED BELOW BBB/BAA OR COMPARABLE UNRATED
BONDS ARE CONSIDERED JUNK BONDS. THEY ARE SUBJECT TO GREATER CREDIT RISK THAN
INVESTMENT GRADE BONDS. RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND
INFORMATION.
35N
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PRINCIPAL INVESTMENT PRACTICES AND RISKS (CONT'D)
INVESTMENT PRACTICES
UNRATED DEBT SECURITIES. BONDS THAT HAVE NOT BEEN RATED BY A
RECOGNIZED RATING AGENCY; THE ADVISOR HAS DETERMINED THE CREDIT QUALITY BASED ON
ITS OWN RESEARCH. RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND
INFORMATION.
J
ILLIQUID SECURITIES. SECURITIES WHICH CANNOT BE READILY SOLD BECAUSE THERE IS NO
ACTIVE MARKET. RISKS: LIQUIDITY, MARKET AND TRANSACTION.
15N
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES. SECURITIES ARE BACKED BY UNSECURED DEBT, SUCH AS CREDIT
CARD DEBT. THESE SECURITIES ARE OFTEN GUARANTEED OR OVER-COLLATERALIZED TO
ENHANCE THEIR CREDIT QUALITY. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
J
MORTGAGE-BACKED SECURITIES. SECURITIES ARE BACKED BY POOLS OF MORTGAGES,
INCLUDING PASSTHROUGH CERTIFICATES, AND OTHER SENIOR CLASSES OF COLLATERALIZED
MORTGAGE OBLIGATIONS (CMOS). RISKS: CREDIT, EXTENSION, PREPAYMENT, LIQUIDITY AND
INTEREST RATE.
J
PARTICIPATION INTERESTS. SECURITIES REPRESENTING AN INTEREST IN ANOTHER SECURITY
OR IN BANK LOANS. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
O
LEVERAGED DERIVATIVE INSTRUMENTS
CURRENCY CONTRACTS. CONTRACTS INVOLVING THE RIGHT OR OBLIGATION TO BUY OR SELL A
GIVEN AMOUNT OF FOREIGN CURRENCY AT A SPECIFIED PRICE AND FUTURE DATE. RISKS:
CURRENCY, LEVERAGE, CORRELATION, LIQUIDITY AND OPPORTUNITY.
J
5T
OPTIONS ON SECURITIES AND INDICES. CONTRACTS GIVING THE HOLDER THE RIGHT BUT NOT
THE OBLIGATION TO PURCHASE OR SELL A SECURITY (OR THE CASH VALUE, IN THE CASE OF
AN OPTION ON AN INDEX) AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. IN THE CASE
OF SELLING (WRITING) OPTIONS, THE FUND WILL WRITE CALL OPTIONS ONLY IF IT
ALREADY OWNS THE SECURITY (IF IT IS "COVERED"). RISKS: INTEREST RATE, CURRENCY,
MARKET, LEVERAGE, CORRELATION, LIQUIDITY, CREDIT AND OPPORTUNITY.
0
FUTURES CONTRACT. AGREEMENT TO BUY OR SELL A SPECIFIC AMOUNT OF
A COMMODITY OR FINANCIAL INSTRUMENT AT A PARTICULAR PRICE ON A SPECIFIC FUTURE
DATE. RISKS: INTEREST RATE, CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY
AND OPPORTUNITY.
5N
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PRINCIPAL INVESTMENT PRACTICES AND RISKS (CONT'D)
INVESTMENT PRACTICES
STRUCTURED SECURITIES. INDEXED AND/OR LEVERAGED MORTGAGE-BACKED AND OTHER DEBT
SECURITIES, INCLUDING PRINCIPAL-ONLY AND INTEREST-ONLY SECURITIES, LEVERAGED
FLOATING RATE SECURITIES, AND OTHERS. THESE SECURITIES TEND TO BE HIGHLY
SENSITIVE TO INTEREST RATE MOVEMENTS AND THEIR PERFORMANCE MAY NOT CORRELATE TO
THESE MOVEMENTS IN A CONVENTIONAL FASHION. RISKS: CREDIT, INTEREST RATE,
EXTENSION, PREPAYMENT, MARKET, LEVERAGE, LIQUIDITY AND CORRELATION.
O
THE FUND HAS ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS THAT ARE NOT
PRINCIPAL TO THEIR INVESTMENT STRATEGIES (FOR EXAMPLE, REPURCHASE AGREEMENTS,
BORROWING, PLEDGING, AND REVERSE REPURCHASE AGREEMENTS, SECURITIES LENDING,
WHEN-ISSUED SECURITIES AND SHORT SALES.) THESE POLICIES AND RESTRICTIONS ARE
DISCUSSED IN THE STATEMENT OF ADDITIONAL INFORMATION ("SAI").
TYPES OF INVESTMENT RISK
CORRELATION RISK
THIS OCCURS WHEN A FUND "HEDGES"- USES ONE INVESTMENT TO OFFSET THE FUND'S
POSITION IN ANOTHER. IF THE TWO INVESTMENTS DO NOT BEHAVE IN RELATION TO ONE
ANOTHER THE WAY FUND MANAGERS EXPECT THEM TO, THEN UNEXPECTED OR UNDESIRED
RESULTS MAY OCCUR. FOR EXAMPLE, A HEDGE MAY ELIMINATE OR REDUCE GAINS AS WELL AS
OFFSET LOSSES.
CREDIT RISK
THE RISK THAT THE ISSUER OF A SECURITY OR THE COUNTERPARTY TO AN INVESTMENT
CONTRACT MAY DEFAULT OR BECOME UNABLE TO PAY ITS OBLIGATIONS WHEN DUE.
CURRENCY RISK
CURRENCY RISK OCCURS WHEN A FUND BUYS OR SELLS A SECURITY DENOMINATED IN FOREIGN
CURRENCY. FOREIGN CURRENCIES "FLOAT" IN VALUE AGAINST THE U.S. DOLLAR. ADVERSE
CHANGES IN FOREIGN CURRENCY VALUES CAN CAUSE INVESTMENT LOSSES WHEN A FUND'S
INVESTMENTS ARE CONVERTED TO U.S. DOLLARS.
EXTENSION RISK
THE RISK THAT AN UNEXPECTED RISE IN INTEREST RATES WILL EXTEND THE LIFE OF A
MORTGAGE-BACKED SECURITY BEYOND THE EXPECTED PREPAYMENT TIME, TYPICALLY
REDUCING THE SECURITY'S VALUE.
INFORMATION RISK
THE RISK THAT INFORMATION ABOUT A SECURITY OR ISSUER MIGHT NOT BE AVAILABLE,
COMPLETE, ACCURATE OR COMPARABLE.
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INTEREST RATE RISK
THE RISK THAT CHANGES IN INTEREST RATES WILL ADVERSELY AFFECT THE VALUE OF AN
INVESTOR'S SECURITIES. WHEN INTEREST RATES RISE, THE VALUE OF FIXED-INCOME
SECURITIES WILL GENERALLY FALL. CONVERSELY, A DROP IN INTEREST RATES WILL
GENERALLY CAUSE AN INCREASE IN THE VALUE OF FIXED-INCOME SECURITIES. LONGER-TERM
SECURITIES AND ZERO COUPON/"STRIPPED" COUPON SECURITIES ("STRIPS") ARE SUBJECT
TO GREATER INTEREST RATE RISK.
LEVERAGE RISK
THE RISK THAT OCCURS IN SOME SECURITIES OR TECHNIQUES WHICH TEND TO MAGNIFY THE
EFFECT OF SMALL CHANGES IN AN INDEX OR A MARKET. THIS CAN RESULT IN A LOSS THAT
EXCEEDS THE AMOUNT ACTUALLY INVESTED.
LIQUIDITY RISK
THE RISK THAT OCCURS WHEN INVESTMENTS CANNOT BE READILY SOLD. A FUND MAY HAVE TO
ACCEPT A LESS-THAN-DESIRABLE PRICE TO COMPLETE THE SALE OF AN ILLIQUID SECURITY
OR MAY NOT BE ABLE TO SELL IT AT ALL.
MANAGEMENT RISK
THE RISK THAT A FUND'S PORTFOLIO MANAGEMENT PRACTICES MIGHT NOT WORK TO ACHIEVE
THEIR DESIRED RESULT.
MARKET RISK
THE RISK THAT SECURITIES PRICES IN A MARKET, A SECTOR OR AN INDUSTRY WILL
FLUCTUATE, AND THAT SUCH MOVEMENTS MIGHT REDUCE AN INVESTMENT'S VALUE.
OPPORTUNITY RISK
THE RISK OF MISSING OUT ON AN INVESTMENT OPPORTUNITY BECAUSE THE ASSETS NEEDED
TO TAKE ADVANTAGE OF IT ARE COMMITTED TO LESS ADVANTAGEOUS INVESTMENTS OR
STRATEGIES.
POLITICAL RISK
THE RISK THAT MAY OCCUR WITH FOREIGN INVESTMENTS, AND MEANS THAT THE VALUE OF
AN INVESTMENT MAY BE ADVERSELY AFFECTED BY NATIONALIZATION, TAXATION, WAR,
GOVERNMENT INSTABILITY OR OTHER ECONOMIC OR POLITICAL ACTIONS OR FACTORS.
PREPAYMENT RISK
THE RISK THAT ANTICIPATED PREPAYMENTS MAY OCCUR, REDUCING THE VALUE OF A
MORTGAGE-BACKED SECURITY. THE FUND MUST THEN REINVEST THOSE ASSETS AT THE
CURRENT MARKET RATE WHICH MAY BE LOWER.
TRANSACTION RISK
THE RISK THAT A FUND MAY BE DELAYED OR UNABLE TO SETTLE A TRANSACTION OR THAT
COMMISSIONS AND SETTLEMENT EXPENSES MAY BE HIGHER THAN USUAL.
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ABOUT CALVERT GROUP
CALVERT ASSET MANAGEMENT COMPANY, INC., ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MD 20814), IS THE FUND'S INVESTMENT ADVISOR. CAMCO PROVIDES THE
FUND WITH INVESTMENT SUPERVISION AND MANAGEMENT AND OFFICE SPACE; FURNISHES
EXECUTIVE AND OTHER PERSONNEL TO THE FUND; AND PAYS THE SALARIES AND FEES OF ALL
TRUSTEES WHO ARE AFFILIATED PERSONS OF THE ADVISOR. IT HAS BEEN MANAGING MUTUAL
FUNDS SINCE 1976. CAMCO IS THE INVESTMENT ADVISOR FOR OVER 25 MUTUAL FUND
PORTFOLIOS, INCLUDING THE FIRST AND LARGEST FAMILY OF SOCIALLY SCREENED FUNDS.
AS OF DECEMBER 31, 1999, CAMCO HAD OVER $6 BILLION IN ASSETS UNDER MANAGEMENT.
CAMCO USES A TEAM APPROACH TO ITS MANAGEMENT OF THE FUND. RENO J. MARTINI,
SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER, HEADS THIS TEAM AND OVERSEES
THE INVESTMENT STRATEGY AND MANAGEMENT OF ALL CALVERT FUNDS FOR CAMCO WHILE
GREGORY HABEEB MANAGES THE DAY-TO-DAY INVESTMENTS OF CAMCO'S TAXABLE
FIXED-INCOME PORTFOLIOS. MR. HABEEB HAS OVER 19 YEARS OF EXPERIENCE AS AN
ANALYST, TRADER, AND PORTFOLIO MANAGER.
ADVISORY FEES
THE ANNUAL ADVISORY FEE PAID TO CAMCO BY THE FUND FOR THE MOST RECENT FISCAL
YEAR WAS 0.50% OF THE FUND'S AVERAGE DAILY NET ASSETS.
HOW TO BUY SHARES
GETTING STARTED-BEFORE YOU OPEN AN ACCOUNT
FIRST, DECIDE WHICH FUND OR FUNDS BEST SUITS YOUR NEEDS AND YOUR GOALS.
SECOND, DECIDE WHAT KIND OF ACCOUNT YOU WANT TO OPEN. CALVERT OFFERS INDIVIDUAL,
JOINT, TRUST, UNIFORM GIFTS/TRANSFERS TO MINOR ACCOUNTS, TRADITIONAL, EDUCATION
AND ROTH IRAS, QUALIFIED PROFIT-SHARING AND MONEY PURCHASE PLANS, SIMPLE IRAS,
SEP-IRAS, 403(B)(7) ACCOUNTS, AND SEVERAL OTHER TYPES OF ACCOUNTS. MINIMUM
INVESTMENTS ARE LOWER FOR THE RETIREMENT PLANS.
THEN, DECIDE WHICH CLASS OF SHARES IS BEST FOR YOU. YOU SHOULD MAKE THE DECISION
CAREFULLY, BASED ON:
- THE AMOUNT YOU WISH TO INVEST;
- THE LENGTH OF TIME YOU PLAN TO KEEP THE INVESTMENT; AND
- THE CLASS EXPENSES.
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CHOOSING A SHARE CLASS
THE FUND OFFERS FOUR DIFFERENT CLASSES (CLASS A, B, C AND I). CLASS I ($1
MILLION MINIMUM) IS OFFERED IN A SEPARATE PROSPECTUS. THIS PROSPECTUS OFFERS
CLASS A, B, AND C. THE CHART SHOWS THE DIFFERENCE IN THE CLASSES AND THE GENERAL
TYPES OF INVESTORS WHO MAY BE INTERESTED IN EACH CLASS.
CLASS A:
FRONT-END SALES
CHARGE
FOR ALL INVESTORS, PARTICULARLY THOSE INVESTING A SUBSTANTIAL AMOUNT WHO PLAN TO
HOLD THE SHARES FOR A LONG PERIOD OF TIME.
SALES CHARGE ON EACH PURCHASE OF 3.75% OR LESS, DEPENDING ON THE AMOUNT YOU
INVEST.
CLASS A SHARES HAVE AN ANNUAL 12B-1 FEE OF UP TO 0.50%.
CLASS A SHARES HAVE LOWER ANNUAL EXPENSES DUE TO A LOWER 12B-1 FEE.
PURCHASES OF CLASS A SHARES AT NAV FOR ACCOUNTS WITH $1,000,000 OR MORE WILL BE
SUBJECT TO A 1.0% DEFERRED SALES CHARGE FOR 1 YEAR.
CLASS B:
DEFERRED SALES
CHARGE FOR 4 YEARS
FOR INVESTORS WHO PLAN TO HOLD THE SHARES AT LEAST 4 YEARS. THE EXPENSES OF THIS
CLASS ARE HIGHER THAN CLASS A, BECAUSE OF THE 12B-1 FEE.
NO SALES CHARGE ON EACH PURCHASE, BUT IF YOU SELL YOUR SHARES WITHIN 4 YEARS,
YOU WILL PAY A DEFERRED SALES CHARGE OF 4% OR LESS ON SHARES YOU SELL.
CLASS B SHARES HAVE AN ANNUAL 12B-1 FEE OF 1.00%.
YOUR SHARES WILL AUTOMATICALLY CONVERT TO CLASS A SHARES AFTER 6 YEARS, REDUCING
YOUR FUTURE ANNUAL EXPENSES.
IF YOU ARE INVESTING MORE THAN $250,000, YOU SHOULD CONSIDER INVESTING IN CLASS
A OR C.
CLASS C:
DEFERRED SALES
CHARGE FOR 1 YEAR
FOR INVESTORS WHO ARE INVESTING FOR AT LEAST ONE YEAR, BUT LESS THAN 4 YEARS.
THE EXPENSES OF THIS CLASS ARE HIGHER THAN CLASS A, BECAUSE OF THE 12B-1 FEE.
NO SALES CHARGE ON EACH PURCHASE, BUT IF YOU SELL SHARES WITHIN 1 YEAR, THEN YOU
WILL PAY A DEFERRED SALES CHARGE OF 1% AT THAT TIME.
CLASS C SHARES HAVE AN ANNUAL 12B-1 FEE OF 1.00%.
CLASS C SHARES HAVE HIGHER ANNUAL EXPENSES THAN CLASS A AND THERE IS NO
AUTOMATIC CONVERSION TO CLASS A.
IF YOU ARE INVESTING MORE THAN $1,000,000, YOU SHOULD INVEST IN CLASS A.
<PAGE>
CLASS A
IF YOU CHOOSE CLASS A, YOU WILL PAY A SALES CHARGE AT THE TIME OF EACH PURCHASE.
THIS TABLE SHOWS THE CHARGES BOTH AS A PERCENTAGE OF OFFERING PRICE AND AS A
PERCENTAGE OF THE AMOUNT YOU INVEST. THE TERM "OFFERING PRICE" INCLUDES THE
FRONT-END SALES CHARGE. IF YOU INVEST MORE, THE SALES CHARGE WILL BE LOWER. FOR
EXAMPLE, IF YOU INVEST MORE THAN $50,0006, OR IF YOUR CUMULATIVE PURCHASES OR
THE VALUE IN YOUR ACCOUNT IS MORE THAN $50,000, THEN THE SALES CHARGE IS REDUCED
TO 3.00%
YOUR INVESTMENT IN SALES CHARGE % % OF AMT.
OF OFFERING PRICE INVESTED
LESS THAN $50,000 3.75% 3.90%
$50,000 BUT LESS THAN $100,000 3.00% 3.09%
$100,000 BUT LESS THAN $250,000 2.25% 2.30%
$250,000 BUT LESS THAN $500,000 1.75% 1.78%
$500,000 BUT LESS THAN $1,000,000 1.00% 1.01%
$1,000,000 AND OVER NONE* NONE*
6 THIS IS CALLED "RIGHTS OF ACCUMULATION." THE SALES CHARGE IS CALCULATED BY
TAKING INTO ACCOUNT NOT ONLY THE DOLLAR AMOUNT OF THE NEW PURCHASE OF
SHARES, BUT ALSO THE HIGHER OF COST OR CURRENT VALUE OF SHARES YOU HAVE
PREVIOUSLY PURCHASED IN CALVERT GROUP FUNDS THAT IMPOSE SALES CHARGES. THIS
AUTOMATICALLY APPLIES TO YOUR ACCOUNT FOR EACH NEW PURCHASE OF CLASS A SHARES.
* PURCHASES OF CLASS A SHARES AT NAV FOR ACCOUNTS WITH $1,000,000 OR MORE
ARE SUBJECT TO A 1 YEAR CDSC OF 1.00%. (SEE THE "CALCULATION OF
CONTINGENT DEFERRED SALES CHARGE").
THE CLASS A FRONT-END SALES CHARGE MAY BE WAIVED FOR CERTAIN PURCHASES OR
INVESTORS, SUCH AS PARTICIPANTS IN CERTAIN GROUP RETIREMENT PLANS OR OTHER
QUALIFIED GROUPS AND CLIENTS OF REGISTERED INVESTMENT ADVISERS. FOR DETAILS ON
THESE AND OTHER PURCHASES THAT MAY QUALIFY FOR A REDUCED SALES CHARGE, SEE
EXHIBIT A.
CLASS B
IF YOU CHOOSE CLASS B, THERE IS NO FRONT-END SALES CHARGE LIKE CLASS A, BUT IF
YOU SELL THE SHARES WITHIN THE FIRST 4 YEARS, YOU WILL HAVE TO PAY A "CONTINGENT
DEFERRED" SALES CHARGE ("CDSC"). THIS MEANS THAT YOU DO NOT HAVE TO PAY THE
SALES CHARGE UNLESS YOU SELL YOUR SHARES WITHIN THE FIRST 4 YEARS AFTER
PURCHASE. KEEP IN MIND THAT THE LONGER YOU HOLD THE SHARES THE LESS YOU WILL
HAVE TO PAY IN DEFERRED SALES CHARGES.
TIME SINCE PURCHASE CDSC %
1ST YEAR 4%
2ND YEAR 3%
3RD YEAR 2%
4TH YEAR 1%
AFTER 5 YEARS NONE
<PAGE>
CALCULATION OF CONTINGENT DEFERRED SALES CHARGE AND
WAIVER OF SALES CHARGE
THE CDSC WILL NOT BE CHARGED ON SHARES YOU RECEIVED AS DIVIDENDS OR FROM
CAPITAL GAINS DISTRIBUTIONS OR ON ANY CAPITAL APPRECIATION (GAIN IN THE VALUE)
OF SHARES THAT ARE SOLD.
SHARES THAT ARE NOT SUBJECT TO THE CDSC WILL BE REDEEMED FIRST, FOLLOWED BY
SHARES YOU HAVE HELD THE LONGEST. THE CDSC IS CALCULATED BY DETERMINING THE
SHARE VALUE AT BOTH THE TIME OF PURCHASE AND REDEMPTION AND THEN MULTIPLYING
WHICHEVER VALUE IS LESS BY THE PERCENTAGE THAT APPLIES AS SHOWN ABOVE. IF YOU
CHOOSE TO SELL ONLY PART OF YOUR SHARES, THE CAPITAL APPRECIATION FOR THOSE
SHARES ONLY IS INCLUDED IN THE CALCULATION, RATHER THAN THE CAPITAL APPRECIATION
FOR THE ENTIRE ACCOUNT.
THE CDSC ON CLASS B SHARES WILL BE WAIVED IN THE FOLLOWING CIRCUMSTANCES:
- REDEMPTION UPON THE DEATH OR DISABILITY OF THE SHAREHOLDER, PLAN
PARTICIPANT, OR BENEFICIARY.7
- MINIMUM REQUIRED DISTRIBUTIONS FROM RETIREMENT PLAN ACCOUNTS FOR
SHAREHOLDERS 701/2 AND OLDER.8
- THE RETURN OF AN EXCESS CONTRIBUTION OR DEFERRAL AMOUNTS, PURSUANT TO
SECTIONS 408(D)(4) OR (5), 401(K)(8), 402(G)(2), OR 401(M)(6) OF THE INTERNAL
REVENUE CODE.
- INVOLUNTARY REDEMPTIONS OF ACCOUNTS UNDER PROCEDURES SET FORTH BY THE
FUND'S BOARD OF TRUSTEES.
- A SINGLE ANNUAL WITHDRAWAL UNDER A SYSTEMATIC WITHDRAWAL PLAN OF UP TO 10%
PER YEAR OF THE SHAREHOLDER'S ACCOUNT BALANCE.9
7 "DISABILITY" MEANS A TOTAL DISABILITY AS EVIDENCED BY A DETERMINATION BY
THE FEDERAL SOCIAL SECURITY ADMINISTRATION.
8 THE MAXIMUM AMOUNT SUBJECT TO THIS WAIVER IS BASED ONLY UPON THE
SHAREHOLDER'S CALVERT GROUP RETIREMENT ACCOUNTS.
9 THIS SYSTEMATIC WITHDRAW PLAN REQUIRES A MINIMUM ACCOUNT BALANCE OF
$50,000 TO BE ESTABLISHED.
CLASS C
IF YOU CHOOSE CLASS C, THERE IS NO FRONT-END SALES CHARGE LIKE CLASS A, BUT IF
YOU SELL THE SHARES WITHIN THE FIRST YEAR, YOU WILL HAVE TO PAY A 1% CDSC. CLASS
C MAY BE A GOOD CHOICE FOR YOU IF YOU PLAN TO BUY SHARES AND HOLD THEM FOR AT
LEAST 1 YEAR, BUT NOT MORE THAN FOUR YEARS.
DISTRIBUTION AND SERVICE FEES
THE FUND HAS ADOPTED A PLAN UNDER RULE 12B-1 OF THE INVESTMENT COMPANY ACT OF
1940 THAT ALLOWS IT TO PAY DISTRIBUTION FEES FOR THE SALE AND DISTRIBUTION OF
ITS SHARES. THE DISTRIBUTION PLAN ALSO PAYS SERVICE FEES TO PERSONS (SUCH AS
YOUR FINANCIAL PROFESSIONAL) FOR SERVICES PROVIDED TO SHAREHOLDERS. BECAUSE
THESE FEES ARE PAID OUT OF A FUND'S ASSETS ON AN ONGOING BASIS, OVER TIME, THESE
FEES WILL INCREASE THE COST OF YOUR INVESTMENT AND MAY COST YOU MORE THAN PAYING
OTHER TYPES OF SALES CHARGES. PLEASE SEE EXHIBIT B FOR MORE SERVICE FEE
INFORMATION.
<PAGE>
THE TABLE BELOW SHOWS THE MAXIMUM ANNUAL PERCENTAGE PAYABLE UNDER THE
DISTRIBUTION PLAN, AND THE AMOUNT ACTUALLY PAID BY THE FUND FOR THE MOST RECENT
FISCAL YEAR. THE FEES ARE BASED ON AVERAGE DAILY NET ASSETS OF THE PARTICULAR
CLASS.
MAXIMUM PAYABLE UNDER PLAN/AMOUNT ACTUALLY PAID
CLASS A: 0.50% /0.15% CLASS B: 1.00% / 1.00% CLASS C: 1.00%/N/A
NEXT STEP - ACCOUNT APPLICATION
COMPLETE AND SIGN AN APPLICATION FOR EACH NEW ACCOUNT. PLEASE SPECIFY WHICH
CLASS YOU WISH TO PURCHASE. FOR MORE INFORMATION, CONTACT YOUR FINANCIAL
PROFESSIONAL OR OUR SHAREHOLDER SERVICES DEPARTMENT AT 800-368-2748.
MINIMUM TO OPEN AN ACCOUNT MINIMUM ADDITIONAL INVESTMENTS
$2,000 $250
PLEASE MAKE YOUR CHECK PAYABLE
TO THE FUND AND MAIL IT TO:
NEW ACCOUNTS: SUBSEQUENT INVESTMENTS:
(INCLUDE APPLICATION) (INCLUDE INVESTMENT SLIP)
CALVERT GROUP CALVERT GROUP
PO BOX 219544 PO BOX 219739
KANSAS CITY, MO KANSAS CITY, MO
64121-9544 64121-9739
BY REGISTERED, CALVERT GROUP
CERTIFIED, OR C/O NFDS
OVERNIGHT MAIL 330 WEST 9TH STREET
KANSAS CITY, MO 64105-1807
IMPORTANT - HOW SHARES ARE PRICED
THE PRICE OF SHARES IS BASED ON THE FUND'S NET ASSET VALUE ("NAV"). NAV IS
COMPUTED BY ADDING THE VALUE OF A FUND'S HOLDINGS PLUS OTHER ASSETS, SUBTRACTING
LIABILITIES, AND THEN DIVIDING THE RESULT BY THE NUMBER OF SHARES OUTSTANDING.
THE NAV OF EACH CLASS WILL BE DIFFERENT, DEPENDING ON THE NUMBER OF SHARES
OUTSTANDING FOR EACH CLASS.
PORTFOLIO SECURITIES AND OTHER ASSETS ARE VALUED BASED ON MARKET QUOTATIONS,
EXCEPT THAT SECURITIES MATURING WITHIN 60 DAYS ARE VALUED AT AMORTIZED COST. IF
MARKET QUOTATIONS ARE NOT READILY AVAILABLE, SECURITIES ARE VALUED BY A METHOD
THAT THE FUND'S BOARD OF TRUSTEES BELIEVES ACCURATELY REFLECTS FAIR VALUE.
THE NAV IS CALCULATED AS OF THE CLOSE OF EACH BUSINESS DAY, WHICH COINCIDES
<PAGE>
WITH THE CLOSING OF THE REGULAR SESSION OF THE NEW YORK STOCK EXCHANGE ("NYSE")
(NORMALLY 4 P.M. ET). THE FUND IS OPEN FOR BUSINESS EACH DAY THE NYSE IS OPEN.
PLEASE NOTE THAT THERE ARE SOME FEDERAL HOLIDAYS, HOWEVER, SUCH AS COLUMBUS DAY
AND VETERANS' DAY, WHEN THE NYSE IS OPEN AND THE FUND IS OPEN BUT PURCHASES
CANNOT BE RECEIVED BECAUSE THE BANKS AND POST OFFICES ARE CLOSED.
THE FUND MAY HOLD SECURITIES THAT ARE PRIMARILY LISTED ON FOREIGN EXCHANGES THAT
TRADE ON DAYS WHEN THE NYSE IS CLOSED. THE FUND DOES NOT PRICE SHARES ON DAYS
WHEN THE NYSE IS CLOSED, EVEN IF FOREIGN MARKETS MAY BE OPEN. AS A RESULT, THE
VALUE OF THE FUND'S SHARES MAY CHANGE ON DAYS WHEN YOU WILL NOT BE ABLE TO BUY
OR SELL YOUR SHARES.
WHEN YOUR ACCOUNT WILL BE CREDITED
YOUR PURCHASE WILL BE PROCESSED AT THE NEXT NAV CALCULATED AFTER YOUR ORDER IS
RECEIVED AND ACCEPTED. ALL OF YOUR PURCHASES MUST BE MADE IN US DOLLARS. NO CASH
OR THIRD PARTY CHECKS WILL BE ACCEPTED. NO CREDIT CARD OR CREDIT LOAN CHECKS
WILL BE ACCEPTED. THE FUND RESERVES THE RIGHT TO SUSPEND THE OFFERING OF SHARES
FOR A PERIOD OF TIME OR TO REJECT ANY SPECIFIC PURCHASE ORDER. AS A CONVENIENCE,
CHECK PURCHASES RECEIVED AT CALVERT'S OFFICE IN BETHESDA, MARYLAND WILL BE SENT
BY OVERNIGHT DELIVERY TO THE TRANSFER AGENT AND WILL BE CREDITED THE NEXT
BUSINESS DAY UPON RECEIPT. ANY CHECK PURCHASE RECEIVED WITHOUT AN INVESTMENT
SLIP MAY CAUSE DELAYED CREDITING. ANY PURCHASE LESS THAN THE $250 MINIMUM FOR
SUBSEQUENT INVESTMENTS WILL BE CHARGED A SERVICE FEE OF $3. IF YOUR CHECK DOES
NOT CLEAR YOUR BANK, YOUR PURCHASE WILL BE CANCELED AND YOU WILL BE CHARGED A
$25 FEE PLUS ANY COSTS INCURRED. ALL PURCHASES WILL BE CONFIRMED AND CREDITED TO
YOUR ACCOUNT IN FULL AND FRACTIONAL SHARES (ROUNDED TO THE NEAREST 1/1000TH OF A
SHARE).
OTHER CALVERT GROUP FEATURES
CALVERT INFORMATION NETWORK
FOR 24 HOUR PERFORMANCE AND ACCOUNT INFORMATION CALL 800-368-2745 OR VISIT
HTTP://WWW.CALVERT.COM. YOU CAN OBTAIN CURRENT PERFORMANCE AND PRICING
INFORMATION, VERIFY ACCOUNT BALANCES, AND AUTHORIZE CERTAIN TRANSACTIONS WITH
THE CONVENIENCE OF ONE PHONE CALL, 24 HOURS A DAY.
ACCOUNT SERVICES
BY SIGNING UP FOR SERVICES WHEN YOU OPEN YOUR ACCOUNT, YOU AVOID HAVING TO
OBTAIN A SIGNATURE GUARANTEE. IF YOU WISH TO ADD SERVICES AT A LATER DATE, A
SIGNATURE GUARANTEE TO VERIFY YOUR SIGNATURE MAY BE OBTAINED FROM ANY BANK,
TRUST COMPANY AND SAVINGS AND LOAN ASSOCIATION, CREDIT UNION, BROKER-DEALER FIRM
OR MEMBER OF A DOMESTIC STOCK EXCHANGE. A NOTARY PUBLIC CANNOT PROVIDE A
SIGNATURE GUARANTEE.
<PAGE>
CALVERT MONEY CONTROLLER
CALVERT MONEY CONTROLLER ALLOWS YOU TO PURCHASE OR SELL SHARES BY ELECTRONIC
FUNDS TRANSFER WITHOUT THE TIME DELAY OF MAILING A CHECK OR THE ADDED EXPENSE OF
A WIRE. USE THIS SERVICE TO TRANSFER UP TO $300,000 ELECTRONICALLY. ALLOW ONE OR
TWO BUSINESS DAYS AFTER YOU PLACE YOUR REQUEST FOR THE TRANSFER TO TAKE PLACE.
MONEY TRANSFERRED TO PURCHASE NEW SHARES WILL BE SUBJECT TO A HOLD OF UP TO 10
BUSINESS DAYS BEFORE REDEMPTION REQUESTS WILL BE HONORED. TRANSACTION REQUESTS
MUST BE RECEIVED BY 4 P.M. ET. YOU MAY REQUEST THIS SERVICE ON YOUR INITIAL
ACCOUNT APPLICATION. CALVERT MONEY CONTROLLER TRANSACTIONS RETURNED FOR
INSUFFICIENT FUNDS WILL INCUR A $25 CHARGE.
TELEPHONE TRANSACTIONS
YOU MAY PURCHASE, REDEEM, OR EXCHANGE SHARES, WIRE FUNDS AND USE CALVERT MONEY
CONTROLLER BY TELEPHONE IF YOU HAVE PRE-AUTHORIZED SERVICE INSTRUCTIONS. YOU
RECEIVE TELEPHONE PRIVILEGES AUTOMATICALLY WHEN YOU OPEN YOUR ACCOUNT UNLESS YOU
ELECT OTHERWISE. FOR OUR MUTUAL PROTECTION, THE FUND, THE SHAREHOLDER SERVICING
AGENT AND THEIR AFFILIATES USE PRECAUTIONS SUCH AS VERIFYING SHAREHOLDER
IDENTITY AND RECORDING TELEPHONE CALLS TO CONFIRM INSTRUCTIONS GIVEN BY PHONE. A
CONFIRMATION STATEMENT IS SENT FOR MOST TRANSACTIONS; PLEASE REVIEW THIS
STATEMENT AND VERIFY THE ACCURACY OF YOUR TRANSACTION IMMEDIATELY.
EXCHANGES
CALVERT GROUP OFFERS A WIDE VARIETY OF INVESTMENT OPTIONS THAT INCLUDES COMMON
STOCK FUNDS, TAX-EXEMPT AND CORPORATE BOND FUNDS, AND MONEY MARKET FUNDS (CALL
YOUR BROKER OR CALVERT REPRESENTATIVE FOR MORE INFORMATION). WE MAKE IT EASY FOR
YOU TO PURCHASE SHARES IN OTHER CALVERT FUNDS IF YOUR INVESTMENT GOALS CHANGE.
THE EXCHANGE PRIVILEGE OFFERS FLEXIBILITY BY ALLOWING YOU TO EXCHANGE SHARES ON
WHICH YOU HAVE ALREADY PAID A SALES CHARGE FROM ONE MUTUAL FUND TO ANOTHER AT NO
ADDITIONAL CHARGE.
COMPLETE AND SIGN AN ACCOUNT APPLICATION, TAKING CARE TO REGISTER YOUR NEW
ACCOUNT IN THE SAME NAME AND TAXPAYER IDENTIFICATION NUMBER AS YOUR EXISTING
CALVERT ACCOUNT(S). EXCHANGE INSTRUCTIONS MAY THEN BE GIVEN BY TELEPHONE IF
TELEPHONE REDEMPTIONS HAVE BEEN AUTHORIZED AND THE SHARES ARE NOT IN CERTIFICATE
FORM.
BEFORE YOU MAKE AN EXCHANGE, PLEASE NOTE THE FOLLOWING:
EACH EXCHANGE REPRESENTS THE SALE OF SHARES OF ONE FUND AND THE PURCHASE OF
SHARES OF ANOTHER. THEREFORE, YOU COULD REALIZE A TAXABLE GAIN OR LOSS.
YOU MAY EXCHANGE SHARES ACQUIRED BY REINVESTMENT OF DIVIDENDS OR DISTRIBUTIONS
INTO ANOTHER CALVERT FUND AT NO ADDITIONAL CHARGE.
SHARES MAY ONLY BE EXCHANGED FOR SHARES OF THE SAME CLASS OF ANOTHER CALVERT
FUND.
<PAGE>
NO CDSC IS IMPOSED ON EXCHANGES OF SHARES SUBJECT TO A CDSC AT THE TIME OF THE
EXCHANGE. THE APPLICABLE CDSC IS IMPOSED AT THE TIME THE SHARES ACQUIRED BY THE
EXCHANGE ARE REDEEMED.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
ELECTRONIC DELIVERY OF PROSPECTUSES AND SHAREHOLDER REPORTS
YOU MAY REQUEST TO RECEIVE ELECTRONIC DELIVERY OF PROSPECTUSES AND ANNUAL AND
SEMI ANNUAL REPORTS.
COMBINED GENERAL MAILINGS (HOUSEHOLDING)
MULTIPLE ACCOUNTS WITH THE SAME SOCIAL SECURITY NUMBER WILL RECEIVE ONE MAILING
PER HOUSEHOLD OF INFORMATION SUCH AS PROSPECTUSES AND SEMI-ANNUAL AND ANNUAL
REPORTS. YOU MAY REQUEST FURTHER GROUPING OF ACCOUNTS TO RECEIVE FEWER MAILINGS.
SEPARATE STATEMENTS WILL BE GENERATED FOR EACH SEPARATE ACCOUNT AND WILL BE
MAILED IN ONE ENVELOPE FOR EACH COMBINATION ABOVE.
SPECIAL SERVICES AND CHARGES
THE FUND PAYS FOR SHAREHOLDER SERVICES BUT NOT FOR SPECIAL SERVICES THAT ARE
REQUIRED BY A FEW SHAREHOLDERS, SUCH AS A REQUEST FOR A HISTORICAL TRANSCRIPT OF
AN ACCOUNT OR A STOP PAYMENT ON A DRAFT. YOU MAY BE REQUIRED TO PAY A FEE FOR
THESE SPECIAL SERVICES.
IF YOU ARE PURCHASING SHARES THROUGH A PROGRAM OF SERVICES OFFERED BY A
BROKER/DEALER OR FINANCIAL INSTITUTION, YOU SHOULD READ THE PROGRAM MATERIALS
TOGETHER WITH THIS PROSPECTUS. CERTAIN FEATURES MAY BE MODIFIED IN THESE
PROGRAMS. INVESTORS MAY BE CHARGED A FEE IF THEY EFFECT TRANSACTIONS IN FUND
SHARES THROUGH A BROKER OR AGENT.
<PAGE>
MINIMUM ACCOUNT BALANCE
PLEASE MAINTAIN A BALANCE IN EACH OF YOUR FUND ACCOUNTS OF AT LEAST $1,000 PER
CLASS. IF THE BALANCE IN YOUR ACCOUNT FALLS BELOW THE MINIMUM DURING A MONTH,
THE ACCOUNT MAY BE CLOSED AND THE PROCEEDS MAILED TO THE ADDRESS OF RECORD. YOU
WILL RECEIVE NOTICE THAT YOUR ACCOUNT IS BELOW THE MINIMUM, AND WILL BE CLOSED
IF THE BALANCE IS NOT BROUGHT UP TO THE REQUIRED MINIMUM WITHIN 30 DAYS.
DIVIDENDS, CAPITAL GAINS, AND TAXES
THE FUND PAYS DIVIDENDS FROM ITS NET INVESTMENT INCOME ON A MONTHLY BASIS. NET
INVESTMENT INCOME CONSISTS OF INTEREST INCOME, NET SHORT-TERM CAPITAL GAINS, IF
ANY, AND DIVIDENDS DECLARED AND PAID ON INVESTMENTS, LESS EXPENSES.
DISTRIBUTIONS OF NET SHORT-TERM CAPITAL GAINS (TREATED AS DIVIDENDS FOR TAX
PURPOSES) AND NET LONG-TERM CAPITAL GAINS, IF ANY, ARE NORMALLY PAID ONCE A
YEAR; HOWEVER, THE FUND DOES NOT ANTICIPATE MAKING ANY SUCH DISTRIBUTIONS UNLESS
AVAILABLE CAPITAL LOSS CARRYOVERS HAVE BEEN USED OR HAVE EXPIRED. DIVIDEND AND
DISTRIBUTION PAYMENTS WILL VARY BETWEEN CLASSES.
DIVIDEND PAYMENT OPTIONS
DIVIDENDS AND ANY DISTRIBUTIONS ARE AUTOMATICALLY REINVESTED IN THE SAME FUND AT
NAV, UNLESS YOU ELECT TO HAVE AMOUNTS OF $10 OR MORE PAID IN CASH, BY CHECK OR
BY CALVERT MONEY CONTROLLER. DIVIDENDS AND DISTRIBUTIONS FROM ANY CALVERT GROUP
FUND MAY BE AUTOMATICALLY INVESTED IN AN IDENTICALLY REGISTERED ACCOUNT IN ANY
OTHER CALVERT GROUP FUND AT NAV. IF REINVESTED IN THE SAME ACCOUNT, NEW SHARES
WILL BE PURCHASED AT NAV ON THE REINVESTMENT DATE, WHICH IS GENERALLY 1 TO 3
DAYS PRIOR TO THE PAYMENT DATE. YOU MUST NOTIFY THE FUND IN WRITING TO CHANGE
YOUR PAYMENT OPTIONS. IF YOU ELECT TO HAVE DIVIDENDS AND/OR DISTRIBUTIONS PAID
IN CASH, AND THE US POSTAL SERVICE RETURNS THE CHECK AS UNDELIVERABLE, IT, AS
WELL AS FUTURE DIVIDENDS AND DISTRIBUTIONS, WILL BE REINVESTED IN ADDITIONAL
SHARES. NO DIVIDENDS WILL ACCRUE ON AMOUNTS REPRESENTED BY UNCASHED DISTRIBUTION
OR REDEMPTION CHECKS.
BUYING A DIVIDEND
AT THE TIME OF PURCHASE, THE SHARE PRICE OF EACH CLASS MAY REFLECT UNDISTRIBUTED
INCOME, CAPITAL GAINS OR UNREALIZED APPRECIATION OF SECURITIES. ANY INCOME OR
CAPITAL GAINS FROM THESE AMOUNTS WHICH ARE LATER DISTRIBUTED TO YOU ARE FULLY
TAXABLE. ON THE RECORD DATE FOR A DISTRIBUTION, SHARE VALUE IS REDUCED BY THE
AMOUNT OF THE DISTRIBUTION. IF YOU BUY SHARES JUST BEFORE THE RECORD DATE
("BUYING A DIVIDEND") YOU WILL PAY THE FULL PRICE FOR THE SHARES AND THEN
RECEIVE A PORTION OF THE PRICE BACK AS A TAXABLE DISTRIBUTION.
FEDERAL TAXES
IN JANUARY, THE FUND WILL MAIL YOU FORM 1099-DIV INDICATING THE FEDERAL TAX
STATUS OF DIVIDENDS AND ANY CAPITAL GAIN DISTRIBUTIONS PAID TO YOU DURING THE
<PAGE>
PAST YEAR. GENERALLY, DIVIDENDS AND DISTRIBUTIONS ARE TAXABLE IN THE YEAR THEY
ARE PAID. HOWEVER, ANY DIVIDENDS AND DISTRIBUTIONS PAID IN JANUARY BUT DECLARED
DURING THE PRIOR THREE MONTHS ARE TAXABLE IN THE YEAR DECLARED. DIVIDENDS AND
DISTRIBUTIONS ARE TAXABLE TO YOU REGARDLESS OF WHETHER THEY ARE TAKEN IN CASH OR
REINVESTED. DIVIDENDS, INCLUDING SHORT-TERM CAPITAL GAINS, ARE TAXABLE AS
ORDINARY INCOME. DISTRIBUTIONS FROM LONG-TERM CAPITAL GAINS ARE TAXABLE AS
LONG-TERM CAPITAL GAINS, REGARDLESS OF HOW LONG YOU HAVE OWNED SHARES.
YOU MAY REALIZE A CAPITAL GAIN OR LOSS WHEN YOU SELL OR EXCHANGE SHARES. THIS
CAPITAL GAIN OR LOSS WILL BE SHORT- OR LONG-TERM, DEPENDING ON HOW LONG YOU
HAVE OWNED THE SHARES WHICH WERE SOLD. IN JANUARY, THE FUND WILL MAIL YOU FORM
1099-B INDICATING THE TOTAL AMOUNT OF ALL SALES, INCLUDING EXCHANGES. YOU SHOULD
KEEP YOUR ANNUAL YEAR-END ACCOUNT STATEMENTS TO DETERMINE THE COST (BASIS) OF
THE SHARES TO REPORT ON YOUR TAX RETURNS.
OTHER TAX INFORMATION
IN ADDITION TO FEDERAL TAXES, YOU MAY BE SUBJECT TO STATE OR LOCAL TAXES ON YOUR
INVESTMENT, DEPENDING ON THE LAWS IN YOUR AREA. YOU WILL BE NOTIFIED TO THE
EXTENT, IF ANY, THAT DIVIDENDS REFLECT INTEREST RECEIVED FROM US GOVERNMENT
SECURITIES. SUCH DIVIDENDS MAY BE EXEMPT FROM CERTAIN STATE INCOME TAXES.
TAXPAYER IDENTIFICATION NUMBER
IF WE DO NOT HAVE YOUR CORRECT SOCIAL SECURITY OR TAXPAYER IDENTIFICATION NUMBER
("TIN") AND A SIGNED CERTIFIED APPLICATION OR FORM W-9, FEDERAL LAW REQUIRES US
TO WITHHOLD 31% OF YOUR REPORTABLE DIVIDENDS, AND POSSIBLY 31% OF CERTAIN
REDEMPTIONS. IN ADDITION, YOU MAY BE SUBJECT TO A FINE BY THE INTERNAL REVENUE
SERVICE. YOU WILL ALSO BE PROHIBITED FROM OPENING ANOTHER ACCOUNT BY EXCHANGE.
IF THIS TIN INFORMATION IS NOT RECEIVED WITHIN 60 DAYS AFTER YOUR ACCOUNT IS
ESTABLISHED, YOUR ACCOUNT MAY BE REDEEMED (CLOSED) AT THE CURRENT NAV ON THE
DATE OF REDEMPTION. CALVERT GROUP RESERVES THE RIGHT TO REJECT ANY NEW ACCOUNT
OR ANY PURCHASE ORDER FOR FAILURE TO SUPPLY A CERTIFIED TIN.
HOW TO SELL SHARES
YOU MAY REDEEM ALL OR A PORTION OF YOUR SHARES ON ANY DAY YOUR FUND IS OPEN FOR
BUSINESS, PROVIDED THE AMOUNT REQUESTED IS NOT ON HOLD. WHEN YOU PURCHASE BY
CHECK OR WITH CALVERT MONEY CONTROLLER (ELECTRONIC FUNDS TRANSFER), THE PURCHASE
WILL BE ON HOLD FOR UP TO 10 BUSINESS DAYS FROM THE DATE OF RECEIPT. DURING THE
HOLD PERIOD, REDEMPTIONS PROCEEDS WILL NOT BE SENT UNTIL THE TRANSFER AGENT IS
REASONABLY SATISFIED THAT THE PURCHASE PAYMENT HAS BEEN COLLECTED.
YOUR SHARES WILL BE REDEEMED AT THE NEXT NAV CALCULATED AFTER YOUR REDEMPTION
REQUEST IS RECEIVED AND ACCEPTED (LESS ANY APPLICABLE CDSC). THE PROCEEDS WILL
NORMALLY BE SENT TO YOU ON THE NEXT BUSINESS DAY, BUT IF MAKING IMMEDIATE
PAYMENT COULD ADVERSELY AFFECT YOUR FUND, IT MAY TAKE UP TO SEVEN (7) DAYS TO
MAKE
<PAGE>
PAYMENT. CALVERT MONEY CONTROLLER REDEMPTIONS GENERALLY WILL BE CREDITED TO YOUR
BANK ACCOUNT BY THE SECOND BUSINESS DAY AFTER YOUR PHONE CALL. 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. PLEASE NOTE THAT THERE ARE SOME FEDERAL HOLIDAYS,
HOWEVER, SUCH AS COLUMBUS DAY AND VETERANS' DAY, WHEN THE NYSE IS OPEN AND THE
FUND IS OPEN BUT REDEMPTIONS CANNOT BE MAILED OR WIRED BECAUSE THE POST OFFICES
AND BANKS ARE CLOSED.
FOLLOW THESE SUGGESTIONS TO ENSURE TIMELY PROCESSING OF YOUR REDEMPTION REQUEST:
BY TELEPHONE - CALL 800-368-2745
YOU MAY REDEEM SHARES FROM YOUR ACCOUNT BY TELEPHONE AND HAVE YOUR MONEY MAILED
TO YOUR ADDRESS OF RECORD OR ELECTRONICALLY TRANSFERRED OR WIRED TO A BANK YOU
HAVE PREVIOUSLY AUTHORIZED. A CHARGE OF $5 MAY BE IMPOSED ON WIRE TRANSFERS OF
LESS THAN $1,000.
WRITTEN REQUESTS
CALVERT GROUP, P.O. BOX 219544, KANSAS CITY, MO 64121-9544
YOUR LETTER SHOULD INCLUDE YOUR ACCOUNT NUMBER, NAME OF THE FUND, AND THE NUMBER
OF SHARES OR THE DOLLAR AMOUNT YOU ARE REDEEMING. PLEASE PROVIDE A
DAYTIME TELEPHONE NUMBER, IF POSSIBLE, FOR US TO CALL IF WE HAVE QUESTIONS. IF
THE MONEY IS BEING SENT TO A NEW BANK, PERSON, OR ADDRESS OTHER THAN THE ADDRESS
OF RECORD, YOUR LETTER MUST BE SIGNATURE GUARANTEED.
SYSTEMATIC CHECK REDEMPTIONS
IF YOU MAINTAIN AN ACCOUNT WITH A BALANCE OF $10,000 OR MORE, YOU MAY HAVE UP TO
TWO (2) REDEMPTION CHECKS FOR A FIXED AMOUNT SENT TO YOU ON THE 15TH OF THE
MONTH, SIMPLY BY SENDING A LETTER WITH ALL INFORMATION, INCLUDING YOUR ACCOUNT
NUMBER, AND THE DOLLAR AMOUNT ($100 MINIMUM). IF YOU WOULD LIKE A REGULAR CHECK
MAILED TO ANOTHER PERSON OR PLACE, YOUR LETTER MUST BE SIGNATURE
GUARANTEED. UNLESS THEY OTHERWISE QUALIFY FOR A WAIVER, CLASS B OR CLASS C
SHARES REDEEMED BY SYSTEMATIC CHECK REDEMPTION WILL BE SUBJECT TO THE CONTINGENT
DEFERRED SALES CHARGE.
CORPORATIONS AND ASSOCIATIONS
YOUR LETTER OF INSTRUCTION AND CORPORATE RESOLUTION SHOULD BE SIGNED BY
PERSON(S) AUTHORIZED TO ACT ON THE ACCOUNT, ACCOMPANIED BY SIGNATURE
GUARANTEE(S).
TRUSTS
YOUR LETTER OF INSTRUCTION SHOULD BE SIGNED BY THE TRUSTEE(S) (AS TRUSTEE), WITH
A SIGNATURE GUARANTEE. (IF THE TRUSTEE'S NAME IS NOT REGISTERED ON YOUR ACCOUNT,
PLEASE PROVIDE A COPY OF THE TRUST DOCUMENT, CERTIFIED WITHIN THE LAST 60 DAYS.)
<PAGE>
THROUGH YOUR DEALER
YOUR DEALER MUST RECEIVE YOUR REQUEST BEFORE THE CLOSE OF REGULAR TRADING ON THE
NYSE TO RECEIVE THAT DAY'S NAV. YOUR DEALER WILL BE RESPONSIBLE FOR FURNISHING
ALL NECESSARY DOCUMENTATION TO CALVERT GROUP AND MAY CHARGE YOU FOR SERVICES
PROVIDED.
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE FUND'S
FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) FISCAL YEARS. THE FUND'S FISCAL YEAR
END IS SEPTEMBER 30. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE
SHARE BY CLASS. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN
INVESTOR WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A FUND (ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES NOT REFLECT ANY
APPLICABLE FRONT- OR BACK-END SALES CHARGE. THIS INFORMATION HAS BEEN AUDITED BY
PRICEWATERHOUSECOOPERS LLP WHOSE REPORT, ALONG WITH THE FUND'S FINANCIAL
STATEMENTS, ARE INCLUDED IN THE FUND'S ANNUAL REPORT, WHICH IS AVAILABLE UPON
REQUEST.
<PAGE>
FINANCIAL HIGHLIGHTS
YEARS ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
CLASS A SHARES 1999 1998 1997
NET ASSET VALUE, BEGINNING $17.17 $17.20 $16.47
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .99 1.02 1.02
NET REALIZED AND UNREALIZED GAIN (LOSS) .74 .61 .74
TOTAL FROM INVESTMENT OPERATIONS 1.73 1.63 1.76
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.99) (1.01) (1.02)
NET REALIZED GAIN (.83) (.65) (.01)
TOTAL DISTRIBUTIONS (1.82) (1.66) (1.03)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE
(.09) (.03) .73
NET ASSET VALUE, ENDING $17.08 $17.17 $17.20
TOTAL RETURN* 10.68% 9.92% 11.03%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 6.01% 5.96% 6.04%
TOTAL EXPENSES 1.32% 1.43% 1.33%
EXPENSES BEFORE OFFSETS 1.32% 1.43% 1.33%
NET EXPENSES 1.23% 1.36% 1.26%
PORTFOLIO TURNOVER 3,454% 3,461% 2,961%
NET ASSETS, ENDING (IN THOUSANDS) $91,764 $41,607 $39,302
NUMBER OF SHARES OUTSTANDING,
ENDING (IN THOUSANDS) 5,372 2,423 2,285
YEARS ENDED
SEPTEMBER 30, SEPTEMBER 30,
CLASS A SHARES 1996 1995
NET ASSET VALUE, BEGINNING $16.82 $15.68
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME 1.01 1.11
NET REALIZED AND UNREALIZED GAIN (LOSS) (.32) 1.14
TOTAL FROM INVESTMENT OPERATIONS .69 2.25
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (1.01) (1.11)
IN EXCESS OF NET REALIZED GAIN (.03) -
NET REALIZED GAIN -- -
TOTAL DISTRIBUTIONS (1.04) (1.11)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE (.35) 1.14
NET ASSET VALUE, ENDING $16.47 $16.82
TOTAL RETURN* 4.21% 14.90%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 6.02% 6.89%
TOTAL EXPENSES 1.26% 1.26%
EXPENSES BEFORE OFFSETS 1.26% 1.26%
NET EXPENSES 1.23% 1.23%
PORTFOLIO TURNOVER 153% 135%
NET ASSETS, ENDING (IN THOUSANDS) $44,431 $42,637
NUMBER OF SHARES OUTSTANDING,
ENDING (IN THOUSANDS) 2,698 2,535
YEAR ENDED
SEPTEMBER 30,
CLASS B SHARES 1999 ^^
NET ASSET VALUE, BEGINNING $17.02
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .13
NET REALIZED AND UNREALIZED GAIN (LOSS) .05
TOTAL FROM INVESTMENT OPERATIONS .18
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.14)
TOTAL DISTRIBUTIONS (.14)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE .04
NET ASSET VALUE, ENDING $17.06
TOTAL RETURN* 1.06%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 5.00% (A)
TOTAL EXPENSES 3.74% (A)
EXPENSES BEFORE OFFSETS 2.98% (A)
NET EXPENSES 2.91% (A)
PORTFOLIO TURNOVER 3,454%
NET ASSETS, ENDING (IN THOUSANDS) $1,231
NUMBER OF SHARES OUTSTANDING,
ENDING (IN THOUSANDS) 72
YEAR ENDED
SEPTEMBER 30,
CLASS I SHARES 1999 ^
NET ASSET VALUE, BEGINNING $16.73
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .63
NET REALIZED AND UNREALIZED GAIN (LOSS) .34
TOTAL FROM INVESTMENT OPERATIONS .97
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.64)
TOTAL DISTRIBUTIONS (.64)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE .33
NET ASSET VALUE, ENDING $17.06
TOTAL RETURN* 5.83%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 6.37% (A)
TOTAL EXPENSES 1.07% (A)
EXPENSES BEFORE OFFSETS .81% (A)
NET EXPENSES .72% (A)
PORTFOLIO TURNOVER 3,454%
NET ASSETS, ENDING (IN THOUSANDS) $6,442
NUMBER OF SHARES OUTSTANDING,
ENDING (IN THOUSANDS) 378
(A) ANNUALIZED
* TOTAL RETURN IS NOT ANNUALIZED AND DOES NOT REFLECT DEDUCTION OF ANY
FRONT-END OR DEFERRED SALES CHARGE.
^ FROM MARCH 1, 1999 INCEPTION.
^^ FROM AUGUST 1, 1999, INCEPTION.
<PAGE>
EXHIBIT A
REDUCED SALES CHARGES (CLASS A ONLY)
YOU MAY QUALIFY FOR A REDUCED SALES CHARGE THROUGH SEVERAL PURCHASE PLANS
AVAILABLE. YOU MUST NOTIFY THE FUND AT THE TIME OF PURCHASE TO TAKE ADVANTAGE OF
THE REDUCED SALES CHARGE.
RIGHTS OF ACCUMULATION CAN BE APPLIED TO SEVERAL ACCOUNTS
CLASS A SALES CHARGE BREAKPOINTS ARE AUTOMATICALLY CALCULATED FOR EACH ACCOUNT
BASED ON THE HIGHER OF COST OR CURRENT VALUE OF SHARES PREVIOUSLY PURCHASED.
THIS PRIVILEGE CAN BE APPLIED TO A FAMILY GROUP OR OTHER QUALIFIED GROUP10 UPON
REQUEST. SHARES COULD THEN BE PURCHASED AT THE REDUCED SALES CHARGE WHICH
APPLIES TO THE ENTIRE GROUP; THAT IS, BASED ON THE HIGHER OF COST OR CURRENT
VALUE OF SHARES PREVIOUSLY PURCHASED AND CURRENTLY HELD BY ALL THE MEMBERS OF
THE GROUP.
LETTER OF INTENT
IF YOU (OR YOUR GROUP, AS DESCRIBED ABOVE) PLAN TO PURCHASE $50,000 OR MORE OF
CALVERT FUND SHARES OVER THE NEXT 13 MONTHS, YOUR SALES CHARGE MAY BE REDUCED
THROUGH A "LETTER OF INTENT." YOU PAY THE LOWER SALES CHARGE APPLICABLE TO THE
TOTAL AMOUNT YOU PLAN TO INVEST OVER THE 13-MONTH PERIOD, EXCLUDING ANY MONEY
MARKET FUND PURCHASES. PART OF YOUR SHARES WILL BE HELD IN ESCROW, SO THAT IF
YOU DO NOT INVEST THE AMOUNT INDICATED, YOU WILL HAVE TO PAY THE SALES CHARGE
APPLICABLE TO THE SMALLER INVESTMENT ACTUALLY MADE. FOR MORE INFORMATION, SEE
THE SAI.
RETIREMENT PLANS UNDER SECTION 457, SECTION 403(B)(7), OR SECTION 401(K)
THERE IS NO SALES CHARGE ON SHARES PURCHASED FOR THE BENEFIT OF A RETIREMENT
PLAN UNDER SECTION 457 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED
("CODE"), OR FOR A PLAN QUALIFYING UNDER SECTION 403(B) OR 401(K) OF THE CODE
IF, AT THE TIME OF PURCHASE, (I) CALVERT GROUP HAS BEEN NOTIFIED IN WRITING THAT
THE 403(B) OR 401(K) PLAN HAS AT LEAST 200 ELIGIBLE EMPLOYEES AND IS NOT
SPONSORED BY A K-12 SCHOOL DISTRICT, OR (II) THE COST OR CURRENT VALUE OF SHARES
A 401(K) PLAN HAS IN CALVERT GROUP FUNDS (EXCEPT MONEY MARKET FUNDS) IS AT LEAST
$1 MILLION.
10A "QUALIFIED GROUP" IS ONE WHICH:
1. HAS BEEN IN EXISTENCE FOR MORE THAN SIX MONTHS, AND
2. HAS A PURPOSE OTHER THAN ACQUIRING SHARES AT A DISCOUNT, AND
3. SATISFIES UNIFORM CRITERIA WHICH ENABLE CDI AND BROKERS OFFERING SHARES
TO REALIZE ECONOMIES OF
SCALE IN DISTRIBUTING SUCH SHARES.
A QUALIFIED GROUP MUST HAVE MORE THAN 10 MEMBERS, MUST BE AVAILABLE TO ARRANGE
FOR GROUP MEETINGS BETWEEN REPRESENTATIVES OF CDI OR BROKERS DISTRIBUTING
SHARES, MUST AGREE TO INCLUDE SALES AND OTHER MATERIALS RELATED TO THE FUNDS IN
ITS PUBLICATIONS AND MAILINGS TO MEMBERS AT REDUCED OR NO COST TO CDI OR
BROKERS. A PENSION PLAN IS NOT A QUALIFIED GROUP FOR RIGHTS OF ACCUMULATION.
<PAGE>
THEREOF WILL REIMBURSE A PLAN OR PARTICIPANT FOR ANY SALES CHARGES PAID PRIOR TO
NEITHER THE FUND, NOR CALVERT DISTRIBUTORS, INC. ("CDI"), NOR ANY AFFILIATE
RECEIPT OF SUCH WRITTEN COMMUNICATION AND CONFIRMATION BY CALVERT GROUP. PLAN
ADMINISTRATORS SHOULD SEND REQUESTS FOR THE WAIVER OF SALES CHARGES BASED ON THE
ABOVE CONDITIONS TO: CALVERT GROUP RETIREMENT PLANS, 4550 MONTGOMERY AVENUE,
SUITE 1000N, BETHESDA, MARYLAND 20814.
OTHER CIRCUMSTANCES
THERE IS NO SALES CHARGE ON SHARES OF ANY FUND OF THE CALVERT GROUP OF FUNDS
SOLD TO: (I) CURRENT OR RETIRED DIRECTORS, TRUSTEES, OR OFFICERS OF THE CALVERT
GROUP OF FUNDS, EMPLOYEES OF CALVERT GROUP, LTD. AND ITS AFFILIATES, OR THEIR
FAMILY MEMBERS; (II) CSIF ADVISORY COUNCIL MEMBERS, DIRECTORS, OFFICERS, AND
EMPLOYEES OF ANY SUBADVISOR FOR THE CALVERT GROUP OF FUNDS, EMPLOYEES OF
BROKER/DEALERS DISTRIBUTING THE FUND'S SHARES AND IMMEDIATE FAMILY MEMBERS OF
THE COUNCIL, SUBADVISOR, OR BROKER/DEALER; (III) PURCHASES MADE THROUGH A
REGISTERED INVESTMENT ADVISOR; (IV) TRUST DEPARTMENTS OF BANKS OR SAVINGS
INSTITUTIONS FOR TRUST CLIENTS OF SUCH BANK OR INSTITUTION, (V) PURCHASES
THROUGH A BROKER MAINTAINING AN OMNIBUS ACCOUNT WITH THE FUND, PROVIDED THE
PURCHASES ARE MADE BY (A) INVESTMENT ADVISORS OR FINANCIAL PLANNERS PLACING
TRADES FOR THEIR OWN ACCOUNTS (OR THE ACCOUNTS OF THEIR CLIENTS) AND WHO CHARGE
A MANAGEMENT, CONSULTING, OR OTHER FEE FOR THEIR SERVICES; OR (B) CLIENTS OF
SUCH INVESTMENT ADVISORS OR FINANCIAL PLANNERS WHO PLACE TRADES FOR THEIR OWN
ACCOUNTS IF SUCH ACCOUNTS ARE LINKED TO THE MASTER ACCOUNT OF SUCH INVESTMENT
ADVISOR OR FINANCIAL PLANNER ON THE BOOKS AND RECORDS OF THE BROKER OR AGENT; OR
(C) RETIREMENT AND DEFERRED COMPENSATION PLANS AND TRUSTS, INCLUDING, BUT NOT
LIMITED TO, THOSE DEFINED IN SECTION 401(A) OR SECTION 403(B) OF THE I.R.C., AND
"RABBI TRUSTS."
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS FROM OTHER CALVERT GROUP FUNDS
YOU MAY PREARRANGE TO HAVE YOUR DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS FROM
ANOTHER CALVERT GROUP FUND AUTOMATICALLY INVESTED IN ANOTHER ACCOUNT WITH NO
ADDITIONAL SALES CHARGE.
PURCHASES MADE AT NAV
IF YOU MAKE A PURCHASE AT NAV, YOU MAY EXCHANGE THAT AMOUNT TO ANOTHER CALVERT
GROUP FUND AT NO ADDITIONAL SALES CHARGE.
REINSTATEMENT PRIVILEGE
IF YOU REDEEM SHARES AND THEN WITHIN 60 DAYS DECIDE TO REINVEST IN THE SAME
FUND, YOU MAY DO SO AT THE NET ASSET VALUE NEXT COMPUTED AFTER THE REINVESTMENT
ORDER IS RECEIVED, WITHOUT A SALES CHARGE. YOU MAY USE THE REINSTATEMENT
PRIVILEGE ONLY ONCE. THE FUND RESERVES THE RIGHT TO MODIFY OR ELIMINATE THIS
PRIVILEGE.
<PAGE>
EXHIBIT B
SERVICE FEES AND ARRANGEMENTS WITH DEALERS
CDI, THE FUND'S UNDERWRITER, PAYS DEALERS A COMMISSION, OR REALLOWANCE
(EXPRESSED AS A PERCENTAGE OF THE OFFERING PRICE FOR CLASS A AND A PERCENTAGE OF
THE AMOUNT INVESTED FOR CLASS B AND C) WHEN YOU PURCHASE SHARES OF THE FUND. CDI
ALSO PAYS DEALERS AN ONGOING SERVICE FEE WHILE YOU OWN SHARES OF THE FUND
(EXPRESSED AS AN ANNUAL PERCENTAGE RATE OF AVERAGE DAILY NET ASSETS HELD IN
CALVERT ACCOUNTS BY THAT DEALER). THE TABLE BELOW SHOWS THE AMOUNT OF PAYMENT
WHICH DIFFERS DEPENDING ON THE CLASS.
MAXIMUM COMMISSION/SERVICE FEES
CLASS A CLASS B* CLASS C**
3.00% / 0.25% 3.00% / 0.25% 1.00%/1.00%
*CLASS B SERVICE FEE BEGINS TO ACCRUE IN 13TH MONTH.
**CLASS C PAYS DEALERS A SERVICE FEE OF 0.25% AND ADDITIONAL COMPENSATION OF
0.75% FOR A TOTAL OF 1%. BEGINS TO ACCRUE IN 13TH MONTH.
OCCASIONALLY, CDI MAY REALLOW TO DEALERS THE FULL CLASS A FRONT-END SALES
CHARGE. CDI MAY ALSO PAY ADDITIONAL CONCESSIONS, INCLUDING NON-CASH PROMOTIONAL
INCENTIVES, SUCH AS MERCHANDISE OR TRIPS, TO BROKERS EMPLOYING REGISTERED
REPRESENTATIVES WHO HAVE SOLD OR ARE EXPECTED TO SELL A MINIMUM DOLLAR AMOUNT OF
SHARES OF THE FUND AND/OR SHARES OF OTHER FUNDS UNDERWRITTEN BY CDI. CDI MAY
MAKE EXPENSE REIMBURSEMENTS FOR SPECIAL TRAINING OF A BROKER'S REGISTERED
REPRESENTATIVES, ADVERTISING OR EQUIPMENT, OR TO DEFRAY THE EXPENSES OF SALES
CONTESTS. CAMCO, CDI, OR THEIR AFFILIATES MAY PAY, FROM THEIR OWN RESOURCES
CERTAIN BROKER-DEALERS AND/OR OTHER PERSONS, FOR THE SALE AND DISTRIBUTION OF
THE SECURITIES OR FOR SERVICES TO THE FUND. THESE AMOUNTS MAY BE SIGNIFICANT.
PAYMENTS MAY INCLUDE ADDITIONAL COMPENSATION BEYOND THE REGULARLY
SCHEDULED RATES, AND FINDER'S FEES. CDI PAYS DEALERS A FINDER'S FEE OF UP TO 1%
ON CERTAIN CLASS A SHARES PURCHASED AT NAV. CALL 800-368-2750 FOR MORE
INFORMATION. WHERE PAID, THE FINDER'S FEE IS 1% OF THE NAV PURCHASE AMOUNT ON
THE FIRST $2 MILLION, 0.80% ON $2 TO $3 MILLION, 0.50% ON $3 TO $50 MILLION,
0.25% ON $50 TO $100 MILLION AND 0.15% OVER $100 MILLION. IF A FINDER'S FEE IS
PAID, THEN THE SERVICE FEE BEGINS IN THE 13TH MONTH AFTER PURCHASE. ALL PAYMENTS
WILL BE IN COMPLIANCE WITH THE RULES OF THE NATIONAL ASSOCIATION OF SECURITIES
DEALERS, INC.
<PAGE>
TO OPEN AN ACCOUNT:
800-368-2748
PERFORMANCE AND PRICES:
WWW.CALVERT.COM
CALVERT INFORMATION NETWORK
24 HOURS, 7 DAYS A WEEK
800-368-2745
SERVICE FOR EXISTING ACCOUNTS:
SHAREHOLDERS 800-368-2745
BROKERS 800-368-2746
TDD FOR HEARING-IMPAIRED:
800-541-1524
BRANCH OFFICE:
4550 MONTGOMERY AVENUE
SUITE 1000N
BETHESDA, MD 20814
REGISTERED, CERTIFIED OR
OVERNIGHT MAIL:
CALVERT GROUP
C/O NFDS
330 WEST 9TH STREET
KANSAS CITY, MO 64105
CALVERT GROUP WEB-SITE
WWW.CALVERT.COM
PRINCIPAL UNDERWRITER
CALVERT DISTRIBUTORS, INC.
4550 MONTGOMERY AVENUE
SUITE 1000N
BETHESDA, MARYLAND 20814
<PAGE>
FOR INVESTORS WHO WANT MORE INFORMATION ABOUT THE FUND, THE FOLLOWING DOCUMENTS
ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMI-ANNUAL REPORTS: ADDITIONAL INFORMATION ABOUT THE FUND'S INVESTMENTS
IS AVAILABLE IN THE FUND'S ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS. IN
THE FUND'S ANNUAL REPORT, YOU WILL FIND A DISCUSSION OF THE MARKET CONDITIONS
AND INVESTMENT STRATEGIES THAT SIGNIFICANTLY AFFECTED THE FUND'S PERFORMANCE
DURING ITS LAST FISCAL YEAR.
SAI: THE SAI FOR THE FUND PROVIDES MORE DETAILED INFORMATION ABOUT THE FUND AND
IS INCORPORATED INTO THIS PROSPECTUS BY REFERENCE.
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE FUND BY CONTACTING YOUR FINANCIAL PROFESSIONAL,
OR THE FUND AT:
CALVERT GROUP
4550 MONTGOMERY AVE.
SUITE 1000N
BETHESDA, MD 20814
TELEPHONE: 1-800-368-2745
CALVERT GROUP WEB-SITE:
WWW.CALVERT.COM
YOU CAN REVIEW THE FUND'S REPORTS AND SAI AT THE PUBLIC REFERENCE ROOM OF THE
SECURITIES AND EXCHANGE COMMISSION. YOU CAN GET TEXT-ONLY COPIES:
- FOR A FEE, BY WRITING TO OR CALLING THE PUBLIC REFERENCE SECTION OF THE
COMMISSION, WASHINGTON, D.C. 20549-6009, TELEPHONE: 1-800-SEC-0330.
- FREE FROM THE COMMISSION'S INTERNET WEBSITE AT WWW.SEC.GOV.
INVESTMENT COMPANY ACT FILE NO.:811-3416
<PAGE>
THE CALVERT FUND
CALVERT INCOME FUND
4550 MONTGOMERY AVENUE, BETHESDA, MARYLAND 20814
STATEMENT OF ADDITIONAL INFORMATION
JANUARY 31, 2000
REVISED JULY 14, 2000
NEW ACCOUNT (800) 368-2748 SHAREHOLDER
INFORMATION: (301) 951-4820 SERVICES: (800) 368-2745
BROKER (800) 368-2746 TDD FOR THE HEARING-
SERVICES: (301) 951-4850 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, 2000, REVISED JULY 14, 2000. THE
FUND'S AUDITED FINANCIAL STATEMENTS INCLUDED IN ITS MOST RECENT ANNUAL REPORT TO
SHAREHOLDERS, ARE EXPRESSLY INCORPORATED BY REFERENCE, AND MADE A PART OF THIS
SAI. THE PROSPECTUS AND THE MOST RECENT SHAREHOLDER REPORT MAY BE OBTAINED FREE
OF CHARGE BY WRITING THE FUND AT THE ABOVE ADDRESS OR CALLING THE FUND.
TABLE OF CONTENTS
INVESTMENT POLICIES AND RISKS 2
INVESTMENT RESTRICTIONS 8
DIVIDENDS, DISTRIBUTIONS AND TAXES 9
NET ASSET VALUE 10
CALCULATION OF YIELD AND TOTAL RETURN 10
PURCHASE AND REDEMPTION OF SHARES 12
ADVERTISING 12
TRUSTEES AND OFFICERS 13
INVESTMENT ADVISOR 15
ADMINISTRATIVE SERVICES AGENT 16
METHOD OF DISTRIBUTION 16
TRANSFER AND SHAREHOLDER SERVICING AGENTS 18
PORTFOLIO TRANSACTIONS 18
PERSONAL SECURITIES TRANSACTIONS 18
INDEPENDENT ACCOUNTANTS AND CUSTODIANS 19
GENERAL INFORMATION 19
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES 20
APPENDIX 21
<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 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". 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 AND SHORT-TERM CASH POSITIONS
FOR TEMPORARY DEFENSIVE OR SHORT-TERM INVESTMENT PURPOSES 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. THE FUND CONSIDERS A SECURITY TO BE INVESTMENT GRADE
IF IT HAS RECEIVED AN INVESTMENT GRADE RATING FROM AT LEAST ONE NATIONALLY
RECOGNIZED STATISTICAL RATING ORGANIZATION (NRSRO), OR IS AN UNRATED SECURITY OF
COMPARABLE QUALITY. CURRENTLY, THERE ARE FOUR NRSROS.) 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 PREPARES ITS OWN CAREFUL CREDIT ANALYSIS TO ATTEMPT TO IDENTIFY THOSE
ISSUERS WHOSE FINANCIAL CONDITION IS ADEQUATE TO MEET FUTURE OBLIGATIONS OR IS
EXPECTED TO BE ADEQUATE IN THE FUTURE. THROUGH PORTFOLIO DIVERSIFICATION AND
CREDIT ANALYSIS, INVESTMENT RISK CAN BE REDUCED, ALTHOUGH THERE CAN BE NO
ASSURANCE THAT LOSSES WILL NOT OCCUR.
DERIVATIVES
THE 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 2.)
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 FUND INTENDS 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, 1999, 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 PUBLIC OFFERING PRICE OF THE SHARES OF THE FUND IS THE RESPECTIVE NET
ASSET VALUE PER SHARE (PLUS, FOR CLASS A SHARES, THE APPLICABLE SALES CHARGE.)
THE NET ASSET VALUE FLUCTUATES BASED ON THE MARKET VALUE OF THE FUND'S
INVESTMENTS. THE NET ASSET VALUE PER SHARE FOR EACH CLASS IS DETERMINED EVERY
BUSINESS DAY AS OF THE CLOSE OF THE REGULAR SESSION OF THE NEW YORK STOCK
EXCHANGE (NORMALLY 4:00 P.M., EASTERN TIME). 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, 1999
CLASS A NET ASSET VALUE PER SHARE
($91,763,518 /5,371,502 SHARES) $17.08
MAXIMUM SALES CHARGE, CLASS A
(3.75% OF OFFERING PRICE) 0.67
OFFERING PRICE PER SHARE, CLASS A $17.75
CLASS B NET ASSET VALUE AND OFFERING PRICE PER SHARE
($1,231,275/72,175 SHARES) $17.06
CLASS I NET ASSET VALUE AND OFFERING PRICE PER SHARE
($6,441,656/377,680 SHARES) $17.06
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, 1999 WAS 6.41%, 5.12% AND 7.22% FOR CLASS A, B AND I SHARES, RESPECTIVELY.
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. CLASS I SHARES
DO NOT HAVE A SALES CHARGE.
THE STANDARDIZED TOTAL RETURN FOR CLASS I SHARES IS "LINKED" TO THE CLASS A
TOTAL RETURN. THAT IS, CLASS I SHARES HAVE AN ACTUAL INCEPTION DATE OF 1999.
HOWEVER, CLASS A SHARES HAVE AN INCEPTION DATE OF SEVERAL YEARS EARLIER. IN THE
TABLE BELOW, PERFORMANCE RESULTS BEFORE THE CLASS I ACTUAL INCEPTION DATE ARE
FOR CLASS A AT NAV (I.E., THEY DO NOT REFLECT THE DEDUCTION OF THE CLASS A
FRONT-END SALES CHARGE.) BECAUSE CLASS A HAD HIGHER EXPENSES, ITS PERFORMANCE
WAS LOWER THAN THE CLASS I WOULD HAVE REALIZED IN THE SAME PERIOD.
NONSTANDARDIZED TOTAL RETURN FOR CLASS I SHARE MAY ALSO BE SHOWN FROM THE ACTUAL
CLASS I INCEPTION DATE; THIS FIGURE IS NOT LINKED TO CLASS A TOTAL RETURN.
RETURN FOR THE FUND'S SHARES FOR THE PERIODS INDICATED ARE AS FOLLOWS:
FOR PERIODS ENDED CLASS A CLASS B CLASS C CLASS I
SEPTEMBER 30, 1999 TOTAL RETURN TOTAL RETURN TOTAL RETURN TOTAL RETURN
WITH/WITHOUT MAXIMUM LOAD WITH/WITHOUT CDSC WITH/WITHOUT CDSC LINKED/ACTUAL
ONE YEAR
6.58% 10.74% N/A N/A N/A N/A 11.02% N/A
FIVE YEARS
9.21% 10.05% N/A N/A N/A N/A 10.10% N/A
TEN YEARS
8.31% 8.73% N/A N/A N/A N/A 8.75% N/A
SINCE INCEPTION
9.80% 10.05% (2.94%) 1.06% N/A N/A - 5.83%
INCEPTION DATE: OCTOBER 12, 1982 FOR CLASS A; JULY 31, 1999 FOR CLASS B; JULY
14, 2000 FOR CLASS C; FEBRUARY 26, 1999 FOR ACTUAL CLASS I.
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, 1999). 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: 282 SOUTH AVENUE, SUITE 201, P.O. BOX 207 FANWOOD,
NJ 07023.
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 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 22201-3917.
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. DOB:
05/15/48. ADDRESS: 388 CALLE COLINA SANTA FE, NM 87501.
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 THAT: (1) 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) 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) 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.
*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 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 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.
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. SHE ALSO SERVES AS SECRETARY
AND PROVIDES COUNSEL TO THE CALVERT SOCIAL INVESTMENT FOUNDATION. PRIOR TO
WORKING AT CALVERT GROUP, MS. DUKE WAS AN ASSOCIATE IN THE INVESTMENT MANAGEMENT
GROUP OF THE BUSINESS AND FINANCE DEPARTMENT AT DRINKER BIDDLE & REATH. DOB:
09/07/68.
VICTOR FRYE, ESQ., ASSISTANT SECRETARY AND COMPLIANCE OFFICER. MR. FRYE IS
COUNSEL AND COMPLIANCE OFFICER OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS
SUBSIDIARIES AND CALVERT-SLOAN ADVISERS, L.L.C. HE IS ALSO AN OFFICER OF EACH OF
THE OTHER INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING
AT CALVERT GROUP, MR. FRYE WAS COUNSEL AND MANAGER OF THE COMPLIANCE DEPARTMENT
AT THE ADVISORS GROUP. DOB: 10/15/58.
JENNIFER P. STREAKS, ESQ., ASSISTANT SECRETARY. MS. STREAKS IS ASSISTANT
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: AUGUST 2, 1971.
MICHAEL V.YUHAS JR., CPA, CONTROLLER OF FUNDS. MR. YUHAS IS THE DIRECTOR OF
FUND ADMINISTRATION OF CALVERT GROUP, LTD., AND AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. DOB: 08/04/61.
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 AND KRUVANT 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. DIEHL, GAVIAN, ROCHAT, SILBY, AND MS. KRUMSIEK.
DURING FISCAL 1999, TRUSTEES OF THE FUND NOT AFFILIATED WITH THE FUND'S
ADVISOR WERE PAID $5,991. 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 1999
(UNAUDITED NUMBERS)
AGGREGATE COMPENSATION PENSION OR RETIREMENT TOTAL COMPENSATION FROM
FROM REGISTRANT FOR SERVICE BENEFITS ACCRUED AS PART REGISTRANT AND FUND
NAME OF TRUSTEE AS TRUSTEE OF REGISTRANT EXPENSES* COMPLEX PAID TO
TRUSTEE**
RICHARD L. BAIRD, JR. $36,250 $0 $39,250
FRANK H. BLATZ, JR. $37,749 $37,749 $48,250
CHARLES E. DIEHL $37,749 $0 $48,250
DOUGLAS E. FELDMAN $37,000 $0 $37,000
PETER W. GAVIAN $37,000 $0 $37,000
JOHN G. GUFFEY, JR. $36,249 $7,032 $56,365
M. CHARITO KRUVANT $35,501 $21,300 $45,250
ARTHUR J. PUGH $37,750 $0 $48,250
D. WAYNE SILBY $32,500 $0 $60,831
*MESSRS. BLATZ, DIEHL, GAVIAN, PUGH, GUFFEY, AND MS. KRUVANT HAVE CHOSEN TO
DEFER A PORTION OF THEIR COMPENSATION. AS OF SEPTEMBER 30, 1999, TOTAL DEFERRED
COMPENSATION, INCLUDING DIVIDENDS AND CAPITAL APPRECIATION, WAS $610,683,
$835,804, $110,429, $220,237, $11,021 AND $57,932, FOR EACH OF THEM,
RESPECTIVELY.
**FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999, 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 LIFE INSURANCE COMPANY OF
WASHINGTON, D.C. ("ACACIA"). EFFECTIVE JANUARY 1, 1999, ACACIA 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, 2001, 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 0.40% 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, 1997, 1998, AND 1999, CALVERT
INCOME FUND PAID ADVISORY FEES OF $29,440, $278,234, AND $285,313 RESPECTIVELY.
INVESTMENT ADVISORY FEES ARE ALLOCATED AS A PORTFOLIO-LEVEL EXPENSE BASED ON NET
ASSETS.
ADMINISTRATIVE SERVICES AGENT
-----------------------------
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
SERVICES FEE PAYABLE MONTHLY (AS A % OF NET ASSETS) AS FOLLOWS:
CLASS A, B AND C CLASS I
0.30% 0.10%
THE ADMINISTRATIVE SERVICES FEES PAID TO CASC BY THE FUND FOR THE FISCAL
YEAR ENDED SEPTEMBER 30, 1999, WERE $115,104. NO SUCH FEES WERE PAID FOR ANY
EARLIER PERIODS. ADMINISTRATIVE SERVICES FEES ARE ALLOCATED AS A CLASS-LEVEL
EXPENSE, BASED ON NET ASSETS.
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 DISTRIBUTION PLANS WHICH PERMITS IT TO PAY CERTAIN EXPENSES
ASSOCIATED WITH THE DISTRIBUTION AND SERVICING OF ITS SHARES. SUCH EXPENSES MAY
NOT EXCEED, ON AN ANNUAL BASIS, 0.50%, 1.00%, AND 1.00% OF THE AVERAGE DAILY NET
ASSETS OF THE FUND'S CLASS A, B, AND C SHARES, RESPECTIVELY. THE CLASS A
DISTRIBUTION PLAN REIMBURSES CDI ONLY FOR EXPENSES IT INCURS, WHILE THE CLASS B
AND C DISTRIBUTION PLANS COMPENSATE CDI AT A SET RATE REGARDLESS OF CDI'S
EXPENSES.
THE FUND'S DISTRIBUTION PLANS WERE APPROVED BY THE BOARD OF TRUSTEES,
INCLUDING THE TRUSTEES WHO ARE NOT "INTERESTED PERSONS" OF THE FUND (AS THAT
TERM IS DEFINED IN THE INVESTMENT COMPANY ACT OF 1940) AND WHO HAVE NO DIRECT OR
INDIRECT FINANCIAL INTEREST IN THE OPERATION OF THE PLANS OR IN ANY AGREEMENTS
RELATED TO THE PLANS. THE SELECTION AND NOMINATION OF THE TRUSTEES WHO ARE NOT
INTERESTED PERSONS OF THE FUND IS COMMITTED TO THE DISCRETION OF SUCH
DISINTERESTED TRUSTEES. IN ESTABLISHING THE PLANS, THE TRUSTEES CONSIDERED
VARIOUS FACTORS INCLUDING THE AMOUNT OF THE DISTRIBUTION EXPENSES. THE TRUSTEES
DETERMINED THAT THERE IS A REASONABLE LIKELIHOOD THAT THE PLANS WILL BENEFIT THE
FUND AND ITS SHAREHOLDERS.
THE PLANS MAY BE TERMINATED BY VOTE OF A MAJORITY OF THE NON-INTERESTED
TRUSTEES WHO HAVE NO DIRECT OR INDIRECT FINANCIAL INTEREST IN THE PLANS, OR BY
VOTE OF A MAJORITY OF THE OUTSTANDING SHARES OF THE AFFECTED CLASS OR PORTFOLIO
OF THE FUND. IF THE FUND SHOULD EVER SWITCH TO A NEW PRINCIPAL UNDERWRITER
WITHOUT TERMINATING THE CLASS B PLAN, THE FEE WOULD BE PRORATED BETWEEN CDI AND
THE NEW PRINCIPAL UNDERWRITER. ANY CHANGE IN THE PLANS THAT WOULD MATERIALLY
INCREASE THE DISTRIBUTION COST TO A PORTFOLIO REQUIRES APPROVAL OF THE
SHAREHOLDERS OF THE AFFECTED CLASS; OTHERWISE, THE PLANS MAY BE AMENDED BY THE
TRUSTEES, INCLUDING A MAJORITY OF THE NON-INTERESTED TRUSTEES AS DESCRIBED
ABOVE. THE PLANS WILL CONTINUE IN EFFECT FOR SUCCESSIVE ONE-YEAR TERMS PROVIDED
THAT SUCH CONTINUANCE IS SPECIFICALLY APPROVED BY (I) THE VOTE OF A MAJORITY OF
THE TRUSTEES WHO ARE NOT PARTIES TO THE PLANS OR INTERESTED PERSONS OF ANY SUCH
PARTY AND WHO HAVE NO DIRECT OR INDIRECT FINANCIAL INTEREST IN THE PLANS, AND
(II) THE VOTE OF A MAJORITY OF THE ENTIRE BOARD OF TRUSTEES.
APART FROM THE PLANS, THE ADVISOR AND CDI, AT THEIR OWN EXPENSE, MAY INCUR
COSTS AND PAY EXPENSES ASSOCIATED WITH THE DISTRIBUTION OF SHARES OF THE FUND.
THE ADVISOR AND/OR CDI AGREED TO PAY CERTAIN FIRMS COMPENSATION BASED ON SALES
OF FUND SHARES OR ASSETS HELD IN THOSE FIRMS' FUND ACCOUNTS FOR THEIR MARKETING
AND DISTRIBUTION OF THE FUND SHARES, ABOVE THE USUAL SALES CHARGES AND SERVICE
FEES. THIS LIST MAY BE CHANGED FROM TIME TO TIME. AS OF DECEMBER 31, 1999, THE
ADVISOR AND/OR CDI HAD SPECIAL ARRANGEMENTS WITH THE FOLLOWING FIRMS: FIDELITY,
MORGAN STANLEY DEAN WITTER, PRUDENTIAL SECURITIES, SALOMON SMITH BARNEY,
AMERICAN EXPRESS FINANCIAL ADVISORS, MERRILL LYNCH, AND THE ADVISORS GROUP.
THE FUND HAS ENTERED INTO AN AGREEMENT WITH CDI AS PRINCIPAL UNDERWRITER.
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. TOTAL DISTRIBUTION PLAN EXPENSES
PAID TO CDI BY THE FUND FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1999 WERE
$84,053 FOR CLASS A AND $897 FOR CLASS B. FOR THE FISCAL YEAR ENDED SEPTEMBER
30, 1999, THE FUND'S DISTRIBUTION PLAN EXPENSES FOR EACH CLASS WERE SPENT FOR
THE FOLLOWING PURPOSES:
CLASS A CLASS B CLASS I
COMPENSATION TO BROKER-DEALERS $84,052 $241 N/A
COMPENSATION TO SALES PERSONNEL - - -
ADVERTISING - 656 -
PRINTING AND MAILING OF PROSPECTUSES
TO OTHER THAN CURRENT SHAREHOLDERS - - -
COMPENSATION TO UNDERWRITERS - - -
INTEREST, FINANCING CHARGES - - -
OTHER - - -
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 % OF
INVESTMENT PRICE INVESTED 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 THREE FISCAL YEARS ARE:
FISCAL YEAR 1997 1998 1999
CLASS A GROSS NET GROSS NET GROSS NET
$31,699 $11,471 $49,042 $20,132 $181,321 $96,342
FISCAL YEAR 1997 1998 1999
CLASS B GROSS NET GROSS NET GROSS NET
N/A N/A N/A N/A $427 $0
FISCAL YEAR 1997 1998 1999
CLASS I GROSS NET GROSS NET GROSS NET
N/A N/A N/A N/A $0 $0
FUND TRUSTEES AND CERTAIN OTHER AFFILIATED PERSONS OF THE FUND ARE EXEMPT
FROM THE SALES CHARGE SINCE THE DISTRIBUTION COSTS ARE MINIMAL TO PERSONS
ALREADY FAMILIAR WITH THE FUND. OTHER GROUPS (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. ("CSSI"), A SUBSIDIARY OF CALVERT GROUP,
LTD. AND ACACIA, 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.
FOR THESE SERVICES, NFDS AND CSSI 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, MARKET FAMILIARITY, RELIABILITY, INTEGRITY AND
FINANCIAL CONDITION, SUBJECT TO THE ADVISOR'S OBLIGATION TO ACCEPT BEST
EXECUTION. FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 1997, 1998, AND 1999, NO
BROKERAGE COMMISSIONS WERE PAID BY THE FUND TO ANY BROKER-DEALER, OFFICERS OR
TRUSTEES OF THE FUND OR ANY OF THEIR AFFILIATES.
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. THE ADVISOR MAY ALSO CONSIDER SALES OF FUND SHARES AS A
FACTOR IN THE SELECTION OF BROKERS. THESE SERVICES MAY INCLUDE ANALYSES OF THE
BUSINESS OR PROSPECTS OF A COMPANY, INDUSTRY OR ECONOMIC SECTOR, OR STATISTICAL
AND PRICING SERVICES. THE ADVISOR MAY ALSO DIRECT SELLING CONCESSIONS AND/OR
DISCOUNTS IN FIXED-PRICE OFFERINGS FOR RESEARCH 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, 1998 AND 1999, THE PORTFOLIO TURNOVER
RATES OF THE FUND WERE 3,461% AND 3,454%, RESPECTIVELY. THE HIGH TURNOVER RATE
IS DUE TO THE IMPLEMENTATION OF THE ADVISOR'S MORE ACTIVE TRADING STRATEGY.
PERSONAL SECURITIES TRANSACTIONS
--------------------------------
THE FUND, ITS ADVISORS, AND PRINCIPAL UNDERWRITER HAVE ADOPTED A CODE OF
ETHICS PURSUANT TO RULE 17J-1 OF THE INVESTMENT COMPANY ACT OF 1940. THE CODE OF
ETHICS IS DESIGNED TO PROTECT THE PUBLIC FROM ABUSIVE TRADING PRACTICES AND TO
MAINTAIN ETHICAL STANDARDS FOR ACCESS PERSONS AS DEFINED IN THE RULE WHEN
DEALING WITH THE PUBLIC. THE CODE OF ETHICS PERMITS THE FUND'S INVESTMENT
PERSONNEL TO INVEST IN SECURITIES THAT MAYBE PURCHASED OR HELD BY THE FUND. THE
CODE OF ETHICS CONTAINS CERTAIN CONDITIONS SUCH AS PRECLEARANCE AND RESTRICTIONS
ON USE OF MATERIAL INFORMATION.
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. ALLFIRST FINANCIAL, INC., 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 THREE SEPARATE CLASSES OF SHARES: CLASS A, CLASS B, CLASS
C 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).
<PAGE>
------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
---------------------------------------------------
AS OF JANUARY 14, 2000, THE FOLLOWING SHAREHOLDER OWNED OF RECORD 5% OR
MORE OF THE SHARES OF THE FUND:
NAME AND ADDRESS % OF OWNERSHIP
CHARLES SCHWAB & CO. INC. 13.14% OF CLASS A
REINVEST ACCOUNT
MUTUAL FUND DEPARTMENT
101 MONTGOMERY STREET
SAN FRANCISCO, CA 94104-4122
MLPF&S FOR THE SOLE BENEFIT OF ITS CUSTOMERS 5.67% OF CLASS A
FUND ADMINISTRATION 975T2
4800 DEER LAKE DR. E FL 3
JACKSONVILLE, FL 32246-6484
NFSC FEBO # 04J-690570 6.03% OF CLASS B
HUNTINGTON ANESTHESIOLOGY GROUP
HOSNY S GABRIEL
2828 1ST AVENUE
HUNTINGTON, WV 25702-1236
STATE OF TENNESSEE 457 PLAN 15.04% OF CLASS I
STATE GOVERNMENT
CANDICE PREFROST
500 DEADRICK ST. FL 9
NASHVILLE, TN 37242-0001
STATE OF TENNESSEE 401K PLAN 61.52% OF CLASS I
STATE GOVERNMENT
CANDICE PREFROST
500 DEADRICK ST. FL 9
NASHVILLE, TN 37242-0001
ACACIA GROUP PLAN 23.44% OF CLASS I
ACCUMULATION PLAN
LAURA PIERRON
7315 WISCONSIN AVENUE
BETHESDA, MD 20814-3202
<PAGE>
------
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.
THE FUND MAY ALSO RELY ON RATINGS BY ANY OTHER NRSRO, SUCH AS FITCH
INTERNATIONAL RATING AGENCY OR THOMPSON'S BANKWATCH.
<PAGE>
LETTER OF INTENT
DATE
CALVERT DISTRIBUTORS, INC.
4550 MONTGOMERY AVENUE
BETHESDA, MD 20814
LADIES AND GENTLEMEN:
BY SIGNING THIS LETTER OF INTENT, OR AFFIRMATIVELY MARKING THE LETTER OF
INTENT OPTION ON MY FUND ACCOUNT APPLICATION FORM, I AGREE TO BE BOUND BY THE
TERMS AND CONDITIONS APPLICABLE TO LETTERS OF INTENT APPEARING IN THE PROSPECTUS
AND THE STATEMENT OF ADDITIONAL INFORMATION FOR THE FUND AND THE PROVISIONS
DESCRIBED BELOW AS THEY MAY BE AMENDED FROM TIME TO TIME BY THE FUND. SUCH
AMENDMENTS WILL APPLY AUTOMATICALLY TO EXISTING LETTERS OF INTENT.
I INTEND TO INVEST IN THE SHARES OF:_____________________ (FUND OR
PORTFOLIO NAME) DURING THE THIRTEEN (13) MONTH PERIOD FROM THE DATE OF MY FIRST
PURCHASE PURSUANT TO THIS LETTER (WHICH CANNOT BE MORE THAN NINETY (90) DAYS
PRIOR TO THE DATE OF THIS LETTER OR MY FUND ACCOUNT APPLICATION FORM, WHICHEVER
IS APPLICABLE), AN AGGREGATE AMOUNT (EXCLUDING ANY REINVESTMENTS OF
DISTRIBUTIONS) OF AT LEAST FIFTY THOUSAND DOLLARS ($50,000) WHICH, TOGETHER WITH
MY CURRENT HOLDINGS OF THE FUND (AT PUBLIC OFFERING PRICE ON DATE OF THIS LETTER
OR MY FUND ACCOUNT APPLICATION FORM, WHICHEVER IS APPLICABLE), WILL EQUAL OR
EXCEED THE AMOUNT CHECKED BELOW:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
SUBJECT TO THE CONDITIONS SPECIFIED BELOW, INCLUDING THE TERMS OF ESCROW,
TO WHICH I HEREBY AGREE, EACH PURCHASE OCCURRING AFTER THE DATE OF THIS LETTER
WILL BE MADE AT THE PUBLIC OFFERING PRICE APPLICABLE TO A SINGLE TRANSACTION OF
THE DOLLAR AMOUNT SPECIFIED ABOVE, AS DESCRIBED IN THE FUND'S PROSPECTUS. "FUND"
IN THIS LETTER OF INTENT SHALL REFER TO THE FUND OR PORTFOLIO, AS THE CASE MAY
BE. NO PORTION OF THE SALES CHARGE IMPOSED ON PURCHASES MADE PRIOR TO THE DATE
OF THIS LETTER WILL BE REFUNDED.
I AM MAKING NO COMMITMENT TO PURCHASE SHARES, BUT IF MY PURCHASES WITHIN
THIRTEEN MONTHS FROM THE DATE OF MY FIRST PURCHASE DO NOT AGGREGATE THE MINIMUM
AMOUNT SPECIFIED ABOVE, I WILL PAY THE INCREASED AMOUNT OF SALES CHARGES
PRESCRIBED IN THE TERMS OF ESCROW DESCRIBED BELOW. I UNDERSTAND THAT 4.75% OF
THE MINIMUM DOLLAR AMOUNT SPECIFIED ABOVE WILL BE HELD IN ESCROW IN THE FORM OF
SHARES (COMPUTED TO THE NEAREST FULL SHARE). THESE SHARES WILL BE HELD SUBJECT
TO THE TERMS OF ESCROW DESCRIBED BELOW.
FROM THE INITIAL PURCHASE (OR SUBSEQUENT PURCHASES IF NECESSARY), 4.75% OF
THE DOLLAR AMOUNT SPECIFIED IN THIS LETTER SHALL BE HELD IN ESCROW IN SHARES OF
THE FUND BY THE FUND'S TRANSFER AGENT. FOR EXAMPLE, IF THE MINIMUM AMOUNT
SPECIFIED UNDER THE LETTER IS $50,000, THE ESCROW SHALL BE SHARES VALUED IN THE
AMOUNT OF $2,375 (COMPUTED AT THE PUBLIC OFFERING PRICE ADJUSTED FOR A $50,000
PURCHASE). ALL DIVIDENDS AND ANY CAPITAL GAINS DISTRIBUTION ON THE ESCROWED
SHARES WILL BE CREDITED TO MY ACCOUNT.
IF THE TOTAL MINIMUM INVESTMENT SPECIFIED UNDER THE LETTER IS COMPLETED
WITHIN A THIRTEEN MONTH PERIOD, ESCROWED SHARES WILL BE PROMPTLY RELEASED TO ME.
HOWEVER, SHARES DISPOSED OF PRIOR TO COMPLETION OF THE PURCHASE REQUIREMENT
UNDER THE LETTER WILL BE DEDUCTED FROM THE AMOUNT REQUIRED TO COMPLETE THE
INVESTMENT COMMITMENT.
UPON EXPIRATION OF THIS LETTER, IF THE TOTAL PURCHASES PURSUANT TO THE
LETTER ARE LESS THAN THE AMOUNT SPECIFIED IN THE LETTER AS THE INTENDED
AGGREGATE PURCHASES, CALVERT DISTRIBUTORS, INC. ("CDI") WILL BILL ME FOR AN
AMOUNT EQUAL TO THE DIFFERENCE BETWEEN THE LOWER LOAD I PAID AND THE DOLLAR
AMOUNT OF SALES CHARGES WHICH I WOULD HAVE PAID IF THE TOTAL AMOUNT PURCHASED
HAD BEEN MADE AT A SINGLE TIME. IF NOT PAID BY THE INVESTOR WITHIN 20 DAYS, CDI
WILL DEBIT THE DIFFERENCE FROM MY ACCOUNT. FULL SHARES, IF ANY, REMAINING IN
ESCROW AFTER THE AFOREMENTIONED ADJUSTMENT WILL BE RELEASED AND, UPON REQUEST,
REMITTED TO ME.
I IRREVOCABLY CONSTITUTE AND APPOINT CDI AS MY ATTORNEY-IN-FACT, WITH FULL
POWER OF SUBSTITUTION, TO SURRENDER FOR REDEMPTION ANY OR ALL ESCROWED SHARES ON
THE BOOKS OF THE FUND. THIS POWER OF ATTORNEY IS COUPLED WITH AN INTEREST.
THE COMMISSION ALLOWED BY CDI TO THE BROKER-DEALER NAMED HEREIN SHALL BE AT
THE RATE APPLICABLE TO THE MINIMUM AMOUNT OF MY SPECIFIED INTENDED PURCHASES.
THE LETTER MAY BE REVISED UPWARD BY ME AT ANY TIME DURING THE
THIRTEEN-MONTH PERIOD, AND SUCH A REVISION WILL BE TREATED AS A NEW LETTER,
EXCEPT THAT THE THIRTEEN-MONTH PERIOD DURING WHICH THE PURCHASE MUST BE MADE
WILL REMAIN UNCHANGED AND THERE WILL BE NO RETROACTIVE REDUCTION OF THE SALES
CHARGES PAID ON PRIOR PURCHASES.
IN DETERMINING THE TOTAL AMOUNT OF PURCHASES MADE HEREUNDER, SHARES
DISPOSED OF PRIOR TO TERMINATION OF THIS LETTER WILL BE DEDUCTED. MY
BROKER-DEALER SHALL REFER TO THIS LETTER OF INTENT IN PLACING ANY FUTURE
PURCHASE ORDERS FOR ME WHILE THIS LETTER IS IN EFFECT.
DEALER NAME OF INVESTOR(S)
BY
AUTHORIZED SIGNER ADDRESS
DATE SIGNATURE OF INVESTOR(S)
DATE SIGNATURE OF INVESTOR(S)
<PAGE>
INVESTMENT ADVISOR
CALVERT ASSET MANAGEMENT COMPANY, INC.
4550 MONTGOMERY AVENUE
SUITE 1000N
BETHESDA, MARYLAND 20814
SHAREHOLDER SERVICES TRANSFER AGENT
CALVERT SHAREHOLDER SERVICES, INC. NATIONAL FINANCIAL DATA SERVICES, INC.
4550 MONTGOMERY AVENUE 330 WEST 9TH STREET
SUITE 1000N KANSAS CITY, MISSOURI 64105
BETHESDA, MARYLAND 20814
PRINCIPAL UNDERWRITER INDEPENDENT ACCOUNTANTS
CALVERT DISTRIBUTORS, INC. PRICEWATERHOUSECOOPERS LLP
4550 MONTGOMERY AVENUE 250 WEST PRATT STREET
SUITE 1000N BALTIMORE, MARYLAND 21201
BETHESDA, MARYLAND 20814
<PAGE>
JULY 13, 2000
SECURITIES AND EXCHANGE COMMISSION
JUDICIARY PLAZA
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
RE: CALVERT INCOME FUND
FILE NUMBERS: 2-76510 AND 811-3416
LADIES AND GENTLEMEN:
PURSUANT TO RULE 497(C) UNDER THE SECURITIES ACT OF 1933, WE ARE TRANSMITTING A
REVISED PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION FOR THE ABOVE
REFERENCED FUND. BOTH DOCUMENTS WERE AMENDED TO RE-INCLUDE DISCLOSURE
ABOUT THE OFFERING OF CLASS C SHARES OF THE FUND.
IF YOU HAVE ANY QUESTIONS OR REQUIRE FURTHER INFORMATION, PLEASE CONTACT
ME AT 301-951-4858.
SINCERELY,
/S/ IVY WAFFORD DUKE
ASSOCIATE GENERAL COUNSEL
