22
CALVERT WORLD VALUES FUND, INC.
CAPITAL ACCUMULATION FUND
Statement of Additional Information
July 31, 1997
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TRANSFER AGENT
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, L.L.P.
217 E. Redwood Street
Baltimore, Maryland 21202-3316
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective and Policies 1
Investment Restrictions 8
Purchase and Redemption of Shares 10
Reduced Sales Charges (Class A) 11
Net Asset Value 11
Calculation of Total Return 11
Advertising 12
Dividends and Taxes 13
Directors and Officers 15
Investment Advisor and Subadvisors 17
Transfer and Shareholder Servicing Agent 19
Method of Distribution 20
Portfolio Transactions 21
Independent Accountants and Custodians 21
General Information 22
Financial Statements 22
Appendix 22
STATEMENT OF ADDITIONAL INFORMATION-July 31, 1997
CALVERT CAPITAL ACCUMULATION FUND
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748
Information: (301) 951-4820
Shareholder Services: (800) 368-2745
Broker (800) 368-2746
Services: (301) 951-4850
TDD for the Hearing-Impaired: (800) 541-1524
This Statement of Additional Information is not a prospectus.
Investors should read the Statement of Additional Information in conjunction
with the Fund's Prospectus, dated July 31, 1997, which may be obtained free of
charge by writing the Fund at the above address or calling the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The Fund seeks to provide long-term capital appreciation by investing
primarily in the equity securities of small- to mid-sized companies that are
undervalued but demonstrate a potential for growth. Currently, and for the
foreseeable future, the Advisor manages the Fund as a mid-cap fund, with a
slight bias toward growth style. The Fund will rely on its proprietary
research to identify stocks that may have been overlooked by analysts,
investors, and the media, and which generally are within the range of
capitalization of the S&P 400 Mid-Cap Index, but which may be larger or
smaller as deemed appropriate.
Investments may also include, but are not limited to, preferred
stocks, foreign securities, convertible securities, certain options and
futures transactions, bonds, notes and other debt securities. The Fund will
take reasonable risks in seeking to achieve its investment objective. There
is, of course, no assurance that the Fund will be successful in meeting its
objective since there is risk involved in the ownership of all equity
securities. The Fund's investment objective is not fundamental and may be
changed without shareholder approval.
Defensive Strategies
The Fund may employ certain defensive strategies (generally options
and futures contracts) in an attempt to protect against the decline of its
investments. An option is a legal contract that gives the holder the right to
buy or sell a specified amount of the underlying interest at a fixed or
determinable price (called the exercise or strike price) upon exercise of the
option. A futures contract is an agreement to take delivery or to make
delivery of a standardized quantity and quality of a certain commodity during
particular months in the future at a specified price. Buying or selling
futures contracts -- contracts that establish a price level at a given time
for items to be delivered later -- amounts to insurance against adverse price
changes, or "hedging."
The Fund may purchase put and call options, and write (sell) covered
put and call options, on equity and debt securities, foreign currencies and
stock or debt indices. The Fund may purchase or write both exchange-traded and
OTC options. These strategies may also be used with respect to futures.
Special Risks of Defensive Strategies
Successful use of defensive strategies depends on the ability to
predict movements of the overall securities, currency and interest rate
markets, which is a different skill than that required to select equity and
debt investments. There can be no assurance that a chosen strategy will
succeed.
There may not be an expected correlation between price movements of a
hedging instrument and price movements of the investment being hedged, so that
the Fund may lose money notwithstanding employment of the hedging strategy.
While defensive strategies can reduce risk of loss by offsetting the
negative effect of unfavorable price movements, they can also reduce the
opportunity for gain by offsetting the positive effect of a favorable price
movement. If the variance is great enough, a decline in the price of an
instrument used for defensive purposes may result in a loss to the Fund.
The Fund may be required to cover its assets in a segregated account.
If an investment is not able to be liquidated at the time the Subadvisor
believes it is best for the Fund to do so, the Fund might be required to keep
assets on reserve that it otherwise would not have had to maintain. Similarly,
it might have to sell a security at an inopportune time in order to maintain
the reserves.
Instruments used as part of a Defensive Strategy
The Fund may write covered call options and purchase call and put
options on securities and securities indices, and may write secured put
options and enter into option transactions on foreign currency. It may also
engage in transactions in financial futures contracts and related options for
hedging purposes, and invest in repurchase agreements. A call option on a
security, security index or a foreign currency gives the purchaser of the
option, in return for the premium paid to the writer (seller), the right to
buy the underlying security, index or foreign currency at the exercise price
at any time during the option period. Upon exercise by the purchaser, the
writer of a call option on an individual security or foreign currency has the
obligation to sell the underlying security or currency at the exercise price.
A call option on a securities index is similar to a call option on an
individual security, except that the value of the option depends on the
weighted value of the group of securities comprising the index and all
settlements are to be made in cash. A call option may be terminated by the
writer (seller) by entering into a closing purchase transaction in which it
purchases an option of the same series as the option previously written.
A put option on a security, security index, or foreign currency gives
the purchaser of the option, in return for the premium paid to the writer
(seller), the right to sell the underlying security, index, or foreign
currency at the exercise price at any time during the option period. Upon
exercise by the purchaser, the writer of a put option has the obligation to
purchase the underlying security or foreign currency at the exercise price. A
put option on a securities index is similar to a put option on an individual
security, except that the value of the option depends on the weighted value of
the group of securities comprising the index and all settlements are made in
cash. The Fund may write exchange-traded call options on its securities.
Call options may be written on portfolio securities, securities indices, or
foreign currencies. With respect to securities and foreign currencies, the
Fund may write call and put options on an exchange or over-the-counter. Call
options on portfolio securities will be covered since the Fund will own the
underlying securities. Call options on securities indices will be written only
to hedge in an economically appropriate way against anticipated changes in the
market value of portfolio securities which are not otherwise hedged with
options or financial futures contracts and will be "covered" by identifying
the specific portfolio securities being hedged.
Options on foreign currencies will be covered by securities
denominated in that currency. Options on securities indices will be covered by
securities that substantially replicate the movement of the index.
The Fund may not write options on more than 50% of its total assets.
Management presently intends to cease writing options if and as long as 25% of
such total assets are subject to outstanding options contracts or if required
under regulations of state securities administrators. The Fund may purchase a
put or call option on securities (including a straddle or spread) only if the
value of that option premium, when aggregated with the premiums on all other
options on securities held by the Fund, does not exceed 5% of the Fund's total
assets.
The Fund may write call and put options in order to obtain a return
on its investments from the premiums received and will retain the premiums
whether or not the options are exercised. Any decline in the market value of
portfolio securities or foreign currencies will be offset to the extent of the
premiums received (net of transaction costs). If an option is exercised, the
premium received on the option will effectively increase the exercise price or
reduce the difference between the exercise price and market value. During the
option period, the writer of a call option gives up the opportunity for
appreciation in the market value of the underlying security or currency above
the exercise price. It retains the risk of loss should the price of the
underlying security or foreign currency decline. Writing call options also
involves risks relating to the Fund's ability to close out options it has
written. During the option period, the writer of a put option has assumed the
risk that the price of the underlying security or foreign currency will
decline below the exercise price. However, the writer of the put option has
retained the opportunity for an appreciation above the exercise price should
the market price of the underlying security or foreign currency increase.
Writing put options also involves risks relating to the Fund's ability to
close out options it has written.
The Fund may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or the sale
(in the case of a put) of the underlying security or foreign currency. Any
such sale would result in a net gain or loss depending on whether the amount
received on the sale is more or less than the premium and other transaction
costs paid on the call or put which is sold. Purchasing a call or put option
involves the risk that the Fund may lose the premium it paid plus transaction
costs.
Warrants and stock rights are almost identical to call options in
their nature, use and effect except that they are issued by the issuer of the
underlying security rather than an option writer, and they generally have
longer expiration dates than call options. The Fund may invest up to 5% of its
net assets in warrants and stock rights, but no more than 2% of its net assets
in warrants and stock rights not listed on the New York Stock Exchange or the
American Stock Exchange.
The Fund may enter into financial futures contracts and related
options as a hedge against anticipated changes in the market value of
portfolio securities or securities which it or the Fund intends to purchase or
in the exchange rate of foreign currencies. Hedging is the initiation of an
offsetting position in the futures market which is intended to minimize the
risk associated with a position's underlying securities in the cash market.
Investment techniques related to financial futures and options are summarized
below.
Financial futures contracts in which the Fund may invest include
interest rate futures contracts, foreign currency futures contracts and
securities index futures contracts. An interest rate futures contract
obligates the seller of the contract to deliver, and the purchaser to take
delivery of, the interest rate securities called for in the contract at a
specified future time and at a specified price. A foreign currency futures
contract obligates the seller of the contract to deliver, and the purchaser to
take delivery of, the foreign currency called for in the contract at a
specified future time and at a specified price. (See "Foreign Currency
Transactions.") A securities index assigns relative values to the securities
included in the index, and the index fluctuates with changes in the market
values of the securities so included. A securities index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times the
difference between the index value at the close of the last trading day of the
contract and the price at which the futures contract is originally struck. An
option on a financial futures contract gives the purchaser the right to assume
a position in the 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.
Engaging in transactions in financial futures contracts involves
certain risks, such as the possibility of an imperfect correlation between
futures market prices and cash market prices and the possibility that the
Advisor or Subadvisor could be incorrect in its expectations as to the
direction or extent of various interest rate movements or foreign currency
exchange rates, in which case the Fund's return might have been greater had
hedging not taken place. There is also the risk that a liquid secondary market
may not exist. The risk in purchasing an option on a financial futures
contract is that the Fund will lose the premium it paid. Also, there may be
circumstances when the purchase of an option on a financial futures contract
would result in a loss to the Fund while the purchase or sale of the contract
would not have resulted in a loss.
The Fund may purchase and sell financial futures contracts which are
traded on a recognized exchange or board of trade and may purchase exchange or
board-traded put and call options on financial futures contracts. It will
engage in transactions in financial futures contracts and related options only
for hedging purposes and not for speculation. In addition, the Fund will not
purchase or sell any financial futures contract or related option if,
immediately thereafter, the sum of the cash or U.S. Treasury bills committed
with respect to its existing futures and related options positions and the
premiums paid for related options would exceed 5% of the market value of its
total assets. At the time of purchase of a futures contract or a call option
on a futures contract, an amount of cash, U.S. Government securities or other
appropriate high-grade debt obligations equal to the market value of the
futures contract minus the Fund's initial margin deposit with respect thereto,
will be deposited in a segregated account with the Fund's custodian bank to
collateralize fully the position and thereby ensure that it is not leveraged.
The extent to which the Fund may enter into financial futures contracts and
related options may also be limited by requirements of the Internal Revenue
Code of 1986 for qualification as a regulated investment company.
Noninvestment-grade (High Yield/High Risk - or Junk Bond) Debt Securities
The Fund may invest in lower quality debt securities (generally those
rated BB or lower by S&P or Ba or lower by Moody s), which provides that no
more than 35% of its assets is in securities rated below BBB, or in unrated
securities determined by the Advisor to be comparable to securities rated
below BBB. 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 are rated securities, which may make them less
marketable.
The quality limitation set forth in the investment policy is
determined immediately after the Fund's acquisition of a security.
Accordingly, any later change in ratings will not be considered when
determining whether an investment complies with the Fund's investment policy.
If an obligation held by the Fund is later downgraded, the Fund's Advisor,
under the supervision of the Fund's Board of Directors, will consider whether
it is in the best interest of the Fund's shareholders to hold or to dispose of
the obligation. Among the criteria that may be considered by the Advisor and
the Board are the probability that the obligations will be able to make
scheduled interest and principal payments in the future, the extent to which
any devaluation of the obligation has already been reflected in the Fund's net
asset value, and the total percentage, if any, of obligations currently rated
below investment grade held by the Fund.
When purchasing high-yielding securities, rated or unrated, the
Subadvisor 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.
Foreign Securities
The Fund may purchase foreign securities. 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. Foreign companies and foreign investment practices
are not subject to uniform accounting, auditing and financial reporting
standards and practices or regulatory requirements comparable to those
applicable to United States companies. There may be less public information
available about foreign companies.
United States Government policies have at times, in the past, through
imposition of interest equalization taxes and other restrictions, discouraged
United States investors from making certain investments abroad and may be
reinstituted from time to time as a means of fostering a favorable United
States balance of payments. In addition, foreign countries may impose
withholding and taxes on dividends and interest.
Foreign Currency Transactions
Forward Foreign Currency Exchange Contracts. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days
("Term") 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 directly between
currency traders (usually large commercial banks) and their customers.
The Fund will not enter into such forward contracts or maintain a net
exposure in such contracts where it would be obligated to deliver an amount of
foreign currency in excess of the value of its portfolio securities and other
assets denominated in that currency. The Subadvisor believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that to do so is in the Fund's best interests.
Foreign Currency Options. A foreign currency option provides the
option buyer with the right to buy or sell a stated amount of foreign currency
at the exercise price at a specified date or during the option period. A call
option gives its owner the right, but not the obligation, to buy the currency,
while a put option gives its owner the right, but not the obligation, to sell
the currency. The option seller (writer) is obligated to fulfill the terms of
the option sold if it is exercised. However, either seller or buyer may close
its position during the option period for such options any time prior to
expiration.
A call rises in value if the underlying currency appreciates.
Conversely, a put rises in value if the underlying currency depreciates. While
purchasing a foreign currency option can protect the Fund against an adverse
movement in the value of a foreign currency, it does not limit the gain which
might result from a favorable movement in the value of such currency. For
example, if the Fund was holding securities denominated in an appreciating
foreign currency and had purchased a foreign currency put to hedge against a
decline in the value of the currency, it would not have to exercise its put.
Similarly, if the Fund had entered into a contract to purchase a security
denominated in a foreign currency and had purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency had
depreciated in value between the date of purchase and the settlement date, it
would not have to exercise its call but could acquire in the spot market the
amount of foreign currency needed for settlement.
Foreign Currency Futures Transactions. The Fund may use foreign
currency futures contracts and options on such futures contracts. Through the
purchase or sale of such contracts, it may be able to achieve many of the same
objectives attainable through the use of foreign currency forward contracts,
but more effectively and possibly at a lower cost.
Unlike forward foreign currency exchange contracts, foreign currency
futures contracts and options on foreign currency futures contracts are
standardized as to amount and delivery period and are traded on boards of
trade and commodities exchanges. It is anticipated that such contracts may
provide greater liquidity and lower cost than forward foreign currency
exchange contracts.
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, provided the value of the securities loaned from the Fund will not
exceed one-third of the Fund's assets. Loans must be secured continuously in
the form of cash or cash equivalents such as U.S. 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 or Subadvisor deems
creditworthy and only on such 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 realize 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.
Nondiversified Status
The Fund is a "nondiversified" investment company under the
Investment Act of 1940 (the "Act"), which means the Fund is not limited by the
Act in the proportion of its assets that may be invested in the securities of
a single issuer. A nondiversified fund may invest in a smaller number of
issuers than a diversified fund. Thus, an investment in the Fund may, under
certain circumstances, present greater risk of loss to an investor than an
investment in a diversified fund. However, the Fund intends to conduct its
operations so as to qualify to be taxed as a "regulated investment company"
for purposes of the Code, which will relieve the Fund of any liability for
federal income tax to the extent its earnings are distributed to shareholders.
To qualify for this Subchapter M tax treatment, the Fund will limit its
investments to satisfy the Code diversification requirements so that, at the
close of each quarter of the taxable year, (i) not more than 25% of the fund's
assets will be invested in the securities of a single issuer or of two or more
issuers which the Fund controls and which are determined to be engaged in the
same or similar trades or businesses or related trades or businesses, and (ii)
with respect to 50% of its assets, not more than 5% of its assets will be
invested in the securities of a single issuer and the Fund will not own more
than 10% of the outstanding voting securities of a single issuer. Investments
in United States Government securities are not subject to these limitations;
while securities issued or guaranteed by foreign governments are subject to
the above tests in the same manner as the securities of non-governmental
issuers. The Fund intends to comply with the SEC staff position that
securities issued or guaranteed as to principal and interest by any single
foreign government are considered to be securities of issuers in the same
industry.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Fund has adopted the following investment restrictions which
cannot be changed without the approval of the holders of a majority of the
outstanding shares of the Fund. As defined in the Investment Company Act of
1940, this means the lesser of the vote of (a) 67% of the shares of the Fund
at a meeting where more than 50% of the outstanding shares are present in
person or by proxy or (b) more than 50% of the outstanding shares of the Fund.
The Fund may not:
1. With respect to 50% of its assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the
value of its total assets would be invested in securities of
that issuer. (The remaining 50% of its total assets may be
invested without restriction except to the extent other
investment restrictions may be applicable.)
2. Concentrate 25% or more of the value of its assets
in any one industry; provided, however, that there is no
limitation with respect to investments in obligations issued
or guaranteed by the United States Government or its
agencies and instrumentalities, and repurchase agreements
secured thereby.
3. Make loans of more than one-third of the assets of
the Fund, or as permitted by law. The purchase by the Fund
of all or a portion of an issue of publicly or privately
distributed debt obligations in accordance with its
investment objective, policies and restrictions, shall not
constitute the making of a loan.
4. Underwrite the securities of other issuers, except
as permitted by the Board of Directors 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. Purchase from or sell to any of the Fund's officers
or directors, or companies of which any of them are
directors, officers or employees, any securities (other than
shares of beneficial interest of the Fund), but such persons
or firms may act as brokers for the Fund for customary
commissions.
6. Except as required in connection with permissible
options, futures and commodity activities of the Fund,
invest in commodities, commodity futures contracts, 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 it may purchase or sell stock index futures,
foreign currency futures, interest rate futures and options
thereon.
7. Invest in the shares of other investment companies,
except as permitted by the 1940 Act or other applicable law,
or pursuant to Calvert's nonqualified deferred compensation
plan adopted by the Board of Directors in an amount not to
exceed 10% or as permitted by law.
8. Purchase more than 10% of the outstanding voting
securities of any issuer.
Nonfundamental Investment Restrictions
The Fund has adopted the following operating (i.e., non-fundamental)
investment policies and restrictions which may be changed by the Board of
Directors without shareholder approval. The Fund may not:
9. Purchase the securities of any issuer with less
than three years' continuous operation if, as a result, more
than 5% of the value of its total assets would be invested
in securities of such issuers.
10. Invest, in the aggregate, more than 15% of its net
assets in illiquid securities. Purchases of securities
outside the U.S. that are not registered with the SEC or
marketable in the U.S. are not per se illiquid.
11. Invest, in the aggregate, more than 5% of its net
assets in the securities of issuers restricted from selling
to the public without registration under the Securities Act
of 1933, excluding restricted securities eligible for resale
pursuant to Rule 144A under that statute. Purchases of
securities outside the U.S. that are not registered with the
SEC or marketable in the U.S. are not per se restricted.
12. Make short sales of securities or purchase any
securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities. The depositor payment by
the Fund of initial or maintenance margin in connection with
financial futures contracts or related options transactions
is not considered the purchase of a security on margin.
13. Purchase or retain securities of any issuer if the
officers, Directors of the Fund or its Advisors, owning
beneficially more than 1/2 of 1% of the securities of such
issuer, together own beneficially more than 5% of such
issuer's securities.
14. Invest in warrants if more than 5% of the value of
the Fund's net assets would be invested in such securities.
15. Invest in interests in oil, gas, or other mineral
exploration or development programs or leases although it
may invest in securities of issuers which invest in or
sponsor such programs.
16. Borrow money, except from banks for temporary or
emergency purposes, and then only in an amount not to exceed
one-third of the Fund's total assets, or as permitted by
law. In order to secure any permitted borrowings under this
section, the Fund may pledge, mortgage or hypothecate its
assets.
17. Invest for the purpose of exercising control or
management of another issuer.
For purposes of the Fund's concentration policy contained in
restriction (2), above, the Fund intends to comply with the SEC staff position
that securities issued or guaranteed as to principal and interest by any
single foreign government are considered to be securities of issuers in the
same industry.
Any investment restriction which involves a maximum percentage of
securities or assets shall not be considered to be violated unless an excess
over the applicable percentage occurs immediately after an acquisition of
securities or utilization of assets and results therefrom.
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.
New shareholders wishing to use the Fund's telephone redemption
procedure must so indicate on their Investment Applications and, if desired,
designate a commercial bank or securities broker and account to receive the
redemption proceeds. 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 to the Fund, with a voided check for the
bank wiring instructions to be added. If a voided check does not accompany the
request, then the request must be signature guaranteed by a commercial bank,
savings and loan association, trust company, member firm of any national
securities exchange, or certain credit unions. Further documentation may be
required from corporations, fiduciaries, 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 of Fund shares may be suspended or the date
of payment postponed for any period during which the New York Stock Exchange
is closed (other than customary weekend and holiday closings), when trading on
the New York Stock Exchange is restricted, or an emergency exists, as
determined by the SEC, or if the Commission has ordered such a suspension for
the protection of shareholders. Redemption proceeds are normally mailed or
wired the next business day after a proper redemption request has been
received unless redemptions have been suspended or postponed as described
above.
REDUCED SALES CHARGES (CLASS A)
The Fund imposes reduced sales charges for Class A shares in certain
situations in which the Principal Underwriter and the dealers selling Fund
shares may expect to realize significant economies of scale with respect to
such sales. Generally, sales costs do not increase in proportion to the dollar
amount of the shares sold; the per-dollar transaction cost for a sale to an
investor of shares worth, say, $5,000 is generally much higher than the
per-dollar cost for a sale of shares worth $1,000,000. Thus, the applicable
sales charge declines as a percentage of the dollar amount of shares sold as
the dollar amount increases.
When a shareholder agrees to make purchases of shares over a period
of time totaling a certain dollar amount pursuant to a Letter of Intent, the
Underwriter and selling dealers can expect to realize the economies of scale
applicable to that stated goal amount. Thus the Fund imposes the sales charge
applicable to the goal amount. Similarly, the Underwriter and selling dealers
also experience cost savings when dealing with existing Fund shareholders,
enabling the Fund to afford existing shareholders the Right of Accumulation.
The Underwriter and selling dealers can also expect to realize economies of
scale when making sales to the members of certain qualified groups which agree
to facilitate distribution of Fund shares to their members. See "Exhibit A -
Reduced Sales Charges" in the Prospectus.
NET ASSET VALUE
The net asset value per share of the Fund, the price at which the
Fund's shares are redeemed, is determined every business day as of the close of
the New York Stock Exchange (generally, 4:00 p.m., Eastern time), and at such
other times as may be necessary or appropriate. The 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, Presidents Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
The public offering price of the Fund's shares is the net asset value
per share (plus, for Class A shares, the applicable sales charge). The net
asset value per share is computed separately for each class by dividing the
value of the Fund's total assets, less its liabilities, by the total number of
shares outstanding for that class. The Fund's 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 are valued at cost, plus or
minus any amortized discount or premium, unless the Board of Directors
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 are fairly valued by the Advisor in good faith under the supervision
of the Board of Directors.
CALCULATION OF TOTAL RETURN
The Fund may, from time to time, advertise "total return." Total
return is calculated separately for each class. Total return is computed by
taking the total number of shares purchased by a hypothetical $1,000
investment, after deducting the applicable sales charge for Class A shares,
adding all additional shares purchased within the period with reinvested
dividends and distributions, calculating the value of those shares at the end
of the period, and dividing the result by the initial $1,000 investment. Note:
"Total Return" when quoted in the Financial Highlights section of the Fund's
Prospectus and the Annual Report to Shareholders, however, per SEC
instructions, does not reflect deduction of the sales charge, and corresponds
to "return without maximum sales load" return as referred to herein. For
periods of more than one year, the cumulative total return is then adjusted
for the number of years, taking compounding into account, to calculate average
annual total return during that period.
Total return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $l,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.
Performance 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, except quotations of "return without maximum
sales load" which do not reflect deduction of the sales charge. Return without
maximum sales load, which will be higher than total return, should be
considered only by investors, such as participants in certain pension plans,
to whom the sales charge does not apply, or for purposes of comparison only
with comparable figures which also do not reflect sales charges, such as
Lipper averages. Thus, in the above formula, for return without maximum sales
load, P = the entire $1,000 hypothetical initial investment and does not
reflect deduction of any sales charge. Return may be advertised for other
periods, such as by quarter, or cumulatively for more than one year.
Return for the Fund's shares are as follows:
Class A Shares Class A Shares
Without Total Return
Maximum With Maximum Class C Shares
Sales Load Sales Load Total Return
9/30/96 to 3/31/97 -5.59% -10.05% -6.18%
Since inception,
10/31/94 16.97% 14.63% 16.15%
Total return, like net asset value per share, fluctuates in response
to changes in market conditions. Performance for any particular time period
should not be considered an indication of future return.
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, 1996). Calvert Group was also
the first to offer a family of socially responsible mutual fund portfolios.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Fund declares and pays dividends from net investment income on an
annual basis. 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. Dividends and distributions paid may differ among the classes
because of different expenses.
Certain options, futures contracts, and options on futures contracts
are section 1256 contracts. Any gains or losses on section 1256 contracts are
generally considered 60% long-term and 40% short-term capital gains or losses
("60/40 gains or losses"). Also, section 1256 contracts held by the Fund at
the end of each taxable year are treated for federal income tax purposes as
being sold on such date for their fair market value. The resultant gains or
losses are treated as 60/40 gains or losses. When the section 1256 contract is
subsequently disposed of, the actual gain or loss will be adjusted by the
amount of the year-end gain or loss. The use of section 1256 contracts may
increase the amount of short-term capital gain realized by the Fund and taxed
as ordinary income when distributed to shareholders.
Hedging transactions in options, futures contracts and straddles or
other similar transactions will subject the Fund to special tax rules
(including mark-to-market, straddle, wash sale and short sales rules). The
effect of these rules may be to accelerate income to the Fund, defer losses to
the Fund, cause adjustments in the holding periods of the Fund's securities or
convert short-term capital losses into long-term capital losses. Hedging
transactions may increase the amount of short-term capital gain realized by
the Fund which is taxed as ordinary income when distributed to shareholders.
The Fund may make one or more of the various selections available under the
Code with respect to hedging transactions. If the Fund makes any of the
elections, the amount, character and timing of the recognition of gains or
losses from the affected positions will be determined under rules that vary
according to the elections made. The Fund will use its best efforts to make
any available elections pertaining to the foregoing transactions in a manner
believed to be in the best interests of the Fund. The 30% limit on gains from
the sale of securities held for less than three months and the diversification
requirements applicable to the Fund's assets may limit the extent to which the
Fund will be able to engage in transactions in options, futures contracts, or
options on futures contracts.
The Fund's transactions in foreign currency-denominated debt and
equity securities, certain foreign currency options, futures contracts, and
forward contracts may give rise to ordinary income or loss to the extent such
income or loss results from fluctuations in the value of the foreign currency
concerned.
If more than 50% of the Fund's assets at year end consist of the debt
and equity securities of foreign corporations, the Fund may elect to permit
shareholders to claim a credit or deduction on their income tax returns for
their pro rata portion of qualified taxes paid by the Fund to foreign
countries. In such a case, shareholders will include in gross income from
foreign sources their pro rata shares of such taxes. A shareholder's ability
to claim a foreign tax credit or deduction in respect of foreign taxes paid by
the Fund may be subject to certain limitations imposed by the Code, as a
result of which a shareholder may not get a full credit or deduction for the
amount of such taxes. Shareholders who do not itemize on their federal income
tax returns may claim a credit (but no deduction) for such foreign taxes.
Dividends and distributions may be subject to state and local taxes.
Dividends paid by the Fund from income attributable to interest on obligations
of the U.S. Government and certain of its agencies and instrumentalities may
be exempt from state and local taxes in certain states. The Fund will advise
shareholders of the proportion of its dividends consisting of such
governmental interest. Shareholders should consult their tax advisors
regarding the possible exclusion of this portion of their dividends for state
and local tax purposes.
Investors should note that the Internal Revenue Code may require
investors to exclude the initial sales charge, if any, paid on the purchase of
Fund shares from the tax basis of those shares if the shares are exchanged for
shares of another Calvert Group Fund within 90 days of purchase. This
requirement applies only to the extent that the payment of the original sales
charge on the shares of the Fund causes a reduction in the sales charge
otherwise payable on the shares of the Calvert Group Fund acquired in the
exchange, and investors may treat sales charges excluded from the basis of the
original shares as incurred to acquire the new shares.
The Fund is required to withhold 31% of any dividends or redemption
payments occurring in the Fund if: (a) the shareholder's social security
number or other taxpayer identification number ("TIN") is not provided, or an
obviously incorrect TIN is provided; (b) the shareholder does not certify
under penalties of perjury that the TIN provided is the shareholder's correct
TIN and that the shareholder is not subject to backup withholding under
section 3406(a)(1)(C) of the Code because of underreporting (however, failure
to provide certification as to the application of section 3406(a)(1)(C) will
result only in backup withholding on 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.
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 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; or foreign
central banks of issue. Non-resident aliens, certain foreign partnerships and
foreign corporations are generally not subject to either requirement but may
instead be subject to withholding under sections 1441 or 1442 of the Internal
Revenue Code. Shareholders claiming exemption from backup withholding and
broker reporting should call or write the Fund for further information.
DIRECTORS AND OFFICERS
JOHN G. GUFFEY, JR., Director. Mr. Guffey is chairman 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, 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 New World Fund, Inc., and Acacia Capital Corporation. Address: 7205
Pomander Lane, Chevy Chase, Maryland 20815. DOB: 05/15/48.
*BARBARA J. KRUMSIEK, President and Director. 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
President and Director of Calvert-Sloan Advisers, L.L.C., and a
trustee/director of each of the investment companies in the Calvert Group of
Funds. DOB: 08/09/52.
TERRENCE J. MOLLNER, Ed.D, Director. Dr. Mollner is Founder and
Chairperson of Trusteeship Institute, Inc., a diverse foundation known
principally for its consultation to corporations converting to cooperative
employee-ownership. He served as a Trustee of the Cooperative Fund of New
England, Inc., and is now a member of its Board of Advisors. Mr. Mollner also
serves as Trustee for the Calvert Social Investment Fund. He is also a founder
and member of the Board of Trustees of the Foundation for Soviet-American
Economic Cooperation. Address: 15 Edwards Square, Northampton, Massachusetts
01060. DOB: 12/13/44.
RUSTUM ROY, Director. Mr. Roy is the Evan Pugh Professor of the Solid
State Geochemistry at Pennsylvania State University, and Corporation Chair,
National Association of Science, Technology, and Society. Address: Material
Research Laboratory, Room 102A, Pennsylvania State University, University
Park, Pennsylvania, 16802. DOB: 7/3/24.
*D. WAYNE SILBY, Esq., Director. Mr. Silby is a trustee/director of
each of the investment companies in the Calvert Group of Funds, except for
Calvert New World Fund, Inc., and Acacia Capital Corporation. Mr. Silby is an
officer, director and shareholder of Silby, Guffey & Company, Inc., which
serves as general partner of Calvert Social Venture Partners ("CSVP"). CSVP is
a venture capital firm investing in socially responsible small companies. He
is also a Director of Acacia Mutual Life Insurance Company. Address: 1715 18th
Street, N.W., Washington, D.C. 20009. DOB: 07/20/48.
TESSA TENNANT, Director. Ms. Tennant is the head of green and ethical
investing for National Provident Investment Managers Ltd. Previously, she was
in charge of the Environmental Research Unit of Jupiter Tyndall Merlin Ltd.,
and was the Director of the Jupiter Tyndall Merlin investment managers.
Address: 55 Calverley Road, Tunbridge Wells, Kent, TN1 2UE, United Kingdom.
DOB: 5/29/59.
MOHAMMAD YUNUS, Director. Mr. Yunus is a Managing Director of Grameen
Bank in Bangladesh. Address: Grameen Bank, Mirpur Two, Dhaka 1216, Bangladesh.
DOB: 6/28/40.
RENO J. MARTINI, Senior Vice President. Mr. Martini is Senior Vice
President of Calvert Group, Ltd. and Senior Vice President and Chief
Investment Officer of Calvert Asset Management Company, Inc. DOB: 01/13/50.
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 Vice
President and Secretary of Calvert-Sloan Advisers, L.L.C., and is an officer
of Acacia National Life Insurance Company. DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of
Calvert Asset Management Company, Inc. and is an officer of each of the other
investment companies in the Calvert Group of Funds. DOB: 09/09/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior Vice
President and Controller of Calvert Group, Ltd. 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. DOB: 07/24/52.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is
Associate General Counsel of Calvert Group and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of each
of the other investment companies in the Calvert Group of Funds. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is Associate
General Counsel of Calvert Group and an officer of each of its subsidiaries
and Calvert-Sloan Advisers, L.L.C. She is also an officer of each of the other
investment companies in the Calvert Group of Funds. DOB: 10/21/56.
LISA CROSSLEY, Esq., Assistant Secretary and Compliance Officer. Ms.
Crossley is Associate General Counsel of Calvert Group and an officer of each
of its subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer
of each of the other investment companies in the Calvert Group of Funds. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is Assistant
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: 09/07/68.
*"Interested persons" of the Fund under the Investment Company Act of 1940.
The address of directors and officers, unless otherwise noted, is
4550 Montgomery Avenue, Bethesda, Maryland 20814. Directors and officers as a
group own less than one percent of the total outstanding shares of the Fund.
During fiscal 1997, Directors of the Fund not affiliated with the
Fund's Advisor were paid aggregate fees and expenses of $3,072.
Directors 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.
Director Compensation Table
(Fiscal Year 1997)
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Name of Director Aggregate Pension or Total
Compensation Retirement Compensation
from Portfolio Benefits from Registrant
for service Accrued as and Fund
as Director part of Complex paid
Registrant to Directors <F2>
Expenses<F1>
John Guffey, Jr. $101 $0 $12,564
Terrence J. Mollner $0 $0 $10,158
Rustum Roy $0 $0 $2,000
D. Wayne Silby $101 $0 $14,832
Tessa Tennant $0 $2,000 $2,000
Mohammad Yunus $0 $2,000 $2,000
<FN>
<F1> None of the Directors have chosen to defer a portion of their
compensation as of March 31, 1997
<F2> As of March 31, 1997, the Fund complex consists of nine (9)
registered investment companies.
</FN>
</TABLE>
INVESTMENT ADVISOR AND SUB-ADVISORS
The Fund's Investment Advisor is Calvert Asset Management Company,
Inc., 4550 Montgomery Avenue, 1000N, Bethesda, Maryland 20814, a subsidiary of
Calvert Group Ltd., which is a subsidiary of Acacia Mutual Life Insurance
Company of Washington, D.C. ("Acacia Mutual").
The Advisory Contract between the Fund and the Advisor was entered
into on May 21, 1992, and will remain in effect indefinitely, provided
continuance is approved at least annually by the vote of the holders of a
majority of the outstanding shares of the Fund or by the Board of Directors 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
Fund and oversees its day-to-day operations, subject to direction and control
by the Fund's Board of Directors. For its services, the Advisor receives an
annual base fee, payable monthly, of 0.80% of the Fund's average daily net
assets. For the 1995 fiscal period, the Advisor received a fee of $50,418,
reimbursed $12,183, and voluntarily waived or assumed $3,256 of expenses. For
the 1996 fiscal period, the Advisor received a fee of $243,241 and there were
no expenses reimbursed or fees voluntarily waived. For the 1997 fiscal period,
the Advisor received a fee of $177,369. There were no expenses reimbursed or
fees voluntarily waived.
The Advisor provides the Fund with investment supervision and
management, administrative services, office space, furnishes executive and
other personnel to the Fund, and may pay 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 administrative and operating expenses, including: custodial,
registrar, dividend disbursing and transfer agency fees; federal and state
securities registration fees; salaries, fees and expenses of directors,
executive officers and employees of the Fund, who are not "affiliated persons"
of the Advisor or the Subadvisors within the meaning of the Investment Company
Act of 1940; insurance premiums; trade association dues; legal and audit fees;
interest, taxes and other business fees; expenses of printing and mailing
reports, notices, prospectuses, and proxy material to shareholders; annual
shareholders meeting expenses; and brokerage commissions and other costs
associated with the purchase and sale of portfolio securities.
The Fund's current Subadvisor is described in the Prospectus. See
"Management of the Fund." The remaining pool of Sub-Advisors are described
below.
Apodaca Investment Group, Inc.: Apodaca Investment Group, Inc. of San
Francisco, California is a small-cap growth manager that seeks to discover
compelling investment ideas by focusing on those entrepreneurial companies
that identify and capitalize on positive trends. It looks for companies that
are experiencing a powerful acceleration in earnings, exhibit a strong, high
quality balance sheet or decidedly improving financial statements and
demonstrate strong relative price strength. Its performance index is the
Russell 2000.
Jerry Apodaca is Vice President of Apodaca Investment Group, Inc. He
earned a B.A. from the University of New Mexico in 1983, and has had active
business experience since that time.
Fortaleza Asset Management, Inc.: Fortaleza Asset Management, Inc., of
Chicago, Illinois, is a small-cap growth manager that bases its investment
principles on three key elements: (1) a proprietary stock valuation system
that incorporates technical and market sentiment indicators to determine
optimal buy points; (2) an emphasis on the preservation of capital through the
implementation of a strict selling discipline to lock in capital gains and
reduce losses; and (3) a discipline that does not force equity commitment in
overvalued markets. The investment approach is based on a bottom-up stock
selection process. Its performance index is the Russell 2000.
Ms. Margarita Perez is the founder, President and Portfolio Manager
of Fortaleza, and has over 14 years of investment experience. Prior to forming
Fortaleza, Ms. Perez was Vice President and Portfolio Manager for Monetta
Financial Services, Inc., where she was directly involved in the management of
equity accounts totaling in excess of $100 million.
Ms. Perez is a native of Puerto Rico. She earned an MBA fro DePaul
University School of Commerce. Ms. Perez is a member of various professional
organizations including the American Institute of CPA s, National Society of
Hispanic MBA s, Association for Investment Management and Research, and the
National Association of Securities Professionals. She is also a trustee of the
Chicago Historical Society.
New Amsterdam Partners, L.P.: New Amsterdam Partners, L.P. is a mid-cap value
investment manager in New York, New York. New Amsterdam Partners is a
quantitative investment firm, evaluating investment opportunities by comparing
expected investment returns. The firm believes that the disciplined use of
their valuation techniques, in conjunction with fundamental analysis of
companies, is the key to understanding and maximizing investment returns.
Michelle Clayman, General Partner of New Amsterdam, was a founding
partner of the company, which was started in 1986. Prior to co-founding New
Amsterdam, Ms. Clayman was a Vice President of Salomon Brothers in charge of
STOCKFACTS, an on-line computer system that combines analytical tools for
equity analysis and databases and was designed and developed by Ms. Clayman.
Ms. Clayman received her Bachelor of Arts from Oxford University and an MBA
from Stanford University. She is a CFA and is past President of the Society of
Quantitative Analysts.
Keith Graham is Vice President and Special Limited Partner of New
Amsterdam. Before joining the company in 1987, Mr. Graham was an Assistant
Treasurer at the Bankers Trust Company, first in the Trust Administration
Group and later in the Investment Management Consulting Group.
Sturdivant & Co., Inc.: Sturdivant & Co., Inc., of Clementon, New Jersey,
seeks to identify undervalued companies or companies undergoing significant
changes that will enhance shareholder value. The company utilizes a
conservative, disciplined and consistently-applied decision making process
designed to achieve lower risk than the market.
Ralph Sturdivant is Chairman and CEO who, prior to founding the firm,
was a Vice President at Prudential-Bache Securities and an Account Executive
with Merrill Lynch. Mr. Sturdivant holds a Bachelor of Arts from Morgan State
University and is a member of the Financial Analysts of Philadelphia.
Albert Sturdivant is President and CIO, and was a principal and
manager of the capital markets division of Grigsby, Brandford & Company prior
to co-founding Sturdivant & Co. Mr. Sturdivant earned an MBA from the Wharton
Business School of the University of Pennsylvania.
Administrative Services
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, the daily determination of its net
asset value per share and dividends, and the maintenance of its portfolio and
general accounting records. For providing such services, CASC receives an
annual fee from the Fund of 0.10% of the Fund's average daily net assets. For
the 1995, 1996 and 1997 fiscal periods, CASC received $6,251, $30,405 and
$22,248 in administrative fees, respectively.
TRANSFER AND SHAREHOLDER SERVICING AGENT
Calvert Shareholder Services, Inc. ("CSSI"), a subsidiary of Calvert
Group, Ltd., and Acacia Mutual, has been retained by the Fund to act as
transfer agent, dividend disbursing agent and shareholder servicing agent.
These responsibilities include: responding to shareholder inquiries and
instructions concerning their accounts; crediting and debiting shareholder
accounts for purchases and redemptions of Fund shares and confirming such
transactions; updating of shareholder accounts to reflect declaration and
payment of dividends; and preparing and distributing quarterly statements to
shareholders regarding their accounts. For such services, Calvert Shareholder
Services, Inc. receives compensation based on the number of shareholder
accounts and the number of shareholder transactions. During fiscal period
1995, 1996 and 1997, CSSI received $13,179, $134,497, and $77,552 from the
Fund, respectively.
METHOD OF DISTRIBUTION
The Fund has entered into an agreement with Calvert Distributors,
Inc. ("CDI") whereby CDI, acting as principal underwriter for the Fund, makes
a continuous offering of the Fund's securities on a "best efforts" basis.
Under the terms of the agreement, CDI is entitled to receive reimbursement of
distribution expenses pursuant to the Distribution Plan (see below). For
fiscal period 1997, CDI received distribution fees of $72,378 under the Class
A Distribution Plan. Of the Class A distribution expenses paid in fiscal 1997,
$44,432 was used to compensate dealers for their share distribution
promotional services, and the remainder was used for Advertising. CDI also
receives the portion of the sales charge in excess of the dealer reallowance.
CDI received net sales charges of $23,647, $151,785, and $49,218 for fiscal
periods ending 1995, 1996 and 1997, respectively.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Fund has adopted Distribution Plans (the "Plans") which permits the Fund to
pay certain expenses associated with the distribution of its shares. Such
expenses may not exceed, on an annual basis, 0.35% of the Fund's Class A
average daily net assets. Expenses under the Fund's Class C Plan may not
exceed, on an annual basis, 1.00% of the average daily net assets of Class C.
For the period from inception (October 31, 1994) to September 30, 1995, Class
C Distribution Plan expenses totaled $4,448. That amount was used entirely to
compensate dealers distributing shares, and to compensate the underwriter. For
the fiscal year 1996, Class C Distribution Plan expenses totaled $27,695. That
amount was used entirely to compensate dealers distributing shares, and to
compensate the underwriter. For the fiscal year 1997, Class C Distribution
Plan expenses totaled $15,686.
The Fund's Distribution Plans were approved by the Board of
Directors, including the Directors 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
Directors who are not interested persons of the Fund is committed to the
discretion of such disinterested Directors. In establishing the Plans, the
Directors considered various factors including the amount of the distribution
expenses. The Directors 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 Directors who have no direct or indirect financial interest in
the Plans, or by vote of a majority of the outstanding shares of the Fund. Any
change in the Plans that would materially increase the distribution cost to
the Fund requires approval of the shareholders of the affected class;
otherwise, the Plans may be amended by the Directors, including a majority of
the non-interested Directors 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 Directors 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 Directors.
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.
Certain broker-dealers, and/or other persons may receive compensation
from the investment advisor, underwriter, or their affiliates for the sale and
distribution of the securities or for services to the Fund. Such compensation
may include additional compensation based on assets held through that firm
beyond the regularly scheduled rates, and finder's fee payments to firms whose
representatives are responsible for soliciting a new account where the
accountholder does not choose to purchase through that firm.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. Investment decisions and choice of
brokers and dealers are made by the Fund's Advisor under the direction and
supervision of the Fund's Board of Directors.
The Fund's policy is to limit portfolio turnover to transactions
necessary to carry out its investment policies and to obtain cash for
redemption of its shares. Depending upon market conditions, the Fund's
turnover expressed as a percentage may in some years exceed 100%, but is not
expected to exceed 200%. For the 1995, 1996 and 1997 fiscal periods, the
portfolio turnover rates of the Fund were 95%, 114% and 117%, respectively. In
all transactions, the Fund seeks to obtain the best price and most favorable
execution and selects broker-dealers on the basis of their professional
capability and the value and quality of their services. Broker-dealers may be
selected who provide the Fund with statistical, research, or other information
and services. Such broker-dealers may receive compensation for executing
portfolio transactions that is in excess of the compensation another
broker-dealer would have received for executing such transactions, if the
Advisor determines in good faith that such compensation is reasonable in
relation to the value of the information and services provided. Although any
statistical, research, or other information or services provided by
broker-dealers may be useful to the Advisor, its dollar value is generally
indeterminable and its availability or receipt does not materially reduce the
Advisor's normal research activities or expenses. During fiscal 1995, no
commissions were paid to any officer or director of the Fund, or to any of
their affiliates. During fiscal year 1996, $177,000 in aggregate brokerage
commissions were paid to broker-dealers. During fiscal year 1997, $17,728 in
aggregate brokerage commissions were paid to broker-dealers.
The Advisor may also execute Fund transactions with or through
broker-dealers who have sold shares of the Fund. However, such sales will not
be a qualifying or disqualifying factor in a broker-dealer's selection nor
will the selection of any broker-dealer be based on the volume of Fund shares
sold.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers and Lybrand, L.L.P., has been selected by the Board of
Directors to serve as independent accountants of the Fund for fiscal year
1998. State Street Bank & Trust Company, N.A., 225 Franklin Street, Boston, MA
02110 acts as custodian of the Fund's investments. First National Bank of
Maryland, 25 South Charles Street, Baltimore, Maryland 21203 also serves as
custodian of certain of the Fund's cash assets. Neither custodian has a 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 Fund was organized as a Maryland Corporation on February 14,
1992. The other series of the Fund is the Calvert International Equity Fund.
Each share represents an equal proportionate interest with each other
share and is entitled to such dividends and distributions out of the income
belonging to such class as declared by the Board. The Fund offers two separate
classes of shares: Class A and Class C. Each class represents interests in the
same portfolio of investments but, as further described in the prospectus,
each class is subject to differing sales charges and expenses, which
differences will result in differing net asset values and distributions. Upon
any liquidation of the Fund, shareholders of each class are entitled to share
pro rata in the net assets belonging to that series available for distribution.
The Fund will send its shareholders confirmations of purchase and
redemption transactions, as well as periodic transaction statements and
unaudited semi-annual and audited annual financial statements of the Fund's
investment securities, assets and liabilities, income and expenses, and
changes in net assets.
The Prospectus and this Statement of Additional Information do not
contain all the information in the Fund's registration statement. The
registration statement is on file with the Securities and Exchange Commission
and is available to the public.
FINANCIAL STATEMENTS
The Fund's audited financial statements included in its Annual Report
to Shareholders dated March 31, 1997, are expressly incorporated by reference
and made a part of this Statement of Additional Information. A copy of the
Annual Report may be obtained free of charge by writing or calling The Calvert
Fund.
APPENDIX
Corporate Bond Ratings:
Description of Moody's Investors Service Inc. s/Standard & Poor's bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to pay
principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt obligations.
Capacity to pay principal and interest is very strong, and in the majority of
instances they differ from AAA issues only in small degree. They are rated
lower than the best bonds because margins of protection may not be as large as
in Aaa securities, fluctuation of protective elements may be of greater
amplitude, or there may be other elements present which make long-term risks
appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay principal
and interest. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead
to a weakened capacity to pay principal and interest for bonds in this
category than for bonds in higher rated categories.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay interest
and repay principal. The higher the degree of speculation, the lower the
rating. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
C/C: This rating is only for income bonds on which no interest is
being paid.
D: Debt in default; payment of interest and/or principal is in
arrears.
Commercial Paper Ratings:
MOODY's INVESTORS SERVICE, INC.:
The Prime rating is the highest commercial paper rating assigned by
Moody s. Among the factors considered by Moody's in assigning ratings are the
following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management
of obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations. Issuers within
this Prime category may be given ratings 1, 2, or 3, depending on the relative
strengths of these factors.
STANDARD & POOR's CORPORATION:
Commercial paper rated A by Standard & Poor's has the following
characteristics: (i) liquidity ratios are adequate to meet cash requirements;
(ii) long-term senior debt rating should be A or better, although in some
cases BBB credits may be allowed if other factors outweigh the BBB; (iii) the
issuer should have access to at least two additional channels of borrowing;
(iv) basic earnings and cash flow should have an upward trend with allowances
made for unusual circumstances; and (v) typically the issuer's industry should
be well established and the issuer should have a strong position within its
industry and the reliability and quality of management should be unquestioned.
Issuers rated A are further referred to by use of numbers 1, 2 and 3 to denote
the relative strength within this highest classification.
LETTER OF INTENT
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the Letter
of Intent option on my Fund Account Application Form, I agree to be bound by
the terms and conditions applicable to Letters of Intent appearing in the
Prospectus and the Statement of Additional Information for the Fund and the
provisions described below as they may be amended from time to time by the
Fund. Such amendments will apply automatically to existing Letters of Intent.
I intend to invest in the shares of: (Fund or Portfolio name*)
during the thirteen (13) month period from the date of my first purchase
pursuant to this Letter (which cannot be more than ninety (90) days prior to
the date of this Letter or my Fund Account Application Form, whichever is
applicable), an aggregate amount (excluding any reinvestments of
distributions) of at least fifty thousand dollars ($50,000) which, together
with my current holdings of the Fund (at public offering price on date of this
Letter or my Fund Account Application Form, whichever is applicable), will
equal or exceed the amount checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms of
escrow, to which I hereby agree, each purchase occurring after the date of
this Letter will be made at the public offering price applicable to a single
transaction of the dollar amount specified above, as described in the Fund's
prospectus. No portion of the sales charge imposed on purchases made prior to
the date of this Letter will be refunded.
I am making no commitment to purchase shares, but if my purchases
within thirteen months from the date of my first purchase do not aggregate the
minimum amount specified above, I will pay the increased amount of sales
charges prescribed in the terms of escrow described below. I understand that
4.75% of the minimum dollar amount specified above will be held in escrow in
the form of shares (computed to the nearest full share). These shares will be
held subject to the terms of escrow described below.
From the initial purchase (or subsequent purchases if necessary),
4.75% of the dollar amount specified in this Letter shall be held in escrow in
shares of the Fund by the Fund's transfer agent. For example, if the minimum
amount specified under the Letter is $50,000, the escrow shall be shares
valued in the amount of $2,375 (computed at the public offering price adjusted
for a $50,000 purchase). All dividends and any capital gains distribution on
the escrowed shares will be credited to my account.
If the total minimum investment specified under the Letter is
completed within a thirteen month period, escrowed shares will be promptly
released to me. However, shares disposed of prior to completion of the
purchase requirement under the Letter will be deducted from the amount
required to complete the investment commitment.
Upon expiration of this Letter, the total purchases pursuant to the
Letter are less than the amount specified in the Letter as the intended
aggregate purchases, Calvert Distributors, Inc. ("CDI") will bill me for an
amount equal to the difference between the lower load I paid and the dollar
amount of sales charges which I would have paid if the total amount purchased
had been made at a single time. If not paid by the investor within 20 days,
CDI will debit the difference from my account. Full shares, if any, remaining
in escrow after the aforementioned adjustment will be released and, upon
request, remitted to me.
I irrevocably constitute and appoint CDI as my attorney-in-fact, with
full power of substitution, to surrender for redemption any or all escrowed
shares on the books of the Fund. This power of attorney is coupled with an
interest.
The commission allowed by Calvert Distributors, Inc. 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)
*"Fund" in this Letter of Intent shall refer to the Fund or Portfolio, as the
case may be, here indicated.
