CALVERT WORLD VALUES FUND, INC.
International Equity Fund
4550 Montgomery Avenue, Bethesda, Maryland 20814
Statement of Additional Information
January 31, 1999
As revised May 6, 1999
New Account Information
(800) 368-2748
(301) 951-4820
Shareholder Services
(800) 368-2745
Broker Services
(800) 368-2746
(301) 951-4850
TDD for the Hearing- Impaired
(800) 541-1524
This Statement of Additional Information ("SAI") is not a
prospectus. Investors should read the Statement of Additional Information in
conjunction with the Fund's Prospectus dated January 31, 1999. The Fund's
audited financial statements included in its most recent Annual Report to
Shareholders, are expressly incorporated by reference, and made a part of
this SAI. The prospectus and the most recent shareholder report may be
obtained free of charge by writing the Fund at the above address or calling
the Fund.
TABLE OF CONTENTS
Investment Policies and Risks 2
Investment Restrictions 9
Investment Selection Process 11
Dividends, Distributions and Taxes 11
Net Asset Value 12
Calculation of Total Return 13
Purchase and Redemption of Shares 14
Advertising 14
Directors and Officers 15
Investment Advisor and Subadvisor 17
Method of Distribution 18
Transfer and Shareholder Servicing Agents 20
Portfolio Transactions 20
Independent Accountants and Custodians 21
Control Persons & Principal Holders of Securities 21
General Information 21
Appendix 22
INVESTMENT POLICIES AND RISKS
Calvert World Values Fund, Inc., International Equity Fund (the
"Fund") seeks to achieve a high total return consistent with reasonable
risk, by investing primarily in a globally diversified portfolio of equity
securities. To the extent possible, investments are made in enterprises that
make a significant contribution to our global society through their products
and services and through the way they do business.
Under normal circumstances, the Fund will invest primarily in
equity securities. However, the Fund may invest in any other type of
security including, but not limited to, convertible securities, preferred
stocks, bonds, notes and other debt securities of companies, (including
Euro-currency instruments and securities) or of any international agency
(such as the Asian Development Bank or Inter-American Development Bank) or
obligations of domestic or foreign governments and their political
subdivisions, and in foreign currency transactions.
Under normal circumstances, the Fund will invest in the securities
of issuers in many different countries, other than the USA. The Fund makes
investments in various countries. Under exceptional economic or market
conditions, the Fund may invest substantially all of its assets in only one
or two countries, or in US government obligations.
In determining the appropriate distribution of investments among
various countries and geographic regions, the Subadvisor ordinarily will
consider the following factors: prospects for relative economic growth among
foreign countries; expected levels of inflation; relative price levels of
the various capital markets; government policies influencing business
conditions; the outlook for currency relationships and the range of
individual investment opportunities available to the global investor.
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. If the Fund invests 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. In
addition, foreign countries may impose withholding and taxes on dividends
and interest.
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. It may also use foreign currency
options and futures. See below. A forward foreign currency contract involves
an obligation to purchase or sell a specific currency at a future date which
may be any fixed number of days from the date of the contract agreed upon by
the parties, at a price set at the time of the contract. These contracts are
traded in the interbank market conducted directly between currency traders
(usually large, commercial banks) and their customers. A forward foreign
currency contract generally has no deposit requirement, and no commissions
are charged at any stage for trades.
The Fund may enter into forward foreign currency contracts for two
reasons. First, the Fund may desire to preserve the United States dollar
price of a security when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency. The Fund may be able to
protect itself against possible losses resulting from changes in the
relationship between the United States dollar and foreign currencies during
the period between the date the security is purchased or sold and the date
on which payment is made or received by entering into a forward contract for
the purchase or sale, for a fixed amount of dollars, of the amount of the
foreign currency involved in the underlying security transactions.
Second, when the Advisor or Subadvisor believes that the currency
of a particular foreign country may suffer a substantial decline against the
United States dollar, the Fund enters into a forward foreign currency
contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of the Fund's securities
denominated in such foreign currency. The precise matching of the forward
foreign currency contract amounts and the value of the Fund's securities
involved will not generally be possible since the future value of the
securities will change as a consequence of market movements between the date
the forward contract is entered into and the date it matures. The projection
of short-term currency market movement is difficult, and the successful
execution of this short-term hedging strategy is uncertain. Although forward
foreign currency contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, at the same time they tend to
limit any potential gain which might result should the value of such
currency increase. The Fund does not intend to enter into such forward
contracts under this circumstance on a regular or continuous basis.
Eurocurrency Conversion Risk. European countries that are members
of the European Monetary Union have agreed to use a common currency unit,
the "euro," beginning in 1999. Currently, each of these countries has its
own currency unit. Although the Advisor and Subadvisor do not anticipate
any problems in conversion from the old currencies to the euro, there may be
issues involved in settlement, valuation, and numerous other areas that
could impact the 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,
Subadvisor 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.
TEMPORARY DEFENSIVE POSITIONS
For temporary defensive purposes - which may include a lack of
adequate purchase candidates or an unfavorable market environment - the Fund
may invest in cash or cash equivalents. Cash equivalents include instruments
such as, but not limited to, U.S. government and agency obligations,
certificates of deposit, banker's acceptances, time deposits commercial
paper, short-term corporate debt securities, and repurchase agreements.
Repurchase Agreements
The Fund may purchase debt securities subject to repurchase
agreements, which are arrangements under which the Fund buys a security, and
the seller simultaneously agrees to repurchase the security at a specified
time and price reflecting a market rate of interest. The Fund engages in
repurchase agreements in order to earn a higher rate of return than it could
earn simply by investing in the obligation which is the subject of the
repurchase agreement. Repurchase agreements are not, however, without risk.
In the event of the bankruptcy of a seller during the term of a repurchase
agreement, a legal question exists as to whether the Fund would be deemed
the owner of the underlying security or would be deemed only to have a
security interest in and lien upon such security. The Fund will only engage
in repurchase agreements with recognized securities dealers and banks
determined to present minimal credit risk by the Advisor under the direction
and supervision of the Fund's Board of Directors. In addition, the Fund will
only engage in repurchase agreements reasonably designed to secure fully
during the term of the agreement the seller's obligation to repurchase the
underlying security and will monitor the market value of the underlying
security during the term of the agreement. If the value of the underlying
security declines and is not at least equal to the repurchase price due the
Fund pursuant to the agreement, the Fund will require the seller to pledge
additional securities or cash to secure the seller's obligations pursuant to
the agreement. If the seller defaults on its obligation to repurchase and
the value of the underlying security declines, the Fund may incur a loss and
may incur expenses in selling the underlying security. Repurchase agreements
are always for periods of less than one year. Repurchase agreements not
terminable within seven days are considered illiquid.
Reverse Repurchase Agreements
The Fund may also engage in reverse repurchase agreements. Under a
reverse repurchase agreement, the Fund sells 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 Directors. In addition, the Fund bears the risk that the market
value of the securities it sold may decline below the agreed-upon repurchase
price, in which case the dealer may request the Fund to post additional
collateral.
Non-Investment Grade Debt Securities
Non-investment grade debt securities are lower quality debt
securities (generally those rated BB or lower by S&P or Ba or lower by
Moody's, known as "junk bonds"). These securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. (See Appendix for a description of the ratings.) These
securities involve greater risk of default or price declines due to changes
in the issuer's creditworthiness than investment-grade debt securities.
Because the market for lower-rated securities may be thinner and less active
than for higher-rated securities, there may be market price volatility for
these securities and limited liquidity in the resale market. Market prices
for these securities may decline significantly in periods of general
economic difficulty or rising interest rates. Unrated debt securities may
fall into the lower quality category. Unrated securities usually are not
attractive to as many buyers as rated securities are, which may make them
less marketable.
The quality limitation set forth in the Fund's investment policy is
determined immediately after the Fund's acquisition of a given security.
Accordingly, any later change in ratings will not be considered when
determining whether an investment complies with the Fund's investment policy.
When purchasing high-yielding securities, rated or unrated, the
Advisors prepare their own careful credit analysis to attempt to identify
those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through Fund
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur.
DERIVATIVES
The Fund can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, or other factors that
affect security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts and leveraged
notes, entering into swap agreements, and purchasing indexed securities. The
Fund can use these practices either as substitution or as protection against
an adverse move in the Fund to adjust the risk and return characteristics of
the Fund. If the Advisor and/or Subadvisor judges market conditions
incorrectly or employs a strategy that does not correlate well with a Fund's
investments, or if the counterparty to the transaction does not perform as
promised, these techniques could result in a loss. These techniques may
increase the volatility of a Fund and may involve a small investment of cash
relative to the magnitude of the risk assumed. Derivatives are often
illiquid.
Options and Futures Contracts
The Fund may, in pursuit of its respective investment objectives,
purchase put and call options and engage in the writing of covered call
options and secured put options on securities which meet the Fund's social
criteria, and employ a variety of other investment techniques. Specifically,
the Fund may also engage in the purchase and sale of stock index future
contracts, foreign currency futures contracts, interest rate futures
contracts, and options on such futures, as described more fully below.
The Fund may engage in such transactions only to hedge the existing
positions. It will not engage in such transactions for the purposes of
speculation or leverage. Such investment policies and techniques may involve
a greater degree of risk than those inherent in more conservative investment
approaches.
The Fund may write "covered options" on securities in standard
contracts traded on national securities exchanges. The Fund may write such
options in order to receive the premiums from options that expire and to
seek net gains from closing purchase transactions with respect to such
options.
Put and Call Options. The Fund may purchase put and call options, in
standard contracts traded on national securities exchanges, on securities of
issuers which meet the Fund's social criteria. The Fund will purchase such
options only to hedge against changes in the value of securities the Fund
hold and not for the purposes of speculation or leverage. By buying a put,
the Fund has the right to sell the security at the exercise price, thus
limiting its risk of loss through a decline in the market value of the
security until the put expires. The amount of any appreciation in the value
of the underlying security will be partially offset by the amount of the
premium paid for the put option and any related transaction costs. Prior to
its expiration, a put option may be sold in a closing sale transaction and
any profit or loss from the sale will depend on whether the amount received
is more or less than the premium paid for the put option plus the related
transaction costs.
The Fund may purchase call options on securities which they may
intend to purchase and which meet the Fund's social criteria. Such
transactions may be entered into in order to limit the risk of a substantial
increase in the market price of the security which the Fund intends to
purchase. Prior to its expiration, a call option may be sold in a closing
sale transaction. Any profit or loss from such a sale will depend on whether
the amount received is more or less than the premium paid for the call
option plus the related transaction costs.
Covered Options. The Fund may write only covered options on equity and debt
securities in standard contracts traded on national securities exchanges.
This means that, in the case of call options, so long as the Fund is
obligated as the writer of a call option, the Fund 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 either cash or securities
with a market value equal to or greater than the exercise price of the
option.
When the 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.
Risks Related to Options Transactions. The Fund can close out its
respective positions in exchange-traded options only on an exchange which
provides a secondary market in such options. Although the Fund intend to
acquire and write only such exchange-traded options for which an active
secondary market appears to exist, there can be no assurance that such a
market will exist for any particular option contract at any particular time.
This might prevent the Fund from closing an options position, which could
impair the Fund's ability to hedge effectively. The inability to close out a
call position may have an adverse effect on liquidity because the Fund may
be required to hold the securities underlying the option until the option
expires or is exercised.
Over-the-Counter ("OTC") Options. OTC options differ from exchange-traded
options in several respects. They are transacted directly with dealers and
not with a clearing corporation, and there is a risk of non-performance by
the dealer. However, the premium is paid in advance by the dealer. OTC
options are available for a greater variety of securities and foreign
currencies, and in a wider range of expiration dates and exercise prices
than exchange-traded options. Since there is no exchange, pricing is
normally done by reference to information from a market maker, which
information is carefully monitored or caused to be monitored by the
Subadvisor and verified in appropriate cases.
A writer or purchaser of a put or call option can terminate it
voluntarily only by entering into a closing transaction. In the case of OTC
options, there can be no assurance that a continuous liquid secondary market
will exist for any particular option at any specific time. Consequently, the
Fund may be able to realize the value of an OTC option it has purchased only
by exercising it or entering into a closing sale transaction with the dealer
that issued it. Similarly, when the Fund writes an OTC option, it generally
can close out that option prior to its expiration only by entering into a
closing purchase transaction with the dealer to which it originally wrote
the option. If a covered call option writer cannot effect a closing
transaction, it cannot sell the underlying security or foreign currency
until the option expires or the option is exercised. Therefore, the writer
of a covered OTC call option may not be able to sell an underlying security
even though it might otherwise be advantageous to do so. Likewise, the
writer of a secured OTC put option may be unable to sell the securities
pledged to secure the put for other investment purposes while it is
obligated as a put writer. Similarly, a purchaser of an OTC put or call
option might also find it difficult to terminate its position on a timely
basis in the absence of a secondary market.
The Fund understands the position of the staff of the Securities
and Exchange Commission (the "SEC") to be that purchased OTC options and the
assets used as "cover" for written OTC options are illiquid securities. The
Fund has adopted procedures for engaging in OTC options transactions for the
purpose of reducing any potential adverse effect of such transactions upon
the liquidity of the Fund.
Futures Transactions. The Fund may purchase and sell futures contracts, but
only when, in the judgment of the Advisor, such a position acts as a hedge
against market changes which would adversely affect the securities held by
the Fund. These futures contracts may include, but are not limited to,
market index futures contracts and futures contracts based on U.S.
Government obligations.
A futures contract is an agreement between two parties to buy and
sell a security on a future date which has the effect of establishing the
current price for the security. Although futures contracts by their terms
require actual delivery and acceptance of securities, in most cases the
contracts are closed out before the settlement date without the making or
taking of delivery of securities. Upon buying or selling a futures contract,
the 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
positions become more valuable.
The Fund may only invest in futures contracts to hedge their
respective existing investment positions and not for income enhancement,
speculation or leverage purposes. Although some of the securities underlying
a futures contract may not necessarily meet the Fund's social criteria, any
such hedge position taken by the Fund will not constitute a direct ownership
interest in the underlying securities.
Futures contracts are designed by boards of trade which are
designated "contracts markets" by the Commodity Futures Trading Commission
("CFTC"). As series of a registered investment company, the 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
contracts markets in a manner that is similar to the way a stock trades on a
stock exchange and the boards of trade, through their clearing corporations,
guarantee performance of the contracts.
Options on Futures Contracts. The Fund may purchase and write put or call
options and sell call options on futures contracts in which the Fund could
otherwise invest and which are traded on a U.S. exchange or board of trade.
The Fund may also enter into closing transactions with respect to such
options to terminate an existing position; that is, to sell a put option
already owned and to buy a call option to close a position where the Fund
has already sold a corresponding call option.
The Fund may only invest in options on futures contracts to hedge
their respective existing investment positions and not for income
enhancement, speculation or leverage purposes. Although some of the
securities underlying the futures contract underlying the option may not
necessarily meet the Fund's social criteria, any such hedge position taken
by the Fund will not constitute a direct ownership interest in the
underlying securities.
An option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract-a
long position if the option is a call and a short position if the option is
a put-at a specified exercise price at any time during the period of the
option. The Fund will pay a premium for such options purchased or sold. In
connection with such options bought or sold, 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.
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 against the risk of declining prices. The Fund may purchase
put options and sell put options on futures contracts that are already owned
by the Fund. The Fund will only engage in the purchase of put options and
the sale of covered put options on market index futures for hedging purposes.
Call Options on Futures Contracts. The sale of call options on futures
contracts is analogous to the sale of futures contracts and is used to
protect the Fund against the risk of declining prices. The purchase of call
options on futures contracts is analogous to the purchase of a futures
contract. The Fund may only buy call options to close an existing position
where the Fund has already sold a corresponding call option, or for a cash
hedge. The Fund will only engage in the sale of call options and the
purchase of call options to cover for hedging purposes.
Writing Call Options on Futures Contracts. The writing of call options on
futures contracts constitutes a partial hedge against declining prices of
the securities deliverable upon exercise of the futures contract. If the
futures contract price at expiration is below the exercise price, the 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 securities
holdings.
Risks of Options and Futures Contracts. If the Fund has sold futures or
takes options positions to hedge 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.
Correlation is also imperfect between movements in the prices of futures
contracts and movements in prices of the securities which are the subject of
the hedge. Thus the price of the futures contract or option may move more
than or less than the price of the securities being hedged. Where the Fund
has sold futures or taken options positions to hedge against decline in the
market, the market may advance and the value of the securities held in the
Fund may decline. If this were to occur, the Fund might lose money on the
futures contracts or options and also experience a decline in the value of
its securities.
The Fund can close out futures positions only on an exchange or
board of trade which provides a secondary market in such futures. Although
the Fund intend to purchase or sell only such futures for which an active
secondary market appears to exist, there can be no assurance that such a
market will exist for any particular futures contract at any particular
time. This might prevent the 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.
Options on futures transactions bear several risks apart from those
inherent in options transactions generally. The 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 seek to close its positions. 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.
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.
The value of the Fund's assets as measured in United States dollars
may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations, and the Fund may incur
costs in connection with conversions between various currencies. 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 currency
exchange market, or through forward contracts to purchase or sell foreign
currencies. 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 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.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a foreign currency, it may want to establish the
United States dollar cost or proceeds, as the case may be. By entering into
a forward contract in United States dollars for the purchase or sale of the
amount of foreign currency involved in the underlying security transaction,
the Fund is able to protect itself against a possible loss between trade and
settlement dates resulting from an adverse change in the relationship
between the United States dollar and such foreign currency. However, this
tends to limit potential gains which might result from a positive change in
such currency relationships. The Fund may also hedge its foreign currency
exchange rate risk by engaging in currency financial futures and options
transactions.
When the Advisor or the Subadvisor believes that the currency of a
particular foreign country may suffer a substantial decline against the
United States dollar, it may enter into a forward contract to sell an amount
of foreign currency approximating the value of some or all of the Fund's
portfolio securities denominated in such foreign currency. The forecasting
of short-term currency market movement is extremely difficult and whether
such a short-term hedging strategy will be successful is highly uncertain.
It is impossible to forecast with precision the market values of
portfolio securities at the expiration of a contract. Accordingly, it may be
necessary for the Fund to purchase additional currency on the spot market
(and bear the expense of such purchase) if the market value of the security
is less than the amount of foreign currency the Fund is obligated to deliver
when a decision is made to sell the security and make delivery of the
foreign currency in settlement of a forward contract. Conversely, it may be
necessary to sell on the spot market some of the foreign currency received
upon the sale of the portfolio security if its market value exceeds the
amount of foreign currency the Fund is obligated to deliver.
If the Fund retains the security and engages in an offsetting
transaction, it will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the foreign currency. Should forward prices decline
during the period between the Fund entering into a forward contract for the
sale of a foreign currency and the date it enters into an offsetting
contract for the purchase of the foreign currency, it would realize gains to
the extent the price of the currency it has agreed to sell exceeds the price
of the currency it has agreed to purchase. Should forward prices increase,
the Fund would suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
Although such contracts tend to minimize the risk of loss due to a decline
in the value of the hedged currency, they also tend to limit any potential
gain which might result should the value of such currency increase. The Fund
may have to convert its holdings of foreign currencies into United States
dollars from time to time. Although foreign exchange dealers do not charge a
fee for conversion, they do realize a profit based on the difference (the
"spread") between the prices at which they are buying and selling various
currencies.
LENDING FUND SECURITIES
The Fund may lend its 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 will not exceed 33 1/3% of
assets. 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
securities only to those firms the Advisor or Subadvisor deems creditworthy
and only on terms the Advisor believes should compensate for such risk. On
termination of the loan, the borrower is obligated to return the securities
to the 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.
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 diversified 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 allowed by law or to the extent that
the purchase of obligations in accordance with its
investment objective and policies, either directly from
the issuer, or from an underwriter for an issuer, may be
deemed an underwriting.
(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.
(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 may not enter into reverse repurchase
agreements if the aggregate proceeds from outstanding
reverse repurchase agreements, when added to other
outstanding borrowings permitted by the 1940 Act, would
exceed 33 1/3% of the Fund's total assets. The Fund does
not intend to make any purchases of securities if
borrowing exceeds 5% of total assets.
(2) The Fund may not invest, in the aggregate, more than
15% of its net assets in illiquid securities. The Fund may
buy and sell securities outside the U.S. that are not
registered with the SEC or marketable in the US.
(3) The Fund may not invest in securities of U.S. issuers
if more than 5% of the value of Fund's net assets would be
invested in such securities, excluding Special Equities
and High Social Impact Investments.
(4) The Fund may not make short sales of securities or
purchase any securities on margin except as provided with
respect to options, futures contracts and options on
future contracts.
(5) The Fund may not enter into a futures contract or an
option on a futures contract if the aggregate initial
margins and premiums required to establish these positions
would exceed 5% of the Fund's net assets.
(6) The Fund may not purchase a put or call option on a
security (including a straddle or spread) if the value of
that option premium, when aggregated with the premiums on
all other options on securities held by the Fund, would
exceed 5% of the Fund's total assets.
(7) The Fund may not write, purchase or sell puts, calls
or combinations thereof except that the Fund may (a) write
exchange-traded covered call options on portfolio
securities and enter into closing purchase transactions
with respect to such options, and the Fund may write
exchange-traded covered call options on foreign currencies
and secured put options on securities and foreign
currencies and write covered call and secured put options
on securities and foreign currencies traded over the
counter, and enter into closing purchase transactions with
respect to such options, and (b) purchase exchange-traded
call options and put options and purchase call and put
options traded over the counter, provided that the
premiums on all outstanding call and put options do not
exceed 5% of its total assets, and enter into closing sale
transaction with respect to such options.
(8) The Fund may, under normal circumstances, from time to
time, have more than 25% of its assets invested in any
major industrial or developed country which in the view of
the Subadvisor poses no unique investment risk. The
Subadvisor considers an investment in a given foreign
country to have "no unique investment risk" if the Fund's
investment in that country is not disproportionate to the
relative size of the country's market versus the Morgan
Stanley Capital International Europe-Far East-Asia (EFEA)
or World Index or other comparable index, and if the
capital markets in that country are mature, and of
sufficient liquidity and depth.
(9) The Fund will invest at least 65% of its assets in the
securities of issuers in no less than three countries,
excluding the US, under normal circumstances.
(10) The Fund may invest up to 30% of its net assets in
developing countries, which involve exposure to economic
structures that are generally less diverse and mature than
in the United States, and to political systems which may
be less stable. A country is considered a developing
country if it is not included in the Morgan Stanley
Capital International World Index.
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.
INVESTMENT SELECTION PROCESS
Investments in the Fund are selected on the basis of their ability
to contribute to the dual objective of the Fund. The Subadvisor uses its
best efforts to select investments for the Fund that satisfy the Fund's
investment and social criteria to the greatest practical extent. The
Subadvisor has developed a number of techniques for evaluating the
performance of issuers in each of these areas. The primary sources of
information are reports published by the issuers themselves, the reports of
public agencies, and the reports of groups which monitor performance in
particular areas. These sources of information are sometimes augmented with
direct interviews or written questionnaires addressed to the issuers. It
should be recognized, however, that there are few generally accepted
measures by which achievement in these areas can be readily distinguished;
therefore, the development of suitable measurement techniques is largely
within the discretion and judgment of the Advisors of the Fund.
Candidates for inclusion in any particular class of assets are then
examined according to the social criteria. The Subadvisor classifies the
issuers into three categories of suitability under the social criteria. In
the first category are those issuers which exhibit unusual positive
accomplishment with respect to some of the criteria and do not fail to meet
minimum standards with respect to the remaining criteria. To the greatest
extent possible, investment selections are made from this group. In the
second category are those issuers which meet minimum standards with respect
to all the criteria but do not exhibit outstanding accomplishment with
respect to any criterion. This category includes issuers which may lack an
affirmative record of accomplishment in these areas but which are not known
by the Subadvisor to violate any of the social criteria. The third category
under the social criteria consists of issuers which flagrantly violate, or
have violated, one or more of those values, for example, a company which
repeatedly engages in unfair labor practices. The Fund will not knowingly
purchase the securities of issuers in this third category.
It should be noted that the Fund's social criteria tend to limit
the availability of investment opportunities more than is customary with
other investment companies. The Advisors of the Fund, however, believe that
within the first and second categories there are sufficient investment
opportunities to permit full investment among issuers which satisfy the
Fund's social investment objective.
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, 1998, the Fund had tax-loss
carryforwards of $0.
Generally, dividends (including short-term capital gains) and
distributions are taxable to the shareholder in the year they are paid.
However, any dividends and distributions paid in January but declared during
the prior three months are taxable in the year declared.
The Fund is required to withhold 31% of any reportable dividends
and long-term capital gain distributions paid and 31% reportable of each
redemption transaction occurring in the Balanced, Equity and Bond Portfolios
if: (a) the shareholder's social security number or other taxpayer
identification number ("TIN") is not provided or an obviously incorrect TIN
is provided; (b) the shareholder does not certify under penalties of perjury
that the TIN provided is the shareholder's correct TIN and that the
shareholder is not subject to backup withholding under section 3406(a)(1)(C)
of the Internal Revenue Code because of underreporting (however, failure to
provide certification as to the application of section 3406(a)(1)(C) will
result only in backup withholding on dividends, not on redemptions); or (c)
the Fund is notified by the Internal Revenue Service that the TIN provided
by the shareholder is incorrect or that there has been underreporting of
interest or dividends by the shareholder. Affected shareholders will receive
statements at least annually specifying the amount withheld.
In addition, the Fund is required to report to the Internal Revenue
Service the following information with respect to each redemption
transaction occurring in the Fund:(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,
certain foreign partnerships and foreign corporations are generally not
subject to either requirement but may instead be subject to withholding
under sections 1441 or 1442 of the Internal Revenue Code. Shareholders
claiming exemption from backup withholding and broker reporting should call
or write the Fund for further information.
Many states do not tax the portion of the Fund's dividends which is
derived from interest on U.S. Government obligations. State law varies
considerably concerning the tax status of dividends derived from U.S.
Government obligations. Accordingly, shareholders should consult their tax
advisors about the tax status of dividends and distributions from the Fund
in their respective jurisdictions.
Dividends paid by the Fund may be eligible for the dividends
received deduction available to corporate taxpayers. Information concerning
the tax status of dividends and distributions and the amount of dividends
withheld, if any, is mailed annually to Fund shareholders.
Investors should note that they may be required to exclude the
initial sales charge, if any, paid on the purchase of Fund shares from the
tax basis of those shares if the shares are exchanged for shares of another
Calvert Group Fund within 90 days of purchase. This requirement applies only
to the extent that the payment of the original sales charge on the shares of
the Fund causes a reduction in the sales charge otherwise payable on the
shares of the Calvert Group Fund acquired in the exchange, and investors may
treat sales charges excluded from the basis of the original shares as
incurred to acquire the new shares.
NET ASSET VALUE
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 values fluctuates based on the
respective 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) and at such other times as may be necessary or appropriate. The Fund
does not determine net asset value on certain national holidays or other
days on which the New York Stock Exchange is closed: New Year's Day, Martin
Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Thanksgiving Day, and Christmas Day. The Fund's net asset
value per share is determined by dividing total net assets (the value of its
assets net of liabilities, including accrued expenses and fees) by the
number of shares outstanding for that class.
The assets of the Fund 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 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 will be
fairly valued by the Advisor in good faith under the supervision of the
Board of Directors. Securities primarily traded on foreign securities
exchanges are generally valued at the preceding closing values on their
respective exchanges where primarily traded. Equity options are valued at
the last sale price unless the bid price is higher or the asked price is
lower, in which event such bid or asked price is used. Exchange traded fixed
income options are valued at the last sale price unless there is no sale
price, in which event current prices provided by market makers are used.
Over-the-counter fixed income options are valued based upon current prices
provided by market makers. Financial futures are valued at the settlement
price established each day by the board of trade or exchange on which they
are traded. Because of the need to obtain prices as of the close of trading
on various exchanges throughout the world, the calculation of the Fund's net
asset value does not take place for contemporaneously with the determination
of the prices of U.S. portfolio securities. For purposes of determining the
net asset value all assets and liabilities initially expressed in foreign
currency values will be converted into United States dollar values at the
mean between the bid and offered quotations of such currencies against
United States dollars at last quoted by any recognized dealer. If an event
were to occur after the value of an investment was so established but before
the net asset value per share was determined which was likely to materially
change the net asset value, then the instrument would be valued using fair
value consideration by the Directors or their delegates.
Net Asset Value and Offering Price Per Share, as of 9/30/98
Net asset value per share
($195,191,918/10,509,698 shares) $18.57
Maximum sales charge, Class A
(4.75% of offering price) 0.88
Offering price per share, Class A $19.45
Class B net asset value and offering price per share
($879,499/47,588 shares) $18.48
Class C net asset value and offering price per share
($8,042,559/451,123 shares) $17.83
CALCULATION OF TOTAL RETURN
The Fund may advertise "total return." Total return is calculated
separately for each class. Total return differs from yield in that yield
figures measure only the income component of the Fund's investments, while
total return includes not only the effect of income dividends but also any
change in net asset value, or principal amount, during the stated period.
Total return is computed by taking the total number of shares purchased by a
hypothetical $1,000 investment after deducting any applicable sales charge,
adding all additional shares purchased within the period with reinvested
dividends and distributions, calculating the value of those shares at the
end of the period, and dividing the result by the initial $1,000 investment.
For periods of more than one year, the cumulative total return is then
adjusted for the number of years, taking compounding into account, to
calculate average annual total return during that period.
Total return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000; T = total return; n =
number of years; and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the period.
Total return is historical in nature and is not intended to
indicate future performance. All total return quotations reflect the
deduction of the maximum sales charge, except quotations of "return without
maximum load," (or "without CDSC") which do not deduct sales charge. Total
returns for the Fund's shares for the periods indicated are as follows:
Periods Ended Class A
September 30, 1998 Total Return
With/Without Maximum Load
International Equity
One year -13.60% -9.29%
Five years 6.05% 7.09%
From date of inception 6.38% 7.21%
(July 2, 1992, for Class A)
Periods Ended Class B
September 30, 1998 Total Return
With/Without CDSC
International Equity
One year N/A N/A
Five years N/A N/A
From date of inception -19.58% -15.35%
(March 31, 1998, for Class B)
Periods Ended Class C
September 30, 1998 Total Return
With/Without CDSC
International Equity
One year -11.11% -10.22%
Five years N/A N/A
From date of inception 3.39% 3.39%
(March 1, 1994, for Class C.)
Total return, like net asset value per share, fluctuates in
response to changes in market conditions. It should not be considered an
indication of future return.
PURCHASE AND REDEMPTION OF SHARES
Investments in the Fund made by mail, bank wire or electronic funds
transfer, or through the Fund's branch offices, Calvert Distributors, Inc.,
or other brokers participating in the distribution of Fund shares, are
credited to a shareholder's account at the public offering price which is
the net asset value next determined after receipt by the Fund, Calvert
Distributors, Inc., or the Fund's custodian bank or lockbox facility, plus
the applicable sales charge as set forth in the Fund's Prospectus.
All purchases of the Fund shares will be confirmed and credited to
shareholder accounts in full and fractional shares (rounded to the nearest
1/1000th of a share). 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. A service
fee of $10.00, plus any costs incurred by the Fund, will be charged
investors whose purchase checks are returned for insufficient funds.
The Fund reserves the right to modify the telephone redemption
privilege.
Amounts redeemed by telephone may be mailed by check to the
investor to the address of record. Amounts of more than $50 and less than
$300,000 may be transferred electronically at no charge to the investor.
Amounts of $l,000 or more will be transmitted by wire by the Fund to the
investor's account at a domestic bank or savings association 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 institution is
not a Federal Reserve System member, failure of immediate notification to
that institution by the correspondent bank could result in a delay in
crediting the funds to the investor's account at the institution.
Redemption proceeds are normally paid in cash. However, 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.
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 Commission, or if the Commission has ordered such a suspension for the
protection of shareholders.
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles,
sociological conditions, and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list its holdings or give examples or securities that
may have been considered for inclusion in the Fund, 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., including other socially responsible investment
companies, and unmanaged market indices such as Morgan Stanley Capital
International World Index or Europe-Far East-Asia Index. 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 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 leading family of socially responsible mutual
funds, both in terms of socially responsible mutual fund assets under
management, and number of socially responsible mutual fund portfolios
offered (source: Social Investment Forum, December 31, 1998). Calvert Group
was also the first to offer a family of socially responsible mutual fund
portfolios.
DIRECTORS AND OFFICERS
The Fund's Board of Directors supervises the Fund's activities and
reviews its contracts with companies that provide it with services.
JOHN G. GUFFEY, JR., Director. Mr. Guffey is Executive Vice
President of Calvert Social Investment Fund. He is on the Board of Directors
of the Calvert Social Investment Foundation, organizing director of the
Community Capital Bank in Brooklyn, New York, and a financial consultant to
various organizations. In addition, he is a director of the Community
Bankers Mutual Fund of Denver, Colorado, a director of Ariel Funds, and the
Treasurer and Director of Silby, Guffey, and Co., Inc., a venture capital
firm. Mr. Guffey is a trustee/director of each of the other investment
companies in the Calvert Group of Funds, except for Calvert Variable Series,
Inc. and Calvert New World Fund, Inc.
Mr. Guffey has been advised that the Securities and Exchange
Commission ("SEC") has entered an order against him relating to his former
service as a director of Community Bankers Mutual Fund, Inc. This fund is
not connected with any Calvert Fund or the Calvert Group and ceased
operations in September, 1994. Mr. Guffey consented to the entry of the
order without admitting or denying the findings in the order. The order
contains findings (1) that the Community Bankers Mutual Fund's prospectus
and statement of additional information were materially false and misleading
because they misstated or failed to state material facts concerning the
pricing of fund shares and the percentage of illiquid securities in the
fund's portfolio and that Mr. Guffey, as a member of the fund's board,
should have known of these misstatements and therefore violated the
Securities Act of 1933; (2) that the price of the fund's shares sold to the
public was not based on the current net asset value of the shares, in
violation of the Investment Company Act of 1940 (the "Investment Company
Act"); and (3) that the board of the fund, including Mr. Guffey, violated
the Investment Company Act by directing the filing of a materially false
registration statement. The order directed Mr. Guffey to cease and desist
from committing or causing future violations and to pay a civil penalty of
$5,000. The SEC placed no restrictions on Mr. Guffey's continuing to serve
as a Trustee or Director of mutual funds. DOB: 05/15/48. Address: 7205
Pomander Lane, Chevy Chase, Maryland 20815.
*BARBARA J. KRUMSIEK, President and 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 a director of Calvert-Sloan Advisers, L.L.C., and a trustee/director of
each of the investment companies in the Calvert Group of Funds, as well as
Senior Vice President of Calvert Social Investment Fund. Ms. Krumsiek is on
the Board of Directors of the Calvert Social Investment Foundation. Prior to
joining Calvert Group, Ms. Krumsiek served as a Managing Director of
Alliance Fund Distributors, Inc. DOB: 08/09/52.
TERRENCE J. MOLLNER, Ed.D., Director. Dr. Mollner is Founder,
Chairperson, and President of Trusteeship Institute, Inc., a diverse
foundation known principally for its consultation to corporations converting
to cooperative employee-ownership. He is also a director of Calvert World
Values Fund, Inc. He served as a Trustee of the Cooperative Fund of New
England, Inc., and is now a member of its Board of Advisors. In addition,
Dr. Mollner is a founder and member of the Board of Trustees of the
Foundation for Soviet-American Economic Cooperation and is on the Board of
Directors of the Calvert Social Investment Foundation.
On October 8, 1998, Mr. Mollner declared and filed for personal
bankruptcy protection under Chapter 7 of the Federal Bankruptcy Code. The
cause of Mr. Mollner's financial difficulties was losses sustained in
trading in the options and futures market. DOB: 12/13/44. Address: 15
Edwards Square, Northampton, Massachusetts 01060.
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. DOB:
7/3/24. Address: Material Research Laboratory, Room 102A, Pennsylvania State
University, University Park, Pennsylvania, 16802.
*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 Variable Series, Inc. and Calvert New World Fund, Inc. He is the
President of Calvert Social Investment Fund. Mr. Silby is Executive Chairman
of Group Serve, Inc., an internet company focused on community building
collaborative tools, and an officer, director and shareholder of Silby,
Guffey & Company, Inc., which serves as general partner of Calvert Social
Venture Partners ("CSVP"). CSVP is a venture capital firm investing in
socially responsible small companies. He is also a Director of Acacia Mutual
Life Insurance Company and Chairman of the Calvert Social Investment
Foundation. DOB: 7/20/48. Address: 1715 18th Street, N.W., Washington, D.C.
20009.
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. DOB: 5/29/59. Address: Glen Innerleithen, Boraers,
Scotland EH446PX.
MUHAMMAD YUNUS, Director. Mr. Yunus is a Managing Director of
Grameen Bank in Bangladesh. DOB: 6/28/40. Address: Grameen Bank, Mirpur
Two, Dhaka 1216, Bangladesh.
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, Inc. DOB: 1/13/50.
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 also
Vice President and Secretary of Calvert-Sloan Advisers, L.L.C., a director
of Calvert Distributors, Inc., and is an officer of Acacia National Life
Insurance Company. DOB: 08/12/47.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of
Calvert Asset Management Company, Inc., and is an officer of each of the
other investment companies in the Calvert Group of Funds, except for Calvert
New World Fund, Inc. DOB: 09/09/50.
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.
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.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is Associate
General Counsel of Calvert Group and an officer of each of its subsidiaries
and Calvert-Sloan Advisers, L.L.C. She is also an officer of each of the
other investment companies in the Calvert Group of Funds and Secretary and
provides counsel to the Calvert Social Investment Foundation. Prior to
working at Calvert Group, Ms. Duke was an Associate in the Investment
Management Group of the Business and Finance Department at Drinker Biddle &
Reath. DOB: 09/07/68.
The address of 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. Directors marked with a * above are "interested persons" of the Fund
under the Investment Company Act of 1940.
Messrs. Guffey and Silby serve on the Fund's High Social Impact
Investments Committee which assists the Fund in identifying, evaluating, and
selecting investments in securities that offer a rate of return below the
then-prevailing market rate and that present attractive opportunities for
furthering the Fund's social criteria. Messrs. Guffey, Silby, and Roy serve
on the Fund's Special Equities Committee which assists the Fund in
identifying, evaluating, and selecting appropriate private placement
investment opportunities for the Fund that are not high social impact
investments. Messrs. Guffey, Silby, Mollner, and Ms. Krumsiek also serve on
the Calvert Social Investment Foundation Board.
During fiscal 1998, Directors of the Fund not affiliated with the
Fund's Advisor were paid aggregate fees and expenses of $54,541.
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.
Trustee Compensation Table
Fiscal Year 1998 Aggregate Pension or Total Compensation
Compensation Retirement from Benefits
(unaudited numbers) from Registrant Accrued as Registrant and Fund
for Service part of Complex paid to
as Director of Registrant Director**
Expenses*
Name of Director
John G. Guffey, Jr. $8,000 $0 $54,715
Terrence J. Mollner $9,907 $0 $44,731
Rustum Roy $9,000 $0 $10,300
D. Wayne Silby $8,000 $0 $60,831
Tessa Tennant $8,000 $8,000 $8,000
Muhammad Yunus $13,000 $13,000 $13,000
*Ms. Tennant has chosen to defer a portion of her compensation. Her total
deferred compensation, including dividends and capital appreciation, was
$24,183.39, as of September 30, 1998. Mr. Yunus has also chosen to defer a
portion of his compensation. His total deferred compensation, including
dividends and capital appreciation, was $46,699.39, as of September 30, 1998.
**The Fund Complex consists of nine (9) registered investment companies.
INVESTMENT ADVISOR AND SUBADVISOR
The Fund's Investment Advisor is Calvert Asset Management Company,
Inc., 4550 Montgomery Avenue, 1000N, Bethesda, Maryland 20814, a subsidiary
of Calvert Group Ltd., which is a subsidiary of Acacia Mutual Life Insurance
Company of Washington, D.C. ("Acacia Mutual"). Effective January 1, 1999,
Acacia merged with and became a subsidiary of Ameritas Acacia Mutual Holding
Company. Under the Advisory Contract, the Advisor provides investment advice
to the Fund and oversees its day-to-day operations, subject to direction and
control by the Fund's Board of Directors. The Advisor provides the Funds
with investment supervision and management, and office space; furnishes
executive and other personnel to the Funds; and pays the salaries and fees
of all Trustees/Directors who are employees of the Advisor or its
affiliates. The Fund pays all other administrative and operating expenses,
including: custodial, registrar, dividend disbursing and transfer agency
fees; administrative service fees; federal and state securities registration
fees; salaries, fees and expenses of trustees, executive officers and
employees of the Fund, who are not employees of the Advisor or of its
affiliates; insurance premiums; trade association dues; legal and audit
fees; interest, taxes and other business fees; expenses of printing and
mailing reports, notices, prospectuses, and proxy material to shareholders;
annual shareholders' meeting expenses; and brokerage commissions and other
costs associated with the purchase and sale of portfolio securities.
For its services, the Advisor receives an annual fee of .75% of the
Fund's average daily net assets up to $250 million, 0.725% of the next $250
million, and 0.675% on assets in excess of $500 million. The Advisor may
voluntarily defer its fees or assume expenses of the Fund.
Subadvisor
Murray Johnstone International, Ltd., is controlled by United Asset
Management Company. For its services to International Equity, it receives a
subadvisory fee, paid by the Advisor, of 0.45% of the assets it manages for
International Equity. Murray Johnstone also receives a 0.05% fee, paid by
CAMCO (not the Fund) for its assistance with the distribution of the Fund.
The Fund has received an exemptive order from the Securities and
Exchange Commission to permit the Fund and the Advisor to enter into and
materially amend the Investment Subadvisory Agreement without shareholder
approval. If approved then within 90 days of the hiring of any Subadvisor or
the implementation of any proposed material change in the Investment
Subadvisory Agreement, the Fund will furnish its shareholders information
about the new Subadvisor or Investment Subadvisory Agreement that would be
included in a proxy statement. Such information will include any change in
such disclosure caused by the addition of a new Subadvisor or any proposed
material change in the Investment Subadvisory Agreement of the Fund. The
Fund will meet this condition by providing shareholders, within 90 days of
the hiring of the Subadvisor or implementation of any material change to the
terms of an Investment Subadvisory Agreement, with an information statement
to this effect.
The advisory fees paid to the Advisor by the Fund for the fiscal
years ended September 30, 1996, 1997, and 1998 were $1,971,329, $2,134,708,
and $2,338,864, respectively.
Calvert Administrative Services Company ("CASC"), an affiliate of
the Advisor, has been retained by the Fund to provide certain administrative
services necessary to the conduct of its affairs, including the preparation
of regulatory filings and shareholder reports. For providing such services,
CASC receives an annual administrative service fee payable monthly (as a
percentage of net assets) as follows (with a minimum annual fee of $40,000
across all classes):
Class A, B, and C Class I
International Equity 0.35% 0.15%
For fiscal years 1996, 1997, and 1998, International Equity paid
$197,133, $213,471, and $233,886, respectively, to CASC in administrative
fees. For those Funds with multiple classes, investment advisory fees are
allocated as a Portfolio-level expense based on net assets. Administrative
Service fees are allocated as a class-level expense, 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 Funds, CDI markets and distributes the Fund's shares and is responsible
for preparing advertising and sales literature, and printing and mailing
prospectuses to prospective investors.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940,
the Fund has adopted Distribution Plans (the "Plans") which permit the Fund
to pay certain expenses associated with the distribution and servicing of
its shares. Such expenses for Class A shares may not exceed, on an annual
basis, 0.35% of the Fund's respective average daily net assets. Expenses
under the Fund's Class B and Class C Plans may not exceed, on an annual
basis, 1.00% of the Fund's Class B and Class C average daily net assets,
respectively.
The Class A Distribution Plans 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
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
affected class 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 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.
CDI, makes a continuous offering of the Fund's securities on a
"best efforts" basis. Under the terms of the agreement, CDI is entitled to
receive, pursuant to the Distribution Plans, a distribution fee and a
service fee from the Fund based on the average daily net assets of each of
the Fund's respective Classes. These fees are paid pursuant to the Fund's
Distribution Plan. The Distribution Plan Expenses (includes both
distribution fees and services fees) paid by the Fund (all classes) to CDI
for the fiscal year ended September 30, 1998, was $652,432.
Of the distribution expenses paid by Class A Shares of the
International Equity Fund in fiscal year 1998, $453,021 was used to
compensate dealers for their share distribution promotional services.
$109,123 was used for the printing and mailing of prospectuses and sales
materials to investors (other than current shareholders), and the remainder
partially financed advertising.
Of the distribution expenses paid by Class B Shares of the
International Equity Fund in fiscal year 1998, $2,016 was used for financing
advertising.
Of the distribution expenses paid by Class C Shares of the
International Equity Fund in fiscal year 1998, $16,318 was used for
financing advertising.
International Equity Fund
Class A shares are offered at net asset value plus a front-end sales charge
as follows:
As a % of As a % of Allowed to
Amount of offering net amount Brokers as a %
Investment price invested of offering
price
Less than $50,000 4.75% 4.99% 4.00%
$50,000 but less than $100,000 3.75% 3.90% 3.00%
$100,000 but less than $250,000 2.75% 2.83% 2.25%
$250,000 but less than $500,000 1.75% 1.78% 1.25%
$500,000 but less than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.00%
CDI receives any front-end sales charge or CDSC paid. A portion of
the front-end sales charge may be reallowed to dealers. The aggregate amount
of sales charges (gross underwriting commissions) and for Class A only, the
net amount retained by CDI (i.e., not reallowed to dealers) for the last 3
fiscal years are:
Fiscal Year 1996
Gross Net
Class A $525,242 $157,897
Class B N/A
Class C N/A
Fiscal Year 1997
Gross Net
Class A $448,027 $141,844
Class B N/A
Class C N/A
Fiscal Year 1998
Gross Net
Class A $384,307 $126,829
Class B $143
Class C $0
Fund Directors and certain other affiliated persons of the Fund are
exempt from the sales charge since the distribution costs are minimal to
persons already familiar with the Fund. Other groups (e.g., group retirement
plans) are exempt due to economies of scale in distribution. See Exhibit A
to the Prospectus.
TRANSFER AND SHAREHOLDER SERVICING AGENTS
National Financial Data Services, Inc. ("NFDS"), a subsidiary of
State Street Bank & Trust, has been retained by the Fund to act as transfer
agent and dividend disbursing agent. These responsibilities include:
responding to certain shareholder inquiries and instructions, crediting and
debiting shareholder accounts for purchases and redemptions of Fund shares
and confirming such transactions, and daily updating of shareholder accounts
to reflect declaration and payment of dividends.
Calvert Shareholder Services, Inc., a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, has been retained by the Fund to act as shareholder
servicing agent. Shareholder servicing responsibilities include responding
to shareholder inquiries and instructions concerning their accounts,
entering any telephoned purchases or redemptions into the NFDS system,
maintenance of broker-dealer data, and preparing and distributing statements
to shareholders regarding their accounts. Calvert Shareholder Services, Inc.
was the sole transfer agent prior to January 1, 1998.
For these services, NFDS and Calvert Shareholder Services, Inc.
receive a fee based on number of the shareholder accounts and transactions.
PORTFOLIO TRANSACTIONS
Fund transactions are undertaken on the basis of their desirability
from an investment standpoint. The Fund's Advisor and Subadvisors make
investment decisions and the choice of brokers and dealers under the
direction and supervision of the Fund's Board of Directors.
Broker-dealers who execute transactions on behalf of the Fund are
selected on the basis of their execution capability and trading expertise
considering, among other factors, the overall reasonableness of the
brokerage commissions, current market conditions, size and timing of the
order, difficulty of execution, per share price, etc.
For the last three fiscal years, total brokerage commissions paid
are as follows:
1996 1997 1998
International Equity $1,155,171 $749,050 $947,291
The Fund did not pay any brokerage commissions to affiliated
persons during the last three fiscal years.
While the Fund's Advisor and Subadvisor(s) select brokers primarily
on the basis of best execution, in some cases they may direct transactions
to brokers based on the quality and amount of the research and
research-related services which the brokers provide to them. These services
are of the type described in Section 28(e) of the Securities Exchange Act of
1934 and may include analyses of the business or prospects of a company,
industry or economic sector, or statistical and pricing services. Other such
services are designed primarily to assist the Advisor in monitoring the
investment activities of the Subadvisor(s) of the Fund. Such services
include portfolio attribution systems, return-based style analysis, and
trade-execution analysis.
If, in the judgment of the Advisor or Subadvisor(s), the Fund or
other accounts managed by them will be benefited by supplemental research
services, they are authorized to pay brokerage commissions to a broker
furnishing such services which are in excess of commissions which another
broker may have charged for effecting the same transaction. These research
services include advice, either directly or through publications or
writings, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing of analyses and reports
concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; providing portfolio
performance evaluation and technical market analyses; and providing other
services relevant to the investment decision making process. It is the
policy of the Advisor that such research services will be used for the
benefit of the Fund as well as other Calvert Group funds and managed
accounts.
For the fiscal year ended September 30, 1998, the Fund, through its
Advisor and/or Subadvisor, directed brokerage for research services in the
following amounts:
Amount of Related
Transactions Commissions
International Equity $329,632,496 $947,291
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
PricewaterhouseCoopers LLP has been selected by the Board of
Directors to serve as independent auditors for fiscal year 1999. State
Street Bank & Trust Company, N.A., 225 Franklin Street, Boston, MA 02110,
serves as custodian of the Fund's investments. First National Bank of
Maryland, 25 South Charles Street, Baltimore, Maryland 21203 also serves as
custodian of certain of the Fund's cash assets. The custodians have no part
in deciding the Fund's investment policies or the choice of securities that
are to be purchased or sold for the Fund.
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
As of January 19, 1999, no shareholders owned 5% or more of the
outstanding voting securities of any class of the Fund.
GENERAL INFORMATION
The Fund is an open-end diversified management investment company,
organized as a Maryland Corporation on February 14, 1992. Prior to January
31, 1997, the Fund was known as the Global 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
four 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
Directors, 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).
APPENDIX
CORPORATE BOND AND COMMERCIAL PAPER RATINGS
Corporate Bonds:
Description of Moody's Investors Service Inc.'s/Standard & Poor's bond
ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to
pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and in
the majority of instances, they differ from AAA issues only in small degree.
They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
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. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
Commercial Paper:
MOODY'S INVESTORS SERVICE, INC.:
The Prime rating is the highest commercial paper rating assigned by
Moody's. Among the factors considered by Moody's in assigning ratings are
the following: (1) evaluation of the management of the issuer; (2) economic
evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3)
evaluation of the issuer's products in relation to competition and customer
acceptance; (4) liquidity; (5) amount and quality of long-term debt; (6)
trend of earnings over a period of ten years; (7) financial strength of a
parent company and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations. Issuers within this Prime category may be given ratings 1, 2,
or 3, depending on the relative strengths of these factors.
STANDARD & POOR'S CORPORATION:
Commercial paper rated A by Standard & Poor's has the following
characteristics: (i) liquidity ratios are adequate to meet cash
requirements; (ii) long-term senior debt rating should be A or better,
although in some cases BBB credits may be allowed if other factors outweigh
the BBB; (iii) the issuer should have access to at least two additional
channels of borrowing; (iv) basic earnings and cash flow should have an
upward trend with allowances made for unusual circumstances; and (v)
typically the issuer's industry should be well established and the issuer
should have a strong position within its industry and the reliability and
quality of management should be unquestioned. Issuers rated A are further
referred to by use of numbers 1, 2 and 3 to denote the relative strength
within this highest classification.
LETTER OF INTENT
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the
Letter of Intent option on my Fund Account Application Form, I agree to be
bound by the terms and conditions applicable to Letters of Intent appearing
in the Prospectus and the Statement of Additional Information for the Fund
and the provisions described below as they may be amended from time to time
by the Fund. Such amendments will apply automatically to existing Letters of
Intent.
I intend to invest in the shares of:________________________ (Fund
or Portfolio name) during the thirteen (13) month period from the date of my
first purchase pursuant to this Letter (which cannot be more than ninety
(90) days prior to the date of this Letter or my Fund Account Application
Form, whichever is applicable), an aggregate amount (excluding any
reinvestments of distributions) of at least fifty thousand dollars ($50,000)
which, together with my current holdings of the Fund (at public offering
price on date of this Letter or my Fund Account Application Form, whichever
is applicable), will equal or exceed the amount checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms of
escrow, to which I hereby agree, each purchase occurring after the date of
this Letter will be made at the public offering price applicable to a single
transaction of the dollar amount specified above, as described in the Fund's
prospectus. "Fund" in this Letter of Intent shall refer to the Fund or
Portfolio, as the case may be. No portion of the sales charge imposed on
purchases made prior to the date of this Letter will be refunded.
I am making no commitment to purchase shares, but if my purchases
within thirteen months from the date of my first purchase do not aggregate
the minimum amount specified above, I will pay the increased amount of sales
charges prescribed in the terms of escrow described below. I understand that
4.75% of the minimum dollar amount specified above will be held in escrow in
the form of shares (computed to the nearest full share). These shares will
be held subject to the terms of escrow described below.
From the initial purchase (or subsequent purchases if necessary),
4.75% of the dollar amount specified in this Letter shall be held in escrow
in shares of the Fund by the Fund's transfer agent. For example, if the
minimum amount specified under the Letter is $50,000, the escrow shall be
shares valued in the amount of $2,375 (computed at the public offering price
adjusted for a $50,000 purchase). All dividends and any capital gains
distribution on the escrowed shares will be credited to my account.
If the total minimum investment specified under the Letter is
completed within a thirteen month period, escrowed shares will be promptly
released to me. However, shares disposed of prior to completion of the
purchase requirement under the Letter will be deducted from the amount
required to complete the investment commitment.
Upon expiration of this Letter, the total purchases pursuant to the
Letter are less than the amount specified in the Letter as the intended
aggregate purchases, Calvert Distributors, Inc. ("CDI") will bill me for an
amount equal to the difference between the lower load I paid and the dollar
amount of sales charges which I would have paid if the total amount
purchased had been made at a single time. If not paid by the investor within
20 days, CDI will debit the difference from my account. Full shares, if any,
remaining in escrow after the aforementioned adjustment will be released
and, upon request, remitted to me.
I irrevocably constitute and appoint CDI as my attorney-in-fact,
with full power of substitution, to surrender for redemption any or all
escrowed shares on the books of the Fund. This power of attorney is coupled
with an interest.
The commission allowed by CDI to the broker-dealer named herein
shall be at the rate applicable to the minimum amount of my specified
intended purchases.
The Letter may be revised upward by me at any time during the
thirteen-month period, and such a revision will be treated as a new Letter,
except that the thirteen-month period during which the purchase must be made
will remain unchanged and there will be no retroactive reduction of the
sales charges paid on prior purchases.
In determining the total amount of purchases made hereunder, shares
disposed of prior to termination of this Letter will be deducted. My
broker-dealer shall refer to this Letter of Intent in placing any future
purchase orders for me while this Letter is in effect.
Dealer
Name of Investor(s)
By
Authorized Signer
Address
Date
Signature of Investor(s)
Date
Signature of Investor(s)
Date
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
SHAREHOLDER SERVICE
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TRANSFER AGENT
National Financial Data Services, Inc.
1004 Baltimore
6th Floor
Kansas City, Missouri 64105
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
250 West Pratt Street
Baltimore, Maryland 21201
