STATEMENT OF ADDITIONAL INFORMATION-July 31, 1997
CALVERT NEW WORLD FUND, INC.
CALVERT NEW AFRICA FUND
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748 Shareholder
Information: (301) 951-4820 Services: (800) 368-2745
Broker (800) 368-2746 TDD for the Hearing-
Services: (301) 951-4850 Impaired: (800) 541-1524
This Statement of Additional Information is not a prospectus.
Investors should read the Statement of Additional Information in conjunction
with the Fund's Prospectus dated July 31, 1997, which may be obtained free of
charge by writing the Fund at the above address or calling the Fund.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of Calvert New World Fund,
Inc., Calvert New Africa Fund (the "Fund") is to achieve capital appreciation
over time. The Fund seeks capital appreciation aggressively by focusing the
Fund's investments mostly in the emerging market of equity and equity-linked
securities and fixed-income securities of African and African-related
companies. The following discussion supplements the discussion in the
Prospectus. Unless otherwise specified, the investment objective, programs and
restrictions of the Fund are not fundamental policies. The operating policies
of the Fund are subject to change by its Board of Directors without
shareholder approval. Shareholders will be notified of a material change in
the investment objective, a non-fundamental or operating policy.
Foreign Securities
Additional costs may be incurred which are related to any
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
United States investors from making certain investments abroad. While such
taxes or restrictions are not presently in effect, they may be reinstituted
from time to time as a means of fostering a favorable United States balance of
payments. In addition, foreign countries may impose withholding and taxes on
dividends and interest. See "Risk Factors" in the Prospectus.
Options and Futures Contracts
The Fund may purchase put and call options and engage in the writing
of covered call options and secured put options on securities and employ a
variety of other investment techniques. Specifically, the Fund may 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. Such investment policies and
techniques may involve a greater degree of risk than those inherent in more
conservative investment approaches.
The Fund will engage in such transactions only to hedge existing
positions. It will not engage in such transactions for the purposes of
speculation or leverage. The Fund may write call and put options in order to
obtain a return on its investments from the premiums received and will retain
the premiums whether or not the options are exercised. Any decline in the
market value of portfolio securities or foreign currencies will be offset to
the extent of the premiums received (net of transaction costs). If an option
is exercised, the premium received on the option will effectively increase the
exercise price or reduce the difference between the exercise price and market
value.
The Fund will not engage in such options or futures transactions
unless it receives any necessary regulatory approvals permitting it to engage
in such transactions. The Fund may write "covered options" on securities in
standard contracts traded on national or foreign securities exchanges, or in
individually negotiated contracts traded over-the-counter. It 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.
To preserve the Fund's status as a regulated investment company under
Subchapter M of the Internal Revenue Code, it is the Fund's operating policy
to limit any gains on put or call options and other securities held less than
three months to less than 30% of the Fund's annual gross income.
Risks Related to Options Transactions. The Fund can close out its
respective positions in exchange-traded options only on an exchange which
provides a secondary market in such options. Although it intends to acquire
and write only such exchange-traded options for which an active secondary
market appears to exist, there can be no assurance that such a market will
exist for any particular option contract at any particular time. This might
prevent the Fund from closing an options position, which could impair its
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.
Writing (Selling) Call and Put Options
The Fund may write covered options on equity and debt securities and
indices. This means that, in the case of call options, so long as the Fund is
obligated as the writer of a call option, it will own the underlying security
subject to the option and, in the case of put options, it 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, it 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, it 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. Upon exercise by the
purchaser, the writer of a call option on an individual security or foreign
currency has the obligation to sell the underlying security or currency at the
exercise price. A call option on a securities index is similar to a call
option on an individual security, except that the value of the option depends
on the weighted value of the group of securities comprising the index and all
settlements are to be made in cash. A call option may be terminated by the
writer (seller) by entering into a closing purchase transaction in which it
purchases an option of the same series as the option previously written.
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.
The Fund may write exchange-traded call options on its securities.
Call options may be written on portfolio securities, securities indices, or
foreign currencies. With respect to securities and foreign currencies, the
Fund may write call and put options on an exchange or over-the-counter. Call
options on portfolio securities will be covered since the Fund will own the
underlying securities. Call options on securities indices will be written only
to hedge in an economically appropriate way portfolio securities which are not
otherwise hedged with options or financial futures contracts and will be
"covered" by identifying the specific portfolio securities being hedged.
Options on foreign currencies will be covered by securities denominated in
that currency. Options on securities indices will be covered by securities
that substantially replicate the movement of the index. The Fund may not write
options on more than 50% of its total assets. The Fund presently intends to
cease writing options if and as long as 25% of such total assets are subject
to outstanding options contracts or if required under state regulations.
During the option period, the writer of a call option gives up the
opportunity for appreciation in the market value of the underlying security or
currency above the exercise price. It retains the risk of loss should the
price of the underlying security or foreign currency decline. Writing call
options also involves risks relating to the Fund's ability to close out
options it has written.
A put option on a security, security index, or foreign currency gives
the purchaser of the option, in return for the premium paid to the writer
(seller), the right to sell the underlying security, index, or foreign
currency at the exercise price at any time during the option period. When the
Fund writes a secured 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 funds 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. Upon exercise by the purchaser, the writer of a put
option has the obligation to purchase the underlying security or foreign
currency at the exercise price. A put option on a securities index is similar
to a put option on an individual security, except that the value of the option
depends on the weighted value of the group of securities comprising the index
and all settlements are made in cash.
During the option period, the writer of a put option has assumed the
risk that the price of the underlying security or foreign currency will
decline below the exercise price. However, the writer of the put option has
retained the opportunity for an appreciation above the exercise price should
the market price of the underlying security or foreign currency increase.
Writing put options also involves risks relating to the Fund's ability to
close out options it has written.
Purchasing Call and Put Options, Warrants and Stock Rights
The Fund may invest up to an aggregate of 5% of its total assets in
exchange-traded or over-the-counter call and put options on securities and
securities indices and foreign currencies. Purchases of such options may be
made for the purpose of hedging against changes in the market value of the
underlying securities or foreign currencies. The Fund may invest in call and
put options whenever, in the opinion of the Subadvisor, a hedging transaction
is consistent with its investment objectives. 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. The Fund may sell a call
option or a put option which it has previously purchased prior to the purchase
(in the case of a call) or the sale (in the case of a put) of the underlying
security or foreign currency. Any such sale would result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid on the call or put which is sold.
Purchasing a call or put option involves the risk that the Fund may lose the
premium it paid plus transaction costs.
Warrants and stock rights are almost identical to call options in
their nature, use and effect except that they are issued by the issuer of the
underlying security rather than an option writer, and they generally have
longer expiration dates than call options. The Fund may invest up to 5% of its
net assets in warrants and stock rights, but no more than 2% of its net assets
in warrants and stock rights not listed on the New York Stock Exchange or the
American Stock Exchange.
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
Advisor 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 will adopt 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 ("futures
contracts") but only when, in the judgment of the Advisor or Subadvisor, 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 its existing
investment positions and not for income enhancement, speculation or leverage
purposes. Although some of the securities underlying the 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 have been designed by boards of trade which have
been designated "contracts markets" by the Commodity Futures Trading
Commission ("CFTC"). As a registered investment company, the Fund is eligible
for exclusion from the CFTC's definition of "commodity pool operator," meaning
that it may invest in futures contracts under specified conditions without
registering with the CFTC. Among these conditions are requirements that to the
extent that the Fund enters into future contracts and options on futures
positions that are not for bonafide hedging purposes (as defined by the CFTC),
the aggregate initial margin and premiums on these positions (excluding the
amount by which options are "in-the-money") may not exceed 5% of the Fund's
net assets.
Options on Futures Contracts. The Fund may purchase and write put or call
options and sell call options on futures contracts in which it could otherwise
invest and which are traded on a U.S. exchange or board of trade. It 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 its
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 portfolio against the risk of declining prices. The Fund may purchase put
options and sell put options on futures contracts it already owns. 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 portfolio 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 its portfolio against decline in the market and the
market later advances, it 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 portfolio securities.
However, although this might occur for a brief period or to a slight degree,
the value of a diversified portfolio will tend to move in the direction of the
market generally.
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
intends to purchase or sell only such futures for which an active secondary
market appears to exist, there can be no assurance that such a market will
exist for any particular futures contract at any particular time. This might
prevent the Fund from closing a futures position, which could require the Fund
to make daily cash payments with respect to its position in the event of
adverse price movements.
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 seeks 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
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.
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 Advisor 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.
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 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 portfolio 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's 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.
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 entered into a contract to purchase a security
denominated in a foreign currency and purchased a foreign currency call to
hedge against a rise in the value of the currency but instead the currency
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.
Repurchase agreements
Repurchase agreements are arrangements under which the Fund buys
securities and the seller simultaneously agrees to repurchase the securities
at a specified time and price. The Fund may engage in repurchase agreements 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
Subadvisor 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,
and are considered illiquid if not terminable within seven days.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Fund has adopted the following investment restrictions which
cannot be changed without the approval of the holders of a majority of the
outstanding shares of the Fund. As defined in the Investment Company Act of
1940, this means the lesser of the vote of (a) 67% of the shares of the Fund
at a meeting where more than 50% of the outstanding shares are present in
person or by proxy or (b) more than 50% of the outstanding shares of the Fund.
The Fund may not:
1. With respect to 50% of its assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its agencies or
instrumentalities) if, as a result, more than 5% of the
value of its total assets would be invested in securities of
that issuer. (The remaining 50% of its total assets may be
invested without restriction except to the extent other
investment restrictions may be applicable, although, with
respect to 50% of the Fund's assets, the Fund does not
currently anticipate investing more than 25% in the
securities of a single issuer in the coming year).
2. Concentrate 25% or more of the value of its total
assets in any one industry; provided, however, that there is
no limitation with respect to investments in obligations
issued or guaranteed by the United States Government or its
agencies and instrumentalities, and repurchase agreements
secured thereby.
3. Make loans of more than one-third of the assets of
the Fund, other than through the purchase of money market
instruments and repurchase agreements or by the purchase of
bonds, debentures or other debt securities, or the lending
of portfolio securities as detailed in the Prospectus, or as
permitted by law. The purchase by the Fund of all or a
portion of an issue of publicly or privately distributed
debt obligations in accordance with its investment
objective, policies and restrictions, shall not constitute
the making of a loan.
4. Issue senior securities or underwrite the
securities of other issuers, except as permitted by the
Board of Directors within applicable law, and except to the
extent that in connection with the disposition of its
portfolio securities, the Fund may be deemed to be an
underwriter.
5. Except as required in connection with permissible
options, futures and commodity activities of the Fund,
invest in commodities, commodity futures contracts, or real
estate, although it may invest in securities which are
secured by real estate or real estate mortgages and
securities of issuers which invest or deal in commodities,
commodity futures, real estate or real estate mortgages and
provided that it may purchase or sell stock index futures,
foreign currency futures, interest rate futures and options
thereon.
6. Borrow money, except from banks for temporary or
emergency purposes, and then only in an amount not to exceed
one-third of the Fund's total assets, or as permitted by
law. The Fund will not make purchases while its borrowings
exceed 5% of total assets. In order to secure any permitted
borrowings under this section, the Fund may pledge, mortgage
or hypothecate its assets.
Nonfundamental Investment Restrictions
The Fund has adopted the following operating (i.e., non-fundamental)
investment policies and restrictions which may be changed by the Board of
Directors without shareholder approval. The Fund may not:
7. Invest, in the aggregate, more than 15% of its net
assets in illiquid securities. Purchases of securities
outside the U.S. that are not registered with the SEC or
marketable in the U.S. are not per se illiquid.
8. Invest, in the aggregate, more than 5% of its net
assets in the securities of issuers restricted from selling
to the public without registration under the Securities Act
of 1933, excluding restricted securities eligible for resale
pursuant to Rule 144A under that statute. Purchases of
securities outside the U.S. that are not registered with the
SEC or marketable in the U.S. are not per se restricted.
9. 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, (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, and (c) engage in financial
futures contracts and related options transactions, provided
that the sum of the initial margin deposits on the Fund's
existing futures and related options positions and the
premiums paid for related options would not exceed 5% of its
total assets.
10. Purchase from or sell to any of the Fund's officers
or directors, or companies of which any of them are
directors, officers or employees, any securities (other than
shares of beneficial interest of the Fund), but such persons
or firms may act as brokers for the Fund for customary
commissions.
11. Invest in the shares of other investment companies,
except as permitted by the 1940 Act or other applicable law,
or pursuant to Calvert's nonqualified deferred compensation
plan adopted by the Board of Directors, in an amount not to
exceed 10% or as permitted by law and will ensure that there
is no duplication of advisory fees.
12. Make short sales of securities or purchase any
securities on margin except that the Fund may obtain such
short-term credits as may be necessary for the clearance of
purchases and sales of securities. The depositor payment by
the Fund of initial or maintenance margin in connection with
financial futures contracts or related options transactions
is not considered the purchase of a security on margin.
13. Purchase or retain securities of any issuer if the
officers, Directors of the Fund or its Advisors, owning
beneficially more than 1/2 of 1% of the securities of such
issuer, together own beneficially more than 5% of such
issuer's securities.
14. Invest in warrants if more than 5% of the value of
the Fund's net assets would be invested in such securities.
15. Invest in interests in oil, gas, or other mineral
exploration or development programs or leases, although it
may invest in securities of issuers which invest in or
sponsor such programs.
16. Purchase the securities of any issuer with less
than three years' continuous operation if, as a result, more
than 5% of the value of its total assets would be invested
in securities of such issuers.
17. With respect to 75% of the Fund's assets, purchase
more than 10% of the outstanding voting securities of any
issuer.
Any investment restriction which involves a maximum percentage of
securities or assets (except for fundamental investment restriction six) 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 by the Fund are selected on the basis of their ability to
help achieve the objective of the Fund. The Subadvisor uses its best efforts
to select investments for the Fund that satisfy the Fund's investment criteria
to the greatest practical extent. New Africa Advisers, Inc., one of the Fund's
Subadvisors, has developed a number of techniques for evaluating the
performance of issuers in each of these areas, as explained in the Prospectus.
DIVIDENDS, DISTRIBUTIONS, AND TAXES
The Fund declares and pays dividends from net investment income on an
annual basis. Distributions of realized net capital gains, if any, are
normally paid once a year; however, the Fund does not intend to make any such
distributions unless available capital loss carryovers, if any, have been used
or have expired. Dividends and distributions paid may differ among the classes.
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.
Investors should note that the Internal Revenue Code ("Code") may
require investors to exclude the initial sales charge, if any, paid on the
purchase of Fund shares from the tax basis of those shares if the shares are
exchanged for shares of another Calvert Group Fund within 90 days of purchase.
This requirement applies only to the extent that the payment of the original
sales charge on the shares of the Fund causes a reduction in the sales charge
otherwise payable on the shares of the Calvert Group Fund acquired in the
exchange, and investors may treat sales charges excluded from the basis of the
original shares as incurred to acquire the new shares.
The Fund is required to withhold 31% of any long-term capital gain
dividends and 31% of each redemption transaction occurring in the Fund if: (a)
the shareholder's social security number or other taxpayer identification
number ("TIN") is not provided, or an obviously incorrect TIN is provided; (b)
the shareholder does not certify under penalties of perjury that the TIN
provided is the shareholder's correct TIN and that the shareholder is not
subject to backup withholding under section 3406(a)(1)(C) of the Code because
of underreporting (however, failure to provide certification as to the
application of section 3406(a)(1)(C) will result only in backup withholding on
capital gain dividends, not on redemptions); or (c) the Fund is notified by
the Internal Revenue Service that the TIN provided by the shareholder is
incorrect or that there has been underreporting of interest or dividends by
the shareholder. Affected shareholders will receive statements at least
annually specifying the amount withheld.
The Fund is required to report to the Internal Revenue Service the
following information with respect to each redemption transaction: (a) the
shareholder's name, address, account number and taxpayer identification
number; (b) the total dollar value of the redemptions; and (c) the Fund's
identifying CUSIP number.
Certain shareholders are exempt from the backup withholding and
broker reporting requirements. Exempt shareholders include: corporations;
financial institutions; tax-exempt organizations; individual retirement plans;
the U.S., a State, the District of Columbia, a U.S. possession, a foreign
government, an international organization, or any political subdivision,
agency or instrumentality of any of the foregoing; U.S. registered commodities
or securities dealers; real estate investment trusts; registered investment
companies; bank common trust funds; certain charitable trusts; 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.
Nondiversified Status
The Fund is a "nondiversified" investment company under the
Investment Act of 1940 (the "Act"), which means the Fund is not limited by the
Act in the proportion of its assets that may be invested in the securities of
a single issuer. A nondiversified fund may invest in a smaller number of
issuers than a diversified fund. Thus, an investment in Calvert New Africa
Fund may, under certain circumstances, present greater risk of loss to an
investor than an investment in a diversified fund. However, Calvert New Africa
Fund intends to conduct its operations so as to qualify to be taxed as a
"regulated investment company" for purposes of the Code, which will relieve the
Fund of any liability for federal income tax to the extent its earnings are
distributed to shareholders. To qualify for this Subchapter M tax treatment,
the Fund will limit its investments to satisfy the Code diversification
requirements so that, at the close of each quarter of the taxable year, (i)
not more than 25% of the fund's assets will be invested in the securities of a
single issuer or of two or more issuers which the Fund controls and which are
determined to be engaged in the same or similar trades or businesses or
related trades or businesses, and (ii) with respect to 50% of its assets, not
more than 5% of its assets will be invested in the securities of a single
issuer and the Fund will not own more than 10% of the outstanding voting
securities of a single issuer. Investments in United States Government
securities are not subject to these limitations; while securities issued or
guaranteed by foreign governments are subject to the above tests in the same
manner as the securities of non-governmental issuers. The Fund intends to
comply with the SEC staff position that securities issued or guaranteed as to
principal and interest by any single foreign government are considered to be
securities of issuers in the same industry.
NET ASSET VALUE
The public offering price of the shares of the Fund is the respective
net asset value per share plus 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 is determined every business day at
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,
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.
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; (b) for debt or equity securities traded over-the-counter where
closing prices are not readily available, at the mean of the bid and asked
price, or yield equivalent as obtained from one or more market makers for such
securities; (c) 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 represent fair value; and (d) 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 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 as 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
Net asset value per share
($9,206,076/727,629 shares) $12.65
Maximum sales charge
(2.50% of offering price) 0.32
Offering price per share $12.97
CALCULATION OF TOTAL RETURN
The Fund may advertise "total return." Total return is computed by
taking the total number of shares purchased by a hypothetical $1,000
investment after deducting any applicable front-end 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. Note: "Total Return"
when quoted in the Financial Highlights section of the Fund's Prospectus and
the Annual Report to Shareholders, however, per SEC instructions, does not
reflect deduction of the sales charge, and corresponds to "return without
maximum load" return as referred to herein. For periods of more than one year,
the cumulative total return is then adjusted for the number of years, taking
compounding into account, to calculate average annual total return during that
period.
Total return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $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.
All total return quotations ("return with maximum load") reflect the
deduction of the maximum sales charge, except quotations of "return without
maximum load" which do not reflect deduction of the sales charge. Return
without maximum load, which will be higher than total return, should be
considered only by investors, such as participants in certain pension plans,
to whom the sales charge does not apply, or for purposes of comparison only
with comparable figures which also do not reflect sales charges, such as
Lipper averages. Thus, in the above formula, for return without maximum load,
P = the entire $1,000 hypothetical initial investment and does not reflect
deduction of any sales charge. Return without maximum load may be advertised
for other periods, such as by quarter, or cumulatively for more than one year.
Total return, like net asset value per share, fluctuates in response
to changes in market conditions. Performance for any particular time period is
historical in nature and should not be considered an indication of future
return. For the periods shown, returns for the Fund's shares are as follows:
Average Annual
Return Without Return With
Maximum Sales Load Maximum Sales Load
One Year 5.42% 2.76%
Since Inception (April 12, 1995) 2.71% 1.39%
ADVERTISING
The Fund or its affiliates may provide information such as, but not
limited to, the economy, investment climate, investment principles and
rationale, sociological conditions and political ambiance. Discussion may
include hypothetical scenarios or lists of relevant factors designed to aid
the investor in determining whether the Fund is compatible with the investor's
goals. The Fund may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Portfolio, whether held or
not.
The Fund or its affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings, Mutual
Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker Investment
Management, Inc. Such averages generally do not reflect any front- or back-end
sales charges that may be charged by Funds in that grouping. The Fund may also
cite to any source, whether in print or on-line, such as Bloomberg, in order
to acknowledge origin of information. The Fund may compare itself or its
portfolio holdings to other investments, whether or not issued or regulated by
the securities industry, including, but not limited to, certificates of
deposit and Treasury notes. The Fund, its Advisor, and its affiliates reserve
the right to update performance rankings as new rankings become available.
Calvert Group is the nation's leading family of socially responsible
mutual funds, both in terms of socially responsible mutual fund assets under
management, and number of socially responsible mutual fund portfolios offered
(source: Social Investment Forum, December 31, 1994). Calvert Group was also
the first to offer a family of socially responsible mutual fund portfolios.
PURCHASE AND REDEMPTION OF SHARES
Investments in the Fund made by mail, bank wire or electronic funds
transfer, through the Fund's branch office, 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 lock box facility, plus the applicable sales
charge as set forth in the Fund's Prospectus.
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 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.
If you redeem shares of the Fund after holding them less than two
years, the Fund will deduct a redemption fee equal to 2.0% of the net asset
value of the shares redeemed. Redemption proceeds are normally paid in cash.
However, at the sole discretion of the Fund, the Fund has the right to redeem
shares in assets other than cash for redemption amounts exceeding, in any
90-day period, $250,000 or 1.0% of the net asset value of the Fund, whichever
is less, or as allowed by law. Shareholder objections to redemptions in kind
will be handled on a case-by-case basis, under the guidance of the Board of
Directors.
To change redemption instructions already given, shareholders must
send a notice to Calvert Group, P.O. Box 419544 Kansas City, MO 64141-6544,
with a voided copy of a check for the bank wiring instructions to be added. If
a voided check does not accompany the request, then the request must be
signature guaranteed by a commercial bank, trust company, savings association
or member firm of any national securities exchange. Other documentation may be
required from corporations, fiduciaries and institutional investors. The Fund
reserves the right to modify the telephone redemption privilege.
REDUCED SALES CHARGES
The Fund imposes reduced sales charges for its shares in certain
situations in which the Principal Underwriter and the dealers selling Fund
shares may expect to realize significant economies of scale with respect to
such sales. Generally, sales costs do not increase in proportion to the dollar
amount of the shares sold; the per-dollar transaction cost for a sale to an
investor of shares worth, say, $5,000 is generally much higher than the
per-dollar cost for a sale of shares worth $1,000,000. Thus, the applicable
sales charge declines as a percentage of the dollar amount of shares sold as
the dollar amount increases.
When a shareholder agrees to make purchases of shares over a period
of time totaling a certain dollar amount pursuant to a Letter of Intent, the
Underwriter and selling dealers can expect to realize the economies of scale
applicable to that stated goal amount. Thus the Portfolio imposes the sales
charge applicable to the goal amount. Similarly, the Underwriter and selling
dealers also experience cost savings when dealing with existing Fund
shareholders, enabling the Fund to afford existing shareholders the Right of
Accumulation. The Underwriter and selling dealers can also expect to realize
economies of scale when making sales to the members of certain qualified
groups which agree to facilitate distribution of Portfolio shares to their
members. For shareholders who intend to invest at least $50,000, a Letter of
Intent is included in the Appendix to this Statement of Additional
Information. See "Exhibit A - Reduced Sales Charges" in the Prospectus.
DIRECTORS AND OFFICERS
ELIAS BELAYNEH, Director. Mr. Belayneh is the President of U.S. -
Africa Chamber of Commerce, Washington, D.C., which serves as a collective
organization focusing on the promotion of trade and investment between Africa
and the United States. Date of birth: May 18, 1955. Address: 1899 L Street,
N.W., 5th Floor, Washington, D.C. 20036.
ROBERT S. BROWNE, Director. Mr. Browne is the President of the
Twenty-First Century Foundation, which makes grants in the areas of education
and community service and was formerly a research fellow at Howard University.
Mr. Browne also serves on the Advisory Council to Calvert Social Investment
Fund. In 1992 and 1993, Mr. Browne was a Ford Foundation Research Fellow. He
served as Staff Director to the Sub-Committee on International Development,
Finance, Trade, and Monetary Policy from 1986-1991. Date of birth: August 17,
1924. Address: 214 Tryon Ave., Teaneck, NJ 07666.
BERTIE HOWARD, Director. Ms. Howard is the Executive Director of
Africa News Service. Date of birth: . Address: 0-16, Colony Apartments Chapel
Hill, NC 27514.
MICHAEL SUDARKASA, Director. Presently, Mr. Sudarkasa is the Director
of the International Division of International Trade and Investment Promotion
Services. He was previously President of 21st Century Africa, Inc. Date of
birth: August 5, 1964. Address: 1418 Woodman Avenue Silver Spring, MD 20902.
<F1>RENO J. MARTINI, Director and 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. He is an officer of each of the investment companies in the Calvert Group
of Funds. Date of birth: January 13, 1950.
MADALA MTHEMBU, Director. Presently, Mr. Mthembu is the Senior
Advisor to the Premier of the Northern Cape Province of South Africa. He was
previously a consultant with the Uniworld Group, Inc., and a graduate student
at Georgetown Law School. He is the former Assistant Chief U.S. Representative
for the African National Congress. Mr. Mthembu received his degree in law from
National University of Lesotho. Date of birth: April 22, 1964. Address Office
of the Premier, Private Bag X5016, Kimberley, 8300, Republic of South Africa.
DONALD R. NORLAND, Director. Mr. Norland is a foreign affairs
specialist, a 29-year career diplomat, and Ambassador, retired. He is a Senior
Policy Advisor at WORLDSPACE, Inc. Mr. Norland was a member of the American
Foreign Service Association ("AFSA"), Governing Board from 1991 to 1993, and
subsequently was the Vice President (elected). He was the U.S. Ambassador to
Chad from 1979 - 1981, and the Ambassador to Botswana from 1976 - 1979. Date
of birth: June 14, 1924. Address: 11 Dupont Circle, N.W., Washington, D.C.
20036.
1 MACEO K. SLOAN, Director. Mr. Sloan is Chairman, President, and
Chief Executive Officer of Sloan Financial Group and NCM Capital Management
Group, Inc., Chairman of New Africa Advisers, Inc., Sloan Communications,
Inc., and PCS Development Corporation. In addition, Mr. Sloan is a Director of
the National Association of Securities Professionals, a Chartered Financial
Analyst and a Fellow of the Life Management Institute. Date of birth: October
18, 1949. Address: New Africa Advisers, Inc., 103 West Main Street, Durham,
North Carolina 27701.
1 BARBARA J. KRUMSIEK, President and Director. Ms. Krumsiek serves as
President, Chief Executive Officer and Vice Chairman of Calvert Group, Ltd.
and as an officer and director of each of its affiliated companies. She is
President and Director of Calvert-Sloan Advisers, L.L.C., and a
trustee/director of each of the investment companies in the Calvert Group of
Funds. Address: 129 E. 69th Street, Apt. #8B, New York, NY 10021. DOB:
08/09/52.
TIM SMITH, Director. Mr. Smith is the Executive Director of the
Interfaith Center on Corporate Responsibility based in New York City. He is
also the Chair of the Advisory Council of the Calvert Social Investment Fund.
Date of birth: September 15, 1943. Address: Interfaith Center on Corporate
Responsibility, 475 Riverside, Room 566, New York, N.Y. 10115.
PAMELA D. VAN ARSDALE, Director. Ms. Van Arsdale is currently a
community activist. Prior to her retirement in 1983, she was employed by
Calvert Group. Date of birth: May 6, 1954. Address: 23 Church Road, Bedford,
New Hampshire 03110.
JUSTIN F. BECKETT, President. Mr. Beckett is President and CEO of New
Africa Advisers, Inc. He is a Director and Executive Vice President of Sloan
Financial Group, Inc. and NCM Capital Management Group, Inc., Executive Vice
President of Sloan Holdings, Inc., and a Director of Sloan Communications,
Inc. and PCS Development Corporation. Date of birth: April 5, 1963. Address:
New Africa Advisers, Inc., 103 West Main Street, Durham, North Carolina 27701.
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 and General Counsel of Calvert
Group, Ltd., and each of its subsidiaries, except for Calvert Distributors,
Inc., of which he is a Director, President, and Secretary. Date of birth:
August 12, 1947.
RONALD M. WOLFSHEIMER, CPA, Vice President, Treasurer, and
Controller. Mr. Wolfsheimer is an officer of each of the other investment
companies in the Calvert Group of Funds. He is Senior Vice President and
Controller of Calvert Group, Ltd. and its subsidiaries, except for Calvert
Distributors, Inc., of which he is a Director and Treasurer. Date of birth:
July 24, 1952.
CLIFFORD MPARE, Vice President. Mr. Mpare is the Chief Investment
Officer of NAA. Prior to joining NAA's parent company, Sloan Financial Group,
Mr. Mpare was a Senior Analyst with First Union Corp's private equity
department. He is a Chartered Financial Analyst and a Certified Management
Accountant. Date of birth: November 21, 1957. Address: New Africa Advisers,
Inc., 103 West Main Street, Durham, North Carolina 27701.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is
Assistant Secretary of Calvert Group, Ltd. and each of its subsidiaries and
each of the other investment companies in the Calvert Group of Funds. Date of
birth: January 29, 1959.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is Assistant
Secretary of Calvert-Sloan Advisers, L.L.C., and Calvert Group, Ltd. and each
of its subsidiaries. Date of birth: October 21, 1956.
JAMILAH SABIR-CALLOWAY, Assistant Secretary. Ms. Sabir-Calloway is
the Corporate Secretary of NAA. Prior to that, Ms. Sabir-Calloway was the
Assistant to the Corporate Secretary of the Sloan Financial Group. Date of
birth: April 19, 1949. Address: New Africa Advisers, Inc., 103 West Main
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 of the Fund not affiliated with the Advisor currently
receive an annual fee of $1,000 for service as a member of the Board of
Directors plus a fee of $500 to $1000 for each Board and Committee meeting
attended. For the period from inception (April 12, 1995) to March 31, 1996,
Directors of the Fund not affiliated with the Fund's advisor received fees and
expenses of $36,086. For fiscal year 1997, Directors of the Fund not
affiliated with the Fund's advisor received fees and expenses of $55,621.
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/Directors
Deferred Compensation Plan. Deferral of the fees is designed to maintain the
parties in the same position as if the fees were paid on a current basis.
Management believes this will have a negligible effect on the Fund's assets,
liabilities, net assets, and net income per share, and will ensure that there
is no duplication of advisory fees.
Director Compensation Table
Fiscal Year 1997 (unaudited numbers)
<TABLE>
<S> <C> <C> <C>
Name of Director Aggregate Pension or Total
Compensation Retirement Compensation
from Registrant Benefits from
for service Accrued as Registrant and
as Director part of Fund Complex
Registrant paid to
Expenses Directors<F2>
Elias Belayneh $1,250 $0 $1,250
Robert Browne $1,250 $0 $1,250
Madala Mthembu $1,250 $0 $1,250
Donald Norland $1,250 $0 $1,250
Tim Smith $1,250 $0 $1,250
Pamela Van Arsdale $1,250 $0 $1,250
Bertie Howard $0 $0 $0
Michael Sudarkasa $0 $0 $0
<FN>
<F1> "Interested persons" of the Fund under the Investment Company Act of 1940.
<F2> As of March 31, 1997. The Fund Complex consists of nine (9) registered
investment companies.
</FN>
</TABLE>
INVESTMENT ADVISOR AND SUBADVISORS
The Fund's Investment Advisor is Calvert-Sloan Advisers, L.L.C., 4550
Montgomery Avenue, 1000N, Bethesda, Maryland 20814, a jointly-owned subsidiary
of Calvert Group, Ltd. and Sloan Holdings, Inc. Calvert Group Ltd. is a
subsidiary of Acacia Mutual Life Insurance Company of Washington, D.C.
("Acacia Mutual").
The Advisory Contract between the Fund and the Advisor was entered
into on April 11, 1995, and will remain in effect indefinitely, provided
continuance is approved at least annually by the vote of the holders of a
majority of the outstanding shares of the Fund or by the Board of Directors of
the Fund; and further provided that such continuance is also approved annually
by the vote of a majority of the directors of the Fund who are not parties to
the Contract or interested persons of parties to the Contract or interested
persons of such parties, cast in person at a meeting called for the purpose of
voting on such approval. The Contract may be terminated without penalty by
either party upon 60 days' prior written notice; it automatically terminates
in the event of its assignment.
The Advisor provides the Fund with investment supervision and
management, administrative services, office space, furnishes executive and
other personnel to the Fund, and may pay Fund advertising and promotional
expenses. The Advisor reserves the right to compensate broker-dealers in
consideration of their promotional or administrative services. The Fund pays
all other administrative and operating expenses, including: custodial,
registrar, dividend disbursing and transfer agency fees; federal and state
securities registration fees; salaries, fees and expenses of directors,
executive officers and employees of the Fund, who are not ''affiliated
persons" of the Advisor or the Advisor within the meaning of the Investment
Company Act of 1940; insurance premiums; trade association dues; legal and
audit fees; interest, taxes and other business fees; expenses of printing and
mailing reports, notices, prospectuses, and proxy material to shareholders;
annual shareholders' meeting expenses; and brokerage commissions and other
costs associated with the purchase and sale of portfolio securities. The
Advisor has agreed to reimburse the Fund for all expenses (excluding
brokerage, taxes, interest, and all or a portion of distribution and certain
other expenses, to the extent allowed or required by state or federal law or
regulation exceeding the most restrictive expense limitation in those states
where the Fund's shares are qualified for sale.
Under the Contract, the Advisor provides investment advice to the
Fund and oversees its day-to-day operations, subject to direction and control
by the Fund's Board of Directors. For its services, the Advisor receives a
base annual fee of 1.50% of the Fund's average daily net assets. For the
fiscal 1996 period (since inception, April 12, 1995, through March 31, 1996),
the Fund paid advisory fees of $68,590 and in fiscal year 1997 the Fund paid
advisory fees of $119,720. The Advisor may voluntarily defer its fees or
assume expenses of the Fund. During 1996 fiscal period, the Advisor reimbursed
$56,484. For the 1997 fiscal period, the Advisor reimbursed $106,380.
Any fees the current payment of which is waived by the Advisor and
any expenses paid on behalf of or reimbursed to the Fund by the Advisor
through March 31, 1996, may be recaptured by the Advisor from the Fund during
the two years beginning on April 1, 1996, and ending on March 31, 1998; and
such recapture shall only be made to the extent that it does not result in
the Fund aggregate expenses exceeding state expense limit at the time the
original amount was waived. Each year's current advisory fees (incurred in
that year) will be paid in full before any recapture for a prior year is
applied. Recapture then will be applied beginning with the most recent year
first.
The Fund's Subadvisors are New Africa Advisers, Inc. ("NAA"), and
Calvert Asset Management Company, Inc. Pursuant to Investment Advisory
Agreements with the Advisor, the Subadvisors determine investment selections
for the Fund. For its services, NAA receives a base annual fee from the
Advisor of 0.755% of the Fund's average daily net assets under management.
CAMCO receives a base annual fee of 0.495%. In addition, a consulting fee of
0.10% is paid to Sloan Holdings, Inc. See the Prospectus for an explanation of
the Performance Fee.
Calvert Administrative Services Company ("CASC"), an affiliate of the
Advisor, has been retained by the Fund to provide certain administrative
services necessary to the conduct of its affairs, including the preparation of
regulatory filings and shareholder reports, the daily determination of its net
asset value per share and dividends, and the maintenance of its portfolio and
general accounting records. For providing such services, CASC receives an
annual fee from the Fund of 0.25% of the Fund's average daily net assets. For
the fiscal 1996 period (since inception, April 12, 1995, through March 31,
1996), the Fund paid administrative services fees of $11,432. CASC waived a
portion of its fee during that period. For fiscal year 1997, CASC received
administrative services fees of $19,953.
METHOD OF DISTRIBUTION
The Fund has entered into an agreement with Calvert Distributors,
Inc. (CDI) whereby CDI, acting as principal underwriter for the Fund, makes a
continuous offering of the Fund's securities on a "best efforts" basis. Under
the terms of the agreement, CDI is entitled to receive reimbursement of
distribution expenses pursuant to the Distribution Plan (see below). CDI also
receives the portion of the sales charge in excess of the dealer reallowance.
For the period since inception, April 12, 1995, through March 31, 1996, CDI
received net sales charges of $17,193. For fiscal year 1997, CDI received net
sales charges of $9,725.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940, the
Fund has adopted Distribution Plans (the "Plans") which permits the Fund to
pay certain expenses associated with the distribution of its shares. Such
expenses may not exceed, on an annual basis, 0.75% of the Fund's average daily
net assets. For fiscal year 1997, the Fund Paid Distribution Plan expenses of
$59,860. Of the distribution expenses paid in fiscal 1996 and 1997, $26,963
and $39,425 was used for the printing and mailing of prospectuses and sales
materials to investors (other than current shareholders), and the remainder
was used for advertising.
The Fund's Distribution Plan was 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 Plan or in any
agreements related to the Plan. 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 Plan, the Directors
considered various factors including the amount of the distribution expenses.
The Directors determined that there is a reasonable likelihood that the Plan
will benefit the Fund and its shareholders.
The Plan may be terminated by vote of a majority of the
non-interested Directors who have no direct or indirect financial interest in
the Plans, or by vote of a majority of the outstanding shares of the Fund. Any
change in the Plan that would materially increase the distribution cost to the
Fund requires approval of the shareholders of the affected class; otherwise,
the Plan may be amended by the Directors, including a majority of the
non-interested Directors as described above. The Plan 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 Plan or interested persons of any such party and who have no direct or
indirect financial interest in the Plan, and (ii) the vote of a majority of
the entire Board of Directors.
Apart from the Plan, the Advisor and CDI, at their own expense, may
incur costs and pay expenses associated with the distribution of shares of the
Fund.
Certain broker-dealers, and/or other persons may receive compensation
from the investment advisor, underwriter, or their affiliates for the sale and
distribution of the securities or for services to the Fund. Such compensation
may include additional compensation based on assets held through that firm
beyond the regularly scheduled rates, and finder's fee payments to firms whose
representatives are responsible for soliciting a new account where the
accountholder does not choose to purchase through that firm.
TRANSFER AND SHAREHOLDER SERVICING AGENT
Calvert Shareholder Services, Inc., a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, has been retained by the Fund to act as transfer
agent, dividend disbursing agent and shareholder servicing agent. These
responsibilities include: responding to shareholder inquiries and instructions
concerning their accounts; crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions;
daily updating of shareholder accounts to reflect declaration and payment of
dividends; and preparing and distributing semi-annual statements to
shareholders regarding their accounts. The Fund will pay Calvert Shareholder
Services, Inc. fee based on the number of accounts and transactions. For the
period since inception, April 12, 1995, through March 31, 1996, the Fund paid
Calvert Shareholder Services, Inc. fees of $12,594. For fiscal year 1997, the
Fund paid Calvert Shareholder Services, Inc. fees of $17,690.
FUND TRANSACTIONS
Fund transactions are undertaken on the basis of their desirability
from an investment standpoint. Investment decisions and the choice of brokers
and dealers are made by the Fund's Advisor and Advisor under the direction and
supervision of the Fund's Board of Directors.
Broker-dealers who execute portfolio transactions on behalf of the
Fund are selected on the basis of their professional capability and the value
and quality of their services. The Fund may pay brokerage commissions to
broker-dealers who provide the Fund with statistical, research, or other
information and services. Although any statistical research or other
information and services provided by such broker-dealers may be useful to the
Advisor and the Advisor, the dollar value of such information and services is
generally indeterminable, and its availability or receipt does not serve to
materially reduce the Advisor's or Advisor's normal research activities or
expenses.
For the period since inception, April 12, 1995, through March 31,
1996, brokerage commissions totaling $3,797 were paid by the Fund. In fiscal
year 1997, brokerage commissions totaling $1,559 were paid by the Fund. No
commissions were paid to any officers or directors of the Fund or any of its
affiliates.
The Advisor and Advisor may also execute portfolio transactions with
or through broker-dealers who have sold shares of the Fund. However, such
sales will not be a qualifying or disqualifying factor in a broker-dealer's
selection nor will the selection of any broker-dealer be based on the volume
of Fund shares sold.
Depending upon market conditions, portfolio turnover, generally
defined as the lesser of annual sales or purchases of portfolio securities
divided by the average monthly value of the Fund's portfolio securities
(excluding from both the numerator and the denominator all securities whose
maturities or expiration dates as of the date of acquisition are one year or
less), expressed as a percentage, is under normal circumstances expected not
to exceed 100%. For the period since inception, April 12, 1995, through March
31, 1996, the portfolio turnover rate of the Fund was 6%. For the period
through March 31, 1997, the portfolio turnover rate of the Fund was 23%.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers & Lybrand, L.L.P. has been selected by the Board of Directors
to serve as independent accountants for fiscal year 1998. 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
GENERAL INFORMATION
The Fund was organized as a Maryland Corporation, Calvert New World
Fund, Inc., on December 22, 1994.
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 one class of
shares, Class A. Upon any liquidation of the Fund, shareholders are entitled
to share pro rata in the net assets belonging to that series available for
distribution.
The Fund will send its shareholders confirmations of purchase and
redemption transactions, as well as periodic transaction statements and
unaudited semi-annual and audited annual financial statements of the Fund's
investment securities, assets and liabilities, income and expenses, and
changes in net assets.
The Prospectus and this Statement of Additional Information do not
contain all the information in the Fund's registration statement. The
registration statement is on file with the Securities and Exchange Commission
and is available to the public.
FINANCIAL STATEMENTS
The Fund's audited financial statements included in its Annual Report
to Shareholders dated March 31, 1997, are expressly incorporated by reference
and made a part of this Statement of Additional Information. A copy of the
Annual Report may be obtained free of charge by writing or calling the Fund.
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 higher rated categories.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay interest
and repay principal. The higher the degree of speculation, the lower the
rating. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
C/C: This rating is only for income bonds on which no interest is
being paid.
D: Debt in default; payment of interest and/or principal is in
arrears.
Commercial Paper:
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.
<PAGE>
LETTER OF INTENT
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the Letter
of Intent option on my Fund Account Application Form, I agree to be bound by
the terms and conditions applicable to Letters of Intent appearing in the
Prospectus and the Statement of Additional Information for the Fund and the
provisions described below as they may be amended from time to time by the
Fund. Such amendments will apply automatically to existing Letters of Intent.
I intend to invest in the shares of: _____________ (Fund or Portfolio
name*) during the thirteen (13) month period from the date of my first
purchase pursuant to this Letter (which cannot be more than ninety (90) days
prior to the date of this Letter or my Fund Account Application Form,
whichever is applicable), an aggregate amount (excluding any reinvestments of
distributions) of at least fifty thousand dollars ($50,000) which, together
with my current holdings of the Fund (at public offering price on date of this
Letter or my Fund Account Application Form, whichever is applicable), will
equal or exceed the amount checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms of
escrow, to which I hereby agree, each purchase occurring after the date of
this Letter will be made at the public offering price applicable to a single
transaction of the dollar amount specified above, as described in the Fund's
prospectus. No portion of the sales charge imposed on purchases made prior to
the date of this Letter will be refunded.
I am making no commitment to purchase shares, but if my purchases
within thirteen months from the date of my first purchase do not aggregate the
minimum amount specified above, I will pay the increased amount of sales
charges prescribed in the terms of escrow described below. I understand that
4.75% of the minimum dollar amount specified above will be held in escrow in
the form of shares (computed to the nearest full share). These shares will be
held subject to the terms of escrow described below.
From the initial purchase (or subsequent purchases if necessary),
4.75% of the dollar amount specified in this Letter shall be held in escrow in
shares of the Fund by the Fund's transfer agent. For example, if the minimum
amount specified under the Letter is $50,000, the escrow shall be shares
valued in the amount of $2,375 (computed at the public offering price adjusted
for a $50,000 purchase). All dividends and any capital gains distribution on
the escrowed shares will be credited to my account.
If the total minimum investment specified under the Letter is
completed within a thirteen month period, escrowed shares will be promptly
released to me. However, shares disposed of prior to completion of the
purchase requirement under the Letter will be deducted from the amount
required to complete the investment commitment.
Upon expiration of this Letter, the total purchases pursuant to the
Letter are less than the amount specified in the Letter as the intended
aggregate purchases, Calvert Distributors, Inc. ("CDI") will bill me for an
amount equal to the difference between the lower load I paid and the dollar
amount of sales charges which I would have paid if the total amount purchased
had been made at a single time. If not paid by the investor within 20 days,
CDI will debit the difference from my account. Full shares, if any, remaining
in escrow after the aforementioned adjustment will be released and, upon
request, remitted to me.
I irrevocably constitute and appoint CDI as my attorney-in-fact, with
full power of substitution, to surrender for redemption any or all escrowed
shares on the books of the Fund. This power of attorney is coupled with an
interest.
The commission allowed by Calvert Distributors, Inc. to the
broker-dealer named herein shall be at the rate applicable to the minimum
amount of my specified intended purchases.
The Letter may be revised upward by me at any time during the
thirteen-month period, and such a revision will be treated as a new Letter,
except that the thirteen-month period during which the purchase must be made
will remain unchanged and there will be no retroactive reduction of the sales
charges paid on prior purchases.
In determining the total amount of purchases made hereunder, shares
disposed of prior to termination of this Letter will be deducted. My
broker-dealer shall refer to this Letter of Intent in placing any future
purchase orders for me while this Letter is in effect.
Dealer
Name of Investor(s)
By
Authorized Signer
Address
Date
Signature of Investor(s)
Date
Signature of Investor(s)
*"Fund" in this Letter of Intent shall refer to the Fund or Portfolio, as the
case may be, here indicated.
