UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-3416
THE CALVERT FUND
(Exact name of registrant as specified in charter)
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Address of Principal Executive Offices)
William M. Tartikoff, Esq.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Name and Address of Agent for Service)
Registrant's telephone number, including area code: (301) 951-4800
Date of fiscal year end: September 30
Date of reporting period: Six months ended March 31, 2008
Item 1. Report to Stockholders.
<PAGE>
Calvert
Investments that make a difference®
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March 31, 2008
Semi-Annual Report
Calvert New Vision
Small Cap Fund
Calvert
Investments that make a difference®
A UNIFI Company
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Table of Contents
President's Letter
1
Social Update
4
Portfolio Management Discussion
6
Shareholder Expense Example
10
Statement of Net Assets
12
Statement of Operations
17
Statements of Changes in Net Assets
18
Notes to Financial Statements
19
Financial Highlights
24
Explanation of Financial Tables
29
Proxy Voting and Availability of Quarterly Portfolio Holdings
31
Basis for Board's Approval of Investment Advisory Contracts
31
Dear Shareholder:
The six months ended March 31, 2008 featured deep turmoil in the financial markets in response to the subprime mortgage crisis, with steep declines in the equity markets. Investors continued to be spooked by the credit crunch, worries about an economic slowdown or recession, and oil prices that exceeded $110 per barrel. Against this backdrop, Calvert's socially responsible equity portfolio managers continued to face significant market headwinds. As oil prices remained high, energy stocks have fared well and persistent problems in the Financial sector continued to hamper stock performance in that arena. Working in our favor, however, was a flight to quality as investors favored stocks with dependable earnings and dividends.
By the numbers, the broad-market equity benchmark Standard & Poor's 500 Index returned -12.46% from October 1, 2007 through March 31, 2008. The Russell 1000 Index of large-cap stocks returned -12.41% over the six months, while the small-cap benchmark Russell 2000 Index posted a -14.02% return. Stocks outside the U.S. fared slightly better during the reporting period but still lost significant ground. The Citigroup/S&P World ex-U.S. Extended Market Index, a benchmark for foreign stocks, returned -11.24%.
Fed Takes Aggressive Action
The Federal Reserve has taken a nearly unprecedented series of actions to stabilize the financial markets and reassure investors. The Fed moved aggressively to add liquidity to the financial system and reduced its target federal funds rate by a total of 2.5 percentage points. Even more significant than the central bank's loosening of monetary policy were its actions in March, when it orchestrated a buyout of investment firm Bear Stearns to prevent it from abruptly going out of business. Although some say that the Fed essentially bailed out Bear Stearns and other financial firms from their overly aggressive risk-taking, the Fed's actions did prove effective, stabilizing the financial system and providing some confidence to investors.
Flight to Quality
Amid the market turbulence, no style of equity investment was truly dominant during the six-month period. In the fourth quarter of 2007, growth stocks generally outperformed value shares in a continuation of a trend that lasted for most of 2007. However, in the first quarter of 2008 that trend reversed and value stocks started to perform better than growth companies.
In terms of sector performance during the reporting period, most stock sectors lost value. Financial stocks had some of the most precipitous declines as investors remain extremely wary about the subprime mortgage exposures of banks and other financial companies. However, some stocks in other market sectors may be underpriced in light of their long-term value. In recent years, investors had been irrationally paying as much for riskier stocks as for higher-quality stocks in the hopes of earning a little more return. Now, in this more cautious environment, we see opportunities for the higher-quality stocks largely favored in our equity portfolios to shine.
Climate Change, Sudan Inroads
Shareholder advocacy means using our position as an owner in a company to push for improved corporate performance. Calvert routinely engages companies, policymakers, and other investors on critical governance and sustainability challenges. For 2008, Calvert is off to a strong start for the proxy voting season. To date, we have filed 25 resolutions and co-filed another four resolutions on our core issues (e.g., climate change, diversity, and disclosure) as well as the Sudan, privacy rights, and product safety. Overall, of the 29 submitted, 16 have thus far been withdrawn after the company involved agreed to address our concerns. For more information on the proxy votes, please visit www.calvert.com, select the "Socially Responsible Investing" tab and click on "Shareholder Advocacy."
Sudan Divestment
Calvert's continued partnership with the Sudan Divestment Task Force and the Save Darfur Coalition takes a variety of approaches to working to end this humanitarian crisis. As part of a coalition, we have filed shareholder resolutions calling on six major Wall Street firms that are among the largest U.S. shareholders of foreign oil companies to push Sudan to end the violence in Darfur.
In addition, Calvert was the only investment firm to submit a comment letter to the Securities and Exchange Commission (SEC) during the period it considered implementing regulations related to mutual funds' divestment from the Sudan. The SEC rule that went into effect on April 30 included "safe harbor" legal protections for mutual funds under the Sudan Accountability and Divestment Act that President Bush signed into law on December 31. Calvert lobbied the SEC to require strong disclosure requirements for mutual funds regarding any continued ownership of companies with operations in the Sudan and links to the country's government, which the SEC adopted in its rule.
In our March 14 comment letter, Calvert assistant vice president and associate general counsel Ivy Wafford Duke wrote "...it is the right of investors to ensure that their investments do not support genocide and do support peace and security in the Sudan. Full and complete disclosure by divesting companies helps advance this effort." We were gratified that the SEC incorporated this and several other provisions advanced by Calvert into its new rule.
Maintain a Long-Term View
In tough markets, investors should pay close attention to corporate fundamentals and sustainable business practices. The type of bottom-up, fundamental analysis that many of Calvert's portfolio managers conduct tends to favor companies that exhibit sustainable business practices and long-term financial performance.
The financial markets will probably continue to be volatile for at least the next few months, so it's important that you maintain a long-term view in terms of your investments and not get swept up in the day-to-day fluctuations in the market. Your financial advisor is an excellent source of guidance, so please continue to consult with him or her about your investment plan.
As always, thank you for your continued confidence in Calvert's investment products.
Sincerely,
Barbara J. Krumsiek
President and CEO
Calvert Group, Ltd.
April 2008
Social Update
from the Calvert Social Research Department
The work of Calvert's Social Research Department and our unique investment programs continue to demonstrate Calvert's leadership in socially responsible investment practices. This Social Update highlights key initiatives and involvement for the six-month reporting period ended March 31, 2008.
Renewable Energy
Last fall, Calvert collaborated with the Investor Network on Climate Risk policy working group (coordinated by Ceres) to create legislation that will establish incentives to improve energy efficiency, accelerate renewable energy, and boost vehicle fuel economy standards. In February, we also testified at the Maryland House of Delegates in support of its Global Warming Solutions Act. And in March, we participated in a "Policy Tour" organized by the Clean Technology and Sustainable Industries Organization to impress upon legislators the importance of policies that will encourage the growth of a clean technology and sustainable energy industry in the U.S.
Indigenous Peoples' Rights
To encourage the participation of Native American leaders in Indigenous Peoples' rights advocacy activities, Calvert co-sponsored a one-day pre-conference event at the annual SRI in the Rockies conference called "Native American Leaders for SRI" with the Indigenous Peoples Task Force of the Social Investment Forum. The unprecedented American Indian engagement at the event brought together leaders from 13 American Indian Tribes with socially responsible investment practitioners (money managers, community investors, and social researchers).
Subprime Lending
Calvert has developed an advocacy plan in response to the subprime mortgage crisis to persuade mortgage lenders across the industry to adopt transparent, responsible lending policies--which we believe will reduce the number of risky loans to borrowers who are the least able to repay.
Special Equities
A modest but important portion of certain Funds is allocated to venture capital investment in innovative companies that are developing for-profit products or services that address important social or environmental issues. We recently increased our investment in groSolar (Global Resource Options, Inc.), a Vermont-based installer of solar cells and panels. Since our first purchase, the company acquired Energy Outfitters in December 2006, and now has a broad solar distribution network in North America.1
Given the success of our investment in the China Environment Fund II (2004), we have invested with the same team for the China Environment Fund III.1 Both funds have the same core philosophy and approach, but the holdings vary because of changing market conditions and events. Calvert was the only U.S. investor to participate in the China Environment Fund II, and its success has encouraged more interest in cleantech companies within China.
Community Investments
Many of our Funds participate in Calvert's High Social Impact Investment (HSII) program, which is administered through the Calvert Social Investment Foundation. This community investment program may allocate up to 3% of Fund assets at below-market interest rates to investments that provide economic opportunity for struggling populations.2
During the reporting period, the Calvert Social Investment Foundation made its first loan in the local currency to microfinance organization EDPYME Edyficar in Peru. This enables us to make the loan without passing on the risk that the dollar will be devalued, effectively reducing the amount of the loan.
Given the current economic environment in the U.S., it's also notable that the Foundation's Affordable Housing Portfolio continues to provide affordable financing and homes to low-income communities while avoiding the delinquencies and foreclosure rates common among conventional mortgage banking providers. The Portfolio currently holds $20 million in loans to 36 successful, nationally recognized nonprofit housing developers and lenders.
We appreciate your investment in Calvert mutual funds and will continue to manage your investments with an eye on both financial performance and corporate integrity.
1. As of March 31, 2008, groSolar (Global Resource Options, Inc.) was 0.26% of CSIF Equity Portfolio; China Environment Fund II (2004) was 0.01% of CSIF Equity Portfolio and 0.02% of Calvert World Values International Equity Fund; and China Environment Fund III was 0.01% of Calvert Large Cap Growth Fund.
2. As of March 31, 2008, Calvert Social Investment Foundation Community Investment Notes represented the following percentages of Fund net assets: Calvert Capital Accumulation Fund, 1.19%; Calvert World Values International Equity Fund, 0.67%; Calvert New Vision Small Cap Fund, 1.07%; and Calvert Large Cap Growth Fund, 0.20%. All holdings are subject to change without notice. The Calvert Social Investment Foundation is a 501(c)(3) nonprofit organization. The Foundation's Community Investment Note Program is not a mutual fund and should not be confused with any Calvert Group-sponsored-investment product.
Portfolio Statistics
March 31, 2008
Investment Performance
(total return at NAV*)
| 6 Months
ended
3/31/08 | 12 Months
ended
3/31/08 |
Class A | (18.17%) | (14.08%) |
Class B | (18.54%) | (14.95%) |
Class C | (18.45%) | (14.79%) |
Class I | (17.84%) | (13.38%) |
Russell 2000 Index** | (14.02%) | (13.00%) |
Lipper Small-Cap Core Funds Avg. | (14.98%) | (13.30%) |
| | | |
Ten Largest Stock Holdings | | |
| | % of Net Assets | |
Watson Wyatt Worldwide, Inc. | 5.2% | |
priceline.com, Inc. | 4.4% | |
Robbins & Myers, Inc. | 3.4% | |
Calgon Carbon Corp. | 3.2% | |
Amedisys, Inc. | 3.0% | |
Applied Industrial Technologies, Inc. | 3.0% | |
Hornbeck Offshore Services, Inc. | 2.6% | |
RLI Corp. | 2.4% | |
Valmont Industries, Inc. | 2.3% | |
AMERIGROUP Corp. | 2.2% | |
Total | 31.7% | |
| | | |
Economic Sectors | | |
| | % of Total
Investments | |
Consumer Discretionary | 13.5% | |
Consumer Staples | 2.2% | |
Energy | 4.5% | |
Exchange Traded Funds | 0.3% | |
Financials | 17.0% | |
Health Care | 11.0% | |
Industrials | 26.0% | |
Information Technology | 12.8% | |
Materials | 7.3% | |
Telecommunication Services | 0.9% | |
U.S. Government Agency Obligations | 2.0% | |
Utilities | 2.5% | |
Total | 100% | |
Portfolio Management Discussion
John Montgomery
of Bridgeway Capital Management
Performance
For the six-month reporting period ended March 31, 2008, Calvert New Vision Small Cap Fund Class A shares (at NAV) returned -18.17% versus the Russell 2000® Index, which returned -14.02%. The Fund's underperformance was primarily due to a combination of stock selection and sector weighting.
Investment Climate
What began with a summer of subprime mortgage woes became a fall and winter of increasingly cold, hard market declines. This six-month period was plagued by talks of recession, the continued credit crisis, and the impending collapse of investment giant Bear Stearns--which led the Federal Reserve to orchestrate the firm's sale to JPMorgan Chase. All of these factors led to heavy volatility in the stock market, which ultimately ended the period well below where it started. In the end, stocks from large to small, and growth to value, declined--with growth stocks feeling the most pain,
especially during the first three months of 2008.
*Investment performance/return at NAV does not reflect the deduction of the Fund's maximum 4.75% front-end sales charge or any deferred sales charge.
**Source: Lipper Analytical Services, Inc.
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
(with max. load)
| | Class A Shares |
One year | (18.17%) |
Five year | 4.10% |
Ten year | 0.80% |
| | |
| | Class B Shares |
One year | (19.21%) |
Five year | 3.98% |
Ten year | 0.30% |
| | |
| | Class C Shares |
One year | (15.64%) |
Five year | 4.28% |
Ten year | 0.46% |
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
| | Class I Shares* |
One year | (13.38%) |
Five year | 6.34% |
Since inception | 5.58% |
(2/26/99) | |
Performance Comparison
Comparison of change in value of $10,000 investment.
*Note Regarding Class I Shares Total Returns: There were times during the reporting period when there were no shareholders in Class I. For purposes of reporting Average Annual Total Return, Class A performance at NAV (i.e. does not reflect deduction of the Class A front-end sales charge) is used during these periods in which there were no shareholders in Class I. For purposes of this Average Annual Total Return, the Class A performance at NAV was used during the periods January 18, 2002 through January 30, 2003 and March 12, 2003 through July 31, 2003.
Average annual total returns in the Portfolio Statistics above and the Performance Comparison line graph are with maximum load deducted -- they assume reinvestment of dividends and reflect the deduction of the Fund's maximum 4.75% front-end sales charge, or deferred sales charge as applicable. No sales charge has been applied to the index used for comparison. However, the Lipper average does reflect the deduction of the category's average front-end sales charge. The value of an investment in Class A & C shares is plotted in the line graph. The value of an investment in another class of shares would be different. The graph and table do not reflect the deduction of taxes that a shareholder would pay on the Fund's distributions or the redemption of Fund shares. Past performance is no guarantee of future results. New subadvisor assumed management of the Fund effective March 2007, and previously in June 2005.
**Source: Lipper Analytical Services, Inc.
Based on Morningstar data, the performance of our investment style, small-cap core, varied during the period. In the fourth quarter of 2007, it had the worst performance of any market segment. But in the first quarter of 2008, growth-style stocks in all capitalizations finished at the bottom.
The Fund's benchmark, the Russell 2000 Index, contains both value and growth stocks from the general small-cap universe. Therefore, the Fund's recent tendency toward owning more "growthy" stocks hurt our relative performance.
Portfolio Strategy
What Worked Well
An underweight to Industrials and Utilities, coupled with good stock selection in Consumer Staples and Industrials, helped performance. True to the design of our investment management process, the smaller, more aggressive, active component of the portfolio underperformed as the market declined, while the larger, low-turnover, core component provided slightly more stability during the market turmoil.
Our best performers for the period represented a variety of industries. At the top was lighting manufacturer Genlyte Group, which climbed 46.8%, followed by FTI Consulting, which was up 40.7%.1 Human resources consultancy Watson Wyatt Worldwide increased 26.3% and is now our single largest holding. Other strong performers included Priceline.com and Datascope, a diversified medical device company.
What Didn't Work Well
Poor stock selections in Consumer Discretionary and Information Technology--as well as an underweighting to the latter--hurt overall Fund performance. We liquidated our position in four of the stocks on the 10 worst performers list during the period. Disappointing domestic sales drove mattress and pillow company Tempur-Pedic International down 69.2%. Other poor performers included technology firm Anadigics, clinical software provider Allscripts Healthcare Solutions, trendy footwear manufacturer Crocs, and DealerTrack Holdings, which creates online data solutions for the auto industry.
Outlook
We are disappointed that our first full year as sub-advisor for the New Vision Small Cap Fund ended with a return that trailed the Index by one percentage point. However, we feel confident that we can improve the longer-term performance record of this Fund by continuing to employ the same disciplined approach to investment management.
April 2008
1. All returns shown for individual holdings reflect that part of the reporting period the holdings were held.
As of March 31, 2008, the following companies represented the following percentages of Fund net assets: Genlyte 0%, FTI Consulting 1.96%, Watson Wyatt 5.22%, Priceline.com 4.40%, Datascope 1.20%, Tempur-Pedic 0.46%%, Anadigics 0.59%, Allscripts Healthcare Solutions 0%, CROCS 1.42%, and DealerTrack Holdings 0%. All holdings are subject to change without notice.
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges and redemption fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2007 to March 31, 2008).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
10/1/07 | Ending Account
Value
3/31/08 | Expenses Paid
During Period*
10/1/07 - 3/31/08 |
Class A | | | |
Actual | $1,000.00 | $818.80 | $7.96 |
Hypothetical | $1,000.00 | $1,016.24 | $8.83 |
(5% return per year before expenses) | | | |
Class B | | | |
Actual | $1,000.00 | $814.60 | $12.55 |
Hypothetical | $1,000.00 | $1,011.16 | $13.91 |
(5% return per year before expenses) | | | |
Class C | | | |
Actual | $1,000.00 | $815.50 | $11.80 |
Hypothetical | $1,000.00 | $1,012.00 | $13.08 |
(5% return per year before expenses) | | | |
Class I | | | |
Actual | $1,000.00 | $822.20 | $4.19 |
Hypothetical | $1,000.00 | $1,020.40 | $4.65 |
(5% return per year before expenses) | | | |
* Expenses are equal to the Fund's annualized expense ratio of 1.75%, 2.77%, 2.60%, and 0.92% for Class A, Class B, Class C, and Class I, respectively, multiplied by the average account value over the period, multiplied by 183/366.
Statement of Net Assets
March 31, 2008
Equity Securities - 97.9% | | Shares | Value | |
Biotechnology - 2.1% | | | | |
Alexion Pharmaceuticals, Inc.* | | 19,700 | $1,168,210 | |
OSI Pharmaceuticals, Inc.* | | 28,500 | 1,065,615 | |
| | | | 2,233,825 | |
| | | | | |
Capital Markets - 5.6% | | | | |
Greenhill & Co., Inc. | | 24,500 | 1,704,220 | |
optionsXpress Holdings, Inc. | | 110,850 | 2,295,704 | |
TradeStation Group, Inc.* | | 233,952 | 1,993,271 | |
| | | | 5,993,195 | |
| | | | | |
Chemicals - 4.3% | | | | |
Calgon Carbon Corp.* | | 222,700 | 3,351,635 | |
H.B. Fuller Co. | | 60,100 | 1,226,641 | |
| | | | 4,578,276 | |
| | | | | |
Commercial Services & Supplies - 9.2% | | | | |
FTI Consulting, Inc.* | | 29,300 | 2,081,472 | |
Layne Christensen Co.* | | 31,800 | 1,113,636 | |
School Specialty, Inc.* | | 34,100 | 1,075,514 | |
Watson Wyatt Worldwide, Inc. | | 97,855 | 5,553,271 | |
| | | | 9,823,893 | |
| | | | | |
Communications Equipment - 2.9% | | | | |
Comtech Telecommunications Corp.* | | 27,000 | 1,053,000 | |
Tekelec* | | 159,900 | 1,990,755 | |
| | | | 3,043,755 | |
| | | | | |
Computers & Peripherals - 0.3% | | | | |
Novatel Wireless, Inc.* | | 35,000 | 338,800 | |
| | | | | |
Construction & Engineering - 1.4% | | | | |
Perini Corp.* | | 41,200 | 1,492,676 | |
| | | | | |
Construction Materials - 1.1% | | | | |
Headwaters, Inc.* | | 87,100 | 1,148,849 | |
| | | | | |
Consumer Finance - 1.9% | | | | |
World Acceptance Corp.* | | 63,360 | 2,018,016 | |
| | | | | |
Diversified Consumer Services - 3.1% | | | | |
Bright Horizons Family Solutions, Inc.* | | 33,715 | 1,451,094 | |
Strayer Education, Inc. | | 12,100 | 1,845,250 | |
| | | | 3,296,344 | |
| | | | | |
Diversified Financial Services - 2.1% | | | | |
Portfolio Recovery Associates, Inc. | | 52,045 | 2,232,210 | |
| | | | | |
Equity Securities - Cont'd | | Shares | Value | |
Diversified Telecommunication Services - 0.9% | | | | |
Shenandoah Telecom Co. | | 62,800 | $931,952 | |
| | | | | |
Electrical Equipment - 0.9% | | | | |
Woodward Governor Co. | | 34,800 | 929,856 | |
| | | | | |
Electronic Equipment & Instruments - 2.8% | | | | |
Multi-Fineline Electronix, Inc.* | | 46,400 | 870,928 | |
PC Connection, Inc.* | | 150,200 | 1,189,584 | |
ScanSource, Inc.* | | 25,800 | 933,702 | |
| | | | 2,994,214 | |
| | | | | |
Energy Equipment & Services - 4.6% | | | | |
Hornbeck Offshore Services, Inc.* | | 60,300 | 2,753,901 | |
Superior Energy Services, Inc.* | | 53,420 | 2,116,500 | |
| | | | 4,870,401 | |
| | | | | |
Food Products - 1.2% | | | | |
Flowers Foods, Inc. | | 52,050 | 1,288,238 | |
| | | | | |
Gas Utilities - 2.5% | | | | |
New Jersey Resources Corp. | | 45,150 | 1,401,908 | |
WGL Holdings, Inc. | | 40,600 | 1,301,636 | |
| | | | 2,703,544 | |
| | | | | |
Health Care Equipment & Supplies - 2.4% | | | | |
Datascope Corp. | | 30,800 | 1,276,044 | |
Meridian Bioscience, Inc. | | 39,500 | 1,320,485 | |
| | | | 2,596,529 | |
| | | | | |
Health Care Providers & Services - 5.6% | | | | |
Amedisys, Inc.* | | 81,819 | 3,218,759 | |
AMERIGROUP Corp.* | | 86,385 | 2,360,902 | |
RehabCare Group, Inc.* | | 26,800 | 402,000 | |
| | | | 5,981,661 | |
| | | | | |
Health Care Technology - 1.0% | | | | |
Allscripts Healthcare Solutions, Inc.* | | 102,203 | 1,054,735 | |
| | | | | |
Household Durables - 0.5% | | | | |
Tempur-Pedic International, Inc. | | 44,600 | 490,600 | |
| | | | | |
Insurance - 5.4% | | | | |
Amerisafe, Inc.* | | 74,900 | 946,736 | |
HCC Insurance Holdings, Inc. | | 50,175 | 1,138,471 | |
Philadelphia Consolidated Holding Corp.* | | 35,366 | 1,138,785 | |
RLI Corp. | | 51,800 | 2,567,726 | |
| | | | 5,791,718 | |
| | | | | |
Internet & Catalog Retail - 6.4% | | | | |
NetFlix, Inc.* | | 35,200 | 1,219,680 | |
PetMed Express, Inc.* | | 76,800 | 851,712 | |
priceline.com, Inc.* | | 38,712 | 4,678,732 | |
| | | | 6,750,124 | |
| | | | | |
Equity Securities - Cont'd | | Shares | Value | |
Internet Software & Services - 1.0% | | | | |
Interwoven, Inc.* | | 98,600 | $1,053,048 | |
| | | | | |
IT Services - 1.2% | | | | |
MAXIMUS, Inc. | | 33,900 | 1,244,469 | |
| | | | | |
Leisure Equipment & Products - 1.1% | | | | |
Callaway Golf Co. | | 82,500 | 1,211,100 | |
| | | | | |
Machinery - 10.0% | | | | |
Actuant Corp. | | 60,000 | 1,812,600 | |
Columbus McKinnon Corp.* | | 24,000 | 743,520 | |
Robbins & Myers, Inc. | | 112,302 | 3,666,660 | |
Toro Co. | | 49,755 | 2,059,360 | |
Valmont Industries, Inc. | | 27,300 | 2,399,397 | |
| | | | 10,681,537 | |
| | | | | |
Marine - 0.9% | | | | |
American Commercial Lines, Inc.* | | 59,900 | 946,420 | |
| | | | | |
Metals & Mining - 2.0% | | | | |
Compass Minerals International, Inc. | | 36,600 | 2,158,668 | |
| | | | | |
Personal Products - 1.0% | | | | |
NBTY, Inc.* | | 35,715 | 1,069,664 | |
| | | | | |
Semiconductors & Semiconductor Equipment - 1.7% | | | | |
Amkor Technology, Inc.* | | 107,000 | 1,144,900 | |
Anadigics, Inc.* | | 96,400 | 632,384 | |
| | | | 1,777,284 | |
| | | | | |
Software - 3.2% | | | | |
MICROS Systems, Inc.* | | 62,630 | 2,108,126 | |
SPSS, Inc.* | | 33,700 | 1,306,886 | |
| | | | 3,415,012 | |
| | | | | |
Specialty Retail - 1.3% | | | | |
Gymboree Corp.* | | 34,100 | 1,359,908 | |
| | | | | |
Textiles, Apparel & Luxury Goods - 1.4% | | | | |
Crocs, Inc.* | | 86,620 | 1,513,251 | |
| | | | | |
Thrifts & Mortgage Finance - 1.0% | | | | |
Trustco Bank Corp. NY | | 114,993 | 1,022,288 | |
| | | | | |
Trading Companies & Distributors - 3.9% | | | | |
Applied Industrial Technologies, Inc. | | 107,400 | 3,210,186 | |
WESCO International, Inc.* | | 25,405 | 927,028 | |
| | | | 4,137,214 | |
| | | | | |
Total Equity Securities (Cost $103,578,394) | | | 104,173,274 | |
| | | | | |
Exchange Traded Funds - 0.3% | | Shares | Value | |
iShares Russell 2000 Index Fund | | 4,410 | $302,129 | |
| | | | | |
Total Exchange Traded Funds (Cost $348,390) | | | 302,129 | |
| | | | | |
| | | Principal | | |
Certificates of Deposit - 0.1% | | Amount | | |
ShoreBank, 3.00%, 2/11/09 (b)(k) | | $100,000 | 99,750 | |
| | | | | |
Total Certificates of Deposit (Cost $100,000) | | | 99,750 | |
| | | | | |
High Social Impact Investments - 1.1% | | | | |
Calvert Social Investment Foundation Notes, 3.00%, 7/1/10 (b)(i)(r) | | 1,151,905 | 1,138,071 | |
| | | | | |
Total High Social Impact Investments (Cost $1,151,905) | | | 1,138,071 | |
| | | | | |
U.S. Government Agencies and Instrumentalities - 2.1% | | | | |
Federal Home Loan Bank Discount Notes, 4/1/08 | | 2,200,000 | 2,200,000 | |
| | | | | |
Total U.S. Government Agencies and Instrumentalities | | | | |
(Cost $2,200,000) | | | 2,200,000 | |
| | | | | |
TOTAL INVESTMENTS (Cost $107,378,689) - 101.5% | | | 107,913,224 | |
Other assets and liabilities, net - (1.5%) | | | (1,573,108) | |
Net Assets - 100% | | | $106,340,116 | |
| | | | | |
Net Assets Consist of: | | | | |
Paid-in capital applicable to the following shares of beneficial interest, unlimited number of no par value shares authorized: | | | | |
Class A: 5,437,595 shares outstanding | | | $83,573,518 | |
Class B: 656,050 shares outstanding | | | 8,833,860 | |
Class C: 820,697 shares outstanding | | | 11,795,205 | |
Class I: 640,219 shares outstanding | | | 11,076,602 | |
Undistributed net investment income (loss) | | | (682,399) | |
Accumulated net realized gain (loss) on investments | | | (8,791,205) | |
Net unrealized appreciation (depreciation) on investments | | | 534,535 | |
| | | | | |
Net Assets | | | $106,340,116 | |
| | | | | |
Net Asset Value Per Share: | | | | |
Class A (based on net assets of $77,657,013) | | | $14.28 | |
Class B (based on net assets of $8,356,848) | | | $12.74 | |
Class C (based on net assets of $10,592,038) | | | $12.91 | |
Class I (based on net assets of $9,734,217) | | | $15.20 | |
| | | Acquisition | |
Restricted Securities | | Date | Cost |
Calvert Social Investment Foundation Notes, | | | |
3.00%, 7/1/10 | | 7/2/07 | $1,151,905 |
* Non-income producing security.
(b) This security was valued by the Board of Trustees. See Note A.
(i) Restricted securities represent 1.1% of net assets of the Fund.
(k) These certificates of deposit are fully insured by agencies of the federal government.
(r) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
See notes to financial statements.
Statement of Operations
Six Months Ended March 31, 2008
Net Investment Income | | | |
Investment Income: | | | |
Dividend income | | $394,101 | |
Interest income | | 60,614 | |
Total investment income | | 454,715 | |
| | | | |
Expenses: | | | |
Investment advisory fee | | 461,616 | |
Transfer agency fees and expenses | | 237,793 | |
Distribution Plan expenses: | | | |
Class A | | 112,654 | |
Class B | | 50,622 | |
Class C | | 61,163 | |
Trustees' fees and expenses | | 3,828 | |
Administrative fees | | 145,909 | |
Accounting fees | | 10,358 | |
Custodian fees | | 17,889 | |
Registration fees | | 21,955 | |
Reports to shareholders | | 44,065 | |
Professional fees | | 9,829 | |
Miscellaneous | | 6,429 | |
Total expenses | | 1,184,110 | |
Reimbursement from Advisor: | | | |
Class I | | (9,514) | |
Fees waived | | (28,120) | |
Fees paid indirectly | | (9,362) | |
Net expenses | | 1,137,114 | |
| | | | |
Net Investment Income (Loss) | | (682,399) | |
| | | | |
Realized and Unrealized Gain (Loss) On Investments | | | |
Net realized gain (loss) | | (4,409,818) | |
Change in unrealized appreciation or (depreciation) | | (19,275,100) | |
| | | | |
Net Realized and Unrealized Gain (Loss) On Investments | | (23,684,918) | |
Increase (Decrease) in Net Assets | | | |
Resulting From Operations | | ($24,367,317) | |
See notes to financial statements.
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets | | Six Months Ended
March 31,
2008 | Year Ended
September 30,
2007 | |
Operations: | | | | |
Net investment income (loss) | | ($682,399) | ($1,758,890) | |
Net realized gain (loss) | | (4,409,818) | 343,328 | |
Change in unrealized appreciation or (depreciation) | | (19,275,100) | 16,223,901 | |
| | | | | |
Increase (Decrease) in Net Assets | | | | |
Resulting From Operations | | (24,367,317) | 14,808,339 | |
| | | | | |
| | | | | |
Capital share transactions: | | | | |
Shares sold: | | | | |
Class A Shares | | 7,122,599 | 11,684,507 | |
Class B Shares | | 275,232 | 570,299 | |
Class C Shares | | 473,048 | 1,050,108 | |
Class I Shares | | 1,159,177 | 5,720,495 | |
Redemption fees: | | | | |
Class A Shares | | 757 | 1,008 | |
Class B Shares | | 86 | 10 | |
Class C Shares | | 968 | 51 | |
Class I Shares | | -- | 1 | |
Shares redeemed: | | | | |
Class A Shares | | (15,631,750) | (40,248,430) | |
Class B Shares | | (1,598,628) | (4,384,844) | |
Class C Shares | | (1,209,857) | (5,862,512) | |
Class I Shares | | (629,926) | (22,689,339) | |
Total capital share transactions | | (10,038,294) | (54,158,646) | |
| | | | | |
Total Increase (Decrease) in Net Assets | | (34,405,611) | (39,350,307) | |
| | | | | |
Net Assets | | | | |
Beginning of period | | 140,745,727 | 180,096,034 | |
End of period (including net investment loss of $682,399 and $0, respectively) | | $106,340,116 | $140,745,727 | |
| | | | | |
Capital Share Activity | | | | |
Shares sold: | | | | |
Class A Shares | | 442,916 | 689,638 | |
Class B Shares | | 19,125 | 37,588 | |
Class C Shares | | 32,775 | 68,068 | |
Class I Shares | | 67,842 | 322,227 | |
Shares redeemed: | | | | |
Class A Shares | | (962,823) | (2,389,674) | |
Class B Shares | | (112,955) | (288,163) | |
Class C Shares | | (83,301) | (381,822) | |
Class I Shares | | (37,808) | (1,291,602) | |
Total capital share activity | | (634,229) | (3,233,740) | |
See notes to financial statements.
Notes to Financial Statements
Note A -- Significant Accounting Policies
General: The Calvert New Vision Small Cap Fund (the "Fund"), a series of The Calvert Fund, is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The operation of each series is accounted for separately. The Fund offers four classes of shares of beneficial interest. Class A shares are sold with a maximum front-end sales charge of 4.75%. Class B shares are sold without a front-end sales charge. With certain exceptions, the Fund will impose a deferred sales charge at the time of redemption, depending on how long investors have owned the shares. Class C shares are sold without a front-end sales charge. With certain exceptions, the Fund will impose a deferred sales charge on shares sold within one year of purchase. Class B and Class C shares have higher levels of expenses than Class A shares. Class I shares require a minimum account balance of $1,000,000. The $1 million minimum investment may be waived for certain institutional accounts, where it i s believed to be in the best interest of the Fund and its shareholders. Class I shares have no front-end or deferred sales charge and have lower levels of expenses than Class A shares. Each class has different: (a) dividend rates, due to differences in Distribution Plan expenses and other class specific expenses, (b) exchange privileges and (c) class specific voting rights.
Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Fund uses independent pricing services approved by the Board of Trustees to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the Fund's net asset value is determined, that are expected to materially affect the value of those securities then they are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Fund may invest in securities whose resale is subjec t to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Trustees.
In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
At March 31, 2008, securities valued at $1,237,821, or 1.2% of net assets, were fair valued in good faith under the direction of the Board of Trustees.
Repurchase Agreements: The Fund may enter into repurchase agreements with recognized financial institutions or registered broker/dealers and, in all instances, holds underlying securities with a value exceeding the total repurchase price, including accrued interest. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its value and a possible loss of income or value if the counterparty fails to perform in accordance with the terms of the agreement.
Restricted Securities: The Fund may invest in securities that are subject to legal or contractual restrictions on resale. Generally, these securities may only be sold publicly upon registration under the Securities Act of 1933 or in transactions exempt from such registration. Information regarding restricted securities is included at the end of the Fund's Statement of Net Assets.
Security Transactions and Net Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Fund is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Investment income and realized and unrealized gains and losses are allocated to separate classes of shares based upon the relative net assets of each class. Expenses arising in connection with a class are charged directly to that class. Expenses common to the classes are allocated to each class in proportion to their relative net assets. Withhold ing taxes on foreign dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates.
Foreign Currency Transactions: The Fund's accounting records are maintained in U. S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are converted into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities and foreign currencies is included in the net realized and unrealized gain or loss on securities and foreign currencies.
Redemption Fees: The Fund charges a 2% redemption fee on redemptions, including exchanges, made within 30 days of purchase in the same Fund (within seven days for Class I shares). The redemption fee is paid to the Class of the Fund from which the redemption is made, and is accounted for as an addition to paid-in capital. The fee is intended to discourage market-timers by ensuring that short-term trading costs are borne by the investors making the transactions and not the shareholders already in the Fund.
Distributions to Shareholders: Distributions to shareholders are recorded by the Fund on ex-dividend date. Dividends from net investment income and distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Fund's capital accounts to reflect income and gains available for distribution under income tax regulations.
Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Expense Offset Arrangements: The Fund has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Fund's cash on deposit with the bank. These credits are used to reduce the Fund's expenses. Such a deposit arrangement may be an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is required since the Fund intends to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.
New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" -- an interpretation of FASB Statement 109 (FIN 48), effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years ended September 30, 2004 -- 2007) for purposes of implementing FIN 48, and has concluded that as of March 31, 2008, no provision for income tax is required in the Fund's financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of March 31, 2008, the Fund does not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures may be requi red about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging Activities." The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effect on the Fund's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS No. 161 will have on the Fund's financial statements and related disclosures.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Trustees of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, of .75% based on the Fund's average daily net assets. Under the terms of the agreement, $68,167 was payable at period end. In addition, $39,155 was payable at period end for operating expenses paid by the Advisor during March 2008.
The Advisor has contractually agreed to limit net annual fund operating expenses through January 31, 2009 for Class I. The contractual expense cap is .92%. For the purposes of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. This expense limitation does not limit any acquired fund fees and expenses. To the extent any expense offset credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.
Calvert Administrative Services Company ("CASC"), an affiliate of the Advisor, provides administrative services to the Fund for an annual fee, payable monthly, of .25% for Class A, Class B, and Class C shares and .10% for Class I shares based on their average daily net assets. Under the terms of the agreement, $17,352 was payable at period end. For the six months ended March 31, 2008, CASC waived $28,120 of its fee.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Fund. Distribution Plans, adopted by Class A, Class B and Class C shares, allow the Fund to pay the Distributor for expenses and services associated with distribution of shares. The expenses paid may not exceed .25%, 1.00% and 1.00% annually of average daily net assets of each Class A, Class B and Class C, respectively. The amount actually paid by the Fund is an annualized fee, payable monthly of .25%, 1.00% and 1.00% of the Fund's average daily net assets of Class A, Class B and Class C, respectively. Class I does not have Distribution Plan expenses. Under the term of the agreement, $32,863 was payable at period end.
The Distributor received $12,762 as its portion of the commissions charged on sales of the Fund's Class A shares for the six months ended March 31, 2008.
Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, is the shareholder servicing agent for the Fund. For its services, CSSI received fees of $55,613 for the six months ended March 31, 2008. Under the terms of the agreement, $9,118 was payable at period end. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.
The Fund may invest in Community Investment Notes issued by the Calvert Social Investment Foundation (the "CSI Foundation"). The CSI Foundation is a 501(c)(3) non-profit organization that receives in-kind support from the Calvert Group, Ltd. and its subsidiaries. The Fund has received from the Securities and Exchange Commission an exemptive order permitting the Fund to make investments in these notes under certain conditions.
Each Trustee of the Fund who is not an employee of the Advisor or its affiliates receives an annual retainer of $32,000 plus up to $1,500 for each Board and Committee meeting attended. Trustees fees are allocated to each of the funds served.
Note C -- Investment Activity
During the period, cost of purchases and proceeds from sales of investments, other than short-term securities, were $33,080,767 and $43,066,607, respectively.
The cost of investments owned at March 31, 2008 for federal income tax purposes was $107,438,355. Net unrealized appreciation aggregated $474,869, of which $13,723,369 related to appreciated securities and $13,248,500 related to depreciated securities.
Net realized capital loss carryforwards for federal income tax purposes of $571,370 (acquired from Calvert Social Investment Fund Technology Portfolio), $2,061,130 and $1,688,942 at September 30, 2007 may be available, subject to certain tax limitations, to offset future capital gains until expiration in September 2010, September 2014 and September 2015, respectively.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds (except for the Calvert Social Investment Fund's Balanced and Enhanced Equity Portfolios the CVS Calvert Social Balanced Portfolio) and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the overnight Federal Funds Rate plus .50% per annum. A commitment fee of .10% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at March 31, 2008. For the six months ended March 31, 2008, borrowings by the Fund under the Agreement were as follows:
| Average
Daily
Balance | Weighted
Average
Interest
Rate | Maximum
Amount
Borrowed | Month of
Maximum
Amount
Borrowed |
| | $58,285 | 5.18% | $1,416,613 | November 2007 |
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class A Shares | | 2008 | 2007 (w) | 2006 | |
Net asset value, beginning | | $17.45 | $15.92 | $18.25 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.08) | (.17) | (.21) | |
Net realized and unrealized gain (loss) | | (3.09) | 1.70 | (.22) | |
Total from investment operations | | (3.17) | 1.53 | (.43) | |
Distributions from | | | | | |
Net realized gain | | -- | -- | (1.90) | |
Total distributions | | -- | -- | (1.90) | |
Total increase (decrease) in net asset value | | (3.17) | 1.53 | (2.33) | |
Net asset value, ending | | $14.28 | $17.45 | $15.92 | |
| | | | | | |
Total return* | | (18.17%) | 9.61% | (3.04%) | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (1.01%) (a) | (1.03%) | (1.10%) | |
Total expenses | | 1.82% (a) | 1.76% | 1.74% | |
Expenses before offsets | | 1.77% (a) | 1.73% | 1.74% | |
Net expenses | | 1.75% (a) | 1.71% | 1.73% | |
Portfolio turnover | | 27% | 98% | 160% | |
Net assets, ending (in thousands) | | $77,657 | $103,937 | $121,941 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class A Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $18.70 | $16.43 | $13.61 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.06) | (.10) | (.15) | |
Net realized and unrealized gain (loss) | | .22 | 2.37 | 3.11 | |
Total from investment operations | | .16 | 2.27 | 2.96 | |
Distributions from | | | | | |
Net investment income | | -- | -- | (.13) | |
Net realized gain | | (.61) | -- | (.01) | |
Total distributions | | (.61) | -- | (.14) | |
Total increase (decrease) in net asset value | | (.45) | 2.27 | 2.82 | |
Net asset value, ending | | $18.25 | $18.70 | $16.43 | |
| | | | | | |
Total return* | | 0.64% | 13.82% | 21.89% | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (0.28%) | (0.53%) | (1.03%) | |
Total expenses | | 1.71% | 1.69% | 1.77% | |
Expenses before offsets | | 1.71% | 1.69% | 1.76% | |
Net expenses | | 1.70% | 1.68% | 1.75% | |
Portfolio turnover | | 169% | 54% | 54% | |
Net assets, ending (in thousands) | | $172,540 | $214,143 | $157,611 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class B Shares | | 2008 | 2007 (w) | 2006 | |
Net asset value, beginning | | $15.64 | $14.42 | $16.84 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.16) | (.31) | (.36) | |
Net realized and unrealized gain (loss) | | (2.74) | 1.53 | (.16) | |
Total from investment operations | | (2.90) | 1.22 | (.52) | |
Distributions from | | | | | |
Net realized gain | | -- | -- | (1.90) | |
Total distributions | | -- | -- | (1.90) | |
Total increase (decrease) in net asset value | | (2.90) | 1.22 | (2.42) | |
Net asset value, ending | | $12.74 | $15.64 | $14.42 | |
| | | | | | |
Total return* | | (18.54%) | 8.46% | (3.91%) | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (2.03%) (a) | (2.02%) | (2.02%) | |
Total expenses | | 2.83% (a) | 2.75% | 2.66% | |
Expenses before offsets | | 2.78% (a) | 2.72% | 2.66% | |
Net expenses | | 2.77% (a) | 2.70% | 2.65% | |
Portfolio turnover | | 27% | 98% | 160% | |
Net assets, ending (in thousands) | | $8,357 | $11,729 | $14,425 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class B Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $17.45 | $15.47 | $12.94 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.24) | (.24) | (.22) | |
Net realized and unrealized gain (loss) | | .24 | 2.22 | 2.88 | |
Total from investment operations | | (.00) | 1.98 | 2.66 | |
Distributions from | | | | | |
Net investment income | | -- | -- | (.12) | |
Net realized gain | | (.61) | -- | (.01) | |
Total distributions | | (.61) | -- | (.13) | |
Total increase (decrease) in net asset value | | (.61) | 1.98 | 2.53 | |
Net asset value, ending | | $16.84 | $17.45 | $15.47 | |
| | | | | | |
Total return* | | (0.25%) | 12.80% | 20.71% | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (1.18%) | (1.42%) | (2.02%) | |
Total expenses | | 2.61% | 2.58% | 2.76% | |
Expenses before offsets | | 2.60% | 2.58% | 2.75% | |
Net expenses | | 2.60% | 2.57% | 2.74% | |
Portfolio turnover | | 169% | 54% | 54% | |
Net assets, ending (in thousands) | | $20,309 | $26,089 | $19,522 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class C Shares | | 2008 | 2007 (w) | 2006 | |
Net asset value, beginning | | $15.83 | $14.57 | $16.98 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.14) | (.29) | (.33) | |
Net realized and unrealized gain (loss) | | (2.78) | 1.55 | (.18) | |
Total from investment operations | | (2.92) | 1.26 | (.51) | |
Distributions from | | | | | |
Net realized gain | | -- | -- | (1.90) | |
Total distributions | | -- | -- | (1.90) | |
Total increase (decrease) in net asset value | | (2.92) | 1.26 | (2.41) | |
Net asset value, ending | | $12.91 | $15.83 | $14.57 | |
| | | | | | |
Total return* | | (18.45%) | 8.65% | (3.81%) | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (1.86%) (a) | (1.88%) | (1.89%) | |
Total expenses | | 2.67% (a) | 2.60% | 2.53% | |
Expenses before offsets | | 2.62% (a) | 2.57% | 2.53% | |
Net expenses | | 2.60% (a) | 2.55% | 2.52% | |
Portfolio turnover | | 27% | 98% | 160% | |
Net assets, ending (in thousands) | | $10,592 | $13,794 | $17,270 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class C Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $17.57 | $15.57 | $13.00 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.21) | (.21) | (.23) | |
Net realized and unrealized gain (loss) | | .23 | 2.21 | 2.93 | |
Total from investment operations | | .02 | 2.00 | 2.70 | |
Distributions from | | | | | |
Net investment income | | -- | -- | (.12) | |
Net realized gain | | (.61) | -- | (.01) | |
Total distributions | | (.61) | -- | (.13) | |
Total increase (decrease) in net asset value | | (.59) | 2.00 | 2.57 | |
Net asset value, ending | | $16.98 | $17.57 | $15.57 | |
| | | | | | |
Total return* | | (0.13%) | 12.85% | 20.93% | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (1.06%) | (1.33%) | (1.89%) | |
Total expenses | | 2.50% | 2.49% | 2.64% | |
Expenses before offsets | | 2.49% | 2.49% | 2.62% | |
Net expenses | | 2.48% | 2.48% | 2.61% | |
Portfolio turnover | | 169% | 54% | 54% | |
Net assets, ending (in thousands) | | $23,131 | $27,501 | $19,092 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class I Shares | | 2008 | 2007 (w) | 2006 | |
Net asset value, beginning | | $18.50 | $16.75 | $18.96 | |
Income from investment operations | | | | | |
Net investment income (loss) | | (.01) | (.05) | (.03) | |
Net realized and unrealized gain (loss) | | (3.29) | 1.80 | (.28) | |
Total from investment operations | | (3.30) | 1.75 | (.31) | |
Distributions from | | | | | |
Net realized gain | | -- | -- | (1.90) | |
Total distributions | | -- | -- | (1.90) | |
Total increase (decrease) in net asset value | | (3.30) | 1.75 | (2.21) | |
Net asset value, ending | | $15.20 | $18.50 | $16.75 | |
| | | | | | |
Total return* | | (17.84%) | 10.45% | (2.24%) | |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | (.18%) (a) | (.28%) | (.31%) | |
Total expenses | | 1.11% (a) | 1.06% | 1.10% | |
Expenses before offsets | | .94% (a) | .94% | .93% | |
Net expenses | | .92% (a) | .92% | .92% | |
Portfolio turnover | | 27% | 98% | 160% | |
Net assets, ending (in thousands) | | $9,734 | $11,286 | $26,460 | |
| | | | Periods Ended | |
Class I Shares | | September 30, 2005 | September 30, 2004 | September 30, 2003(z) | March 13,
2003 (y) |
Net asset value, beginning | | $19.26 | $16.46 | $16.20 | $13.25 |
Income from investment operations | | | | | |
Net investment income (loss) | | .06 | .02 | -- | -- |
Net realized and unrealized gain (loss) | | .25 | 2.78 | .26 | (1.29) |
Total from investment operations | | .31 | 2.80 | .26 | (1.29) |
Distributions from | | | | | |
Net realized gain | | (.61) | -- | -- | -- |
Total distributions | | (.61) | -- | -- | -- |
Total increase (decrease) in net asset value | | (.30) | 2.80 | .26 | (1.29) |
Net asset value, ending | | $18.96 | $19.26 | $16.46 | $11.96 |
| | | | | | |
Total return* | | 1.42% | 17.01% | 1.60% | (9.74%) |
Ratios to average net assets:A | | | | | |
Net investment income (loss) | | .43% | .22% | (.11%) (a) | (.31%) (a) |
Total expenses | | 1.16% | 1.14% | 1.01% (a) | 1.12% (a) |
Expenses before offsets | | .93% | .93% | .93% (a) | .93% (a) |
Net expenses | | .92% | .92% | .92% (a) | .92% (a) |
Portfolio turnover | | 169% | 54% | 5% | 9% |
Net assets, ending (in thousands) | | $4,979 | $2,878 | $1,130 | $0 |
See notes to financial highlights.
A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the Fund.
(a) Annualized.
(w) Per share figures are calculated using the Average Shares Method.
(y) The last remaining shareholder in Class I redeemed on January 18, 2002 and Class I shares resumed on January 30, 2003 when the Calvert Social Investment Fund's Technology Portfolio merged into the Calvert New Vision Small Cap Fund. Subsequently, the last remaining shareholder redeemed on March 12, 2003.
(z) Class I shares resumed upon shareholder investment on July 31, 2003.
* Total return is not annualized for periods less than one year and does not reflect deduction of any front-end or deferred sales charge.
See notes to financial statements.
Explanation of Financial Tables
Schedule of Investments
The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.
Statement of Net Assets
The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.
At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.
Statement of Operations
The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fee, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.
Statement of Changes in Net Assets
The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.
The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.
Financial Highlights
The Financial Highlights table provides a per-share breakdown per class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business , expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.
Proxy Voting
The Proxy Voting Guidelines of the Calvert Funds that the Fund uses to determine how to vote proxies relating to portfolio securities are provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745, by visiting the Calvert website at www.calvert.com; or by visiting the SEC's website at www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund's website at www.calvert.com and on the SEC's website at www.sec.gov.
Availability of Quarterly Portfolio Holdings
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Basis for Board's Approval of Investment Advisory Contracts
At a meeting held on December 5, 2007, the Board of Trustees, and by a separate vote, the disinterested Trustees, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor and the Investment Subadvisory Agreement between the Advisor and the Subadvisor with respect to the Fund.
In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Fund and the Advisor. The disinterested Trustees reviewed a report prepared by the Advisor regarding various services provided to the Fund by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Fund, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable mutual funds.
The disinterested Trustees were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement and Investment Subadvisory Agreement. Prior to voting, the disinterested Trustees reviewed the proposed continuance of the Investment Advisory Agreement and Investment Subadvisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.
In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Fund's advisory fee; comparative performance, fee and expense information for the Fund; the profitability of the Calvert Group of Funds to the Advisor; the allocation of the Fund's brokerage, including the Advisor's process for monitoring "best execution"; the direct and indirect benefits, if any, derived by the Advisor from its relationship with the Fund; the effect of the Fund's growth and size on the Fund's performance and expenses; the affiliated distributor's process for monitoring sales load breakpoints; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.
In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with the Advisor's senior management through Board of Trustees' meetings, discussions and other reports. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Fund, were also considered. The Board discussed the Advisor's effectiveness in monitoring the performance of the Subadvisor and its timeliness in responding to performance issues. The Board concluded that it was satisfied with the nature, ex tent and quality of services provided to the Fund by the Advisor under the Investment Advisory Agreement.
In considering the Fund's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Fund's performance results, portfolio composition and investment strategies. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Fund's total return with its Lipper index and with that of other mutual funds deemed to be in its peer group by an independent third party in its report. This comparison indicated that for the one-, three- and five-year annualized periods ended June 30, 2007, the Fund's performance was below the median of its peer group. The Fund underperformed its Lipper index for the same one-, three- and five-year annualized periods. The Board noted the recent change in the Subadvisor of the Fund and that performance information prior to March 2007 reflected the performance of the prior subadvisor. The Board al so considered management's discussion of the Fund's recent performance. Based upon its review, the Board concluded that appropriate action has been taken by the Advisor to address the Fund's performance.
In considering the Fund's fees and expenses, the Board compared the Fund's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Fund's advisory fee (after taking into account waivers and reimbursements) was below the median of its peer group and that total expenses (net of waivers and reimbursements) were above the median of its peer group. The Board also noted management's discussion of the Fund's expenses and certain factors that affected the level of such expenses. Based upon its review, the Board concluded that the advisory fee was reasonable in view of the quality of services provided by the Advisor and the other factors considered.
The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Fund's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Fund for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Fund in terms of the total amount of annual advisory fees it received with respect to the Fund and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Fund. The Board noted the Advisor's current undertaking to maintain expense limitations for the Fund's Class I shares. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Fund. The Board also noted that the Advisor paid the subadvisory fee to the Subadvisor. Based upon its review, the Board concluded that the Advisor's level of profitability from its relationship with the Fund was reasonable.
The Board considered the effect of the Fund's growth and size on its performance and expenses. Although the Fund's advisory fee currently did not have a breakpoint that reduced the advisory fee rate on assets above specified levels, the Board noted that if the Fund's assets increased over time, the Fund might realize other economies of scale if assets increased proportionally more than certain other expenses.
In reapproving the Investment Advisory Agreement, the Board, including the disinterested Trustees, did not identify any single factor as controlling, and each Trustee attributed different weight to various factors.
In evaluating the Investment Subadvisory Agreement, the disinterested Trustees reviewed information provided by the Subadvisor relating to its operations, personnel, investment philosophy, strategies and techniques. Among other information, the Subadvisor provided biographical information on portfolio management and other professional staff, performance information for itself, and descriptions of its investment philosophies, strategies and techniques, organizational and management structures and brokerage policies and practices.
The Board reapproved the Investment Subadvisory Agreement between the Subadvisor and the Advisor based on a number of factors relating to the Subadvisor's ability to perform under the Investment Subadvisory Agreement. In the course of its deliberations, the Board evaluated, among other factors: the nature, extent and the quality of the services to be provided by the Subadvisor; the Subadvisor's management style and long-term performance record; the Fund's performance record and the Subadvisor's performance in employing its investment strategies; the Subadvisor's current level of staffing and its overall resources; the qualifications and experience of the Subadvisor's personnel; the Subadvisor's financial condition with respect to its ability to perform the services required under the Investment Subadvisory Agreement; the Subadvisor's compliance systems, including those related to personal investing; and any disciplinary history. Based upon its review, the Board concluded that it was satisfied with the nature, extent and quality of services provided to the Fund by the Subadvisor under the Investment Subadvisory Agreement.
As noted above, the Board considered, among other information, the Fund's performance during the one-, three- and five-year annualized periods ended June 30, 2007 as compared to the Fund's peer group and noted that it reviewed on a quarterly basis detailed information about the Fund's performance results, portfolio composition and investment strategies. The Board noted the Advisor's expertise and resources in monitoring the performance, investment style and risk adjusted performance of the Subadvisor as well as the Advisor's actions to address the Fund's performance.
In considering the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Fund, the Board noted that the subadvisory fee under the Investment Subadvisory Agreement was paid by the Advisor out of the advisory fee that the Advisor received under the Investment Advisory Agreement. The Board also relied on the ability of the Advisor to negotiate the Investment Subadvisory Agreement and the corresponding subadvisory fee at arm's length. Based upon its review, the Board determined that the subadvisory fee was reasonable. For each of the above reasons, the cost of services to be provided by the Subadvisor and the profitability to the Subadvisor of its relationship with the Fund were not material factors in the Board's deliberations. For similar reasons, the Board did not consider the potential economies of scale in the Subadvisor's management of the Fund to be a material factor in its consideration.
In reapproving the Investment Subadvisory Agreement, the Board, including the disinterested Trustees, did not identify any single factor as controlling, and each Trustee attributed different weight to various factors.
Conclusions
The Board reached the following conclusions regarding the Investment Advisory Agreement and the Investment Subadvisory Agreement, among others: (a) the Advisor has demonstrated that it possesses the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Subadvisor is qualified to manage the Fund's assets in accordance with the Fund's investment objectives and policies; (c) the Advisor and Subadvisor maintain appropriate compliance programs; (d) the Subadvisor is likely to execute its investment strategies consistently over time; (e) appropriate action is being taken by the Advisor to address the Fund's performance; and (f) the Fund's advisory and subadvisory fees are reasonable relative to those of similar funds and to the services to be provided by the Advisor and the Subadvisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement and the Investment Subadvisory Agreement would be in the best inte rests of the Fund and its shareholders.
Calvert New Vision Small Cap Fund
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Calvert Distributors, Inc.
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Suite 1000 North
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This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.
Calvert's Family of Funds
Tax-Exempt Money Market Funds
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Taxable Money Market Funds
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Income Fund
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CSIF Equity Portfolio
Calvert Large Cap Growth Fund
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New Vision Small Cap Fund
Calvert Social Index Fund
Calvert Small Cap Value Fund
Calvert Mid Cap Value Fund
Calvert Global Alternative Energy Fund
Calvert International Opportunities Fund
Balanced and Asset Allocation Funds
CSIF Balanced Portfolio
Calvert Conservative Allocation Fund
Calvert Moderate Allocation Fund
Calvert Aggressive Allocation Fund
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<PAGE>
Calvert
Investments that make a difference®
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March 31, 2008
Semi-Annual Report
Calvert Income Fund
Calvert
Investments that make a difference
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Table of Contents
President's Letter
1
Portfolio Management Discussion
4
Shareholder Expense Example
8
Statement of Net Assets
10
Statement of Operations
23
Statements of Changes in Net Assets
24
Notes to Financial Statements
26
Financial Highlights
32
Explanation of Financial Tables
38
Proxy Voting and Availability of Quarterly Portfolio Holdings
40
Basis for Board's Approval of Investment Advisory Contract
40
Dear Shareholder:
The six months ended March 31, 2008 featured turmoil in the financial markets that was almost unprecedented at times. Investors continued to be spooked by the credit crunch, worries about an economic slowdown or recession, and oil prices that exceeded $110 per barrel. This volatility had its roots in the fixed-income markets, where fears about the value of securities linked to subprime mortgages spread throughout the bond market and beyond, even affecting the values of securities with no direct connection to subprime mortgages. Notably, Calvert's taxable bond funds weathered the market turmoil well as a result of our emphasis on holding higher-quality securities and our general avoidance of most holdings that were directly related to subprime mortgages. However, the indirect effects of the subprime mortgage problems impacted our fixed-income funds through their holdings of securities issued by financial companies.
By the numbers, the Lehman U.S. Credit Index, a common benchmark for the entire U.S. bond market, returned 2.63% from October 1, 2007 through March 31, 2008. The credit crisis also affected previously staid debt sectors, including auction-rate securities and municipal bonds. At the beginning of 2008, worries about the ability of bond insurers to meet their obligations on payment of principal and interest in the event of default on the municipal debt that they insure drove municipal yields sharply higher. The market was further roiled by liquidity problems in auction rate securities, a sector that had previously been viewed as having characteristics almost like cash.
Fed Takes Aggressive Action
The Federal Reserve (Fed) has taken a nearly unprecedented series of actions to stabilize the financial markets and reassure investors. The Fed moved aggressively to add liquidity to the financial system and reduced its target federal funds rate by a total of 2.5 percentage points.
In March, it boldly moved to stem the rising panic in the credit markets by increasing the size of its lending program for commercial banks and changing the length and terms of the loans. The Fed also allowed investment banks to borrow directly from the central bank and started accepting hard-to-sell mortgage-backed securities as collateral. When JPMorgan Chase swooped in to rescue Bear Stearns at the bargain basement price of $2 per share (later raised to $10), the Fed agreed to backstop up to $30 billion of Bear Stearns' illiquid holdings. Although some say that the Fed essentially bailed out Bear Stearns and other financial firms from their overly aggressive risk-taking, the Fed's actions did prove effective, stabilizing the financial system and providing some confidence to investors.
Lipper Awards
As a result of our experienced, professional team of portfolio managers and credit analysts, Calvert's taxable bond funds have steered a steady course through the considerable market turbulence. Our portfolio management team largely avoided investing in securities that are directly related to subprime mortgages as we maintained our focus on fundamental credit research and buying only bonds that represent significant value.
As evidence of our ongoing success and expertise in the fixed income arena, three of Calvert's taxable bond funds--Calvert Social Investment Fund (CSIF) Bond Portfolio, Calvert Income Fund, and Calvert Long-Term Income Fund--received 2008 Lipper Awards as a result of their consistently high risk-adjusted returns.1 In fact, this is the fourth time in the last five years that CSIF Bond Portfolio (Class I shares) was won the Lipper Award for the three-year period. All of us at Calvert are extremely proud of these awards and of our taxable fixed-income management team led by Senior Vice President Greg Habeeb.
Maintain a Long-Term View
The financial markets will probably continue to be volatile for at least the next few months, so it's important that you maintain a long-term view in terms of your investments and not get swept up in the day-to-day fluctuations in the market. Your financial advisor is an excellent source of guidance, so please continue to consult with him or her about your investment plan.
As always, thank you for your continued confidence in Calvert's investment products.
Sincerely,
Barbara J. Krumsiek
President and CEO
Calvert Group, Ltd.
April 2008
1. This is the fourth time in the last five years that the Calvert Social Investment Fund Bond Portfolio Class I Shares has won the Lipper Award for consistent risk-adjusted return for the three-year period. For the three-year periods ended December 31, 2003, 2005, 2006, and 2007, the Class I Shares of the Portfolio were chosen from among 154, 152, 150, and 144 funds, respectively.
Lipper Fund Awards are granted annually to the funds in each Lipper classification that achieve the highest score for Consistent Return, a measure of funds' historical risk-adjusted returns, measured in local currency, relative to peers. Funds registered for sale in a given country are selected, and then scores for Consistent Return are computed for all Lipper global classifications with five or more distinct portfolios. The scores are subject to change every month and are calculated for the following periods: three-year, five-year, 10-year, and overall. The highest 20% of funds in each classification are named Lipper Leaders for Consistent Return. The highest Lipper Leader for Consistent Return within each eligible classification determines the fund classification winner over three, five, or 10 years. Source: Lipper, Inc.
The Calvert Social Investment Fund Bond Portfolio Class I Shares (CBDIX) ranked #1 (out of 128 funds) in the Corporate Debt Funds A Rated classification for the five-year period ended December 31, 2007.
The Calvert Social Investment Fund Bond Portfolio Class A Shares (CSIBX) ranked #1 (out of 58 funds) in the Corporate Debt Funds A Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class A Shares (CFICX) ranked #1 (out of 48 funds) in the Corporate Debt Funds BBB-Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class I Shares (CINCX) ranked #1 (out of 100 funds) in the Corporate Debt Funds BBB-Rated classification for the five-year period ended December 31, 2007.
The Calvert Long-Term Income Fund Class A Shares (CLDAX) ranked #1 (out of 117 funds) in the Corporate Debt Funds BBB-Rated classification for the three-year period ended December 31, 2007.
For more information on any Calvert fund, please contact Calvert at 800.368.2748 for a free prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The prospectus contains this and other information. Read it carefully before you invest or send money. Bond funds are subject to interest rate risk. When interest rates rise, the value of fixed-income securities will generally fall. Conversely, a drop in interest rates will generally cause an increase in the value of fixed-income securities.
Calvert mutual funds are underwritten and distributed by Calvert Distributors, Inc., member FINRA, a subsidiary of Calvert Group, Ltd.
Portfolio Management Discussion
Gregory Habeeb
Senior Portfolio Manager
of Calvert Asset Management Company
Performance
For the six-month reporting period ended March 31, 2008, Calvert Income Fund Class A shares (at NAV) returned 0.47%. The benchmark Lehman U.S. Credit Index returned 2.63% for the same period. Fund underperformance versus the benchmark was the result of our short relative duration and allocation to non-Index below-investment- grade securities in a period where credit aversion drove Treasury yields significantly down and credit spreads wider.
Investment Climate
The six-month reporting period that ended March 31, 2008 was one of the most memorable times in credit markets' history. The first three months of the period were characterized by a spreading and deepening liquidity crunch that had roots in the U.S. subprime mortgage market collapse. The effects of the crunch were most acute in U.S., European, and U.K. money markets. Markets for a broad variety of asset-backed securities were severely impaired. The U.S., European and Swiss central banks cooperated on a very large scale to pump liquidity into banking systems. Old and new techniques were used by central banks to supply money to inter-bank lending markets in the summer and over the turn of the year. The overall effort was successful.
Portfolio Statistics
March 31, 2008
Investment Performance
(total return at NAV*) |
| 6 Months
ended
3/31/08 | 12 Months
ended
3/31/08 |
Class A | 0.47% | 1.97% |
Class B | 0.02% | 1.14% |
Class C | 0.13% | 1.26% |
Class I | 0.77% | 2.62% |
Class R** | 0.30% | 1.64% |
Class Y*** | 0.55% | 2.10% |
Lehman U.S. | | |
Credit Index**** | 2.63% | 3.99% |
Lipper Corporate Debt | | |
Funds BBB-Rated Avg. | 1.57% | 2.89% |
| | | |
Maturity Schedule | | |
| | Weighted Average |
| | 3/31/08 | 9/30/07 |
| | 9 years | 10 years |
| | | |
SEC Yields | | |
| | 30 days ended |
| | 3/31/08 | 9/30/07 |
Class A | 5.77% | 5.30% |
Class B | 5.15% | 4.72% |
Class C | 5.29% | 4.81% |
Class I | 6.65% | 6.15% |
Class R | 5.71% | 5.24% |
Class Y | 7.20% | N/A |
*Investment performance/return at NAV does not reflect the deduction of the Fund's maximum 3.75% front-end sales charge or any deferred sales charge.
**The Calvert Income Fund first offered Class R shares beginning on October 31, 2006. Performance results for Class R shares prior to October 31, 2006 reflect the performance of Class A shares at net asset value (NAV). Actual Class R share performance would have been lower than Class A share performance because of higher Rule 12b-1 fees and other class-specific expenses that apply to the Class R shares.
*** The Calvert Income Fund first offered Class Y shares beginning on February 29, 2008. Performance for Class Y Shares prior to February 29, 2008 reflects the performance of Class A shares at net asset value (NAV). Actual Class Y share performance would have been different.
**** Source: Lipper Analytical Services, Inc.
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
(with max. load)
| | Class A Shares |
One year | (1.88%) |
Five year | 4.97% |
Ten year | 6.59% |
| | Class B Shares |
One year | (2.86%) |
Five year | 4.98% |
Since inception | 5.66% |
(7/30/99) | |
| | Class C Shares |
One year | 0.26% |
Five year | 5.03% |
Since inception | 5.84% |
(7/31/00) | |
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
| | Class I Shares |
One year | 2.62% |
Five year | 6.45% |
Since inception | 7.29% |
(2/26/99) | |
| | Class R Shares* |
One year | 1.64% |
Five year | 5.68% |
Ten year | 6.95% |
| | Class Y Shares* |
One year | 2.10% |
Five year | 5.80% |
Ten year | 7.01% |
*See note regarding share class R and Y on previous page.
Performance Comparison
Comparison of change in value of $10,000 investment.
Average annual total returns in the Portfolio Statistics above and the Performance Comparison line graph are with maximum load deducted -- they assume reinvestment of dividends and reflect the deduction of the Fund's Class A maximum front-end sales charge of 3.75%, or deferred sales charge as applicable. No sales charge has been applied to the indices used for comparison. However, the Lipper average does reflect the deduction of the category's average front-end sales charge. The value of an investment in Class A shares is plotted in the line graph. The value of an investment in another Class of shares would be different. The graph and table do not reflect the deduction of taxes that a shareholder would pay on the Fund's distributions or the redemption of Fund shares. Past performance is no guarantee of future results.
**Source: Lipper Analytical Services, Inc.
In January, bond insurance companies teetered and the municipal bond market was greatly affected. Previously quiet corners of the credit market, such as municipal auction rate preferred securities and tender option bonds, were roiled. By early March the crisis had escalated into a broader panic about counterparty exposure in exchange-traded and over-the-counter derivative markets. Margins were raised for short-term loans used to finance asset portfolios. The combination of liquidity crunch and higher margins forced a number of investors to accelerate the deleveraging of portfolios, dumping an increasing amount of even the most credit-worthy securities into a very weak market. From March 7 through March 16, the Fed made a series of historically significant policy announcements to stem the growing panic. These policy moves included opening a borrowing window for investment banks and financing for $30 billion of Bear Stearns' most illiquid assets. The Fed was successful in calming the panic.
Over the reporting period, economic growth slowed while inflation remained steady. The Fed cut the Fed funds rate from 4.75% to 2.25%. Fed rate cuts and a flight to quality during the market turmoil led the three-month T-bill yield to fall from 3.82% to 1.38%. The 10-year treasury yield fell from 4.59% to 3.45%. However, the extremely difficult market conditions sent municipal and corporate bond yields higher.1
Portfolio Strategy
Going into the period, the Fund had an overweighting to securities with high credit quality and little exposure to asset-backed securities--with 38% of the Fund invested in
Portfolio Statistics
March 31, 2008
Economic Sectors | % of Total
Investments |
Asset Backed Securities | 5.7% |
Banks | 14.9% |
Brokerages | 2.9% |
Commercial Mortgage Backed Securities | 1.4% |
Consumer Discretionary | 0.1% |
Financials | 1.8% |
Financial Services | 6.0% |
Industrial | 16.3% |
Industrial - Finance | 6.1% |
Insurance | 0.7% |
Mortgage Backed Securities | 0.9% |
Municipal Obligations | 7.5% |
Real Estate Investment Trust | 2.4% |
Sovereign Obligations | 0.1% |
Special Purpose | 6.1% |
Transportation | 2.0% |
U.S. Government Agency Obligations | 15.8% |
U.S. Treasury | 6.4% |
Utilities | 2.9% |
Total | 100% |
AAA rated bonds versus 11% for the benchmark as of September 30, 2007--which helped limit the Fund's exposure to fallout from the subprime mortgage crisis.
Nevertheless, the Fund's short duration relative to the index (the Fund's duration was 4.31 years versus 6.08 years for the benchmark as of September 30, 2007) hurt returns as the subprime contagion spread to high-credit-quality sectors and liquidity froze. (Duration measures a portfolio's sensitivity to changes in interest rates. The longer the duration, the greater the price change relative to interest-rate movements.). As a result, a flight to quality ensued and yields of two- and 10-year Treasuries fell 1.14 and 2.42 percentage points, respectively, during the period. Our yield curve strategies and active Treasury trading helped offset some of the drag from short duration in a period where short yields rallied substantially more than those of longer-duration Treasuries.
We began to gradually increase the Fund's holdings of corporate bonds when falling prices started to represent attractive value. However, these moves proved to be premature, as corporate bond prices continued to fall and the difference between yields on corporate bonds and U.S. Treasury bonds widened significantly.
Outlook
Market anxiety appears to have crested in March, though neither the credit markets nor the economy are out of the woods. Credit markets need to stabilize and better flow, something we expect to see over the remainder of 2008. By mid-2008, however, credit markets will have been under severe stress for a year. As a result, economic growth may remain sub-par for a protracted period. The turmoil in the credit markets, though, has resulted in extremely attractive buying opportunities in most credit market sectors, including corporate debt and asset-backed securities. We remain poised to take advantage of such opportunities in markets that we expect to remain volatile for some time.
April 2008
1. The yield on the Bond Buyer 20 Index of state and local general obligation bonds rose 0.48 percentage points and the yield on the Moody's Baa-rated corporate bond index increased 0.31 percentage points between September 30, 2007 and March 31, 2008.
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) and redemption fees and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2007 to March 31, 2008).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
10/1/07 | Ending Account
Value
3/31/08 | Expenses Paid
During Period*
10/1/07 - 3/31/08 |
Class A | | | |
Actual | $1,000.00 | $1,004.10 | $5.79 |
Hypothetical | $1,000.00 | $1,019.23 | $5.83 |
(5% return per year before expenses) | | | |
Class B | | | |
Actual | $1,000.00 | $1,000.20 | $9.89 |
Hypothetical | $1,000.00 | $1,015.11 | $9.96 |
(5% return per year before expenses) | | | |
Class C | | | |
Actual | $1,000.00 | $1,000.60 | $9.25 |
Hypothetical | $1,000.00 | $1,015.75 | $9.32 |
(5% return per year before expenses) | | | |
Class I | | | |
Actual | $1,000.00 | $1,007.70 | $2.67 |
Hypothetical | $1,000.00 | $1,022.34 | $2.69 |
(5% return per year before expenses) | | | |
| | | | |
Class R | | | |
Actual | $1,000.00 | $1,003.00 | $7.36 |
Hypothetical | $1,000.00 | $1,017.65 | $7.41 |
(5% return per year before expenses) | | | |
| | | | |
| Beginning
Account Value
2/29/08** | Ending Account
Value
3/31/08 | Expenses Paid
During Period
2/29/08 - 3/31/08*** |
Class Y | | | |
Actual | $1,000.00 | $988.70 | $0.78 |
Hypothetical | $1,000.00 | $1,003.58 | $0.79 |
(5% return per year before expenses) | | | |
* Expenses are equal to the Fund's annualized expense ratio of 1.15%, 1.98%, 1.85%, 0.53% and 1.47% for Class A, Class B, Class C, Class I, and Class R, respectively, multiplied by the average account value over the period, multiplied by 183/366.
** Inception date 2/29/08.
*** Expenses are equal to the Fund's annualized expense ratio of 0.90% for Class Y, multiplied by the average account value over the period, multiplied by 32/366.
Statement of Net Assets
March 31, 2008
| | | Principal | | |
Asset Backed Securities - 3.3% | | Amount | Value | |
ACL Business Loan Receivables Trust, 3.468%, 10/15/21 (e)(r) | | $2,692,005 | $2,634,847 | |
AmeriCredit Automobile Receivables Trust: | | | | |
5.11%, 10/6/10 | | 2,054,201 | 2,064,587 | |
3.43%, 7/6/11 | | 8,664,685 | 8,664,801 | |
Atherton Franchisee Loan Funding LLC, 7.08%, 5/15/20 (e) | | 2,000,000 | 2,029,538 | |
Capital Auto Receivables Asset Trust: | | | | |
5.40%, 10/15/09 | | 29,744,493 | 29,989,432 | |
5.22%, 11/16/09 | | 29,288,027 | 29,356,415 | |
Capital One Auto Finance Trust, 5.33%, 11/15/10 | | 15,802,399 | 15,890,323 | |
Captec Franchise Trust: | | | | |
8.155%, 6/15/13 (e) | | 6,920,000 | 7,517,846 | |
8.155%, 12/15/13 (e) | | 2,895,000 | 2,026,500 | |
Countrywide Asset-Backed Certificates, 3.049%, 11/25/34 (r) | | 4,486,732 | 4,123,321 | |
Discover Card Master: | | | | |
Trust I Series 2007-1, 2.828%, 8/15/12 (r) | | 6,200,000 | 6,195,065 | |
Trust I Series 2008-A2, 4.086%, 9/17/12 (r) | | 5,800,000 | 5,805,752 | |
Dunkin Securitization, 5.779%, 6/20/31 (e) | | 20,750,000 | 18,624,993 | |
Enterprise Mortgage Acceptance Co. LLC, 0.65%, 1/15/27 (e)(r) | | 24,262,148 | 485,243 | |
FMAC Loan Receivables Trust: | | | | |
2.90%, 11/15/18 (e)(r) | | 12,509,304 | 484,736 | |
6.74%, 11/15/20 (e) | | 1,878,105 | 1,594,037 | |
GE Dealer Floorplan Master Note Trust, 2.546%, 4/20/11 (r) | | 36,000,000 | 35,501,692 | |
Golden Securities Corp., 3.419%, 12/2/13 (e)(r) | | 3,094,467 | 3,099,619 | |
Household Automotive Trust, 3.93%, 7/18/11 | | 15,858,228 | 15,869,596 | |
SLM Student Loan Trust, 3.02%, 12/15/17 (b)(r) | | 2,893,425 | 2,864,491 | |
WFS Financial Owner Trust: | | | | |
3.54%, 11/21/11 | | 1,917,722 | 1,917,676 | |
3.93%, 2/17/12 | | 2,399,088 | 2,401,134 | |
World Financial Network, Credit Card Master Note Trust, | | | | |
3.188%, 5/15/12 (r) | | 3,900,000 | 3,901,562 | |
| | | | | |
Total Asset Backed Securities (Cost $204,496,451) | | | 203,043,206 | |
| | | | | |
Collateralized Mortgage-Backed | | | | |
Obligations (privately originated) - 0.5% | | | | |
American Home Mortgage Assets, 2.499%, 5/25/46 (r) | | 140,801,269 | 6,688,060 | |
Chase Funding Mortgage Loan, 4.045%, 5/25/33 | | 1,907,716 | 1,908,994 | |
Impac CMB Trust: | | | | |
3.239%, 9/25/34 (b)(r) | | 1,468,400 | 1,316,811 | |
2.859%, 4/25/35 (b)(r) | | 7,651,556 | 5,662,872 | |
2.909%, 4/25/35 (b)(r) | | 2,741,808 | 1,772,473 | |
2.869%, 5/25/35 (b)(r) | | 9,865,496 | 7,855,310 | |
2.919%, 8/25/35 (b)(r) | | 8,442,040 | 6,312,515 | |
| | | | | |
Collateralized Mortgage-Backed | | Principal | | |
Obligations (privately originated) - Cont'd | | Amount | Value | |
Washington Mutual Alternative Mortgage Pass-Through Certificates, | | | | |
0.507%, 7/25/46 | | $139,378,208 | $1,480,894 | |
| | | | | |
Total Collateralized Mortgage-Backed Obligations | | | | |
(privately originated) (Cost $43,125,509) | | | 32,997,929 | |
| | | | | |
Commercial Mortgage-Backed Securities - 3.1% | | | | |
Banc of America Commercial Mortgage, Inc., 5.449%, 1/15/49 | | 11,700,000 | 11,013,538 | |
Citigroup/Deutsche Bank Commercial Mortgage Trust, | | | | |
5.205%, 12/11/49 | | 45,600,000 | 44,239,113 | |
Cobalt CMBS Commercial Mortgage Trust, 5.94%, 8/15/12 (r) | | 30,500,000 | 30,004,375 | |
Crown Castle Towers LLC: | | | | |
4.643%, 6/15/35 (e) | | 39,250,000 | 40,768,684 | |
5.245%, 11/15/36 (e) | | 18,600,000 | 18,226,205 | |
5.362%, 11/15/36 (e) | | 11,000,000 | 11,578,083 | |
Global Signal: | | | | |
Trust II, 4.232%, 12/15/14 (e) | | 12,895,000 | 12,574,688 | |
Trust III, 5.361%, 2/15/36 (e) | | 22,820,000 | 22,910,824 | |
Wachovia Bank Commercial Mortgage Trust, 0.471%, | | | | |
12/15/35 (e)(r) | | 113,469,109 | 1,227,736 | |
| | | | | |
Total Commercial Mortgage-Backed Securities (Cost $193,682,050) | | 192,543,246 | | |
| | | | | |
Corporate Bonds - 59.0% | | | | |
AgFirst Farm Credit Bank: | | | | |
7.30%, 10/14/49 (e) | | 19,950,000 | 18,720,083 | |
8.393% to 12/15/11, floating rate thereafter to 12/15/16 (r) | | 16,725,000 | 15,654,098 | |
6.585% to 06/15/12, floating rate thereafter to 6/29/49 (e)(r) | | 76,150,000 | 53,415,037 | |
Alliance Mortgage Investments: | | | | |
12.61%, 6/1/10 (b)(k)(r) | | 3,077,944 | - | |
15.36%, 12/1/10 (b)(k)(r) | | 17,718,398 | - | |
Anadarko Petroleum Corp., 3.20%, 9/15/09 (r) | | 43,950,000 | 42,787,083 | |
APL Ltd., 8.00%, 1/15/24 | | 13,525,000 | 12,781,125 | |
Asian Development Bank, 6.22%, 8/15/27 | | 2,470,000 | 2,879,483 | |
Atlantic Marine Corp. Communities LLC, 6.158%, 12/1/51 (b)(e) | | 23,670,000 | 22,020,201 | |
Atlantic Mutual Insurance Co., 8.15%, 2/15/28 (e)(p)* | | 53,561,000 | 10,712,200 | |
Autopista del Maipo Sociedad, 7.373%, 6/15/22 (e) | | 21,885,000 | 26,447,670 | |
BAC Capital Trust XV, 3.876%, 6/1/56 (r) | | 77,170,000 | 56,893,278 | |
BAE Systems Asset Trust, 6.664%, 9/15/13 (e) | | 39,289,650 | 41,401,469 | |
Bank of America Corp., 8.00% to 1/30/18, floating rate | | | | |
thereafter to 12/29/49 (r) | | 25,980,000 | 26,011,176 | |
Bank of Nova Scotia Trust Company of New York, | | | | |
5.20%, 2/20/09 | | 10,000,000 | 10,180,464 | |
Bayview Research Center Finance Trust, 6.33%, 1/15/37 (e) | | 26,081,000 | 27,124,240 | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
Bear Stearns Co's, Inc.: | | | | |
3.456%, 4/29/08 (r) | | $39,660,000 | $39,495,480 | |
2.875%, 7/2/08 | | 2,200,000 | 2,155,989 | |
3.551%, 1/30/09 (r) | | 6,670,000 | 6,136,496 | |
4.92%, 3/30/09 (r) | | 7,920,000 | 7,526,988 | |
3.16%, 8/21/09 (r) | | 2,000,000 | 1,744,326 | |
3.183%, 2/23/10 (r) | | 1,510,000 | 1,436,576 | |
4.326%, 7/19/10 (r) | | 21,560,000 | 19,189,376 | |
4.034%, 10/22/10 (r) | | 6,000,000 | 5,492,253 | |
3.275%, 8/15/11 (r) | | 5,000,000 | 4,399,659 | |
3.964%, 10/28/14 (r) | | 27,470,000 | 19,632,191 | |
BellSouth Telecommunications, Inc., STEP, 0.00% to 12/15/15, | | | | |
6.65% thereafter to 12/15/95 (r) | | 20,000,000 | 9,994,440 | |
BF Saul, REIT, 7.50%, 3/1/14 | | 18,485,000 | 16,451,650 | |
BNSF Funding Trust I, 6.613% to 1/15/26, floating rate thereafter | | | | |
to 12/15/55 (r) | | 128,906,000 | 119,115,718 | |
Bunge Ltd. Finance Corp., 4.375%, 12/15/08 | | 20,150,000 | 20,146,840 | |
Burlington Northern Santa Fe Corp., 7.29%, 6/1/36 | | 4,675,000 | 5,093,677 | |
C8 Capital SPV Ltd., 6.64% to 12/31/14, floating rate | | | | |
thereafter to 12/31/49 (e)(r) | | 17,955,000 | 16,542,061 | |
C10 Capital SPV Ltd., 6.722% to 12/31/16, floating rate | | | | |
thereafter to 12/31/49 (e)(r) | | 20,470,000 | 18,916,327 | |
Calfrac Holdings LP, 7.75%, 2/15/15 (e) | | 13,750,000 | 12,959,375 | |
CAM US Finance SA Sociedad Unipersonal, 3.389%, | | | | |
2/1/10 (e)(r) | | 11,000,000 | 10,596,091 | |
Camp Pendleton & Quantico Housing LLC, 5.937%, 10/1/43 (e) | | 1,150,000 | 1,172,510 | |
Capmark Financial Group, Inc., 3.746%, 5/10/10 (e)(r) | | 12,260,000 | 8,582,000 | |
Cargill, Inc: | | | | |
5.144%, 1/21/11 (e)(r) | | 44,455,000 | 44,309,277 | |
5.20%, 1/22/13 (e) | | 15,000,000 | 15,296,475 | |
Chesapeake Energy Corp., 6.50%, 8/15/17 | | 25,851,000 | 24,881,588 | |
Chevy Chase Bank FSB, 6.875%, 12/1/13 | | 7,811,000 | 7,352,677 | |
Chugach Electric Association, Inc., 6.55%, 3/15/11 | | 2,780,000 | 3,012,975 | |
Cinergy Global Resources, Inc., 6.20%, 11/3/08 (e) | | 13,500,000 | 13,623,728 | |
CIT Group, Inc.: | | | | |
3.303%, 5/23/08 (r) | | 43,200,000 | 42,228,000 | |
3.19%, 8/17/09 (r) | | 2,745,000 | 2,292,075 | |
3.021%, 3/12/10 (r) | | 4,970,000 | 3,976,000 | |
6.10% to 3/15/17, floating rate thereafter to 3/15/67 (r) | | 24,487,000 | 11,386,455 | |
Citigroup Capital XXI, 8.30% to 12/21/37, floating rate | | | | |
thereafter to 12/21/57 (r) | | 12,160,000 | 12,043,791 | |
Citigroup, Inc.: | | | | |
6.50%, 1/18/11 | | 47,050,000 | 48,569,472 | |
5.125%, 2/14/11 | | 9,250,000 | 9,306,286 | |
6.875%, 3/5/38 | | 24,745,000 | 24,678,325 | |
Compass Bancshares, Inc., 5.143%, 10/9/09 (e)(r) | | 18,200,000 | 18,097,064 | |
Countrywide Financial Corp., 3.345%, 5/5/08 (r) | | 21,725,000 | 21,399,125 | |
Countrywide Home Loans, Inc., 3.25%, 5/21/08 | | 28,023,000 | 27,742,770 | |
Credit Agricole SA, 6.637% to 5/31/17, floating rate thereafter | | | | |
to 12/31/49 (e)(r) | | 138,410,000 | 107,217,784 | |
Dime Community Bancshares, Inc.: | | | | |
9.25%, 5/1/10 (e) | | 2,000,000 | 2,219,355 | |
9.25%, 5/1/10 | | 500,000 | 554,839 | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
Discover Financial Services: | | | | |
3.431%, 6/11/10 (e)(r) | | $31,550,000 | $28,438,570 | |
6.45%, 6/12/17 (e) | | 2,900,000 | 2,641,068 | |
Dominion Resources, Inc., 5.687%, 5/15/08 (r) | | 6,800,000 | 6,817,071 | |
Duke Energy Corp., 4.20%, 10/1/08 | | 9,081,000 | 9,144,497 | |
Enterprise Products Operating LP: | | | | |
8.375% to 8/1/16, floating rate thereafter to 8/1/66 (r) | | 4,470,000 | 4,298,112 | |
7.034% to 1/15/18, floating rate thereafter to 1/15/68 (r) | | 96,420,000 | 79,183,929 | |
Fidelity National Information Services, Inc., 4.75%, 9/15/08 | | 2,500,000 | 2,490,225 | |
First Republic Bank, 7.75%, 9/15/12 | | 500 | 541 | |
Fisher Scientific International, Inc., 6.125%, 7/1/15 | | 6,068,000 | 6,038,167 | |
FMG Finance Pty Ltd.: | | | | |
7.076%, 9/1/11 (e)(r) | | 60,535,000 | 58,567,613 | |
10.00%, 9/1/13 (e) | | 29,275,000 | 31,470,625 | |
Ford Motor Credit Co. LLC: | | | | |
6.625%, 6/16/08 | | 32,985,000 | 32,819,882 | |
8.708%, 4/15/12 (r) | | 97,488,000 | 91,157,855 | |
Fort Knox Military Housing: | | | | |
5.815%, 2/15/52 (e) | | 11,225,000 | 10,299,387 | |
5.915%, 2/15/52 (e) | | 10,455,000 | 9,600,722 | |
General Motors Acceptance Corp. LLC, 5.125%, 5/9/08 | | 32,233,000 | 32,031,663 | |
Giants Stadium LLC: | | | | |
13.50%, 4/1/29 (e)(r) | | 44,000,000 | 44,000,000 | |
11.50%, 4/1/37 (e)(r) | | 10,250,000 | 10,250,000 | |
Glitnir Banki HF: | | | | |
4.418%, 10/15/08 (e)(r) | | 30,230,000 | 29,165,870 | |
4.154%, 4/20/10 (e)(r) | | 42,295,000 | 34,904,279 | |
4.75%, 10/15/10 (e) | | 6,000,000 | 5,623,373 | |
4.334%, 1/21/11 (e)(r) | | 26,000,000 | 21,821,662 | |
6.375%, 9/25/12 (e) | | 77,675,000 | 66,165,069 | |
6.693% to 6/15/11, floating rate thereafter to 6/15/16 (e)(r) | | 8,400,000 | 6,417,944 | |
GMAC Commercial Mortgage Asset Corp., 6.107%, 8/10/52 (e) | | 37,050,000 | 37,221,542 | |
GMAC LLC: | | | | |
3.749%, 9/23/08 (r) | | 72,680,000 | 68,684,175 | |
4.315%, 5/15/09 (r) | | 91,630,000 | 79,716,540 | |
Golden State Petroleum Transport Corp., 8.04%, 2/1/19 | | 11,878,558 | 12,677,866 | |
Great River Energy: | | | | |
5.829%, 7/1/17 (e) | | 75,730,000 | 78,713,005 | |
6.254%, 7/1/38 (e) | | 17,750,000 | 18,226,410 | |
HBOS plc: | | | | |
6.657% to 5/21/37, floating rate thereafter to 5/29/49 (e)(r) | | 28,770,000 | 20,554,870 | |
6.413% to 10/1/35, floating rate thereafter to 9/29/49 (e)(r) | | 2,400,000 | 1,718,870 | |
Health Care Property Investors, Inc., 3.25%, 9/15/08 (r) | | 61,600,000 | 60,225,864 | |
Hewlett-Packard Co., 3.476%, 9/3/09 (r) | | 25,965,000 | 25,981,555 | |
HRPT Properties Trust, 3.40%, 3/16/11 (r) | | 22,985,000 | 21,676,591 | |
Independence Community Bank Corp., 3.75% to 4/1/09, | | | | |
floating rate thereafter to 4/1/14 (r) | | 19,210,000 | 19,028,102 | |
Ingersoll-Rand Co. Ltd., 6.015%, 2/15/28 | | 10,340,000 | 10,867,754 | |
Jersey Central Power & Light Co., 5.625%, 5/1/16 | | 4,985,000 | 4,903,919 | |
John Deere Capital Corp.: | | | | |
3.53%, 2/26/10 (r) | | 13,000,000 | 12,983,175 | |
4.698%, 1/18/11 (r) | | 52,400,000 | 52,287,001 | |
| | | | | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
JPMorgan Chase & Co.: | | | | |
1.91%, 10/28/08 (r) | | $72,800,000 | $72,789,634 | |
4.394%, 1/22/10 (r) | | 36,900,000 | 36,727,350 | |
Kaupthing Bank hf: | | | | |
4.958%, 1/15/10 (e)(r) | | 39,000,000 | 35,589,473 | |
5.75%, 10/4/11 (e) | | 3,350,000 | 2,674,094 | |
Koninklijke Philips Electronics NV, 4.89%, 3/11/11 (r) | | 62,930,000 | 62,958,807 | |
Kraft Foods, Inc., 3.596%, 8/11/10 (r) | | 2,300,000 | 2,287,311 | |
Land O'Lakes Capital Trust I, 7.45%, 3/15/28 (e) | | 50,648,000 | 44,317,000 | |
Lehman Brothers Holdings, Inc.: | | | | |
1.69%, 9/8/08 (r) | | 7,157,000 | 6,980,372 | |
3.233%, 5/25/10 (r) | | 17,000,000 | 15,361,326 | |
5.625%, 1/24/13 | | 13,750,000 | 13,303,703 | |
Leucadia National Corp.: | | | | |
7.00%, 8/15/13 | | 22,745,000 | 22,460,688 | |
8.125%, 9/15/15 | | 54,550,000 | 54,989,242 | |
LL & P Wind Energy, Inc. Washington Revenue Bonds: | | | | |
5.733%, 12/1/17 | | 8,060,000 | 8,376,274 | |
5.983%, 12/1/22 | | 14,695,000 | 15,708,220 | |
6.192%, 12/1/27 | | 3,925,000 | 4,033,840 | |
Lumbermens Mutual Casualty Co.: | | | | |
9.15%, 7/1/26 (e)(m)* | | 51,271,000 | 256,355 | |
8.30%, 12/1/37 (e)(m)* | | 33,720,000 | 168,600 | |
8.45%, 12/1/97 (e)(m)* | | 1,000,000 | 5,000 | |
M&I Marshall & Ilsley Bank, 3.328%, 12/4/12 (r) | | 11,675,000 | 10,900,551 | |
M&T Bank Corp., 6.625%, 12/4/17 | | 16,750,000 | 16,053,407 | |
McGuire Air Force Base Military Housing Project, 5.611%, | | | | |
9/15/51 (e) | | 11,420,000 | 10,151,010 | |
Medco Health Solutions, Inc., 6.125%, 3/15/13 | | 1,500,000 | 1,521,482 | |
Meridian Funding Co. LLC: | | | | |
5.378%, 6/9/08 (r) | | 214,167 | 212,491 | |
4.846%, 10/6/08 (e)(r) | | 3,484,464 | 3,476,530 | |
Mid-Atlantic Family Military Communities LLC, 5.24%, | | | | |
8/1/50 (e) | | 23,150,000 | 21,450,096 | |
Morgan Stanley: | | | | |
4.348%, 1/15/10 (r) | | 20,420,000 | 19,684,437 | |
4.538%, 1/15/10 (r) | | 11,380,000 | 11,067,126 | |
NationsBank Cap Trust III, 4.808%, 1/15/27 (r) | | 1,677,000 | 1,288,758 | |
Nationwide Health Properties, Inc.: | | | | |
6.50%, 7/15/11 | | 22,379,000 | 22,914,150 | |
6.90%, 10/1/37 | | 10,460,000 | 11,660,331 | |
6.59%, 7/7/38 | | 4,023,000 | 4,392,417 | |
Noble Group Ltd., 6.625%, 3/17/15 (e) | | 13,740,000 | 11,869,263 | |
NPS LLC, 9.80%, 12/28/16 (e)(r) | | 43,600,000 | 43,600,000 | |
Ohana Military Communities LLC: | | | | |
5.462%, 10/1/26 (e) | | 17,500,000 | 16,507,050 | |
5.88%, 10/1/51 (e) | | 20,000,000 | 18,774,000 | |
6.00%, 10/1/51 (e) | | 13,120,000 | 13,075,654 | |
6.15%, 10/1/51 (e) | | 10,000,000 | 9,966,100 | |
Orkney Re II plc, Series B, 6.096%, 12/21/35 (b)(e)(r)(s) | | 19,550,000 | 14,662,500 | |
Overseas Shipholding Group, Inc., 7.50%, 2/15/24 | | 20,465,000 | 17,599,900 | |
Pacific Pilot Funding Ltd., 4.644%, 10/20/16 (e)(r) | | 6,216,874 | 6,223,520 | |
Pedernales Electric Cooperative, 5.952%, 11/15/22 (e) | | 11,250,000 | 11,951,937 | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
Pepco Holdings, Inc., 3.701%, 6/1/10 (r) | | $5,000,000 | $4,918,121 | |
Pioneer Natural Resources Co.: | | | | |
5.875%, 7/15/16 | | 10,145,000 | 9,164,255 | |
6.65%, 3/15/17 | | 37,505,000 | 35,362,534 | |
6.875%, 5/1/18 | | 47,975,000 | 45,461,364 | |
7.20%, 1/15/28 | | 4,912,000 | 4,218,894 | |
Pitney Bowes, Inc., 5.60%, 3/15/18 | | 9,900,000 | 9,990,870 | |
PPF Funding, Inc., 5.35%, 4/15/12 (e) | | 3,000,000 | 2,990,539 | |
PPG Industries, Inc., 5.75%, 3/15/13 | | 10,000,000 | 10,312,940 | |
Preferred Term Securities IX Ltd., 5.608%, 4/3/33 (e)(r) | | 959,500 | 921,120 | |
Public Service Electric & Gas Co., 6.375%, 5/1/08 (r) | | 1,000,000 | 1,001,179 | |
Public Steers Trust, 6.646%, 11/15/18 (b) | | 4,434,934 | 3,332,543 | |
Puget Sound Energy, Inc., 7.02%, 12/1/27 | | 571,000 | 585,393 | |
RBS Capital Trust IV, STEP, 5.63%, 9/29/49 (r) | | 19,868,000 | 12,877,517 | |
Renaissance Ketchikan Group LLC, 5.645%, 6/2/08 (e) | | 15,000,000 | 15,000,000 | |
Residential Capital LLC: | | | | |
3.49%, 6/9/08 (r) | | 55,030,000 | 43,473,700 | |
7.875%, 6/30/10 | | 9,050,000 | 4,547,625 | |
Richmond County Capital Corp., 8.61%, 7/15/49 (e) | | 10,000,000 | 10,037,500 | |
Rouse Co., 8.00%, 4/30/09 | | 8,000,000 | 7,833,108 | |
Royal Bank of Scotland Group plc, 7.64% to 9/30/12, floating rate | | | | |
thereafter to 3/31/49 (b)(r) | | 36,395,000 | 31,343,010 | |
Santander Issuances SA Unipersonal, 2.902%, 6/20/16 (e)(r) | | 25,000,000 | 24,183,423 | |
Skyway Concession Co. LLC, 2.976%, 6/30/17 (e)(r) | | 9,615,000 | 8,521,707 | |
Sovereign Bancorp, Inc., 3.365%, 3/1/09 (r) | | 25,313,000 | 24,699,539 | |
Sovereign Bank, 4.375% to 8/1/08, floating rate thereafter to | | | | |
8/1/13 (r) | | 13,000,000 | 11,726,630 | |
SPARCS Trust 99-1, STEP, 0.00% to 4/15/19, 7.697% thereafter | | | | |
to 10/15/97 (b)(e)(r) | | 26,500,000 | 7,243,775 | |
Sterling Equipment, Inc., 6.125%, 9/28/19 | | 311,047 | 357,433 | |
SunTrust Bank, 7.25%, 3/15/18 | | 4,900,000 | 4,941,780 | |
TEPPCO Partners LP, 7.00% to 6/1/17, floating rate thereafter | | | | |
to 6/1/67 (r) | | 19,730,000 | 16,905,631 | |
TIERS Trust: | | | | |
8.45%, 12/1/17 (b)(e)(n)* | | 8,559,893 | 42,799 | |
STEP, 0.00% to 4/15/18, 7.697% thereafter to 10/15/97 (b)(e)(r) | | 11,001,000 | 3,308,991 | |
STEP, 0.00% to 10/15/28, 7.697% thereafter to 10/1/97 (b)(r) | | 15,000,000 | 1,733,550 | |
STEP, 0.00% to 10/15/33, 7.697% thereafter to | | | | |
10/15/97 (b)(e)(r) | | 12,295,000 | 839,749 | |
Toll Road Investors Partnership II LP, Zero Coupon: | | | | |
2/15/11 (e) | | 7,600,000 | 6,572,814 | |
2/15/18 (e) | | 7,900,000 | 4,919,678 | |
2/15/19 (e) | | 8,600,000 | 4,423,324 | |
2/15/28 (e) | | 16,737,000 | 5,410,559 | |
2/15/29 (e) | | 12,600,000 | 3,848,121 | |
2/15/43 (b)(e) | | 50,650,000 | 9,243,625 | |
2/15/45 (e) | | 650,326,134 | 95,213,781 | |
United Parcel Services, Inc., 2.674%, 3/27/50 (r) | | 2,030,000 | 1,819,626 | |
UnitedHealth Group, Inc., 4.462%, 2/7/11 (r) | | 14,940,000 | 14,845,189 | |
Verizon North, Inc., 5.634%, 1/1/21 (e) | | 4,785,000 | 4,683,399 | |
Verizon Pennsylvania, Inc., 8.35%, 12/15/30 | | 4,590,000 | 5,326,025 | |
Wachovia Bank, 6.60%, 1/15/38 | | 3,000,000 | 2,784,466 | |
| | | | | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
Wachovia Capital Trust III, 5.80% to 3/15/11, floating rate thereafter | | | | |
to 3/15/42 (r) | | $64,816,000 | $46,424,460 | |
Wachovia Corp., 7.98% to 3/15/18, floating rate thereafter | | | | |
to 2/28/49 (r) | | 11,925,000 | 11,611,949 | |
Wells Fargo Bank: | | | | |
6.584%, 9/1/27 (e) | | 6,080,000 | 6,306,054 | |
6.734%, 9/1/47 (e) | | 37,970,000 | 39,783,068 | |
Weyerhaeuser Co., 3.599%, 9/24/09 (r) | | 27,440,000 | 27,114,108 | |
Whitney National Bank, 5.875%, 4/1/17 | | 3,000,000 | 3,041,111 | |
Windsor Petroleum Transport Corp, 7.84%, 1/15/21 (e) | | 14,270,000 | 16,617,700 | |
Xerox Corp., 3.514%, 12/18/09 (r) | | 3,250,000 | 3,169,949 | |
Xstrata Finance Dubai Ltd., 3.42%, 11/13/09 (e)(r) | | 6,980,000 | 6,889,189 | |
| | | | | |
Total Corporate Bonds (Cost $3,974,924,070) | | | 3,678,726,467 | |
| | | | | |
Taxable Municipal Obligations - 7.1% | | | | |
Alabaster Alabama GO Bonds: | | | | |
5.38%, 4/1/19 | | 780,000 | 789,976 | |
5.40%, 4/1/20 | | 840,000 | 851,718 | |
5.45%, 4/1/21 | | 880,000 | 891,739 | |
Alameda California Corridor Transportation Authority Revenue | | | | |
Bonds, Zero Coupon: | | | | |
10/1/09 | | 5,155,000 | 4,899,724 | |
10/1/10 | | 16,230,000 | 15,032,388 | |
Anaheim California Redevelopment Agency Tax Allocation Bonds: | | | | |
5.759%, 2/1/18 | | 1,795,000 | 1,881,196 | |
6.506%, 2/1/31 | | 3,875,000 | 3,999,155 | |
Azusa California Redevelopment Agency Tax Allocation Bonds, | | | | |
5.765%, 8/1/17 | | 3,760,000 | 4,055,837 | |
Baltimore Maryland General Revenue Bonds: | | | | |
5.03%, 7/1/13 | | 1,460,000 | 1,521,145 | |
5.05%, 7/1/14 | | 1,520,000 | 1,586,880 | |
5.07%, 7/1/15 | | 1,340,000 | 1,390,907 | |
5.27%, 7/1/18 | | 2,435,000 | 2,482,896 | |
Bartow-Cartersville Georgia Joint IDA Revenue Bonds, 5.55%, | | | | |
11/1/20 | | 3,970,000 | 4,070,957 | |
Boynton Beach Florida Community Redevelopment Agency Tax | | | | |
Allocation Revenue Bonds, 5.10%, 10/1/15 | | 1,440,000 | 1,507,320 | |
Brownsville Texas Utility System Revenue Bonds: | | | | |
5.084%, 9/1/16 | | 2,000,000 | 2,024,180 | |
5.204%, 9/1/17 | | 2,275,000 | 2,290,061 | |
5.304%, 9/1/19 | | 1,000,000 | 1,009,960 | |
Burlingame California PO Revenue Bonds, 5.285%, 6/1/12 | | 1,775,000 | 1,854,982 | |
California Statewide Communities Development Authority | | | | |
Revenue Bonds: | | | | |
5.44%, 8/1/10 | | 1,560,000 | 1,623,430 | |
5.61%, 8/1/14 | | 2,270,000 | 2,465,538 | |
Zero Coupon, 6/1/15 | | 3,425,000 | 2,502,168 | |
Zero Coupon, 6/1/15 | | 1,205,000 | 880,325 | |
Zero Coupon, 6/1/16 | | 2,620,000 | 1,793,102 | |
| | | | | |
| | | | | |
| | | Principal | | |
Taxable Municipal Obligations - Cont'd | | Amount | Value | |
California Statewide Communities Development Authority | | | | |
Revenue Bonds (Cont'd): | | | | |
Zero Coupon, 6/1/17 | | $2,710,000 | $1,723,614 | |
Zero Coupon, 6/1/17 | | 1,835,000 | 1,167,097 | |
Zero Coupon, 6/1/18 | | 2,810,000 | 1,668,409 | |
Zero Coupon, 6/1/19 | | 1,975,000 | 1,092,531 | |
Chicago Illinois GO Bonds, 5.30%, 1/1/14 | | 1,940,000 | 1,999,888 | |
College Park Georgia Revenue Bonds: | | | | |
5.631%, 1/1/11 | | 4,965,000 | 5,219,804 | |
5.658%, 1/1/12 | | 2,500,000 | 2,632,175 | |
5.688%, 1/1/13 | | 5,540,000 | 5,861,929 | |
Commonwealth Pennsylvania Financing Authority Revenue Bonds, | | | | |
5.631%, 6/1/23 | | 8,025,000 | 8,786,171 | |
Detroit Michigan GO Bonds, 5.15%, 4/1/25 | | 14,605,000 | 13,021,672 | |
Eugene Oregon Electric Utilities Revenue Bonds, Zero Coupon, | | | | |
8/1/25 | | 1,500,000 | 561,495 | |
Fairfield California PO Revenue Bonds, 5.34%, 6/1/25 | | 1,960,000 | 1,864,685 | |
Florida State First Governmental Financing Commission | | | | |
Revenue Bonds: | | | | |
5.05%, 7/1/14 | | 285,000 | 295,639 | |
5.10%, 7/1/15 | | 300,000 | 309,696 | |
Fort Wayne Indiana Redevelopment District Revenue Bonds, | | | | |
5.24%, 6/1/21 | | 1,250,000 | 1,260,388 | |
Grant County Washington Public Utility District No. 2 Revenue | | | | |
Bonds: | | | | |
4.76%, 1/1/13 | | 400,000 | 407,340 | |
5.11%, 1/1/13 | | 1,210,000 | 1,250,571 | |
5.29%, 1/1/20 | | 2,415,000 | 2,436,107 | |
5.48%, 1/1/21 | | 990,000 | 1,034,807 | |
Hoffman Estates Illinois GO Bonds, 5.15%, 12/1/17 | | 1,135,000 | 1,137,054 | |
Howell Township New Jersey School District GO Bonds, | | | | |
5.30%, 7/15/19 | | 660,000 | 689,535 | |
Indiana State Bond Bank Revenue Bonds: | | | | |
5.72%, 1/15/15 | | 2,430,000 | 2,584,645 | |
5.82%, 7/15/17 | | 3,925,000 | 4,094,089 | |
6.01%, 7/15/21 | | 19,715,000 | 21,120,088 | |
Inglewood California Pension Funding Revenue Bonds: | | | | |
4.79%, 9/1/11 | | 235,000 | 235,183 | |
4.82%, 9/1/12 | | 250,000 | 250,120 | |
4.90%, 9/1/13 | | 260,000 | 260,112 | |
4.94%, 9/1/14 | | 275,000 | 275,105 | |
4.95%, 9/1/15 | | 285,000 | 285,060 | |
Jersey City New Jersey GO Bonds, 5.38%, 9/1/16 | | 7,755,000 | 8,206,419 | |
Kansas City Missouri Airport Revenue Bonds, 5.125%, 9/1/17 | | 4,485,000 | 4,493,028 | |
King County Washington Housing Authority Revenue Bonds, | | | | |
6.375%, 12/31/46 | | 4,550,000 | 4,707,066 | |
La Mesa California COPs, 6.32%, 8/1/26 | | 1,305,000 | 1,357,083 | |
La Verne California PO Revenue Bonds, 5.62%, 6/1/16 | | 1,000,000 | 1,047,290 | |
Lancaster Pennsylvania Parking Authority Revenue Bonds, | | | | |
5.95%, 12/1/25 | | 2,450,000 | 2,469,453 | |
| | | | | |
| | | | | |
| | | Principal | | |
Taxable Municipal Obligations - Cont'd | | Amount | Value | |
Long Beach California Bond Finance Authority Revenue Bonds: | | | | |
5.34%, 8/1/35 | | $5,000,000 | $4,418,800 | |
5.44%, 8/1/40 | | 5,000,000 | 4,421,300 | |
Metropolitan Washington DC Airport Authority System Revenue | | | | |
Bonds: | | | | |
5.59%, 10/1/25 | | 2,785,000 | 2,724,231 | |
5.69%, 10/1/30 | | 2,835,000 | 2,727,270 | |
Michigan State Municipal Bond Authority Revenue Bonds, | | | | |
5.252%, 6/1/15 | | 6,200,000 | 6,422,580 | |
Mississippi State Development Bank SO Revenue Bonds: | | | | |
5.21%, 7/1/08 | | 3,630,000 | 3,649,058 | |
5.20%, 7/1/09 | | 8,835,000 | 9,029,635 | |
5.19%, 7/1/10 | | 6,290,000 | 6,517,761 | |
5.21%, 7/1/11 | | 9,275,000 | 9,682,544 | |
5.04%, 6/1/20, Project A | | 1,940,000 | 1,977,248 | |
5.04%, 6/1/20, Project B | | 990,000 | 1,009,008 | |
5.375%, 1/1/22 | | 1,265,000 | 1,278,055 | |
5.60%, 1/1/26 | | 1,470,000 | 1,417,036 | |
Moreno Valley California Public Financing Authority Revenue | | | | |
Bonds, 5.549%, 5/1/27 | | 4,385,000 | 4,219,598 | |
Nevada State Department of Business & Industry Lease Revenue | | | | |
Bonds, 5.87%, 6/1/27 | | 1,210,000 | 1,213,291 | |
New York City IDA Revenue Bonds, 6.027%, 1/1/46 | | 12,000,000 | 12,136,560 | |
New York State Sales Tax Asset Receivables Corp. Revenue Bonds: | | | | |
3.60%, 10/15/08 | | 1,500,000 | 1,506,480 | |
4.06%, 10/15/10 | | 1,000,000 | 1,014,280 | |
4.42%, 10/15/12 | | 10,500,000 | 10,593,345 | |
Northwest Washington Electric Energy Revenue Bonds: | | | | |
4.06%, 7/1/09 | | 1,150,000 | 1,153,830 | |
4.49%, 7/1/11 | | 2,500,000 | 2,525,900 | |
Oakland California Redevelopment Agency Tax Allocation Bonds: | | | | |
5.252%, 9/1/16 | | 2,200,000 | 2,305,336 | |
5.653%, 9/1/21 | | 19,635,000 | 20,328,901 | |
Oceanside California PO Revenue Bonds: | | | | |
4.95%, 8/15/16 | | 2,215,000 | 2,214,867 | |
5.14%, 8/15/18 | | 2,760,000 | 2,746,669 | |
5.20%, 8/15/19 | | 3,070,000 | 3,067,206 | |
5.25%, 8/15/20 | | 3,395,000 | 3,403,012 | |
Oconomowoc Wisconsin Area School District GO Bonds, | | | | |
5.44%, 3/1/21 | | 780,000 | 798,080 | |
Philadelphia Pennsylvania IDA Revenue Bonds, Zero Coupon, | | | | |
4/15/19 | | 3,375,000 | 1,773,799 | |
Philadelphia Pennsylvania School District GO Bonds, 5.09%, | | | | |
7/1/20 | | 7,990,000 | 8,218,594 | |
Pittsburgh Pennsylvania GO Bonds: | | | | |
5.47%, 9/1/08 | | 4,890,000 | 4,932,005 | |
5.54%, 9/1/09 | | 19,670,000 | 20,171,978 | |
Pomona California Public Financing Authority Revenue Bonds, | | | | |
5.718%, 2/1/27 | | 6,015,000 | 5,904,384 | |
Rio Rancho New Mexico Event Center Revenue Bonds, 5.00%, | | | | |
6/1/20 | | 3,260,000 | 3,218,859 | |
| | | | | |
| | | Principal | | |
Taxable Municipal Obligations - Cont'd | | Amount | Value | |
Riverside California Public Financing Authority Tax Allocation | | | | |
Bonds: | | | | |
5.19%, 8/1/17 | | $2,025,000 | $2,040,208 | |
5.24%, 8/1/17 | | 3,250,000 | 3,381,332 | |
Sacramento City California Financing Authority Tax Allocation | | | | |
Revenue Bonds: | | | | |
5.11%, 12/1/13 | | 1,235,000 | 1,265,159 | |
5.54%, 12/1/20 | | 21,940,000 | 22,183,753 | |
San Bernardino California Joint Powers Financing Authority Tax | | | | |
Allocation Bonds, 5.625%, 5/1/16 | | 5,430,000 | 5,718,442 | |
San Diego California Redevelopment Agency Tax Allocation | | | | |
Bonds, 6.00%, 9/1/21 | | 2,515,000 | 2,662,907 | |
San Jose California Redevelopment Agency Tax Allocation Bonds: | | | | |
4.54%, 8/1/12 | | 3,105,000 | 3,137,913 | |
5.10%, 8/1/20 | | 3,960,000 | 3,920,440 | |
5.46%, 8/1/35 | | 5,300,000 | 4,897,306 | |
Santa Cruz County California Redevelopment Agency Tax | | | | |
Allocation Revenue Bonds, 5.60%, 9/1/25 | | 1,815,000 | 1,754,216 | |
Santa Fe Springs California Community Development Commission | | | | |
Tax Allocation Bonds, 5.35%, 9/1/18 | | 1,265,000 | 1,283,773 | |
Sonoma County California PO Revenue Bonds, 6.625%, 6/1/13 | | 7,570,000 | 8,358,037 | |
Thousand Oaks California Redevelopment Agency Tax | | | | |
Allocation Bonds: | | | | |
5.00%, 12/1/12 | | 675,000 | 695,871 | |
5.00%, 12/1/13 | | 710,000 | 732,770 | |
5.00%, 12/1/14 | | 745,000 | 767,201 | |
5.125%, 12/1/15 | | 785,000 | 806,878 | |
5.125%, 12/1/16 | | 830,000 | 839,960 | |
5.25%, 12/1/21 | | 5,070,000 | 5,107,771 | |
5.375%, 12/1/21 | | 4,880,000 | 4,954,615 | |
University of Central Florida COPs, 5.125%, 10/1/20 | | 3,750,000 | 3,377,812 | |
Utah State Housing Corp. Military Housing Revenue Bonds: | | | | |
5.392%, 7/1/50 | | 11,735,000 | 10,763,342 | |
5.442%, 7/1/50 | | 3,990,000 | 3,686,800 | |
Vigo County Indiana Economic Redevelopment Authority | | | | |
Revenue Bonds, 5.30%, 2/1/21 | | 2,750,000 | 2,763,062 | |
Virginia State Housing Development Authority Revenue Bonds, | | | | |
5.35%, 7/1/14 | | 2,025,000 | 2,141,437 | |
West Contra Costa California Unified School District COPs: | | | | |
5.03%, 1/1/20 | | 3,190,000 | 3,172,965 | |
5.15%, 1/1/24 | | 3,630,000 | 3,388,169 | |
Wilkes-Barre Pennsylvania GO Bonds, 5.28%, 11/15/19 | | 2,025,000 | 2,042,577 | |
| | | | | |
Total Taxable Municipal Obligations (Cost $433,691,217) | | | 441,777,148 | |
| | | | | |
U.S. Government Agencies | | | | |
and Instrumentalities - 15.7% | | | | |
Central American Bank For Economic Integration AID Bonds, Guaranteed by the United States Agency of International Development, 6.79%, 10/1/10 | | 2,608,577 | 2,763,422 | |
Fannie Mae, 5.50%, 12/25/16 | | 4,988,639 | 5,085,836 | |
| | | | | |
U.S. Government Agencies | | Principal | | |
and Instrumentalities - Cont'd | | Amount | Value | |
Federal Home Loan Bank Discount Notes, 4/1/08 | | $886,000,000 | $886,000,000 | |
Freddie Mac: | | | | |
STEP, 4.10% to 1/28/09, 5.80% thereafter to 1/28/14 (r) | | 5,000,000 | 5,054,554 | |
5.125%, 12/15/13 | | 47,228,522 | 47,901,613 | |
5.00%, 10/15/29 | | 9,292,204 | 548,821 | |
6.00%, 12/15/32 | | 22,355,190 | 4,530,686 | |
Ginnie Mae, 11.00%, 10/15/15 | | 537 | 597 | |
Government National Mortgage Association, 5.50%, 1/16/32 | | 14,910,773 | 2,088,528 | |
Overseas Private Investment Corp., 4.05%, 11/15/14 | | 2,168,000 | 2,250,319 | |
Small Business Administration: | | | | |
5.038%, 3/10/15 | | 6,453,125 | 6,463,869 | |
4.94%, 8/10/15 | | 16,345,805 | 16,353,196 | |
| | | | | |
Total U.S. Government Agencies and Instrumentalities | | | | |
(Cost $978,166,567) | | | 979,041,441 | |
| | | | | |
U.S. Treasury - 6.2% | | | | |
United States Treasury Bonds: | | | | |
3.50%, 12/15/09 | | 280,200,000 | 289,306,503 | |
2.00%, 2/28/10 | | 24,000,000 | 24,187,500 | |
5.25%, 2/15/29 | | 23,000,000 | 25,918,125 | |
5.375%, 2/15/31 | | 125,000 | 144,492 | |
4.75%, 2/15/37 | | 15,823,000 | 17,007,254 | |
5.00%, 5/15/37 | | 11,396,000 | 12,742,153 | |
United States Treasury Notes: | | | | |
2.75%, 2/28/13 | | 6,910,000 | 7,009,331 | |
5.125%, 5/15/16 | | 9,226,000 | 10,507,549 | |
4.625%, 2/15/17 | | 70,000 | 76,891 | |
3.50%, 2/15/18 | | 1,793,000 | 1,803,646 | |
| | | | | |
Total U.S. Treasury (Cost $387,395,457) | | | 388,703,444 | |
| | | | | |
Equity Securities - 2.4% | | Shares | | |
Conseco, Inc.: | | | | |
Common * | | 1,204,755 | 12,288,501 | |
Warrants (strike price $27.60/share, expires 9/10/08)* | | 4,668 | 93 | |
Double Eagle Petroleum Co., Preferred | | 105,000 | 2,588,250 | |
Fannie Mae, Series S Preferred | | 996,000 | 23,953,800 | |
First Republic Preferred Capital Corp., Preferred (e) | | 6,050 | 6,546,100 | |
Ford Motor Co. * | | 485,514 | 2,777,140 | |
Freddie Mac, Series Z Preferred | | 652,000 | 15,908,800 | |
MFH Financial Trust I, Preferred (e) | | 400,000 | 40,850,000 | |
| | | | | |
Equity Securities - Cont'd | | Shares | Value | |
Roslyn Real Estate Asset Corp., Preferred | | $222 | $22,304,063 | |
WoodBourne Pass-Through Trust, Preferred (b)(e) | | 258 | 25,727,438 | |
| | | | | |
Total Equity Securities (Cost $164,222,027) | | | 152,944,185 | |
| | | | | |
TOTAL INVESTMENTS (Cost $6,379,703,348) - 97.3% | | | 6,069,777,066 | |
Other assets and liabilities, net - 2.7% | | | 166,292,155 | |
Net Assets - 100% | | | $6,236,069,221 | |
| | | | | |
Net Assets Consist of: | | | | |
Paid-in capital applicable to the following shares of beneficial interest, unlimited number of no par value shares authorized: | | | | |
Class A: 321,386,999 shares outstanding | | | $5,432,352,226 | |
Class B: 9,100,573 shares outstanding | | | 156,935,667 | |
Class C: 32,750,757 shares outstanding | | | 550,295,983 | |
Class I: 23,739,796 shares outstanding | | | 396,338,735 | |
Class R: 215,695 shares outstanding | | | 3,589,310 | |
Class Y: 10,587 shares outstanding | | | 172,188 | |
Undistributed net investment income (loss) | | | (646,224) | |
Accumulated net realized gain (loss) on investments | | | 11,230,471 | |
Net unrealized appreciation (depreciation) on investments | | | (314,199,135) | |
Net Assets | | | $6,236,069,221 | |
| | | | | |
Net Asset Value Per Share | | | | |
Class A (based on net assets of $5,176,619,720) | | | $16.11 | |
Class B (based on net assets of $146,076,731) | | | $16.05 | |
Class C (based on net assets of $527,150,430) | | | $16.10 | |
Class I (based on net assets of $382,564,784) | | | $16.11 | |
Class R (based on net assets of $3,486,369) | | | $16.16 | |
Class Y (based on net assets of $171,187) | | | $16.17 | |
Futures | | # of
Contracts | Expiration
Date | Underlying
Face Amount
at Value | Unrealized
Appreciation
(Depreciation) |
Purchased: | | | | | |
U.S. Treasury Bonds | | 2,844 | 6/08 | $337,858,313 | ($1,428,003) |
Total Purchased | | | | | ($1,428,003) |
| | | | | | |
Sold: | | | �� | | |
2 Year U.S. Treasury Notes | | 2,305 | 6/08 | $494,782,656 | ($1,566,501) |
5 Year U.S. Treasury Notes | | 383 | 6/08 | 43,751,766 | 213,630 |
10 Year U.S. Treasury Notes | | 3,384 | 6/08 | 402,537,375 | (1,491,979) |
Total Sold | | | | | ($2,844,850) |
* Non-income producing security.
(b) This security was valued by the Board of Trustees. See Note A.
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(k) Alliance Bankcorp and its affiliates filed for chapter 7 bankruptcy on July 13, 2007.This security is no longer accruing interest.
(m) The Illinois Insurance Department prohibited Lumbermens from making interest payments. This security is no longer accruing interest.
(n) The Illinois Insurance Department prohibited Lumbermens from making interest payments.
This TIERS security is based on interest payments from Lumbermens. This security is no longer accruing interest.
(p) The State of New York Insurance Department has prohibited Atlantic Mutual Insurance Co. from making interest payments. This security is no longer accruing interest.
(r) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
(s) Subsequent to period end, this security stopped accruing interest.
Abbreviations:
COPs: Certificates of Participation
FSB: Federal Savings Bank
GO: General Obligation
IDA: Industrial Development Authority
LLC: Limited Liability Corporation
LP: Limited Partnership
MFH: Multi - Family Housing
PO: Pension Obligation
SO: Special Obligation
STEP: Stepped Coupon bond for which the coupon rate of interest will adjust on specific future date(s).
VRDN: Variable Rate Demand Note
See notes to financial statements.
Statement of Operations
Six Months Ended March 31, 2008
Net Investment Income | |
Investment Income: | |
Interest income | $187,974,550 |
Dividend income | 5,672,595 |
Total investment income | 193,647,145 |
| | |
Expenses: | |
Investment advisory fee | 11,954,259 |
Administrative fees | 8,045,505 |
Transfer agency fees and expenses | 6,065,870 |
Distribution plan expenses: | |
Class A | 6,483,816 |
Class B | 894,261 |
Class C | 2,609,817 |
Class R | 5,866 |
Trustees' fees and expenses | 173,022 |
Custodian fees | 317,000 |
Reports to shareholders | 649,094 |
Professional fees | 60,349 |
Accounting fees | 329,127 |
Miscellaneous | 105,733 |
Total expenses | 37,693,719 |
Reimbursement from Advisor: | |
Class R | (7,583) |
Class Y | (1,190) |
Fees paid indirectly | (190,141) |
Net expenses | 37,494,805 |
| | |
Net Investment Income | 156,152,340 |
| | |
Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) on: | |
Investments | (9,330,484) |
Futures | 35,642,280 |
| | 26,311,796 |
Change in unrealized appreciation (depreciation) on: | |
Investments | (151,312,807) |
Futures | (5,611,475) |
| | (156,924,282) |
| | |
Net Realized and Unrealized Gain | |
(Loss) | (130,612,486) |
| | |
Increase (Decrease) in Net Assets | |
Resulting From Operations | $25,539,854 |
See notes to financial statements.
Statements of Changes in Net Assets
| | | Six Months Ended | Year Ended | |
| | | March 31, | September 30, | |
Increase (Decrease) in Net Assets | | 2008 | 2007 | |
Operations: | | | | |
Net investment income | | $156,152,340 | $243,301,117 | |
Net realized gain (loss) | | 26,311,796 | 103,389,772 | |
Change in unrealized appreciation (depreciation) | | (156,924,282) | (104,892,865) | |
| | | | | |
Increase (Decrease) in Net Assets | | | | |
Resulting From Operations | | 25,539,854 | 241,798,024 | |
| | | | | |
Distributions to shareholders from | | | | |
Net investment income: | | | | |
Class A Shares | | (129,904,067) | (209,655,214) | |
Class B Shares | | (3,745,774) | (9,765,931) | |
Class C Shares | | (11,285,547) | (18,117,237) | |
Class I Shares | | (9,941,826) | (9,061,107) | |
Class R Shares | | (55,514) | (8,845) | |
Class Y Shares | | (266) | -- | |
Net realized gain: | | | | |
Class A Shares | | (87,053,456) | -- | |
Class B Shares | | (3,137,805) | -- | |
Class C Shares | | (8,738,853) | -- | |
Class I Shares | | (5,705,708) | -- | |
Class R Shares | | (31,543) | | |
Total distributions | | (259,600,359) | (246,608,334) | |
Capital share transactions: | | | | |
Shares sold: | | | | |
Class A Shares | | 974,637,703 | 2,070,918,612 | |
Class B Shares | | 7,653,423 | 18,120,638 | |
Class C Shares | | 79,365,900 | 188,665,383 | |
Class I Shares | | 99,089,423 | 244,487,418 | |
Class R Shares | | 2,505,443 | 1,305,187 | |
Class Y Shares | | 172,000 | -- | |
Reinvestment of distributions: | | | | |
Class A Shares | | 167,729,397 | 161,710,542 | |
Class B Shares | | 5,101,235 | 6,876,409 | |
Class C Shares | | 10,504,267 | 9,390,349 | |
Class I Shares | | 13,802,664 | 8,615,583 | |
Class R Shares | | 18,249 | 175 | |
Class Y Shares | | 188 | -- | |
Redemption fees: | | | | |
Class A Shares | | 100,670 | 109,311 | |
Class B Shares | | 402 | 1,605 | |
Class C Shares | | 3,392 | 2,257 | |
Class I Shares | | 690 | 515 | |
Class R Shares | | 1 | -- | |
Class Y Shares | | -- | -- | |
Shares redeemed: | | | | |
Class A Shares | | (796,456,040) | (1,063,599,149) | |
Class B Shares | | (67,372,851) | (103,373,508) | |
Class C Shares | | (47,476,195) | (83,873,475) | |
Class I Shares | | (29,057,163) | (16,944,144) | |
Class R Shares | | (237,086) | (2,659) | |
Total capital share transactions | | 420,085,712 | 1,442,411,049 | |
| | | | | |
Total Increase (Decrease) in Net Assets | | 186,025,207 | 1,437,600,7393 | |
Statements of Changes in Net Assets
| | | Six Months Ended | Year Ended | |
| | | March 31, | September 30, | |
Net Assets | | 2008 | 2007 | |
Beginning of period | | $6,050,044,014 | $4,612,443,275 | |
End of period (including distributions in excess of net investment income of $646,224 and $1,865,570, respectively) | | $6,236,069,221 | $6,050,044,014 | |
| | | | | |
Capital Share Activity | | | | |
Shares sold: | | | | |
Class A Shares | | 58,757,836 | 123,524,457 | |
Class B Shares | | 462,781 | 1,083,060 | |
Class C Shares | | 4,788,169 | 11,258,351 | |
Class I Shares | | 5,977,462 | 14,614,029 | |
Class R Shares | | 151,052 | 77,985 | |
Class Y Shares | | 10,575 | -- | |
Reinvestment of distributions: | | | | |
Class A Shares | | 10,154,148 | 9,670,355 | |
Class B Shares | | 309,380 | 411,863 | |
Class C Shares | | 636,388 | 561,898 | |
Class I Shares | | 835,447 | 515,953 | |
Class R Shares | | 1,110 | 10 | |
Class Y Shares | | 12 | -- | |
Shares redeemed: | | | | |
Class A Shares | | (48,123,488) | (63,533,244) | |
Class B Shares | | (4,073,671) | (6,189,773) | |
Class C Shares | | (2,868,612) | (5,010,034) | |
Class I Shares | | (1,761,401) | (1,013,745) | |
Class R Shares | | (14,302) | (160) | |
Total capital share activity | | 25,242,886 | 85,971,005 | |
See notes to financial statements.
Notes to Financial Statements
Note A ---- Significant Accounting Policies
General: The Calvert Income Fund (the Fund), a series of The Calvert Fund, is registered under the Investment Company Act of 1940 as a non-diversified, open-end management investment company. The operations of each series are accounted for separately. The Fund offers six classes of shares of beneficial interest. Class A shares are sold with a maximum front-end sales charge of 3.75%. Class B shares are sold without a front-end sales charge. With certain exceptions, the Fund will impose a deferred sales charge at the time of redemption, depending on how long investors have owned the shares. Class C shares are sold without a front-end sales charge. With certain exceptions, the Fund will impose a deferred sales charge on shares sold within one year of purchase. Class B and Class C shares have higher levels of expenses than Class A shares. Class I shares require a minimum account balance of $1,000,000. The $1 million minimum initial investment may be waived for certain institutional accounts, where it is b elieved to be in the best interest of the Fund and its shareholders. Class I shares have no front-end or deferred sales charge and have lower levels of expenses than Class A shares. Class R shares are generally only available to certain retirement plans where plan level or omnibus accounts are held on the books of the Fund. Class R shares have no front-end or deferred sales charge and have a higher level of expenses than Class A Shares. Effective February 29, 2008, the Fund began to offer Class Y shares. Class Y shares are generally only available to wrap or similar fee-based programs offered by financial intermediaries that have entered into an agreement with the Fund's Distributor to offer Class Y shares. Each class has different: (a) dividend rates due to differences in Distribution Plan expenses and other class specific expenses, (b) exchange privileges and (c) class specific voting rights.
Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Fund uses independent pricing services approved by the Board of Trustees to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the Fund's net asset value determination, that are expected to materially affect the value of those securities, then the y are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Fund may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Trustees.
In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
At March 31, 2008, securities valued at $145,282,653 or 2.3% of net assets were fair valued in good faith under the direction of the Board of Trustees.
Repurchase Agreements: The Fund may enter into repurchase agreements with recognized financial institutions or registered broker/dealers and, in all instances, holds underlying securities with a value exceeding the total repurchase price, including accrued interest. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its value and a possible loss of income or value if the counterparty fails to perform in accordance with the terms of the agreement.
Futures Contracts: The Fund may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Fund's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms.
Short Sales: The Fund may use a hedging technique that involves short sales of U.S. Treasury securities for the purposes of managing the duration of the Fund. Any short sales are covered with an equivalent amount of high-quality, liquid securities.
Security Transactions and Net Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Fund is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Investment income and realized and unrealized gains and losses are allocated to separate classes of shares based upon the relative net assets of each class. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. (See the Schedule of Investments footnotes on page 22.) A debt obligation may be removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured. Expenses arising in connection with a class are charged directly to that class. Expenses common to the classes are allocated to each class in proportion to their relative net assets. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates.
Foreign Currency Transactions: The Fund's accounting records are maintained in U. S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are converted into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities and foreign currencies is included in the net realized and unrealized gain or loss on securities and foreign currencies.
Distributions to Shareholders: Distributions to shareholders are recorded by the Fund on ex-dividend date. Dividends from net investment income are paid monthly. Distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Fund's capital accounts to reflect income and gains available for distribution under income tax regulations.
Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Actual results could differ from those estimates.
Redemption Fees: The Fund charges a 2% redemption fee on redemptions, including exchanges, made within 30 days of purchase in the same Fund (within seven days for Class I and Class R shares). The redemption fee is paid to the Class of the Fund from which the redemption is made, and is accounted for as an addition to paid-in capital. The fee is intended to discourage market-timers by ensuring that short-term trading costs are borne by the investors making the transactions and not the shareholders already in the Fund.
Expense Offset Arrangements: The Fund has arrangements with its custodian banks whereby the custodian's fees may be paid indirectly by credits earned on the Fund's cash on deposit with the banks. These credits are used to reduce the Fund's expenses. Such deposit arrangements may be an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is required since the Fund intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.
New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" -- an interpretation of FASB Statement 109 (FIN 48), effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years ended September 30, 2004 -- 2007) for purposes of implementing FIN 48, and has concluded that as of March 31, 2008, no provision for income tax is required in the Fund's financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of March 31, 2008, the Fund does not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures may be requi red about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging Activities." The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effect on the Fund's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS No. 161 will have on the Fund's financial statements and related disclosures.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the Advisor) is wholly-owned by Calvert Group, Ltd. (Calvert), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Trustees of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly based on the following annual rates of average daily net assets: .40% on the first $2 billion, .375% on the next $5.5 billion, .35% on the next $2.5 billion and .325% over $10 billion. Under the terms of the agreement, $2,032,772 was payable at period end. In addition, $1,060,745 was payable at period end for operating expenses paid by the advisor during March 2008.
The Advisor has contractually agreed to limit net annual fund operating expenses through January 31, 2009 for Class R. The contractual expense cap is 1.47%. For the purposes of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes and extraordinary expenses. To the extent any expense offset credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement. The Advisor voluntarily reimbursed Class Y shares for expenses of $1,190 for the period ended March 31, 2008.
Calvert Administrative Services Company, an affiliate of the Advisor, provides administrative services to the Fund for an annual fee, payable monthly. Classes A, B, C, R and Y shares pay an annual rate of .30% on the first $3 billion, 0.25% on the next $2 billion, and 0.225% over $5 billion of the combined assets of the classes. Class I shares pay an annual rate of .10%, based on their average daily net assets. Under the terms of the agreement, $1,362,973 was payable at period end.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Fund. Distribution Plans, adopted by Class A, B, C and R shares, allow the Fund to pay the Distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed .50%, 1.00%, 1.00% and .75% annually of the Fund's average daily net assets of Class A, B, C and R, respectively. The amount actually paid by the Fund is an annualized fee, payable monthly of .25%, 1.00%, 1.00% and .50% of the Fund's average daily net assets of Class A, B, C, and R, respectively. Class I and Y shares do not have Distribution Plan expenses. Under the terms of the agreement, $1,680,256 was payable at period end.
The Distributor received $202,675 as its portion of commissions charged on sales of the Fund's Class A shares for the six months ended March 2008.
Calvert Shareholder Services, Inc. (CSSI), an affiliate of the Advisor, is the shareholder servicing agent for the Fund. For its services, CSSI received a fee of $441,761 for the six months ended March 31, 2008. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent. Under the terms of the agreement, $74,962 was payable at period end.
Each Trustee of the Fund who is not an employee of the Advisor or its affiliates receives an annual retainer of $32,000 plus up to $1,500 for each Board and Committee meeting attended. Trustee's fees are allocated to each of the funds served.
Note C -- Investment Activity
During the period, cost of purchases and proceeds from sales of investments, other than short-term and U.S. government securities, were $5,755,248,416 and $5,629,280,912, respectively. U.S. government security purchases and sales were $22,006,828,936 and $22,515,965,273, respectively.
The cost of investments owned at March 31, 2008 for federal income tax purposes was $6,393,081,660. Net unrealized depreciation aggregated $323,304,594, of which $57,772,468 related to appreciated securities and $381,077,062 related to depreciated securities.
The Fund may sell or purchase securities to and from other funds managed by the Advisor, typically short-term variable rate demand notes. Interportfolio transactions are primarily used for cash management purposes. Interportfolio transactions are made pursuant to Rule 17a-7 of the Investment Company Act of 1940. For the six months ended March 31, 2008, such purchase and sales transactions were $36,415,000 and $36,415,000, respectively.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds (except for the Calvert Social Investment Fund's Balanced and Enhanced Equity Portfolios, the CVS Social Balanced Portfolio) and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the overnight Federal Funds Rate plus .50% per annum. A commitment fee of .10% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at March 31, 2008. For the six months ended March 31, 2008, borrowings by the Fund under the Agreement were as follows:
| Average
Daily
Balance | Weighted
Average
Interest
Rate | Maximum
Amount
Borrowed | Month of
Maximum
Amount
Borrowed |
| | $757,633 | 3.96% | $41,705,237 | March 2008 |
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class A Shares | | 2008 | 2007 (z) | 2006 | |
Net asset value, beginning | | $16.72 | $16.72 | $17.03 | |
Income from investment operations | | | | | |
Net investment income | | .42 | .77 | .75 | |
Net realized and unrealized gain (loss) | | (.33) | .01 | (.09) | |
Total from investment operations | | .09 | .78 | .66 | |
Distributions from | | | | | |
Net investment income | | (.42) | (.78) | (.75) | |
Net realized gain | | (.28) | -- | (.22) | |
Total distributions | | (.70) | (.78) | (.97) | |
Total increase (decrease) in net asset value | | (.61) | -- | (0.31) | |
Net asset value, ending | | $16.11 | $16.72 | $16.72 | |
| | | | | | |
Total return* | | .47% | 4.74% | 4.02% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 5.05% (a) | 4.60% | 4.54% | |
Total expenses | | 1.16% (a) | 1.19% | 1.20% | |
Expenses before offsets | | 1.16% (a) | 1.19% | 1.20% | |
Net expenses | | 1.15% (a) | 1.18% | 1.20% | |
Portfolio turnover | | 551% | 877% | 578% | |
Net assets, ending (in thousands) | | $5,176,620 | $5,024,998 | $3,860,160 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class A Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $17.37 | $17.53 | $16.14 | |
Income from investment operations | | | | | |
Net investment income | | .57 | .53 | .79 | |
Net realized and unrealized gain (loss) | | .09 | .65 | 1.48 | |
Total from investment operations | | .66 | 1.18 | 2.27 | |
Distributions from | | | | | |
Net investment income | | (.57) | (.54) | (.78) | |
Net realized gain | | (.43) | (.80) | (.10) | |
Total distributions | | (1.00) | (1.34) | (.88) | |
Total increase (decrease) in net asset value | | (.34) | (.16) | 1.39 | |
Net asset value, ending | | $17.03 | $17.37 | $17.53 | |
| | | | | | |
Total return* | | 3.95% | 7.03% | 14.51% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 3.36% | 3.08% | 4.69% | |
Total expenses | | 1.20% | 1.21% | 1.21% | |
Expenses before offsets | | 1.20% | 1.21% | 1.21% | |
Net expenses | | 1.19% | 1.20% | 1.21% | |
Portfolio turnover | | 742% | 824% | 1,046% | |
Net assets, ending (in thousands) | | $2,976,466 | $2,309,621 | $1,673,699 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class B Shares | | 2008 | 2007 (z) | 2006 | |
Net asset value, beginning | | $16.68 | $16.69 | $17.01 | |
Income from investment operations | | | | | |
Net investment income | | .36 | .64 | .63 | |
Net realized and unrealized gain (loss) | | (.35) | .01 | (.10) | |
Total from investment operations | | .01 | .65 | .53 | |
Distributions from | | | | | |
Net investment income | | (.36) | (.66) | (.63) | |
Net realized gain | | (.28) | -- | (.22) | |
Total distributions | | (.64) | (.66) | (.85) | |
Total increase (decrease) in net asset value | | (.63) | (0.01) | (0.32) | |
Net asset value, ending | | $16.05 | $16.68 | $16.69 | |
| | | | | | |
Total return* | | .02% | 3.94% | 3.25% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 4.22% (a) | 3.82% | 3.74% | |
Total expenses | | 1.98% (a) | 1.96% | 1.95% | |
Expenses before offsets | | 1.98% (a) | 1.96% | 1.95% | |
Net expenses | | 1.98% (a) | 1.95% | 1.94% | |
Portfolio turnover | | 551% | 877% | 578% | |
Net assets, ending (in thousands) | | $146,077 | $206,805 | $285,301 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class B Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $17.35 | $17.52 | $16.13 | |
Income from investment operations | | | | | |
Net investment income | | .45 | .41 | .66 | |
Net realized and unrealized gain (loss) | | .09 | .64 | 1.48 | |
Total from investment operations | | .54 | 1.05 | 2.14 | |
Distributions from | | | | | |
Net investment income | | (.45) | (.42) | (.65) | |
Net realized gain | | (.43) | (.80) | (.10) | |
Total distributions | | (.88) | (1.22) | (.75) | |
Total increase (decrease) in net asset value | | (.34) | (.17) | 1.39 | |
Net asset value, ending | | $17.01 | $17.35 | $17.52 | |
| | | | | | |
Total return* | | 3.22% | 6.20% | 13.67% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 2.60% | 2.37% | 3.94% | |
Total expenses | | 1.94% | 1.95% | 1.94% | |
Expenses before offsets | | 1.94% | 1.95% | 1.94% | |
Net expenses | | 1.93% | 1.93% | 1.94% | |
Portfolio turnover | | 742% | 824% | 1,046% | |
Net assets, ending (in thousands) | | $346,829 | $373,648 | $369,355 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class C Shares | | 2008 | 2007 (z) | 2006 | |
Net asset value, beginning | | $16.71 | $16.70 | $17.02 | |
Income from investment operations | | | | | |
Net investment income | | .36 | .65 | .63 | |
Net realized and unrealized gain (loss) | | (.33) | .02 | (.10) | |
Total from investment operations | | .03 | .67 | .53 | |
Distributions from | | | | | |
Net investment income | | (.36) | (.66) | (.63) | |
Net realized gain | | (.28) | -- | (.22) | |
Total distributions | | (.64) | (.66) | (.85) | |
Total increase (decrease) in net asset value | | (.61) | 0.01 | (0.32) | |
Net asset value, ending | | $16.10 | $16.71 | $16.70 | |
| | | | | | |
Total return* | | .13% | 4.09% | 3.24% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 4.36% (a) | 3.93% | 3.86% | |
Total expenses | | 1.86% (a) | 1.87% | 1.90% | |
Expenses before offsets | | 1.86% (a) | 1.87% | 1.90% | |
Net expenses | | 1.85% (a) | 1.86% | 1.89% | |
Portfolio turnover | | 551% | 877% | 578% | |
Net assets, ending (in thousands) | | $527,150 | $504,417 | $390,620 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class C Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $17.35 | $17.52 | $16.13 | |
Income from investment operations | | | | | |
Net investment income | | .45 | .41 | .67 | |
Net realized and unrealized gain (loss) | | .10 | .64 | 1.48 | |
Total from investment operations | | .55 | 1.05 | 2.15 | |
Distributions from | | | | | |
Net investment income | | (.45) | (.42) | (.66) | |
Net realized gain | | (.43) | (.80) | (.10) | |
Total distributions | | (.88) | (1.22) | (.76) | |
Total increase (decrease) in net asset value | | (.33) | (.17) | 1.39 | |
Net asset value, ending | | $17.02 | $17.35 | $17.52 | |
| | | | | | |
Total return* | | 3.29% | 6.23% | 13.72% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 2.66% | 2.39% | 3.98% | |
Total expenses | | 1.91% | 1.92% | 1.89% | |
Expenses before offsets | | 1.91% | 1.92% | 1.89% | |
Net expenses | | 1.90% | 1.91% | 1.88% | |
Portfolio turnover | | 742% | 824% | 1,046% | |
Net assets, ending (in thousands) | | $285,889 | $231,952 | $194,686 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class I Shares | | 2008 | 2007 (z) | 2006 | |
Net asset value, beginning | | $16.72 | $16.70 | $17.02 | |
Income from investment operations | | | | | |
Net investment income | | .46 | .87 | .85 | |
Net realized and unrealized gain | | (.33) | .01 | (.10) | |
Total from investment operations | | .13 | .88 | .75 | |
Distributions from | | | | | |
Net investment income | | (.46) | (.86) | (.85) | |
Net realized gain | | (.28) | -- | (.22) | |
Total distributions | | (.74) | (.86) | (1.07) | |
Total increase (decrease) in net asset value | | (0.61) | 0.02 | (.32) | |
Net asset value, ending | | $16.11 | $16.72 | $16.70 | |
| | | | | | |
Total return* | | .77% | 5.40% | 4.65% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 5.68% (a) | 5.24% | 5.18% | |
Total expenses | | .54% (a) | .55% | .56% | |
Expenses before offsets | | .54% (a) | .55% | .56% | |
Net expenses | | .53% (a) | .54% | .55% | |
Portfolio turnover | | 551% | 877% | 578% | |
Net assets, ending (in thousands) | | $382,565 | $312,520 | $76,362 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class I Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $17.36 | $17.53 | $16.13 | |
Income from investment operations | | | | | |
Net investment income | | .69 | .64 | .89 | |
Net realized and unrealized gain (loss) | | .09 | .64 | 1.49 | |
Total from investment operations | | .78 | 1.28 | 2.38 | |
Distributions from | | | | | |
Net investment income | | (.69) | (.65) | (.88) | |
Net realized gain | | (.43) | (.80) | (.10) | |
Total distributions | | (1.12) | (1.45) | (.98) | |
Total increase (decrease) in net asset value | | (.34) | (.17) | 1.40 | |
Net asset value, ending | | $17.02 | $17.36 | $17.53 | |
| | | | | | |
Total return* | | 4.66% | 7.65% | 15.31% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 3.98% | 3.74% | 5.22% | |
Total expenses | | .55% | .56% | .57% | |
Expenses before offsets | | .55% | .56% | .57% | |
Net expenses | | .55% | .56% | .56% | |
Portfolio turnover | | 742% | 824% | 1,046% | |
Net assets, ending (in thousands) | | $62,013 | $67,736 | $54,842 | |
See notes to financial highlights.
Financial Highlights
| | | Periods Ended |
| | | March 31, | September 30, |
Class R Shares | | 2008 | 2007 #(z) |
Net asset value, beginning | | $16.75 | $16.78 |
Income from investment operations | | | |
Net investment income | | .36 | .51 |
Net realized and unrealized gain | | (.31) | .09 |
Total from investment operations | | .05 | .60 |
Distributions from | | | |
Net investment income | | (.36) | (.63) |
Net realized gain | | (.28) | -- |
Total distributions | | (.64) | (.63) |
Total increase (decrease) in net asset value | | (.59) | (0.03) |
Net asset value, ending | | $16.16 | $16.75 |
| | | | |
Total return* | | .30% | 3.66% |
Ratios to average net assets: A | | | |
Net investment income | | 4.77% (a) | 4.41% (a) |
Total expenses | | 2.12% (a) | 10.44% (a) |
Expenses before offsets | | 1.48% (a) | 1.48% (a) |
Net expenses | | 1.47% (a) | 1.47% (a) |
Portfolio turnover | | 551% | 814% |
Net assets, ending (in thousands) | | $3,486 | $1,304 |
See notes to financial highlights.
Financial Highlights
| | | Period Ended |
| | | March 31, |
Class Y Shares | | 2008 ## |
Net asset value, beginning | | $16.38 |
Income from investment operations | | |
Net investment income | | .03 |
Net realized and unrealized gain | | (.21) |
Total from investment operations | | (.18) |
Distributions from | | |
Net investment income | | (.03) |
Net realized gain | | -- |
Total distributions | | (.03) |
Total increase (decrease) in net asset value | | (0.21) |
Net asset value, ending | | $16.17 |
| | | |
Total return* | | (1.13%) |
Ratios to average net assets: A | | |
Net investment income | | 9.07% (a) |
Total expenses | | 40.42% (a) |
Expenses before offsets | | .91% (a) |
�� Net expenses | | .90% (a) |
Portfolio turnover | | 99% |
Net assets, ending (in thousands) | | $171 |
A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the Fund.
* Total return is not annualized for periods less than one year and does not reflect deduction of any front-end or deferred sales charge.
# From October 31, 2006, inception.
## From February 29, 2008, inception.
(a) Annualized.
(z) Per share figures are calculated using the Average Shares Method.
See notes to financial statements.
Explanation of Financial Tables
Schedule of Investments
The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.
Statement of Net Assets
The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.
At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.
Statement of Operations
The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.
Statement of Changes in Net Assets
The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.
The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.
Financial Highlights
The Financial Highlights table provides a per-share breakdown per class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business , expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.
Proxy Voting
The Proxy Voting Guidelines of the Calvert Funds that the Fund uses to determine how to vote proxies relating to portfolio securities are provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745, by visiting the Calvert website at www.calvert.com; or by visiting the SEC's website at www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund's website at www.calvert.com and on the SEC's website at www.sec.gov.
Availability of Quarterly Portfolio Holdings
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Basis for Board's Approval of Investment Advisory Contract
At a meeting held on December 5, 2007, the Board of Trustees, and by a separate vote, the disinterested Trustees, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor with respect to the Fund.
In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Fund and the Advisor. The disinterested Trustees reviewed a report prepared by the Advisor regarding various services provided to the Fund by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Fund, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable mutual funds.
The disinterested Trustees were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement. Prior to voting, the disinterested Trustees reviewed the proposed continuance of the Investment Advisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.
In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Fund's advisory fee; comparative performance, fee and expense information for the Fund; the profitability of the Calvert Group of Funds to the Advisor; the direct and indirect benefits, if any, derived by the Advisor from its relationship with the Fund; the effect of the Fund's growth and size on the Fund's performance and expenses; the affiliated distributor's process for monitoring sales load breakpoints; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.
In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's investment, supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with management through Board of Trustees' meetings, discussions and other reports. The Board considered the Advisor's management style and its performance in employing its investment strategies, as well as its current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Fund, were also considered. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Fund by the Advisor under the Investment
Advisory Agreement.
In considering the Fund's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Fund's performance results, portfolio composition and investment strategies. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Fund's total return with its Lipper index and with that of other mutual funds deemed to be in its peer group by an independent third party in its report. This comparison indicated that for the three- and five-year annualized periods ended June 30, 2007, the Fund's performance was above the median of its peer group and was below the median of its peer group for the one- year annualized period ended June 30, 2007. The Fund outperformed its Lipper index for the five-year annualized period and underperformed its Lipper index for the one- and three- year annualized periods. The Board noted the Fund' s strong performance over time. Based upon its review, the Board concluded that the Fund's performance was satisfactory.
In considering the Fund's fees and expenses, the Board compared the Fund's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Fund's advisory fee was below the median of its peer group and that total expenses were above the median of its peer group. Based upon its review, the Board determined that the advisory fee was reasonable in view of the high quality of services received by the Fund from the Advisor and the other factors considered.
The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Fund's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Fund for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Fund in terms of the total amount of annual advisory fees it received with respect to the Fund and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Fund. The Board also noted the Advisor's current undertaking to maintain expense limitations for the Fund's Class R shares. The Board also considered tha t the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Fund. Based upon its review, the Board concluded that the Advisor's level of profitability from its relationship with the Fund was reasonable.
The Board considered that the advisory fee schedule for the Fund contained a breakpoint that reduced the advisory fee rate on assets above a specified level, noting that the Fund currently benefited from economies of scale. The Board noted that management was proposing two additional breakpoints.
In reapproving the Investment Advisory Agreement, the Board, including the disinterested Trustees, did not identify any single factor as controlling, and each Trustee attributed different weight to various factors.
Conclusions
The Board reached the following conclusions regarding the Investment Advisory Agreement, among others: (a) the Advisor has demonstrated that it possessed the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains appropriate compliance programs; (c) performance of the Fund is satisfactory relative to the performance of funds with similar investment objectives and to relevant indices; (d) the Advisor is likely to execute its investment strategies consistently over time; and (e) the Fund's advisory fee is reasonable relative to those of similar funds and to the services to be provided by the Advisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement would be in the best interests of the Fund and its shareholders.
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Web Site
http://www.calvert.com
Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.
Principal Underwriter
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000 North
Bethesda, Maryland 20814
This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.
Calvert's Family of Funds
Tax-Exempt Money Market Funds
CTFR Money Market Portfolio
Taxable Money Market Funds
First Government Money Market Fund
CSIF Money Market Portfolio
Municipal Funds
CTFR Limited-Term Portfolio
CTFR Long-Term Portfolio
CTFR Vermont Municipal Portfolio
National Muni. Intermediate Fund
Taxable Bond Funds
CSIF Bond Portfolio
Income Fund
Short Duration Income Fund
Long-Term Income Fund
Ultra-Short Floating Income Fund
Equity Funds
CSIF Enhanced Equity Portfolio
CSIF Equity Portfolio
Calvert Large Cap Growth Fund
Capital Accumulation Fund
CWV International Equity Fund
New Vision Small Cap Fund
Calvert Social Index Fund
Calvert Small Cap Value Fund
Calvert Mid Cap Value Fund
Calvert Global Alternative Energy Fund
Calvert International Opportunities Fund
Balanced and Asset Allocation Funds
CSIF Balanced Portfolio
Calvert Conservative Allocation Fund
Calvert Moderate Allocation Fund
Calvert Aggressive Allocation Fund
printed on recycled paper using soy-based inks
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Calvert
Investments that make a difference®
E-Delivery Sign-up -- details inside
March 31, 2008
Semi-Annual Report
Calvert Short Duration
Income Fund
Calvert
Investments that make a difference®
A UNIFI Company
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Table of Contents
President's Letter
1
Portfolio Management Discussion
4
Shareholder Expense Example
8
Schedule of Investments
10
Statement of Assets and Liabilities
21
Statement of Operations
22
Statements of Changes in Net Assets
23
Notes to Financial Statements
25
Financial Highlights
30
Explanation of Financial Tables
34
Proxy Voting and Availability of Quarterly Portfolio Holdings
36
Basis for Board's Approval of Investment Advisory Contract
36
Dear Shareholder:
The six months ended March 31, 2008 featured turmoil in the financial markets that was almost unprecedented at times. Investors continued to be spooked by the credit crunch, worries about an economic slowdown or recession, and oil prices that exceeded $110 per barrel. This volatility had its roots in the fixed-income markets, where fears about the value of securities linked to subprime mortgages spread throughout the bond market and beyond, even affecting the values of securities with no direct connection to subprime mortgages. Notably, Calvert's taxable bond funds weathered the market turmoil well as a result of our emphasis on holding higher-quality securities and our general avoidance of most holdings that were directly related to subprime mortgages. However, the indirect effects of the subprime mortgage problems impacted our fixed-income funds through their holdings of securities issued by financial companies.
By the numbers, the Lehman U.S. Credit Index, a common benchmark for the entire U.S. bond market, returned 2.63% from October 1, 2007 through March 31, 2008. The credit crisis also affected previously staid debt sectors, including auction-rate securities and municipal bonds. At the beginning of 2008, worries about the ability of bond insurers to meet their obligations on payment of principal and interest in the event of default on the municipal debt that they insure drove municipal yields sharply higher. The market was further roiled by liquidity problems in auction rate securities, a sector that had previously been viewed as having characteristics almost like cash.
Fed Takes Aggressive Action
The Federal Reserve (Fed) has taken a nearly unprecedented series of actions to stabilize the financial markets and reassure investors. The Fed moved aggressively to add liquidity to the financial system and reduced its target federal funds rate by a total of 2.5 percentage points.
In March, it boldly moved to stem the rising panic in the credit markets by increasing the size of its lending program for commercial banks and changing the length and terms of the loans. The Fed also allowed investment banks to borrow directly from the central bank and started accepting hard-to-sell mortgage-backed securities as collateral. When JPMorgan Chase swooped in to rescue Bear Stearns at the bargain basement price of $2 per share (later raised to $10), the Fed agreed to backstop up to $30 billion of Bear Stearns' illiquid holdings. Although some say that the Fed essentially bailed out Bear Stearns and other financial firms from their overly aggressive risk-taking, the Fed's actions did prove effective, stabilizing the financial system and providing some confidence to investors.
Lipper Awards
As a result of our experienced, professional team of portfolio managers and credit analysts, Calvert's taxable bond funds have steered a steady course through the considerable market turbulence. Our portfolio management team largely avoided investing in securities that are directly related to subprime mortgages as we maintained our focus on fundamental credit research and buying only bonds that represent significant value.
As evidence of our ongoing success and expertise in the fixed income arena, three of Calvert's taxable bond funds--Calvert Social Investment Fund (CSIF) Bond Portfolio, Calvert Income Fund, and Calvert Long-Term Income Fund--received 2008 Lipper Awards as a result of their consistently high risk-adjusted returns.1 In fact, this is the fourth time in the last five years that CSIF Bond Portfolio (Class I shares) has won the Lipper Award for the three-year period. All of us at Calvert are extremely proud of these awards and of our taxable fixed-income management team led by Senior Vice President Greg Habeeb.
Maintain a Long-Term View
The financial markets will probably continue to be volatile for at least the next few months, so it's important that you maintain a long-term view in terms of your investments and not get swept up in the day-to-day fluctuations in the market. Your financial advisor is an excellent source of guidance, so please continue to consult with him or her about your investment plan.
As always, thank you for your continued confidence in Calvert's investment products.
Sincerely,
Barbara J. Krumsiek
President and CEO
Calvert Group, Ltd.
April 2008
1. This is the fourth time in the last five years that the Calvert Social Investment Fund Bond Portfolio Class I Shares has won the Lipper Award for consistent risk-adjusted return for the three-year period. For the three-year periods ended December 31, 2003, 2005, 2006, and 2007, the Class I Shares of the Portfolio were chosen from among 154, 152, 150, and 144 funds, respectively.
Lipper Fund Awards are granted annually to the funds in each Lipper classification that achieve the highest score for Consistent Return, a measure of funds' historical risk-adjusted returns, measured in local currency, relative to peers.
Funds registered for sale in a given country are selected, and then scores for Consistent Return are computed for all Lipper global classifications with five or more distinct portfolios. The scores are subject to change every month and are calculated for the following periods: three-year, five-year, 10-year, and overall. The highest 20% of funds in each classification are named Lipper Leaders for Consistent Return. The highest Lipper Leader for Consistent Return within each eligible classification determines the fund classification winner over three, five, or 10 years. Source: Lipper, Inc.
The Calvert Social Investment Fund Bond Portfolio Class I Shares (CBDIX) ranked #1 (out of 128 funds) in the Corporate Debt Funds A Rated classification for the five-year period ended December 31, 2007.
The Calvert Social Investment Fund Bond Portfolio Class A Shares (CSIBX) ranked #1 (out of 58 funds) in the Corporate Debt Funds A Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class A Shares (CFICX) ranked #1 (out of 48 funds) in the Corporate Debt Funds BBB-Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class I Shares (CINCX) ranked #1 (out of 100 funds) in the Corporate Debt Funds BBB-Rated classification for the five-year period ended December 31, 2007.
The Calvert Long-Term Income Fund Class A Shares (CLDAX) ranked #1 (out of 117 funds) in the Corporate Debt Funds BBB-Rated classification for the three-year period ended December 31, 2007.
For more information on any Calvert fund, please contact Calvert at 800.368.2748 for a free prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The prospectus contains this and other information. Read it carefully before you invest or send money. Bond funds are subject to interest rate risk. When interest rates rise, the value of fixed-income securities will generally fall. Conversely, a drop in interest rates will generally cause an increase in the value of fixed-income securities.
Calvert mutual funds are underwritten and distributed by Calvert Distributors, Inc., member FINRA, a subsidiary of Calvert Group, Ltd.
Portfolio Management Discussion
Gregory Habeeb
Senior Portfolio Manager of Calvert Asset Management Company
Performance
Calvert Short Duration Income Fund Class A shares (at NAV) returned 2.63% versus 3.78% for the Lehman 1-5 Year Credit Index for the six-month reporting period ended March 31, 2008. A short duration relative to the index and an allocation to below-investment-grade securities not in the benchmark drove the Fund's underperformance. (Duration is a measure of a portfolio's sensitivity to changes in interest rates. The longer the duration, the greater the price change relative to interest-rate movements.) In addition, markdowns in several securities, including high yield securities from Residential Capital and other financial issuers, contributed to underperformance.1
Portfolio Statistics
March 31, 2008
Investment Performance
(total return at NAV*)
| | 6 Months | 12 Months |
| | ended | ended |
| | 3/31/08 | 3/31/08 |
Class A | 2.63% | 5.26% |
Class C | 2.17% | 4.39% |
Class I | 2.81% | 5.59% |
Class Y** | 2.61% | 5.24% |
Lehman 1-5 Year Credit Index*** | 3.78% | 6.12% |
Lipper Short Investment | | |
Grade Debt Funds Avg. | 0.36% | 2.17% |
| | | |
Maturity Schedule | | |
| | Weighted Average |
| | 3/31/08 | 9/30/07 |
| | 3 years | 4 years |
| | | |
SEC Yields | | |
| | 30 days ended |
| | 3/31/08 | 9/30/07 |
Class A | 5.38% | 5.74% |
Class C | 4.73% | 5.08% |
Class I | 5.86% | 6.24% |
Class Y | 5.51% | -- |
* Investment performance/return at NAV does not reflect the deduction of the Fund's maximum 2.75% front-end sales charge or any deferred sales charge.
** The Calvert Short Duration Income Fund first offered Class Y shares beginning on February 29, 2008. Performance prior to February 29, 2008 reflects the performance of Class A shares at net asset value (NAV). Actual Class Y share performance would have been different.
*** Source: Lipper Analytical Services, Inc.
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
(with max. load)
| | Class A Shares |
One year | 2.34% |
Five year | 4.43% |
Since inception | 5.79% |
(1/31/02) | |
| | Class C Shares |
One year | 3.39% |
Five year | 4.11% |
Since inception | 4.45% |
(10/1/02) | |
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
| | Class I Shares* |
One year | 5.59% |
Five year | 5.42% |
Since inception | 6.28% |
(2/26/02) | |
| | Class Y Shares** |
One year | 5.24% |
Five year | 5.01% |
Since inception | 6.26% |
(1/31/02) | |
Performance Comparison
Comparison of change in value of $10,000 investment.
*Note Regarding Class I Shares Total Returns: There were times during the reporting period when there were no shareholders in Class I. For purposes of reporting Average Annual Total Return, Class A performance at NAV (i.e. does not reflect deduction of the Class A front-end sales charge) is used during these periods in which there were no shareholders in Class I. For purposes of this Average Annual Total Return, the Class A performance at NAV was used during the period November 7, 2005 through April 21, 2006.
Average annual total returns in the Portfolio Statistics above and the Performance Comparison line graph are with maximum load deducted -- they assume reinvestment of dividends and reflect the deduction of the Fund's Class A maximum front-end sales charge of 2.75%, or deferred sales charge, as applicable. No sales charge has been applied to the index used for comparison. However, the Lipper average does reflect the deduction of the category's average front-end sales charge.The value of an investment in Class A shares is plotted in the line graph. The value of an investment in another Class of shares would be different. The graph and table do not reflect the deduction of taxes that a shareholder would pay on the Fund's distributions or the redemption of Fund shares. Past performance is no guarantee of future results.
**See note regarding share Class Y on previous page.
***Source: Lipper Analytical Services, Inc.
Investment Climate
The six-month period ended March 31, 2008 was one of the most memorable periods in the history of the bond market. During the first three months, the collapse of the U.S. subprime mortgage market spurred a severe liquidity crunch that was acutely felt in U.S., European, and United Kingdom money markets. Extensive cooperation between the Federal Reserve (Fed) and European central banks pumped enough liquidity back into the system to restore calm by the end of 2007.
However, issues with the financial stability of bond insurers arose in January and roiled the typically staid municipal bond market. By early March, the crisis had escalated into a broad sell-off of even the most credit-worthy securities into an already weak market. In response, the Fed made a series of historically significant policy announcements--such as allowing investment banks to borrow directly from the Fed and agreeing to finance $30 billion of Bear Stearns' most illiquid assets so the company could be sold--which calmed the turmoil by the end of March.
Throughout the period, economic growth slowed while inflation remained steady. A series of cuts over the six-month period reduced the target federal funds rate from 4.75% to 2.25%. As a result of a flight to quality amid market turmoil, the three-month Treasury bill yield dropped from 3.82% to 1.38% while the ten-year Treasury bond yield fell from 4.59% to 3.45%. However, the extremely difficult market conditions sent municipal and corporate bond yields higher.2
Portfolio Strategy
Going into the period, the Fund had an overweighting to securities with high credit quality and little exposure to asset backed securities--with more than half of the Fund invested in AAA rated bonds as of September 30, 2007--which helped limit the Fund's exposure to fallout from the subprime mortgage crisis.
Nevertheless, the Fund's short duration relative to the index (the Fund's duration was 1.2 years versus 2.89 years for the benchmark as of March 31, 2008) detracted from performance as Treasury rates generally fell during the period. However, the Fund's holdings of short-term floating-rate instruments also helped returns as risk premiums widened through the period, hurting the values of long-term corporate bonds to a much greater extent.
We began to gradually increase the Fund's holdings of corporate bonds when falling prices started to represent attractive value. However, these moves proved to be premature, as corporate bond prices continued to fall and the difference between yields on corporate bonds and U.S. Treasury bonds widened significantly.
Economic Sectors | % of total
investments |
Asset Backed Securities | 13.1% |
Banks | 11.7% |
Brokerages | 2.8% |
Financial Services | 4.9% |
Financials | 1.4% |
Industrial | 11.6% |
Industrial - Finance | 7.6% |
Insurance | 0.3% |
Mortgage Backed Securities | 0.3% |
Municipal Obligations | 16.9% |
Real Estate Investment Trusts | 3.1% |
Special Purpose | 5.5% |
U.S. Government Agency | |
Obligations | 16.8% |
U.S. Treasury | 0.8% |
Utilities | 3.2% |
| | 100% |
Outlook
Market anxiety appears to have crested in March, though neither the credit markets nor the economy are out of the woods. Credit markets need to stabilize and better flow, something we expect to see over the remainder of 2008. By mid-2008, however, credit markets will have been under severe stress for a year. As a result, economic growth may remain sub-par for a protracted period.
The good news is that recent turmoil in the bond market has beaten down the prices of bonds in most sectors, including corporate debt and asset-backed securities, so we may have more opportunities to add to our corporate bond holdings in the months ahead. Of course, we will also strive to take advantage of interest rate movements in the months to come.
April 2008
1. As of March 31, 2008, Residential Capital represented 0.7% of the Fund's net assets. All holdings are subject to change without notice.
2. The yield on the Bond Buyer 20 Index of state and local general obligation bonds rose 0.48 percentage points and the yield on the Moody's Baa-rated corporate bond index increased 0.31 percentage points between September 30, 2007 and March 31, 2008.
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges and redemption fees; and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2007 to March 31, 2008).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
10/1/07 | Ending Account
Value
3/31/08 | Expenses Paid
During Period*
10/1/07 - 3/31/08 |
Class A | | | |
Actual | $1,000.00 | $1,026.30 | $5.47 |
Hypothetical | $1,000.00 | $1,019.60 | $5.45 |
(5% return per year before expenses) | | |
Class C | | | |
Actual | $1,000.00 | $1,021.70 | $9.49 |
Hypothetical | $1,000.00 | $1,015.61 | $9.46 |
(5% return per year before expenses) | | |
Class I | | | |
Actual | $1,000.00 | $1,028.10 | $3.80 |
Hypothetical | $1,000.00 | $1,021.25 | $3.79 |
(5% return per year before expenses) | | |
* Expenses are equal to the Fund's annualized expense ratio of 1.08%, 1.88% and 0.75% for Class A, Class C, and Class I, respectively, multiplied by the average account value over the period, multiplied by 183/366.
| Beginning
Account Value
2/29/08** | Ending Account
Value
3/31/08 | Expenses Paid
During Period***
2/29/08 - 3/31/08 |
Class Y | | | |
Actual | $1,000.00 | $996.80 | $0.81 |
Hypothetical | $1,000.00 | $1,020.35 | $0.81 |
(5% return per year before expenses) | | |
** Inception date 2/29/08.
*** Expenses are equal to the Fund's annualized expense ratio of 0.93% for Class Y, multiplied by the average account value over the period, multiplied by 32/366.
Schedule of Investments
March 31, 2008
| | Principal | |
Asset Backed Securities - 9.2% | | Amount | Value |
ACLC Business Loan Receivables Trust, 3.468%, 10/15/21 (e)(r) | | $239,289 | $234,209 |
AmeriCredit Automobile Receivables Trust: | | | |
5.37%, 10/6/09 | | 102,433 | 102,282 |
4.05%, 2/6/10 | | 906,468 | 906,700 |
5.11%, 10/6/10 | | 1,277,223 | 1,283,681 |
5.31%, 1/6/11 | | 1,271,590 | 1,281,551 |
3.61%, 5/6/11 | | 1,745,405 | 1,717,575 |
3.43%, 7/6/11 | | 828,796 | 828,807 |
5.56%, 9/6/11 | | 473,683 | 478,096 |
5.21%, 10/6/11 | | 8,855,393 | 8,862,410 |
Atherton Franchisee Loan Funding LLC: | | | |
6.85%, 6/15/11 (e) | | 235,660 | 235,777 |
7.20%, 2/15/13 (e) | | 126,071 | 122,289 |
Capital Auto Receivables Asset Trust: | | | |
5.40%, 10/15/09 | | 3,342,078 | 3,369,599 |
5.22%, 11/16/09 | | 3,665,585 | 3,674,144 |
Capital One Auto Finance Trust: | | | |
5.33%, 5/15/10 | | 3,656,966 | 3,661,079 |
5.33%, 11/15/10 | | 13,781,778 | 13,858,460 |
2.858%, 10/15/12 (r) | | 3,425,614 | 3,268,186 |
Captec Franchise Trust, 8.155%, 6/15/13 (e) | | 1,250,000 | 1,357,992 |
Carmax Auto Owner Trust, 3.17%, 9/15/11 | | 1,324,692 | 1,315,991 |
Countrywide Asset-Backed Certificates, 3.049%, 11/25/34 (r) | | 152,530 | 140,176 |
Discover Card Master Trust I, 2.828%, 8/15/12 (r) | | 2,000,000 | 1,998,408 |
Dunkin Securitization, 5.779%, 6/20/31 (e) | | 4,000,000 | 3,590,360 |
First Investors Auto Owner Trust, 4.93%, 2/15/11 (e) | | 194,522 | 191,028 |
FMAC Loan Receivables Trust: | | | |
2.90%, 11/15/18 (e)(r) | | 12,167,007 | 471,472 |
1.728%, 4/15/19 (e)(r) | | 20,815,283 | 858,630 |
Ford Credit Auto Owner Trust, 4.30%, 8/15/09 | | 279,497 | 279,634 |
GE Dealer Floorplan Master Note Trust, 3.124%, 4/20/11 (r) | | 8,000,000 | 7,889,265 |
Golden Securities Corp., 3.419%, 12/2/13 (e)(r) | | 239,417 | 239,816 |
GS Auto Loan Trust, 2.65%, 5/16/11 | | 2,248,390 | 2,247,643 |
Harley-Davidson Motorcycle Trust, 2.76%, 5/15/11 | | 413,446 | 413,234 |
Household Automotive Trust, 3.93%, 7/18/11 | | 2,629,017 | 2,630,901 |
Hyundai Auto Receivables Trust: | | | |
5.25%, 9/15/09 | | 802,646 | 804,669 |
3.46%, 8/15/11 | | 1,058,603 | 1,059,053 |
Long Beach Auto Receivables Trust: | | | |
5.34%, 11/15/09 | | 81,618 | 81,649 |
4.08%, 6/15/10 | | 461,366 | 461,498 |
Onyx Acceptance Owner Trust, 3.50%, 12/15/11 | | 3,721,074 | 3,708,196 |
Triad Auto Receivables Owner Trust: | | | |
2.50%, 9/13/10 | | 507,909 | 506,343 |
4.77%, 1/12/11 | | 634,251 | 628,352 |
| | | | |
| | | | |
| | Principal | |
Asset Backed Securities - Cont'd | | Amount | Value |
WFS Financial Owner Trust: | | | |
3.54%, 11/21/11 | | $2,227,275 | $2,227,222 |
3.93%, 2/17/12 | | 2,399,088 | 2,401,134 |
3.44%, 5/17/12 | | 2,824,747 | 2,824,706 |
Whole Auto Loan Trust, 3.26%, 3/15/11 | | 1,629,609 | 1,647,844 |
World Financial Network, Credit Card Master Note Trust, | | | |
3.188%, 5/15/12 (r) | | 1,000,000 | 1,000,401 |
| | | | |
Total Asset Backed Securities (Cost $84,514,802) | | | 84,860,462 |
| | | | |
Collateralized Mortgage-Backed | | | |
Obligations (Privately Originated) - 0.4% | | | |
American Home Mortgage Assets, 2.499%, 5/25/46 (r) | | 6,994,488 | 332,238 |
Bella Vista Mortgage Trust, 2.786%, 5/20/45 (r) | | 30,548 | 22,848 |
Chase Funding Mortgage Loan, 4.045%, 5/25/33 | | 1,127,937 | 1,128,693 |
Impac CMB Trust: | | | |
3.239%, 9/25/34 (b)(r) | | 104,886 | 94,058 |
3.339%, 11/25/34 (b)(r) | | 75,668 | 70,086 |
2.859%, 4/25/35 (b)(r) | | 930,939 | 688,983 |
2.909%, 4/25/35 (b)(r) | | 318,815 | 206,102 |
2.869%, 5/25/35 (b)(r) | | 139,383 | 110,982 |
2.919%, 8/25/35 (b)(r) | | 712,408 | 532,702 |
MASTR Adjustable Rate Mortgages Trust, 2.979%, 11/25/34 (r) | | 25,879 | 24,596 |
WaMu Mortgage Pass Through Certificates, 6.405%, 4/25/44 (r) | | 16,994 | 14,946 |
| | | | |
Total Collateralized Mortgage-Backed Obligations | | | |
(privately originated) (Cost $3,906,062) | | | 3,226,234 |
| | | | |
Commercial Mortgage-Backed Securities - 2.5% | | | |
Banc of America Commercial Mortgage, Inc., 5.449%, 1/15/49 | | 3,000,000 | 2,823,984 |
Banc of America Mortgage Securities, Inc., 6.25%, 10/25/36 | | 3,224,574 | 679,655 |
Citigroup/Deutsche Bank Commercial Mortgage Trust, 5.205%, | | | |
12/11/49 (r) | | 4,000,000 | 3,880,624 |
Cobalt CMBS Commercial Mortgage Trust, 5.94%, 5/15/46 (r) | | 4,000,000 | 3,935,000 |
Commercial Capital Access One, Inc., 22.53%, 2/15/09 (e)(r) | | 4,700,000 | 822,500 |
Crown Castle Towers LLC: | | | |
4.643%, 6/15/35 (e) | | 4,000,000 | 4,154,770 |
5.245%, 11/15/36 (e) | | 2,000,000 | 1,959,807 |
5.362%, 11/15/36 (e) | | 1,000,000 | 1,052,553 |
Enterprise Mortgage Acceptance Co. LLC, .832%, 1/15/25 (e)(r) | | 32,806,882 | 656,138 |
FFCA Secured Lending Corp, 1.021%, 10/18/25 (e)(r) | | 8,070,817 | 213,795 |
First Union National Bank - Bank Of America N.A. Commercial | | | |
Mortgage Trust, 1.709%, 3/15/33 (e)(r) | | 15,000,000 | 243,165 |
Global Signal: | | | |
Trust II, 4.232%, 12/15/14 (e) | | 500,000 | 487,580 |
Trust III, 5.361%, 2/15/36 (e) | | 1,175,000 | 1,179,677 |
| | | | |
| | | | |
| | | Principal | |
Commercial Mortgage-Backed Securities - Cont'd | | Amount | Value |
Residential Accredit Loans, Inc., 0.225%, 5/25/19 | | $82,386,423 | $536,986 |
Wells Fargo Mortgage Backed Securities Trust, 0.193%, 10/25/36 | | 74,305,552 | 371,528 |
| | | | |
Total Commercial Mortgage-Backed Securities (Cost $23,133,994) | | | 22,997,762 |
| | | | |
Corporate Bonds - 48.1% | | | |
AgFirst Farm Credit Bank: | | | |
8.393% to 12/15/11, floating rate thereafter to 12/15/16 (r) | | 1,945,000 | 1,820,462 |
6.585% to 06/15/12, floating rate thereafter to 6/15/49 (e)(r) | | 5,000,000 | 3,507,225 |
7.30%, 10/14/49 (e) | | 1,000,000 | 938,350 |
Alliance Mortgage Investments: | | | |
12.61%, 6/1/10 (b)(r)(x) | | 385,345 | - |
15.36%, 12/1/10 (b)(r)(x) | | 259,801 | - |
AMB Property LP, 5.45%, 12/1/10 | | 3,000,000 | 3,031,831 |
Anadarko Petroleum Corp., 3.20%, 9/15/09 (r) | | 8,005,000 | 7,793,188 |
APL Ltd., 8.00%, 1/15/24 | | 150,000 | 141,750 |
Atlantic Mutual Insurance Co., 8.15%, 2/15/28 (e)(p)* | | 350,000 | 70,000 |
Autopista del Maipo Sociedad, 7.373%, 6/15/22 (e) | | 227,000 | 274,326 |
BAC Capital Trust XV, 3.876%, 6/1/56 (r) | | 1,500,000 | 1,105,869 |
BAE Systems Asset Trust, 6.664%, 9/15/13 (e) | | 6,178,696 | 6,510,801 |
Bank of Nova Scotia Trust Company of New York, 5.20%, 2/20/09 | | 5,000,000 | 5,090,232 |
Bear Stearns Co's, Inc.: | | | |
3.456%, 4/29/08 (r) | | 2,000,000 | 1,991,703 |
2.786%, 3/30/09 (r) | | 10,390,000 | 9,874,420 |
4.326%, 7/19/10 (r) | | 3,000,000 | 2,670,136 |
3.964%, 10/28/14 (r) | | 500,000 | 357,339 |
BellSouth Telecommunications, Inc., 6.125%, 9/23/08 | | 1,000,000 | 1,014,614 |
Branch Banking & Trust Co, 3.126%, 9/2/08 (r) | | 120,000 | 120,051 |
Bunge Ltd. Finance Corp., 4.375%, 12/15/08 | | 3,000,000 | 2,999,530 |
C8 Capital SPV Ltd., 6.64% to 12/31/14, floating rate thereafter | | | |
to 12/31/49 (e)(r) | | 2,000,000 | 1,842,613 |
CAM US Finance SA Sociedad Unipersonal, 3.389%, 2/1/10 (e)(r) | | 1,000,000 | 963,281 |
Capmark Financial Group, Inc., 3.746%, 5/10/10 (e)(r) | | 1,400,000 | 980,000 |
Cardinal Health, Inc., 4.999%, 10/2/09 (r) | | 1,000,000 | 981,252 |
Cargill, Inc: | | | |
5.144%, 1/21/11 (e)(r) | | 10,000,000 | 9,967,220 |
5.60%, 9/15/12 (e) | | 3,000,000 | 3,102,639 |
Caterpillar Financial Services Corp., 3.578%, 2/8/10 (r) | | 4,950,000 | 4,943,040 |
Chevy Chase Bank FSB, 6.875%, 12/1/13 | | 1,000,000 | 941,323 |
Chilquinta Energia Finance Co. LLC, 6.47%, 4/1/08 (e) | | 2,000,000 | 1,999,830 |
Cinergy Global Resources, Inc., 6.20%, 11/3/08 (e) | | 6,500,000 | 6,559,573 |
CIT Group, Inc.: | | | |
3.303%, 5/23/08 (r) | | 5,000,000 | 4,887,500 |
3.875%, 11/3/08 | | 399,000 | 367,080 |
2.729%, 12/19/08 (r) | | 1,000,000 | 900,000 |
| | | | |
| | | | |
| | | Principal | |
Corporate Bonds - Cont'd | | Amount | Value |
Citigroup, Inc.: | | | |
3.13%, 6/9/09 (r) | | $110,000 | $108,077 |
6.50%, 1/18/11 | | 7,000,000 | 7,226,064 |
5.125%, 2/14/11 | | 2,475,000 | 2,490,060 |
3.16%, 5/18/11 (r) | | 2,900,000 | 2,658,336 |
Compass Bancshares, Inc., 5.143%, 10/9/09 (e)(r) | | 3,000,000 | 2,983,032 |
Countrywide Financial Corp., 3.345%, 5/5/08 (r) | | 5,230,000 | 5,151,550 |
Countrywide Home Loans, Inc., 3.25%, 5/21/08 | | 1,500,000 | 1,485,000 |
Credit Agricole SA, 6.637% to 5/31/17, floating rate thereafter to | | | |
5/31/49 (e)(r) | | 1,000,000 | 774,639 |
CVS Caremark Corp., 6.302% to 6/1/12, floating rate thereafter | | | |
to 6/1/37 (r) | | 2,000,000 | 1,834,048 |
Dime Community Bancshares, Inc., 9.25%, 5/1/10 (e) | | 1,000,000 | 1,109,677 |
Discover Financial Services, 3.431%, 6/11/10 (e)(r) | | 6,756,000 | 6,089,730 |
Dominion Resources, Inc., 5.687%, 5/15/08 (r) | | 3,000,000 | 3,007,531 |
Duke Energy Corp., 4.20%, 10/1/08 | | 2,000,000 | 2,013,985 |
Enterprise Products Operating LP, 7.034% to 1/15/18, floating | | | |
rate thereafter to 1/15/68 (r) | | 300,000 | 246,372 |
ERAC USA Finance Co., 5.30%, 11/15/08 (e) | | 1,000,000 | 1,013,179 |
Fidelity National Information Services, Inc., 4.75%, 9/15/08 | | 500,000 | 498,045 |
Fifth Third Bank, 2.87%, 8/10/09 | | 163,632 | 161,446 |
First Tennessee Bank: | | | |
5.75%, 12/1/08 | | 250,000 | 250,116 |
5.316%, 12/8/08 | | 5,150,000 | 5,169,118 |
FMG Finance Pty Ltd.: | | | |
7.076%, 9/1/11 (e)(r) | | 10,600,000 | 10,255,500 |
10.00%, 9/1/13 (e) | | 1,400,000 | 1,505,000 |
Ford Motor Credit Co. LLC: | | | |
6.625%, 6/16/08 | | 3,440,000 | 3,422,780 |
8.708%, 4/15/12 (r) | | 16,750,000 | 15,662,380 |
Giants Stadium LLC: | | | |
13.50%, 4/1/29 (e)(r) | | 25,000,000 | 25,000,000 |
11.50%, 4/1/37 (e)(r) | | 15,000,000 | 15,000,000 |
Glitnir Banki HF: | | | |
4.418%, 10/15/08 (e)(r) | | 8,000,000 | 7,718,391 |
4.75%, 10/15/10 (e) | | 1,000,000 | 937,229 |
4.334%, 1/21/11 (e)(r) | | 2,000,000 | 1,678,589 |
6.693% to 6/15/11 (e)(r) | | 10,830,000 | 8,937,542 |
6.33%, 7/28/11 (e) | | 180,000 | 169,285 |
6.375%, 9/25/12 (e) | | 100,000 | 85,182 |
GMAC LLC: | | | |
3.749%, 9/23/08 (r) | | 14,000,000 | 13,230,303 |
5.125%, 5/9/08 | | 4,690,000 | 4,660,705 |
4.315%, 5/15/09 (r) | | 10,500,000 | 9,134,821 |
Great River Energy, 5.829%, 7/1/17 (e) | | 11,000,000 | 11,433,290 |
Health Care Property Investors, Inc., 3.25%, 9/15/08 (r) | | 13,850,000 | 13,541,043 |
Hewlett-Packard Co., 3.476%, 9/3/09 (r) | | 3,660,000 | 3,662,334 |
HRPT Properties Trust, 3.40%, 3/16/11 (r) | | 2,000,000 | 1,886,151 |
HSBC Finance Corp., 4.45%, 9/15/08 | | 2,000,000 | 2,006,555 |
Independence Community Bank Corp.: | | | |
3.5% to 6/1/08, floating rate thereafter to 6/20/13 (r) | | 2,350,000 | 2,353,563 |
3.75% to 4/1/09, floating rate thereafter to 4/1/14 (r) | | 4,500,000 | 4,457,390 |
| | | | |
| | | | |
| | | Principal | |
Corporate Bonds - Cont'd | | Amount | Value |
Ingersoll-Rand Co. Ltd.: | | | |
6.391%, 11/15/27 | | $1,135,000 | $1,224,602 |
6.443%, 11/15/27 | | 105,000 | 121,971 |
6.015%, 2/15/28 | | 500,000 | 525,520 |
Irwin Land LLC, 4.51%, 12/15/15 (e) | | 1,335,000 | 1,287,701 |
John Deere Capital Corp.: | | | |
3.53%, 2/26/10 (r) | | 3,000,000 | 2,996,117 |
4.698%, 1/18/11 (r) | | 10,000,000 | 9,978,435 |
JPMorgan Chase & Co.: | | | |
3.625%, 5/1/08 | | 915,000 | 915,464 |
1.91%, 10/28/08 (r) | | 4,000,000 | 3,999,430 |
4.394%, 1/22/10 (r) | | 10,000,000 | 9,953,211 |
Kaupthing Bank hf, 5.75%, 10/4/11 (e) | | 7,000,000 | 5,587,659 |
Koninklijke Philips Electronics NV, 4.14%, 3/11/11 (r) | | 5,000,000 | 5,002,289 |
Lehman Brothers Holdings, Inc.: | | | |
1.69%, 9/8/08 (r) | | 3,000,000 | 2,925,963 |
5.625%, 1/24/13 | | 1,000,000 | 967,542 |
Leucadia National Corp.: | | | |
7.00%, 8/15/13 | | 4,930,000 | 4,868,375 |
8.125%, 9/15/15 | | 2,750,000 | 2,772,143 |
LL&P Wind Energy, Inc. Washington Revenue Bonds: | | | |
5.217%, 12/1/12 | | 4,000,000 | 4,144,640 |
5.733%, 12/1/17 | | 2,000,000 | 2,078,480 |
Lumbermens Mutual Casualty Co., 8.30%, 12/1/37 (e)(m)* | | 300,000 | 1,500 |
M&I Marshall & Ilsley Bank, 3.328%, 12/4/12 (r) | | 1,000,000 | 933,666 |
Medco Health Solutions, Inc., STEP, 6.125%, 3/15/13 | | 3,000,000 | 3,042,964 |
Meridian Funding Co. LLC: | | | |
5.378%, 6/9/08 (r) | | 416,667 | 413,406 |
4.846%, 10/6/08 (e)(r) | | 157,195 | 156,837 |
Merrill Lynch & Co., Inc., 3.315%, 2/5/10 (r) | | 291,000 | 277,661 |
Morgan Stanley: | | | |
4.348%, 1/15/10 (r) | | 1,500,000 | 1,445,967 |
4.538%, 1/15/10 (r) | | 3,500,000 | 3,403,774 |
Nationwide Health Properties, Inc.: | | | |
6.50%, 7/15/11 | | 4,000,000 | 4,095,652 |
6.59%, 7/7/38 | | 1,300,000 | 1,419,374 |
Noble Group Ltd., 6.625%, 3/17/15 (e) | | 500,000 | 431,924 |
NPS LLC, 9.80%, 12/28/16 (e)(r) | | 6,000,000 | 6,000,000 |
Orkney Re II plc, Series B, 6.096%, 12/21/35 (b)(e)(r)(z) | | 1,400,000 | 1,050,000 |
Pacific Pilot Funding Ltd., 4.644%, 10/20/16 (e)(r) | | 485,693 | 486,213 |
Pacificorp, 6.375%, 5/15/08 | | 30,000 | 30,110 |
Pioneer Natural Resources Co.: | | | |
5.875%, 7/15/16 | | 1,150,000 | 1,038,826 |
6.65%, 3/15/17 | | 2,000,000 | 1,885,750 |
PPF Funding, Inc., 5.35%, 4/15/12 (e) | | 2,000,000 | 1,993,693 |
Preferred Term Securities IX Ltd., 5.608%, 4/3/33 (e)(r) | | 959,500 | 921,120 |
PRICOA Global Funding I, 3.156%, 6/3/08 (e)(r) | | 350,000 | 349,885 |
Prudential Financial, Inc., 3.018%, 6/13/08 (r) | | 500,000 | 499,778 |
Public Service Electric & Gas Co., 6.375%, 5/1/08 (r) | | 1,275,000 | 1,276,503 |
Reed Elsevier Capital, Inc., 3.13%, 6/15/10 (r) | | 2,500,000 | 2,434,382 |
Regions Financial Corp., 4.50%, 8/8/08 | | 1,500,000 | 1,502,982 |
| | | | |
| | | | |
| | | Principal | |
Corporate Bonds - Cont'd | | Amount | Value |
Residential Capital LLC: | | | |
3.49%, 6/9/08 (r) | | $7,600,000 | $6,004,000 |
6.375%, 6/30/10 | | 500,000 | 251,250 |
Richmond County Capital Corp., 8.61%, 7/15/49 (e) | | 1,700,000 | 1,706,375 |
Rouse Co., 8.00%, 4/30/09 | | 1,000,000 | 979,138 |
SABMiller plc, 5.029%, 7/1/09 (e)(r) | | 175,000 | 175,445 |
Skyway Concession Co. LLC, 2.976%, 6/30/17 (e)(r) | | 2,500,000 | 2,215,733 |
Southern Union Co., 6.089%, 2/16/10 | | 2,000,000 | 2,049,238 |
Sovereign Bancorp, Inc., 3.365%, 3/1/09 (r) | | 2,000,000 | 1,951,530 |
Sovereign Bank, 4.375% to 8/1/08, floating rate thereafter | | | |
to 8/1/13 (r) | | 6,825,000 | 6,156,481 |
Susquehanna Bancshares, Inc., 4.75% to 5/1/09, floating rate | | | |
thereafter to, 4.75%, 5/1/14 (r) | | 1,000,000 | 1,030,390 |
TIERS Trust, 8.45%, 12/1/17 (b)(n)* | | 658,859 | 3,294 |
Toll Road Investors Partnership II LP, Zero Coupon: | | | |
2/15/09 (e) | | 3,000,000 | 2,937,793 |
�� 2/15/45 (e) | | 42,565,142 | 6,231,932 |
Union Pacific Corp., 6.91%, 8/27/17 | | 1,234,794 | 1,383,464 |
UnitedHealth Group, Inc.: | | | |
2.779%, 6/21/10 (r) | | 3,000,000 | 2,874,192 |
4.462%, 2/7/11 (r) | | 5,000,000 | 4,968,269 |
Wachovia Capital Trust III, 5.80% to 3/15/11, floating rate | | | |
thereafter to 3/15/42 (r) | | 11,628,000 | 8,328,555 |
Wal-Mart Stores, Inc., 8.07%, 12/21/12 (b) | | 500,000 | 500,000 |
Weyerhaeuser Co., 3.599%, 9/24/09 (r) | | 5,500,000 | 5,434,679 |
Xerox Corp., 3.514%, 12/18/09 (r) | | 750,000 | 731,527 |
Xstrata Finance Dubai Ltd., 3.42%, 11/13/09 (e)(r) | | 3,000,000 | 2,960,970 |
| | | | |
Total Corporate Bonds (Cost $453,734,414) | | | 442,070,980 |
| | | | |
Taxable Municipal Obligations - 15.1% | | | |
Adams-Friendship Area Wisconsin School District GO Bonds: | | | |
5.07%, 3/1/09 | | 95,000 | 96,765 |
5.09%, 3/1/10 | | 105,000 | 108,975 |
5.13%, 3/1/11 | | 115,000 | 121,092 |
Alameda California Corridor Transportation Authority Revenue | | | |
Bonds, Zero Coupon, 10/1/09 | | 6,000,000 | 5,702,880 |
Allentown Pennsylvania GO Bonds: | | | |
Prerefunded, 3.41%, 10/1/09 | | 1,895,000 | 1,910,425 |
Unrefunded Balance, 3.41%, 10/1/09 | | 15,000 | 15,002 |
Baltimore Maryland General Revenue Bonds, 5.00%, 7/1/12 | | 1,330,000 | 1,382,748 |
Bayonne New Jersey Municipal Utilities Authority Revenue Bonds, | | | |
3.70%, 4/1/10 | | 365,000 | 365,909 |
Bethlehem Pennsylvania GO Bonds, 4.10%, 11/1/09 | | 675,000 | 679,151 |
Boynton Beach Florida Community Redevelopment Agency | | | |
Tax Allocation Revenue Bonds, 5.10%, 10/1/15 | | 910,000 | 952,543 |
Bridgeview Illinois GO Bonds, 4.62%, 12/1/11 | | 490,000 | 501,838 |
Burlingame California PO Revenue Bonds, 5.255%, 6/1/11 | | 1,000,000 | 1,045,940 |
Butler Pennsylvania Redevelopment Authority Tax Increment | | | |
Revenue Bonds, 5.25%, 12/1/13 | | 680,000 | 704,548 |
California State Industry Sales Tax Revenue Bonds, 5.00%, 1/1/12 | | 2,900,000 | 2,994,772 |
| | | | |
| | | | |
| | | Principal | |
Taxable Municipal Obligations - Cont'd | | Amount | Value |
California State M-S-R Public Power Agency Revenue Bonds, | | | |
3.45%, 7/1/09 | | $3,460,000 | $3,461,626 |
California Statewide Communities Development Authority | | | |
Revenue Bonds: | | | |
Zero Coupon, 6/1/08 | | 1,395,000 | 1,389,099 |
5.34%, 8/1/08 | | 1,680,000 | 1,692,482 |
5.41%, 8/1/09 | | 1,755,000 | 1,797,278 |
Zero Coupon, 6/1/10 | | 2,820,000 | 2,649,108 |
Zero Coupon, 6/1/13 | | 3,190,000 | 2,622,052 |
Canyon Texas Regional Water Authority Revenue Bonds, 5.70%, | | | |
8/1/12 | | 165,000 | 175,146 |
Chicago Illinois GO Bonds, 5.20%, 1/1/10 | | 3,600,000 | 3,686,796 |
Chicago Illinois O'Hare International Airport Revenue Bonds, | | | |
5.053%, 1/1/11 | | 3,720,000 | 3,810,656 |
Cook County Illinois School District GO Bonds: | | | |
No. 95 Taxable Limited Refunding School Bonds, 5.45%, 12/1/11 | | 200,000 | 213,628 |
No. 170 Chicago Heights, Zero Coupon, 12/1/12 | | 380,000 | 312,299 |
No. 089 Maywood, Zero Coupon, 12/1/12 | | 2,135,000 | 1,754,628 |
Corte Madera California COPs, 5.447%, 2/1/16 | | 1,435,000 | 1,497,207 |
El Paso Texas GO Bonds: | | | |
5.512%, 8/15/09 | | 1,245,000 | 1,280,918 |
5.674%, 8/15/12 | | 1,000,000 | 1,060,600 |
5.724%, 8/15/13 | | 1,000,000 | 1,068,450 |
Escondido California Joint Powers Financing Authority Lease | | | |
Revenue Bonds, 5.53%, 9/1/18 | | 1,810,000 | 1,919,505 |
Fall Creek Wisconsin School District GO Bonds, 5.91%, 3/1/19 | | 605,000 | 641,760 |
Frisco Texas Economic Development Corp. Sales Tax Revenue | | | |
Bonds, 5.619%, 2/15/17 | | 1,000,000 | 1,054,410 |
Grant County Washington Public Utility District No. 2 Revenue | | | |
Bonds, 5.11%, 1/1/13 | | 500,000 | 516,765 |
Hillsborough County Florida Port District Revenue Bonds, | | | |
Zero Coupon: | | | |
6/1/11 | | 1,230,000 | 1,102,215 |
12/1/11 | | 1,230,000 | 1,075,094 |
Illinois State MFH Development Authority Revenue Bonds: | | | |
5.60%, 12/1/15 | | 1,630,000 | 1,737,531 |
5.662%, 7/1/17 | | 2,130,000 | 2,259,078 |
Inglewood California Pension Funding Revenue Bonds: | | | |
4.57%, 9/1/08 | | 205,000 | 205,242 |
4.65%, 9/1/09 | | 215,000 | 215,219 |
4.74%, 9/1/10 | | 225,000 | 225,227 |
Iron County Wisconsin GO Bonds, 5.26%, 3/1/19 | | 620,000 | 665,923 |
La Verne California PO Revenue Bonds: | | | |
5.34%, 6/1/08 | | 260,000 | 260,957 |
5.40%, 6/1/09 | | 270,000 | 276,010 |
5.45%, 6/1/10 | | 340,000 | 353,376 |
5.49%, 6/1/11 | | 350,000 | 367,654 |
Los Angeles California Community Redevelopment Agency Tax | | | |
Allocation Bonds: | | | |
3.94%, 7/1/08 | | 775,000 | 776,542 |
4.22%, 7/1/09 | | 805,000 | 812,672 |
Los Angeles County California PO Revenue Bonds, Zero Coupon, | | | |
6/30/10 | | 363,000 | 339,710 |
| | | | |
| | | | |
| | | Principal | |
Taxable Municipal Obligations - Cont'd | | Amount | Value |
Maryland State Health and Higher Educational Facilities Authority | | | |
Revenue Bonds, 5.30%, 7/1/10 | | $630,000 | $654,992 |
Michigan State Municipal Bond Authority Revenue Bonds: | | | |
5.46%, 6/1/08 | | 2,785,000 | 2,796,279 |
5.42%, 12/1/08 | | 2,890,000 | 2,931,356 |
5.252%, 6/1/15 | | 1,000,000 | 1,035,900 |
Midpeninsula California Regional Open Space District Financing | | | |
Authority Revenue Bonds, 5.15%, 9/1/12 | | 3,075,000 | 3,220,386 |
Mississippi State Development Bank SO Revenue Bonds, 5.21%, | | | |
7/1/08 | | 4,000,000 | 4,021,000 |
Nashville & Davidson County Tennessee Water & Sewage Revenue | | | |
Bonds, 4.74%, 1/1/15 | | 1,585,000 | 1,651,031 |
Nevada State Department of Business & Industry Lease Revenue | | | |
Bonds, 5.32%, 6/1/17 | | 1,230,000 | 1,284,747 |
New York State Dormitory Authority Revenue Bonds, 3.85%, | | | |
3/15/11 | | 1,850,000 | 1,890,090 |
New York State Sales Tax Asset Receivables Corp. Revenue Bonds, | | | |
3.60%, 10/15/08 | | 3,300,000 | 3,314,256 |
New York State Urban Development Corp. Revenue Bonds, | | | |
4.38%, 12/15/11 | | 2,300,000 | 2,339,629 |
Northwest Washington Electric Energy Revenue Bonds, 4.06%, | | | |
7/1/09 | | 1,000,000 | 1,003,330 |
Northwest Washington Open Access Network Revenue Bonds, | | | |
6.39%, 12/1/10 | | 935,000 | 1,003,788 |
Oakland California PO Revenue Bonds, Zero Coupon, 12/15/10 | | 2,000,000 | 1,830,840 |
Oakland California Redevelopment Agency Tax Allocation Bonds: | | | |
5.268%, 9/1/11 | | 2,860,000 | 2,991,932 |
5.252%, 9/1/16 | | 1,760,000 | 1,844,269 |
5.263%, 9/7/16 | | 2,675,000 | 2,807,894 |
Oakland City California PO Revenue Bonds, Zero Coupon, 12/15/12 | | 1,680,000 | 1,397,306 |
Oklahoma City Oklahoma Airport Trust Revenue Bonds, 4.60%, | | | |
10/1/09 | | 1,330,000 | 1,353,674 |
Oklahoma State Capital Improvement Authority Revenue Bonds, | | | |
5.10%, 7/1/11 | | 2,720,000 | 2,834,675 |
Orange County California PO Revenue Bonds, Zero Coupon, | | | |
9/1/11 | | 6,100,000 | 5,445,409 |
Oregon State Department of Administrative Services Lottery | | | |
Revenue Bonds: | | | |
5.389%, 4/1/08 | | 1,000,000 | 1,000,000 |
5.334%, 4/1/09 | | 1,565,000 | 1,601,558 |
5.374%, 4/1/10 | | 1,650,000 | 1,724,019 |
5.355%, 4/1/11 | | 1,000,000 | 1,060,030 |
Palm Springs California Community Redevelopment Agency Tax | | | |
Allocation Bonds, 5.59%, 9/1/17 | | 1,140,000 | 1,215,901 |
Pennsylvania State Convention Center Authority Revenue Bonds, | | | |
4.97%, 9/1/11 | | 3,040,000 | 3,132,720 |
Pittsburg California Redevelopment Agency Tax Allocation Bonds, | | | |
5.115%, 8/1/16 | | 1,800,000 | 1,802,772 |
Pittsburgh Pennsylvania GO Bonds, 5.47%, 9/1/08 | | 4,000,000 | 4,034,360 |
Placer County California Redevelopment Agency Tax Allocation Bonds, | | | |
5.75%, 8/1/15 | | 705,000 | 753,582 |
| | | | |
| | | | |
| | | Principal | |
Taxable Municipal Obligations - Cont'd | | Amount | Value |
Riverside California Public Financing Authority Tax Allocation | | | |
Bonds, 5.24%, 8/1/17 | | $2,000,000 | $2,080,820 |
Roseville California Redevelopment Agency Tax Allocation Bonds, | | | |
5.31%, 9/1/13 | | 580,000 | 606,987 |
Sacramento City California Financing Authority Tax Allocation | | | |
Revenue Bonds, 4.985%, 12/1/09 | | 1,035,000 | 1,055,980 |
San Diego California Redevelopment Agency Tax Allocation Bonds, | | | |
5.66%, 9/1/16 | | 1,435,000 | 1,530,944 |
Santa Fe Springs California Community Development Commission | | | |
Tax Allocation Bonds, 5.18%, 9/1/11 | | 1,575,000 | 1,643,261 |
Schenectady New York Metroplex Development Authority | | | |
Revenue Bonds: | | | |
5.20%, 8/1/08 | | 125,000 | 126,040 |
5.15%, 8/1/09 | | 135,000 | 138,868 |
Shawano-Gresham Wisconsin School District GO Bonds, 5.75%, | | | |
3/1/11 | | 285,000 | 304,979 |
Shorewood Wisconsin School District GO Bonds, 5.30%, 4/1/16 | | 320,000 | 339,533 |
South Bend County Indiana Economic Development Income | | | |
Tax Revenue Bonds: | | | |
5.125%, 2/1/10 | | 560,000 | 580,698 |
5.20%, 2/1/14 | | 1,295,000 | 1,380,341 |
Southern California Airport Authority Tax Allocation Bonds, | | | |
5.00%, 12/1/12 | | 850,000 | 861,883 |
St Paul Minnesota Sales Tax Revenue Bonds, 5.30%, 11/1/12 | | 1,500,000 | 1,559,715 |
Stanislaus County California Revenue Bonds, 7.15%, 8/15/13 | | 555,000 | 613,442 |
Virginia State Housing Development Authority Revenue Bonds, | | | |
5.24%, 7/1/09 | | 1,050,000 | 1,075,452 |
West Contra Costa California Unified School District COPs: | | | |
4.59%, 1/1/09 | | 285,000 | 287,605 |
4.66%, 1/1/10 | | 435,000 | 444,066 |
Ypsilanti Michigan GO Bonds, 5.55%, 5/1/12 | | 335,000 | 353,388 |
| | | | |
Total Taxable Municipal Obligations (Cost $133,812,022) | | | 138,821,178 |
| | | | |
U.S. Government Agencies | | | |
And Instrumentalities - 16.1% | | | |
Fannie Mae, 5.50%, 12/25/16 | | 838,427 | 854,762 |
Federal Home Loan Bank, 3.625%, 11/14/08 | | 3,395,000 | 3,425,355 |
Federal Home Loan Bank Discount Notes, 4/1/08 | | 137,000,000 | 137,000,000 |
Freddie Mac: | | | |
5.125%, 12/15/13 | | 1,705,001 | 1,729,300 |
6.00%, 12/15/32 | | 2,262,597 | 458,556 |
Government National Mortgage Association: | | | |
5.50%, 1/16/32 | | 5,093,810 | 713,482 |
5.50%, 5/20/32 | | 5,226,172 | 742,375 |
New Valley Generation I, 7.299%, 3/15/19 | | 792,233 | 915,473 |
New Valley Generation V, 4.929%, 1/15/21 | | 774,610 | 775,058 |
Overseas Private Investment Corp., 7.45%, 12/15/10 | | 620,455 | 659,599 |
U.S. Government Agencies | | Principal | |
And Instrumentalities - Cont'd | | Amount | Value |
Tunisia Government AID Bonds, Guaranteed by the United States Agency of International Development, 9.375%, 8/1/16 | | $674,999 | $830,175 |
| | | | |
Total U.S. Government Agencies and Instrumentalities | | | |
(Cost $147,780,749) | | | 148,104,135 |
| | | | |
U.S. Treasury - 0.8% | | | |
United States Treasury Notes: | | | |
2.125%, 1/31/10 | | 920,000 | 928,625 |
3.50%, 2/15/18 | | 6,320,000 | 6,357,525 |
| | | | |
Total U.S. Treasury (Cost $7,226,849) | | | 7,286,150 |
| | | | |
| | | | |
Equity Securities - 1.3% | | Shares | |
Conseco, Inc. * | | 98,632 | 1,006,046 |
Fannie Mae, Series S Preferred | | 160,000 | 3,848,000 |
Freddie Mac, Series Z Preferred | | 140,000 | 3,416,000 |
Roslyn Real Estate Asset Corp., Preferred | | 15 | 1,507,031 |
WoodBourne Pass-Through Trust, Preferred (b)(e) | | 25 | 2,492,969 |
| | | | |
Total Equity Securities (Cost $13,356,240) | | | 12,270,046 |
| | | | |
TOTAL INVESTMENTS (Cost $867,465,132) - 93.5% | | | 859,636,947 |
Other assets and liabilities, net - 6.5% | | | 59,556,371 |
Net Assets - 100% | | | $919,193,318 |
Futures | # of
Contracts | Expiration
Date | Underlying
Face Amount
at Value | Unrealized
Appreciation
(Depreciation) |
Purchased: | | | | |
10 Year U.S. Treasury Notes | 127 | 6/08 | 15,107,047 | $495,988 |
* Non-income producing security.
(b) This security is valued by the Board of Trustees.
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(m)The Illinois Insurance Department prohibited Lumbermens from making interest payments.
This security is no longer accruing interest.
(n) The Illinois Insurance Department prohibited Lumbermens from making interest payments.
This TIERS security is based on interest payments from Lumbermens. This security is no longer accruing interest.
(p) The State of New York Insurance Department has prohibited Atlantic Mutual Insurance Co. from making interest payments. This security is no longer accruing interest.
(r) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
(x) Alliance Bancorp and its affiliates filed for Chapter 7 bankruptcy on July 13, 2007. As a result, the value of the bond was marked down to $0 and is no longer accruing interest.
(z) Subsequent to period end, this security stopped accruing interest.
Abbreviations:
COPs: Certificates of Participation
GO: General Obligation
LLC: Limited Liability Corporation
PO: Pension Obligation
MFH: Multi-Family Housing
LP: Limited Partnership
SO: Special Obligation
See notes to financial statements.
Statement of Assets and Liabilities
March 31, 2008
Assets | | | |
Investments in securities, at value (Cost $867,465,132) - see accompanying schedule | | $859,636,947 | |
Cash | | 491,375 | |
Receivable for securities sold | | 47,035,272 | |
Receivable for futures variation margin | | 31,750 | |
Receivable for shares sold | | 7,733,485 | |
Interest and dividends receivable | | 6,374,404 | |
Other assets | | 252,245 | |
Total assets | | 921,555,478 | |
| | | | |
Liabilities | | | |
Payable for shares repurchased | | 1,385,512 | |
Payable to Calvert Asset Management Company, Inc. | | 411,228 | |
Payable to Calvert Administrative Services Company | | 229,808 | |
Payable to Calvert Shareholder Services, Inc. | | 12,896 | |
Payable to Calvert Distributors, Inc. | | 232,117 | |
Accrued expenses and other liabilities | | 90,599 | |
Total liabilities | | 2,362,160 | |
Net Assets | | $919,193,318 | |
| | | | |
Net Assets Consist of: | | | |
Paid-in capital applicable to the following shares of beneficial interest unlimited number of no par value shares authorized: | | | |
Class A: 53,036,758 shares outstanding | | $854,894,040 | |
Class C: 4,134,644 shares outstanding | | 66,573,429 | |
Class I: 21,752 shares outstanding | | (472,190) | |
Class Y: 62.03 shares outstanding | | 1,004 | |
Undistributed net investment income | | 190,631 | |
Accumulated net realized gain (loss) on investments | | 5,338,601 | |
Net unrealized appreciation (depreciation) on investments | | (7,332,197) | |
| | | | |
Net Assets | | $919,193,318 | |
| | | | |
Net Asset Value Per Share: | | | |
Class A (based on net assets of $852,637,975) | | $16.08 | |
Class C (based on net assets of $66,204,203) | | $16.01 | |
Class I (based on net assets of $350,143) | | $16.10 | |
Class Y (based on net assets of $997) | | $16.07 | |
See notes to financial statements.
Statement of Operations
Six Months Ended March 31, 2008
Net Investment Income | | | |
Investment Income: | | | |
Interest income | | $23,367,484 | |
Dividend income (net foreign taxes withheld of $356) | | 370,363 | |
Total investment income | | 23,737,847 | |
| | | | |
Expenses: | | | |
Investment advisory fee | | 1,387,193 | |
Administrative fees | | 1,195,098 | |
Transfer agency fees and expenses | | 857,441 | |
Distribution plan expenses: | | | |
Class A | | 926,963 | |
Class C | | 275,303 | |
Trustees' fees and expenses | | 22,966 | |
Custodian fees | | 53,346 | |
Registration fees | | 7,475 | |
Reports to shareholders | | 91,126 | |
Professional fees | | 16,921 | |
Accounting fees | | 54,148 | |
Miscellaneous | | 17,181 | |
Total expenses | | 4,905,161 | |
Reimbursement from Advisor: | | | |
Class A | | (357,631) | |
Class I | | (4,717) | |
Class Y | | (1,166) | |
Fees paid indirectly | | (19,195) | |
Net expenses | | 4,522,452 | |
Net Investment Income | | 19,215,395 | |
| | | | |
Realized and Unrealized Gain (Loss) | | | |
Net realized gain (loss) on: | | | |
Investments | | 5,923,705 | |
Futures | | (155,610) | |
| | | 5,768,095 | |
| | | | |
Change in unrealized appreciation (depreciation) on: | | | |
Investments | | (6,083,445) | |
Futures | | 468,043 | |
| | | (5,615,402) | |
| | | | |
Net Realized and Unrealized Gain (Loss) | | 152,693 | |
| | | | |
| | | | |
Increase (Decrease) in Net Assets | | | |
Resulting From Operations | | $19,368,088 | |
See notes to financial statements.
Statements of Changes in Net Assets
| | | Six Months ended | Year Ended | |
| | | March 31, | September 30, | |
Increase (Decrease) in Net Assets | | 2008 | 2007 | |
Operations: | | | | |
Net investment income | | $19,215,395 | $22,867,991 | |
Net realized gain (loss) | | 5,768,095 | 5,331,621 | |
Change in unrealized appreciation (depreciation) | | (5,615,402) | (1,001,623) | |
| | | | | |
Increase (Decrease) in Net Assets | | | | |
Resulting From Operations | | 19,368,088 | 27,197,989 | |
| | | | | |
Distributions to shareholders from: | | | | |
Net investment income: | | | | |
Class A shares | | (18,312,575) | (20,939,160) | |
Class C shares | | (1,142,914) | (1,607,370) | |
Class I shares | | (8,011) | (7,526) | |
Class Y shares | | (4) | -- | |
Net realized gain: | | | | |
Class A shares | | (5,212,748) | (2,214,450) | |
Class C shares | | (382,740) | (221,673) | |
Class I shares | | (2,150) | (466) | |
Total distributions | | (25,061,142) | (24,990,645) | |
| | | | | |
Capital share transactions: | | | | |
Shares sold: | | | | |
Class A shares | | 343,406,337 | 337,959,234 | |
Class C shares | | 21,810,897 | 23,251,828 | |
Class I shares | | 60,189 | 194,816 | |
Class Y shares | | 1,000 | -- | |
Reinvestment of distributions: | | | | |
Class A shares | | 19,801,871 | 20,858,186 | |
Class C shares | | 753,749 | 899,429 | |
Class I shares | | 10,161 | 7,992 | |
Class Y shares | | 4 | -- | |
Redemption fees: | | | | |
Class A shares | | 25,683 | 10,380 | |
Class C shares | | 650 | 39 | |
Shares redeemed: | | | | |
Class A shares | | (110,099,929) | (147,033,086) | |
Class C shares | | (5,940,055) | (13,937,301) | |
Class I shares | | (573) | (3,903) | |
Total capital share transactions | | 269,829,984 | 222,207,614 | |
| | | | | |
Total Increase (Decrease) in Net Assets | | 264,136,930 | 224,414,958 | |
| | | | | |
Net Assets | | | | |
Beginning of period | | 655,056,388 | 430,641,430 | |
End of period (including undistributed net investment income of $190,631 and $438,740, respectively) | | $919,193,318 | $655,056,388 | |
See notes to financial statements.
| | | Six Months Ended | Year Ended | |
| | | March 31, | September 30, | |
Capital Share Activity | | 2008 | 2007 | |
Shares sold: | | | | |
Class A shares | | 21,218,967 | 20,962,017 | |
Class C shares | | 1,353,594 | 1,447,904 | |
Class I shares | | 3,714 | 12,082 | |
Class Y shares | | 62.03 | -- | |
Reinvestment of distributions: | | | | |
Class A shares | | 1,227,448 | 1,295,903 | |
Class C shares | | 46,919 | 56,087 | |
Class I shares | | 629 | 495 | |
Shares redeemed: | | | | |
Class A shares | | (6,807,919) | (9,121,028) | |
Class C shares | | (368,690) | (867,911) | |
Class I shares | | (35) | (242) | |
Total capital share activity | | 16,674,689 | 13,785,307 | |
See notes to financial statements.
Notes to Financial Statements
Note A ---- Significant Accounting Policies
General: The Calvert Short Duration Income Fund (the "Fund"), a series of The Calvert Fund, is registered under the Investment Company Act of 1940 as a non-diversified, open-end management investment company. The operations of each series are accounted for separately. The Fund currently offers four classes of shares of beneficial interest. Class A shares are sold with a maximum front-end sales charge of 2.75%. Class C shares are sold without a front-end sales change and, with certain exceptions, will be charged a deferred sales charge on shares sold within one year of purchase. Class C shares have a higher expense ratio than Class A shares. Class I shares require a minimum account balance of $1,000,000. The $1 million minimum initial investment may be waived for certain institutional accounts, where it is believed to be in the best interest of the Fund and its shareholders. Class I shares have no front-end or deferred sales charge and have lower levels of expenses than Class A shares. Effective Februa ry 29, 2008, the Fund began to offer Class Y shares. Class Y shares are generally only available to wrap or similar fee-based programs offered by financial intermediaries that have entered into an agreement with the Fund's Distributor to offer Class Y shares. Class Y shares have no front-end or deferred sales charge and have lower levels of expenses than Class A shares. Each class has different: (a) dividend rates due to differences in Distribution Plan expenses and other class specific expenses, (b) exchange privileges and (c) class specific voting rights.
Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Fund uses independent pricing services approved by the Board of Trustees to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the Fund's net asset value is determined, that are expected to materially affect the value of those securities, then the y are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Fund may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Trustees.
In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
At March 31, 2008, securities valued at $5,749,176 or 0.6% of net assets were fair valued under the direction of the Board of Trustees.
Repurchase Agreements: The Fund may enter into repurchase agreements with recognized financial institutions or registered broker/dealers and, in all instances, holds underlying securities with a value exceeding the total repurchase price, including accrued interest. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its value and a possible loss of income or value if the counterparty fails to perform in accordance with the terms of the agreement.
Futures Contracts: The Fund may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Fund's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms.
Short Sales: The Fund may use a hedging technique that involves short sales of U.S. Treasury securities for the purposes of managing the duration of the Fund. Any short sales are "covered" with an equivalent amount of high quality, liquid securities.
Security Transactions and Net Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Fund is informed of the ex-dividend date. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Investment income and realized and unrealized gains and losses are allocated to separate classes of shares based upon the relative net assets of each class. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. (See the Schedule of Investments footnotes on page 20.) A debt obligation may be removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured. Expenses arising in connection with a class are charged directly to that class. Expenses common to the classes are allocated to each class in proportion to their relative net assets. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates.
Foreign Currency Transactions: The Fund's accounting records are maintained in U. S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are translated into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities and foreign currencies is included in the net realized and unrealized gain or loss on securities and foreign currencies.
Distributions to Shareholders: Distributions to shareholders are recorded by the Fund on ex-dividend date. Dividends from net investment income are paid monthly. Distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Fund's capital accounts to reflect income and gains available for distribution under income tax regulations.
Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Actual results could differ from those estimates.
Redemption Fees: The Fund charges a 2% redemption fee on redemptions, including exchanges, made within 30 days of purchase in the same Fund (within seven days for Class I shares). The redemption fee is paid to the Class of the Fund from which the redemption is made, and is accounted for as an addition to paid-in capital. The fee is intended to discourage market-timers by ensuring that short-term trading costs are borne by the investors making the transactions and not the shareholders already in the Fund.
Expense Offset Arrangements: The Fund has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Fund's cash on deposit with the bank. These credits are used to reduce the Fund's expenses. Such a deposit arrangement may be an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is required since the Fund intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.
New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" -- an interpretation of FASB Statement 109 (FIN 48), effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years ended September 30, 2004 -- 2007) for purposes of implementing FIN 48, and has concluded that as of March 31, 2008, no provision for income tax is required in the Fund's financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of March 31, 2008, the Fund does not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures may be requi red about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging Activities." The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effect on the Fund's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS No. 161 will have on the Fund's financial statements and related disclosures.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Trustees of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives an annual fee, payable monthly, based on the following annual rates of average net assets: .35% on the first $750 million, and .325% over $750 million.
The Advisor has contractually agreed to limit net annual fund operating expenses through January 31, 2009. The contractual expense cap is 1.08% for Class A, and .75% for Class I. For the purposes of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent that any expense offset credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement. The Advisor voluntarily reimbursed Class Y shares for expenses of $1,166 for the period ended March 31, 2008.
Calvert Administrative Services Company, an affiliate of the Advisor, provides administrative services to the Fund for an annual fee, payable monthly. Class A, Class C and Class Y shares pay an annual rate of .30%, and Class I shares pay an annual rate of .10%, based on their average daily net assets.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Fund. Distribution Plans, adopted by Class A and Class C shares, allow the Fund to pay the Distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed .50% and 1.00% annually of the Fund's average daily net assets of Class A and Class C, respectively. The amount actually paid by the Fund is an annualized fee, payable monthly of .25% and 1.00% of the Fund's average daily net assets of Class A and Class C, respectively. Class I and Y shares do not have Distribution Plan expenses.
The Distributor received $52,174 as its portion of the commissions charged on sales of the Fund's Class A shares for the six months ended March 31, 2008.
Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, is the shareholder servicing agent for the Fund. For its services, CSSI received a fee of $64,790 for the six months ended March 31, 2008. Boston Financial Data Services, Inc. is the transfer and dividend disbursing agent.
Each Trustee of the Fund who is not an employee of the Advisor or its affiliates receives an annual fee of $32,000 plus up to $1,500 for each Board and Committee meeting attended. Trustee's fees are allocated to each of the funds served.
Note C -- Investment Activity
During the period, the cost of purchases and proceeds from sales of investments, other than short-term and U.S. government securities, were $1,051,069,450 and $873,972,105, respectively. U.S. government security purchases and sales were $1,212,206,337 and $1,218,460,717, respectively.
The cost of investments owned at March 31, 2008 for federal income tax purposes was $867,773,255. Net unrealized depreciation aggregated $8,136,308 of which $9,408,110 related to appreciated securities and $17,544,418 related to depreciated securities.
The Fund may sell or purchase securities to and from other funds managed by the Advisor, typically short-term variable rate demand notes. Interportfolio transactions are primarily used for cash management purposes. Interportfolio transactions are made pursuant to Rule 17a-7 of the Investment Company Act of 1940. There were no such transactions for the six months ended March 31, 2008.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds (except for the Calvert Social Investment Fund's Balanced and Enhanced Equity Portfolios, the CVS Calvert Social Balanced Portfolio) and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under this committed facility bear interest at the overnight Federal Funds Rate plus .50% per annum. A commitment fee of .10% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at March 31, 2008. For the six months ended March 31, 2008, borrowings by the Fund under the Agreement were as follows:
| Average
Daily
Balance | Weighted
Average
Interest
Rate | Maximum
Amount
Borrowed | Month of
Maximum
Amount
Borrowed |
| | $71,448 | 3.66% | $5,665,458 | February 2008 |
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class A Shares | | 2008 (z) | 2007 (z) | 2006 (z) | |
Net asset value, beginning | | $16.17 | $16.11 | $16.13 | |
Income from investment operations | | | | | |
Net investment income | | .39 | .73 | .65 | |
Net realized and unrealized gain | | .03 | .13 | .11 | |
Total from investment operations | | .42 | .86 | .76 | |
Distributions from: | | | | | |
Net investment income | | (.39) | (.71) | (.64) | |
Net realized gain | | (.12) | (.09) | (.14) | |
Total distributions | | (.51) | (.80) | (.78) | |
Total increase (decrease) in net asset value | | (0.09) | 0.06 | (.02) | |
Net asset value, ending | | $16.08 | $16.17 | $16.11 | |
| | | | | | |
Total return* | | 2.63% | 5.47% | 4.86% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 4.88% (a) | 4.54% | 4.12% | |
Total expenses | | 1.18% (a) | 1.22% | 1.19% | |
Expenses before offsets | | 1.08% (a) | 1.09% | 1.09% | |
Net expenses | | 1.08% (a) | 1.08% | 1.08% | |
Portfolio turnover | | 325% | 533% | 524% | |
Net assets, ending (in thousands) | | $852,638 | $604,790 | $390,947 | |
| | | | | | |
| | | | | | |
| | | | Years Ended | | |
| | | September 30, | September 30, | September 30, | |
Class A Shares | | 2005 | 2004 | 2003 | |
Net asset value, beginning | | $16.35 | $16.58 | $15.96 | |
Income from investment operations | | | | | |
Net investment income | | .43 | .32 | .39 | |
Net realized and unrealized gain | | .09 | .36 | 1.00 | |
Total from investment operations | | .52 | .68 | 1.39 | |
Distributions from: | | | | | |
Net investment income | | (.43) | (.32) | (.39) | |
Net realized gain | | (.31) | (.59) | (.38) | |
�� Total distributions | | (.74) | (.91) | (.77) | |
Total increase (decrease) in net asset value | | (.22) | (.23) | .62 | |
Net asset value, ending | | $16.13 | $16.35 | $16.58 | |
| | | | | | |
Total return* | | 3.25% | 4.23% | 9.04% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 2.69% | 1.98% | 2.43% | |
Total expenses | | 1.19% | 1.21% | 1.27% | |
Expenses before offsets | | 1.09% | 1.09% | 1.07% | |
Net expenses | | 1.08% | 1.08% | 1.06% | |
Portfolio turnover | | 633% | 967% | 2,078% | |
Net assets, ending (in thousands) | | $211,734 | $141,155 | $92,600 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class C Shares | | 2008 (z) | 2007 (z) | 2006 (z) | |
Net asset value, beginning | | $16.11 | $16.06 | $16.08 | |
Income from investment operations | | | | | |
Net investment income | | .33 | .59 | .52 | |
Net realized and unrealized gain | | .02 | .13 | .11 | |
Total from investment operations | | .35 | .72 | .63 | |
Distributions from: | | | | | |
Net investment income | | (.33) | (.58) | (.51) | |
Net realized gain | | (.12) | (.09) | (.14) | |
Total distributions | | (.45) | (.67) | (.65) | |
Total increase (decrease) in net asset value | | (0.10) | 0.05 | (.02) | |
Net asset value, ending | | $16.01 | $16.11 | $16.06 | |
| | | | | | |
Total return* | | 2.17% | 4.59% | 4.05% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 4.10% (a) | 3.72% | 3.28% | |
Total expenses | | 1.88% (a) | 1.90% | 1.92% | |
Expenses before offsets | | 1.88% (a) | 1.90% | 1.92% | |
Net expenses | | 1.88% (a) | 1.89% | 1.91% | |
Portfolio turnover | | 325% | 533% | 524% | |
Net assets, ending (in thousands) | | $66,204 | $49,984 | $39,612 | |
| | | | | | |
| | | | | | |
| | | | Periods Ended | | |
| | | September 30, | September 30, | September 30, | |
Class C Shares | | 2005 | 2004 | 2003^ | |
Net asset value, beginning | | $16.31 | $16.54 | $15.96 | |
Income from investment operations | | | | | |
Net investment income | | .29 | .18 | .25 | |
Net realized and unrealized gain | | .08 | .36 | .96 | |
Total from investment operations | | .37 | .54 | 1.21 | |
Distributions from: | | | | | |
Net investment income | | (.29) | (.18) | (.25) | |
Net realized gain | | (.31) | (.59) | (.38) | |
Total distributions | | (.60) | (.77) | (.63) | |
Total increase (decrease) in net asset value | | (.23) | (.23) | .58 | |
Net asset value, ending | | $16.08 | $16.31 | $16.54 | |
| | | | | | |
Total return* | | 2.32% | 3.34% | 7.81% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 1.81% | 1.12% | 1.32% | |
Total expenses | | 1.95% | 1.96% | 2.14% | |
Expenses before offsets | | 1.95% | 1.96% | 2.14% | |
Net expenses | | 1.94% | 1.95% | 2.12% | |
Portfolio turnover | | 633% | 967% | 2,078% | |
Net assets, ending (in thousands) | | $28,663 | $23,537 | $14,283 | |
See notes to financial highlights.
Financial Highlights
| | | | Periods Ended | | |
| | | March 31, | September 30, | September 30, | |
Class I Shares | | 2008 (z) | 2007 (z) | 2006 (y)(z) | |
Net asset value, beginning | | $16.19 | $16.13 | $16.04 | |
Income from investment operations | | | | | |
Net investment income | | .42 | .79 | .33 | |
Net realized and unrealized gain | | .03 | .12 | .12 | |
Total from investment operations | | .45 | .91 | .45 | |
Distributions from: | | | | | |
Net investment income | | (.42) | (.76) | (.36) | |
Net realized gain | | (.12) | (.09) | -- | |
Total distributions | | (.54) | (.85) | (.36) | |
Total increase (decrease) in net asset value | | (0.09) | 0.06 | .09 | |
Net asset value, ending | | $16.10 | $16.19 | $16.13 | |
| | | | | | |
Total return* | | 2.81% | 5.78% | 2.84% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 5.21% (a) | 4.91% | 4.73% (a) | |
Total expenses | | 3.86% (a) | 6.11% | .63% (a) | |
Expenses before offsets | | .75% (a) | .76% | .62% (a) | |
Net expenses | | .75% (a) | .75% | .61% (a) | |
Portfolio turnover | | 325% | 533% | 209% | |
Net assets, ending (in thousands) | | $350 | $282 | $82 | |
| | | | | | |
| | | | | | |
| | | | Periods Ended | | |
| | | November 7, | September 30, | September 30, | |
Class I Shares | | 2005 (x) | 2005 (z) | 2004 | |
Net asset value, beginning | | $16.12 | $16.37 | $16.61 | |
Income from investment operations | | | | | |
Net investment income | | .06 | .49 | .41 | |
Net realized and unrealized gain | | (.04) | .10 | .35 | |
Total from investment operations | | .02 | .59 | .76 | |
Distributions from: | | | | | |
Net investment income | | (.05) | (.53) | (.41) | |
Net realized gain | | -- | (.31) | (.59) | |
Total distributions | | (.05) | (.84) | (1.00) | |
Total increase (decrease) in net asset value | | (.03) | (.25) | (.24) | |
Net asset value, ending | | $16.09 | $16.12 | $16.37 | |
| | | | | | |
Total return* | | .13% | 3.72% | 4.73% | |
Ratios to average net assets: A | | | | | |
Net investment income | | 3.65% (a) | 3.00% | 2.46% | |
Total expenses | | .81% (a) | .62% | .61% | |
Expenses before offsets | | .81% (a) | .62% | .61% | |
Net expenses | | .79% (a) | .61% | .60% | |
Portfolio turnover | | 293% | 633% | 967% | |
Net assets, ending (in thousands) | | $0 | $6,167 | $24,369 | |
See notes to financial highlights.
Financial Highlights
| | Period Ended |
| | March 31, |
Class Y Shares | 2008 (z)^^ |
Net asset value, beginning | $16.19 |
Income from investment operations | |
Net investment income | .07 |
Net realized and unrealized gain | (.12) |
Total from investment operations | (.05) |
Distributions from: | |
Net investment income | (.07) |
Net realized gain | -- |
Total distributions | (.07) |
Total increase (decrease) in net asset value | (.12) |
Net asset value, ending | $16.07 |
| | |
Total return* | (.32%) |
Ratios to average net assets: A | |
Net investment income | 4.85% (a) |
Total expenses | 1,381.42% (a) |
Expenses before offsets | .93% (a) |
Net expenses | .93% (a) |
Portfolio turnover | 33% |
Net assets, ending (in thousands) | $1 |
A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the Fund.
(a) Annualized.
(x) The last remaining shareholder in Class I redeemed on November 7, 2005.
(y) Class I resumed upon shareholder investment on April 21, 2006.
(z) Per share figures are calculated using the Average Share Method.
* Total return is not annualized for periods less than one year and does not reflect deduction of any front-end or deferred sales charge.
^ From October 1, 2002, inception.
^^ From February 29, 2008, inception.
See notes to financial statements.
Explanation of Financial Tables
Schedule of Investments
The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.
Statement of Net Assets
The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.
At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.
Statement of Operations
The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.
Statement of Changes in Net Assets
The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.
The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.
Financial Highlights
The Financial Highlights table provides a per-share breakdown per class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business , expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.
Proxy Voting
The Proxy Voting Guidelines of the Calvert Funds that the Fund uses to determine how to vote proxies relating to portfolio securities are provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745, by visiting the Calvert website at www.calvert.com; or by visiting the SEC's website at www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund's website at www.calvert.com and on the SEC's website at www.sec.gov.
Availability of Quarterly Portfolio holdings
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Basis for Board's Approval of Investment Advisory Contract
At a meeting held on December 5, 2007, the Board of Trustees, and by a separate vote, the disinterested Trustees, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor with respect to the Fund.
In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Fund and the Advisor. The disinterested Trustees reviewed a report prepared by the Advisor regarding various services provided to the Fund by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Fund, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable mutual funds.
The disinterested Trustees were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement. Prior to voting, the disinterested Trustees reviewed the proposed continuance of the Investment Advisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.
In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Fund's advisory fee; comparative performance, fee and expense information for the Fund; the profitability of the Calvert Group of Funds to the Advisor; the direct and indirect benefits, if any, derived by the Advisor from its relationship with the Fund; the effect of the Fund's growth and size on the Fund's performance and expenses; the affiliated distributor's process for monitoring sales load breakpoints; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.
In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's investment, supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with management through Board of Trustees' meetings, discussions and other reports. The Board considered the Advisor's management style and its performance in employing its investment strategies, as well as its current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Fund, were also considered. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Fund by the Advisor under the Investment Advisory Agreement.
In considering the Fund's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Fund's performance results, portfolio composition and investment strategies. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Fund's total return with its Lipper index and with that of other mutual funds deemed to be in its peer group by an independent third party in its report. This comparison indicated that for the one-, three- and five-year annualized periods ended June 30, 2007, the Fund's performance was above the median of its peer group. The Fund outperformed its Lipper index for the same one-, three- and five-year annualized periods. The Board noted the Fund's strong performance. Based upon its review, the Board concluded that the Fund's performance was satisfactory.
In considering the Fund's fees and expenses, the Board compared the Fund's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Fund's advisory fee (after taking into account waivers and reimbursements) was below the median of its peer group and that total expenses (net of waivers and reimbursements) were above the median of its peer group. The Board took into account the Advisor's current undertaking to maintain expense limitations for the Fund. Based upon its review, the Board determined that the advisory fee was reasonable in view of the high quality of services received by the Fund from the Advisor, the Fund's performance and the other factors considered.
The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Fund's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Fund for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Fund in terms of the total amount of annual advisory fees it received with respect to the Fund and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Fund. The Board also noted the Advisor's current undertaking to maintain expense limitations for the Fund's Class A and Class I shares. The Board also no ted that the Advisor reimbursed expenses of the Fund. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Fund. Based upon its review, the Board concluded that the Advisor's level of profitability from its relationship with the Fund was reasonable.
The Board considered the effect of the Fund's growth and size on its performance and fees. The Board noted that management was proposing adding a breakpoint to the advisory fee. The Board also noted that if the Fund's assets increased over time, the Fund might realize other economies of scale if assets increased proportionally more than certain other expenses.
In reapproving the Investment Advisory Agreement, the Board, including the disinterested Trustees, did not identify any single factor as controlling, and each Trustee attributed different weight to various factors.
Conclusions
The Board reached the following conclusions regarding the Investment Advisory Agreement, among others: (a) the Advisor has demonstrated that it possessed the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains appropriate compliance programs; (c) performance of the Fund is satisfactory relative to the performance of funds with similar investment objectives and to relevant indices; (d) the Advisor is likely to execute its investment strategies consistently over time; and (e) the Fund's advisory fee is reasonable relative to those of similar funds and to the services to be provided by the Advisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement would be in the best interests of the Fund and its shareholders.
Calvert Short Duration Income Fund
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Principal Underwriter
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000 North
Bethesda, Maryland 20814
This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.
Calvert's Family of Funds
Tax-Exempt Money Market Funds
CTFR Money Market Portfolio
Taxable Money Market Funds
First Government Money Market Fund
CSIF Money Market Portfolio
Balanced Fund
CSIF Balanced Portfolio
Municipal Funds
CTFR Limited-Term Portfolio
CTFR Long-Term Portfolio
CTFR Vermont Municipal Portfolio
National Muni. Intermediate Fund
Taxable Bond Funds
CSIF Bond Portfolio
Income Fund
Short Duration Income Fund
Long-Term Income Fund
Ultra-Short Floating Income Fund
Equity Funds
CSIF Enhanced Equity Portfolio
CSIF Equity Portfolio
Calvert Large Cap Growth Fund
Capital Accumulation Fund
CWV International Equity Fund
New Vision Small Cap Fund
Calvert Social Index Fund
Calvert Small Cap Value Fund
Calvert Mid Cap Value Fund
Calvert Global Alternative Energy Fund
Calvert International Opportunities Fund
Balanced and Asset Allocation Funds
CSIF Balanced Portfolio
Calvert Conservative Allocation Fund
Calvert Moderate Allocation Fund
Calvert Aggressive Allocation Fund
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<PAGE>
Calvert
Investments that make a difference®
March 31, 2008
Semi-Annual Report
Calvert Long-Term
Income Fund
Calvert
Investments that make a difference®
A UNIFI Company
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Table of Contents
President's Letter
1
Portfolio Management Discussion
4
Shareholder Expense Example
7
Schedule of Investments
9
Statement of Assets and Liabilities
16
Statement of Operations
17
Statements of Changes in Net Assets
18
Notes to Financial Statements
19
Financial Highlights
24
Explanation of Financial Tables
26
Proxy Voting and Availability of Quarterly Portfolio Holdings
28
Basis for Board's Approval of Investment Advisory Contract
28
Dear Shareholder:
The six months ended March 31, 2008 featured turmoil in the financial markets that was almost unprecedented at times. Investors continued to be spooked by the credit crunch, worries about an economic slowdown or recession, and oil prices that exceeded $110 per barrel. This volatility had its roots in the fixed-income markets, where fears about the value of securities linked to subprime mortgages spread throughout the bond market and beyond, even affecting the values of securities with no direct connection to subprime mortgages. Notably, Calvert's taxable bond funds weathered the market turmoil well as a result of our emphasis on holding higher-quality securities and our general avoidance of most holdings that were directly related to subprime mortgages. However, the indirect effects of the subprime mortgage problems impacted our fixed-income funds through their holdings of securities issued by financial companies.
By the numbers, the Lehman U.S. Credit Index, a common benchmark for the entire U.S. bond market, returned 2.63% from October 1, 2007 through March 31, 2008. The credit crisis also affected previously staid debt sectors, including auction-rate securities and municipal bonds. At the beginning of 2008, worries about the ability of bond insurers to meet their obligations on payment of principal and interest in the event of default on the municipal debt that they insure drove municipal yields sharply higher. The market was further roiled by liquidity problems in auction rate securities, a sector that had previously been viewed as having characteristics almost like cash.
Fed Takes Aggressive Action
The Federal Reserve (Fed) has taken a nearly unprecedented series of actions to stabilize the financial markets and reassure investors. The Fed moved aggressively to add liquidity to the financial system and reduced its target federal funds rate by a total of 2.5 percentage points.
In March, it boldly moved to stem the rising panic in the credit markets by increasing the size of its lending program for commercial banks and changing the length and terms of the loans. The Fed also allowed investment banks to borrow directly from the central bank and started accepting hard-to-sell mortgage-backed securities as collateral. When JPMorgan Chase swooped in to rescue Bear Stearns at the bargain basement price of $2 per share (later raised to $10), the Fed agreed to backstop up to $30 billion of Bear Stearns' illiquid holdings. Although some say that the Fed essentially bailed out Bear Stearns and other financial firms from their overly aggressive risk-taking, the Fed's actions did prove effective, stabilizing the financial system and providing some confidence to investors.
Lipper Awards
As a result of our experienced, professional team of portfolio managers and credit analysts, Calvert's taxable bond funds have steered a steady course through the considerable market turbulence. Our portfolio management team largely avoided investing in securities that are directly related to subprime mortgages as we maintained our focus on fundamental credit research and buying only bonds that represent significant value.
As evidence of our ongoing success and expertise in the fixed income arena, three of Calvert's taxable bond funds--Calvert Social Investment Fund (CSIF) Bond Portfolio, Calvert Income Fund, and Calvert Long-Term Income Fund--received 2008 Lipper Awards as a result of their consistently high risk-adjusted returns.1 In fact, this is the fourth time in the last five years that CSIF Bond Portfolio (Class I shares) has won the Lipper Award for the three-year period. All of us at Calvert are extremely proud of these awards and of our taxable fixed-income management team led by Senior Vice President Greg Habeeb.
Maintain a Long-Term View
The financial markets will probably continue to be volatile for at least the next few months, so it's important that you maintain a long-term view in terms of your investments and not get swept up in the day-to-day fluctuations in the market. Your financial advisor is an excellent source of guidance, so please continue to consult with him or her about your investment plan.
As always, thank you for your continued confidence in Calvert's investment products.
Sincerely,
Barbara J. Krumsiek
President and CEO
Calvert Group, Ltd.
April 2008
1. This is the fourth time in the last five years that the Calvert Social Investment Fund Bond Portfolio Class I Shares has won the Lipper Award for consistent risk-adjusted return for the three-year period. For the three-year periods ended December 31, 2003, 2005, 2006, and 2007, the Class I Shares of the Portfolio were chosen from among 154, 152, 150, and 144 funds, respectively.
Lipper Fund Awards are granted annually to the funds in each Lipper classification that achieve the highest score for Consistent Return, a measure of funds' historical risk-adjusted returns, measured in local currency, relative to peers.
Funds registered for sale in a given country are selected, and then scores for Consistent Return are computed for all Lipper global classifications with five or more distinct portfolios. The scores are subject to change every month and are calculated for the following periods: three-year, five-year, 10-year, and overall. The highest 20% of funds in each classification are named Lipper Leaders for Consistent Return. The highest Lipper Leader for Consistent Return within each eligible classification determines the fund classification winner over three, five, or 10 years. Source: Lipper, Inc.
The Calvert Social Investment Fund Bond Portfolio Class I Shares (CBDIX) ranked #1 (out of 128 funds) in the Corporate Debt Funds A Rated classification for the five-year period ended December 31, 2007.
The Calvert Social Investment Fund Bond Portfolio Class A Shares (CSIBX) ranked #1 (out of 58 funds) in the Corporate Debt Funds A Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class A Shares (CFICX) ranked #1 (out of 48 funds) in the Corporate Debt Funds BBB-Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class I Shares (CINCX) ranked #1 (out of 100 funds) in the Corporate Debt Funds BBB-Rated classification for the five-year period ended December 31, 2007.
The Calvert Long-Term Income Fund Class A Shares (CLDAX) ranked #1 (out of 117 funds) in the Corporate Debt Funds BBB-Rated classification for the three-year period ended December 31, 2007.
For more information on any Calvert fund, please contact Calvert at 800.368.2748 for a free prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The prospectus contains this and other information. Read it carefully before you invest or send money. Bond funds are subject to interest rate risk. When interest rates rise, the value of fixed-income securities will generally fall. Conversely, a drop in interest rates will generally cause an increase in the value of fixed-income securities.
Calvert mutual funds are underwritten and distributed by Calvert Distributors, Inc., member FINRA, a subsidiary of Calvert Group, Ltd.
Portfolio Management Discussion
Gregory Habeeb
Senior Portfolio Manager of Calvert Asset Management Company
Performance
Calvert Long-Term Income Fund Class A shares (at NAV) returned 5.86% for the six-month reporting period ended March 31, 2008, outperforming the benchmark Lehman Long U.S. Credit Index, which returned 0.16%. An overweight to Treasury securities drove the Fund's outperformance.
Investment Climate
The six-month period ended March 31, 2008 was one of the most memorable periods in the history of the bond market. During the first three months, the collapse of the U.S. subprime mortgage market spurred a severe liquidity crunch that was acutely felt in U.S., European, and United Kingdom money markets. Extensive cooperation between the Federal Reserve (Fed) and European central banks pumped enough liquidity back into the system to restore calm by the end of 2007.
However, issues with the financial stability of bond insurers arose in January and roiled the typically staid municipal bond market. By early March, the crisis had escalated into a broad sell-off of even the most creditworthy securities into an already weak market. In response, the Fed made a series of historically significant policy announcements--such as allowing investment banks to borrow directly from the Fed and agreeing to finance $30 billion of Bear Stearns' most illiquid assets so the company could be sold--which calmed the turmoil by the end of March.
Throughout the period, economic growth slowed while inflation remained steady. A series of cuts over the six-month period reduced the target federal funds rate from 4.75% to 2.25%. As a result of a flight to quality amid market turmoil, the three-month Treasury bill yield dropped from 3.82% to 1.38% while the 10-year Treasury bond yield fell from 4.59% to 3.45%. However, the extremely difficult market conditions sent municipal and corporate bond yields higher.1
Portfolio Statistics
March 31, 2008
Investment Performance
(total return at NAV*)
| 6 Months
Ended
3/31/08 | 12 Months
Ended
3/31/08 |
Class A | 5.86% | 8.60% |
Lehman Long U.S. Credit Index** | 0.16% | 0.56% |
Lipper Corp Debt Funds BBB Rated Average | 1.57% | 2.89% |
| | | |
Maturity Schedule | | |
| | Weighted Average |
| | 3/31/08 | 9/30/07 |
| | 10 years | 12 years |
| | | |
SEC Yield | | |
| | 30 days ended |
| | 3/31/08 | 9/30/07 |
| | 4.27% | 4.16% |
| | | |
Economic Sectors | % of total investments | |
Asset Backed Securities | 5.2% | |
Banks | 8.7% | |
Brokerages | 1.9% | |
Financial Services | 1.6% | |
Financials | 0.6% | |
Industrial | 11.3% | |
Industrial - Finance | 3.9% | |
Municipal Obligations | 13.5% | |
Real Estate Investment Trusts | 1.3% | |
Special Purpose | 7.2% | |
Transportation | 1.4% | |
U.S. Government Agency Obligations | 26.2% | |
U.S. Treasury | 15.6% | |
Utility | 1.6% | |
Total | 100% | |
*Investment performance/return at NAV does not reflect the deduction of the Fund's maximum 3.75% front-end sales charge or any deferred sales charge.
**Source: Lipper Analytical Services, Inc.
Portfolio Strategy
Going into the period, the Fund had a 24% allocation to Treasury securities, which was the best-performing bond market sector during the period. Also, our yield curve strategies offset the drag caused by the Fund's significantly shorter duration relative to the benchmark index,2 as yields of short-term Treasuries fell far more than those of long-term Treasury bonds during a flight to quality among market turmoil.3 (Duration measures a portfolio's sensitivity to changes in interest rates. The longer the duration, the greater the price move relative to interest-rate movements.)
We began taking advantage of falling corporate bond prices to gradually increase the Fund's holdings in this area. However, these moves proved to be premature, as the difference between yields on corporate bonds and U.S. Treasury bonds continued to widen, hurting performance.
Outlook
Market anxiety appears to have crested in March, though neither the credit markets nor the economy are out of the woods. Credit markets need to stabilize and better flow, something we expect to see over the remainder of 2008. By mid-2008, however, credit markets will have been under severe stress for a year. As a result, economic growth may remain sub-par for a protracted period.
The good news is that recent turmoil in the bond market has beaten down the prices of bonds in most sectors, including corporate debt and asset-backed securities, so we may continue to opportunistically add to our corporate bond holdings in the months ahead.
April 2008
1 The yield on the Bond Buyer 20 Index of state and local general obligation bonds rose 0.48 percentage points and the yield on the Moody's Baa-rated corporate bond index increased 0.31 percentage points between September 30, 2007 and March 31, 2008.
2 The Fund's duration was 6.20 years versus 11.57 years for the Index as of September 30, 2007.
3 Yields of two-year Treasury notes fell 2.42 percentage points while yields of thirty-year Treasury bonds fell 0.49 percentage points during the period.
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
(with max. load)
Class A | |
One Year | 4.50% |
Since Inception | 5.43% |
(12/31/04) | |
Performance Comparison
Comparison of change in value of $10,000 investment
Average annual total returns in the Portfolio Statistics above and the Performance Comparison line graph are with maximum load deducted -- they assume reinvestment of dividends and reflect the deduction of the Fund's Class A maximum front-end sales charge of 3.75%. No sales charge has been applied to the indices used for comparison. However, the Lipper average does reflect the deduction of the category's average front-end sales charge. The value of an investment in Class A shares is plotted in the line graph. The value of an investment in another Class of shares would be different. The graph and table do not reflect the deduction of taxes that a shareholder would pay on the Fund's distributions or the redemption of Fund shares. Past performance is no guarantee of future results.
*Source: Lipper Analytical Services, Inc.
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) and redemption fees and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2007 to March 31, 2008).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
10/1/07 | Ending Account
Value
3/31/08 | Expenses Paid
During Period*
10/1/07 - 3/31/08 |
Actual | $1,000.00 | $1,058.60 | $6.43 |
Hypothetical | $1,000.00 | $1,018.75 | $6.31 |
(5% return per year before expenses) | | | |
* Expenses are equal to the Fund's annualized expense ratio of 1.25%, multiplied by the average account value over the period, multiplied by 183/366.
Schedule of Investments
March 31, 2008
| | Principal | | |
Asset Backed Securities - 4.8% | | Amount | Value | |
AmeriCredit Automobile Receivables Trust: | | | | |
4.05%, 2/6/10 | | $74,166 | $74,184 | |
4.47%, 5/6/10 | | 151,022 | 151,192 | |
Capital Auto Receivables Asset Trust, 5.22%, 11/16/09 | | 36,656 | 36,741 | |
Capital One Auto Finance Trust, 5.33%, 11/15/10 | | 79,510 | 79,953 | |
Discover Card Master Trust, 4.086%, 9/17/12 (r) | | 100,000 | 100,099 | |
GE Dealer Floorplan Master Note Trust, 3.124%, 4/20/11 (r) | | 75,000 | 73,962 | |
GS Auto Loan Trust, 2.65%, 5/16/11 | | 10,011 | 10,007 | |
Household Automotive Trust, 3.93%, 7/18/11 | | 52,580 | 52,618 | |
WFS Financial Owner Trust: | | | | |
3.60%, 2/17/12 | | 88,745 | 88,640 | |
3.93%, 2/17/12 | | 266,565 | 266,793 | |
| | | | | |
Total Asset Backed Securities (Cost $928,207) | | | 934,189 | |
| | | | | |
Collateralized Mortgage-Backed | | | | |
Obligations (privately originated) - 0.0% | | | | |
Impac CMB Trust, 3.869%, 5/25/35 (b)(r) | | 2,788 | 2,220 | |
| | | | | |
Total Collateralized Mortgage-Backed Obligations | | | | |
(privately originated) (Cost $2,788) | | | 2,220 | |
| | | | | |
Corporate Bonds - 36.0% | | | | |
Alliance Mortgage Investments, 12.61%, 6/1/10 (b)(r)(x) | | 4,817 | - | |
APL Ltd., 8.00%, 1/15/24 | | 30,000 | 28,350 | |
Army Hawaii Family Housing, 5.524%, 6/15/50 (e) | | 100,000 | 88,643 | |
Asian Development Bank, 6.22%, 8/15/27 | | 30,000 | 34,973 | |
Atlantic Marine Corp. Communities LLC, 6.158%, 12/1/51 (b)(e) | | 60,000 | 55,818 | |
Atlantic Mutual Insurance Co., 8.15%, 2/15/28 (e)(p)* | | 30,000 | 6,000 | |
Autopista del Maipo Sociedad, 7.373%, 6/15/22 (e) | | 25,000 | 30,212 | |
BAC Capital Trust XV, 3.876%, 6/1/56 (r) | | 100,000 | 73,725 | |
BAE Systems Asset Trust, 6.664%, 9/15/13 (e) | | 90,184 | 95,032 | |
Bank of America Corp., 8.00% to 1/30/18, floating rate thereafter | | | | |
to 12/29/49 (r) | | 120,000 | 120,144 | |
Bayview Research Center Finance Trust, 6.33%, 1/15/37 (e) | | 50,000 | 52,000 | |
Bear Stearns Co's, Inc.: | | | | |
3.456%, 4/29/08 (r) | | 190,000 | 189,212 | |
2.786%, 3/30/09 (r) | | 40,000 | 38,015 | |
3.964%, 10/28/14 (r) | | 30,000 | 21,440 | |
BNSF Funding Trust I, 6.613% to 1/15/26, floating rate thereafter | | | | |
to 12/15/55 (r) | | 250,000 | 231,013 | |
Burlington Northern Santa Fe Corp., 7.29%, 6/1/36 | | 10,000 | 10,896 | |
C8 Capital SPV Ltd., 6.64% to 12/31/14, floating rate thereafter to | | | | |
12/31/49 (e)(r) | | 45,000 | 41,459 | |
| | | | | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
C10 Capital SPV Ltd., 6.722% to 12/31/16, floating rate thereafter | | | | |
to 12/31/49 (e)(r) | | $30,000 | $27,723 | |
Camp Pendleton & Quantico Housing LLC, 5.937%, 10/1/43 (e) | | 50,000 | 50,979 | |
Cargill, Inc, 5.144%, 1/21/11 (e)(r) | | 70,000 | 69,771 | |
Chesapeake Energy Corp., 6.50%, 8/15/17 | | 50,000 | 48,125 | |
CIT Group, Inc.: | | | | |
3.303%, 5/23/08 (r) | | 50,000 | 48,875 | |
6.10% to 3/15/17, floating rate thereafter to 3/15/67 (r) | | 55,000 | 25,575 | |
Citigroup Capital XXI, 8.30% to 12/21/37, floating rate thereafter | | | | |
to 12/21/57 (r) | | 195,000 | 193,136 | |
Citigroup, Inc., 6.875%, 3/5/38 | | 55,000 | 54,852 | |
Compass Bancshares, Inc., 5.143%, 10/9/09 (e)(r) | | 100,000 | 99,434 | |
Credit Agricole SA, 6.637% to 5/31/17, floating rate thereafter | | | | |
to 5/31/49 (e)(r) | | 390,000 | 302,109 | |
Discover Financial Services, 6.45%, 6/12/17 (e) | | 100,000 | 91,071 | |
Enterprise Products Operating LP: | | | | |
8.375% to 8/1/16, floating rate thereafter to 8/1/66 (r) | | 30,000 | 28,846 | |
7.034% to 1/15/18, floating rate thereafter to 1/15/68 (r) | | 220,000 | 180,673 | |
Fisher Scientific International, Inc., 6.125%, 7/1/15 | | 60,000 | 59,705 | |
FMG Finance Pty Ltd.: | | | | |
7.076%, 9/1/11 (e)(r) | | 145,000 | 140,288 | |
10.00%, 9/1/13 (e) | | 75,000 | 80,625 | |
Ford Motor Credit Co. LLC: | | | | |
6.625%, 6/16/08 | | 15,000 | 14,925 | |
8.708%, 4/15/12 (r) | | 175,000 | 163,637 | |
Fort Knox Military Housing, 5.915%, 2/15/52 (e) | | 130,000 | 119,378 | |
Giants Stadium LLC, 13.50%, 4/1/29 (e)(r) | | 250,000 | 250,000 | |
Glitnir Banki HF: | | | | |
4.154%, 4/20/10 (e)(r) | | 75,000 | 61,894 | |
6.693% to 6/15/11, floating rate thereafter to 6/15/16 (e)(r) | | 150,000 | 114,606 | |
GMAC LLC: | | | | |
5.125%, 5/9/08 | | 150,000 | 149,063 | |
3.749%, 9/23/08 (r) | | 245,000 | 231,530 | |
4.315%, 5/15/09 (r) | | 155,000 | 134,847 | |
Great River Energy, 6.254%, 7/1/38 (e) | | 100,000 | 102,684 | |
HBOS plc, 6.657% to 5/21/37, floating rate thereafter | | | | |
to 5/21/49 (e)(r) | | 30,000 | 21,434 | |
Health Care Property Investors, Inc., 3.25%, 9/15/08 (r) | | 150,000 | 146,654 | |
Hewlett-Packard Co., 3.476%, 9/3/09 (r) | | 70,000 | 70,045 | |
Ingersoll-Rand Co. Ltd.: | | | | |
6.391%, 11/15/27 | | 40,000 | 43,158 | |
6.23%, 11/19/27 | | 15,000 | 16,330 | |
6.015%, 2/15/28 | | 25,000 | 26,276 | |
Irwin Land LLC: | | | | |
5.03%, 12/15/25 (e) | | 25,000 | 22,313 | |
5.40%, 12/15/47 (e) | | 125,000 | 105,199 | |
Jersey Central Power & Light Co., 5.625%, 5/1/16 | | 15,000 | 14,756 | |
JPMorgan Chase & Co., 4.394%, 1/22/10 (r) | | 50,000 | 49,766 | |
Land O'Lakes Capital Trust I, 7.45%, 3/15/28 (e) | | 100,000 | 87,500 | |
LL & P Wind Energy, Inc. Washington Revenue Bonds, 6.192%, | | | | |
12/1/27 | | 100,000 | 102,773 | |
Massachusetts Institute of Technology, 7.25%, 11/2/96 | | 25,000 | 33,513 | |
McGuire Air Force Base Military Housing Project, 5.611%, 9/15/51 (e) | | 30,000 | 26,666 | |
| | | | | |
| | | | | |
| | | Principal | | |
Corporate Bonds - Cont'd | | Amount | Value | |
Morgan Stanley: | | | | |
4.348%, 1/15/10 (r) | | $30,000 | $28,919 | |
4.538%, 1/15/10 (r) | | 60,000 | 58,350 | |
NationsBank Cap Trust III, 4.808%, 1/15/27 (r) | | 65,000 | 49,952 | |
Nationwide Health Properties, Inc.: | | | | |
6.90%, 10/1/37 | | 40,000 | 44,590 | |
6.59%, 7/7/38 | | 30,000 | 32,755 | |
Noble Group Ltd., 6.625%, 3/17/15 (e) | | 30,000 | 25,915 | |
Northrop Grumman Space & Mission Systems Corp., 6.32%, 5/27/08 | | 25,000 | 25,127 | |
NPS LLC, 9.80%, 12/28/16 (e)(r) | | 100,000 | 100,000 | |
Ohana Military Communities LLC: | | | | |
5.675%, 10/1/26 (e) | | 70,000 | 67,295 | |
6.00%, 10/1/51 (e) | | 30,000 | 29,899 | |
Pacific Beacon LLC, 5.638%, 7/15/51 (e) | | 40,000 | 35,046 | |
Pedernales Electric Cooperative, 5.952%, 11/15/22 (e) | | 50,000 | 53,120 | |
Pioneer Natural Resources Co., 6.65%, 3/15/17 | | 240,000 | 226,290 | |
Pitney Bowes, Inc., 5.60%, 3/15/18 | | 100,000 | 100,918 | |
PPL Montana LLC, 8.903%, 7/2/20 | | 24,517 | 28,401 | |
Puget Sound Energy, Inc., 7.02%, 12/1/27 | | 25,000 | 25,630 | |
Redstone Arsenal Military Housing, 5.45%, 9/1/26 (e) | | 25,000 | 26,586 | |
Residential Capital LLC, 3.49%, 6/9/08 (r) | | 155,000 | 122,450 | |
Rochester Gas & Electric Corp., 6.375%, 9/1/33 | | 10,000 | 9,681 | |
Royal Bank of Scotland Group plc, 7.64% to 9/30/12, floating rate | | | | |
thereafter to 3/31/49 (b)(r) | | 105,000 | 90,425 | |
SABMiller plc, 5.029%, 7/1/09 (e)(r) | | 60,000 | 60,152 | |
Skyway Concession Co. LLC, 2.976%, 6/30/17 (e)(r) | | 100,000 | 88,629 | |
Southern California Edison Co., 5.75%, 4/1/35 | | 10,000 | 9,778 | |
SouthTrust Bank, 6.565%, 12/15/27 | | 120,000 | 121,167 | |
SunTrust Bank, 7.25%, 3/15/18 | | 100,000 | 100,853 | |
TEPPCO Partners LP, 7.00% to 6/1/17, floating thereafter | | | | |
to 6/1/67 (r) | | 50,000 | 42,842 | |
Toll Road Investors Partnership II LP, Zero Coupon: | | | | |
2/15/18 (e) | | 100,000 | 62,274 | |
2/15/28 (e) | | 135,000 | 43,641 | |
2/15/31 (e) | | 196,000 | 53,427 | |
2/15/43 (b)(e) | | 750,000 | 136,875 | |
2/15/45 (e) | | 357,257 | 52,306 | |
Verizon North, Inc., 5.634%, 1/1/21 (e) | | 15,000 | 14,682 | |
Verizon Pennsylvania, Inc., 8.35%, 12/15/30 | | 30,000 | 34,811 | |
Wachovia Corp., 7.98% to 3/15/18, floating rate thereafter | | | | |
to 2/28/49 (r) | | 75,000 | 73,031 | |
Wells Fargo Bank: | | | | |
6.584%, 9/1/27 (e) | | 100,000 | 103,718 | |
6.734%, 9/1/47 (e) | | 100,000 | 104,775 | |
Windsor Petroleum Transport Corp, 7.84%, 1/15/21 (e) | | 30,000 | 34,936 | |
| | | | | |
Total Corporate Bonds (Cost $7,296,119) | | | 7,046,912 | |
| | | | | |
| | | | | |
| | | Principal | | |
Taxable Municipal Obligations - 11.9% | | Amount | Value | |
Adams-Friendship Area Wisconsin School District GO Bonds, | | | | |
5.47%, 3/1/18 | | $30,000 | $31,667 | |
Alabaster Alabama GO Bonds, 5.45%, 4/1/21 | | 25,000 | 25,333 | |
Anaheim California Redevelopment Agency Tax Allocation Bonds, | | | | |
6.506%, 2/1/31 | | 125,000 | 129,005 | |
Baltimore Maryland General Revenue Bonds, 5.27%, 7/1/18 | | 30,000 | 30,590 | |
California Statewide Communities Development Authority Revenue | | | | |
Bonds, 5.61%, 8/1/14 | | 30,000 | 32,584 | |
Camarillo California Community Development Commission Tax | | | | |
Allocation Bonds, 5.78%, 9/1/26 | | 30,000 | 28,849 | |
Commonwealth Pennsylvania Financing Authority Revenue Bonds, | | | | |
5.631%, 6/1/23 | | 30,000 | 32,845 | |
Cook County Illinois School District GO Bonds, Zero Coupon, | | | | |
12/1/24 | | 25,000 | 8,678 | |
East Lansing Michigan GO Bonds, 5.00%, 4/1/14 | | 85,000 | 89,727 | |
Ewing Township New Jersey School District GO Bonds, 4.80%, | | | | |
5/1/16 | | 10,000 | 10,358 | |
Fairfield California PO Revenue Bonds: | | | | |
5.22%, 6/1/20 | | 15,000 | 15,115 | |
5.34%, 6/1/25 | | 15,000 | 14,271 | |
Florida State First Governmental Financing Commission Revenue | | | | |
Bonds, 5.30%, 7/1/19 | | 25,000 | 25,313 | |
Fort Wayne Indiana Redevelopment District Revenue Bonds, | | | | |
5.24%, 6/1/21 | | 25,000 | 25,208 | |
Grant County Washington Public Utility District No. 2 | | | | |
Revenue Bonds: | | | | |
5.29%, 1/1/20 | | 25,000 | 25,218 | |
5.48%, 1/1/21 | | 10,000 | 10,453 | |
Hammonton New Jersey GO Bonds, 5.90%, 3/1/18 | | 15,000 | 15,888 | |
Howell Township New Jersey School District GO Bonds, 5.30%, | | | | |
7/15/19 | | 25,000 | 26,119 | |
Illinois State MFH Development Authority Revenue Bonds, | | | | |
6.537%, 1/1/33 | | 70,000 | 68,621 | |
Indiana State Bond Bank Revenue Bonds, 6.01%, 7/15/21 | | 50,000 | 53,564 | |
Jackson & Williamson Counties Illinois Community High School | | | | |
District GO Bonds, Zero Coupon, 12/1/21 | | 180,000 | 80,998 | |
Kansas City Missouri Airport Revenue Bonds, 5.125%, 9/1/17 | | 15,000 | 15,027 | |
Kaukauna Wisconsin School District GO Revenue Bonds, 5.07%, | | | | |
3/1/09 | | 125,000 | 126,517 | |
Kern County California PO Revenue Bonds, Zero Coupon, 8/15/20 | | 125,000 | 60,982 | |
King County Washington Housing Authority Revenue Bonds, | | | | |
6.375%, 12/31/46 | | 50,000 | 51,726 | |
La Mesa California COPs, 6.32%, 8/1/26 | | 30,000 | 31,197 | |
Lancaster Pennsylvania Parking Authority Revenue Bonds, 5.95%, | | | | |
12/1/25 | | 50,000 | 50,397 | |
Leland Stanford Jr. University California Revenue Bonds, 6.875%, | | | | |
2/1/24 | | 100,000 | 118,271 | |
Linden New Jersey GO Revenue Bonds, 5.63%, 4/1/21 | | 60,000 | 62,496 | |
Metropolitan Washington DC Airport Authority System Revenue | | | | |
Bonds, 5.69%, 10/1/30 | | 15,000 | 14,430 | |
Nashville & Davidson County Tennessee Water & Sewage Revenue | | | | |
Bonds, 4.74%, 1/1/15 | | 80,000 | 83,333 | |
| | | | |
| | | Principal | | |
Taxable Municipal Obligations - Cont'd | | Amount | Value | |
Mississippi State Development Bank SO Revenue Bonds, 5.60%, | | | | |
1/1/26 | | $30,000 | $28,919 | |
Montgomery Alabama GO Bonds, 4.94%, 4/1/17 | | 10,000 | 10,180 | |
Moreno Valley California Public Financing Authority Revenue | | | | |
Bonds, 5.549%, 5/1/27 | | 50,000 | 48,114 | |
Nevada State Department of Business & Industry Lease Revenue | | | | |
Bonds, 5.87%, 6/1/27 | | 50,000 | 50,136 | |
New York City IDA Revenue Bonds, 6.027%, 1/1/46 | | 30,000 | 30,342 | |
Oakland California PO Revenue Bonds, Zero Coupon, 12/15/20 | | 120,000 | 57,564 | |
Oakland California Redevelopment Agency Tax Allocation Bonds, | | | | |
5.411%, 9/1/21 | | 30,000 | 30,580 | |
Orange County California PO Revenue Bonds, Zero Coupon, 9/1/14 | | 95,000 | 72,774 | |
Oregon State Local Governments GO Bonds, Zero Coupon, 6/1/18 | | 100,000 | 59,374 | |
Oregon State School Boards Association GO Bonds, Zero Coupon: | | | | |
6/30/16 | | 25,000 | 17,015 | |
6/30/18 | | 30,000 | 17,719 | |
Philadelphia Pennsylvania IDA Revenue Bonds, Zero Coupon, 4/15/20 | | 25,000 | 12,190 | |
Philadelphia Pennsylvania School District GO Bonds, 5.09%, 7/1/20 | | 10,000 | 10,286 | |
Redlands California PO Revenue Bonds, Zero Coupon: | | | | |
8/1/27 | | 250,000 | 76,045 | |
8/1/28 | | 175,000 | 49,957 | |
San Bernardino California Joint Powers Financing Authority Tax | | | | |
Allocation Bonds, 5.625%, 5/1/16 | | 40,000 | 42,125 | |
San Jose California Redevelopment Agency Tax Allocation Bonds, | | | | |
5.10%, 8/1/20 | | 15,000 | 14,850 | |
Santa Cruz County California Redevelopment Agency Tax Allocation | | | | |
Revenue Bonds, 5.50%, 9/1/20 | | 40,000 | 40,877 | |
Schenectady New York Metroplex Development Authority Revenue | | | | |
Bonds, 5.36%, 8/1/16 | | 40,000 | 42,506 | |
St. Paul Minnesota Sales Tax Revenue Bonds, 6.125%, 11/1/25 | | 50,000 | 50,702 | |
Thorp Wisconsin School District GO Bonds, 6.15%, 4/1/26 | | 40,000 | 41,770 | |
Thousand Oaks California Redevelopment Agency Tax Allocation | | | | |
Bonds, 5.25%, 12/1/21 | | 50,000 | 50,373 | |
Utah State Housing Corp. Military Housing Revenue Bonds: | | | | |
5.392%, 7/1/50 | | 15,000 | 13,758 | |
5.442%, 7/1/50 | | 10,000 | 9,240 | |
Vigo County Indiana Industrial Redevelopment Authority Revenue | | | | |
Bonds, 5.30%, 2/1/21 | | 15,000 | 15,071 | |
West Contra Costa California Unified School District COPs, | | | | |
5.03%, 1/1/20 | | 15,000 | 14,920 | |
West Covina California Public Financing Authority General Revenue | | | | |
Bonds, 6.05%, 6/1/26 | | 40,000 | 40,252 | |
| | | | | |
Total Taxable Municipal Obligations (Cost $2,290,296) | | | 2,342,419 | |
| | | | | |
| | | | | |
U.S. Government Agencies | | Principal | | |
and Instrumentalities - 24.0% | | Amount | Value | |
Federal Home Loan Bank Discount Notes, 4/1/08 | | $4,600,000 | $4,600,000 | |
Freddie Mac, 6.00%, 12/15/32 | | 314,250 | 63,688 | |
New Valley Generation V, 4.929%, 1/15/21 | | 38,730 | 38,753 | |
| | | | | |
Total U.S. Government Agencies and Instrumentalities (Cost $4,705,352) | | | 4,702,441 | |
| | | | | |
U.S. Treasury - 14.3% | | | | |
United States Treasury Bonds: | | | | |
5.375%, 2/15/31 | | 35,000 | 40,458 | |
4.75%, 2/15/37 | | 122,000 | 131,131 | |
5.00%, 5/15/37 | | 114,000 | 127,466 | |
United States Treasury Notes: | | | | |
5.125%, 5/15/16 | | 909,000 | 1,035,266 | |
3.50%, 2/15/18 | | 1,457,000 | 1,465,651 | |
| | | | | |
Total U.S. Treasury (Cost $2,662,758) | | | 2,799,972 | |
| | | | | |
Equity Securities - 0.6% | | Shares | | |
Conseco, Inc. * | | 1,712 | 17,462 | |
Fannie Mae, Series S Preferred | | 4,000 | 96,200 | |
| | | | | |
Total Equity Securities (Cost $130,993) | | | 113,662 | |
| | | | | |
TOTAL INVESTMENTS (Cost $18,016,513) - 91.6% | | | 17,941,815 | |
Other assets and liabilities, net - 8.4% | | | 1,644,504 | |
Net Assets - 100% | | | $19,586,319 | |
Futures | # of
Contracts | Expiration
Date | Underlying
Face Amount
at Value | Unrealized
Appreciation
(Depreciation) |
Purchased: | | | | |
10 Year U.S. Treasury Notes | 18 | 6/08 | $2,141,156 | $80,560 |
U.S. Treasury Bonds | 3 | 6/08 | 356,391 | 11,081 |
Total Purchased | | | | $91,641 |
* Non-income producing security.
(b) This security was valued by the Board of Trustees. See note A.
(e) Security is exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(p) The State of New York Insurance Department has prohibited Atlantic Mutual Insurance Co. from making interest payments. This security is no longer accruing interest.
(r) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
(x) Alliance Bancorp and its affiliates filed for Chapter 7 bankruptcy on July 13, 2007.
This security is no longer accruing interest.
Abbreviations: | |
COPs: Certificates of Participation | LP: Limited Partnership |
GO: General Obligation | MFH: Multi-Family Housing |
IDA: Industrial Development Authority | PO: Pension Obligation |
LLC: Limited Liability Corporation | SO: Special Obligation |
See notes to financial statements.
Statement of Assets and Liabilities
March 31, 2008
Assets | | |
Investments in securities, at value (Cost $18,016,513) - see accompanying schedule | | $17,941,815 |
Cash | | 242,657 |
Receivable for securities sold | | 300,000 |
Receivable for futures variation margin | | 5,297 |
Receivable for shares sold | | 1,034,926 |
Interest and dividends receivable | | 151,814 |
Other assets | | 43,359 |
Total assets | | 19,719,868 |
| | | |
Liabilities | | |
Payable for securities purchased | | 75,613 |
Payable for shares redeemed | | 24,501 |
Payable to Calvert Asset Management Company, Inc. | | 9,952 |
Payable to Calvert Administrative Services Company | | 4,529 |
Payable to Calvert Shareholder Services, Inc. | | 291 |
Payable to Calvert Distributors, Inc. | | 3,774 |
Accrued expenses and other liabilities | | 14,889 |
Total liabilities | | 133,549 |
Net Assets | | $19,586,319 |
| | | |
Net Assets Consist of: | | |
Paid-in capital applicable to 1,239,679 shares of beneficial interest, unlimited number of no par shares authorized | | $19,257,857 |
Undistributed net investment income (loss) | | (3,130) |
Accumulated net realized gain (loss) on investments | | 314,649 |
Net unrealized appreciation (depreciation) on investments | | 16,943 |
Net Assets | | $19,586,319 |
Net Asset Value Per Share | | $15.80 |
See notes to financial statements.
Statement of Operations
Six Months Ended March 31, 2008
Net Investment Income | |
Investment Income: | |
Interest income | $406,363 |
Dividend income | 2,543 |
Total investment income | 408,906 |
| | |
Expenses: | |
Investment advisory fee | 29,217 |
Administrative fees | 21,913 |
Transfer agency fees and expenses | 27,925 |
Trustees' fees and expenses | 531 |
Distribution plan expenses | 18,261 |
Custodian fees | 15,771 |
Accounting fees | 1,194 |
Registration fees | 6,482 |
Reports to shareholders | 1,981 |
Professional fees | 8,960 |
Miscellaneous | 1,023 |
Total expenses | 133,258 |
Reimbursement from Advisor | (38,096) |
Fees paid indirectly | (3,858) |
Net expenses | 91,304 |
Net Investment Income | 317,602 |
| | |
Realized and Unrealized Gain (Loss) | |
Net realized gain (loss) on: | |
Investments | 372,345 |
Futures | 27,118 |
| | 399,463 |
| | |
Change in unrealized appreciation (depreciation) on: | |
Investments | (15,635) |
Futures | 86,541 |
| | 70,906 |
| | |
Net Realized and Unrealized Gain | |
(Loss) | 470,369 |
| | |
Increase (Decrease) in Net Assets | |
Resulting From Operations | $787,971 |
See notes to financial statements.
Statements of Changes in Net Assets
| | | Six Months Ended | Year Ended | |
| | | March 31, | September 30, | |
Increase (Decrease) in Net Assets | | 2008 | 2007 | |
Operations: | | | | |
Net investment income | | $317,602 | $378,059 | |
Net realized gain (loss) on investments | | 399,463 | 241,495 | |
Change in unrealized appreciation (depreciation) | | 70,906 | (97,835) | |
| | | | | |
Increase (Decrease) in Net Assets | | | | |
Resulting From Operations | | 787,971 | 521,719 | |
| | | | | |
Distributions to shareholders from: | | | | |
Net investment income | | (322,035) | (376,887) | |
Net realized gain | | (317,167) | (6,911) | |
Total distributions | | (639,202) | (383,798) | |
| | | | | |
Capital share transactions: | | | | |
Shares sold | | 8,592,132 | 9,659,296 | |
Reinvestment of distributions | | 574,837 | 328,859 | |
Redemption fees | | 325 | 203 | |
Shares redeemed | | (1,868,911) | (2,981,674) | |
Total capital share transactions | | 7,298,383 | 7,006,684 | |
| | | | | |
Total Increase (Decrease) in Net Assets | | 7,447,152 | 7,144,605 | |
| | | | | |
Net Assets | | | | |
Beginning of period | | 12,139,167 | 4,994,562 | |
End of period (including distributions in excess of net investment income of $3,130 and undistributed net investment income of $1,303, respectively) | | $19,586,319 | $12,139,167 | |
| | | | | |
Capital Share Activity | | | | |
Shares sold | | 543,973 | 623,449 | |
Reinvestment of distributions | | 36,585 | 21,263 | |
Shares redeemed | | (117,940) | (192,786) | |
Total capital share activity | | 462,618 | 451,926 | |
See notes to financial statements.
Notes to Financial Statements
Note A ---- Significant Accounting Policies
General: The Calvert Long-Term Income Fund (the "Fund"), a series of The Calvert Fund, is registered under the Investment Company Act of 1940 as a non-diversified, open-end management investment company. The operations of each series are accounted for separately. The Fund offers Class A shares which are sold with a maximum front-end sales charge of 3.75%.
Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Fund uses independent pricing services approved by the Board of Trustees to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the Fund's net asset value determination, that are expected to materially affect the value of those securities, then the y are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Fund may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Trustees.
In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
At March 31, 2008, securities valued at $285,338, or 1.5% of net assets were fair valued in good faith under the direction of the Board of Trustees.
Repurchase Agreements: The Fund may enter into repurchase agreements with recognized financial institutions or registered broker/dealers and, in all instances, holds underlying securities with a value exceeding the total repurchase price, including accrued interest. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its value and a possible loss of income or value if the counterparty fails to perform in accordance with the terms of the agreement.
Futures Contracts: The Fund may enter into futures contracts agreeing to buy or sell a financial instrument for a set price at a future date. Initial margin deposits of either cash or securities as required by the broker are made upon entering into the contract. While the contract is open, daily variation margin payments are made to or received from the broker reflecting the daily change in market value of the contract and are recorded for financial reporting purposes as unrealized gains or losses by the Fund. When a futures contract is closed, a realized gain or loss is recorded equal to the difference between the opening and closing value of the contract. The risks associated with entering into futures contracts may include the possible illiquidity of the secondary market which would limit the Fund's ability to close out a futures contract prior to the settlement date, an imperfect correlation between the value of the contracts and the underlying financial instruments, or that the counterparty will fail to perform its obligations under the contracts' terms.
Short Sales: The Fund may use a hedging technique that involves short sales of U.S. Treasury securities for the purposes of managing the duration of the Fund. Any short sales are "covered" with an equivalent amount of high-quality, liquid securities.
Security Transactions and Net Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. (See Schedule of Investments footnotes on page 15.) A debt obligation may be removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Foreign Currency Transactions: The Fund's accounting records are maintained in U.S. dollars. For valuation of assets and liabilities on each date of net asset value determination, foreign denominations are translated into U.S. dollars using the current exchange rate. Security transactions, income and expenses are translated at the prevailing rate of exchange on the date of the event. The effect of changes in foreign exchange rates on securities and foreign currencies is included in the net realized and unrealized gain or loss on securities and foreign currencies.
Distributions to Shareholders: Distributions to shareholders are recorded by the Fund on ex-dividend date. Dividends from net investment income are paid monthly. Distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Fund's capital accounts to reflect income and gains available for distribution under income tax regulations.
Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Actual results could differ from those estimates.
Redemption Fees: The Fund charges a 2% redemption fee on redemptions, including exchanges, made within 30 days of purchase in the same Fund. The redemption fee is paid to the Class of the Fund from which the redemption is made, and is accounted for as an addition to paid-in capital. The fee is intended to discourage market-timers by ensuring that short-term trading costs are borne by the investors making the transactions and not the shareholders already in the Fund.
Expense Offset Arrangements: The Fund has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Fund's cash on deposit with the bank. These credits are used to reduce the Fund's expenses. Such a deposit arrangement may be an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is required since the Fund intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.
New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" -- an interpretation of FASB Statement 109 (FIN 48), effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax years ended September 30, 2005 -- 2007) for purposes of implementing FIN 48, and has concluded that as of March 31, 2008, no provision for income tax is required in the Fund's financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of March 31, 2008, the Fund does not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures may be requi red about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging Activities." The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effect on the Fund's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS No. 161 will have on the Fund's financial statements and related disclosures.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Trustees of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives a monthly fee based on an annual rate of .40% of the Fund's average daily net assets.
The Advisor has contractually agreed to limit net annual fund operating expenses through January 31, 2009. The contractual expense cap is 1.25%. For the purposes of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense offset credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.
Calvert Administrative Services Company, an affiliate of the Advisor, provides administrative services to the Fund for an annual fee, payable monthly, of .30% of the average daily net assets.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Fund. The Distribution Plan, adopted by Class A shares, allows the Fund to pay the Distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed .50% annually of the Fund's average daily net assets of Class A. The amount actually paid by the Fund is an annualized fee, payable monthly of .25% of the Fund's average daily net assets of Class A.
The Distributor received $4,930 as its portion of the commissions charged on sales of the Fund's Class A shares for the six months ended March 31, 2008.
Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, is the shareholder servicing agent for the Fund. For its services, CSSI received a fee of $1,343 for the six months ended March 31, 2008. Boston Financial Data Services, Inc., is the transfer and dividend disbursing agent.
Each Trustee of the Fund who is not an employee of the Advisor or its affiliates receives an annual retainer of $32,000 plus up to $1,500 for each Board and Committee meeting attended. Trustee's fees are allocated to each of the funds served.
Note C -- Investment Activity
During the period, the cost of purchases and proceeds from sales of investments, other than short-term and U.S. government securities, were $19,038,524 and $15,239,433, respectively. U.S. government security purchases and sales were $27,708,669 and $28,181,373, respectively.
The cost of investments owned at March 31, 2008 for federal income tax purposes was $18,028,572. Net unrealized depreciation aggregated $86,757, of which $286,819 related to appreciated securities and $373,576 related to depreciated securities.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds (except for the Calvert Social Investment Fund's Balanced and Enhanced Equity Portfolios and the CVS Social Balanced Portfolio) and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the overnight Federal Funds Rate plus .50% per annum. A commitment fee of .10% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at March 31, 2008. For the six months ended March 31, 2008, borrowings by the Fund under the Agreement were as follows:
| Average
Daily
Balance | Weighted
Average
Interest
Rate | Maximum
Amount
Borrowed | Month of
Maximum
Amount
Borrowed |
| | $336 | 3.62% | $20,521 | February 2008 |
Financial Highlights
| | | Periods Ended | |
| | | March 31, | September 30, | |
Class A Shares | | 2008 | 2007 | |
Net asset value, beginning | | $15.62 | $15.36 | |
Income from investment operations | | | | |
Net investment income | | .33 | .62 | |
Net realized and unrealized gain (loss) | | .57 | .27 | |
Total from investment operations | | .90 | .89 | |
Distributions from: | | | | |
From net investment income | | (.33) | (.61) | |
Net realized gain | | (.39) | (.02) | |
Total distributions | | (.72) | (.63) | |
Total increase (decrease) in net asset value | | .18 | .26 | |
Net asset value, ending | | $15.80 | $15.62 | |
| | | | | |
Total return* | | 5.86% | 5.92% | |
Ratios to average net assets:A | | | | |
Net investment income | | 4.35% (a) | 4.09% | |
Total expenses | | 1.82% (a) | 2.03% | |
Expenses before offsets | | 1.30% (a) | 1.30% | |
Net expenses | | 1.25% (a) | 1.25% | |
Portfolio turnover | | 405% | 767% | |
Net assets, ending (in thousands) | | $19,586 | $12,139 | |
| | | | | |
| | | | | |
| | | Periods Ended | |
| | | September 30, | September 30, | |
Class A Shares | | 2006 | 2005^ | |
Net asset value, beginning | | $15.52 | $15.00 | |
Income from investment operations | | | | |
Net investment income | | .58 | .27 | |
Net realized and unrealized gain (loss) | | .08 | .52 | |
Total from investment operations | | .66 | .79 | |
Distributions from: | | | | |
From net investment income | | (.58) | (.27) | |
Net realized gain | | (.24) | -- | |
Total distributions | | (.82) | (.27) | |
Total increase (decrease) in net asset value | | (.16) | .52 | |
Net asset value, ending | | $15.36 | $15.52 | |
| | | | | |
Total return* | | 4.49% | 5.29%** | |
Ratios to average net assets:A | | | | |
Net investment income | | 4.04% | 2.41% (a) | |
Total expenses | | 3.76% | 6.82% (a) | |
Expenses before offsets | | 1.55% | 1.51% (a) | |
Net expenses | | 1.25% | 1.25% (a) | |
Portfolio turnover | | 547% | 931% | |
Net assets, ending (in thousands) | | $4,995 | $2,051 | |
See notes to financial highlights.
A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the Fund.
(a) Annualized.
* Total return is not annualized for periods less than one year and does not reflect deduction of any front-end or deferred sales charge.
** Total return would have been 5.15% without the payment by affiliate. On March 30, 2005, the Advisor voluntarily contributed $2,658 to the Fund to reimburse the effect of a realized loss caused by a trading error. This transaction was deemed a "payment by affiliate."
^ From December 31, 2004, inception.
See notes to financial statements.
Explanation of Financial Tables
Schedule of Investments
The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.
Statement of Net Assets
The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.
At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.
Statement of Operations
The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.
Statement of Changes in Net Assets
The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.
The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.
Financial Highlights
The Financial Highlights table provides a per-share breakdown per class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business , expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.
Proxy Voting
The Proxy Voting Guidelines of the Calvert Funds that the Fund uses to determine how to vote proxies relating to portfolio securities are provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745, by visiting the Calvert website at www.calvert.com; or by visiting the SEC's website at www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund's website at www.calvert.com and on the SEC's website at www.sec.gov.
Availability of Quarterly Portfolio holdings
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Basis for Board's Approval of Investment Advisory Contract
At a meeting held on December 5, 2007, the Board of Trustees, and by a separate vote, the disinterested Trustees, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor with respect to the Fund.
In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Fund and the Advisor. The disinterested Trustees reviewed a report prepared by the Advisor regarding various services provided to the Fund by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Fund, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses and fees to comparable mutual funds.
The disinterested Trustees were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement. Prior to voting, the disinterested Trustees reviewed the proposed continuance of the Investment Advisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.
In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Fund's advisory fee; comparative performance, fee and expense information for the Fund; the profitability of the Calvert Group of Funds to the Advisor; the direct and indirect benefits, if any, derived by the Advisor from its relationship with the Fund; the effect of the Fund's growth and size on the Fund's performance and expenses; the affiliated distributor's process for monitoring sales load breakpoints; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.
In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's investment, supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with management through Board of Trustees' meetings, discussions and other reports. The Board considered the Advisor's management style and its performance in employing its investment strategies, as well as its current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Fund, were also considered. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Fund by the Advisor under the Investment Advisory Agreement.
In considering the Fund's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Fund's performance results, portfolio composition and investment strategies. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Fund's total return with its benchmark and with that of other mutual funds deemed to be in its Lipper peer group by an independent third party in its report. This comparison indicated that for the one-year annualized periods ended June 30, 2007, the Fund's performance was above the median of its peer group. The Fund outperformed its Lipper index for the one-year annualized period. Based upon its review, the Board concluded that the Fund's performance was satisfactory.
In considering the Fund's fees and expenses, the Board compared the Fund's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Fund's advisory fee (after taking into account waivers and reimbursements) was below the median of its peer group and that total expenses (after waivers and reimbursements) were above the median of its peer group. The Board took into account the Advisor's current undertaking to maintain expense limitations for the Class A shares of the Fund, noting that the Advisor was currently reimbursing fund expenses in excess of the entire advisory fee. Based upon its review, the Board concluded that the advisory fee was reasonable in view of the quality of services received by the Fund from the Advisor and the other factors considered.
The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Fund's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Fund for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Fund in terms of the total amount of annual advisory fees it received with respect to the Fund and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Fund. The Board also noted the Advisor's current undertaking to maintain expense limitations for the Fund's Class A shares. The Board also noted that the Advisor reimbursed expenses of the Fund. The Board also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Fund. Based upon its review, the Board concluded that the Advisor's level of profitability from its relationship with the Fund was reasonable.
The Board considered the effect of the Fund's size and potential growth on its performance and expenses. The Board also noted that if the Fund's assets increased over time, the Fund might realize other economies of scale if assets increased proportionally more than certain other expenses. The Board concluded that adding breakpoints to the advisory fee at specified asset levels would not be appropriate given the Fund's current size.
In reapproving the Investment Advisory Agreement, the Board, including the disinterested Trustees, did not identify any single factor as controlling, and each Trustee attributed different weight to various factors.
Conclusions
The Board reached the following conclusions regarding the Investment Advisory Agreement, among others: (a) the Advisor has demonstrated that it possessed the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains appropriate compliance programs; (c) performance of the Fund is satisfactory relative to the performance of funds with similar investment objectives and to relevant indices; (d) the Advisor is likely to execute its investment strategies consistently over time; and (e) the Fund's advisory fee is reasonable relative to those of similar funds and to the services to be provided by the Advisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement would be in the best interests of the Fund and its shareholders.
Calvert Long-Term Income Fund
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Calvert Group
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Principal Underwriter
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000 North
Bethesda, Maryland 20814
This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.
Calvert's Family of Funds
Tax-Exempt Money Market Funds
CTFR Money Market Portfolio
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First Government Money Market Fund
CSIF Money Market Portfolio
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New Vision Small Cap Fund
Calvert Social Index Fund
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Calvert Mid Cap Value Fund
Calvert Global Alternative Energy Fund
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Balanced and Asset Allocation Funds
CSIF Balanced Portfolio
Calvert Conservative Allocation Fund
Calvert Moderate Allocation Fund
Calvert Aggressive Allocation Fund
printed on recycled paper using soy-based inks
<PAGE>
Calvert
Investments that make a difference®
March 31, 2008
Semi-Annual Report
Calvert Ultra-Short
Floating Income Fund
Calvert
Investments that make a difference®
A UNIFI Company
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Table of Contents
President's Letter
1
Portfolio Management Discussion
4
Shareholder Expense Example
7
Schedule of Investments
9
Statement of Assets and Liabilities
12
Statement of Operations
13
Statements of Changes in Net Assets
14
Notes to Financial Statements
15
Financial Highlights
19
Explanation of Financial Tables
20
Proxy Voting and Availability of Quarterly Portfolio Holdings
22
Basis for Board's Approval of Investment Advisory Contract
22
Dear Shareholder:
The six months ended March 31, 2008 featured turmoil in the financial markets that was almost unprecedented at times. Investors continued to be spooked by the credit crunch, worries about an economic slowdown or recession, and oil prices that exceeded $110 per barrel. This volatility had its roots in the fixed-income markets, where fears about the value of securities linked to subprime mortgages spread throughout the bond market and beyond, even affecting the values of securities with no direct connection to subprime mortgages. Notably, Calvert's taxable bond funds weathered the market turmoil well as a result of our emphasis on holding higher-quality securities and our general avoidance of most holdings that were directly related to subprime mortgages. However, the indirect effects of the subprime mortgage problems impacted our fixed-income funds through their holdings of securities issued by financial companies.
By the numbers, the Lehman U.S. Credit Index, a common benchmark for the entire U.S. bond market, returned 2.63% from October 1, 2007 through March 31, 2008. The credit crisis also affected previously staid debt sectors, including auction-rate securities and municipal bonds. At the beginning of 2008, worries about the ability of bond insurers to meet their obligations on payment of principal and interest in the event of default on the municipal debt that they insure drove municipal yields sharply higher. The market was further roiled by liquidity problems in auction rate securities, a sector that had previously been viewed as having characteristics almost like cash.
Fed Takes Aggressive Action
The Federal Reserve (Fed) has taken a nearly unprecedented series of actions to stabilize the financial markets and reassure investors. The Fed moved aggressively to add liquidity to the financial system and reduced its target federal funds rate by a total of 2.5 percentage points.
In March, it boldly moved to stem the rising panic in the credit markets by increasing the size of its lending program for commercial banks and changing the length and terms of the loans. The Fed also allowed investment banks to borrow directly from the central bank and started accepting hard-to-sell mortgage-backed securities as collateral. When JPMorgan Chase swooped in to rescue Bear Stearns at the bargain basement price of $2 per share (later raised to $10), the Fed agreed to backstop up to $30 billion of Bear Stearns' illiquid holdings. Although some say that the Fed essentially bailed out Bear Stearns and other financial firms from their overly aggressive risk-taking, the Fed's actions did prove effective, stabilizing the financial system and providing some confidence to investors.
Lipper Awards
As a result of our experienced, professional team of portfolio managers and credit analysts, Calvert's taxable bond funds have steered a steady course through the considerable market turbulence. Our portfolio management team largely avoided investing in securities that are directly related to subprime mortgages as we maintained our focus on fundamental credit research and buying only bonds that represent significant value.
As evidence of our ongoing success and expertise in the fixed income arena, three of Calvert's taxable bond funds--Calvert Social Investment Fund (CSIF) Bond Portfolio, Calvert Income Fund, and Calvert Long-Term Income Fund--received 2008 Lipper Awards as a result of their consistently high risk-adjusted returns.1 In fact, this is the fourth time in the last five years that CSIF Bond Portfolio (Class I shares) has won the Lipper Award for the three-year period. All of us at Calvert are extremely proud of these awards and of our taxable fixed-income management team led by Senior Vice President Greg Habeeb.
Maintain a Long-Term View
The financial markets will probably continue to be volatile for at least the next few months, so it's important that you maintain a long-term view in terms of your investments and not get swept up in the day-to-day fluctuations in the market. Your financial advisor is an excellent source of guidance, so please continue to consult with him or her about your investment plan.
As always, thank you for your continued confidence in Calvert's investment products.
Sincerely,
Barbara J. Krumsiek
President and CEO
Calvert Group, Ltd.
April 2008
1. This is the fourth time in the last five years that the Calvert Social Investment Fund Bond Portfolio Class I Shares has won the Lipper Award for consistent risk-adjusted return for the three-year period. For the three-year periods ended December 31, 2003, 2005, 2006, and 2007, the Class I Shares of the Portfolio were chosen from among 154, 152, 150, and 144 funds, respectively.
Lipper Fund Awards are granted annually to the funds in each Lipper classification that achieve the highest score for Consistent Return, a measure of funds' historical risk-adjusted returns, measured in local currency, relative to peers.
Funds registered for sale in a given country are selected, and then scores for Consistent Return are computed for all Lipper global classifications with five or more distinct portfolios. The scores are subject to change every month and are calculated for the following periods: three-year, five-year, 10-year, and overall. The highest 20% of funds in each classification are named Lipper Leaders for Consistent Return. The highest Lipper Leader for Consistent Return within each eligible classification determines the fund classification winner over three, five, or 10 years. Source: Lipper, Inc.
The Calvert Social Investment Fund Bond Portfolio Class I Shares (CBDIX) ranked #1 (out of 128 funds) in the Corporate Debt Funds A Rated classification for the five-year period ended December 31, 2007.
The Calvert Social Investment Fund Bond Portfolio Class A Shares (CSIBX) ranked #1 (out of 58 funds) in the Corporate Debt Funds A Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class A Shares (CFICX) ranked #1 (out of 48 funds) in the Corporate Debt Funds BBB-Rated classification for the 10-year period ended December 31, 2007.
The Calvert Income Fund Class I Shares (CINCX) ranked #1 (out of 100 funds) in the Corporate Debt Funds BBB-Rated classification for the five-year period ended December 31, 2007.
The Calvert Long-Term Income Fund Class A Shares (CLDAX) ranked #1 (out of 117 funds) in the Corporate Debt Funds BBB-Rated classification for the three-year period ended December 31, 2007.
For more information on any Calvert fund, please contact Calvert at 800.368.2748 for a free prospectus. An investor should consider the investment objectives, risks, charges, and expenses of an investment carefully before investing. The prospectus contains this and other information. Read it carefully before you invest or send money. Bond funds are subject to interest rate risk. When interest rates rise, the value of fixed-income securities will generally fall. Conversely, a drop in interest rates will generally cause an increase in the value of fixed-income securities.
Calvert mutual funds are underwritten and distributed by Calvert Distributors, Inc., member FINRA, a subsidiary of Calvert Group, Ltd.
Portfolio Management Discussion
Gregory Habeeb
Senior Portfolio Manager of Calvert Asset Management Company
Performance
Calvert Ultra-Short Floating Income Fund Class A shares (at NAV) returned 2.10% versus 3.56% for the Lehman Short Treasury 9-12 Month Index over the six-month reporting period ended March 31, 2008. A short duration relative to the index and an allocation to below-investment-grade securities not in the benchmark drove the Fund's underperformance. (Duration is a measure of a portfolio's sensitivity to changes in interest rates. The longer the duration, the greater the price change relative to interest-rate movements.) In addition, markdowns in several securities, including high yield securities from Residential Capital and other financial issuers, contributed to underperformance.1
Investment Climate
The six-month period ended March 31, 2008 was one of the most memorable periods in the history of the bond market. During the first three months, the collapse of the U.S. subprime mortgage market spurred a severe liquidity crunch that was acutely felt in U.S., European, and United Kingdom money markets. Extensive cooperation between the Federal Reserve (Fed) and European central banks pumped enough liquidity back into the system to restore calm by the end of 2007.
However, issues with the financial stability of bond insurers arose in January and roiled the typically staid municipal bond market. By early March, the crisis had escalated into a broad sell-off of even the most creditworthy securities into an already weak market. In response, the Fed made a series of historically significant policy announcements--such as allowing investment banks to borrow directly from the Fed and agreeing to finance $30 billion of Bear Stearns' most illiquid assets so the company could be sold--which calmed the turmoil by the end of March.
Throughout the period, economic growth slowed while inflation remained steady. A series of cuts over the six-month period reduced the target federal funds rate from 4.75% to 2.25%. As a result of a flight to quality amid market turmoil, the three-month Treasury bill yield dropped from 3.82% to 1.38% while the 10-year Treasury bond yield fell from 4.59% to 3.45%. However, the extremely difficult market conditions sent municipal and corporate bond yields higher.2
Portfolio Statistics
March 31, 2008
Investment Performance
(total return at NAV*)
| 6 Months
ended
3/31/08 | 12 Months
ended
3/31/08 |
Class A | 2.10% | 4.36% |
Lehman Short Treasury 9-12 Month Index** | 3.56% | 6.73% |
Lipper Ultra-Short Obligations Funds Average | (1.53%) | (0.24%) |
| | | |
Maturity Schedule | | |
| | Weighted Average |
| | 3/31/08 | 9/30/07 |
| | 35 days | 35 days |
| | | |
SEC Yield | | |
| | 30 days ended |
| | 3/31/08 | 9/30/07 |
| | 5.29% | 4.88% |
| | | |
Economic Sectors | % of total
investments | |
Asset Backed Securities | 10.1% | |
Banks | 10.6% | |
Brokerages | 5.3% | |
Financial Services | 6.1% | |
Financials | 1.1% | |
Industrial | 15.1% | |
Industrial - Finance | 10.4% | |
Municipal Obligations | 4.5% | |
Real Estate Investment Trusts | 3.9% | |
Special Purpose | 10.7% | |
U.S. Government Agency Obligations | 21.4% | |
Utilities | 0.8% | |
Total | 100% | |
*Investment performance/return at NAV does not reflect the deduction of the Fund's maximum 1.25% front-end sales charge or any deferred sales charge.
**Source: Lipper Analytical Services, Inc.
Portfolio Statistics
March 31, 2008
Average Annual Total Returns
(with max. load)
| | Class A Shares |
One year | 3.06% |
Since Inception | 3.64% |
(10/31/06) | |
Performance Comparison
Comparison of change in value of $10,000 investment.
Average annual total returns in the Portfolio Statistics above and the Performance Comparison line graph are with maximum load deducted -- they assume reinvestment of dividends and reflect the deduction of the Fund's Class A maximum front-end sales charge of 1.25%, or deferred sales charge, as applicable. No sales charge has been applied to the index used for comparison. However, the Lipper average does reflect the deduction of the category's average front-end sales charge. The graph and table do not reflect the deduction of taxes that a shareholder would pay on the Fund's distributions or the redemption of Fund shares. Past performance is no guarantee of future results.
*Source: Lipper Analytical Services, Inc.
Portfolio Strategy
Going into the period, the Fund had an overweighting to securities with high credit quality and little asset-backed exposure--with more than half of the Fund invested in AAA rated notes and cash as of September 30, 2007--which helped limit the Fund's exposure to fallout from the subprime mortgage crisis.
However, financial concerns with bond insurers weighed on the insured taxable municipal sector and our holdings in it. As a result, investors sought out Treasury securities, driving yields on three- and six-month Treasury bills down significantly during the period. So, our shorter relative duration of about one month versus almost nine months for the benchmark did not help performance. However, our yield curve strategies helped offset some of the drag from the short relative duration.
Outlook
Market anxiety appears to have crested in March, though neither the credit markets nor the economy are out of the woods. Credit markets need to stabilize and better flow, something we expect to see over the remainder of 2008. By mid-2008, however, credit markets will have been under severe stress for a year. As a result, economic growth may remain sub-par for a protracted period.
The good news is that recent turmoil in the bond market has beaten down the prices of bonds in most sectors, which has created some buying opportunities that appear attractive. We expect markets to remain volatile for some time, and we will continue to look for these types of opportunities in the months ahead.
April 2008
1 As of March 31, 2008, Residential Capital represented 0.7% of the Fund's net assets. All holdings are subject to change without notice.
2 The yield on the Bond Buyer 20 Index of state and local general obligation bonds rose 0.48 percentage points and the yield on the Moody's Baa-rated corporate bond index increased 0.31 percentage points between September 30, 2007 and March 31, 2008.
Shareholder Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) and redemption fees and (2) ongoing costs, including management fees; distribution (12b-1) fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (October 1, 2007 to March 31, 2008).
Actual Expenses
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads) or redemption fees. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning
Account Value
10/1/07 | Ending Account
Value
3/31/08 | Expenses Paid
During Period*
10/1/07 - 3/31/08 |
Actual | $1,000.00 | $1,021.00 | $4.50 |
Hypothetical | $1,000.00 | $1,020.55 | $4.50 |
(5% return per year before expenses) | | |
*Expenses are equal to the Fund's annualized expense ratio of 0.89%, multiplied by the average account value over the period, multiplied by 183/366.
Schedule of Investments
March 31, 2008
| | Principal | |
Asset Backed Securities - 6.7% | | Amount | Value |
AmeriCredit Automobile Receivables Trust: | | | |
5.37%, 10/6/09 | | $11,381 | $11,365 |
4.05%, 2/6/10 | | 24,722 | 24,728 |
Capital One Auto Finance Trust, 2.858%, 10/15/12 (r) | | 65,000 | 62,013 |
Discover Card Master Trust, 4.086%, 9/17/12 (r) | | 100,000 | 100,099 |
GE Dealer Floorplan Master Note Trust, 3.124%, 4/20/11 (r) | | 75,000 | 73,962 |
GS Auto Loan Trust, 2.65%, 5/16/11 | | 6,006 | 6,004 |
Hyundai Auto Receivables Trust, 5.25%, 9/15/09 | | 21,490 | 21,544 |
| | | | |
Total Asset Backed Securities (Cost $297,822) | | | 299,715 |
| | | | |
Collateralized Mortgage-Backed | | | |
Obligations (privately originated) - 2.8% | | | |
Adjustable Rate Mortgage Trust, 2.999%, 2/25/35 (r) | | 6,102 | 6,017 |
Impac CMB Trust: | | | |
3.379%, 10/25/34 (b)(r) | | 5,609 | 4,560 |
2.859%, 4/25/35 (b)(r) | | 6,376 | 4,719 |
MLCC Mortgage Investors, Inc.: | | | |
2.969%, 3/25/28 (r) | | 29,767 | 28,662 |
2.829%, 4/25/29 (r) | | 13,757 | 13,107 |
2.879%, 7/25/29 (r) | | 19,314 | 18,467 |
2.829%, 3/25/30 (r) | | 9,196 | 9,193 |
Sequoia Mortgage Trust, 2.856%, 11/20/34 (r) | | 39,049 | 37,807 |
| | | | |
Total Collateralized Mortgage-Backed Obligations | | | |
(privately originated) (Cost $127,412) | | | 122,532 |
| | | | |
Corporate Bonds - 59.3% | | | |
Anadarko Petroleum Corp., 3.20%, 9/15/09 (r) | | 75,000 | 73,015 |
BAC Capital Trust XV, 3.876%, 6/1/56 (r) | | 30,000 | 22,117 |
Bear Stearns Co's, Inc.: | | | |
3.456%, 4/29/08 (r) | | 60,000 | 59,751 |
2.786%, 3/30/09 (r) | | 20,000 | 19,008 |
4.326%, 7/19/10 (r) | | 40,000 | 35,602 |
Branch Banking & Trust Co, 3.126%, 9/2/08 (r) | | 30,000 | 30,013 |
Capmark Financial Group, Inc., 3.746%, 5/10/10 (e)(r) | | 40,000 | 28,000 |
Cargill, Inc, 5.144%, 1/21/11 (e)(r) | | 75,000 | 74,754 |
Caterpillar Financial Services Corp., 3.578%, 2/8/10 (r) | | 50,000 | 49,930 |
Cinergy Global Resources, Inc., 6.20%, 11/3/08 (e) | | 10,000 | 10,092 |
CIT Group, Inc.: | | | |
2.729%, 12/19/08 (r) | | 30,000 | 27,000 |
3.19%, 8/17/09 (r) | | 20,000 | 16,700 |
3.021%, 3/12/10 (r) | | 30,000 | 24,000 |
Citigroup, Inc., 3.16%, 5/18/11 (r) | | 100,000 | 91,667 |
| | | | |
| | | | |
| | | Principal | |
Corporate Bonds - Cont'd | | Amount | Value |
Comcast Corp., 4.677%, 7/14/09 (r) | | $30,000 | $29,192 |
Countrywide Financial Corp., 3.345%, 5/5/08 (r) | | 25,000 | 24,625 |
Countrywide Home Loans, Inc., 3.25%, 5/21/08 | | 15,000 | 14,850 |
Discover Financial Services, 3.431%, 6/11/10 (e)(r) | | 60,000 | 54,083 |
FMG Finance Pty Ltd., 7.076%, 9/1/11 (e)(r) | | 55,000 | 53,212 |
Ford Motor Credit Co. LLC: | | | |
6.625%, 6/16/08 | | 60,000 | 59,700 |
8.708%, 4/15/12 (r) | | 80,000 | 74,805 |
Giants Stadium LLC: | | | |
13.50%, 4/1/29 (e)(r) | | 250,000 | 250,000 |
11.50%, 4/1/37 (e)(r) | | 100,000 | 100,000 |
Glitnir Banki HF: | | | |
4.418%, 10/15/08 (e)(r) | | 60,000 | 57,888 |
4.154%, 4/20/10 (e)(r) | | 50,000 | 41,263 |
GMAC LLC: | | | |
5.125%, 5/9/08 | | 30,000 | 29,813 |
3.749%, 9/23/08 (r) | | 70,000 | 66,151 |
4.315%, 5/15/09 (r) | | 65,000 | 56,549 |
Health Care Property Investors, Inc., 3.25%, 9/15/08 (r) | | 100,000 | 97,769 |
Hewlett-Packard Co., 3.476%, 9/3/09 (r) | | 75,000 | 75,048 |
HRPT Properties Trust, 3.40%, 3/16/11 (r) | | 15,000 | 14,146 |
John Deere Capital Corp., 4.698%, 1/18/11 (r) | | 100,000 | 99,784 |
JPMorgan Chase & Co., 4.394%, 1/22/10 (r) | | 50,000 | 49,766 |
Koninklijke Philips Electronics NV, 4.089%, 3/11/11 (r) | | 70,000 | 70,032 |
M&I Marshall & Ilsley Bank, 3.328%, 12/4/12 (r) | | 25,000 | 23,342 |
Meridian Funding Co. LLC, 4.846%, 10/6/08 (e)(r) | | 33,744 | 33,667 |
Merrill Lynch & Co., Inc., 3.158%, 8/14/09 (r) | | 50,000 | 48,814 |
Morgan Stanley, 4.538%, 1/15/10 (r) | | 60,000 | 58,350 |
NationsBank Cap Trust III, 4.808%, 1/15/27 (r) | | 30,000 | 23,055 |
NPS LLC , 9.80%, 12/28/16 (e)(r) | | 100,000 | 100,000 |
Pepco Holdings, Inc., 3.701%, 6/1/10 (r) | | 25,000 | 24,591 |
Post Apartment Homes LP VRDN, 2.68%, 7/15/29 (r) | | 50,000 | 50,000 |
Residential Capital LLC, 3.49%, 6/9/08 (r) | | 40,000 | 31,600 |
SABMiller plc, 5.029%, 7/1/09 (e)(r) | | 25,000 | 25,064 |
Skyway Concession Co. LLC, 2.976%, 6/30/17 (e)(r) | | 60,000 | 53,178 |
Sovereign Bancorp, Inc., 3.365%, 3/1/09 (r) | | 80,000 | 78,061 |
SunTrust Bank, 4.809%, 4/2/08 (r) | | 15,000 | 15,001 |
UnitedHealth Group, Inc., 4.462%, 2/7/11 (r) | | 60,000 | 59,619 |
Wachovia Capital Trust III, 5.80% to 3/15/11, floating rate | | | |
thereafter to 3/15/42 (r) | | 20,000 | 14,325 |
Weyerhaeuser Co., 3.599%, 9/24/09 (r) | | 60,000 | 59,287 |
Xstrata Finance Dubai Ltd., 3.42%, 11/13/09 (e)(r) | | 60,000 | 59,219 |
| | | | |
Total Corporate Bonds (Cost $2,726,683) | | | 2,637,498 |
| | | | |
| | | | |
| | | Principal | |
Taxable Municipal Obligations - 4.2% | | Amount | Value |
CIDC-Hudson House LLC New York Revenue VRDN, 3.60%, | | | |
12/1/34 (r) | | $50,000 | $50,000 |
Middletown New York IDA Revenue VRDN, 3.60%, 6/1/15 (r) | | 50,000 | 50,000 |
Portage Indiana Economic Development Revenue VRDN, 2.89%, | | | |
3/1/20 (r) | | 40,000 | 40,000 |
SunAmerica Trust Various States VRDN, 2.928%, 7/1/41(r) | | 47,000 | 47,000 |
| | | | |
Total Taxable Municipal Obligations (Cost $187,000) | | | 187,000 |
| | | | |
U.S. Government Agencies | | | |
and Instrumentalities - 20.3% | | | |
Federal Home Loan Bank Discount Notes, 4/1/08 | | 900,000 | 900,000 |
| | | | |
Total U.S. Government Agencies and Instrumentalities (Cost $900,000) | | | 900,000 |
| | | | |
Equity Securities - 1.1% | | Shares | |
Fannie Mae, Series S Preferred | | 2,000 | 48,100 |
| | | | |
Total Equity Securities (Cost $50,000) | | | 48,100 |
| | | | |
TOTAL INVESTMENTS (Cost $4,288,917) - 94.4% | | | 4,194,845 |
Other assets and liabilities, net - 5.6% | | | 250,789 |
Net Assets - 100% | | | $4,445,634 |
(b) This security was valued by the Board of Trustees. See Note A.
(e) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.
(r) The coupon rate shown on floating or adjustable rate securities represents the rate at period end.
Abbreviations:
IDA: Industrial Development Authority
LLC: Limited Liability Corporation
LP: Limited Partnership
VRDN: Variable Rate Demand Note
See notes to financial statements.
Statement of Assets and Liabilities
March 31, 2008
Assets | | |
Investments in securities, at value (Cost $4,288,917) - see accompanying schedule | | $4,194,845 |
Cash | | 82,431 |
Receivable for securities sold | | 250,000 |
Receivable for shares sold | | 413 |
Interest and dividends receivable | | 19,791 |
Other assets | | 8,305 |
Total assets | | 4,555,785 |
| | | |
Liabilities | | |
Payable for shares redeemed | | 92,694 |
Payable to Calvert Asset Management Company, Inc. | | 997 |
Payable to Calvert Administrative Services Company | | 913 |
Payable to Calvert Shareholder Services, Inc. | | 55 |
Payable to Calvert Distributors, Inc. | | 913 |
Accrued expenses and other liabilities | | 14,579 |
Total liabilities | | 110,151 |
Net Assets | | $4,445,634 |
| | | |
Net Assets Consist of: | | |
Paid-in capital applicable to 299,185 shares of beneficial interest, unlimited number of no par shares authorized | | $4,495,105 |
Undistributed net investment income | | 1,429 |
Accumulated net realized gain (loss) on investments | | 43,172 |
Net unrealized appreciation (depreciation) on investments | | (94,072) |
| | | |
Net Assets | | $4,445,634 |
| | | |
Net Asset Value Per Share | | $14.86 |
See notes to financial statements.
Statement of Operations
Six Months Ended March 31, 2008
Net Investment Income | | |
Investment Income: | | |
Interest income | $111,785 | |
Dividend income | 1,261 | |
Total investment income | 113,046 | |
| | | |
Expenses: | | |
Investment advisory fee | 5,404 | |
Administrative fees | 4,504 | |
Transfer agency fees and expenses | 5,990 | |
Distribution plan expenses | 4,504 | |
Trustees' fees and expenses | 10 | |
Custodian fees | 14,704 | |
Accounting fees | 290 | |
Registration fees | 10,036 | |
Reports to shareholders | 5,226 | |
Professional fees | 7,220 | |
Miscellaneous | 829 | |
Total expenses | 58,717 | |
Reimbursement from Advisor | (41,835) | |
Fees paid indirectly | (849) | |
Net expenses | 16,033 | |
| | | |
Net Investment Income | 97,013 | |
| | | |
Realized and Unrealized Gain (Loss) on Investments | | |
Net realized gain (loss) | 44,495 | |
Change in unrealized appreciation (depreciation) | (75,477) | |
| | | |
Net Realized and Unrealized Gain | | |
(Loss) on Investments | (30,982) | |
| | | |
Increase (Decrease) in Net Assets | | |
Resulting From Operations | $66,031 | |
See notes to financial statements.
Statements of Changes in Net Assets
Increase (Decrease) in Net Assets | | Six Months Ended
March 31,
2008 | From Inception
October 31,
2006
Through
September 30,
2007 | |
Operations: | | | | |
Net investment income | | $97,013 | $105,045 | |
Net realized gain (loss) on investments | | 44,495 | 20,829 | |
Change in unrealized appreciation (depreciation) | | (75,477) | (18,595) | |
| | | | | |
Increase (Decrease) in Net Assets | | | | |
Resulting From Operations | | 66,031 | 107,279 | |
| | | | | |
Distributions to shareholders from: | | | | |
Net investment income | | (96,740) | (102,982) | |
Net realized gain | | (23,059) | -- | |
Total distributions | | (119,799) | (102,982) | |
| | | | | |
Capital share transactions: | | | | |
Shares sold | | 1,379,677 | 3,413,162 | |
Reinvestment of distributions | | 114,008 | 101,197 | |
Redemption fees | | 4,249 | 1 | |
Shares redeemed | | (254,153) | (263,036) | |
Total capital share transactions | | 1,243,781 | 3,251,324 | |
| | | | | |
Total Increase (Decrease) in Net Assets | | 1,190,013 | 3,255,621 | |
| | | | | |
Net Assets | | | | |
Beginning of period | | 3,255,621 | -- | |
End of period (including undistributed net investment income of $1,429 and $1,156, respectively) | | $4,445,634 | $3,255,621 | |
| | | | | |
Capital Share Activity | | | | |
Shares sold | | 92,138 | 227,242 | |
Reinvestment of distributions | | 7,610 | 6,733 | |
Shares redeemed | | (16,981) | (17,557) | |
Total capital share activity | | 82,767 | 216,418 | |
See notes to financial statements.
Notes to Financial Statements
Note A ---- Significant Accounting Policies
General: The Calvert Ultra-Short Floating Income Fund (the "Fund"), a series of The Calvert Fund, is registered under the Investment Company Act of 1940 as a non-diversified, open-end management investment company. The operations of each series are accounted for separately. The Fund commenced operations on October 31, 2006. Class A shares of the Fund are sold with a maximum front-end sales charge of 1.25%.
Security Valuation: Net asset value per share is determined every business day as of the close of the regular session of the New York Stock Exchange (generally 4:00 p.m. Eastern time). The Fund uses independent pricing services approved by the Board of Trustees to value its investments wherever possible. Securities for which market quotations are available are valued at last sale price or official closing price on the primary market or exchange in which they trade. Municipal securities are valued utilizing a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If events occur after the close of the principal market in which foreign securities are traded, and before the Fund's net asset value determination, that are expected to materially affect the value of those securities, then the y are valued at their fair value taking these events into account. Short-term notes are stated at amortized cost, which approximates fair value. The Fund may invest in securities whose resale is subject to restrictions. Investments for which market quotations are not available or deemed not reliable are fair valued in good faith under the direction of the Board of Trustees.
In determining fair value, the Board considers all relevant qualitative and quantitative information available. These factors are subject to change over time and are reviewed periodically. The values assigned to fair value investments are based on available information and do not necessarily represent amounts that might ultimately be realized. Further, because of the inherent uncertainty of valuation, those estimated values may differ significantly from the values that would have been used had a ready market for the investments existed, and the differences could be material.
At March 31, 2008, securities valued at $9,279, or 0.2% of net assets, were fair valued in good faith under the direction of the Board of Trustees.
Repurchase Agreements: The Fund may enter into repurchase agreements with recognized financial institutions or registered broker/dealers and, in all instances, holds underlying securities with a value exceeding the total repurchase price, including accrued interest. Although risk is mitigated by the collateral, the Fund could experience a delay in recovering its value and a possible loss of income or value if the counterparty fails to perform in accordance with the terms of the agreement.
Short Sales: The Fund may use a hedging technique that involves short sales of U.S. Treasury securities for the purposes of managing the duration of the Fund. Any short sales are "covered" with an equivalent amount of high-quality, liquid securities.
Security Transactions and Net Investment Income: Security transactions are accounted for on trade date. Realized gains and losses are recorded on an identified cost basis and may include proceeds from litigation. Dividend income is recorded on the ex-dividend date or, in the case of dividends on certain foreign securities, as soon as the Fund is informed of the ex-dividend date. Withholding taxes on foreign dividends have been provided for in accordance with the Fund's understanding of the applicable country's tax rules and rates. Distributions received on securities that represent a return of capital or capital gain are recorded as a reduction of cost of investments and/or as a realized gain. Interest income, which includes amortization of premium and accretion of discount on debt securities, is accrued as earned. Debt obligations may be placed on non-accrual status and related interest income may be reduced by ceasing current accruals and writing off interest receivables when the collection of all or a portion of interest has become doubtful based on consistently applied procedures. A debt obligation may be removed from non-accrual status when the issuer resumes interest payments or when collectibility of interest is reasonably assured.
Distributions to Shareholders: Distributions to shareholders are recorded by the Fund on ex-dividend date. Dividends from net investment income are paid monthly. Distributions from net realized capital gains, if any, are paid at least annually. Distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles; accordingly, periodic reclassifications are made within the Fund's capital accounts to reflect income and gains available for distribution under income tax regulations.
Estimates: The preparation of the financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reported period. Actual results could differ from those estimates.
Redemption Fees: The Fund charges a 2% redemption fee on redemptions, including exchanges, made within 7 days of purchase in the same Fund. The redemption fee is paid to the Class of the Fund from which the redemption is made, and is accounted for as an addition to paid-in capital. The fee is intended to discourage market-timers by ensuring that short-term trading costs are borne by the investors making the transactions and not the shareholders already in the Fund.
Expense Offset Arrangements: The Fund has an arrangement with its custodian bank whereby the custodian's fees may be paid indirectly by credits earned on the Fund's cash on deposit with the bank. These credits are used to reduce the Fund's expenses. Such a deposit arrangement may be an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is required since the Fund intends to continue to qualify as a regulated investment company under the Internal Revenue Code and to distribute substantially all of its taxable earnings.
New Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 48, "Accounting for Uncertainty in Income Taxes" -- an interpretation of FASB Statement 109 (FIN 48), effective on the last business day of the semi-annual reporting period for fiscal years beginning after December 15, 2006. FIN 48 sets forth a threshold for financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken on a tax return. Management has analyzed the Fund's tax positions taken on federal income tax returns for all open tax years (tax year ended September 30, 2007) for purposes of implementing FIN 48, and has concluded that as of March 31, 2008, no provision for income tax is required in the Fund's financial statements.
In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. As of March 31, 2008, the Fund does not believe the adoption of SFAS No. 157 will impact the financial statement amounts; however, additional disclosures may be requi red about the inputs used to develop the measurements and the effect of certain of the measurements on changes in net assets for the period.
In March 2008, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 161, "Disclosures about Derivative Instruments and Hedging Activities." The new standard is intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand the effect on the Fund's financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. Management is currently evaluating the impact the adoption of SFAS No. 161 will have on the Fund's financial statements and related disclosures.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by UNIFI Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and Trustees of the Fund who are employees of the Advisor or its affiliates. For its services, the Advisor receives a monthly fee based on an annual rate of .30% of the first $1 billion of the Fund's average daily net assets, and .29% of all assets above $1 billion.
The Advisor has contractually agreed to limit net annual fund operating expenses through January 31, 2009. The contractual expense cap is .89%. For the purposes of this expense limit, operating expenses do not include interest expense, brokerage commissions, taxes, and extraordinary expenses. To the extent any expense offset credits are earned, the Advisor's obligation under the contractual limitation may be reduced and the Advisor may benefit from the expense offset arrangement.
Calvert Administrative Services Company, an affiliate of the Advisor, provides administrative services to the Fund for an annual fee, payable monthly, of .25% of the average daily net assets.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor and principal underwriter for the Fund. The Distribution Plan, adopted by Class A shares, allows the Fund to pay the Distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed .50% annually of the Fund's average daily net assets of Class A. The amount actually paid by the Fund is an annualized fee, payable monthly of .25% of the Fund's average daily net assets of Class A.
The Distributor received $266 as its portion of the commissions charged on sales of the Fund's Class A shares for the six months ended March 31, 2008.
Calvert Shareholder Services, Inc. ("CSSI"), an affiliate of the Advisor, is the shareholder servicing agent for the Fund. For its services, CSSI received a fee of $237 for the six months ended March 31, 2008. Boston Financial Data Services, Inc., is the transfer and dividend disbursing agent.
Each Trustee of the Fund who is not an employee of the Advisor or its affiliates receives an annual retainer of $32,000 plus up to $1,500 for each Board and Committee meeting attended. Trustee's fees are allocated to each of the funds served.
Note C -- Investment Activity
During the period, the cost of purchases and proceeds from sales of investments, other than short-term and U.S. government securities, were $6,922,476 and $6,226,297, respectively. U.S. government security purchases and sales were $6,516,562 and $6,558,054, respectively.
The cost of investments owned at March 31, 2008 for federal income tax purposes was $4,290,240. Net unrealized depreciation aggregated $95,395, of which $4,795 related to appreciated securities and $100,190 related to depreciated securities.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds (except for the Calvert Social Investment Fund's Balanced and Enhanced Equity Portfolios and the CVS Social Balanced Portfolio) and State Street Corporation ("SSC"). Under the agreement, SSC provides an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), accessible by the Funds for temporary or emergency purposes only. Borrowings under the committed facility bear interest at the overnight Federal Funds Rate plus .50% per annum. A commitment fee of .10% per annum is incurred on the unused portion of the committed facility, which is allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at March 31, 2008. For the six months ended March 31, 2008, borrowings by the Fund under the Agreement were as follows:
| Average
Daily
Balance | Weighted
Average
Interest
Rate | Maximum
Amount
Borrowed | Month of
Maximum
Amount
Borrowed |
| | $794 | 5.31% | $39,218 | October 2007 |
Financial Highlights
| | | Periods Ended | |
| | | March 31, | September 30, | |
Class A Shares | | 2008 | 2007^ | |
Net asset value, beginning | | $15.04 | $15.00 | |
Income from investment operations | | | | |
Net investment income | | .39 | .61 | |
Net realized and unrealized gain (loss) | | (.08) | .03 | |
Total from investment operations | | .31 | .64 | |
Distributions from | | | | |
Net investment income | | (.39) | (.60) | |
Net realized gain | | (.10) | -- | |
Total distributions | | (.49) | (.60) | |
Total increase (decrease) in net asset value | | (.18) | .04 | |
Net asset value, ending | | $14.86 | $15.04 | |
| | | | | |
Total return* | | 2.10% | 4.34% | |
Ratios to average net assets:A | | | | |
Net investment income | | 5.39% (a) | 4.52% (a) | |
Total expenses | | 3.26% (a) | 3.90% (a) | |
Expenses before offsets | | .94% (a) | 1.05% (a) | |
Net expenses | | .89% (a) | .89% (a) | |
Portfolio turnover | | 471% | 506% | |
Net assets, ending (in thousands) | | $4,446 | $3,256 | |
A Total expenses do not reflect amounts reimbursed and/or waived by the Advisor or reductions from expense offset arrangements. Expenses before offsets reflect expenses after reimbursement and/or waiver by the Advisor but prior to reductions from expense offset arrangements. Net expenses are net of all reductions and represent the net expenses paid by the Fund.
(a) Annualized.
* Total return is not annualized for periods less than one year and does not reflect deduction of any front-end sales charge.
^ From October 31, 2006, inception.
See notes to financial statements.
Explanation of Financial Tables
Schedule of Investments
The Schedule of Investments is a snapshot of all securities held in the fund at their market value, on the last day of the reporting period. Securities are listed by asset type (e.g., common stock, corporate bonds, U.S. government obligations) and may be further broken down into sub-groups and by industry classification.
Statement of Assets and Liabilities
The Statement of Assets and Liabilities is often referred to as the fund's balance sheet. It lists the value of what the fund owns, is due and owes on the last day of the reporting period. The fund's assets include the market value of securities owned, cash, receivables for securities sold and shareholder subscriptions, and receivables for dividends and interest payments that have been earned, but not yet received. The fund's liabilities include payables for securities purchased and shareholder redemptions, and expenses owed but not yet paid. The statement also reports the fund's net asset value (NAV) per share on the last day of the reporting period. The NAV is calculated by dividing the fund's net assets (assets minus liabilities) by the number of shares outstanding. This statement is accompanied by a Schedule of Investments. Alternatively, if certain conditions are met, a Statement of Net Assets may be presented in lieu of this statement and the Schedule of Investments.
Statement of Net Assets
The Statement of Net Assets provides a detailed list of the fund's holdings, including each security's market value on the last day of the reporting period. The Statement of Net Assets includes a Schedule of Investments. Other assets are added and other liabilities subtracted from the investments total to calculate the fund's net assets. Finally, net assets are divided by the outstanding shares of the fund to arrive at its share price, or Net Asset Value (NAV) per share.
At the end of the Statement of Net Assets is a table displaying the composition of the fund's net assets. Paid in Capital is the money invested by shareholders and represents the bulk of net assets. Undistributed Net Investment Income and Accumulated Net Realized Gains usually approximate the amounts the fund had available to distribute to shareholders as of the statement date. Accumulated Realized Losses will appear as negative balances. Unrealized Appreciation (Depreciation) is the difference between the market value of the fund's investments and their cost, and reflects the gains (losses) that would be realized if the fund were to sell all of its investments at their statement-date values.
Statement of Operations
The Statement of Operations summarizes the fund's investment income earned and expenses incurred in operating the fund. Investment income includes dividends earned from stocks and interest earned from interest-bearing securities in the fund. Expenses incurred in operating the fund include the advisory fee paid to the investment advisor, administrative services fees, distribution plan expenses (if applicable), transfer agent fees, shareholder servicing expenses, custodial, legal, and audit fees, and the printing and postage expenses related to shareholder reports. Expense offsets (fees paid indirectly) are also shown. Credits earned from offset arrangements are used to reduce the fund's expenses. This statement also shows net gains (losses) realized on the sale of investments and the increase or decrease in the unrealized appreciation (depreciation) on investments held during the period.
Statement of Changes in Net Assets
The Statement of Changes in Net Assets shows how the fund's total net assets changed during the two most recent reporting periods. Changes in the fund's net assets are attributable to investment operations, distributions and capital share transactions.
The Operations section of the report summarizes information detailed in the Statement of Operations. The Distribution section shows the dividend and capital gain distributions made to shareholders. The amounts shown as distributions in this section may not match the net investment income and realized gains amounts shown in the Operations section because distributions are determined on a tax basis and certain investments or transactions may be treated differently for financial statement and tax purposes. The Capital Share Transactions section shows the amount shareholders invested in the fund, either by purchasing shares or by reinvesting distributions, and the amounts redeemed. The corresponding numbers of shares issued, reinvested and redeemed are shown at the end of the report.
Financial Highlights
The Financial Highlights table provides a per-share breakdown per class of the components that affect the fund's net asset value for current and past reporting periods. The table provides total return, total distributions, expense ratios, portfolio turnover and net assets for the applicable period. Total return is a measure of a fund's performance that encompasses all elements of return: dividends, capital gain distributions and changes in net asset value. Total return is the change in value of an investment over a given period, assuming reinvestment of any dividends and capital gain distributions, expressed as a percentage of the initial investment. Total distributions include distributions from net investment income and net realized gains. Long-term gains are earned on securities held in the fund more than one year. Short-term gains, on the sale of securities held less than one year, are treated as ordinary dividend income for tax purposes. The expense ratio is a fund's cost of doing business , expressed as a percentage of net assets. These expenses directly reduce returns to shareholders. Portfolio turnover measures the trading activity in a fund's investment portfolio -- how often securities are bought and sold by a fund. Portfolio turnover is affected by market conditions, changes in the size of the fund, the nature of the fund's investments and the investment style of the portfolio manager.
Proxy Voting
The Proxy Voting Guidelines of the Calvert Funds that the Fund uses to determine how to vote proxies relating to portfolio securities are provided as an Appendix to the Fund's Statement of Additional Information. The Statement of Additional Information can be obtained free of charge by calling the Fund at 1-800-368-2745, by visiting the Calvert website at www.calvert.com; or by visiting the SEC's website at www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the Fund's website at www.calvert.com and on the SEC's website at www.sec.gov.
Availability of Quarterly Portfolio holdings
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Fund's Form N-Q is available on the SEC's website at www.sec.gov. The Fund's Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
Basis for Board's Approval of Investment Advisory Contract
At a meeting held on December 5, 2007, the Board of Trustees, and by a separate vote, the disinterested Trustees, approved the continuance of the Investment Advisory Agreement between the Trust and the Advisor with respect to the Fund.
In evaluating the Investment Advisory Agreement, the Board considered a variety of information relating to the Fund and the Advisor. The disinterested Trustees reviewed a report prepared by the Advisor regarding various services provided to the Fund by the Advisor and its affiliates. Such report included, among other data, information regarding the Advisor's personnel and the Advisor's revenue and cost of providing services to the Fund, and a separate report prepared by an independent third party, which provided a statistical analysis comparing the Fund's investment performance, expenses, and fees to comparable mutual funds.
The disinterested Trustees were separately represented by independent legal counsel with respect to their consideration of the reapproval of the Investment Advisory Agreement. Prior to voting, the disinterested Trustees reviewed the proposed continuance of the Investment Advisory Agreement with management and also met in private sessions with their counsel at which no representatives of management were present.
In the course of its deliberations regarding the Investment Advisory Agreement, the Board considered the following factors, among others: the nature, extent and quality of the services provided by the Advisor, including the personnel providing such services; the Advisor's financial condition; the level and method of computing the Fund's advisory fee; comparative performance, fee and expense information for the Fund; the profitability of the Calvert Group of Funds to the Advisor; the direct and indirect benefits, if any, derived by the Advisor from its relationship with the Fund; the effect of the Fund's growth and size on the Fund's performance and expenses; the affiliated distributor's process for monitoring sales load breakpoints; the Advisor's compliance programs and policies; the Advisor's performance of substantially similar duties for other funds; and any possible conflicts of interest.
In considering the nature, extent and quality of the services provided by the Advisor under the Investment Advisory Agreement, the Board reviewed information provided by the Advisor relating to its operations and personnel, including, among other information, biographical information on the Advisor's investment, supervisory and professional staff and descriptions of its organizational and management structure. The Board also took into account similar information provided periodically throughout the previous year by the Advisor as well as the Board's familiarity with management through Board of Trustees' meetings, discussions and other reports. The Board considered the Advisor's management style and its performance in employing its investment strategies as well as its current level of staffing and overall resources. The Advisor's administrative capabilities, including its ability to supervise the other service providers for the Fund, were also considered. The Board concluded that it was satisfied with the nature, extent and quality of services provided to the Fund by the Advisor under the Investment Advisory Agreement.
In considering the Fund's performance, the Board noted that it reviewed on a quarterly basis detailed information about the Fund's performance results, portfolio composition and investment strategies. The Board also reviewed various comparative data provided to it in connection with its consideration of the renewal of the Investment Advisory Agreement, including, among other information, a comparison of the Fund's total return with its benchmark and with that of other mutual funds deemed to be in its peer group by an independent third party in its report. This comparison indicated that for the six-month annualized period ended June 30, 2007, the Fund underperformed its peer group. The Trustees noted the Fund's recent inception date. Based upon its review, the Board concluded that the Fund's performance was satisfactory.
In considering the Fund's fees and expenses, the Board compared the Fund's fees and total expense ratio with various comparative data for the funds in its peer group. Among other findings, the data indicated that the Fund's advisory fee (after taking into account waivers and reimbursements) was below the median of its peer group and that total expenses (net of waivers and reimbursements) were below the median of its peer group. The Board also took into account the Advisor's current undertakings to maintain expense limitations for the Fund, noting that the Advisor was currently reimbursing fund expenses in excess of the entire advisory fee for Class A shares. Based upon its review, the Board concluded that the advisory fee was reasonable in view of the high quality of services received by the Fund from the Advisor, and the other factors considered.
The Board reviewed the Advisor's profitability on a portfolio-by-portfolio basis. In reviewing the overall profitability of the advisory fee to the Fund's Advisor, the Board also considered the fact that affiliates of the Advisor provided shareholder servicing and administrative services to the Fund for which they received compensation. The information considered by the Board included Calvert's operating profit margin information both before and after tax expenses with respect to the services that the Advisor and its affiliates provided to the Calvert Group of Funds complex. The Board reviewed the profitability of the Advisor's relationship with the Fund in terms of the total amount of annual advisory fees it received with respect to the Fund and whether the Advisor had the financial wherewithal to continue to provide a high level of services to the Fund. The Board also noted the Advisor's current undertaking to maintain expense limitations for the Fund's Class A shares. The Board also noted that the Advisor had reimbursed expenses of the Fund. The Trustees also considered that the Advisor derived benefits to its reputation and other indirect benefits from its relationship with the Fund. Based upon its review, the Board concluded that the Advisor's level of profitability from its relationship with the Fund was reasonable.
The Board considered the effect of the Fund's growth and size on its performance and expenses. The Board noted that given the Fund's current level of assets, the Fund was unlikely to recognize economies of scale by implementing a breakpoint in the advisory fee schedule. The Board concluded that adding breakpoints to the advisory fee at specified asset levels would not be appropriate at this time given the Fund's current size.
In reapproving the Investment Advisory Agreement, the Board, including the disinterested Trustees, did not identify any single factor as controlling, and each Trustee attributed different weight to various factors.
Conclusions
The Board reached the following conclusions regarding the Investment Advisory Agreement, among others: (a) the Advisor has demonstrated that it possessed the capability and resources to perform the duties required of it under the Investment Advisory Agreement; (b) the Advisor maintains appropriate compliance programs; (c) performance of the Fund is satisfactory relative to the performance of funds with similar investment objectives and to relevant indices; (d) the Advisor is likely to execute its investment strategies consistently over time; and (e) the Fund's advisory fee is reasonable relative to those of similar funds and to the services to be provided by the Advisor. Based on its conclusions, the Board determined that reapproval of the Investment Advisory Agreement would be in the best interests of the Fund and its shareholders.
Calvert Ultra-Short Floating Income Fund
To Open an Account
800-368-2748
Yields and Prices
Calvert Information Network
(24 hours, 7 days a week)
800-368-2745
Service for Existing Account
Shareholders: 800-368-2745
Brokers: 800-368-2746
TDD for Hearing Impaired
800-541-1524
Branch Office
4550 Montgomery Avenue
Suite 1000 North
Bethesda, Maryland 20814
Registered, Certified
or Overnight Mail
Calvert Group
c/o BFDS
330 West 9th Street
Kansas City, MO 64105
Web Site
http://www.calvert.com
Note: The information on our website is not incorporated by reference into this report; our website address is included as an inactive textual reference only.
Principal Underwriter
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000 North
Bethesda, Maryland 20814
This report is intended to provide fund information to shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by a prospectus.
Calvert's Family of Funds
Tax-Exempt Money Market Funds
CTFR Money Market Portfolio
Taxable Money Market Funds
First Government Money Market Fund
CSIF Money Market Portfolio
Municipal Funds
CTFR Limited-Term Portfolio
CTFR Long-Term Portfolio
CTFR Vermont Municipal Portfolio
National Muni. Intermediate Fund
Taxable Bond Funds
CSIF Bond Portfolio
Income Fund
Short Duration Income Fund
Long-Term Income Fund
Ultra-Short Floating Income Fund
Equity Funds
CSIF Enhanced Equity Portfolio
CSIF Equity Portfolio
Calvert Large Cap Growth Fund
Capital Accumulation Fund
CWV International Equity Fund
New Vision Small Cap Fund
Calvert Social Index Fund
Calvert Small Cap Value Fund
Calvert Mid Cap Value Fund
Calvert Global Alternative Energy Fund
Calvert International Opportunities Fund
Balanced and Asset Allocation Funds
CSIF Balanced Portfolio
Calvert Conservative Allocation Fund
Calvert Moderate Allocation Fund
Calvert Aggressive Allocation Fund
printed on recycled paper using soy-based inks
<PAGE>
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Schedule of Investments.
This Schedule is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
No material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Trustees since registrant last provided disclosure in response to this Item.
Item 11. Controls and Procedures.
(a) The principal executive and financial officers concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act) are effective, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Exchange Act, as of a date within 90 days of the filing date of this report.
(b) There was no change in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 12. Exhibits.
(a)(1) Not applicable.
(a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2).
Attached hereto.
(a)(3) Not applicable.
(b) A certification for the registrant's Principal Executive Officer and Principal Financial Officer, as required by Rule 30a-2(b) under the Investment Company Act of 1940, is attached hereto. The certification furnished pursuant to this paragraph is not deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification is not deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the registrant specifically incorporates it by reference.
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
THE CALVERT FUND
By: | /s/ Barbara J. Krumsiek
Barbara J. Krumsiek
President -- Principal Executive Officer |
Date: | May 29, 2008 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Barbara J. Krumsiek
Barbara J. Krumsiek
President -- Principal Executive Officer
Date: May 29, 2008
/s/ Ronald M. Wolfsheimer
Ronald M. Wolfsheimer
Treasurer -- Principal Financial Officer
Date: May 29, 2008
