N-30D 1 incomesemi.htm INCOME SEMI-ANNUAL REPORT Calvert

Calvert

Investments that make a difference (registered)

March 31, 2002

Semi-Annual Report

Calvert Income Fund

Table

of

Contents

President's Letter

1

Portfolio

Manager Remarks

3

Schedule

of Investments

5

Statement

of Assets and Liabilities

9

Statement

of Operations

10

Statements

of Changes in

Net Assets

11

Notes to

Financial Statements

13

Financial Highlights

17

Financial Tables

& Glossary

21

Dear Shareholders:

At quarter end, we continue to be watchful for indicators of economic recovery in 2002. The outlook remains uncertain, however, as to the potential strength and timing of economic improvement.

Since our last report to you, and particularly during the last quarter, we have seen promising signs, with some sectors of our economy stepping up production. On the other hand, labor market data paint a picture of a slower recovery, with March unemployment data indicating a rise to 5.7%.

Keeping Investment Perspective

I remind investors that at times like these, when economic conditions and the global political situation are uncertain, it is particularly important to revisit portfolio holdings in view of personal goals, risk tolerance, and investment time horizon.

Certainly, equity markets remain extremely challenging. Volatility continues, and while we see bursts of what appears to be recovery in stock market valuation, we are still in a period when returns are in many cases negative.

On the fixed income side, investors may want to consider the potential impact of rising interest rates on bond fund holdings. I would remind our investors that shorter-duration bond funds tend to hold value better than longer-duration funds during periods of rising interest rates. Of course, yields tend to be lower on shorter-duration funds, but these investments can be advantageous for investors who are either more conservative overall or wish to maintain a conservative portion of their portfolio.

Calvert continues to expand our broad range of fund options, and we believe investors will find choices appropriate for a variety of strategies and for changing market conditions.

 

Change in Fund Auditors

In light of the uncertainty surrounding the Arthur Andersen accounting firm, the Boards of each of our Funds held a special meeting recently and voted to approve a change in independent auditors to KPMG LLP.

Revisiting Shared Values

As you know, Calvert takes a long view and has a broad perspective on corporate performance. We are diligent in assessing not only financial practices and performance, but also other aspects of a company's operations. Within our socially screened funds, we are reviewing corporate governance guidelines, including director and auditor independence. Clearly, ongoing revelations surrounding Enron have given all of us reason to look more closely at a broad range of corporate behaviors and to shine a brighter light on various corporate stakeholders.

Thank You for Choosing Calvert

At the end of 2001, Calvert celebrated 25 years in the investment business. Your trust and confidence have enabled us not only to reach this milestone, but also to look forward to our next quarter century with optimism and enthusiasm.

Sincerely,

 

Barbara J. Krumsiek

President and CEO

May 13, 2002

Greg Habeeb

of Calvert Asset Management Company

How did the Fund Perform?

For the six months ended March 31, 2002, the Calvert Income Fund's Class A Shares returned 0.77% compared to the 0.26% return of the Lipper Corporate Debt Funds BBB-Rated Average. After weak October performance, the Fund has outperformed its benchmarks for five straight months.

What were the driving forces in the credit markets?

Since the demise of Enron Corporation, the credit markets have been particularly vulnerable to any kind of negative company news - especially news regarding the downward restatement of prior earnings, accounting irregularities, and SEC investigations. As a result, yield volatility for corporate bonds has been excessively high.

Primary issuance continues to be inordinately large. Some companies have been pressured to decrease their commercial paper issuance. These companies are choosing to satisfy their borrowing needs by issuing longer term bonds. Although the absolute level of yield spreads of corporates to treasuries has narrowed since September 11th, the corporate market remains very vulnerable.

What was your Strategy?

We have upgraded our portfolio significantly, with the highest average credit rating for the Fund in five years. We feel this is the time to be defensive. The Fund owns only a small amount of telecom paper, foreign or otherwise. The Fund also owns very few domestic banks because we consider them to be relatively overvalued. The Fund does own a relatively large amount of insured paper (AAA rated) - both municipals and corporates - as well as a moderate position in agencies and mortgages.

Portfolio Statistics

March 31, 2002

Investment Performance
 

6 Months

12 Months
 

ended

ended
 

3/31/02

3/31/02

Class A

0.77%

6.02%

Class B

0.38%

5.17%

Class C

0.34%

5.12%

Class I

1.05%

6.48%

Lehman Aggregate

    

Bond Index TR

0.14%

5.35%

Lipper Corporate Debt

    

Funds BBB-Rated Avg

0.26%

3.72%

 

 

Maturity Schedule

Weighted Average

3/31/02

9/30/01

14 years

16 years

SEC Yields
 

30 days ended
 

3/31/02

9/30/01

Class A

6.51%

7.02%

Class B

5.91%

6.52%

Class C

5.95%

6.38%

Class I

7.24%

7.80%

Investment performance does not reflect the

deduction of any front-end or deferred sales charge.

TR represents total return.

Source: Lipper Analytical Services, Inc.

Portfolio Statistics

March 31, 2002

Average Annual Total Returns
 

Class A Shares

One year

2.02%

Five year

8.88%

Ten year

8.00%

Since inception

9.57%

(10/12/82)

  

 

 

Class B Shares

One year

1.17%

Since inception

6.29%

(8/1/99)

  

 

 

Class C Shares

One year

4.12%

Since inception

8.43%

(8/1/00)

  

 

 

Class I Shares

One year

6.48%

Since inception

8.76%

(3/1/99)

  

What should investors expect in the coming months?

We are anticipating further volatility in the credit markets. This volatility will be driven by news headlines on individual corporate issuers as well as a potentially volatile world situation involving the Middle East. The telecom sector will continue to be volatile as the future of this industry unfolds. The strength of the economy remains uncertain and it is our decision to remain defensive for the rest of the year.

We expect the Federal Reserve to aggressively raise interest rates if the economy starts to improve later this year. We are carefully preparing for this event.

April 26, 2002

Performance Comparison

Comparison of change in value of $10,000 investment. (Source: Lipper Analytical Services, Inc.)

[INSERT LINE GRAPH HERE]

Total returns 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 index used for comparison. 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.

Schedule of Investments

March 31, 2002
 

Principal

  

Debt Securities - 99.8%

Amount

Value

Corporate Bonds - 82.7%

    

AT&T Canada, Inc.:

    

7.625%, 3/15/05

$18,000,000

$3,330,000

7.65%, 9/15/06

35,500,000

6,567,500

Atlantic Mutual Insurance Co., 8.15%, 2/15/28

34,895,000

22,235,443

Autopista del Maipo Sociedad, 7.373%, 6/15/22

3,070,000

3,039,638

BCI U.S. Funding Trust, 8.01%, 12/29/49

28,770,000

29,314,933

Bombardier Capital Mortgage Securitization Corp.,

   

8.29%, 6/15/30

5,000,000

5,132,617

Brascan Corp., 7.375%, 10/1/02

42,625,000

43,112,204

Cendant Corp., 7.75%, 12/1/03

7,500,000

7,698,975

CIT Group, Inc.:

    

1.93%, 4/24/02

34,000,000

33,871,803

7.125%, 6/17/02

1,750,000

1,750,000

6.375%, 8/1/02

2,095,000

2,095,000

7.375%, 4/2/07

15,000,000

15,154,650

7.75%, 4/2/12

25,000,000

25,110,000

Conseco Financing Trust III, 8.796%, 4/1/27

14,895,000

3,574,800

Conseco, Inc., 8.75%, 2/9/04

45,555,000

24,258,037

Continental Airlines, Inc., 2.4875%, 8/15/11

5,000,000

5,003,906

COX Communications, Inc., 6.50%, 11/15/02

5,000,000

5,083,200

Daimler-Benz North America Corp.:

   

6.00%, 4/8/02

4,207,000

4,208,935

5.625%, 5/17/02

4,403,000

4,414,329

Devon Financing Corp., ULC, 7.875%, 9/30/31

25,280,000

25,389,462

Dime Bancorp., Inc., 9.00%, 12/19/02

6,215,000

6,425,129

Dominion Resources, Inc., 3.875%, 1/15/04

5,000,000

4,940,000

EOP Operating LP, 7.875%, 7/15/31

5,000,000

4,941,600

Evangelical Lutheran Good Samaritan Fund,

   

6.78%, 11/1/05, LOC: FSA

2,000,000

2,082,734

FedEx Corp., 7.65%, 1/15/14

2,354,673

2,377,560

Fidelity National Financial, Inc., 7.30%, 8/15/11

4,000,000

3,981,840

Finova Group, Inc., 7.50%, 11/15/09

58,276,000

20,979,360

First Republic Bank, 7.75%, 9/15/12

17,470,000

16,057,900

Ford Motor Co., 7.45%, 7/16/31

10,000,000

9,061,600

Ford Motor Credit Co.:

    

6.52%, 8/12/02

1,000,000

1,006,730

6.55%, 9/10/02

17,134,000

17,266,788

6.00%, 1/14/03

11,450,000

11,511,944

7.25%, 1/15/03

5,115,000

5,191,111

7.25%, 10/25/11

15,000,000

14,444,250

General Electric Co.:

    

2.135%, 3/15/05

9,500,000

9,498,195

6.75%, 3/15/32

55,000,000

53,038,150

General Motors Acceptance Corp.:

    

7.45%, 6/6/02

10,000,000

10,068,700

6.30%, 7/8/02

3,490,000

3,513,662

Great Lakes Power, Inc., 8.30%, 3/1/05

20,000,000

20,885,200

Greenpoint Bank, 9.25%, 10/1/10

23,100,000

24,510,948

 

 

.

Principal

  

Debt Securities - Cont'd

Amount

Value

Corporate Bonds - Cont'd

    

Harris Corp., 6.375%, 8/15/02

$17,500,000

$17,692,675

Health Care Services Corp., 7.75%, 6/15/11

8,000,000

7,995,440

Hertz Corp.:

    

7.00%, 5/1/02

2,000,000

2,003,560

6.70%, 6/15/02

3,000,000

3,016,020

Household Finance Corp., 5.75%, 1/30/07

5,000,000

4,807,150

Interpool Capital Trust, 9.875%, 2/15/27

30,496,000

22,872,000

Interpool, Inc.:

    

7.20%, 8/1/07

18,090,000

16,642,800

7.35%, 8/1/07

20,000,000

18,600,000

Jefferies Group, Inc., 7.75%, 3/15/12

22,000,000

21,195,020

JET Equipment Trust, 9.71%, 2/15/15

6,260,000

5,307,478

Landesbank Baden Wurttemberg, 6.35%, 4/1/12

50,000,000

50,086,500

LCOR Alexandria LLC, 6.625%, 9/15/19

59,000,000

58,341,560

Liberty Mutual Insurance Co.:

    

8.50%, 5/15/25

1,250,000

1,170,287

7.875%, 10/15/26

5,375,000

4,701,190

7.697%, 10/15/97

60,060,000

46,472,026

Lumbermens Mutual Casualty Co.:

    

8.30%, 12/1/37

20,445,000

16,976,506

9.15%, 7/1/26

14,695,000

13,476,050

8.45%, 12/1/97

5,000,000

3,974,600

Markel Capital Trust I, 8.71%, 1/1/46

11,515,000

8,725,952

Markel Corp., 7.25%, 11/1/03

3,110,000

3,104,215

Merrill Lynch & Co., Inc., 4.54%, 3/8/05

13,000,000

12,834,380

Morgan Stanley Group, Inc., 5.80%, 4/1/07

40,000,000

39,896,460

New Plan Excel Realty Trust Inc., 6.80%, 5/15/02

5,000,000

5,015,400

New Valley Generation II, 5.572%, 5/1/20

50,000,000

46,750,000

Nortel Networks Corp., 6.125%, 2/15/06

54,750,000

40,788,750

Ohio Edison Co., 8.25%, 4/1/02

1,600,000

1,599,856

Prudential Holdings, LLC:

    

7.245%, 12/18/23

25,500,000

25,685,385

8.695%, 12/18/23

15,000,000

15,593,100

Qwest Capital Funding, Inc., 6.125%, 7/15/02

27,080,000

26,943,788

Raytheon Co., 6.45%, 8/15/02

26,874,000

27,212,075

RenaissanceRe Holdings Ltd., 7.00%, 7/15/08

5,000,000

4,946,185

Residential Asset Security Corp., 7.59%, 12/25/28

3,750,000

3,938,531

Riggs Capital Trust II, 8.875%, 3/15/27

13,270,000

10,959,295

Southern Orthopaedic Properties, LLC, 2.00%, 10/01/21

1,760,000

1,760,000

Southwest Airlines Co.:

    

5.10%, 5/1/06

6,000,000

5,999,340

5.496%, 11/01/06

2,000,000

1,969,780

Sovereign Bank:

    

10.20%, 6/30/05

19,877,290

21,815,326

12.18%, 6/30/20

26,966,029

34,283,666

Sprint Capital Corp., 7.625%, 6/10/02

21,910,000

22,009,910

Tele-Communications, Inc., 9.25%, 4/15/02

1,500,000

1,502,070

Telecomunicaciones de Puerto Rico, Inc., 6.15%, 5/15/02

15,000,000

15,048,600

Terra Nova Insurance Holdings plc., 7.00%, 5/15/08

2,500,000

2,249,800

Textron, Inc., 6.75%, 9/15/02

6,250,000

6,329,125

 

 

.

Principal

  

Debt Securities - Cont'd

Amount

Value

Corporate Bonds - Cont'd

    

TIERS Trust, 7.697%, 10/15/2097

$13,500,000

$1,616,771

Toll Road Investment Partnership II Discount Notes:

    

2/15/03

9,800,000

9,436,587

2/15/05

3,000,000

2,548,464

2/15/08

19,100,000

13,126,704

2/15/10

10,100,000

5,862,798

2/15/13

17,000,000

7,750,759

2/15/14

21,900,000

9,182,911

Tyco International Group SA, 6.375%, 10/15/11

18,000,000

16,110,000

United Parcel Service, 1.70%, 4/2/02

50,000,000

49,997,639

Verizon Communications, Inc., 6.875%, 4/1/12

17,000,000

16,913,640

Worldcom, Inc.:

    

7.375%, 1/15/03

1,185,000

1,184,277

8.00%, 5/15/06

5,000,000

4,476,800

7.50%, 5/15/11

5,000,000

4,156,600

     

Total Corporate Bonds (Cost $1,400,802,077)

  

1,356,784,634

     

Mortgage Securities - 1.4%

    

Fannie Mae Pool, 6.00%, 9/1/31

24,405,468

23,642,797

Ginnie Mae, 11.00%, 10/15/15

938

1,061

     

Total Mortgage Securities (Cost $23,980,945)

  

23,643,858

     

Taxable Municipal Bonds - 4.0%

    

Columbus Georgia Development Authority, 2.00%, 4/1/20

4,395,000

4,395,000

Greater Valley Medical Building Partnership LP, 6.86%, 3/1/21

3,000,000

3,103,260

Indiana State Development Finance Authority, 2.30%, 9/1/16

10,585,000

10,585,000

Lower Colorado River Authority Revenue Bond, 6.25%, 5/15/32

4,500,000

4,128,795

Oregon State Local Governments, 6.85%, 6/1/28

16,000,000

15,920,800

Philadelphia IDA Revenue Bond, 6.488%, 6/15/04

21,920,577

22,567,234

Southeast Alabama Gas Distribution Revenue, 2.00%, 6/1/25

4,120,000

4,120,000

     

Total Taxable Municipal Bonds (Cost $65,129,599)

  

64,820,089

     

U.S. Government Agencies and Instrumentalities - 6.7%

    

Fannie Mae:

    

4.75%, 1/2/07

46,000,000

44,888,180

6.25%, 2/1/11

12,000,000

12,114,360

Freddie Mac, 5.875%, 3/21/11

7,975,000

7,888,950

Kingdom of Jordan, Guaranteed by the United States Agency

   

of International Development, 8.75%, 9/1/19

1,837,524

2,084,689

Overseas Private Investment Corp.:

    

1.93%, 4/1/14, BPA & GA: US Government

10,400,000

10,400,000

1.93%, 1/15/15, BPA & GA: US Government

31,600,000

31,600,000

     

Total U.S. Government Agencies

   

and Instrumentalities (Cost $109,668,855)

  

108,976,179

 

 

.

Principal

  

Debt Securities - Cont'd

Amount

Value

U.S. Treasury - 4.6%

    

U.S. Treasury Bond, 5.375%, 2/15/31

$27,050,000

$25,385,073

U.S. Treasury Notes:

    

3.50%, 11/15/06

1,200,000

1,134,744

6.125%, 8/15/07

10,000,000

10,507,400

4.875%, 2/15/12

39,400,000

37,812,968

     

Total U.S. Treasury (Cost $75,168,608)

  

74,840,185

     

Repurchase Agreement - 0.3%

    

State Street Bank, 1.80%, dated 3/28/02, due 4/1/02

    

(Repurchase proceeds $4,700,940)

    

(Collateral: $4,842,154, Freddie Mac, 2.21%, 11/26/02)

4,700,000

4,700,000

     

Total Repurchase Agreement (Cost $4,700,000)

  

4,700,000

Equity Securities - 0.4%

Shares

 

Covad Communications Group, Inc. (Common) * #

94,233

214,851

Ford Motor Co. Capital Trust II (Preferred)

100,000

5,624,000

     

Total Equity Securities (Cost $6,921,831)

  

5,838,851

     
     

Total investments (Cost $1,686,371,915) - 100.1%

1,639,603,796

 

Other assets and liabilities, net - (0.1%)

  

(1,893,270)

Net Assets - 100%

  

$1,637,710,526

* Non-income producing.

# Covad Communications Group, Inc. voluntarily filed to reorganize their debt under Chapter 11 of the U.S. Bankruptcy Code on August 11, 2001. As part of the approved "Plan of Reorganization," 94,233 shares of Covad common stock along with $688,981 cash was issued in settlement of the Fund's investment in Covad bonds (par $3,500,000, cost $2,608,823).

Abbreviations:

FHLB: Federal Home Loan Bank

GO: General Obligation

IDA: Industrial Development Authority

LLC: Limited Liability Corporation

LP: Limited Partnership

MFH: Multi-Family Housing

VRDN: Variable Rate Demand Note

 

See notes to financial statements.

STATEMENT OF ASSETS AND LIABILITIES

March 31, 2002

Assets

Value

Investments in securities, at value (Cost $1,686,871,915) -

 

see accompanying schedule

$1,639,603,796

Receivable for securities sold

122,397,417

Receivable for shares sold

13,149,674

Interest and dividends receivable

26,307,484

Other assets

44,079

Total assets

1,801,502,450

 

Liabilities

  

Payable to bank

651,166

Payable for securities purchased

158,432,427

Payable for shares redeemed

2,793,911

Payable to Calvert Asset Management Co., Inc.

822,944

Payable to Calvert Administrative Services Company

401,413

Payable to Calvert Shareholder Services, Inc.

28,561

Payable to Calvert Distributors, Inc.

435,904

Accrued expenses and other liabilities

225,598

Total liabilities

163,791,924

Net Assets

$1,637,710,526

 

Net Assets Consist of:

  

Paid in capital applicable to the following shares of beneficial interest,

  

unlimited number of no par shares authorized:

  

Class A: 76,723,144 shares outstanding

$1,304,154,737

Class B: 14,963,170 shares outstanding

255,671,229

Class C: 5,890,769 shares outstanding

100,610,363

Class I: 1,918,228 shares outstanding

32,136,060

Undistributed net investment income

114,345

Accumulated net realized gain (loss) on investments

(8,208,089)

Net unrealized appreciation (depreciation) on investments

(46,768,119)
   

Net Assets

$1,637,710,526

 

Net Asset Value Per Share

  

Class A (based on net assets $1,263,070,986)

$16.46

Class B (based on net assets $246,186,116)

$16.45

Class C (based on net assets $96,898,093)

$16.45

Class I (based on net assets $31,555,331)

$16.45

 

 

See notes to financial statements.

Statement of Operations

Six Months Ended March 31, 2002

Net Investment Income

  

Investment Income:

  

Interest income

$50,873,582

Dividend income

67,708

Total investment income

50,941,290
   

Expenses:

  

Investment advisory fee

2,736,942

Administrative fees

2,035,774

Transfer agency fees and expenses

1,146,028

Distribution plan expenses:

  

Class A

822,274

Class B

963,565

Class C

312,302

Trustees' fees and expenses

60,149

Custodian fees

82,641

Registration fees

54,464

Reports to shareholders

156,105

Professional fees

16,931

Accounting fees

62,615

Miscellaneous

20,457

Total expenses

8,470,247

Fees paid indirectly

(88,019)

Net expenses

8,382,228

Net Investment Income

42,559,062

 

Realized and Unrealized Gain (Loss) on Investments

  

Net realized gain (loss)

(1,798,386)

Change in unrealized appreciation (depreciation)

(32,559,392)
   

Net Realized and Unrealized Gain

  

(Loss) on Investments

(34,357,778)
   

Increase (Decrease) in Net Assets

 

Resulting From Operations

$8,201,284

 

 

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

2002

2001

Operations:

    

Net investment income

$42,559,062

$47,489,688

Net realized gain (loss)

(1,798,386)

44,797,689

Change in unrealized appreciation (depreciation)

(32,559,392)

(11,788,061)
     

Increase (Decrease) in Net Assets

    

Resulting From Operations

8,201,284

80,499,316
     

Distributions to shareholders from

    

Net investment income:

    

Class A Shares

(34,671,257)

(41,997,231)

Class B Shares

(5,449,382)

(3,931,804)

Class C Shares

(1,798,848)

(638,334)

Class I Shares

(598,245)

(882,753)

Net realized gain:

    

Class A Shares

(38,035,227)

(4,697,323)

Class B Shares

(6,508,971)

(382,867)

Class C Shares

(1,956,572)

(25,170)

Class I Shares

(541,159)

(137,012)

Total distributions

(89,559,664)

(52,692,494)
     

Capital share transactions:

    

Shares sold:

    

Class A Shares

515,310,959

651,439,803

Class B Shares

116,609,102

113,056,140

Class C Shares

65,168,436

37,936,799

Class I Shares

18,744,889

8,123,584

Reinvestment of distributions:

    

Class A Shares

57,004,651

36,683,924

Class B Shares

7,434,215

2,956,551

Class C Shares

2,294,775

413,166

Class I Shares

1,078,730

1,006,468

Shares redeemed:

    

Class A Shares

(189,849,665)

(210,519,099)

Class B Shares

(10,951,683)

(5,014,483)

Class C Shares

(5,004,564)

(1,374,492)

Class I Shares

(1,518,724)

(9,255,139)

Total capital share transactions

576,321,121

625,453,222
     

Total Increase (Decrease) in Net Assets

494,962,744

653,260,044

Net Assets

    

Beginning of period

1,142,747,782

489,487,738

End of period (including undistributed net investment

   

income (loss) of $114,345 and $73,015, respectively.)

$1,637,710,526

$1,142,747,782

See notes to financial statements.

Statements of Changes in Net Assets
 

Six Months Ended

Year Ended
 

March 31,

September 30,

Capital Share Activity

2002

2001

Shares sold:

    

Class A Shares

30,433,315

37,655,888

Class B Shares

6,887,961

6,493,299

Class C Shares

3,862,609

2,170,687

Class I Shares

1,123,803

463,044

Reinvestment of distributions:

    

Class A Shares

3,415,811

2,161,949

Class B Shares

445,978

173,526

Class C Shares

137,781

23,791

Class I Shares

64,736

60,177

Shares redeemed:

    

Class A Shares

(11,230,668)

(12,284,903)

Class B Shares

(646,548)

(290,484)

Class C Shares

(295,944)

(78,878)

Class I Shares

(89,785)

(542,634)

Total capital share activity

34,109,049

36,005,462

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 four 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. Class I shares have no front-end sales charge and have a lower expense ratio 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), and at such other times as may be necessary or appropriate. Securities listed or traded on a national securities exchange are valued at the last reported sale price. Unlisted securities and listed securities for which the last sale price is not available are valued at the most recent bid price or based on a yield equivalent obtained from the securities' market maker. Municipal securities are valued utilizing the average of bid prices or at bid prices based on a matrix system (which considers such factors as security prices, yields, maturities and ratings) furnished by dealers through an independent pricing service. Other securities for which market quotations are not available or deemed inappropriate are 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.

Options: The Fund may write or purchase option securities. The option premium is the basis for recognition of unrealized or realized gain or loss on the option. The cost of securities acquired or the proceeds from securities sold through the exercise of the option is adjusted by the amount of the premium. Risks from writing or purchasing option securities arise from possible illiquidity of the options market and the movement in the value of the investment or in interest rates. The risk associated with purchasing options is limited to the premium originally paid.

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. The Fund maintains securities with

a value equal to its obligation under each contract. Initial margin deposits of either cash

or securities are made upon entering in futures contracts; thereafter, variation margin

payments are made or received daily reflecting the change in market value. Unrealized or realized gains and losses are recognized based on the change in market value. Risks of futures contracts arise from the possible illiquidity of the futures markets and the movement in the value of the investment or in interest rates.

Short Sales: The Fund may use short sales of U.S. Treasury securities for the limited purpose of hedging the Fund's duration. Any short sales will be covered with an equivalent amount of high quality, liquid securities in a segregated account at the Fund's custodian.

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. Dividend income is recorded on the ex-dividend date, and interest income is recognized on an accrual basis. Discounts and premiums on securities purchased are amortized, over the lives of the respective securities. 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.

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.

Expense Offset Arrangements: The Fund has an arrangement with its custodian bank whereby the custodian's and transfer agent's fees may be paid indirectly by credits earned on the Fund's cash on deposit with the bank. Such a deposit arrangement is 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.

Audit Guide Implementation: In November 2000, the American Institute of Certified Public Accountants ("AICPA") issued a revised version of the AICPA Audit and Accounting Guide for Investment Companies (the "Guide"). The Fund has implemented the provisions of the Guide, as required on October 1, 2001. The implementation did not have a material impact on the Fund's financial statements.

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 Ameritas Acacia Mutual Holding Company. The Advisor provides investment advisory services and pays the salaries and fees of officers and affiliated Trustees of the Fund. For its services, the Advisor receives a monthly fee based on an annual rate of .40% of the Fund's average daily net assets.

Calvert Administrative Services Company, an affiliate of the Advisor, provides administrative services to the Fund for an annual fee, payable monthly. Classes A, B, and C 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, B and C shares, allow the Portfolios to pay the Distributor for expenses and services associated with the distribution of shares. The expenses paid may not exceed .50%, 1.0% and 1.0% annually of the Fund's average daily net assets of Class A, B and C, respectively. Class I does not have Distribution plan expenses.

The Distributor received $410,744 as its portion of the commissions charged on sales of the Fund's shares for the six months ended March 31, 2002.

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 $147,019 for the six months ended March 31, 2002. National Financial Data Services, Inc., is the transfer and dividend disbursing agent.

Each Trustee of the Fund who is not affiliated with the Advisor receives an annual fee of $20,500 plus up to $1,500 for each Board and Committee meeting attended. Trustee's fees are allocated to each of the funds in the series served.

Note C - Investment Activity

During the period, purchases and sales of investments, other than short-term and U.S. government securities, were $10,793,438,991 and $10,420,450,928, respectively.

The cost of investments owned at March 31, 2002 for federal income tax purposes was $1,686,396,935. Net unrealized depreciation aggregated $46,793,139, of which $15,976,107 related to appreciated securities and $62,769,246 related to depreciated securities.

The Fund may sell or purchase securities 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, 2002, purchase and sales transactions were $208,987,258 and $162,270,000, respectively.

Note D - Line of Credit

A financing agreement is in place with all Calvert Group Funds (except for the Calvert Social Investment Fund Enhanced Equity Portfolio and the CVS Ameritas Index 500, Portfolio) and State Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is providing an unsecured line of credit facility, in the aggregate amount of $50 million ($25 million committed and $25 million uncommitted), to be accessed by the Funds for temporary or emergency purposes only. Borrowings under this facility bear interest at the overnight Federal Funds Rate plus .50% per annum. A commitment fee of .10% per annum will be incurred on the unused portion of the committed facility which will be allocated to all participating funds. The Fund had no loans outstanding pursuant to this line of credit at March 31, 2002. For the six months ended March 31, 2002, borrowings by the Fund under the Agreement were as follows:

 

Weighted

  

Month of

Average

Average

Maximum

Maximum

Daily

Interest

Amount

Amount

Balance

Rate

Borrowed

Borrowed

$608,977

2.52%

$10,783,573

October 2001

 

 

Change in Independent Auditor

In May 2002, Arthur Andersen LLP (Arthur Andersen) was dismissed as independent auditor for the Calvert Group Funds. KPMG LLP (KPMG) was selected as the Fund's independent auditor. The Fund's selection of KPMG as its independent auditor was recommended by the Fund's audit committee and was approved by the Fund's Board of Trustees.

The reports on the financial statements audited by Arthur Andersen for the years ended September 30, 2001 and September 30, 2000 for the Funds did not contain an adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles. There were no disagreements between the Funds and Arthur Andersen on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Arthur Andersen would have caused it to make reference to the subject matter of the disagreements in connection with its reports on the financial statements of such years.

 

Financial Highlights

Periods Ended

March 31, September 30, September 30,

Class A Shares 2002 2001 2000

Net asset value, beginning $17.48 $16.66 $17.08

Income from investment operations

Net investment income .54 1.14 1.15

Net realized and unrealized gain (loss) (.41) .98 (.16)

Total from investment operations .13 2.12 .99

Distributions from

Net investment income (.53) (1.14) (1.16)

Net realized gain (.62) (.16) (.25)

Total distributions (1.15) (1.30) (1.41)

Total increase (decrease) in net asset value (1.02) .82 (.42)

Net asset value, ending $16.46 $17.48 $16.66

Total return* .77% 13.31% 6.11%

Ratios to average net assets:

Net investment income 6.36% (a) 6.66% 7.47%

Total expenses 1.08% (a) 1.10% 1.20%

Expenses before offsets 1.08% (a) 1.10% 1.20%

Net expenses 1.07% (a) 1.08% 1.17%

Portfolio turnover 958% 2,645% 3,264%

Net assets, ending (in thousands) $1,263,071 $945,671 $442,709

 
   

Years Ended

  
 

September 30,

September 30,

September 30,

Class A Shares

1999

1998

1997

Net asset value, beginning

$17.17

$17.20

$16.47

Income from investment operations

      

Net investment income

.99

1.02

1.02

Net realized and unrealized gain (loss)

.74

.61

.74

Total from investment operations

1.73

1.63

1.76

Distributions from

      

Net investment income

(.99)

(1.01)

(1.02)

In excess of net realized gain

-

-

(.01)

Net realized gain

(.83)

(.65)

-

Total distributions

(1.82)

(1.66)

(1.03)

Total increase (decrease) in net asset value

(.09)

(.03)

.73

Net asset value, ending

$17.08

$17.17

$17.20
       

Total return*

10.68%

9.92%

11.03%

Ratios to average net assets:

      

Net investment income

6.01%

5.96%

6.04%

Total expenses

1.32%

1.43%

1.33%

Expenses before offsets

1.32%

1.43%

1.33%

Net expenses

1.23%

1.36%

1.26%

Portfolio turnover

3,454%

3,461%

2,961%

Net assets, ending (in thousands)

$91,764

$41,607

$39,302

 

 

Financial Highlights
 

Periods Ended
 

March 31,

September 30,

Class B Shares

2002

2001

Net asset value, beginning

$17.47

$16.66

Income from investment operations

    

Net investment income

.47

1.00

Net realized and unrealized gain (loss)

(.41)

.98

Total from investment operations

.06

1.98

Distributions from

    

Net investment income

(.46)

(1.01)

Net realized gain

(.62)

(.16)

Total distributions

(1.08)

(1.17)

Total increase (decrease) in net asset value

(1.02)

.81

Net asset value, ending

$16.45

$17.47
     

Total return*

.38%

12.38%

Ratios to average net assets:

   

Net investment income

5.59% (a)

5.74%

Total expenses

1.92% (a)

1.93%

Expenses before offsets

1.92% (a)

1.93%

Net expenses

1.91% (a)

1.91%

Portfolio turnover

958%

2,645%

Net assets, ending (in thousands)

$246,186

$144,580

 

 

 

 

Periods Ended
 

September 30,

September 30,

Class B Shares

2000

1999 (caret)

Net asset value, beginning

$17.06

$17.02

Income from investment operations

    

Net investment income

.97

.13

Net realized and unrealized gain (loss)

(.17)

.05

Total from investment operations

.80

.18

Distributions from

    

Net investment income

(.95)

(.14)

Net realized gain

(.25)

-

Total distributions

(1.20)

(.14)

Total increase (decrease) in net asset value

(.40)

.04

Net asset value, ending

$16.66

$17.06
     

Total return*

4.95%

1.06%

Ratios to average net assets:

   

Net investment income

6.75%

5.00% (a)

Total expenses

2.15%

3.74% (a)

Expenses before offsets

2.15%

2.98% (a)

Net expenses

2.12%

2.91% (a)

Portfolio turnover

3,264%

3,454%

Net assets, ending (in thousands)

$31,646

$1,231

 

 

Financial Highlights

 
   

Periods Ended

  
 

March 31,

September 30,

September 30,

Class C Shares

2002

2001

2000(caret)(caret)

Net asset value, beginning

$17.47

$16.67

$16.59

Income from investment operations

      

Net investment income

.46

.98

.15

Net realized and unrealized gain (loss)

(.41)

.95

.11

Total from investment operations

.05

1.93

.26

Distributions from

      

Net investment income

(.45)

(.97)

(.18)

Net realized gain

(.62)

(.16)

-

Total distributions

(1.07)

(1.13)

(.18)

Total increase (decrease) in net asset value

(1.02)

.80

.08

Net asset value, ending

$16.45

$17.47

$16.67
       

Total return*

.34%

12.09%

1.58%

Ratios to average net assets:

     

Net investment income

5.61% (a)

5.32%

7.42% (a)

Total expenses

1.99% (a)

2.09%

2.16% (a)

Expenses before offsets

1.99% (a)

2.09%

2.16% (a)

Net expenses

1.97% (a)

2.06%

2.13% (a)

Portfolio turnover

958%

2,645%

3,264%

Net assets, ending (in thousands)

$96,898

$38,185

$1,179

 

 

Financial Highlights
 

Periods Ended
 

March 31,

September 30,

Class I Shares

2002

2001

Net asset value, beginning

$17.46

$16.63

Income from investment operations

    

Net investment income

.56

1.22

Net realized and unrealized gain (loss)

(.39)

.97

Total from investment operations

.17

2.19

Distributions from

    

Net investment income

(.56)

(1.20)

Net realized gain

(.62)

(.16)

Total distributions

(1.18)

(1.36)

Total increase (decrease) in net asset value

(1.01)

.83

Net asset value, ending

$16.45

$17.46
     

Total return*

1.05%

13.81%

Ratios to average net assets:

   

Net investment income

6.77% (a)

7.40%

Total expenses

.64% (a)

.68%

Expenses before offsets

.64% (a)

.68%

Net expenses

.62% (a)

.66%

Portfolio turnover

958%

2,645%

Net assets, ending (in thousands)

$31,555

$14,311

 

 

 

Periods Ended
 

September 30,

September 30,

Class I Shares

2000

1999 (caret)(caret)(caret)

Net asset value, beginning

$17.06

$16.73

Income from investment operations

    

Net investment income

1.26

.63

Net realized and unrealized gain (loss)

(.21)

.34

Total from investment operations

1.05

.97

Distributions from

    

Net investment income

(1.23)

(.64)

Net realized gain

(.25)

-

Total distributions

(1.48)

(.64)

Total increase (decrease) in net asset value

(.43)

.33

Net asset value, ending

$16.63

$17.06
     

Total return*

6.48%

5.83%

Ratios to average net assets:

   

Net investment income

7.78%

6.37% (a)

Total expenses

.82%

1.07% (a)

Expenses before offsets

.75%

.81% (a)

Net expenses

.72%

.72% (a)

Portfolio turnover

3,264%

3,454%

Net assets, ending (in thousands)

$13,954

$6,442

 

(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.

(caret) From August 1, 1999, inception.

(caret)(caret) From August 1, 2000, inception.

(caret)(caret)(caret) From March 1, 1999 inception.

See notes to financial statements.

Financial Tables and Glossary

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 and may be further broken down into sub-groups.

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. It 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.

STATEMENT OF NET ASSETS

The Statement of Net Assets provides a detailed list of the fund's holdings, including each securities 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 funds' 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. 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 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, dividends, 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 ones shown in the Operations section as distributions are determined on a tax basis. 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.

GLOSSARY

Appreciation - An increase in an investment's value.

Basis Point - One one-hundredths of a percentage point. This term is often used in describing changes in interest rates.

Capital Gain Distribution - Payments to mutual fund shareholders of net gains realized on the sale of the fund's portfolio securities. Long-term gains are earned on securities held in the portfolio 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.

Depreciation - A decline in an investment's value.

Distributions - Dividends paid from net investment income and realized capital gains.

Expense Ratio - A fund's cost of doing business, disclosed in the prospectus, expressed as a percentage of net assets. An expense ratio of 0.50% means that a fund's expenses amount to half of one percent of its average net assets a year.

Net Asset Value (NAV) - Value of one share of a fund that is determined by subtracting liabilities (payables, accrued expenses, taxes) from assets (cash, investments, receivables) and dividing the net assets by the number of shares outstanding.

Portfolio Turnover - A measure of the trading activity in a fund's investment portfolio - how often securities are bought and sold by a fund.

Total Return - 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.

Yield - A measure of net income (dividends and interest less expenses) earned by the securities in a fund's portfolio during a specified period.

Calvert

Income Fund

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800-368-2748

Yields and Prices

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(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 NFDS

330 West 9th Street

Kansas City, MO 64105

Web Site

http://www.calvert.com

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

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