Fixed-Income Update: Pricing Adjustment to Toll Road Investors Partnership II Bond
10/25/2011
On October 19, 2011, Calvert deemed it necessary to make a pricing adjustment to the Toll Road Investors Partnership II bond held in various Calvert taxable bond portfolios. These bonds have been carefully monitored over time based on discussions with multiple parties. In markets such as these with thinly traded securities, it is not unusual to have to make adjustments from time to time.
As of October 18, the Toll Road bond accounted for the following percentages in Calvert’s taxable bond portfolios:
| Calvert Income Fund | 2.9% |
| Calvert Bond Portfolio | 1.9% |
| Calvert Short Duration Income Fund | 1.5% |
| Calvert Long-Term Income Fund | 1.0% |
| Calvert Balanced Portfolio (percentage of entire Portfolio) | 0.3% |
| Calvert Government Fund | 0.05% |
| Calvert Ultra-Short Income Fund | 0.03% |
| Calvert VP Income Portfolio | 1.7% |
The price adjustment resulted in the following percentage changes in each Portfolio's value on October 19, excluding the effects of any other market changes:
| Calvert Income Fund | -1.65% |
| Calvert Bond Portfolio | -1.10% |
| Calvert Short Duration Income Fund | -0.87% |
| Calvert Long-Term Income Fund | -0.56% |
| Calvert Balanced Portfolio | -0.18% |
| Calvert Government Fund | -0.03% |
| Calvert Ultra-Short Income Fund | -0.02% |
| Calvert VP Income Portfolio | -0.99% |
The Toll Road bonds are zero coupon discount bonds originally issued at a price of $11.847 in 2005. The bonds were originally purchased at $18.25 on March 18, 2008. Subsequent purchases have been made in 2008, 2009 and 2010. The bonds have a legal maturity date of 2043, but we expect them to be optionally redeemed in the years 2022 to 2035.
The current ratings of the bonds are based on a guarantee of National Public Finance Guarantee, formerly known as MBIA. The bonds are currently rated Baa1 by Moody's, BBB by Standard & Poor's, and BBB- by Fitch.
Our outlook on the bond remains positive and our credit analysts are still confident in its credit quality. Calvert believes that at the appropriate yield level, this bond is attractive. The Toll Road bonds are backed by revenue from the Dulles Greenway in northern Virginia. Based on expected growth in Loudon County, VA, we believe that revenue will prove to be sufficient to redeem the bonds as expected.
#11650 (10/11)