SCHEDULE 14A
INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A)
OF THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant
[X]
Filed by a Party other than the Registrant
[ ]
Check the Appropriate Box:
[ ] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CALVERT MUNICIPAL FUND, INC.
(Name of Registrant as Specified in Its Charter)
CALVERT MUNICIPAL FUND, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (check the appropriate box):
[ ] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1),
14a-6(i)(2) or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act
Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which
transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth
the amount on which the filing fee is calculated and
state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[x ] Fee paid previously with preliminary material
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(3) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, or the Form or
Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
CALVERT NATIONAL MUNICIPAL INTERMEDIATE FUND
CALVERT CALIFORNIA MUNICIPAL INTERMEDIATE FUND
portfolios of Calvert Municipal Fund, Inc.
4550 Montgomery Avenue
Bethesda, Maryland 20814
Dear Investor:
I cordially invite you to attend a joint special meeting of
shareholders of Calvert National Municipal Intermediate Fund (the
"National Fund") and Calvert California Municipal Intermediate Fund (the
"California Fund") (each a "Fund" and together, the "Funds") on April 18,
1996 (the "Meeting"). Each Fund is a portfolio of Calvert Municipal
Fund, Inc. (the "Company"). At the Meeting, shareholders of each Fund
will be asked to vote on several important matters affecting the Funds.
Shareholders of both Funds are being asked to vote upon four of the
matters specified below and shareholders of the National Fund are being
asked to vote upon one additional matter. The Directors of the Company
recommend that you vote in favor of each of the Proposals. Each of
these items is explained in greater detail in the enclosed Proxy
Statement.
Proposals 1 - 3. To amend certain of each Fund's fundamental
investment restrictions to permit the use of futures and options. These
proposals are to be voted upon by shareholders of both the National Fund
and the California Fund and concern:
1) commodities and futures contracts,
2) options, and
3) short sales and purchases on
margin
Proposals 4 - 5 To amend certain other fundamental investment
restrictions to eliminate any limitations that are not required to be
fundamental by the Investment Company Act of 1940, as amended (the "1940
Act"). The Directors of the Company believe the Funds' investment
advisor's ability to manage each Fund in a changing investment
environment will be enhanced and that investment management
opportunities will be increased by these proposed changes. These
Proposals concern:
4) non-investment grade debt
securities
5) securities of any single issuer.
[For National Fund
shareholders only]
Please exercise your right to vote. We urge you to complete,
sign and return the enclosed proxy ballot so that your shares will be
represented and voted. If you have any questions, please call your
financial representative or Calvert at 1-800-368-2745. Thank you for
your prompt response to this important matter.
Sincerely,
Clifton S. Sorrell, Jr. President
INSTRUCTIONS FOR EXECUTING PROXY BALLOT
The proxy ballot must be executed properly. When ballots are
not signed as required by law, you and your Fund must undertake the time
and expense to take steps to validate your vote. The following general
guide may help you choose the proper format for signing your ballot.
1. Individual Accounts: Your name should be signed exactly as it
appears in the registration on the proxy ballot.
2. Joint Accounts: Either party may sign, but the name of the
party signing should conform exactly to a name shown in the
registration.
3. All other accounts should show the capacity of the individual
signing. This can be shown either in the form of the account
registration itself or by the individual executing the proxy
ballot. For example:
REGISTRATION
VALID SIGNATURE
A. 1) Save the Earth Corp.
Jane Q. Nature, Treasurer
2) Save the Earth Corp.
Jane Q. Nature,
c/o Jane Q. Nature, Treasurer
B. 1) Save the Earth Corp. Profit Sharing
Jon B. Goodhealth, Plan Trustee
2) Save the Earth Trust
Jon B. Goodhealth, Trustee
3) Jon B. Goodhealth, Trustee
Jon B. Goodhealth,
u/t/d 5/1/78 Trustee
C. 1) Elisa Pachamama, Cust.
Elisa Pachamama
f/b/o Elena Pachamama UGMA
CALVERT NATIONAL MUNICIPAL INTERMEDIATE FUND
CALVERT CALIFORNIA MUNICIPAL INTERMEDIATE FUND
portfolios of Calvert Municipal Fund, Inc.
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
April 18, 1996
NOTICE IS HEREBY GIVEN that a joint Special Meeting of
Shareholders of Calvert National Municipal Intermediate Fund (the
"National Fund") and Calvert California Municipal Intermediate Fund (the
"California Fund") (each a "Fund" and together, the "Funds"), portfolios
of Calvert Municipal Fund, Inc. (the "Company"), will be held at the
offices of Calvert Group, Ltd., 4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland, 20814 on Thursday, April 18, 1996, at 10:00 a.m.
(the "Meeting"). The purpose of the Meeting is to consider and act upon
the following Proposals, and to transact such other business as may
properly come before the meeting or any adjournments.
Proposals for Shareholders of Each Fund
1. To amend each Fund's fundamental investment restriction on
investing in commodities and futures contracts to allow each
Fund to engage in futures trading.
2. To eliminate each Fund's fundamental investment restriction on
options.
3. To eliminate each Fund's fundamental investment restriction on
short sales and purchases on margin and replace such
restriction with two separate non-fundamental policies that
will allow the Fund to engage in certain short sales and margin
purchases in connection with transactions in futures and
options thereon.
4. To eliminate each Fund's fundamental investment restriction
regarding the purchase by the Funds of only investment grade
debt securities and replace it with a non-fundamental
restriction to permit each Fund to invest up to 35% of each
Fund's net assets in non-investment grade debt securities.
Proposal for Shareholders of the National Fund Only
5. To eliminate the National Fund's fundamental investment
restriction concerning diversification and change the
National Fund's classification under the Investment Company Act
of 1940, as amended (the "1940 Act") from "diversified" to
"non-diversified" to permit the National Fund to commit a
higher percentage of its assets to investments in the
securities of any single
issuer.
The Directors of the Company have fixed the close of business
on February 9, 1996 as the record date for the determination of
shareholders of each Fund entitled to notice of, and to vote at, the
Meeting and any adjournments thereof.
By order of the Board of Directors
William M. Tartikoff, Esq.
Vice President and Secretary
Please vote on the enclosed proxy ballot, date, sign, and return it in
the envelope provided, which needs no postage if mailed in the United
States. We ask your cooperation in promptly mailing your proxy ballot,
no matter how large or small your holdings may be.
Proxy Statement Dated February 22, 1996
CALVERT NATIONAL MUNICIPAL INTERMEDIATE FUND
CALVERT CALIFORNIA MUNICIPAL INTERMEDIATE FUND
portfolios of Calvert Municipal Fund, Inc.
4550 Montgomery Avenue
Bethesda, Maryland 20814
This proxy statement is being furnished on behalf of the Board
of Directors (the "Board" or the "Directors") of Calvert Municipal
Fund, Inc. (the "Company") in connection with a solicitation of proxies
from shareholders of Calvert National Municipal Intermediate Fund (the
"National Fund") and Calvert California Municipal Intermediate Fund (the
"California Fund") (each a "Fund" and together, the "Funds") in
connection with the Joint Special Meeting of Shareholders of the Funds
(the "Meeting"), which will be held at the offices of Calvert Group,
Ltd., 4550 Montgomery Avenue, Bethesda, Maryland 20814 on April 18, 1996
at 10:00 a.m. for the purposes set forth in the Notice of Meeting. Each
Fund is a portfolio of Calvert Municipal Fund, Inc. (the "Company").
Shareholders of record of each Fund as of the close of business
on February 9, 1996 are entitled to notice of and to vote at the
Meeting. On February 16, 1996 there were issued and outstanding
3,926,483 and 3,246,977 shares of beneficial interest of Class A and
609,242 and 398,006 shares of beneficial interest of Class C in the
National Fund and the California Fund, respectively. Each share of each
Fund is entitled to one vote, regardless of Class. The approximate date
on which this proxy statement and form of proxy are first being mailed
to shareholders is February 23, 1996.
Each Fund will furnish, without charge, a copy of the annual
report to shareholders for the Fund's most recently completed fiscal
year, and the most recent semi-annual report to shareholders upon
request. Please telephone Calvert Group at 1-800-368-2745 to request
such reports.
Timely, properly executed proxies will be voted as you
instruct. If a returned proxy does not contain a vote on any given
Proposal, the proxy will be voted in favor of the Proposal for which no
vote was specified. A proxy may be revoked at any time prior to its
exercise by written notice to the Board, by execution of a subsequent
proxy, or by voting in person at the Meeting.
The principal solicitation of proxies will be by mail. Proxies
may also be solicited by telephone, computer communications, facsimile,
personal contact, by officers or employees of Calvert Group and its
affiliates, or by proxy solicitation firms retained for this purpose.
The cost of the solicitation and meeting will be paid by the respective
Fund.
Proposals must be approved by a majority of the outstanding
shares, which is defined as the lesser of (1) the vote of 67% or more of
the shares of a Fund at the Meeting if the holders of more than 50% of
the outstanding shares of the Fund are present in person or by proxy, or
(2) the vote of more than 50% of the outstanding shares of a Fund.
Abstentions and "broker non-votes", as defined below, are
counted for purposes of determining whether a quorum is present for
purposes of convening the meeting. Broker non-votes are shares held by
a broker or nominee for which an executed proxy is received by a Fund,
but are not voted as to one or more Proposals because instructions have
not been received from the beneficial owners or persons entitled to vote
and the broker or nominee does not have discretionary voting power. If
a Proposal must be approved by a percentage of votes cast on the
Proposal, abstentions and broker non-votes will not be counted as "votes
cast" on the Proposal and will have no effect on the result of the vote.
If the Proposal must be approved by a percentage of voting securities
present at the meeting, abstentions will be considered to be voting
securities that are present and will have the effect of being counted as
votes against the Proposal. Broker non-votes will not be counted for
any purpose in connection with calculating the vote on such a Proposal.
All officers and directors of a Fund, as a group,
beneficially owned less than one percent of the outstanding shares of
either Fund as of January 31, 1996. For this purpose, "beneficial
ownership" is defined under Section 13(d) of the Securities Exchange Act
of 1934, as amended. No person or group owned more than 5% of the
outstanding shares of either Fund. The information as to beneficial
ownership is based on statements furnished to the Funds by the Directors
or the Funds' transfer agent.
SUMMARY OF PROPOSALS
THE NATIONAL FUND
1. To amend National Fund's fundamental investment restriction on
investing incommodities and futures contracts to allow the National Fund
to engage in futures trading.
2. To eliminate National Fund's fundamental investment restriction
on options.
3. To eliminate National Fund's fundamental investment restriction
on short sales and purchases on margin and replace such
restriction with two separate non-fundamental policies that
will allow the Fund to engage in certain Short Sales and margin
purchases in connection with transaction in futures and options
thereon.
4. To eliminate National Fund's fundamental investment restriction
regarding the purchase by the Fund of only investment grade
debt securities and replace it with a non-fundamental
restriction to permit the Fund to invest up to 35% of each
Fund's net assets in non-investment grade debt securities.
5. To eliminate the National Fund's fundamental investment
restriction concerning diversification and change the
National Fund's classification under the Investment Company Act
of 1940, as amended (the "1940 Act") from "diversified" to
"non-diversified" to permit the National Fund to invest a
higher percentage of its assets to investments in the
securities of any single issuer.
THE CALIFORNIA FUND
1. To amend the California Fund's fundamental investment
restriction on investing in commodities and futures contracts to
allow the California Fund to engage in futures trading.
2. To eliminate the California Fund's fundamental
investment restriction on options.
3. To eliminate the California Fund's fundamental investment
restriction on short sales and purchases on margin and replace
such restriction with two separate non-fundamental policies
that will allow the California Fund to engage in certain Short
sales and margin purchases in connection with transaction in
futures and options thereon.
4. To eliminate the California Fund's fundamental investment
restriction regarding the purchase by the Fund of only
investment grade debt securities and replace it with a
non-fundamental restriction to permit each Fund to invest up to
35% of the Fund's net assets in non-investment grade debt
securities.
BACKGROUND
Each Fund is a portfolio of the Company, an open-end management
investment company organized as a Maryland corporation on May 21, 1992.
The National Fund and the California Fund each are authorized to issue,
250,000,000, which may be issued in series and are freely
transferable. Issued shares are fully paid and non assessable and have
no preemptive or conversion rights. Shareholder voting rights are not
cumulative.
Investment Advisor and Principal Underwriter
Calvert Asset Management Company, Inc. ("CAMCO" or the
"Advisor") serves as investment advisor to each Fund and to several other
registered investment companies in the Calvert Group Family of Funds.
Calvert Distributors, Inc. ("CDI") serves as the principal underwriter
to each Fund. Both CAMCO and CDI are located at 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, and are indirect, wholly-owned
subsidiaries of Acacia Mutual Life Insurance Company, 51 Louisiana
Avenue, NW, Washington, D.C. 20001.
By this proxy statement, the Funds seek shareholder approval to
eliminate or amend certain fundamental investment restrictions, and
change the classification of the National Fund under the 1940 Act from
"diversified" to "non-diversified". Fundamental policies may be changed
only by shareholder vote, while non-fundamental, or operating, policies,
may be changed by vote of the Directors of the Company without
shareholder approval.
1. To amend each Fund's fundamental investment restriction on
investing in commodities and futures contracts to allow each Fund to
engage in futures trading.
The Directors of the Company have proposed amendments to the
fundamental investment restrictions of the Funds to allow each Fund to
engage in buying and selling futures contracts. The provisions of each
Fund's current fundamental investment restrictions in this area prohibit
the Funds from purchasing any futures contracts, and are more
restrictive than are required by applicable law. The Directors believe
CAMCO should have greater flexibility to enter into futures contracts
consistent with each Fund's investment objective and program and as
market and regulatory developments require and permit, without the
necessity of seeking further shareholder approval.
CAMCO believes that using interest rate futures and options for
hedging and substitution purposes to adjust the duration and other
characteristics of the portfolio is an important tool of portfolio
management. These techniques are already used by CAMCO in several other
fixed-income funds managed by CAMCO in the Calvert Family of Funds, and
CAMCO believes that it would be to each Fund's advantage to have access
to these portfolio management techniques.
If approved, the primary effects of the amendments would be to allow
each Fund to invest in exchange traded futures and options thereon for
purposes of hedging and substitution in the portfolio.
These techniques would permit each Fund to more precisely
increase or decrease its exposure to changing security prices, interest
rates, or other factors that affect security values. Each Fund would
use these practices either as substitution or as protection against an
adverse move in the Fund's portfolio to adjust the risk and return
characteristics of the Fund's portfolio. The Funds will use futures and
options thereon only for hedging and substitution. If CAMCO judges
market conditions incorrectly or employs a strategy that does not
correlate well with a Fund's investments, or if the counterparty to the
transaction does not perform as promised, these techniques could result
in a loss. These techniques may increase the volatility of a Fund and
may involve a small investment of cash relative to the magnitude of the
risk assumed. They may involve a greater degree of risk than those
inherent in more conservative investment approaches.
Options on futures Contracts. An option on a future contract
provides the purchaser with the right, but not the obligation, to enter
into a long position in the underlying furtures contract ( that is,
purchase the futures contract), in the case of a "call" option, or a
short position (sell the futures contract), in the case of a "put"
option, for a fixed price up to a stated expiration date. The option is
purchased for a non-refundable fee, known as the "premium". Upon
exercise of the option, the contract market clearing house assigns each
party to the option an opposite position in the underlying futures
contracts. In the event of exercise, therefore, the parties are subject
to all of the risks of futures trading, such as payment of initial and
variation margin. In addition, the seller, or "writer", of the option
is subject to margin requirements on the option position. Options on
futures contracts are traded on the same contract markets as the
underlying futures contracts.
The Funds may purchase options on futures contracts in order to
protect against an anticipated decline in the value of securities it
holds. Conversely, in order to protect against the adverse effects of
anticipated increases in the costs of securities to be acquired, a Fund
could purchase call options on futures contracts, instead of purchasing
the underlying futures contracts. The Funds generally will sell options
on futures contracts only to close out an existing position.
The Funds will not engage in transactions in such instruments
unless and until the Investment Advisor determines that market
conditions and the circumstances of the Fund warrant such trading. To
the extent a Fund engages in the purchase and sale of futures contracts
or options thereon, it will do so only at a level which is reflective of
the Investment Advisor's view of the hedging needs of a Fund, the
liquidity of the market for futures contracts and the anticipated
correlation between movements in the value of the futures or option
contract in the value of the futures or option contract and the value of
securities held by the Portfolio.
When a Fund purchases an option on a futures contract, its risk
is limited to the amount of the premium, plus related transaction costs,
although this entire amount may be lost. In addition, in order to
profit from the purchase of an option on a futures contract, the Fund
may be required to exercise the option and liquidate the underlying
futures contract, subject to the availability of a liquid secondary
market. The trading of options on futures contracts also entails the
risk that changes in the value of the underlying futures contract will
not be fully reflected in the value of the option, although the risk of
imperfect correlation generally tends to diminish as the maturity date
of the futures contract or expiration date of the option approaches.
"Trading Limits" or "Position Limits" may also be imposed on
the maximum number of contracts which any person may hold at a given
time. A contract market may order the liquidation of positions found to
be in violation of these limits and it may impose other sanctions or
restrictions. The investment Advisor does not believe that trading
limits will have any adverse impact on the strategies for hedging the
Portfolio's investments.
Further, the trading of futures contracts is subject to the
risk of the insolvency of a brokerage firm or clearing corporation,
which could make it difficult or impossible to liquidate existing
positions or to recover excess variation margin payments.
In addition to the risks of imperfect correlation and lack of a
liquid secondary market for such instruments, transactions in futures
contracts involve risks related to leveraging and the potential for
incorrect forecasts of the direction and extent of interest rate
movements within a given time frame.
Each Fund's current fundamental investment restriction
concerning investment in commodities and futures is as follows:
"[As a matter of fundamental policy, the Fund may
not] purchase or sell real estate, real estate
investment trust securities, commodities or commodities
contracts, or oil and gas interests, but this shall not
prevent [either Fund] from investing in municipal
obligations secured by real estate or interests
therein;"
As amended, each Fund's fundamental investment restriction on
investing in commodities and futures would be combined, and set apart
from the restriction on investing in real estate and mortgages. Such
revised fundamental investment restrictions would read as follows:
"[As a matter of fundamental policy, the Fund
may not:] purchase or sell physical commodities
except that it may enter into futures contracts
and options thereon."
"[As a matter of fundamental policy, the Fund
may not] purchase or sell real estate, real
estate investment trust securities, or oil and gas
interests, but this shall not prevent [either
Fund] from investing in municipal obligations
secured by real estate or interests therein.
In addition, it is the present intention of the Board of
Directors of the Company to adopt for each Fund the following
non-fundamental operating policy, which may be changed by the Board of
Directors of the Company without further shareholder approval,
"[As a matter of operating policy, the Fund may not]:
Purchase or sell a futures contract or an option thereon if
immediately thereafter, the sum of the amount of initial
margin deposits or futures and premiums on such options
would exceed 5% of the Fund's net asset value".
By making substantive limits on investing in futures and
options on futures contracts non-fundamental, each Fund will have the
flexibility to adapt to changes in Securities and Exchange Commission
("SEC"), Commodity Futures Trading Commission ("CFTC") and state laws
and regulations without seeking further shareholder approval. All
trading in futures by the Fund would be subject to applicable SEC and
CFTC rules and applicable state law.
The Directors of the Company have voted to approve the
proposed changes and recommend such changes to shareholders.
Accordingly, the Director of the Company have recommended that
shareholders vote FOR Proposal 1.
2. To eliminate each Fund's fundamental investment restriction on
options.
The Directors of the Company have proposed that each Fund's
fundamental investment restriction on investing in options be eliminated
and replaced with an operating policy that would permit each Fund to buy
and sell put and call options in implementing its investment program,
and would permit other changes in the policy as the Directors of the
Company may determine from time to time.
Under the proposed new operating policy, each Fund would be
permitted to purchase and sell options of any type for any purpose
consistent with the Fund's investment program. A "put" option is a
legal contract that gives the holder the right to sell a specified
amount of the underlying interest at a fixed price upon exercise of the
option. A "call" option gives the holder the right to buy a specified
amount of the underlying interest at a fixed price upon exercise of the
option.
Options can be used in a variety of strategies aimed at
different goals and having different characteristics of risk and
reward. For example, buying puts or writing calls may hedge against
rising interest rates or other factors, such as currency rates, that
could depress the value of portfolio securities. Buying calls or
writing puts may help fix a definite price for securities a Fund intends
to purchase, reducing the risk of acquiring the securities at a higher
cost at a later date. The purpose of the Proposal is to allow the Funds
greater flexibility in responding to market and regulatory developments
by allowing the Directors of the Company the authority to make changes
in a Fund's policy on options without seeking further shareholder
approval.
A "Spread" position involves the purchase of an option at one
exercise price and the simultaneously sale of another option on the same
underlying security or futures contract, at a different exercise price
and/or expiration date.
A "Straddle" position is an equal number of put options and
call options on the same underlying security or futures contract at the
same exercise price and maturity date. The Fund's current intention is
to use such techniques only occasionally, and then for the purpose of
hedging the Fund's portfolio against volatility.
Each Fund's current fundamental policy in the area of investing
in options is as follows:
"[As a matter of fundamental policy, the Fund may note:] sell
securities short, purchase securities on margin, or write put or
call options. [Each Fund] reserves the right to purchase
securities with puts attached. See "Obligations with Puts
Attached;"
If the Proposal is approved by shareholders, the Directors of
the Company intend to adopt the following operating policy on investing
in options for each Fund:
"Non-fundamental policy. [As a matter of operating policy, the
Fund may note:] invest in puts or calls on a security, including
straddles, spreads, or any combination if the value of that
option premium, when aggregated with the premiums on all other
options on securities held by the Fund, exceeds 5% of the
Fund's total assets.
Any such strategies must, of course, be in accordance with
applicable federal and state regulation. In addition to review by the
Directors of the Company, a Fund would not engage in such strategies
unless the strategies were consistent with the Fund's investment
objective, and until they had been described sufficiently in such Fund's
Prospectus and Statement of Additional Information.
The Directors of the Company have voted to approve the proposed
changes and recommend such changes to shareholders. Accordingly, the
Directors of the Company have recommended that shareholders vote FOR
Proposal 2.
3. To eliminate each Fund's fundamental investment restriction on
short sales and purchases on margin and replace such restriction with
two separate non-fundamental policies that will allow the Funds to
engage in certain short sales and margin purchases in connection with
transactions in futures and options thereon.
Each Fund's current fundamental investment restrictions
concerning selling securities short and purchasing securities on margin
is as follows:
"[As a matter of fundamental policy, the Fund may note:] sell
securities short, purchase securities on margin, or write put or
call options. [Each Fund] reserves the right to purchase
securities with puts attached. See "Obligations with Puts
Attached".
The Directors of the Company recommend that shareholders vote
to eliminate the above fundamental restriction regarding short sales and
purchases on margin. If the proposal is approved, the Directors intend
to adopt separate non-fundamental restrictions for short sales and
purchases on margin that could be changed without a vote of the
shareholders of a Fund. The proposed non-fundamental limitations are
set forth below, with a brief analysis of the substantive differences
between the proposed and current investment limitations.
Short Sales. In a short sale, an investor sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. Each Fund's fundamental investment limitation on
short sales provides that the Fund may not engage in short sales of any
kind. If the Proposal is approved by shareholders, each Fund will adopt
the following non-fundamental investment limitation on short selling to
clarify that futures and options on futures are not considered short
sales. The Fund has no present intention of engaging in short sales.
Purchases on Margin. Margin purchases involve the purchase of
securities with money borrowed from a broker. "Margin" is the cash or
eligible securities that the borrower places with his or her broker as
collateral against this loan. See "Risks of Option and Futures" under
proposal no. 2 above. Each Fund's current fundamental restriction
prohibits the Fund from purchasing securities on margin under any
circumstances. To permit the Fund to implement its proposed investment
policy of using futures and options, the existing fundamental
restriction would be replaced with a non-fundamental restriction that
would allow initial and variation margin payments made in connection
with the purchase and sale of futures contracts and options on futures.
With these exceptions, mutual funds are prohibited from entering into
most types of margin purchases by applicable SEC policies.
If the proposal is approved by shareholders, the Fund will adopt the
following two separate non-fundamental restrictions for each Fund:
[As a matter of operating policy, the Fund may note:] effect
short sales of securities. For purposes of this restriction,
transactions in futures contracts and options are not deemed to
constitute selling securities short.
[As a matter of operating policy, the Fund may note:] purchase
securities on margin, except it may make margin deposits in
connection with futures contracts or options on futures.
The Directors of the Company have voted to approve the proposed
changes and recommend such changes to shareholders. Accordingly, the
Directors of the Company have recommended that shareholders vote FOR
Proposal 3.
4. To eliminate each Fund's fundamental investment restriction
regarding the purchase by the Funds of only investment grade
debt securities and replace it with a non-fundamental
restriction to permit each Fund to invest up to 35% of each
Fund's net assets in non-investment grade debt securities.
Each Fund is currently able to invest only in
investment debt securities. Investment grade securities are those
securities rated within the four highest rating categories by Standard &
Poor's Incorporated ("S&P") or Moody's Investor Services, Inc.
("Moody's"), or securities determined by the Advisor to be of equivalent
credit quality. Municipal obligations rated below the four highest
rating categories (i.e., below BBB or Baa) are referred to as
non-investment grade, "high-yield", or sometimes, "junk bonds".
Non-investment debt securities tend to be more sensitive to
adverse economic changes and developments relating to the issuer's
credit quality. This may affect the issuer's ability to make principal
and interest payments on the debt obligation. There is also a greater
risk of price declines due to changes in the issuer's creditworthiness.
Because the market for lower-rated securities may be less active, or
"thinner", than for higher-rated securities, it may be difficult for a
Fund to sell the securities. Because of a lack of objective data, a
thinly-traded market may make it difficult for the Advisor to value the
securities, so that the Board of Directors of the Company may have to
exercise its judgment in assigning a value. When purchasing
non-investment grade debt securities, rated or unrated, the Advisor
prepares its own credit analysis to attempt to identify those issuers
whose financial condition is adequate to meet future obligations or is
expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur. See the
Appendix to this Proxy Statement for additional information on bond
ratings.
If the proposal is approved by shareholders of the Funds, the
Fund will adopt a non-fundamental restriction to permit each Fund to
invest up to 35% of its net assets in non-investment grade debt
securities.
[As a matter of operating policy, the Fund may note:] invest
more than 35% of its net assets in non-investment grade debt
securities.
The Directors of the Company believe that this will provide
CAMCO with more flexibility to take advantage of investment
opportunities and respond more quickly to market changes.
The Directors of the Company have voted to approve the proposed
changes and recommend such changes to shareholders. Accordingly, the
Directors of the Company recommend that shareholders vote FOR Proposal 4.
[PROPOSAL FOR SHAREHOLDERS
OF THE NATIONAL FUND ONLY]
5. To eliminate the National Fund's fundamental investment
restriction concerning diversification and change the National
Fund's classification under the 1940 Act from "diversified" to
"non-diversified" to permit the National Fund to invest a
higher percentage of its assets to investments in the
securities of any single issuer.
The National Fund's current fundamental investment restriction
on issuer diversification is as follows:
("As a matter of fundamental policy, the Fund may
note:] With respect to 75% of Fund assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its
agencies or instrumentalities) if, as a result, more
than 5% of the value of the Fund's total assets would
be invested in securities of that issuer, or as allowed
by law . . . ".
At the request of CAMCO, the Directors of the Company recommend
that shareholders of the National Fund vote to change the
classification of the Fund from a "diversified" fund to a
"non-diversified" fund (as defined by the 1940 Act). If the proposal is
approved, the National Fund would limit its investments so that at the
close of each quarter of its taxable year: (a) with regard to at least
50% of its total assets, no more than 5% of its total assets are
invested in the securities of a single issuer, and (b) no more than 25%
of its total assets are invested in the securities of a single issuer.
Limitations (a) and (b) do not apply to "Government securities" as
defined for federal tax purposes.
The proposal would permit the National Fund to invest up to 25%
of its total assets in a single issuer and another 25% of its total
assets in another issuer. The remaining 50% of total assets would be
required to be invested in no more than 5% in any one issuer. Currently,
with respect to 75% of its total assets, the Fund can invest no more
than 5% of its assets in any one issuer.
There are risks associated with relaxing the diversification
requirements applicable to the National Fund. Specifically, since,
under the proposal, a relatively high percentage of the assets of the
National Fund could be invested in the obligations of a limited number
of issuers, the value of shares of National Fund may be more susceptible
to any single economic, political or regulatory event than the shares of
a diversified fund would be.
The primary purpose of the proposal is to give the National
Fund greater investment flexibility by permitting it to acquire larger
positions in the securities of individual issuers. CAMCO believes that
this increased flexibility may provide opportunities to enhance the
investment performance of the National Fund. At the same time,
investing a larger percentage of the Fund's assets in a single issuer's
securities increases the National Fund's exposure to credit and other
risks associated with such issuer's financial condition and business
operations. CAMCO expects to use this increased flexibility to acquire
larger positions in the securities of a single issuer when it believes
the potential return on the securities justifies the National Fund's
accepting the risks involved with respect to the investment of the
National Fund's assets in the securities of a single issuer.
The Directors of the Company have voted to approve the proposed
changes and recommend such changes to shareholders. Accordingly, the
Directors of the Company recommend that shareholders vote FOR Proposal 5.
OTHER MATTERS
The Directors of the Company do not know of any other matters
to be brought before the meeting. If any matters not referred to in the
notice of meeting should be presented for consideration and/or action,
the persons named in the proxy intend to take such action in regard to
such matters as in their judgment seems advisable.
SHAREHOLDER PROPOSALS
Neither the National Fund nor the California Fund is required
to hold annual shareholder meetings. Shareholders who would like to
submit Proposals for consideration at future shareholder meetings should
send written Proposals to the Calvert Group Legal Department, 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland, 20814. Proposals
received a reasonable amount of time before any future proxy
solicitations will be considered.
==========================================================================
APPENDIX
==========================================================================
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc. ratings of
state and municipal notes:
Moody's ratings for state and municipal notes and other
short-term obligations are designated Moody's Investment Grade ("MIG").
This distinction is in recognition of the differences between short-term
credit risk and long-term risk.
MIG 1: Notes bearing this designation are of the best quality,
enjoying strong protection from established cash flows of funds for
their servicing or from established and broad-based access to the market
for refinancing, or both.
MIG2: Notes bearing this designation are of high quality, with
margins of protection ample although not so large as in the preceding
group.
MIG3: Notes bearing this designation are of favorable quality,
with all security elements accounted for but lacking the undeniable
strength of the preceding grades. Market access for refinancing, in
particular, is likely to be less well established.
MIG4: Notes bearing this designation are of adequate quality,
carrying specific risk but having protection commonly regarded as
required of an investment security and not distinctly or predominantly
speculative.
Description of Moody's Investors Service Inc./Standard &
Poor's municipal bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge". Interest
payments are protected by a large or by an exceptionally stable margin
and principal is secure. This rating indicates an extremely strong
capacity to pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and
in the majority of instances they differ from AAA issues only in small
degree. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, fluctuation of
protective elements may be of greater amplitude, or there may be other
elements present which make long-term risks appear somewhat larger than
in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be
present which make the bond somewhat more susceptible to the adverse
effects of circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
principal and interest for bonds in this category than for bonds in the
A category.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay
interest and repay principal. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
CALVERT NATIONAL MUNICIPAL INTERMEDIATE FUND
a portfolio of Calvert Municipal Fund, Inc.
PROXY
To be voted at the April 18, 1996 Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
I hereby appoint(s) William M. Tartikoff, Esq. and Clifton S.
Sorrell, Jr. as attorneys-in-fact, with full power of substitution, to
vote all shares of Calvert National Municipal Intermediate Fund (the
"Fund") that I am entitled to vote at the Special Meeting of
Shareholders to be held at the offices of Calvert Group, Ltd., 10th
Floor Conference Room, 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814, on Thursday, April 18, 1996 at 10:00 a.m. and at any
adjournments of the meeting. They are instructed to vote as indicated
on the matter referred to in the Proxy Statement for the meeting,
receipt of which is hereby acknowledged, with discretionary power to
vote on such other business as may properly come before the meeting or
any adjournment thereof. If a returned proxy does not contain a vote
on any given Proposal, the proxy will be voted in favor of the Proposal
for which no vote was specified.
The Board of Directors recommends that you vote FOR the Proposals.
Please vote and sign on the reverse side.
1. To amend the National Fund's fundamental investment restriction
on investing in commodities and futures contracts to allow the
National Fund to engage in futures trading.
___ FOR ___ AGAINST ___ ABSTAIN
2. To eliminate the National Fund's fundamental investment
restriction on options.
___ FOR ___ AGAINST ___ ABSTAIN
3. To eliminate the National Fund's fundamental investment
restriction on short sales and purchases on margin and replace
such restriction with two separate non-fundamental policies
that will allow the National Fund to engage in certain Short
Sales and margin purchases in connection with transactions in
futures and options thereon.
___ FOR ___ AGAINST ___ ABSTAIN
4. To eliminate the National Fund's fundamental investment
restriction regarding the purchase by the Fund of only
investment grade debt securities and replace it with a
non-fundamental restriction to permit the Fund to invest up to
35% of the Fund's net assets in non-investment grade debt
securities.
___ FOR ___ AGAINST ___ ABSTAIN
5. To eliminate the National Fund's fundamental investment
restriction concerning diversification and change the Fund's
classification under the 1940 Act from "diversified" to
"non-diversified" to the Fund to commit a higher percentage of
its assets to investments in the securities of any single
issuer.
___ FOR ___ AGAINST ___ ABSTAIN
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as an executor, administrator,
trustee, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
Date , 1996 ___________
Signature &Title
(if applicable)
Date , 1996 ___________
Signature & Title
(if applicable)
CALVERT CALIFORNIA MUNICIPAL INTERMEDIATE FUND
a portfolio of Calvert Municipal Fund, Inc.
PROXY
To be voted at the April 18, 1996 Special Meeting of Shareholders
THIS PROXY IS SOLICITED ON BEHALF OF
THE BOARD OF DIRECTORS
I hereby appoint(s) William M. Tartikoff, Esq.
and Clifton S. Sorrell, Jr. as attorneys-in-fact, with full power of
substitution, to vote all shares of Calvert National Municipal
Intermediate Fund (the "Fund") that I am entitled to vote at the Special
Meeting of Shareholders to be held at the offices of Calvert Group,
Ltd., 10th Floor Conference Room, 4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland 20814, on Thursday, April 18, 1996 at 10:00 a.m. and
at any adjournments of the meeting. They are instructed to vote as
indicated on the matter referred to in the Proxy Statement for the
meeting, receipt of which is hereby acknowledged, with discretionary
power to vote on such other business as may properly come before the
meeting or any adjournment thereof. If a returned proxy does not
contain a vote on any given Proposal, the proxy will be voted in favor
of the Proposal for which no vote was specified.
The Board of Directors recommends that you vote FOR the Proposals.
Please vote and sign on the reverse side.
1. To amend the California Fund's fundamental investment
restriction on investing in commodities and futures contracts
to allow the California Fund to engage in futures trading.
___ FOR ___ AGAINST ___ ABSTAIN
2. To eliminate the California Fund's fundamental investment
restriction on options.
___ FOR ___ AGAINST ___ ABSTAIN
3. To eliminate the California Fund's fundamental investment
restriction on short sales and purchases on margin and replace
such restriction with two separate non-fundamental policies
that will allow the Fund to engage in certain short sales and
margin purchases in connection with transactions in futures and
options thereon.
___ FOR ___ AGAINST ___ ABSTAIN
4. To eliminate the California Fund's fundamental investment
restriction regarding the purchase by the Fund of only
investment grade debt securities and replace it with a
non-fundamental restriction to permit the Fund to invest up to
35% of the Fund's net assets in non-investment grade debt
securities
___ FOR ___ AGAINST ___ ABSTAIN
PLEASE SIGN, DATE, AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
NOTE: Please sign exactly as your name appears on this Proxy. When
signing in a fiduciary capacity, such as an executor, administrator,
trustee, guardian, etc., please so indicate. Corporate and partnership
proxies should be signed by an authorized person indicating the person's
title.
_________
Date , 1996 Signature & Title
(if applicable)
___________
Date , 1996 Signature & Title
(if applicable)
F:\DML\CGF\PORTFOLI.COP:1/17/96
