SEC Registration Nos. 811-6525 and 33-44968
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 14 XX
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 14 XX
Calvert Municipal Fund, Inc.
(Exact Name of Registrant as Specified in
Charter)
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
(Address of
Principal Executive Offices)
Registrant's Telephone Number: (301) 951-4800
William M. Tartikoff, Esq.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland
20814
(Name and Address of Agent for Service)
It is proposed that this filing will become effective
__ Immediately upon filing XX on April 30, 1997
pursuant to paragraph (b) pursuant to paragraph (b)
__ 60 days after filing __ on (date)
pursuant to paragraph (a) pursuant to paragraph (a)
of Rule 485.
Pursuant to the provisions of Rule 24f-2 under the Investment Company Act
of 1940, an indefinite number of shares of common stock is being registered by
this Registration Statement. On February 26, 1997, Registrant filed the Rule
24f-2 notice for its fiscal year ended December 31, 1996.
<PAGE>
Calvert Municipal Fund, Inc.
Form N-1A Cross Reference Sheet
Item number Prospectus Caption
1. Cover Page
2. Financial Highlights
3. Financial Highlights
Yield and Total Return
4. Investment Objective and Policies
Management of the Fund
5. Management of the Fund
6. Alternative Sales Options
Management of the Fund
Dividends and Taxes
7. How to Buy Shares
Management of the Fund
Net Asset Value
Reduced Sales Charges
When Your Account Will Be Credited
Exchanges
8. Alternative Sales Options
How to Sell Your Shares
9. *
Statement of Additional Information Captions
10. Cover Page
11. Table of Contents
12. General Information
13. Investment Objective
Investment Policies
Investment Restrictions
Portfolio Transactions
14. Directors and Officers
15. Directors and Officers
16. Investment Advisor
Administrative Services and Distribution
Independent Accountants and Custodians
17. Portfolio Transactions
18. General Information
19. Purchases and Redemptions of Shares
Valuation of Shares
20. Tax Matters
21. Administrative Services and Distribution
22. Calculation of Yield
Calculation of Yield and Total Return
23. Financial Statements
* Inapplicable or negative answer
PROSPECTUS
April 30, 1997
CALVERT MUNICIPAL INTERMEDIATE FUNDS:
ARIZONA CALIFORNIA FLORIDA MARYLAND MICHIGAN
NEW YORK PENNSYLVANIA VIRGINIA
CALVERT NATIONAL MUNICIPAL INTERMEDIATE FUND
4550 Montgomery Avenue, Bethesda, Maryland 20814
INTRODUCTION TO THE FUNDS
The Calvert National Municipal Intermediate Fund ("National Municipal")
seeks to earn the highest level of interest income exempt from federal income
taxes as is consistent with prudent investment management, preservation of
capital, and the stated quality and maturity characteristics.
The state-specific Calvert Municipal Intermediate Funds ("State Funds")
seek to earn the highest level of interest income exempt from federal and
specific state income taxes as is consistent with prudent investment management,
preservation of capital, and the stated quality and maturity characteristics.
The National Municipal and the State Funds (collectively, the "Funds" or
"Municipal Funds") each invest in nondiversified portfolios of municipal
obligations, including some with interest that may be subject to the federal
alternative minimum tax. The average dollar-weighted maturity of investments is
between 3 and 10 years. The net asset value per share of each Fund will
fluctuate in response to changes in the value of its investments.
TO OPEN AN ACCOUNT
Call your broker, or complete and return the enclosed Account Application.
Minimum initial investment is $2,000. Shares of each State Fund are being made
available primarily to persons residing in the state for which the Fund is
named. PLEASE CONFIRM THE AVAILABILITY OF A FUND IN YOUR STATE BEFORE SENDING
MONEY.
ABOUT THIS PROSPECTUS
Please read this Prospectus before investing. It is designed to provide you
with information you ought to know before investing and to help you decide if a
Fund's goals match your own. Keep this document for future reference.
A Statement of Additional Information for the Funds (April 30, 1997)
has been filed with the Securities and Exchange Commission and is incorporated
by reference. This free Statement is available by calling: 800-368-2748.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE FEDERAL
OR ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT FEDERALLY INSURED BY THE FDIC, THE FEDERAL
RESERVE BOARD, OR ANY OTHER AGENCY. WHEN INVESTORS OF THE FUND SELL SHARES OF
THE FUND, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY PAID.
<PAGE>
FUND EXPENSES
<TABLE>
<CAPTION>
National Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.34%
Total Fund Operating Expenses<F1> 1.04%
California Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.27%
Total Fund Operating Expenses<F1> 0.97%
<FN>
<F1> Net Fund Operating Expenses after reduction for fees paid indirectly were:
National 1.01%, California .94%
</FN>
</TABLE>
<TABLE>
<CAPTION>
Arizona Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.67%
Total Fund Operating Expenses<F2> 1.37%
Florida Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.25%
Total Fund Operating Expenses<F2> 0.95%
<FN>
<F2> Net Fund Operating Expenses after reduction for fees paid indirectly were:
Arizona 1.00%, Florida .81%
</FN>
</TABLE>
<TABLE>
<CAPTION>
Maryland Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.34%
Total Fund Operating Expenses<F3> 1.04%
Michigan Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.34%
Total Fund Operating Expenses<F3> 1.04%
<FN>
<F3> Net Fund Operating Expenses after reduction for fees paid indirectly were:
Maryland .94%, Michigan .94%
</FN>
</TABLE>
<TABLE>
<CAPTION>
New York Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.46%
Total Fund Operating Expenses<F4> 1.16%
Pennsylvania Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.46%
Total Fund Operating Expenses<F4> 1.16%
<FN>
<F4> Net Fund Operating Expenses after reduction for fees paid indirectly were:
New York .98%, Pennsylvania .93%
</FN>
</TABLE>
<TABLE>
<CAPTION>
Virginia Municipal Intermediate Fund
<S> <C>
A. Shareholder Transaction Costs
Maximum Sales Charge on Purchases
(as a percentage of offering price) 2.75%
Contingent Deferred Sales Charge None
B. Annual Fund Operating Expenses -
Fiscal Year 1996
(as a percentage of average net assets)
Management Fees 0.70%
Rule 12b-1 Service and Distribution Fees 0.00%
Other Expenses 0.33%
Total Fund Operating Expenses<F5> 1.03%
<FN>
<F5> Net Fund Operating Expenses after reduction for fees paid indirectly were:
Virginia .92%
</FN>
</TABLE>
C. Example: You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return; (2) redemption at the end of each period; and (3)
payment of maximum initial sales charge at time of purchase:
<TABLE>
<CAPTION>
Fund 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
National $38 $60 $83 $151
Arizona $40 $68 $97 $181
California $37 $58 $80 $143
Florida $37 $57 $78 $140
Maryland $37 $58 $81 $147
Michigan $38 $59 $82 $149
New York $39 $62 $88 $161
Pennsylvania $39 $62 $87 $159
Virginia $37 $58 $81 $147
</TABLE>
The example, which is hypothetical, should not be considered a
representation of past or future expenses. Actual expenses may be higher or
lower than those shown.
Explanation of Table: The purpose of the table is to assist you in
understanding the various costs and expenses that an investor may bear directly
(shareholder transaction costs) or indirectly (annual fund operating expenses).
A. Shareholder Transaction Costs are charges you pay when you buy or sell
shares of your Fund. See "Reduced Sales Charges" at Exhibit A to see if you
qualify for possible reductions in the sales charge. If you request a wire
redemption of less than $1,000, you will be charged a $5 wire fee.
B. Annual Fund Operating Expenses. Management Fees are paid by the
Funds to Calvert Asset Management Company, Inc. for managing the investments and
business affairs of each Fund and paid to Calvert Administrative Services
Company, Inc. The Funds will incur Other Expenses for maintaining shareholder
records, furnishing shareholder statements and reports, and other services.
Management Fees and Other Expenses have already been reflected in the share
price and are not charged directly to individual shareholder accounts. Please
refer to "Management of the Funds" for further information.
The National Municipal Intermediate Fund commenced operations on
September 30, 1992, and the California Fund commenced operations on May 29,
1992. The Maryland, Michigan, New York and Virginia Funds commenced operation
September 30, 1993. The Arizona, Florida and Pennsylvania Funds commenced
operation December 31, 1993. For the first five years of operation of each Fund,
Rule 12b-1 will be limited to 0.15% and may thereafter be 0.25%. The Advisor may
voluntarily defer fees or assume expenses of the Funds. The following table
shows what Total Fund Operating Expenses would have been, without the voluntary
reimbursement of expenses:
Fund Name Total Expenses
Arizona 1.37%
Florida .95%
Maryland 1.04%
Michigan 1.04%
New York 1.16%
Pennsylvania 1.16%
Virginia 1.03%
The Investment Advisory Agreement provides that the Advisor may later, to
the extent permitted by law, recapture any fees it deferred or expenses it
assumed during the two prior years; provided, however, that Total Annual
Operating Expenses for each Fund shall not exceed 2.00% of average net assets
during any year in which the Advisor elects to exercise the recapture provision.
The above table reflects these agreements.
The Funds' Rule 12b-1 fees include an asset-based sales charge. Thus,
it is possible that long-term shareholders in the Funds may pay more in total
sales charges than the economic equivalent of the maximum front-end sales charge
permitted by rules of the National Association of Securities Dealers, Inc. In
addition to the compensation itemized above (sales charge and Rule 12b-1 service
and distribution fees), certain broker/dealers and/or their salespersons may
receive certain compensation for the sale and distribution of the securities or
for services to the Fund. See the Statement of Additional Information, "Method
of Distribution".
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Funds' financial
history. It expresses the information in terms of a single share outstanding
throughout the period. The table has been audited by Coopers & Lybrand, L.L.P.,
independent accountants, whose report on the period from the Funds' commencement
of operations through December 31, 1996, is included in the Annual Report to
Shareholders for each of the respective periods presented. The table should be
read in conjunction with the financial statements and their related notes. The
Annual Report to Shareholders is incorporated by reference into the Statement of
Additional Information.
<TABLE>
<CAPTION>
National Municipal Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $10.62
Income from investment operations
Net investment income .50
Net realized and unrealized gain (loss)
on investments (.06)
Total from investment operations .44
Distributions from
Net investment income (.50)
Net realized gains --
Total distributions (.50)
Total increase (decrease) in net asset value (.06)
Net asset value, ending $10.56
Total return<F6> 4.32%
Ratio to average net assets
Net investment income 4.83%
Total expenses<F7> 1.04%
Net expenses 1.01%
Expenses reimbursed --
Portfolio turnover 23%
Net assets, ending (in thousands) $45,612
Number of shares outstanding,
ending (in thousands) 4,319
<FN>
<F6>Total return does not reflect deduction of front-end sales charge.
<F7>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
National Municipal Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $9.81 $10.42
Income from investment operations
Net investment income .51 .50
Net realized and unrealized gain (loss)
on investments .80 (.62)
Total from investment operations 1.31 (.12)
Distributions from
Net investment income (.50) (.49)
Net realized gains -- --
Total distributions (.50) (.49)
Total increase (decrease) in net asset value .81 (.61)
Net asset value, ending $10.62 $9.81
Total return<F8> 13.64% (1.18%)
Ratio to average net assets
Net investment income 4.97% 4.88%
Total expenses<F9> .96% --
Net expenses .94% .69%
Expenses reimbursed -- .32%
Portfolio turnover 57% 122%
Net assets, ending (in thousands) $40,146 $36,159
Number of shares outstanding,
ending (in thousands) 3,780 3,686
<FN>
<F8>Total return does not reflect deduction of front-end sales charge.
<F9>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Inception
Year Ended (Sept. 30, 1992)
December 31, through Dec. 31,
National Municipal Shares 1993 1992
<S> <C> <C>
Net asset value, beginning $10.01 $10.00
Income from investment operations
Net investment income .48 .13
Net realized and unrealized gain (loss)
on investments .45 .01
Total from investment operations .93 .14
Distributions from
Net investment income (.48) (.13)
Net realized gains (.04) --
Total distributions (.52) (.13)
Total increase (decrease) in net asset value .41 .01
Net asset value, ending $10.42 $10.01
Total return<F10> 9.47% 5.40%
Ratio to average net assets
Net investment income 5.01% 5.36%(a)
Total expenses<F11> -- --
Net expenses .10% --
Expenses reimbursed .45% 4.34%(a)
Portfolio turnover 162% 12%
Net assets, ending (in thousands) $37,467 $1,542
Number of shares outstanding,
ending (in thousands) 3,596 154
(a) Annualized
<FN>
<F10>Total return does not reflect deduction of front-end sales charge.
<F11>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
California Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $10.51
Income from investment operations
Net investment income .48
Net realized and unrealized gain (loss)
on investments (.07)
Total from investment operations .41
Distributions from
Net investment income (.48)
Net realized gains --
Total distributions (.48)
Total increase (decrease) in net asset value (.07)
Net asset value, ending $10.44
Total return<F12> 4.04%
Ratio to average net assets
Net investment income 4.59%
Total expenses<F13> .97%
Net expenses .94%
Expenses reimbursed --
Portfolio turnover 25%
Net assets, ending (in thousands) $35,693
Number of shares outstanding,
ending (in thousands) 3,419
<FN>
<F12>Total return does not reflect deduction of front-end sales charge.
<F13>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
California Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $9.81 $10.56
Income from investment operations
Net investment income .47 .48
Net realized and unrealized gain (loss)
on investments .69 (.76)
Total from investment operations 1.16 (.28)
Distributions from
Net investment income (.46) (.47)
Net realized gains -- --
Total distributions (.46) (.47)
Total increase (decrease) in net asset value .70 (.75)
Net asset value, ending $10.51 $9.81
Total return<F14> 12.07% (2.57%)
Ratio to average net assets
Net investment income 4.59% 4.67%
Total expenses<F15> .91% --
Net expenses .89% .76%
Expenses reimbursed -- .13%
Portfolio turnover 47% 68%
Net assets, ending (in thousands) $34,424 $34,111
Number of shares outstanding,
ending (in thousands) 3,276 3,476
<FN>
<F14>Total return does not reflect deduction of front-end sales charge.
<F15>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Inception
Year Ended (May 29, 1992)
December 31, through Dec. 31,
California Shares 1993 1992
<S> <C> <C>
Net asset value, beginning $10.24 $10.00
Income from investment operations
Net investment income .53 .29
Net realized and unrealized gain (loss)
on investments .36 .24
Total from investment operations .89 .53
Distributions from
Net investment income (.53) (.29)
Net realized gains (.04) --
Total distributions (.57) (.29)
Total increase (decrease) in net asset value .32 .24
Net asset value, ending $10.56 $10.24
Total return<F16> 8.88% 10.00%
Ratio to average net assets
Net investment income 5.12% 5.24%(a)
Total expenses<F17> -- --
Net expenses .21% --
Expenses reimbursed .12% .38%(a)
Portfolio turnover 21% 3%
Net assets, ending (in thousands) $35,726 $16,046
Number of shares outstanding,
ending (in thousands) 3,383 1,567
(a) Annualized
<FN>
<F16>Total return does not reflect deduction of front-end sales charge.
<F17>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Arizona Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.07
Income from investment operations
Net investment income .19
Net realized and unrealized gain (loss)
on investments (.03)
Total from investment operations .16
Distributions from
Net investment income (.20)
Total increase (decrease) in net asset value (.04)
Net asset value, ending $5.03
Total return<F18> 3.17%
Ratio to average net assets
Net investment income 3.96%
Total expenses<F19> 1.31%
Net expenses 1.00%
Expenses reimbursed .06%
Portfolio turnover 18%
Net assets, ending (in thousands) $2,635
Number of shares outstanding,
ending (in thousands) 524
<FN>
<F18>Total return does not reflect deduction of front-end sales charge.
<F19>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Arizona Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.71 $5.00
Income from investment operations
Net investment income .22 .19
Net realized and unrealized gain (loss)
on investments .36 (.29)
Total from investment operations .58 (.10)
Distributions from
Net investment income (.22) (.19)
Total increase (decrease) in net asset value .36 (.29)
Net asset value, ending $5.07 $4.71
Total return<F20> 12.44% (1.84%)
Ratio to average net assets
Net investment income 4.43% 4.13%
Total expenses<F21> .53% --
Net expenses .41% .38%
Expenses reimbursed .54% .97%
Portfolio turnover 10% 22%
Net assets, ending (in thousands) $2,045 $2,004
Number of shares outstanding,
ending (in thousands) 403 426
<FN>
<F20>Total return does not reflect deduction of front-end sales charge.
<F21>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.06
Income from investment operations
Net investment income .21
Net realized and unrealized gain (loss)
on investments (.04)
Total from investment operations .17
Distributions from
Net investment income (.21)
Total increase (decrease) in net asset value (.04)
Net asset value, ending $5.02
Total return<F22> 3.53%
Ratio to average net assets
Net investment income 4.28%
Total expenses<F23> .94%
Net expenses .81%
Expenses reimbursed .01%
Portfolio turnover 19%
Net assets, ending (in thousands) $5,516
Number of shares outstanding,
ending (in thousands) 1,098
<FN>
<F22>Total return does not reflect deduction of front-end sales charge.
<F23>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Florida Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.67 $5.00
Income from investment operations
Net investment income .24 .21
Net realized and unrealized gain (loss)
on investments .38 (.33)
Total from investment operations .62 (.12)
Distributions from
Net investment income (.23) (.21)
Total increase (decrease) in net asset value .39 (.33)
Net asset value, ending $5.06 $4.67
Total return<F24> 13.48% (2.44%)
Ratio to average net assets
Net investment income 4.73% 4.64%
Total expenses<F25> .43% --
Net expenses .35% .21%
Expenses reimbursed .43% .80%
Portfolio turnover 44% 93%
Net assets, ending (in thousands) $3,892 $3,387
Number of shares outstanding,
ending (in thousands) 769 725
<FN>
<F24>Total return does not reflect deduction of front-end sales charge.
<F25>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maryland Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.06
Income from investment operations
Net investment income .23
Net realized and unrealized gain (loss)
on investments (.04)
Total from investment operations .19
Distributions from
Net investment income (.22)
Total increase (decrease) in net asset value (.03)
Net asset value, ending $5.03
Total return<F26> 3.96%
Ratio to average net assets
Net investment income 4.59%
Total expenses<F27> 1.00%
Net expenses .94%
Expenses reimbursed .04%
Portfolio turnover 8%
Net assets, ending (in thousands) $12,023
Number of shares outstanding,
ending (in thousands) 2,338
<FN>
<F26>Total return does not reflect deduction of front-end sales charge.
<F27>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Maryland Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.67 $5.05
Income from investment operations
Net investment income .24 .24
Net realized and unrealized gain (loss)
on investments .39 (.39)
Total from investment operations .63 (.15)
Distributions from
Net investment income (.24) (.23)
Total increase (decrease) in net asset value .39 (.38)
Net asset value, ending $5.06 $4.67
Total return<F28> 13.66% (2.94%)
Ratio to average net assets
Net investment income 4.87% 5.01%
Total expenses<F29> .51% --
Net expenses .48% .17%
Expenses reimbursed .43% .86%
Portfolio turnover 11% 77%
Net assets, ending (in thousands) $9,411 $7,429
Number of shares outstanding,
ending (in thousands) 1,860 1,589
<FN>
<F28>Total return does not reflect deduction of front-end sales charge.
<F29>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Inception
(October 1, 1993)
Maryland Shares through Dec. 31, 1993
<S> <C>
Net asset value, beginning $5.00
Income from investment operations
Net investment income .04
Net realized and unrealized gain (loss)
on investments .05
Total from investment operations .09
Distributions from
Net investment income (.04)
Total increase (decrease) in net asset value .05
Net asset value, ending $5.05
Total return<F30> 7.46%
Ratio to average net assets
Net investment income 4.42%(a)
Total expenses<F31> --
Net expenses --
Expenses reimbursed .80%(a)
Portfolio turnover 14%
Net assets, ending (in thousands) $5,401
Number of shares outstanding,
ending (in thousands) 1,070
(a) Annualized
<FN>
<F30>Total return does not reflect deduction of front-end sales charge.
<F31>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Michigan Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.12
Income from investment operations
Net investment income .22
Net realized and unrealized gain (loss)
on investments (.01)
Total from investment operations .21
Distributions from
Net investment income (.23)
Total increase (decrease) in net asset value (.02)
Net asset value, ending $5.10
Total return<F32> 4.19%
Ratio to average net assets
Net investment income 4.37%
Total expenses<F33> 1.02%
Net expenses .93%
Expenses reimbursed .02%
Portfolio turnover 18%
Net assets, ending (in thousands) $5,804
Number of shares outstanding,
ending (in thousands) 1,137
<FN>
<F32>Total return does not reflect deduction of front-end sales charge.
<F33>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Michigan Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.74 $5.09
Income from investment operations
Net investment income .24 .23
Net realized and unrealized gain (loss)
on investments .37 (.35)
Total from investment operations .61 (.12)
Distributions from
Net investment income (.23) (.23)
Total increase (decrease) in net asset value .38 (.35)
Net asset value, ending $5.12 $4.74
Total return<F34> 13.08% (2.42%)
Ratio to average net assets
Net investment income 4.76% 4.76%
Total expenses<F35> .52% --
Net expenses .48% .18%
Expenses reimbursed .39% .84%
Portfolio turnover 22% 65%
Net assets, ending (in thousands) $4,556 $5,255
Number of shares outstanding,
ending (in thousands) 890 1,109
<FN>
<F34>Total return does not reflect deduction of front-end sales charge.
<F35>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Inception
(October 1, 1993)
Michigan Shares through Dec. 31, 1993
<S> <C>
Net asset value, beginning $5.00
Income from investment operations
Net investment income .04
Net realized and unrealized gain (loss)
on investments .09
Total from investment operations .13
Distributions from
Net investment income (.04)
Total increase (decrease) in net asset value .09
Net asset value, ending $5.09
Total return<F36> 10.28%
Ratio to average net assets
Net investment income 4.27%(a)
Total expenses<F37> --
Net expenses --
Expenses reimbursed .89%(a)
Portfolio turnover --
Net assets, ending (in thousands) $4,287
Number of shares outstanding,
ending (in thousands) 842
(a) Annualized
<FN>
<F36>Total return does not reflect deduction of front-end sales charge.
<F37>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.12
Income from investment operations
Net investment income .21
Net realized and unrealized gain (loss)
on investments (.02)
Total from investment operations .19
Distributions from
Net investment income (.22)
Net realized gain --
Total distributions (.22)
Total increase (decrease) in net asset value (.03)
Net asset value, ending $5.09
Total return<F38> 3.79%
Ratio to average net assets
Net investment income 4.20%
Total expenses<F39> 1.13%
Net expenses .98%
Expenses reimbursed .03%
Portfolio turnover 19%
Net assets, ending (in thousands) $6,218
Number of shares outstanding,
ending (in thousands) 1,222
<FN>
<F38>Total return does not reflect deduction of front-end sales charge.
<F39>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
New York Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.71 $5.05
Income from investment operations
Net investment income .22 .23
Net realized and unrealized gain (loss)
on investments .41 (.34)
Total from investment operations .63 (.11)
Distributions from
Net investment income (.22) (.23)
Total increase (decrease) in net asset value .41 (.34)
Net asset value, ending $5.12 $4.71
Total return<F40> 13.72% (2.26%)
Ratio to average net assets
Net investment income 4.47% 4.77%
Total expenses<F41> .58% --
Net expenses .50% .18%
Expenses reimbursed .49% 1.13%
Portfolio turnover 13% 56%
Net assets, ending (in thousands) $3,573 $2,648
Number of shares outstanding,
ending (in thousands) 698 562
<FN>
<F40>Total return does not reflect deduction of front-end sales charge.
<F41>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Inception
(October 1, 1993)
New York Shares through Dec. 31, 1993
<S> <C>
Net asset value, beginning $5.00
Income from investment operations
Net investment income .04
Net realized and unrealized gain (loss)
on investments .05
Total from investment operations .09
Distributions from
Net investment income (.04)
Total increase (decrease) in net asset value .05
Net asset value, ending $5.05
Total return<F42> 7.22%
Ratio to average net assets
Net investment income 3.81%(a)
Total expenses<F43> --
Net expenses --
Expenses reimbursed 2.00%(a)
Portfolio turnover --
Net assets, ending (in thousands) $2,236
Number of shares outstanding,
ending (in thousands) 433
(a) Annualized
<FN>
<F42>Total return does not reflect deduction of front-end sales charge.
<F43>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.10
Income from investment operations
Net investment income .21
Net realized and unrealized gain (loss)
on investments (.02)
Total from investment operations .19
Distributions from
Net investment income (.21)
Total increase (decrease) in net asset value (.02)
Net asset value, ending $5.08
Total return<F44> 3.92%
Ratio to average net assets
Net investment income 4.45%
Total expenses<F45> 1.11%
Net expenses .93%
Expenses reimbursed .05%
Portfolio turnover 9%
Net assets, ending (in thousands) $4,486
Number of shares outstanding,
ending (in thousands) 883
<FN>
<F44>Total return does not reflect deduction of front-end sales charge.
<F45>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Pennsylvania Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.71 $5.00
Income from investment operations
Net investment income .25 .22
Net realized and unrealized gain (loss)
on investments .37 (.29)
Total from investment operations .62 (.07)
Distributions from
Net investment income (.23) (.22)
Total increase (decrease) in net asset value .39 (.29)
Net asset value, ending $5.10 $4.71
Total return<F46> 13.51% (1.29%)
Ratio to average net assets
Net investment income 5.10% 4.94%
Total expenses<F47> .49% --
Net expenses .41% .26%
Expenses reimbursed .54% .94%
Portfolio turnover 17% 96%
Net assets, ending (in thousands) $2,522 $1,872
Number of shares outstanding,
ending (in thousands) 495 398
<FN>
<F46>Total return does not reflect deduction of front-end sales charge.
<F47>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Virginia Shares
Year Ended December 31, 1996
<S> <C>
Net asset value, beginning $5.13
Income from investment operations
Net investment income .22
Net realized and unrealized gain (loss)
on investments (.03)
Total from investment operations .19
Distributions from
Net investment income (.22)
Total increase (decrease) in net asset value (.03)
Net asset value, ending $5.10
Total return<F48> 3.82%
Ratio to average net assets
Net investment income 4.35%
Total expenses<F49> 1.00%
Net expenses .92%
Expenses reimbursed .03%
Portfolio turnover 4%
Net assets, ending (in thousands) $12,618
Number of shares outstanding,
ending (in thousands) 2,475
<FN>
<F48>Total return does not reflect deduction of front-end sales charge.
<F49>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Virginia Shares
Year Ended December 31, 1995 1994
<S> <C> <C>
Net asset value, beginning $4.74 $5.06
Income from investment operations
Net investment income .24 .23
Net realized and unrealized gain (loss)
on investments .39 (.32)
Total from investment operations .63 (.09)
Distributions from
Net investment income (.24) (.23)
Total increase (decrease) in net asset value .39 (.32)
Net asset value, ending $5.13 $4.74
Total return<F50> 13.54% (2.04%)
Ratio to average net assets
Net investment income 4.86% 4.87%
Total expenses<F51> .54% --
Net expenses .51% .19%
Expenses reimbursed .38% .86%
Portfolio turnover 11% 65%
Net assets, ending (in thousands) $7,295 $5,866
Number of shares outstanding,
ending (in thousands) 1,423 1,239
<FN>
<F50>Total return does not reflect deduction of front-end sales charge.
<F51>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
From Inception
(October 1, 1993)
Virginia Shares through Dec. 31, 1993
<S> <C>
Net asset value, beginning $5.00
Income from investment operations
Net investment income .05
Net realized and unrealized gain (loss)
on investments .06
Total from investment operations .11
Distributions from
Net investment income (.05)
Total increase (decrease) in net asset value .06
Net asset value, ending $5.06
Total return<F52> 8.65%
Ratio to average net assets
Net investment income 4.81%(a)
Total expenses<F53> --
Net expenses --
Expenses reimbursed 1.54%(a)
Portfolio turnover 28%
Net assets, ending (in thousands) $2,720
Number of shares outstanding,
ending (in thousands) 537
(a) Annualized
<FN>
<F52>Total return does not reflect deduction of front-end sales charge.
<F53>Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the ratio of
net expenses.
</FN>
</TABLE>
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
Investment Objectives
National Municipal seeks to earn the highest level of interest income
exempt from federal income taxes as is consistent with prudent investment
management, preservation of capital, and the quality and maturity objectives of
the Fund.
National Municipal will invest at least 65% of its total assets in
municipal obligations.
National Municipal is a nondiversified (effective upon shareholder
approval) mutual fund that invests primarily in municipal obligations with
interest that, for most investors, is exempt from federal income tax. Municipal
obligations in which the Series may invest include, but are not limited to,
general obligation bonds and notes of state and local issuers, revenue bonds of
various transportation, housing, utilities (e.g., water and sewer), hospital and
other state and local government authorities, tax and revenue anticipation notes
and bond anticipation notes, municipal leases, and certificates of participation
therein, and private activity bonds. See further description below and in the
Statement of Additional Information. The municipal obligations are fixed and
variable rate. Fixed rate investments are limited to obligations normally having
remaining maturities of 12 years or less; variable rate investments may have
longer maturities. The average dollar-weighted maturity will be between 3 and 10
years. Because the Fund may invest in private activity bonds, a portion of its
dividends may be subject to the federal alternative minimum tax. See "Dividends
and Taxes."
The State Funds seek to earn the highest level of interest income exempt
from federal and specific state income taxes as is consistent with prudent
investment management, preservation of capital, and the quality and maturity
objectives of each Fund.
The State Funds invest in state-specific municipal obligations.
Each State Fund invests primarily in a nondiversified portfolio of a
specific state's municipal obligations with interest that, for most investors,
is exempt from federal and that state's income tax. Municipal obligations in
which the Funds invest are fixed and variable rate obligations. The Advisor will
maintain the average dollar-weighted maturity between 3 and 10 years.
Each State Fund invests at least 65% of its assets in debt obligations
issued by or on behalf of the state for which the Fund is named.
Under normal market conditions, each State Fund will attempt to invest at
least 65% of its total assets in municipal obligations with interest that is
exempt from federal and specific state income tax, including those issued by or
on behalf of the state for which the Fund is named and its political
subdivisions. Each State Fund will also attempt to invest its remaining assets
in these obligations, but may invest the remaining assets in municipal
obligations of other states, territories and possessions of the United States,
the District of Columbia, and their respective authorities, agencies,
instrumentalities and political subdivisions. Dividends you receive from a Fund
that are derived from interest on tax-exempt obligations of other governmental
issuers will be exempt from federal income tax, but will be subject to state
income taxes. Because the State Funds may invest in private activity bonds, a
portion of the Fund's dividends may be subject to the federal alternative
minimum tax. See "Dividends and Taxes."
Credit Quality
As an operating policy, each Municipal Fund will invest at least 65% of
its total assets in investment-grade municipal obligations. Investment-grade
obligations are those which, at the date of investment, are rated within the
four highest grades established by Moody's Investors Services, Inc. (Aaa, Aa, A,
or Baa) or by Standard and Poor's Corporation (AAA, AA, A, or BBB). Securities
that are not rated may be purchased by the Funds as part of the 65% total if the
Advisor determines that they are of quality comparable to investment-grade
securities. Bonds rated BBB or Baa, while still considered investment grade,
have certain speculative characteristics and may be more subject to changes in
economic conditions.
The remaining 35% of each Municipal Fund's total may consist of
noninvestment-grade municipal obligations (rated below Baa or BBB), or unrated
obligations that the Advisor has determined are not investment grade. With
noninvestment-grade securities there is a greater possibility that an adverse
change in the financial condition of the issuer may affect the issuer's ability
to pay principal and interest. There is also a greater risk, with
noninvestment-grade securities, of price declines due to changes in the issuer's
creditworthiness. Because the market for lower-rated securities may be less
active ("thinner") than for higher-rated securities, market prices may be more
volatile and liquidity in the resale market may be limited.
The credit quality of municipal obligations is determined by reference to a
commercial credit rating service, such as Moody's Investors Service, Inc. or
Standard & Poor's Corporation. Please refer to the Appendix in the Statement of
Additional Information for a description of the ratings used by these rating
services. The Funds' Advisor determines the credit quality of unrated
instruments under the supervision of the Funds' Board of Directors/Trustees. See
Management of the Funds. There is no limitation on the percentage of assets that
may be invested in unrated obligations, which may be less liquid than rated
obligations of comparable quality.
Determinations as to credit quality are made at the time of investment. If
a change in credit quality occurs, the Advisor, under the supervision of the
Fund's Board of Directors, will consider whether it is in the best interest of
the Funds' shareholders to hold or to dispose of the obligation.
Variable and Floating Rate Obligations
The Funds may invest in variable and floating rate obligations. Variable
rate obligations have a yield that adjusts periodically based on changes in the
level of prevailing interest rates. Floating rate obligations have an interest
rate tied to a known lending rate, such as the prime rate, and are automatically
adjusted when the known rate changes. These obligations lessen the capital
fluctuations usually inherent in fixed income investments, which diminishes the
risk of capital depreciation of portfolio investments and of the Funds' shares.
However, this also means that if interest rates decline, a Fund's yield will
decline, causing each Fund and its shareholders to forego the opportunity for
capital appreciation of the portfolio investments.
Demand Notes
Each Fund may invest in floating rate and variable rate demand notes.
Demand notes provide that the holder may demand payment of the note at its par
value plus accrued interest by giving notice to the issuer. To ensure the
ability of the issuer to make payment upon such demand, such notes are often
supported by an unconditional bank letter of credit. Notes with a demand feature
of more than seven days are considered illiquid and are subject to purchase
restrictions. See "Nonfundamental Investment Restrictions" in the Statement of
Additional Information.
Nondiversified
There may be risks associated with each Fund being nondiversified.
Specifically, since a relatively high percentage of the assets of each Fund may
be invested in the obligations of a limited number of issuers, the value of the
shares of each Fund may be more susceptible to any single economic, political or
regulatory event than the shares of a diversified fund would be.
Interest-Rate Risk
All fixed income instruments are subject to interest-rate risk; that is, if
the market interest rates rise, the current principal value of a bond will
decline. In general, the longer the maturity of the bond, the greater the
decline in value. Because the Funds' respective average dollar-weighted maturity
is between 3 and 10 years, the investments would be expected to be more affected
than by a rise in market interest rates than a short-term money market fund, but
less adversely affected by a rise in market interest rates than those of a fund
which invests in longer-term bonds.
Obligations with Puts Attached
Each Fund has authority to purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase, when it can acquire at the same time the right to sell the
securities back to the seller at an agreed on price at any time during a stated
period or on a certain date. Such a right is generally denoted as a "put." Puts
may be either conditional or unconditional. Unconditional puts are readily
exercisable in the event of a default in payment of principal or interest on the
underlying securities.
Municipal Leases
Each Fund may invest in municipal leases. A municipal lease is an
obligation of a government or governmental authority, not subject to voter
approval, used to finance capital projects or equipment acquisitions and payable
through periodic rental payments. There are additional risks inherent in
investing in this type of municipal security. Unlike municipal notes and bonds,
where a municipality is obligated by law to make interest and principal payments
when due, funding for lease payments needs to be appropriated each fiscal year
in the budget. It is possible that a municipality will not appropriate funds for
lease payments. The Advisor considers risk of cancellation in its investment
analysis. The Funds may purchase unrated municipal leases. The Advisor, under
supervision of the Boards of Directors/Trustees, is responsible for determining
the credit quality of such leases on an ongoing basis. The Funds will invest
only in municipal leases that meet their credit quality restrictions. Certain
municipal leases may be considered illiquid and subject to the Funds' limits on
illiquid investments. The Boards of Directors/Trustees have established
guidelines for determining whether a lease is liquid. See the Statement of
Additional Information for the factors considered by the Board in determining
liquidity and valuation of leases.
When-Issued Purchases
New issues of municipal obligations are offered on a when-issued basis;
that is, delivery and payment for the securities normally take place 15 to 45
days after the date of the transaction. The payment obligation and the yield
that will be received on the securities are each fixed at the time the buyer
enters into the commitment. The Funds will only make commitments to purchase
such securities with the intention of actually acquiring the securities, but may
sell these securities before the settlement date if it is deemed advisable as a
matter of investment strategy.
Temporary Investments
For liquidity purposes or pending the investment of the proceeds of the
sale of its shares, a Fund may invest in and derive up to 35% (20% for National
Municipal and California) of its income from taxable short-term money market
type investments. Interest earned from such taxable investments will be taxable
to you as ordinary income unless you are otherwise exempt from taxation. Such
investments will be of investment grade, or, if unrated, determined to be of
equivalent credit quality by the Advisor.
Financial Futures, Options, and Other Investment Techniques
Each Municipal Fund can use various techniques to increase or decrease its
exposure to changing security prices, interest rates, or other factors that
affect security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts and leveraged notes,
entering into swap agreements, and purchasing indexed securities. The Funds can
use these practices either as a substitution for or as protection against an
adverse move in the Fund's portfolio to adjust the risk and return
characteristics of the Fund's portfolio. If the Advisor judges market conditions
incorrectly or employs a strategy that does not correlate well with the 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. Any instruments determined to be illiquid are
subject to the Fund's 15% restriction on illiquid securities. See the Statement
of Additional Information for more detail about these strategies.
Under certain circumstances, the Municipal Funds may purchase and sell
certain financial futures contracts and certain options on futures contracts to
hedge investments in municipal securities. A financial futures contract
obligates the seller of a contract to deliver -- and the purchaser of a contract
to take delivery of -- the type of financial instrument covered by the contract.
In the case of index-based futures contracts, the obligation is in the form of a
cash settlement at a specific time for a specific price.
The Funds may only engage in futures transactions for the purpose of
hedging their investments in municipal securities against declines in value and
to hedge against increases in the cost of securities the Funds intend to
purchase. A sale of financial futures contracts may provide a hedge against a
decline in the value of portfolio securities because such depreciation may be
offset, in whole or in part, by an increase in the value of the position in the
futures contracts. Similarly, a purchase of financial futures contracts may
provide a hedge against an increase in the cost of securities intended to be
purchased, because such appreciation may be offset, in whole or in part, by an
increase in the value of the position in the futures contracts.
Types of Futures Contracts Purchased
The Advisor intends to deal, on behalf of the Funds, in futures contracts
based on The Bond Buyer Municipal Bond Index, a price-weighted measure of the
market value of 40 large, recently-issued tax-exempt bonds, and to engage in
transactions in exchange-listed futures contracts on U.S. Treasury securities.
The Funds may also engage in transactions in other futures contracts, such as
futures contracts on other municipal bond indices that become available, if the
Advisor believes such contracts would be appropriate for hedging the Funds'
investments in municipal securities.
When a Fund purchases a futures contract, it will maintain an amount of
cash, cash equivalents (for example, commercial paper and daily tender
adjustable notes) or short-term high grade fixed income securities in a
segregated account with the Fund's custodian, so that the segregated amount plus
the amount of initial and variation margin held in the account of its broker
equals the market value of the futures contract, thereby ensuring that the use
of such futures contract is unleveraged. It is not anticipated that transactions
in futures will have the effect of increasing portfolio turnover.
Closing out a Futures Position -- Risks
A Fund may close out its position in a futures contract or an option on a
futures contract only by entering into an offsetting transaction on the exchange
on which the position was established and only if there is a liquid secondary
market for the futures contract. If it is not possible to close a futures
position entered into by the Fund, the Fund could be required to make continuing
daily cash payments of variation margin in the event of adverse price movements.
In such situations, if the Fund has insufficient cash, it may have to sell
portfolio securities to meet daily margin requirements at a time when it would
be disadvantageous to do so. The inability to close futures or options positions
could have an adverse effect on the Fund's ability to hedge effectively. There
is also risk of loss by the Fund of margin deposits in the event of bankruptcy
of a broker with whom the Fund has an open position in a futures contract. The
success of a hedging strategy depends on the Advisor's ability to predict the
direction of interest rates and other economic factors. The correlation is
imperfect between movements in the prices of futures or options contracts, and
the movements of prices of the securities which are subject to the hedge. If a
Fund used a futures or options contract to hedge against a decline in the
market, and the market later advances (or vice-versa), the Fund may suffer a
greater loss than if it had not hedged.
Please refer to the Statement of Additional Information for further
information on futures contracts.
Special considerations regarding single-state municipal obligations
There is risk inherent in investing primarily in the obligations of any one
state, since economic and political changes in the state may affect those
obligations. Since each State Fund invests primarily in municipal obligations of
individual states and is thereby limited in its alternative investment choices,
the performance of a State Fund may be affected by local economic conditions,
generally and the fiscal/budgetary condition of the State and other
municipalities in which a State Fund may invest. With respect to any state, you
should be aware that certain proposed state or local constitutional amendments,
legislative measures, executive orders, administrative regulations or voter
initiatives, in addition to local economic conditions, could result in adverse
consequences affecting the ability of the state or its municipalities to meet
their obligations in a timely manner, which, in turn, could affect a State
Fund's performance.
Other Policies
Each Fund may temporarily borrow money from banks to meet redemption
requests, but such borrowing may not exceed 10% of the value of a Fund's total
assets. The Funds have adopted certain fundamental investment restrictions which
are discussed in detail in the Statement of Additional Information.
YIELD AND TOTAL RETURN
Yield refers to income generated by an investment over a period of time.
Yield measures the current investment performance,
which is the rate of income on portfolio investments divided by the share price.
To determine yield, (1) net investment income is computed by adding all
investment income earned by a Fund over a 30-day period and subtracting
expenses, (2) dividing by the average number of outstanding shares during the
period, and (3) annualizing the result based on the maximum offering price per
share on the last day of the period. Yields are calculated separately for each
series according to accounting methods that are standardized for all stock and
bond funds.
Taxable Equivalent Yield
A Fund may advertise its "taxable equivalent yield."
The taxable equivalent yield is the yield that you would be required to obtain
from taxable investments to equal the yield of the Fund, all or a portion of
which may be exempt from federal income taxes. The federal taxable equivalent
yield is computed by taking the portion of the Fund's yield exempt from regular
federal income tax and multiplying the exempt yield by a factor based on a given
income tax rate, then adding the portion of the yield that is not exempt from
such income tax. The double (combined state and federal) taxable equivalent
yield is computed by taking the portion of the Fund's yield exempt from regular
federal and state income tax and multiplying the exempt yield by a factor based
on a given income tax rate, then adding the portion of the yield that is not
exempt from such income tax. The factor that is used to calculate the taxable
equivalent yield is the reciprocal of the difference between one and the
applicable income tax rate, which will be stated in the advertisement.
A Fund may advertise its total return. Total return is
based on historical results and is not intended to indicate future performance.
Total return includes not only the effect of income dividends but also
any change in net asset value, or principal amount, during the stated
period. Total return shows overall change in value, including changes in
share price and assuming reinvestment of all dividends and capital gain
distributions. Cumulative total return reflects performance over a stated
period of time. Average annual total return reflects the hypothetical
annual compounded return that would have produced the same cumulative total
return if performance had been constant over the entire period. Because
average annual returns tend to smooth out variations in returns, you should
recognize that they are not the same as actual year-by-year results. Both
types of total returns usually will include the effect of paying a
front-end sales charge. Of course, total returns will be higher if sales
charges are not taken into account. Quotations of "return without maximum
load" do not reflect deduction of the sales charge. You should consider
these figures only if you qualify for a reduced sales charge, or for
purposes of comparison with comparable figures which also do not reflect
sales charges, such as mutual fund averages compiled by Lipper Analytical
Services, Inc. Further information about performance is contained in the
Annual Report to Shareholders, which may be obtained without charge.
MANAGEMENT OF THE FUNDS
The Boards of Directors/Trustees supervise the activities and review
contracts with companies that provide the Funds with services.
The Arizona, California, Maryland, Michigan, National, New York,
Pennsylvania and Virginia Municipal Intermediate Funds are series of Calvert
Municipal Fund, Inc., an open-end management investment company incorporated in
Maryland. The Florida Municipal Intermediate Fund is a series of First Variable
Rate Fund for Government Income, an open-end management company organized as a
Massachusetts Business Trust.
The Funds are not required to hold annual shareholder meetings, but
special meetings may be called for certain purposes such as electing or removing
Directors/Trustees, changing fundamental policies, or approving an investment
advisory contract. As a shareholder, you receive one vote for each share of the
Fund you own.
Calvert Group is one of the largest investment management firms in the
Washington, D.C. area.
Calvert Group, Ltd., parent of the Funds' Advisor, transfer agent, and
distributor, is a subsidiary of Acacia Mutual Life Insurance Company of
Washington, D.C., and is one of the largest investment management firms in the
Washington, D.C. area. Calvert Group, Ltd. and its subsidiaries are located at
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. As of December
31, 1996, Calvert Group managed and administered assets in excess of $5.2
billion in more than 220,000 shareholder and depositor accounts.
Portfolio Managers
The Funds are managed by Reno J. Martini, Senior Vice President and
Chief Investment Officer of Calvert Asset Management Company, Inc. ("CAMCO");
and Daniel K. Hayes, Vice President, Investments (CAMCO). Mr. Martini has served
as the Manager of the Portfolio Investments Department since 1985, and as
portfolio manager for CAMCO since 1982. Mr. Hayes serves as head of Portfolio
Research and has been a portfolio manager for CAMCO since 1984.
Calvert Asset Management serves as Advisor to the Funds.
Calvert Asset Management Company, Inc. is each Fund's Advisor, and is
entitled to an annual fee, payable monthly, of 0.60% of each Fund's average net
assets. The Advisor may in its discretion and on a voluntary basis only, waive
or defer its fees or assume each Fund's operating expenses. During 1996,
National and California each paid investment advisory fees of 0.60%. The
Investment Advisory Agreement provides that the Advisor may later, to the extent
permitted by law, recapture any fees it waived, or expenses it assumed under
this limitation. The Advisor provides each Fund with investment supervision and
management, administrative services and office space; furnishes executive and
other personnel to the Funds; and pays the salaries and fees of all
Directors/Trustees who are affiliated persons of the Advisor. The Advisor may
also assume and pay certain advertising and promotional expenses of the Funds
and reserves the right to compensate broker-dealers in return for their
promotional or administrative services.
Calvert Administrative Services Company provides administrative services
for the Funds.
Calvert Administrative Services Company ("CASC"), an affiliate of the
Advisor, provides certain administrative services for the Funds, including the
preparation of regulatory filings and shareholder reports, the daily
determination of each Fund's net asset value per share and dividends, and the
maintenance of its portfolio and general accounting records. For providing such
services, CASC received an annual fee, payable monthly, of 0.10% of each Fund's
average net assets per year.
Calvert Distributors, Inc. serves as underwriter to market shares of the Funds.
Calvert Distributors, Inc. ("CDI") is the Funds' principal underwriter and
distributor, and is an affiliate of the Advisor. Under the terms of its
underwriting agreements for the Funds, CDI markets and distributes each Fund's
shares and is responsible for preparing advertising and sales literature, and
printing and mailing prospectuses to prospective investors.
The transfer agent keeps your account records.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, is the
transfer, dividend disbursing and shareholder servicing agent for the Funds.
SHAREHOLDER GUIDE
Opening An Account
You can buy shares in several ways which are described here and in the
chart below.
An account application accompanies this prospectus. A completed and
signed application is required for each new account you open, regardless of the
method you choose for making your initial investment. Additional forms may be
required from corporations, associations, and certain fiduciaries. If you have
any questions or need extra applications, call your broker, or Calvert Group at
800-368-2748.
Sales Charge
Fund shares are offered at net asset value plus a front-end sales
charge as follows:
<TABLE>
<CAPTION>
Amount of As a % of As a % of Allowed to Dealers
Investment offering net amount as a % of offering
price invested price
<S> <C> <C> <C>
Less than $50,000 2.75% 2.83% 2.25%
$50,000 but less
than $100,000 2.25% 2.30% 1.75%
$100,000 but less
than $250,000 1.75% 1.78% 1.25%
$250,000 but less
than $500,000 1.25% 1.27% 0.95%
$500,000 but less
than $1,000,000 1.00% 1.01% 0.80%
$1,000,000 and over 0.00% 0.00% 0.10%*
</TABLE>
*Payments will be made less redemptions. For either choice, quarterly
trailing commissions will begin in the thirteenth month. CDI reserves the right
to recoup any portion of the amount paid to the dealer if the investor redeems
some or all of the shares from the Funds within twelve months of the time of
purchase.
Sales charges on Fund shares may be reduced or eliminated in certain
cases. See Exhibit A to this prospectus.
The sales charge is paid to CDI, which in turn normally reallows a portion
to your broker-dealer. Upon written notice to dealers with whom it has dealer
agreements, CDI may reallow up to the full applicable sales charge. Dealers to
whom 90% or more of the entire sales charge is reallowed may be deemed to be
underwriters under the Securities Act of 1933.
In addition to any sales charge reallowance or finder's fee, your
broker-dealer, or other financial service firm through which your account is
held, currently will be paid periodic service fees at an annual rate of up to
0.15% of the average daily net asset value of Fund shares held in accounts
maintained by that firm.
Distribution Plan
Each Fund has adopted a Distribution Plan, which provides for payments,
which are limited to an annual rate of 0.15% for each Fund's first five years of
operation (and 0.25% thereafter) of the average daily net asset value of Fund
shares, to pay expenses associated with the distribution and servicing of Fund
shares. Amounts paid by the Funds to CDI under the Distribution Plan are used to
pay to dealers and others, including CDI salespersons who service accounts,
service fees, and to pay CDI for its marketing and distribution expenses,
including, but not limited to, preparation of advertising and sales literature
and the printing and mailing of prospectuses to prospective investors. During
the 1996 fiscal period, the Funds paid no Distribution Plan expenses.
Arrangements with Broker-Dealers and Others
CDI may also pay additional concessions, including non-cash promotional
incentives, such as merchandise or trips, to dealers employing registered
representatives who have sold or are expected to sell a minimum dollar amount of
shares of the Funds and/or shares of other Funds underwritten by CDI. CDI may
make expense reimbursements for special training of a dealer's registered
representatives, advertising or equipment, or to defray the expenses of sales
contests. Eligible marketing and distribution expenses may be paid pursuant to
the Funds' Rule 12b-1 Distribution Plans.
HOW TO BUY SHARES
Method New Accounts Additional Investments
By Mail $2,000 minimum $250 minimum
Please make your check Please make your check
payable to the appropriate payable to the appropriate
Fund and mail it with your Fund and mail it with your
application to: investment slip to:
Calvert Group Calvert Group
P.O. Box 419544 P.O. Box 419739
Kansas City, MO Kansas City, MO
64141-6544 64141-6739
By Registered, Certified, or Overnight Mail:
Calvert Group Calvert Group
c/o NFDS, 6th Floor c/o NFDS, 6th Floor
1004 Baltimore 1004 Baltimore
Kansas City, MO Kansas City, MO
64105-1807 64105-1807
Through Your Broker $2,000 minimum $250 minimum
At the Calvert Visit the Calvert Branch Office to make investments by check.
Branch Office See back cover page for the address.
FOR ALL OPTIONS BELOW, PLEASE CALL YOUR BROKER, OR CALVERT GROUP AT 800-368-2745
By Exchange $2,000 minimum $250 minimum
(From your account in another Calvert Group Fund)
When opening an account by exchange, your new account must be established
with the same name(s), address and taxpayer identification number as your
existing Calvert account.
By Bank Wire $2,000 minimum $250 minimum
By Calvert Money` Not Available for $50 minimum
Controller* Initial Investment
*Please allow sufficient time for Calvert Group to process your initial
request for this service, normally 10 business days. The maximum transaction
amount is $300,000, and your purchase request must be received by 4:00 p.m.
Eastern time.
NET ASSET VALUE
How share price is determined.
Net asset value ("NAV") refers to the worth of one share. NAV is
computed by adding the value of all portfolio holdings and other assets,
deducting liabilities and then dividing the result by the number of shares
outstanding. The NAV will vary daily based on the market values of the Funds'
investments. These values are calculated at the close of each business day,
which coincides with the closing of the regular session of the New York Stock
Exchange (normally 4:00 p.m. Eastern time). The Funds are open for business each
day the New York Stock Exchange is open.
All share purchases will be confirmed and credited to your account in full
and fractional shares (rounded to the nearest 1/1000 of a share).
Portfolio securities and other assets are valued based on market
quotations. If quotations are not available, securities are valued by a method
that the appropriate Fund's Board of Directors/Trustees believes accurately
reflects fair value.
WHEN YOUR ACCOUNT WILL BE CREDITED
Before you buy shares, please read the following information to make sure
your investment is accepted and credited properly.
All of your purchases must be made in U.S. dollars and checks must be
drawn on U.S. banks. No cash will be accepted. The Fund reserves the right to
suspend the offering of shares for a period of time or to reject any specific
purchase order. If your check is not paid, your purchase will be canceled and
you will be charged a $10 fee plus costs incurred by the Fund. When you purchase
by check or with Calvert Money Controller, those funds will be on hold for up to
10 business days from the date of receipt. During that period, the proceeds of
redemptions against those funds will be held until the transfer agent is
reasonably satisfied that the purchase payment has been collected. To avoid this
collection period, you can wire federal funds from your bank, which may charge
you a fee. As a convenience, check purchases can be received at Calvert's
offices for overnight mail delivery to the transfer agent and will be credited
the next business day. Any check purchase received without an investment slip
may cause delayed crediting.
Certain financial institutions or broker-dealers that have entered into a
sales agreement with the Distributor may enter confirmed purchase orders on
behalf of customers by phone, with payment to follow within a number of days of
the order as specified by the program. If payment is not received in the time
specified, the financial institution could be held liable for resulting fees or
losses.
EXCHANGES
Each exchange represents the sale of shares of one Fund and the
purchase of shares of another. Therefore, you could realize a taxable gain or
loss on the transaction.
If your investment goals change, the Calvert Group of Funds has a
variety of investment alternatives that includes common stock funds, tax-exempt
and corporate bond funds, and money market funds. The exchange privilege is a
convenient way to buy shares in other Calvert Group Funds in order to respond to
changes in your goals or in market conditions. However, to protect your Fund's
performance and to prevent additional costs, Calvert Group discourages frequent
exchanges. Shareholders (and those managing multiple accounts) who make two
purchases and two exchange redemptions of shares of the same fund during any
6-month period will be given written notice that they may be prohibited from
making additional investments. These policies do not prohibit you from redeeming
shares of the funds and do not apply to trades solely among money market funds.
Before you make an exchange from a Fund or Portfolio, please note the following:
o Call your broker or a Calvert representative for information and a
prospectus for any of Calvert's other Funds registered in your state. Read the
prospectus of the Fund or Portfolio into which you want to exchange for relevant
information, including class offerings.
o Complete and sign an application for an account in that Fund or
Portfolio, taking care to register your new account in the same name and
taxpayer identification number as your existing Calvert account(s). Exchange
instructions may then be given by telephone if telephone redemptions have been
authorized and the shares are not in certificate form. See "Selling Your Shares"
and "How to Sell Your Shares -- By Telephone, and -- By Exchange To Another
Calvert Group Fund."
o
You may exchange shares on which you have already paid a sales charge
at Calvert Group and shares acquired by reinvestment of dividends or
distributions into another fund at no additional charge. You may exchange Class
C shares for shares of another fund, but you will have to pay the front-end
sales charge, if applicable.
For purposes of the exchange privilege the Fund is related to Summit
Cash Reserves Fund by investment and investor services. Each Fund reserves the
right to terminate or modify the exchange privilege in the future with 60 days'
written notice.
OTHER CALVERT GROUP SERVICES
Calvert Information Network
24 hour yield and prices
Calvert Group has a round-the-clock telephone service that lets
existing customers obtain prices, yields and account balances. Complete
instructions for this service may be found on the back of each statement.
Calvert Money Controller
Calvert Money Controller eliminates the delay of mailing a check or the
expense of wiring funds. You can request this free service on your application.
This service allows you to authorize electronic transfers of money to
purchase or sell shares. You use Calvert Money Controller like an "electronic
check" to move money ($50 to $300,000) between your bank account and your Fund
account with one phone call. Allow two business days after the call for the
transfer to take place; for money recently invested, allow normal check clearing
time (up to 10 business days) before redemption proceeds are sent to your bank.
You may also arrange systematic monthly or quarterly investments
(minimum $50) into your Calvert Group account. After you give us proper
authorization, your bank account will be debited to purchase Fund shares. A
debit entry will appear on your bank statement. If you would like to make
arrangements for systematic monthly or quarterly redemptions from your Calvert
account, call your broker or Calvert for more information.
Telephone Transactions
Calvert Group may record all telephone calls.
You may purchase, redeem, or exchange shares, wire funds and use Calvert
Money Controller by telephone if you have pre-authorized service instructions.
You automatically have telephone privileges unless you elect otherwise. The
Funds, the transfer agent and their affiliates are not liable if they act in
good faith on telephone instructions relating to your account, so long as they
follow reasonable procedures to determine that the telephone instructions are
genuine. Such procedures may include recording the telephone calls and requiring
some form of personal identification. You should verify the accuracy of
telephone transactions immediately upon receipt of your confirmation statement.
Optional Services
Complete the application for the easiest way to establish services.
The easiest way to establish optional services on your Calvert Group
account is to select the options you desire when you complete your account
application. If you wish to add other options later, you may have to provide us
with additional information and a signature guarantee. Please call your broker
or Calvert Investor Relations at 800-368-2745 for further assistance. For our
mutual protection, we may require a signature guarantee on certain written
transaction requests. A signature guarantee verifies the authenticity of your
signature, and may be obtained from any bank, savings and loan association,
credit union, trust company, broker-dealer firm or member of a domestic stock
exchange. A signature guarantee cannot be provided by a notary public.
Householding of General Mailings
Householding reduces Fund expenses while saving paper postage expense.
If you have multiple accounts with Calvert, you may receive combined
mailings of some shareholder information, such as statements, confirms,
prospectuses, semi-annual and annual reports. Please contact Calvert Investor
Relations at 800-368-2745 to receive additional copies of information.
Special Services and Charges
The Funds pay for shareholder services but not for special services that
are required by a few shareholders, such as a request for a historical
transcript of an account. You may be required to pay a research fee for these
special services.
If you are purchasing shares of a Fund through a program of services
offered by a securities dealer or financial institution, you should read the
program materials in conjunction with this Prospectus. Certain features may be
modified in these programs, and administrative charges may be imposed by the
broker-dealer or financial institution for the services rendered.
SELLING YOUR SHARES
You may redeem all or a portion of your shares on any business day. Your
shares will be redeemed at the next net asset value calculated after your
redemption request is received and accepted. See below for specific requirements
necessary to make sure your redemption request is acceptable. Remember that your
Fund may hold payment on the redemption of your shares until it is reasonably
satisfied that investments made by check or by Calvert Money Controller have
been collected (normally up to 10 business days).
Redemption Requirements to Remember
To ensure acceptance of your redemption request, please follow the
procedures described here and below.
Once your shares are redeemed, the proceeds will normally be sent to you on
the next business day, but if making immediate payment could adversely affect a
Fund, it may take up to seven (7) days. Calvert Money Controller redemptions
generally will be credited to your bank account on the second business day after
your phone call. When the New York Stock Exchange is closed (or when trading is
restricted) for any reason other than its customary weekend or holiday closings,
or under any emergency circumstances as determined by the Securities and
Exchange Commission, redemptions may be suspended or payment dates postponed.
Minimum account balance is $1,000.
Please maintain a balance in your account of at least $1,000 per Fund, per
class. If, due to redemptions, your account falls below $1,000, it may be closed
and the proceeds mailed to you at the address of record. You will be given
notice that your account will be closed after 30 days unless you make additional
investments to increase your account balance to the $1,000 minimum.
HOW TO SELL YOUR SHARES
By Mail To:
Calvert Group
P.O. Box 419544
Kansas City, MO
64141-6544
You may redeem available funds from your account at any time by sending a
letter of instruction, including your name, account and Fund number, the number
of shares or dollar amount, and where you want the money to be sent. Additional
requirements, below, may apply to your account. The letter of instruction must
be signed by all required authorized signers. If you want the money to be wired
to a bank not previously authorized, then a voided bank check must be enclosed
with your letter. If you do not have a voided check or if you would like funds
sent to a different address or another person, your letter must be signature
guaranteed.
Type of Requirements
Registration
Corporations Letter of instruction and a corporate resolution,
Associations signed by person(s) authorized to act on the account,
accompanied by signature guarantee(s).
Trusts Letter of instruction signed by the Trustee(s)
(as Trustee), with a signature guarantee.
(If the Trustee's name is not registered on your
account, provide a copy of the trust document,
certified within the last 60 days.)
By Telephone
Please call 800-368-2745. You may redeem shares from your account by
telephone and have your money mailed to your address of record or wired to a
bank you have previously authorized. A charge of $5 is imposed on wire transfers
of less than $1,000. See "Telephone Transactions". If for any reason you are
unable to reach the Funds by telephone, whether due to mechanical difficulties,
heavy market volume, or otherwise, you may send a written redemption request to
the Funds by overnight mail, or, if your account is held through a broker, see
"Through Your Broker" below.
Calvert Money Controller
Please allow sufficient time for Calvert Group to process your initial
request for this service (normally 10 business days). You may also authorize
automatic fixed amount redemptions by Calvert Money Controller. All requests
must received by 4:00 p.m. Eastern time. Accounts cannot be closed by this
service.
Exchange to Another Calvert Group Fund
You must meet the minimum investment requirement of the other Calvert Group
Fund or Portfolio. You can only exchange between accounts with identical names,
addresses and taxpayer identification number, unless previously authorized with
a signature-guaranteed letter. See "Exchanges."
Systematic Check Redemptions
If you maintain an account with a balance of $10,000 or more, you may
have up to two (2) redemption checks for a fixed amount sent to you on the 15th
of the month, simply by sending a letter with all information, including your
account number, and the dollar amount ($100 minimum). If you would like a
regular check mailed to another person or place, your letter must be signature
guaranteed.
Through your Broker
If your account is held in your broker's name ("street name"), you should
contact your broker directly to transfer, exchange or redeem shares.
DIVIDENDS AND TAXES
Dividends from net investment income are paid monthly.
Net investment income consists of interest income, net short-term
capital gains, if any, and dividends declared and paid on investments, less
expenses. Each year, the Funds distribute substantially all of their net
investment income to shareholders.
Dividend payment options
Dividends and any distributions are automatically reinvested at net asset
value in additional shares of the Funds unless you elect to have the dividends
of $10 or more paid in cash (by check or by Calvert Money Controller). Dividends
and distributions may be automatically invested in an identically registered
account with the same account number in any other Calvert Group Fund or
Portfolio at net asset value. If reinvested in the same Fund account, new shares
will be purchased at net asset value on the reinvestment date, which is
generally 1 to 3 days prior to the payment date. You must be a shareholder on
the record date to receive dividends. You must notify the Funds in writing prior
to the record date to change your payment options. If you elect to have
dividends and/or distributions paid in cash, and the U.S. Postal Service cannot
deliver the check, or if it remains uncashed for six months, it, as well as
future dividends and distributions, will be reinvested in additional shares.
"Buying a Dividend"
At the time of purchase, the share price of your Fund may reflect
undistributed income, capital gains or unrealized appreciation of securities.
Any income or capital gains from these amounts which are later distributed to
you are fully taxable. On the record date for a distribution, your Fund's share
value is reduced by the amount of the distribution. If you buy shares just
before the record date ("buying a dividend") you will pay the full price for the
shares and then receive a portion of the price back as a taxable distribution.
Federal Taxes
Dividends derived from interest on municipal obligations constitute
exempt-interest dividends, on which you are not subject to federal income tax.
However, dividends which are from taxable interest and any distributions of
short-term capital gains are taxable to you as ordinary income. If the Funds
make any distributions of long-term capital gains, then these are taxable to you
as long-term capital gains, regardless of how long you held your shares.
If any taxable income or gains are paid, in January, the Funds will mail
you Form 1099-DIV indicating the federal tax status of dividends and any capital
gain distributions paid to you by the Funds during the past year.
You may realize a capital gain or loss when you redeem (sell) or exchange
shares.
If you sell or exchange your shares you will have a short or long-term
capital gain or loss, depending on how long you owned the shares. In January,
your Fund will mail you Form 1099-B indicating the proceeds from all sales,
including exchanges. You should keep your annual year-end account statements to
determine the cost (basis) of your shares to report on your tax returns.
Alternative Minimum Tax
Each Fund may invest in municipal obligations, such as certain private
activity bonds, that earn interest subject to the federal alternative minimum
tax ("AMT"). AMT is a method of computing tax that helps ensure that certain
corporations and high-income individual taxpayers pay a minimum amount of tax.
Since the Funds are likely to invest in obligations that are taxable under the
AMT method of computing income tax, taxpayers who are required to pay AMT may
not receive as high an after-tax yield as investors who are not subject to AMT.
You should consult your tax advisor if you have any questions regarding your
status.
State Taxes
To the extent that exempt-interest dividends are derived from earnings
attributable to municipal obligations of a state, they will also be exempt from
state and local personal income tax in that state. The dividends may be subject
to franchise taxes and corporate income taxes if received by a corporation
subject to such taxes. A letter will be mailed to you shortly after year-end
informing you of the percentage of exempt-interest dividends derived from
earnings on state municipal obligations.
Taxpayer Identification Number
Federal law requires that you provide your correct Social Security or
Taxpayer Identification Number ("TIN") on a signed certified application or Form
W-9. If not provided, the Funds may be required to withhold 31% of any dividends
or redemptions, and you may be subject to a fine. You will also be prohibited
from opening another account by exchange. If this TIN information is not
received within 60 days after your account is established, your account may be
redeemed at the current NAV on the date of redemption. The Funds reserve the
right to reject any new account or any purchase order for failure to supply a
certified TIN.
EXHIBIT A
REDUCED SALES CHARGES
You may qualify for a reduced sales charge through several purchase plans
available. You must notify the Funds at the time of purchase to take advantage
of the reduced sales charge.
Right of Accumulation
The sales charge is calculated by taking into account not only the dollar
amount of a new purchase of shares, but also the higher of cost or current value
of shares previously purchased in Calvert Group Funds that impose sales charges.
This automatically applies to your account for each new purchase.
Letter of Intent
If you plan to purchase $50,000 or more of Fund shares over the next 13
months, your sales charge may be reduced through a "Letter of Intent." You pay
the lower sales charge applicable to the total amount you plan to invest over
the 13-month period, excluding any money market fund purchases. Part of your
shares will be held in escrow, so that if you do not invest the amount
indicated, you will have to pay the sales charge applicable to the smaller
investment actually made. For more information, see the Statement of Additional
Information.
Group Purchases
If you are a member of a qualified group, you may purchase shares of the
Funds at the reduced sales charge applicable to the group taken as a whole. The
sales charge is calculated by taking into account not only the dollar amount of
the shares you purchase, but also the higher of cost or current value of shares
previously purchased and currently held by other members of your group.
A "qualified group" is one which (i) has been in existence for more than
six months, (ii) has a purpose other than acquiring Fund shares at a discount,
and (iii) satisfies uniform criteria which enable CDI and dealers offering Fund
shares to realize economies of scale in distributing such shares. A qualified
group must have more than 10 members, must be available to arrange for group
meetings between representatives of CDI or dealers distributing the Funds'
shares, must agree to include sales and other materials related to each Fund in
its publications and mailings to members at reduced or no cost to CDI or
dealers.
Other Circumstances
There is no sales charge on shares of any fund of the Calvert Group of
Funds sold to (i) Directors, Trustees, Officers, Advisory Council Members,
employees of the Calvert Group of Funds or affiliated companies, employees of
broker dealers distributing the Fund's shares and family members of the above,
(ii) Purchases made through a Registered Investment Advisor, (iii) Trust
departments of banks or savings institutions for trust clients of such bank or
institution, (iv) Purchases through a broker maintaining an omnibus account with
the Fund and the purchases are made by (a) investment advisors or financial
planners placing trades for their own accounts (or the accounts of their
clients) and who charge a management, consulting, or other fee for their
services; or (b) clients of such investment advisors or financial planners who
place trades for their own accounts if such accounts are linked to the master
account of such investment advisor or financial planner on the books and records
of the broker or agent; or (c) retirement and deferred compensation plans and
trusts, including, but not limited to, those defined in section 401(a) or
section 403(b) of the I.R.C., and "rabbi trusts."
Dividends and Capital Gain Distributions from other Calvert Group Funds
You may prearrange to have your dividends and capital gain distributions
from another Calvert Group Fund automatically invested in another account with
no additional sales charge.
Purchases made at net asset value ("NAV")
Except for money market funds, if you make a purchase at NAV, you may
exchange that amount to another fund at no additional sales charge.
Reinstatement Privilege
If you redeem Fund shares and then within 30 days decide to reinvest in the
same Fund, you may do so at the net asset value next computed after the
reinvestment order is received, without a sales charge. You may use the
reinstatement privilege only once. The Funds reserve the right to modify or
eliminate this privilege.
TABLE OF CONTENTS
Fund Expenses
Financial Highlights
Investment Objective and Policies
Yield and Total Return
Management of the Funds
SHAREHOLDER GUIDE:
How to Buy Shares
Net Asset Value
Alternative Sales Options
When Your Account Will Be Credited
Exchanges
Other Calvert Group Services
Selling Your Shares
How to Sell Your Shares
Dividends and Taxes
Exhibit A - Reduced Sales Charges
Prospectus
April 30, 1997
Calvert Arizona Municipal Intermediate Fund
Calvert California Municipal Intermediate Fund
Calvert Florida Municipal Intermediate Fund
Calvert Maryland Municipal Intermediate Fund
Calvert Michigan Municipal Intermediate Fund
Calvert National Municipal Intermediate Fund
Calvert New York Municipal Intermediate Fund
Calvert Pennsylvania Municipal Intermediate Fund
Calvert Virginia Municipal Intermediate Fund
To Open an Account:
800-368-2748
Yields and Prices:
Calvert Information Network
24 hours, 7 days a week
800-368-2745
Service for Existing
Accounts:
Shareholders 800-368-2745
Brokers 800-368-2746
TDD for Hearing Impaired:
800-541-1524
Registered, Certified and
Overnight Mail:
Calvert Group
c/o NFDS, 6th Floor
1004 Baltimore
Kansas City, MO 64105
Branch Office:
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
Calvert Group Web-Site
Address: http://www.calvertgroup.com
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1997
CALVERT NATIONAL MUNICIPAL INTERMEDIATE FUND
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748
Information: (301) 951-4820
Shareholder
Services: (800) 368-2745
Broker (800) 368-2746
Services: (301) 951-4850
TDD for the Hearing-
Impaired: (800) 541-1524
This Statement of Additional Information is not a prospectus. Investors
should read the Statement of Additional Information in conjunction with the
Prospectus, dated April 30, 1997, which may be obtained free of charge by
sending a request to the above address or calling the telephone numbers listed
above.
INVESTMENT OBJECTIVE
National Municipal is designed to provide individual and institutional
investors with the highest level of interest income exempt from federal income
taxes as is consistent with prudent investment management, preservation of
capital, and the quality and maturity characteristics of the Series. There is,
of course, no assurance that the Series will be successful in meeting its
investment objective; there are inherent risks in the ownership of any
investment.
Dividends paid by National Municipal will fluctuate with income earned on
investments. In addition, the dividends and distributions paid and the value of
each share will vary by class of shares; the value of its shares will fluctuate
to reflect changes in the market value of the Series' investments. The Series
will attempt, through careful management, to reduce these risks and enhance the
opportunities for higher income and greater price stability.
INVESTMENT POLICIES
National Municipal invests primarily in a nondiversified portfolio of
municipal obligations, including some with interest that may be subject to
alternative minimum tax. The average dollar-weighted maturity of investments is
between 3 and 10 years. Fixed rate investments normally have remaining
maturities of 12 years or less; variable rate investments may have longer
maturities. A complete explanation of municipal obligations and municipal bond
and note ratings appears in the Appendix.
Under normal market conditions, National Municipal will invest at least 65%
of its total assets in municipal obligations with interest that is exempt from
federal income tax. To the extent the obligations are issued by your state of
residence, you may also be exempt from certain state and local income taxes.
Variable Rate Demand Notes
The Board of Directors of Calvert Municipal Fund, Inc. (the "Fund"), of
which National Municipal is a series, has approved investments in floating and
variable rate demand notes upon the following conditions: the Series has right
of demand, upon notice not to exceed thirty days, against the issuer to receive
payment; the issuer will be able to make payment upon such demand, either from
its own resources or through an unqualified commitment from a third party; and
the rate of interest payable is calculated to ensure that the market value of
such notes will approximate par value on the adjustment dates. The remaining
maturity of such demand notes is deemed the period remaining until such time as
the Series has the right to dispose of the notes at a price which approximates
par and market value. Notes with a right of demand exceeding seven days are
considered illiquid and are subject to purchase restrictions.
Municipal Leases
National Municipal may invest in municipal leases, or structured
instruments where the underlying security is a municipal lease. A municipal
lease is an obligation of a government or governmental authority, not subject to
voter approval, used to finance capital projects or equipment acquisitions and
payable through periodic rental payments. National Municipal may purchase
unrated leases. The Fund's Advisor, under the supervision of the Board of
Trustees/Directors, is responsible for determining the credit quality of such
leases on an ongoing basis, including an assessment of the likelihood that the
lease will not be canceled. Certain municipal leases may be considered illiquid
and subject to National Municipal's limit on illiquid securities. The Board of
Trustees/Directors has directed the Advisor to treat a municipal lease as a
liquid security if it satisfies the following conditions: (A) such treatment
must be consistent with National Municipal's investment restrictions; (B) the
Advisor should be able to conclude that the obligation will maintain its
liquidity throughout the time it is held by National Municipal, based on the
following factors: (1) whether the lease may be terminated by the lessee; (2)
the potential recovery, if any, from a sale of the leased property upon
termination of the lease; (3) the lessee's general credit strength (e.g., its
debt, administrative, economic and financial characteristics and prospects); (4)
the likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of nonappropriation"), and (5) any
credit enhancement or legal recourse provided upon an event of nonappropriation
or other termination of the lease; (C) the Advisor should determine whether the
obligation can be disposed of within seven days in the ordinary course of
business at approximately the amount at which National Municipal has valued it
for purposes of calculating National Municipal's net asset value, taking into
account the following factors: (1) the frequency of trades and quotes; (2) the
volatility of quotations and trade prices; (3) the number of dealers willing to
purchase or sell the security and the number of potential purchasers; (4) dealer
undertakings to make a market in the security; (5) the nature of the security
and the nature of the marketplace trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of the
transfer); (6) the rating of the security and the financial condition and
prospects of the issuer; and (7) other factors relevant to National Municipal's
ability to dispose of the security; and (D) the Advisor should have reasonable
expectations that the municipal lease obligation will maintain its liquidity
throughout the time the instrument is held by National Municipal.
Temporary Investments
Short-term money market type investments consist of: obligations of the
U.S. Government, its agencies and instrumentalities; certificates of deposit of
banks with assets of one billion dollars or more; commercial paper or other
corporate notes of investment-grade quality; and any of such items subject to
short-term repurchase agreements.
When-Issued Purchases
Securities purchased on a when-issued basis and the securities held in
National Municipal's portfolio are subject to changes in market value based on
the public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in both changing in value
in the same way, i.e., both experiencing appreciation when interest rates
decline and depreciation when interest rates rise). Therefore, if in order to
achieve higher interest income, National Municipal remains substantially fully
invested at the same time that it has purchased securities on a when-issued
basis, there will be a greater possibility that the market value of its assets
may vary. No new when-issued commitments will be made if more than 50% of the
Series' net assets would become so committed.
When the time comes to pay for when-issued securities, National Municipal
will meet its obligations from then available cash flow, sale of securities or,
although it would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a market value greater or less than the
Series' payment obligation). Sale of securities to meet such obligations carries
with it a greater potential for the realization of capital losses and capital
gains which are not exempt from federal income tax.
Transactions in Futures Contracts
National Municipal may engage in the purchase and sale of futures contracts
on an index of municipal bonds or on U.S. Treasury securities, or options on
such futures contracts, for hedging and substitution purposes only. National
Municipal may sell such futures contracts in anticipation of a decline in the
cost of municipal bonds it holds or may purchase such futures contracts in
anticipation of an increase in the value of municipal bonds National Municipal
intends to acquire. National Municipal also is authorized to purchase and sell
other financial futures contracts which in the opinion of the Investment Advisor
provide an appropriate hedge for some or all of National Municipal's securities.
Because of low initial margin deposits made upon the opening of a futures
position, futures transactions involve substantial leverage. As a result,
relatively small movements in the price of the futures contract can result in
substantial unrealized gains or losses. Because National Municipal will engage
in the purchase and sale of financial futures contracts solely for hedging and
substitution purposes, however, any losses incurred in connection therewith
should, if the strategy is successful, be offset in whole or in part by
increases in the value of securities held by National Municipal or decreases in
the price of securities National Municipal intends to acquire.
Municipal bond index futures contracts commenced trading in June 1985, and
it is possible that trading in such futures contracts will be less liquid than
that in other futures contracts. The trading of futures contracts and options
thereon is subject to certain market risks, such as trading halts, suspensions,
exchange or clearing house equipment failures, government intervention or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions.
The liquidity of a secondary market in futures contracts may be further
adversely affected by "daily price fluctuation limits" established by contract
markets, which limit the amount of fluctuation in the price of a futures
contract or option thereon during a single trading day. Once the daily limit has
been reached in the contract, no trades may be entered into at a price beyond
the limit, thus preventing the liquidation of open positions. Prices of existing
contracts have in the past moved the daily limit on a number of consecutive
trading days. National Municipal will enter into a futures position only if, in
the judgment of the Investment Advisor, there appears to be an actively traded
secondary market for such futures contracts.
The successful use of transactions in futures contracts and options thereon
depends on the ability of the Investment Advisor to correctly forecast the
direction and extent of price movements of these instruments, as well as price
movements of the securities held by National Municipal within a given time
frame. To the extent these prices remain stable during the period in which a
futures or option contract is held by National Municipal, or move in a direction
opposite to that anticipated, National Municipal may realize a loss on the
hedging transaction which is not fully or partially offset by an increase in the
value of National Municipal's securities. As a result, National Municipal's
total return for such period may be less than if it had not engaged in the
hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller of a contract to
deliver and the purchaser of a contract to take delivery of the type of
financial instrument called for in the contract or, in some instances, to make a
cash settlement, at a specified future time for a specified price. Although the
terms of a contract call for actual delivery or acceptance of securities, or for
a cash settlement, in most cases the contracts are closed out before the
delivery date without the delivery or acceptance taking place. National
Municipal intends to close out any futures contracts prior to the delivery date
of such contracts.
National Municipal may sell futures contracts in anticipation of a decline
in the value of its investments in municipal bonds. The loss associated with any
such decline could be reduced without employing futures as a hedge by selling
long-term securities and either reinvesting the proceeds in securities with
shorter maturities or by holding assets in cash. This strategy, however, entails
increased transaction costs in the form of brokerage commissions and dealer
spreads and will typically reduce National Municipal's average yields as a
result of the shortening of maturities.
The purchase or sale of a futures contract differs from the purchase or
sale of a security, in that no price or premium is paid or received. Instead, an
amount of cash or securities acceptable to National Municipal's futures
commission merchant and the relevant contract market, which varies but is
generally about 5% or less of the contract amount, must be deposited with the
broker. This amount is known as "initial margin," and represents a "good faith"
deposit assuring the performance of both the purchaser and the seller under the
futures contract. Subsequent payments to and from the broker, known as
"variation margin," are required to be made on a daily basis as the price of the
futures contract fluctuates, making the long or short positions in the futures
contract more or less valuable, a process known as "marking to the market."
Prior to the settlement date of the futures contract, the position may be closed
out by taking an opposite position which will operate to terminate the position
in the futures contract. A final determination of variation margin is then made,
additional cash is required to be paid to or released by the broker, and the
purchaser realizes a loss or gain. In addition, a commission is paid on each
completed purchase and sale transaction.
The sale of financial futures contracts provides an alternative means of
hedging National Municipal against declines in the value of its investments in
municipal bonds. As such values decline, the value of National Municipal's
position in the futures contracts will tend to increase, thus offsetting all or
a portion of the depreciation in the market value of National Municipal's fixed
income investments which are being hedged. While National Municipal will incur
commission expenses in establishing and closing out futures positions,
commissions on futures transactions may be significantly lower than transaction
costs incurred in the purchase and sale of fixed income securities. In addition,
the ability of National Municipal to trade in the standardized contracts
available in the futures market may offer a more effective hedging strategy than
a program to reduce the average maturing of portfolio securities, due to the
unique and varied credit and technical characteristics of the municipal debt
instruments available to National Municipal. Employing futures as a hedge may
also permit National Municipal to assume a hedging posture without reducing the
yield on its investments, beyond any amounts required to engage in futures
trading.
National Municipal may engage in the purchase and sale of futures contracts
on an index of municipal securities. These instruments provide for the purchase
or sale of a hypothetical portfolio of municipal bonds at a fixed price in a
stated delivery month. Unlike most other futures contracts, however, a municipal
bond index futures contract does not require actual delivery of securities but
results in a cash settlement based upon the difference in value of the index
between the time the contract was entered into and the time it is liquidated.
The municipal bond index underlying the futures contracts traded by the
Portfolio is The Bond Buyer Municipal Bond Index, developed by The Bond Buyer
and the Chicago Board of Trade ("CBT"), the contract market on which the futures
contracts are traded. As currently structured, the index is comprised of 40
tax-exempt term municipal revenue and general obligation bonds. Each bond
included in the index must be rated either A- or higher by Standard & Poor's or
A or higher by Moody's Investors Service and must have a remaining maturity of
19 years or more. Twice a month new issues satisfying the eligibility
requirements are added to, and an equal number of old issues will be deleted
from, the index. The value of the index is computed daily according to a formula
based upon the price of each bond in the index, as evaluated by four
dealer-to-dealers brokers.
National Municipal may also purchase and sell futures contracts on U.S.
Treasury bills, notes and bonds for the same types of hedging and substitution
purposes. Such futures contracts provide for delivery of the underlying security
at a specified future time for a fixed price, and the value of the futures
contract therefore generally fluctuates with movements in interest rates.
The municipal bond index futures contract, futures contracts on U.S.
Treasury securities and options on such futures contracts are traded on the CBT,
which, like other contract markets, assures the performance of the parties to
each futures contract through a clearing corporation, a nonprofit organization
managed by the exchange membership, which is also responsible for handling daily
accounting of deposits or withdrawals of margin.
National Municipal may also purchase financial futures contracts when not
fully invested in municipal bonds, in anticipation of an increase in the cost of
securities National Municipal intends to purchase. As such securities are
purchased, an equivalent amount of futures contracts will be closed out. In a
substantial majority of these transactions, National Municipal will purchase
municipal bonds upon termination of the futures contracts. Due to changing
market conditions and interest rate forecasts, however, a futures position may
be terminated without a corresponding purchase of securities. Nevertheless, all
purchases of futures contracts by National Municipal will be subject to certain
restrictions, described below.
Options on Futures Contracts. An option on a futures contract provides the
purchaser with the right, but not the obligation, to enter into a long position
in the underlying futures 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 contract. 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.
National Municipal may purchase options on futures contracts for the same
types of purposes described above in connection with futures contracts. For
example, in order to protect against an anticipated decline in the value of
securities it holds, National Municipal could purchase put options on futures
contracts, instead of selling the underlying futures contracts. Conversely, in
order to protect against the adverse effects of anticipated increases in the
costs of securities to be acquired, National Municipal could purchase call
options on futures contracts, instead of purchasing the underlying futures
contracts. National Municipal generally will sell options on futures contracts
only to close out an existing position.
National Municipal will not engage in transactions in such instruments
unless and until the Investment Advisor determines that market conditions and
the circumstances of National Municipal warrant such trading. To the extent
National Municipal 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 National Municipal, the
liquidity of the market for futures contracts and the anticipated correlation
between movements in the value of the futures or option contract and the value
of securities held by National Municipal.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Under regulations of the Commodity Futures Trading Commission
("CFTC"), the futures trading activities described herein will not result in
National Municipal being deemed to be a "commodity pool," as defined under such
regulations, provided that certain trading restrictions are adhered to. In
particular, CFTC regulations require that all futures and option positions
entered into by National Municipal qualify as bona fide hedge transactions, as
defined under CFTC regulations, or, in the case of long positions, that the
value of such positions not exceed an amount of segregated funds determined by
reference to certain cash and securities positions maintained by National
Municipal and accrued profits on such positions. In addition, as a matter of
operating policy, National Municipal may not purchase or sell a futures contract
or an option thereon if, immediately thereafter, the sum of the amount of
initial margin deposits on National Municipal's existing futures positions and
premiums on such options would exceed 5% of its net assets.
When National Municipal purchases a futures contract, it will maintain an
amount of cash, cash equivalents (for example, commercial paper and daily tender
adjustable notes) or short-term high-grade fixed income securities in a
segregated account with National Municipal's custodian, so that the amount so
segregated plus the amount of initial and variation margin held in the account
of its broker equals the market value of the futures contract, thereby ensuring
that the use of such futures is unleveraged.
Risk Factors in Transactions in Futures Contracts. The particular municipal
bonds comprising the index underlying the municipal bond index futures contract
may vary from the bonds held by National Municipal. In addition, the securities
underlying futures contracts on U.S. Treasury securities will not be the same as
securities held by National Municipal. As a result, National Municipal's ability
effectively to hedge all or a portion of the value of its municipal bonds
through the use of futures contracts will depend in part on the degree to which
price movements in the index underlying the municipal bond index futures
contract, or the U.S. Treasury securities underlying other futures contracts
trade, correlate with price movements of the municipal bonds held by National
Municipal.
For example, where prices of securities in National Municipal do not move
in the same direction or to the same extent as the values of the securities or
index underlying a futures contract, the trading of such futures contracts may
not effectively hedge National Municipal's investments and may result in trading
losses. The correlation may be affected by disparities in the average maturity,
ratings, geographical mix or structure of National Municipal's investments as
compared to those comprising the index, and general economic or political
factors. In addition, the correlation between movements in the value of the
index underlying a futures contract may be subject to change over time, as
additions to and deletions from the index alter its structure. In the case of
futures contracts on U.S. Treasury securities and options thereon, the
anticipated correlation of price movements between the U.S. Treasury securities
underlying the futures or options and municipal bonds may be adversely affected
by economic, political, legislative or other developments that have a disparate
impact on the respective markets for such securities. In the event that the
Investment Advisor determines to enter into transactions in financial futures
contracts other than the municipal bond index futures contract or futures on
U.S. Treasury securities, the risk of imperfect correlation between movements in
the prices of such futures contracts and the prices of municipal bonds held by
National Municipal may be greater.
The trading of futures contracts on an index also entails the risk of
imperfect correlation between movements in the price of the futures contract and
the value of the underlying index. The anticipated spread between the prices may
be distorted due to differences in the nature of the markets, such as margin
requirements, liquidity and the participation of speculators in the futures
markets. The risk of imperfect correlation, however, generally diminishes as the
delivery month specified in the futures contract approaches.
Prior to exercise or expiration, a position in futures contracts or options
thereon may be terminated only by entering into a closing purchase or sale
transaction. This requires a secondary market on the relevant contract market.
National Municipal will enter into a futures or option position only if there
appears to be a liquid secondary market therefor, although there can be no
assurance that such a liquid secondary market will exist for any particular
contract at any specific time. Thus, it may not be possible to close out a
position once it has been established. Under such circumstances, National
Municipal could be required to make continuing daily cash payments of variation
margin in the event of adverse price movements. In such situation, if National
Municipal has insufficient cash, it may be required to sell portfolio securities
to meet daily variation margin requirements at a time when it may be
disadvantageous to do so. In addition, National Municipal may be required to
perform under the terms of the futures or option contracts it holds. The
inability to close out futures or options positions also could have an adverse
impact on National Municipal's ability effectively to hedge its portfolio.
When National Municipal 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, National Municipal 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 National Municipal'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.
Credit Quality
As an operating policy, National Municipal may not invest more than 35% of
its net assets in non-investment grade municipal obligations. As has been the
industry practice, this determination of credit quality is made at the time the
Series acquires the obligation. However, because it is possible that subsequent
downgrades could occur, if an obligation held by National Municipal is later
downgraded, the Advisor, under the supervision of the Fund's Board of Directors,
will consider whether it is in the best interest of the shareholders to hold or
to dispose of the obligation. Among the criteria that may be considered by the
Advisor and the Board are the probability that the obligations will be able to
make scheduled interest and principal payments in the future, the extent to
which any devaluation of the obligation has already been reflected in the
Series' net asset value, and the total percentage, if any, of obligations
currently rated below investment-grade held by National Municipal.
Noninvestment-grade securities have moderate to poor protection of
principal and interest payments and have speculative characteristics. They
involve greater risk of default or price declines due to changes in the issuer's
creditworthiness than investment-grade debt securities. Because the market for
lower-rated securities may be thinner and less active than for higher-rated
securities, there may be market price volatility for these securities and
limited liquidity in the resale market. Market prices for these securities may
decline significantly in periods of general economic difficulty or rising
interest rates.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The foregoing investment objective and policies and the following
investment restrictions and fundamental policies may not be changed without the
consent of the holders of a majority of National Municipal's outstanding shares.
Shares have equal rights as to voting. A majority of the shares means the lesser
of (i) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are represented or (ii) more than 50% of the outstanding
shares. National Municipal may not:
1) Purchase common stocks, preferred stocks, warrants, or other equity
securities;
2) Issue senior securities, borrow money, or pledge, mortgage, or
hypothecate its assets, except as may be necessary to secure borrowings from
banks for temporary or emergency (not leveraging) purposes and then in an amount
not greater than 10% of the value of the Series' total assets at the time of the
borrowing. Investment securities will not be purchased while any borrowings are
outstanding;
3) Make loans other than through the purchase of money market instruments
and repurchase agreements or by the purchase of bonds, debentures or other debt
securities. The purchase by a Portfolio of all or a portion of an issue of
publicly or privately distributed debt obligations in accordance with its
investment objective, policies and restrictions, shall not constitute the making
of a loan.
4) Underwrite the securities of other issuers, except to the extent that
the purchase of municipal obligations in accordance with the Series' investment
objective and policies, either directly from the issuer, or from an underwriter
for an issuer, may be deemed an underwriting;
5)
Purchase or sell in real estate, real estate investment trust
securities, or oil and gas interests, but this shall not prevent National
Municipal from investing in municipal obligations secured by real estate or
interests therein;
6)
Purchase or sell physical commodities except that it may enter into
futures contracts and options thereon;
7) Purchase or retain securities of an issuer if those directors of the
Fund, each of whom owns more than 1/2 of 1% of the outstanding securities of
such issuer, together own more than 5% of such outstanding securities;
8) Invest in companies for the purpose of exercising control; or invest in
securities of other investment companies, except as they may be acquired as part
of a merger, consolidation or acquisition of assets, or in connection with a
trustee's/director's deferred compensation plan, as long as there is no
duplication of advisory fees;
9) Invest 25% or more of its assets in any particular industry or
industries. Industrial development bonds, where the payment of principal and
interest is the responsibility of companies within the same industry, are
grouped together as an "industry."
Nonfundamental Investment Restrictions
The Series has adopted the following operating (i.e., nonfundamental)
investment policies and restrictions which may be changed by the Board of
Directors without shareholder approval. National Municipal may not:
1) Purchase illiquid securities if more than 15% of the value of its net
assets would be invested in such securities;
2) Invest more than 5% of the value of its total assets in securities where
the payment of principal and interest is the responsibility of a company or
companies with less than three years' operating history.
3)
Purchase or sell a futures contract or an option thereon if immediately
thereafter, the sum of the amount of initial margin deposits on futures and
premiums on such options would exceed 5% of the Fund's net assets;
4)
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.
5)
Effect short sales of securities. For purposes of this restriction,
transactions in futures contracts and options are not deemed to constitute
selling securities short.
6)
Purchase securities on margin, except that it may make margin deposits
in connection with futures contacts or options on futures.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will be issued at no charge if requested in writing by
the investor. No certificates will be issued for fractional shares (see
Prospectus, "How to Sell Your Shares").
To change redemption instructions already given, shareholders must send a
written notice to Calvert Group, c/o NFDS, 6th Floor, 1004 Baltimore, Kansas
City, MO 64105, with a voided copy of a check for the bank wiring instructions
to be added. If a voided check does not accompany the request, then the request
must be signature guaranteed by a commercial bank, savings and loan association,
trust company, member firm of any national securities exchange, or certain
credit unions. Further documentation may be required from corporations,
fiduciaries, and institutional investors.
The right of redemption may be suspended or the date of payment postponed
for any period during which the New York Stock Exchange is closed (other than
customary weekend and holiday closings), when trading on the New York Stock
Exchange is restricted, or an emergency exists, as determined by the SEC, or if
the Commission has ordered such a suspension for the protection of shareholders.
Redemption proceeds are normally mailed or wired the next business day after a
proper redemption request has been received, unless redemptions have been
suspended or postponed as described above.
Redemption proceeds are normally paid in cash. However, National Municipal
has the right to redeem shares in assets other than cash for redemption amounts
exceeding, in any 90-day period, $250,000 or 1% of the net asset value of
National Municipal, whichever is less.
Reduced Sales Charges
National Municipal imposes reduced sales charges in certain situations in
which the Principal Underwriter (which offers the Series' shares continuously
and on a "best efforts" basis) and the dealers selling National Municipal shares
may expect to realize significant economies of scale with respect to such sales.
Generally, sales costs do not increase in proportion to the dollar amount of the
shares sold; for example, the per-dollar transaction cost for a sale to an
investor of shares worth $5,000 is generally much higher than the per-dollar
cost for a sale of shares worth $1,000,000. Thus, the applicable sales charge
declines as a percentage of the dollar amount of shares sold as the dollar
amount increases.
When a shareholder agrees to make purchases of shares over a period of time
totaling a certain dollar amount pursuant to a Letter of Intent, the Underwriter
and selling dealers can expect to realize the economies of scale applicable to
that stated goal amount. Thus the Series imposes the sales charge applicable to
the goal amount. Similarly, the Underwriter and selling dealers also experience
cost savings when dealing with existing National Municipal shareholders,
enabling the Series to afford existing shareholders the Right of Accumulation.
The Underwriter and selling dealers can also expect to realize economies of
scale when making sales to the members of certain qualified groups which agree
to facilitate distribution of the Series' shares to their members. See "Exhibit
A - Reduced Sales Charges" in the Prospectus.
DIVIDENDS AND DISTRIBUTIONS
National Municipal declares and pays monthly dividends of its net income to
shareholders of record as of the close of business on each designated monthly
record date. Dividends and distributions will differ among the classes. Net
investment income consists of the interest income earned on investments
(adjusted for amortization of original issue discounts or premiums or market
premiums), less estimated expenses. Capital gains, if any, are normally paid
once a year and will be automatically reinvested at net asset value in
additional shares. Dividends and any distributions are automatically reinvested
in additional shares of the Fund, unless you elect to have the dividends of $10
or more paid in cash (by check or by Calvert Money Controller). You may also
request to have your dividends and distributions from the Series invested in
shares of any other Calvert Group Fund, at no additional charge. If you elect to
have dividends and/or distributions paid in cash, and the U.S. Postal Service
cannot deliver the check, or if it remains uncashed for six months, it, as well
as future dividends and distributions, will be reinvested in additional shares.
TAX MATTERS
In 1996 National Municipal did qualify and in 1997 National Municipal
intends to qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code as amended (the "Code"). By so qualifying, it will not be
subject to federal income tax, nor to the federal excise tax imposed by the Tax
Reform Act of 1986 (the "Act"), to the extent that it distributes its net
investment income and realized capital gains.
National Municipal's dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally subject to
federal income tax; however under the Act, dividends attributable to interest on
certain private activity bonds must be included in federal alternative minimum
taxable income for the purpose of determining liability (if any) for individuals
and for corporations. National Municipal's dividends derived from taxable
interest and distributions of net short-term capital gains, whether taken in
cash or reinvested in additional shares, are taxable to shareholders as ordinary
income and do not qualify for the dividends received deduction for corporations.
If you held shares for six months or less, losses must be offset by the amount
of exempt-interest dividends you received, and, to the extent of capital gain
distributions you received, the loss amount not offset (disallowed) must be
treated as long-term capital loss.
A shareholder may also be subject to some state and local taxes on
dividends and distributions. National Municipal will notify shareholders
annually about the tax status of dividends and distributions paid by the Series
and the amount of dividends withheld, if any, during the previous year.
The Code provides that interest on indebtedness incurred or continued in
order to purchase or carry shares of a regulated investment company which
distributes exempt-interest dividends during the year is not deductible.
Furthermore, entities or persons who are "substantial users" (or persons related
to "substantial users") of facilities financed by private activity bonds should
consult their tax advisors before purchasing shares of the Fund. "Substantial
user" is generally defined as including a "nonexempt person" who regularly uses
in trade or business a part of a facility financed from the proceeds of private
activity bonds.
Investors should note that the Code may require investors to exclude the
initial sales charge, if any, paid on the purchase of National Municipal shares
from the tax basis of those shares if the shares are exchanged for shares of
another Calvert Group Fund within 90 days of purchase. This requirement applies
only to the extent that the payment of the original sales charge on the shares
of the Series causes a reduction in the sales charge otherwise payable on the
shares of the Calvert Group Fund acquired in the exchange, and investors may
treat sales charges excluded from the basis of the original sales as incurred to
acquire the new shares.
National Municipal may be required to withhold 31% of any long-term capital
gain dividends and 31% of each redemption transaction occurring in the Series
if: (a) the shareholder's social security number or other taxpayer
identification number ("TIN") is not provided or an obviously incorrect TIN is
provided; (b) the shareholder does not certify under penalties of perjury that
the TIN provided is the shareholder's correct TIN and that the shareholder is
not subject to backup withholding under section 3406(a)(1)(C) of the Code
because of underreporting (however, failure to provide certification as to the
application of section 3406(a)(1)(C) will result only in backup withholding on
capital gain dividends, not on redemptions); or (c) the Fund is notified by the
Internal Revenue Service that the TIN provided by the shareholder is incorrect
or that there has been underreporting of interest or dividends by the
shareholder. Affected shareholders will receive statements at least annually
specifying the amount withheld.
In addition, the Series is required to report to the Internal Revenue
Service the following information with respect to redemption transactions in
National Municipal: (a) the shareholder's name, address, account number and
taxpayer identification number; (b) the total dollar value of the redemptions;
and (c) the Series' identifying CUSIP number.
Certain shareholders are, however, exempt from the backup withholding and
broker reporting requirements. Exempt shareholders include: corporations;
financial institutions; tax-exempt organizations; individual retirement plans;
the U.S., a State, the District of Columbia, a U.S. possession, a foreign
government, an international organization, or any political subdivision, agency,
or instrumentality of any of the foregoing; U.S. registered commodities or
securities dealers; real estate investment trusts; registered investment
companies; bank common trust funds; certain charitable trusts; and foreign
central banks of issue. Nonresident aliens also are generally not subject to
either requirement but, along with certain foreign partnerships and foreign
corporations, may instead be subject to withholding under section 1441 of the
Code. Shareholders claiming exemption from backup withholding and broker
reporting should call or write the Fund for further information.
VALUATION OF SHARES
National Municipal's assets are valued utilizing the average bid dealer
market quotation as furnished by an independent pricing service. Securities and
other assets for which market quotations are not readily available are valued
based on the current market for similar securities or assets, as determined in
good faith by the Fund's Advisor under the supervision of the Board of
Directors.
Valuations, market quotations and market equivalents are provided by Kenny
S&P Evaluation Services, a subsidiary of McGraw-Hill. The use of Kenny as a
pricing service by the Fund has been approved by the Board of Directors.
Valuations provided by Kenny are determined without exclusive reliance on quoted
prices and take into consideration appropriate factors such as institution-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
National Municipal determines the net asset value for its shares every
business day at 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. The Series does not determine net asset value on certain
national holidays or other days on which the New York Stock Exchange is closed:
New Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Net Asset Value and Offering Price Per Share
<TABLE>
<CAPTION>
Net asset value per share
<S> <C>
($45,611,937/4,318,970 shares) $10.56
Maximum sales charge
(2.75% of offering price) 0.29
Offering price per share $10.85
</TABLE>
CALCULATION OF YIELD AND TOTAL RETURN
National Municipal may advertise its "total return." Total return is
historical in nature and is not intended to indicate future performance. Total
return will be quoted for the most recent one-year period, five-year period, and
period from inception of National Municipal's offering of shares. Return
quotations for periods in excess of one year represent the average annual total
return for the period included in the particular quotation. Total return is a
computation of National Municipal's dividend yield, plus or minus realized or
unrealized capital appreciation or depreciation, less fees and expenses. Total
return quotations reflect the deduction of National Municipal's maximum sales
charge ("return with maximum load"), except quotations of "return without
maximum load" which do not deduct the sales charge. Note: "Total Return" as
quoted in the Financial Highlights section of the Series' Prospectus and Annual
Report to Shareholders, however, per SEC instructions, does not reflect
deduction of the sales charge, and corresponds to "return without maximum load"
as referred to herein. Return without maximum load should be considered only by
investors, such as participants in certain pension plans, to whom the sales
charge does not apply, or for purposes of comparison only with comparable
figures which also do not reflect sales charges, such as Lipper averages. Total
return is computed according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000; T = total return; n =
number of years; and ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year periods at the end of such
periods (or portions thereof, if applicable). Returns for the one year period
and period from inception (Class A, September 30, 1992; Class C, March 1, 1994)
are as follows:
<TABLE>
<CAPTION>
National Municipal National Municipal
With Max. Load W/O Max. Load
<S> <C> <C>
One Year 1.46% 4.32%
From Inception 5.59% 6.28%
</TABLE>
National Municipal may also advertise its "yield" and "taxable equivalent
yield." As with total return, both yield figures are historical and are not
intended to indicate future performance. "Yield" quotations for National
Municipal refer to the aggregate imputed yield-to-maturity of each of the
Series' investments based on the market value as of the last day of a given
thirty-day or one-month period less accrued expenses (net of reimbursement),
divided by the average daily number of outstanding shares entitled to receive
dividends times the maximum offering price on the last day of the period (so
that the effect of the sales charge is included in the calculation), compounded
on a "bond equivalent," or semi-annual, basis. Yield is computed according to
the following formula:
Yield = 2[(a-b/cd +1)6 - 1]
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursement); c = the average daily number of
shares outstanding during the period that were entitled to receive dividends;
and d = the maximum offering price per share on the last day of the period.
The taxable equivalent yield is the yield an investor would be required to
obtain from taxable investments to equal National Municipal's yield, all or a
portion of which may be exempt from federal income taxes. The taxable equivalent
yield is computed by taking the portion of the yield exempt from federal income
taxes and multiplying the exempt yield by a factor based on a stated income tax
rate, then adding the portion of the yield that is not exempt from federal
income taxes. The factor which is used to calculate the tax equivalent yield is
the reciprocal of the difference between 1 and the applicable income tax rate,
which will be stated in the advertisement.
For the thirty-day period ended December 31, 1996, National Municipal's
yield was 4.38% and its tax equivalent yield was 6.84% for an investor in the
36% federal income tax bracket, and 7.25% for an investor in the 39.6% federal
income tax bracket.
ADVERTISING
The Fund or its affiliates may provide information such as, but not limited
to, the economy, investment climate, investment principles, sociological
conditions and political ambiance. Discussion may include hypothetical scenarios
or lists of relevant factors designed to aid the investor in determining whether
the Series is compatible with the investor's goals. The Fund may list portfolio
holdings or give examples or securities that may have been considered for
inclusion in the Series, whether held or not.
The Fund or its affiliates may supply comparative performance data and
rankings from independent sources such as Donoghue's Money Fund Report, Bank
Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA Investment
Technologies, Inc., Wiesenberger Investment Companies Service, Russell
2000/Small Stock Index, Mutual Fund Values Morningstar Ratings, Mutual Fund
Forecaster, Barron's, The Wall Street Journal, and Schabacker Investment
Management, Inc. Such averages generally do not reflect any front- or back-end
sales charges that may be charged by Funds in that grouping. The Fund may also
cite to any source, whether in print or on-line, such as Bloomberg, in order to
acknowledge origin of information. The Series may compare itself or its
portfolio holdings to other investments, whether or not issued or regulated by
the securities industry, including, but not limited to, certificates of deposit
and Treasury notes. The Fund, its Advisor, and its affiliates reserve the right
to update performance rankings as new rankings become available.
DIRECTORS AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Director of Finance for the
Family Health Council, Inc. in Pittsburgh, Pennsylvania, a non-profit
corporation which provides family planning services, nutrition, maternal/child
health care, and various health screening services. Mr. Baird is a
trustee/director of each of the investment companies in the Calvert Group of
Funds, except for Acacia Capital Corporation, Calvert New World Fund and Calvert
World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive, Pittsburgh,
Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner in the law firm
of Snevily, Ely, Williams, Gurrieri & Blatz. He was formerly a partner with
Abrams, Blatz, Gran, Hendricks & Reina, P.A. DOB: 10/29/35. Address: 308 East
Broad Street, PO Box 2007, Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a radiologist with Kaiser
Permanente. Prior to that, he was a radiologist at Bethlehem Medical Imaging in
Allentown, Pennsylvania. DOB: 07/23/49. Address: 2040 Nuuanu Avenue #1805,
Honolulu, Hawaii, 96817.
1 CHARLES E. DIEHL, Trustee. Mr. Diehl is Vice President and Treasurer
Emeritus of the George Washington University, and has retired from University
Support Services, Inc. of Herndon, Virginia. He is also a Director of Acacia
Mutual Life Insurance Company. DOB: 10/13/22. Address: 1658 Quail Hollow Court,
McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices head and neck
reconstructive surgery in the Washington, D.C., metropolitan area. DOB:
05/23/48. Address: 7536 Pepperell Drive, Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian was a principal of Gavian De Vaux
Associates, an investment banking firm. He continues to be President of with
Corporate Finance of Washington, Inc. DOB: 12/08/32. Address: 3005 Franklin Road
North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey is chairman of the Calvert Social
Investment Foundation, organizing director of the Community Capital Bank in
Brooklyn, New York, and a financial consultant to various organizations. In
addition, he is a Director of the Community Bankers Mutual Fund of Denver,
Colorado, and the Treasurer and Director of Silby, Guffey, and Co., Inc., a
venture capital firm. Mr. Guffey is a trustee/director of each of the other
investment companies in the Calvert Group of Funds, except for Acacia Capital
Corporation and Calvert New World Fund. DOB: 05/15/48. Address: 7205 Pomander
Lane, Chevy Chase, Maryland 20815.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President of Creative
Associates International, Inc., a firm that specializes in human resources
development, information management, public affairs and private enterprise
development. DOB: 12/08/45. Address: 5301 Wisconsin Avenue, N.W., Washington,
D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh serves as a Director of Acacia Federal
Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive, Fairfax, Virginia
22030.
1 DAVID R. ROCHAT, Senior Vice President and Trustee. Mr. Rochat is
Executive Vice President of Calvert Asset Management Company, Inc., Director and
Secretary of Grady, Berwald and Co., Inc., and Director and President of Chelsea
Securities, Inc. DOB: 10/07/37. Address: Box 93, Chelsea, Vermont 05038.
1 D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a trustee/director of each of
the investment companies in the Calvert Group of Funds, except for Acacia
Capital Corporation and Calvert New World Fund. Mr. Silby is an officer,
director and shareholder of Silby, Guffey & Company, Inc., which serves as
general partner of Calvert Social Venture Partners ("CSVP"). CSVP is a venture
capital firm investing in socially responsible small companies. He is also a
Director of Acacia Mutual Life Insurance Company. DOB: 07/20/48. Address: 1715
18th Street, N.W., Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a director and
Senior Vice President of Calvert Group, Ltd., and Senior Vice President and
Chief Investment Officer of Calvert Asset Management Company, Inc. Mr. Martini
is also a director and President of Calvert-Sloan Advisers, L.L.C., and a
director and officer of Calvert New World Fund. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior Vice
President and Controller of Calvert Group, Ltd. and its subsidiaries and an
officer of each of the other investment companies in the Calvert Group of Funds.
Mr. Wolfsheimer is Vice President and Treasurer of Calvert-Sloan Advisers,
L.L.C., and a director of Calvert Distributors, Inc. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Assistant Secretary. Mr.
Tartikoff is an officer of each of the investment companies in the Calvert Group
of Funds, and is Senior Vice President, Secretary, and General Counsel of
Calvert Group, Ltd., and each of its subsidiaries. Mr. Tartikoff is also Vice
President and Secretary of Calvert-Sloan Advisers, L.L.C., a director of Calvert
Distributors, Inc., and is an officer of Acacia National Life Insurance Company.
DOB: 08/12/47.
EVELYNE S. STEWARD, Vice President. Ms. Steward is a director and Senior
Vice President of Calvert Group, Ltd., and a director of Calvert-Sloan Advisers,
L.L.C. She is the sister of Philip J. Schewetti, the portfolio manager of the
CSIF Equity Portfolio. DOB: 11/14/52.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of Calvert
Asset Management Company, Inc., and is an officer of each of the other
investment companies in the Calvert Group of Funds, except for Calvert New World
Fund, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is Associate
General Counsel of Calvert Group, Ltd. and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of each
of the other investment companies in the Calvert Group of Funds. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is Associate
General Counsel of Calvert Group and an officer of each of its subsidiaries and
Calvert-Sloan Advisers, L.L.C. She is also an officer of each of the other
investment companies in the Calvert Group of Funds. DOB: 10/21/56.
LISA CROSSLEY, Esq., Assistant Secretary and Compliance Officer. Ms.
Crossley is Associate General Counsel of Calvert Group and an officer of each of
its subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of
each of the other investment companies in the Calvert Group of Funds. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary Ms. Duke is Assistant Counsel
of Calvert Group and an officer of each of its subsidiaries and Calvert-Sloan
Advisers. L.L.C. She is also an officer of each of the other investment
companies in the Calvert Group of Funds. DOB: 09/07/68.
1 Directors deemed to be "interested persons" of the Fund under the
Investment Company Act of 1940, by virtue of their affiliation with the Fund's
Advisor.
Each of the above directors and officers is a trustee or officer of other
investment companies in the Calvert Group of Funds except Calvert Social
Investment Fund, and Calvert World Values Fund, Inc., of which only Messrs.
Baird, Guffey, and Silby are among the trustees/directors; Acacia Capital
Corporation, of which only Messrs. Blatz, Diehl, and Pugh are among the
directors, and Calvert New World Fund, Inc., of which only Messr. Martini is
among the directors. The address of directors and officers, unless otherwise
noted, is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
The Audit Committee of the Board of Directors is composed of Messrs. Baird,
Blatz, Feldman, Guffey and Pugh. The Board's Investment Policy Committee is
composed of Messrs. Borts, Diehl, Gavian, Rochat, and Silby.
Directors and officers of the Fund as a group own less than 1% of Calvert
National Municipal Intermediate Fund's outstanding shares.
During fiscal 1996, directors of the Fund not affiliated with the Fund's
Advisor were paid $4,579. Directors of the Fund not affiliated with the Advisor
currently receive an annual fee of $20,500 for service as a member of the Board
of Trustees/Directors of the Calvert Group of Funds plus a fee of $750 to $1,500
for each Board and Committee meeting attended; such fees are allocated among the
Funds on the basis of their net assets.
Directors of the Series not affiliated with the Series' Advisor may elect
to defer receipt of all or a percentage of their fees and invest them in any
fund in the Calvert of Funds through the Directors/Trustees Deferred
Compensation Plan (shown as "Pension or Retirement Benefits Accrued as part of
Fund Expenses," below). Deferral of the fees is designed to maintain the parties
in the same position as if the fees were paid on a current basis. Management
believes this will have a negligible effect on the Fund's assets, liabilities,
net assets, and net income per share, and will ensure that there is no
duplication of advisory fees.
Director Compensation Table
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal Year 1996 Aggregate Pension or Total
(unaudited numbers) Compensation Retirement Compensation from
Name of Director from Registrant Benefits Registrant and Fund
for service as Accrued as part Complex paid to
Director of Registrant Directors<F3>
Expenses <F2>
Richard L. Baird, Jr. $1898 $0 $34,925
Frank H. Blatz, Jr. $1935 $1935 $37,875
Frederick T. Borts $1793 $0 $32,675
Charles E. Diehl $1807 $1807 $35,475
Douglas E. Feldman $1873 $0 $34,175
Peter W. Gavian $1872 $560 $34,175
M. Charito Kruvant $905 $0 $24,313
John G. Guffey, Jr. $1816 $0 $49,433
Arthur J. Pugh $2011 $0 $36,736
D. Wayne Silby $1710 $0 $56,398
<FN>
<F2> Messrs. Blatz, Diehl, and Gavian have chosen to defer a portion of
their compensation. As of December 31, 1996, total deferred compensation,
including dividends and capital appreciation, was $428,689.46, $428,442.42, and
$96,332.93, for each named director, respectively.
<F3> As of December 31, 1996, the Fund Complex consists of nine (9)
registered investment companies.
</FN>
</TABLE>
INVESTMENT ADVISOR
The Fund's Investment Advisor is Calvert Asset Management Company, Inc.,
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814, a subsidiary of
Calvert Group, Ltd., which is a subsidiary of Acacia Mutual Life Insurance
Company of Washington, D.C. ("Acacia Mutual").
The Advisory Contract between the Fund and the Advisor will remain in
effect indefinitely, provided continuance is approved at least annually by the
vote of the holders of a majority of the outstanding shares of the Fund, or by
the directors of the Fund; and further provided that such continuance is also
approved annually by the vote of a majority of the directors of the Fund who are
not parties to the Contract or interested persons of such parties, cast in
person at a meeting called for the purpose of voting on such approval. The
Contract may be terminated without penalty by either party on 60 days' prior
written notice; it automatically terminates in the event of its assignment.
Under the Contract, the Advisor manages the investment and reinvestment of
the Fund's assets, subject to the direction and control of the Fund's Board of
Directors. For its services, the Advisor receives an annual fee of 0.60% of the
first $500 million of the Series' average daily net assets, 0.50% of the next
$500 million of such assets, and 0.40% of all assets over $1 billion.
The advisory fee is payable monthly. The Advisor reserves the right (i) to
waive all or a part of its fee and (ii) to compensate, at its expense,
broker-dealers in consideration of their promotional and administrative
services. The Advisor may recapture in later years, to the extent permitted by
law, fees it waived or deferred and expenses it paid in prior years.
Specifically, the Advisor may recapture fees waived or deferred and expenses
reimbursed for the prior two-year period, but in no event may it recapture fees
or expenses for any period later than the two-year period ending December 31,
1996. Recapture is permitted only to the extent it does not result in the
Series's aggregate expenses exceeding an annual expense limit of 2.00% of its
average daily net assets. The advisory fee incurred in any given year will be
paid in full before any recapture fees are paid for a prior year. Recaptured
fees will apply to the most recent suspension/reimbursement period. During
fiscal year 1994, the Advisor waived advisory fees of $139,628 and reimbursed
the Series $20,701 for other expenses. During fiscal year 1995, the Fund paid
advisory fees of $270,912. During fiscal year 1996, the Fund paid advisory fees
of $275,574.
The Advisor provides the Fund with investment advice and research, pays the
salaries and fees of all directors and executive officers of the Fund who are
principals of the Advisor, and pays certain Fund advertising and promotional
expenses. The Fund pays all other administrative and operating expenses,
including: custodial fees; shareholder servicing, dividend disbursing and
transfer agency fees; administrative service fees; federal and state securities
registration fees; insurance premiums; trade association dues; interest, taxes
and other business fees; legal and audit fees; and brokerage commissions and
other costs associated with the purchase and sale of portfolio securities.
The Advisor has agreed to reimburse National Municipal for all expenses,
excluding brokerage, taxes, interest, and extraordinary items exceeding, on a
pro rata basis, the most restrictive expense limitation in those states which
the Series' shares are qualified for sale (currently, 2.5% of the Series' first
$30 million of average net assets, decreasing to 1.5% for assets over $100
million).
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company, a wholly-owned subsidiary of
Calvert Group, Ltd., has been retained by the Fund to provide certain
administrative services necessary to the conduct of the Series' affairs. Such
services include the preparation of corporate and regulatory reports and
filings, portfolio accounting, and the daily determination of net investment
income and net asset value per share. Calvert Administrative Services Company is
entitled to receive an annual fee of 0.10% of the Series' average net assets for
providing such services. For the 1992 fiscal period, CASC waived its entire fee.
The fees paid by the Series to Calvert Administrative Services Company, Inc. for
fiscal years 1994, 1995, and 1996 were $45,876, $45,152, and $45,929,
respectively.
METHOD OF DISTRIBUTION
The Series has entered into an agreement with Calvert Distributors, Inc.
("CDI"), whereby CDI, acting as principal underwriter for the Series, makes a
continuous offering of the Series' securities on a "best efforts" basis. Prior
to April 1, 1995, the principal underwriter was Calvert Securities Corporation
("CSC"). Under the terms of the agreement, CDI bears all its expenses of
providing services pursuant to the agreement, including payment of any
commissions and service fees. CDI receives all sales charges imposed on the
Series' shares and compensates broker-dealer firms for sales of such shares (see
"Alternative Sales Options" in the Prospectus). CDI is entitled to receive
reimbursement of distribution expenses pursuant to the Distribution Plans (see
below). For the fiscal periods ending December 31, 1994, CSC received sales
charges in excess of the dealer reallowance of $37,135, respectively. During
fiscal 1995 and 1996, CDI received sales charges in excess of the dealer
reallowance of $5,917 and $13,952.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940
Act"), the Series has adopted a Distribution Plan (the "Plan") which permit it
to pay certain expenses associated with the distribution of its shares. Such
expenses may not exceed, on an annual basis, 0.15% of the Series average daily
net assets. As of October 1, 1997, expenses may not exceed, on an annual basis,
0.25% of the Series average daily net assets. No, Distribution Plan expenses
were paid in fiscal 1994, 1995, and 1996.
The Plan was approved by the Board of Directors/Trustees, including the
Directors/Trustees who are not "interested persons" of the Funds (as that term
is defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plan or in any agreements related to the Plan.
The selection and nomination of the Directors/Trustees who are not interested
persons of the Fund is committed to the discretion of such disinterested
Directors/Trustees. In establishing the Plan, the Directors/Trustees considered
various factors including the amount of the distribution fee. The
Directors/Trustees determined that there is a reasonable likelihood that the
Plan will benefit the Funds and their shareholders.
The Plan may be terminated by vote of a majority of the non-interested
Directors/Trustees who have no direct or indirect financial interest in the
Plan, or by vote of a majority of the outstanding shares of the Series. Any
change in the Plan that would materially increase the distribution cost to the
Series requires approval of the shareholders; otherwise, the Plan may be amended
by the Directors/Trustees, including a majority of the non-interested
Directors/Trustees as described above.
The Plan will continue in effect successive one-year terms, provided that
such continuance is specifically approved by (i) the vote of a majority of the
Directors/Trustees who are not parties to the Plan or interested persons of any
such party and who have no direct or indirect financial interest in the Plan,
and (ii) the vote of a majority of the entire Board of Directors/Trustees.
Apart from the Plan, the Advisor, at its expense, may incur costs and pay
expenses associated with the distribution of shares of the Fund.
TRANSFER AND SHAREHOLDER SERVICING AGENT
Calvert Shareholder Services, Inc., a subsidiary of Calvert Group, Ltd.,
and Acacia Mutual, has been retained by the Fund to act as transfer agent,
dividend disbursing agent and shareholder servicing agent. These
responsibilities include: responding to shareholder inquiries and instructions
concerning their accounts; crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions; daily
updating of shareholder accounts to reflect declaration and payment of
dividends; and preparing and distributing semi-annual statements to shareholders
regarding their accounts. For such services, Calvert Shareholder Services, Inc.,
receives compensation based on the number of shareholder accounts and the number
of transactions. The fees paid by the Series to Calvert Shareholder Services,
Inc. for the fiscal periods 1994, 1995, and 1996, were $25,149, $ 30,243, and
$32,227, respectively.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers and Lybrand L.L.P. has been selected by the Board of Directors to
serve as independent accountants of the Fund for fiscal year 1997. State Street
Bank & Trust Company, N.A., 225 Franklin Street, Boston, MA 02110, serves as
custodian of the Series's investments. First National Bank of Maryland, 25 South
Charles Street, Baltimore, Maryland 21203 acts as custodian of certain of the
Series's cash assets. Neither custodian has any part in deciding the Fund's
investment policies or the choice of securities that are to be purchased or sold
by the Series.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their desirability
from an investment standpoint. Investment decisions and the choice of brokers
and dealers are made by the Advisor under the direction and supervision of the
Board of Directors.
Broker-dealers who execute portfolio transactions on behalf of the Fund are
selected on the basis of their professional capability and the value and quality
of their services. The Advisor reserves the right to place orders for the
purchase or sale of portfolio securities with broker-dealers who have sold
shares of National Municipal or who provide it with statistical, research, or
other information and services. Although any statistical research or other
information and services provided by broker-dealers may be useful to the
Advisor, the dollar value of such information and services is generally
indeterminable, and its availability or receipt does not serve to materially
reduce the Advisor's normal research activities or expenses. No brokerage
commissions have been paid to any officer or director of the Fund or any of
their affiliates, or broker-dealers for the period ended December 31, 1994,
1995, or 1996.
The Advisor may also execute portfolio transactions with or through
broker-dealers who have sold shares of National Municipal. However, such sales
will not be a qualifying or disqualifying factor in a broker-dealer's selection
nor will the selection of any broker-dealer be based on the volume of shares
sold. The Advisor or its affiliate may compensate, at its expense,
broker-dealers in consideration of their promotional and administrative
services.
The portfolio turnover was 122%, 57%, and 23% for the 1994, 1995, and 1996,
fiscal years, respectively.
GENERAL INFORMATION
The Fund was organized as a corporation under the General Corporation Law
of the State of Maryland on February 4, 1992. The Fund's other series are:
Calvert California Municipal Intermediate Fund, Calvert Arizona Municipal
Intermediate Fund, Calvert Maryland Municipal Intermediate Fund, Calvert
Michigan Municipal Intermediate Fund, Calvert New York Municipal Intermediate
Fund, Calvert Pennsylvania Municipal Intermediate Fund, and Calvert Virginia
Municipal Intermediate Fund. Prior to March 1, 1994, Calvert National Municipal
Intermediate Fund was known as Calvert Intermediate Municipal Fund.
National Municipal will send its shareholders unaudited semi-annual and
audited annual reports that will include the Series' net asset value per share,
portfolio securities, income and expenses, and other financial information.
Each share of the Series represents an equal proportionate interest in that
Series with each other share and is entitled to such dividends and distributions
out of the income belonging to the Series as declared by the Board. Upon any
liquidation of the Series, shareholders are entitled to share pro rata in the
net assets available for distribution.
This Statement of Additional Information does not contain all the
information in the Fund's registration statement. The registration statement is
on file with the Securities and Exchange Commission and is available to the
public.
FINANCIAL STATEMENTS
The audited financial statements in the Series' Annual Report to
Shareholders, dated December 31, 1996, are expressly incorporated by reference
and made a part of this Statement of Additional Information. A copy of the
Annual Report may be obtained free of charge by writing or calling the Series.
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states, cities,
municipalities, and their agencies to obtain funds for various public purposes.
Such purposes include the construction of a wide range of public facilities, the
refunding of outstanding obligations, the obtaining of funds for general
operating expenses, and the lending of funds to other public institutions and
facilities. In addition, certain types of industrial development bonds are
issued by or on behalf of public authorities to obtain funds for many types of
local, privately operated facilities. Such debt instruments are considered
municipal obligations if the interest paid on them is exempt from federal income
tax in the opinion of bond counsel to the issuer. Although the interest paid on
the proceeds from private activity bonds used for the construction, equipment,
repair or improvement of privately operated industrial or commercial facilities
may be exempt from federal income tax, current federal tax law places
substantial limitations on the size of such issues.
Municipal obligations are generally classified as either "general
obligation" or "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived from
a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source, but not from
the general taxing power. Tax-exempt industrial development bonds are in most
cases revenue bonds and do not generally carry the pledge of the credit of the
issuing municipality. There are, of course, variations in the security of
municipal obligations, both within a particular classification and among
classifications.
Municipal obligations are generally traded on the basis of a quoted yield
to maturity, and the price of the security is adjusted so that relative to the
stated rate of interest it will return the quoted rate to the purchaser.
Short-term and limited-term municipal obligations include Tax Anticipation
Notes, Revenue Anticipation Notes, Bond Anticipation Notes, Construction Loan
Notes, and Discount Notes. The maturities of these instruments at the time of
issue generally will range between three months and one year. Pre-Refunded Bonds
with longer nominal maturities that are due to be retired with the proceeds of
an escrowed subsequent issue at a date within one year and three years of the
time of acquisition are also considered short-term and limited-term municipal
obligations.
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc.'s 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.'s/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.
LETTER OF INTENT
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the Letter of
Intent option on my Fund Account Application Form, I agree to be bound by the
terms and conditions applicable to Letters of Intent appearing in the Prospectus
and the Statement of Additional Information for the Fund and the provisions
described below as they may be amended from time to time by the Fund. Such
amendments will apply automatically to existing Letters of Intent.
I intend to invest in the shares of: (Fund or Portfolio name*)during the
thirteen (13) month period from the date of my first purchase pursuant to this
Letter (which cannot be more than ninety (90) days prior to the date of this
Letter or my Fund Account Application Form, whichever is applicable), an
aggregate amount (excluding any reinvestments of distributions) of at least
fifty thousand dollars ($50,000) which, together with my current holdings of the
Fund (at public offering price on date of this Letter or my Fund Account
Application Form, whichever is applicable), will equal or exceed the amount
checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms of escrow,
to which I hereby agree, each purchase occurring after the date of this Letter
will be made at the public offering price applicable to a single transaction of
the dollar amount specified above, as described in the Fund's prospectus. No
portion of the sales charge imposed on purchases made prior to the date of this
Letter will be refunded.
I am making no commitment to purchase shares, but if my purchases within
thirteen months from the date of my first purchase do not aggregate the minimum
amount specified above, I will pay the increased amount of sales charges
prescribed in the terms of escrow described below. I understand that 4.75% of
the minimum dollar amount specified above will be held in escrow in the form of
shares (computed to the nearest full share). These shares will be held subject
to the terms of escrow described below.
From the initial purchase (or subsequent purchases if necessary), 4.75% of
the dollar amount specified in this Letter shall be held in escrow in shares of
the Fund by the Fund's transfer agent. For example, if the minimum amount
specified under the Letter is $50,000, the escrow shall be shares valued in the
amount of $2,375 (computed at the public offering price adjusted for a $50,000
purchase). All dividends and any capital gains distribution on the escrowed
shares will be credited to my account.
If the total minimum investment specified under the Letter is completed
within a thirteen month period, escrowed shares will be promptly released to me.
However, shares disposed of prior to completion of the purchase requirement
under the Letter will be deducted from the amount required to complete the
investment commitment.
Upon expiration of this Letter, the total purchases pursuant to the Letter
are less than the amount specified in the Letter as the intended aggregate
purchases, Calvert Distributors, Inc. ("CDI") will bill me for an amount equal
to the difference between the lower load I paid and the dollar amount of sales
charges which I would have paid if the total amount purchased had been made at a
single time. If not paid by the investor within 20 days, CDI will debit the
difference from my account. Full shares, if any, remaining in escrow after the
aforementioned adjustment will be released and, upon request, remitted to me.
I irrevocably constitute and appoint CDI as my attorney-in-fact, with full
power of substitution, to surrender for redemption any or all escrowed shares on
the books of the Fund. This power of attorney is coupled with an interest.
The commission allowed by Calvert Distributors, Inc. to the broker-dealer
named herein shall be at the rate applicable to the minimum amount of my
specified intended purchases.
The Letter may be revised upward by me at any time during the
thirteen-month period, and such a revision will be treated as a new Letter,
except that the thirteen-month period during which the purchase must be made
will remain unchanged and there will be no retroactive reduction of the sales
charges paid on prior purchases.
In determining the total amount of purchases made hereunder, shares
disposed of prior to termination of this Letter will be deducted. My
broker-dealer shall refer to this Letter of Intent in placing any future
purchase orders for me while this Letter is in effect.
Dealer
Name of Investor(s)
By
Authorized Signer
Address
Date
Signature of Investor(s)
Signature of Investor(s)
*"Fund" in this Letter of Intent shall refer to the Fund or Portfolio, as
the case may be, here indicated.
Calvert Municipal Fund, Inc.
CALVERT NATIONAL MUNICIPAL
INTERMEDIATE FUND
Statement of Additional Information
April 30, 1997
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
217 E. Redwood Street
Baltimore, Maryland 21202-3316
TRANSFER AGENT
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 3
Purchases and Redemptions of Shares 4
Dividends and Distributions 5
Tax Matters 5
Valuation of Shares 6
Calculation of Yield and Total Return 7
Advertising 8
Directors and Officers 8
Investment Advisor 11
Administrative Services 12
Method of Distribution 12
Transfer and Shareholder Servicing Agent 13
Independent Accountants and Custodians 13
Portfolio Transactions 13
General Information 14
Financial Statements 14
Appendix 14
STATEMENT OF ADDITIONAL INFORMATION-- April 30, 1997
CALVERT CALIFORNIA MUNICIPAL
INTERMEDIATE FUND
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748
Information: (301) 951-4820
Shareholder
Services: (800) 368-2745
Broker (800) 368-2746
Services: (301) 951-4850
TDD for the Hearing-
Impaired: (800) 541-1524
This Statement of Additional Information is not a prospectus. Investors
should read the Statement of Additional Information in conjunction with
the Series' Prospectus, dated April 30, 1997, which may be obtained
free of charge by writing the Series at the above address or calling
the Fund at the telephone numbers listed above.
INVESTMENT OBJECTIVE
Calvert California Municipal Intermediate Fund ("CCMIF") is
designed to provide individual and institutional investors with the
highest level of interest income exempt from federal and California
income taxes as is consistent with prudent investment management,
preservation of capital, and the quality and maturity characteristics
of the Series. There is, of course, no assurance that the Series will
be successful in meeting its investment objective; there are inherent
risks in the ownership of any investment.
Dividends paid by CCMIF will fluctuate with income earned on
investments. In addition, the value of its shares will fluctuate to
reflect changes in the market value of the Series' investments. The
Series will attempt, through careful management, to reduce these risks
and enhance the opportunities for higher income and greater price
stability.
INVESTMENT POLICIES
CCMIF invests primarily in a nondiversified portfolio of
municipal obligations, including some with interest that may be subject
to alternative minimum tax. Fixed rate investments normally have
remaining maturities of 12 years or less; variable rate investments may
have longer maturities. A complete explanation of municipal obligations
and municipal bond and note ratings appears in the Appendix.
Under normal market conditions, CCMIF will invest at least 65%
of its total assets in municipal obligations with interest that is
exempt from federal and California income tax, including those issued
by or on behalf of the State of California and its political
subdivisions ("California Municipal Obligations"). CCMIF will also
attempt to invest its remaining assets in these obligations, but may
invest it in municipal obligations of other states, territories and
possessions of the United States, the District of Columbia, and their
respective authorities, agencies, instrumentalities and political
subdivisions. Dividends you receive from CCMIF that are derived from
interest on tax-exempt obligations of other governmental issuers will
be exempt from federal income tax, but will be subject to California
state income taxes.
Variable Rate Demand Notes
The Board of Directors of Calvert Municipal Fund, Inc. (the
"Fund"), of which CCMIF is a series, has approved investments in
floating and variable rate demand notes upon the following conditions:
the Fund has right of demand, upon notice not to exceed thirty days,
against the issuer to receive payment; the issuer will be able to make
payment upon such demand, either from its own resources or through an
unqualified commitment from a third party; and the rate of interest
payable is calculated to ensure that the market value of such notes
will approximate par value on the adjustment dates. The remaining
maturity of such demand notes is deemed the period remaining until such
time as the Fund has the right to dispose of the notes at a price which
approximates par and market value. Notes with a right of demand
exceeding seven days are considered illiquid and are subject to
purchase restrictions.
Municipal Leases
CCMIF may invest in municipal leases, or structured
instruments where the underlying security is a municipal lease. A
municipal lease is an obligation of a government or governmental
authority, not subject to voter approval, used to finance capital
projects or equipment acquisitions and payable through periodic rental
payments. CCMIF may purchase unrated leases. The Fund's Advisor, under
the supervision of the Board of Trustees/Directors, is responsible for
determining the credit quality of such leases on an ongoing basis,
including an assessment of the likelihood that the lease will not be
canceled. Certain municipal leases may be considered illiquid and
subject to CCMIF's limit on illiquid securities. The Board of
Trustees/Directors has directed the Advisor to treat a municipal lease
as a liquid security if it satisfies the following conditions: (A) such
treatment must be consistent with CCMIF's investment restrictions; (B)
the Advisor should be able to conclude that the obligation will
maintain its liquidity throughout the time it is held by CCMIF, based
on the following factors: (1) whether the lease may be terminated by
the lessee; (2) the potential recovery, if any, from a sale of the
leased property upon termination of the lease; (3) the lessee's general
credit strength (e.g., its debt, administrative, economic and financial
characteristics and prospects); (4) the likelihood that the lessee will
discontinue appropriating funding for the leased property because the
property is no longer deemed essential to its operations (e.g., the
potential for an "event of nonappropriation"), and (5) any credit
enhancement or legal recourse provided upon an event of
nonappropriation or other termination of the lease; (C) the Advisor
should determine whether the obligation can be disposed of within seven
days in the ordinary course of business at approximately the amount at
which CCMIF has valued it for purposes of calculating CCMIF's net asset
value, taking into account the following factors: (1) the frequency of
trades and quotes; (2) the volatility of quotations and trade prices;
(3) the number of dealers willing to purchase or sell the security and
the number of potential purchasers; (4) dealer undertakings to make a
market in the security; (5) the nature of the security and the nature
of the marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of the
transfer); (6) the rating of the security and the financial condition
and prospects of the issuer; and (7) other factors relevant to CCMIF's
ability to dispose of the security; and (D) the Advisor should have
reasonable expectations that the municipal lease obligation will
maintain its liquidity throughout the time the instrument is held by
CCMIF.
Temporary Investments
Short-term money market type investments consist of:
obligations of the U.S. Government, its agencies and instrumentalities;
certificates of deposit of banks with assets of one billion dollars or
more; commercial paper or other corporate notes of investment grade
quality; and any of such items subject to short-term repurchase
agreements.
When-Issued Purchases
Securities purchased on a when-issued basis and the securities
held in CCMIF's portfolio are subject to changes in market value based
on the public's perception of the creditworthiness of the issuer and
changes in the level of interest rates (which will generally result in
both changing in value in the same way, i.e., both experiencing
appreciation when interest rates decline and depreciation when interest
rates rise). Therefore, if in order to achieve higher interest income,
CCMIF remains substantially fully invested at the same time that it has
purchased securities on a when-issued basis, there will be a greater
possibility that the market value of its assets may vary. No new
when-issued commitments will be made if more than 50% of the Series'
net assets would become so committed.
When the time comes to pay for when-issued securities, CCMIF
will meet its obligations from then available cash flow, sale of
securities or, although it would not normally expect to do so, from
sale of the when-issued securities themselves (which may have a market
value greater or less than the Series' payment obligation). Sale of
securities to meet such obligations carries with it a greater potential
for the realization of capital losses and capital gains which are not
exempt from federal income tax.
Transactions in Futures Contracts
CCMIF may engage in the purchase and sale of futures contracts
on an index of municipal bonds or on U.S. Treasury securities, or
options on such futures contracts, for hedging and substitution
purposes only. CCMIF may sell such futures contracts in anticipation of
a decline in the cost of municipal bonds it holds or may purchase such
futures contracts in anticipation of an increase in the value of
municipal bonds CCMIF intends to acquire. CCMIF also is authorized to
purchase and sell other financial futures contracts which in the
opinion of the Investment Advisor provide an appropriate hedge for some
or all of CCMIF's securities.
Because of low initial margin deposits made upon the opening
of a futures position, futures transactions involve substantial
leverage. As a result, relatively small movements in the price of the
futures contract can result in substantial unrealized gains or losses.
Because CCMIF will engage in the purchase and sale of financial futures
contracts solely for hedging and substitution purposes, however, any
losses incurred in connection therewith should, if the strategy is
successful, be offset in whole or in part by increases in the value of
securities held by CCMIF or decreases in the price of securities CCMIF
intends to acquire.
Municipal bond index futures contracts commenced trading in
June 1985, and it is possible that trading in such futures contracts
will be less liquid than that in other futures contracts. The trading
of futures contracts and options thereon is subject to certain market
risks, such as trading halts, suspensions, exchange or clearing house
equipment failures, government intervention or other disruptions of
normal trading activity, which could at times make it difficult or
impossible to liquidate existing positions.
The liquidity of a secondary market in futures contracts may
be further adversely affected by "daily price fluctuation limits"
established by contract markets, which limit the amount of fluctuation
in the price of a futures contract or option thereon during a single
trading day. Once the daily limit has been reached in the contract, no
trades may be entered into at a price beyond the limit, thus preventing
the liquidation of open positions. Prices of existing contracts have in
the past moved the daily limit on a number of consecutive trading days.
CCMIF will enter into a futures position only if, in the judgment of
the Investment Advisor, there appears to be an actively traded
secondary market for such futures contracts.
The successful use of transactions in futures contracts and
options thereon depends on the ability of the Investment Advisor to
correctly forecast the direction and extent of price movements of these
instruments, as well as price movements of the securities held by CCMIF
within a given time frame. To the extent these prices remain stable
during the period in which a futures or option contract is held by
CCMIF, or move in a direction opposite to that anticipated, CCMIF may
realize a loss on the hedging transaction which is not fully or
partially offset by an increase in the value of CCMIF's securities. As
a result, CCMIF's total return for such period may be less than if it
had not engaged in the hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller of
a contract to deliver and the purchaser of a contract to take delivery
of the type of financial instrument called for in the contract or, in
some instances, to make a cash settlement, at a specified future time
for a specified price. Although the terms of a contract call for actual
delivery or acceptance of securities, or for a cash settlement, in most
cases the contracts are closed out before the delivery date without the
delivery or acceptance taking place. CCMIF intends to close out any
futures contracts prior to the delivery date of such contracts.
CCMIF may sell futures contracts in anticipation of a decline
in the value of its investments in municipal bonds. The loss associated
with any such decline could be reduced without employing futures as a
hedge by selling long-term securities and either reinvesting the
proceeds in securities with shorter maturities or by holding assets in
cash. This strategy, however, entails increased transaction costs in
the form of brokerage commissions and dealer spreads and will typically
reduce CCMIF's average yields as a result of the shortening of
maturities.
The purchase or sale of a futures contract differs from the
purchase or sale of a security, in that no price or premium is paid or
received. Instead, an amount of cash or securities acceptable to
CCMIF's futures commission merchant and the relevant contract market,
which varies but is generally about 5% or less of the contract amount,
must be deposited with the broker. This amount is known as "initial
margin," and represents a "good faith" deposit assuring the performance
of both the purchaser and the seller under the futures contract.
Subsequent payments to and from the broker, known as "variation
margin," are required to be made on a daily basis as the price of the
futures contract fluctuates, making the long or short positions in the
futures contract more or less valuable, a process known as "marking to
the market." Prior to the settlement date of the futures contract, the
position may be closed out by taking an opposite position which will
operate to terminate the position in the futures contract. A final
determination of variation margin is then made, additional cash is
required to be paid to or released by the broker, and the purchaser
realizes a loss or gain. In addition, a commission is paid on each
completed purchase and sale transaction.
The sale of financial futures contracts provides an
alternative means of hedging CCMIF against declines in the value of its
investments in municipal bonds. As such values decline, the value of
CCMIF's position in the futures contracts will tend to increase, thus
offsetting all or a portion of the depreciation in the market value of
CCMIF's fixed income investments which are being hedged. While CCMIF
will incur commission expenses in establishing and closing out futures
positions, commissions on futures transactions may be significantly
lower than transaction costs incurred in the purchase and sale of fixed
income securities. In addition, the ability of CCMIF to trade in the
standardized contracts available in the futures market may offer a more
effective hedging strategy than a program to reduce the average
maturing of portfolio securities, due to the unique and varied credit
and technical characteristics of the municipal debt instruments
available to CCMIF. Employing futures as a hedge may also permit CCMIF
to assume a hedging posture without reducing the yield on its
investments, beyond any amounts required to engage in futures trading.
CCMIF may engage in the purchase and sale of futures contracts
on an index of municipal securities. These instruments provide for the
purchase or sale of a hypothetical portfolio of municipal bonds at a
fixed price in a stated delivery month. Unlike most other futures
contracts, however, a municipal bond index futures contract does not
require actual delivery of securities but results in a cash settlement
based upon the difference in value of the index between the time the
contract was entered into and the time it is liquidated.
The municipal bond index underlying the futures contracts
traded by the Portfolio is The Bond Buyer Municipal Bond Index,
developed by The Bond Buyer and the Chicago Board of Trade ("CBT"), the
contract market on which the futures contracts are traded. As currently
structured, the index is comprised of 40 tax-exempt term municipal
revenue and general obligation bonds. Each bond included in the index
must be rated either A- or higher by Standard & Poor's or A or higher
by Moody's Investors Service and must have a remaining maturity of 19
years or more. Twice a month new issues satisfying the eligibility
requirements are added to, and an equal number of old issues will be
deleted from, the index. The value of the index is computed daily
according to a formula based upon the price of each bond in the index,
as evaluated by four dealer-to-dealers brokers.
CCMIF may also purchase and sell futures contracts on U.S.
Treasury bills, notes and bonds for the same types of hedging and
substitution purposes. Such futures contracts provide for delivery of
the underlying security at a specified future time for a fixed price,
and the value of the futures contract therefore generally fluctuates
with movements in interest rates.
The municipal bond index futures contract, futures contracts
on U.S. Treasury securities and options on such futures contracts are
traded on the CBT, which, like other contract markets, assures the
performance of the parties to each futures contract through a clearing
corporation, a nonprofit organization managed by the exchange
membership, which is also responsible for handling daily accounting of
deposits or withdrawals of margin.
CCMIF may also purchase financial futures contracts when not
fully invested in municipal bonds, in anticipation of an increase in
the cost of securities CCMIF intends to purchase. As such securities
are purchased, an equivalent amount of futures contracts will be closed
out. In a substantial majority of these transactions, CCMIF will
purchase municipal bonds upon termination of the futures contracts. Due
to changing market conditions and interest rate forecasts, however, a
futures position may be terminated without a corresponding purchase of
securities. Nevertheless, all purchases of futures contracts by CCMIF
will be subject to certain restrictions, described below.
Options on Futures Contracts. An option on a futures contract
provides the purchaser with the right, but not the obligation, to enter
into a long position in the underlying futures 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
contract. 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.
CCMIF may purchase options on futures contracts for the same
types of purposes described above in connection with futures contracts.
For example, in order to protect against an anticipated decline in the
value of securities it holds, CCMIF could purchase put options on
futures contracts, instead of selling the underlying futures contracts.
Conversely, in order to protect against the adverse effects of
anticipated increases in the costs of securities to be acquired, CCMIF
could purchase call options on futures contracts, instead of purchasing
the underlying futures contracts. CCMIF generally will sell options on
futures contracts only to close out an existing position.
CCMIF will not engage in transactions in such instruments
unless and until the Investment Advisor determines that market
conditions and the circumstances of CCMIF warrant such trading. To the
extent CCMIF 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 CCMIF, the
liquidity of the market for futures contracts and the anticipated
correlation between movements in the value of the futures or option
contract and the value of securities held by the Portfolio.
Restrictions on the Use of Futures Contracts and Options on
Futures Contracts. Under regulations of the Commodity Futures Trading
Commission ("CFTC"), the futures trading activities described herein
will not result in CCMIF being deemed to be a "commodity pool," as
defined under such regulations, provided that certain trading
restrictions are adhered to. In particular, CFTC regulations require
that all futures and option positions entered into by CCMIF qualify as
bona fide hedge transactions, as defined under CFTC regulations, or, in
the case of long positions, that the value of such positions not exceed
an amount of segregated funds determined by reference to certain cash
and securities positions maintained by CCMIF and accrued profits on
such positions. In addition, as a matter of operating policy, CCMIF may
not purchase or sell a futures contract or an option thereon if,
immediately thereafter, the sum of the amount of initial margin
deposits on CCMIF's existing futures positions and premiums on such
options would exceed 5% of its net assets.
When CCMIF purchases a futures contract, it will maintain an
amount of cash, cash equivalents (for example, commercial paper and
daily tender adjustable notes) or short-term high-grade fixed income
securities in a segregated account with CCMIF's custodian, so that the
amount so segregated plus the amount of initial and variation margin
held in the account of its broker equals the market value of the
futures contract, thereby ensuring that the use of such futures is
unleveraged.
Risk Factors in Transactions in Futures Contracts. The
particular municipal bonds comprising the index underlying the
municipal bond index futures contract may vary from the bonds held by
CCMIF. In addition, the securities underlying futures contracts on U.S.
Treasury securities will not be the same as securities held by CCMIF.
As a result, CCMIF's ability effectively to hedge all or a portion of
the value of its municipal bonds through the use of futures contracts
will depend in part on the degree to which price movements in the index
underlying the municipal bond index futures contract, or the U.S.
Treasury securities underlying other futures contracts trade, correlate
with price movements of the municipal bonds held by CCMIF.
For example, where prices of securities in CCMIF do not move
in the same direction or to the same extent as the values of the
securities or index underlying a futures contract, the trading of such
futures contracts may not effectively hedge CCMIF's investments and may
result in trading losses. The correlation may be affected by
disparities in the average maturity, ratings, geographical mix or
structure of CCMIF's investments as compared to those comprising the
index, and general economic or political factors. In addition, the
correlation between movements in the value of the index underlying a
futures contract may be subject to change over time, as additions to
and deletions from the index alter its structure. In the case of
futures contracts on U.S. Treasury securities and options thereon, the
anticipated correlation of price movements between the U.S. Treasury
securities underlying the futures or options and municipal bonds may be
adversely affected by economic, political, legislative or other
developments that have a disparate impact on the respective markets for
such securities. In the event that the Investment Advisor determines to
enter into transactions in financial futures contracts other than the
municipal bond index futures contract or futures on U.S. Treasury
securities, the risk of imperfect correlation between movements in the
prices of such futures contracts and the prices of municipal bonds held
by CCMIF may be greater.
The trading of futures contracts on an index also entails the
risk of imperfect correlation between movements in the price of the
futures contract and the value of the underlying index. The anticipated
spread between the prices may be distorted due to differences in the
nature of the markets, such as margin requirements, liquidity and the
participation of speculators in the futures markets. The risk of
imperfect correlation, however, generally diminishes as the delivery
month specified in the futures contract approaches.
Prior to exercise or expiration, a position in futures
contracts or options thereon may be terminated only by entering into a
closing purchase or sale transaction. This requires a secondary market
on the relevant contract market. CCMIF will enter into a futures or
option position only if there appears to be a liquid secondary market
therefor, although there can be no assurance that such a liquid
secondary market will exist for any particular contract at any specific
time. Thus, it may not be possible to close out a position once it has
been established. Under such circumstances, CCMIF could be required to
make continuing daily cash payments of variation margin in the event of
adverse price movements. In such situation, if CCMIF has insufficient
cash, it may be required to sell portfolio securities to meet daily
variation margin requirements at a time when it may be disadvantageous
to do so. In addition, CCMIF may be required to perform under the terms
of the futures or option contracts it holds. The inability to close out
futures or options positions also could have an adverse impact on
CCMIF's ability effectively to hedge its portfolio.
When CCMIF 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, CCMIF
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
CCMIF'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.
Credit Quality
As an operating policy, the Fund may not invest more than 35% of its
net assets in non-investment grade obligations. As has been the
industry practice, this determination of credit quality is made at the
time the Fund acquires the obligation However, because it is possible
that subsequent downgrades could occur, if an obligation held by the
Fund is later downgraded, CCMIF's Advisor, under the supervision of
CCMIF's Board of Directors, will consider whether it is in the best
interest of CCMIF's shareholders to hold or to dispose of the
obligation. Among the criteria that may be considered by the Advisor
and the Board are the probability that the obligations will be able to
make scheduled interest and principal payments in the future, the
extent to which any devaluation of the obligation has already been
reflected in CCMIF's net asset value, and the total percentage, if any,
of obligations currently rated below investment grade held by the Fund.
Non-investment grade securities have moderate to poor
protection of principal and interest payments and have speculative
characteristics. They involve greater risk of default or price declines
due to changes in the issuer's creditworthiness than investment-grade
debt securities. Because the market for lower-rated securities may be
thinner and less active than for higher-rated securities, there may be
market price volatility for these securities and limited liquidity in
the resale market. Market prices for these securities may decline
significantly in periods of general economic difficulty or rising
interest rates.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The foregoing investment objective and policies and the
following investment restrictions and fundamental policies may not be
changed without the consent of the holders of a majority of CCMIF's
outstanding shares. Shares have equal rights as to voting. A majority
of the shares means the lesser of (i) 67% of the shares represented at
a meeting at which more than 50% of the outstanding shares are
represented or (ii) more than 50% of the outstanding shares. CCMIF may
not:
1) Purchase common stocks, preferred stocks, warrants, or
other equity securities;
2) Issue senior securities, borrow money, or pledge,
mortgage, or hypothecate its assets, except as may be
necessary to secure borrowings from banks for temporary or
emergency (not leveraging) purposes and then in an amount
not greater than 10% of the value of the Series' total
assets at the time of the borrowing. Investment securities
will not be purchased while any borrowings are outstanding;
3) Underwrite the securities of other issuers, except to the
extent that the purchase of municipal obligations in
accordance with the Series' investment objective and
policies, either directly from the issuer, or from an
underwriter for an issuer, may be deemed an underwriting;
4) Purchase or sell real estate, real estate investment
trust securities, or oil and gas interests, but this shall
not prevent CCMIF from investing in municipal obligations
secured by real estate or interests therein;
5) Purchase or retain securities of an issuer if those
directors of the Fund, each of whom owns more than 1/2 of
1% of the outstanding securities of such issuer, together
own more than 5% of such outstanding securities;
6)
Purchase or sell physical commodities except that it may
enter into futures contracts and options thereon;
7) Invest in companies for the purpose of exercising
control; or invest in securities of other investment
companies, except as they may be acquired as part of a
merger, consolidation or acquisition of assets, or in
connection with a trustee's/director's deferred
compensation plan, as long as there is no duplication of
advisory fees;
8) Invest 25% or more of its assets in the securities of any
one issuer. CCMIF may invest more than 25% of its assets
in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities but will
invest in more than 20% of such obligations only during
abnormal market conditions. For purposes of this
limitation, the entity which has the ultimate
responsibility for the payment of principal and interest
on a particular security will be treated as its issuer;
9) Invest 25% or more of its assets in any particular
industry or industries. CCMIF may invest more than 25% of
its assets in obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities but will
invest in more than 20% of such obligations only during
abnormal market conditions. Industrial development bonds,
where the payment of principal and interest is the
responsibility of companies within the same industry, are
grouped together as an "industry";
10) Make loans to others, except in accordance with the
Series' investment objective and policies or pursuant to
contracts providing for the compensation of service
providers by compensating balances.
Nonfundamental Investment Restrictions
The Series has adopted the following operating (i.e.,
nonfundamental) investment policies and restrictions which may be
changed by the Board of Directors without shareholder approval. CCMIF
may not:
1) Purchase illiquid securities if more than 15% of the
value of its net assets would be invested in such
securities;
2) Invest more than 5% of the value of its total assets in
securities where the payment of principal and interest is
the responsibility of a company or companies with less
than three years' operating history;
3)
Purchase or sell a futures contract or an option thereon
if immediately thereafter, the sum of the amount of
initial margin deposits on futures and premiums on such
options would exceed 5% of CCMIF's net assets;
4)
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 CCMIF's total assets.
5)
Effect short sales of securities. For purposes of this
restriction, transactions in futures contracts and options
are not deemed to constitute selling securities short.
6)
Purchase securities on margin, except that it may make
margin deposits in connection with futures contacts or
options on futures.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will be issued at no charge if requested in
writing by the investor. No certificates will be issued for fractional
shares (see Prospectus, "How to Sell Your Shares"). To change
redemption instructions already given, shareholders must send a written
notice to Calvert Group, c/o NFDS, 6th Floor, 1004 Baltimore, Kansas
City, MO 64105, with a voided copy of a check for the bank wiring
instructions to be added. If a voided check does not accompany the
request, then the request must be signature guaranteed by a commercial
bank, savings and loan association, trust company, member firm of any
national securities exchange, or certain credit unions. Further
documentation may be required from corporations, fiduciaries, and
institutional investors.
The right of redemption may be suspended or the date of
payment postponed for any period during which the New York Stock
Exchange is closed (other than customary weekend and holiday closings),
when trading on the New York Stock Exchange is restricted, or an
emergency exists, as determined by the SEC, or if the Commission has
ordered such a suspension for the protection of shareholders.
Redemption proceeds are normally mailed or wired the next business day
after a proper redemption request has been received, unless redemptions
have been suspended or postponed as described above.
Redemption proceeds are normally paid in cash. However, CCMIF
has the right to redeem shares in assets other than cash for redemption
amounts exceeding, in any 90-day period, $250,000 or 1% of the net
asset value of CCMIF, whichever is less.
Reduced Sales Charges
CCMIF imposes reduced sales charges for shares in certain situations in
which the Principal Underwriter (which offers the Series' shares
continuously and on a "best efforts" basis) and the dealers selling
CCMIF shares may expect to realize significant economies of scale with
respect to such sales. Generally, sales costs do not increase in
proportion to the dollar amount of the shares sold; the per-dollar
transaction cost for a sale to an investor of shares worth $5,000 is
generally much higher than the per-dollar cost for a sale of shares
worth $1,000,000. Thus, the applicable sales charge declines as a
percentage of the dollar amount of shares sold as the dollar amount
increases.
When a shareholder agrees to make purchases of shares over a
period of time totaling a certain dollar amount pursuant to a Letter of
Intent, the Underwriter and selling dealers can expect to realize the
economies of scale applicable to that stated goal amount. Thus the
Series imposes the sales charge applicable to the goal amount.
Similarly, the Underwriter and selling dealers also experience cost
savings when dealing with existing CCMIF shareholders, enabling the
Series to afford existing shareholders the Right of Accumulation. The
Underwriter and selling dealers can also expect to realize economies of
scale when making sales to the members of certain qualified groups
which agree to facilitate distribution of Series' shares to their
members. See "Exhibit A - Reduced Sales Charges" in the Prospectus.
DIVIDENDS AND DISTRIBUTIONS
CCMIF declares and pays monthly dividends of its net income to
shareholders of record as of the close of business on each designated
monthly record date. Net investment income consists of the interest
income earned on investments (adjusted for amortization of original
issue discounts or premiums or market premiums), less estimated
expenses. Capital gains, if any, are normally paid once a year and will
be automatically reinvested at net asset value in additional shares.
Dividends and any distributions are automatically reinvested in
additional shares of the Fund, unless you elect to have the dividends
of $10 or more paid in cash (by check or by Calvert Money Controller).
You may also request to have your dividends and distributions from the
Series invested in shares of any other Calvert Group Fund, at no
additional charge. If you elect to have dividends and/or distributions
paid in cash, and the U.S. Postal Service cannot deliver the check, or
if it remains uncashed for six months, it, as well as future dividends
and distributions, will be reinvested in additional shares.
TAX MATTERS
In 1996 the Series did qualify and in 1997 the Series intends to
qualify as a "regulated investment company" under Subchapter M of the
Internal Revenue Code as amended (the "Code"). By so qualifying, the
Series will not be subject to federal income tax, nor to the federal
excise tax imposed by the Tax Reform Act of 1986 (the "Act"), to the
extent that it distributes its net investment income and realized
capital gains.
CCMIF's dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally
subject to federal income tax; however under the Act, dividends
attributable to interest on certain private activity bonds must be
included in federal alternative minimum taxable income for the purpose
of determining liability (if any) for individuals and for corporations.
CCMIF's dividends derived from taxable interest and distributions of
net short-term capital gains, whether taken in cash or reinvested in
additional shares, are taxable to shareholders as ordinary income and
do not qualify for the dividends received deduction for corporations.
If you held shares for six months or less, losses must be offset by the
amount of exempt-interest dividends you received, and, to the extent of
capital gain distributions you received, the loss amount not offset
(disallowed) must be treated as long-term capital loss.
A shareholder may also be subject to some state and local
taxes on dividends and distributions from the Series. The Series will
notify shareholders annually about the tax status of dividends and
distributions paid by the Series and the amount of dividends withheld,
if any, during the previous year.
The Code provides that interest on indebtedness incurred or
continued in order to purchase or carry shares of a regulated
investment company which distributes exempt-interest dividends during
the year is not deductible. Furthermore, entities or persons who are
"substantial users" (or persons related to "substantial users") of
facilities financed by private activity bonds should consult their tax
advisors before purchasing shares of the Series. "Substantial user" is
generally defined as including a "non-exempt person" who regularly uses
in trade or business a part of a facility financed from the proceeds of
private activity bonds.
Investors should note that the Code may require investors to
exclude the initial sales charge, if any, paid on the purchase of CCMIF
shares from the tax basis of those shares if the shares are exchanged
for shares of another Calvert Group Fund within 90 days of purchase.
This requirement applies only to the extent that the payment of the
original sales charge on the shares of the Series causes a reduction in
the sales charge otherwise payable on the shares of the Calvert Group
Fund acquired in the exchange, and investors may treat sales charges
excluded from the basis of the original sales as incurred to acquire
the new shares.
The Series may be required to withhold 31% of any long-term
capital gain dividends and 31% of each redemption transaction occurring
in the Series if: (a) the shareholder's social security number or other
taxpayer identification number ("TIN") is not provided or an obviously
incorrect TIN is provided; (b) the shareholder does not certify under
penalties of perjury that the TIN provided is the shareholder's correct
TIN and that the shareholder is not subject to backup withholding under
section 3406(a)(1)(C) of the Code because of underreporting (however,
failure to provide certification as to the application of section
3406(a)(1)(C) will result only in backup withholding on capital gain
dividends, not on redemptions); or (c) the Series is notified by the
Internal Revenue Service that the TIN provided by the shareholder is
incorrect or that there has been underreporting of interest or
dividends by the shareholder. Affected shareholders will receive
statements at least annually specifying the amount withheld.
In addition, the Series is required to report to the Internal
Revenue Service the following information with respect to redemption
transactions in CCMIF: (a) the shareholder's name, address, account
number and taxpayer identification number; (b) the total dollar value
of the redemptions; and (c) the Series' identifying CUSIP number.
Certain shareholders are, however, exempt from the backup
withholding and broker reporting requirements. Exempt shareholders
include: corporations; financial institutions; tax-exempt
organizations; individual retirement plans; the U.S., a State, the
District of Columbia, a U.S. possession, a foreign government, an
international organization, or any political subdivision, agency, or
instrumentality of any of the foregoing; U.S. registered commodities or
securities dealers; real estate investment trusts; registered
investment companies; bank common trust funds; certain charitable
trusts; and foreign central banks of issue. Non-resident aliens also
are generally not subject to either requirement but, along with certain
foreign partnerships and foreign corporations, may instead be subject
to withholding under section 1441 of the Code. Shareholders claiming
exemption from backup withholding and broker reporting should call or
write the Fund for further information.
VALUATION OF SHARES
CCMIF's assets are valued utilizing the average bid dealer
market quotation as furnished by an independent pricing service.
Securities and other assets for which market quotations are not readily
available are valued based on the current market for similar securities
or assets, as determined in good faith by CCMIF's Advisor under the
supervision of the Board of Directors.
Valuations, market quotations and market equivalents are
provided the Fund by Kenny S&P Evaluation Services, a subsidiary of
McGraw-Hill. The use of Kenny as a pricing service by the Fund has been
approved by the Board of Directors. Valuations provided by Kenny are
determined without exclusive reliance on quoted prices and take into
consideration appropriate factors such as institution-size trading in
similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics, and other market data.
CCMIF determines the net asset value for its shares every business day
at 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. The Series does not determine net asset value
on certain national holidays or other days on which the New York Stock
Exchange is closed: New Year's Day, Presidents' Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and
Christmas Day.
<TABLE>
<CAPTION>
Net Asset Value and Offering Price Per Share
<S> <C>
Net asset value per share
($35,693,430/3,418,878 shares) $10.44
Maximum sales charge
(2.75% of offering price) 0.30
Offering price per share $10.74
</TABLE>
CALCULATION OF YIELD AND TOTAL RETURN
CCMIF may advertise its "total return." Total return is historical in
nature and is not intended to indicate future performance. Total return
will be quoted for the most recent one-year period, five-year period,
and period from inception of CCMIF's offering of shares. Return
quotations for periods in excess of one year represent the average
annual total return for the period included in the particular
quotation. Total return is a computation of CCMIF's dividend yield,
plus or minus realized or unrealized capital appreciation or
depreciation, less fees and expenses. Total return quotations reflect
the deduction of CCMIF's maximum sales charge ("return with maximum
load"), except quotations of "return without maximum load" which do not
deduct the sales charge. Note: "Total Return" as quoted in the
Financial Highlights section of the Series' Prospectus and Annual
Report to Shareholders, however, per SEC instructions, does not reflect
deduction of the sales charge, and corresponds to "return without
maximum load" as referred to herein. Return without maximum load should
be considered only by investors, such as participants in certain
pension plans, to whom the sales charge does not apply, or for purposes
of comparison only with comparable figures which also do not reflect
sales charges, such as Lipper averages. Total return is computed
according to the following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000; T = total return; n
= number of years; and ERV = the ending redeemable value of a
hypothetical $1,000 payment made at the beginning of the 1, 5 or 10
year periods at the end of such periods (or portions thereof, if
applicable). Returns for the one year period and period from inception
are as follows:
<TABLE>
<CAPTION>
California Municipal California Municipal
With Max. Load W/O Max. Load
<S> <C> <C>
One Year 1.16% 4.04%
From Inception 5.20% 5.84%
</TABLE>
CCMIF may also advertise its "yield" and "taxable equivalent yield." As
with total return, both yield figures are historical and are not
intended to indicate future performance. "Yield" quotations for CCMIF
refer to the aggregate imputed yield-to-maturity of each of the Series'
investments based on the market value as of the last day of a given
thirty-day or one-month period less accrued expenses (net of
reimbursement), divided by the average daily number of outstanding
shares entitled to receive dividends times the maximum offering price
on the last day of the period (so that the effect of the sales charge
is included in the calculation), compounded on a "bond equivalent," or
semi-annual, basis. Yield is computed according to the following
formula:
Yield = 2[(a-b/cd +1)6 - 1]
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursement); c = the average daily
number of shares outstanding during the period that were entitled to
receive dividends; and d = the maximum offering price per share on the
last day of the period.
The taxable equivalent yield is the yield an investor would be required
to obtain from taxable investments to equal CCMIF's yield, all or a
portion of which may be exempt from federal income taxes. The taxable
equivalent yield for the federal and state level is computed by taking
the portion of the yield exempt from regular federal and California
income taxes and multiplying the exempt yield by a factor based on a
stated income tax rate, then adding the portion of the yield that is
not exempt from regular federal and California income taxes. The
taxable equivalent yield of the federal level only is computed by
taking the portion of the yield exempt from federal income taxes and
multiplying the exempt yield by a factor based on a stated income tax
rate, then adding the portion of the yield that is not exempt from
federal income taxes. The factor which is used to calculate the tax
equivalent yield is the reciprocal of the difference between 1 and the
applicable income tax rate, which will be stated in the advertisement.
For the thirty-day period ended December 31, 1996, CCMIF's yield was
4.26% and its tax equivalent yield was 6.66% for an investor in the 36%
federal income tax bracket, and 7.05% for an investor in the 39.6%
federal income tax bracket.
ADVERTISING
The Fund or its affiliates may provide information such as,
but not limited to, the economy, investment climate, investment
principles, sociological conditions and political ambiance. Discussion
may include hypothetical scenarios or lists of relevant factors
designed to aid the investor in determining whether the Series is
compatible with the investor's goals. The Fund may list portfolio
holdings or give examples or securities that may have been considered
for inclusion in the Series, whether held or not.
The Fund or its affiliates may supply comparative performance
data and rankings from independent sources such as Donoghue's Money
Fund Report, Bank Rate Monitor, Money, Forbes, Lipper Analytical
Services, Inc., CDA Investment Technologies, Inc., Wiesenberger
Investment Companies Service, Russell 2000/Small Stock Index, Mutual
Fund Values Morningstar Ratings, Mutual Fund Forecaster, Barron's, The
Wall Street Journal, and Schabacker Investment Management, Inc. Such
averages generally do not reflect any front- or back-end sales charges
that may be charged by Funds in that grouping. The Fund may also cite
to any source, whether in print or on-line, such as Bloomberg, in order
to acknowledge origin of information. The Series may compare itself or
its portfolio holdings to other investments, whether or not issued or
regulated by the securities industry, including, but not limited to,
certificates of deposit and Treasury notes. The Fund, its Advisor, and
its affiliates reserve the right to update performance rankings as new
rankings become available.
DIRECTORS AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Director of Finance for
the Family Health Council, Inc. in Pittsburgh, Pennsylvania, a
non-profit corporation which provides family planning services,
nutrition, maternal/child health care, and various health screening
services. Mr. Baird is a trustee/director of each of the investment
companies in the Calvert Group of Funds, except for Acacia Capital
Corporation, Calvert New World Fund and Calvert World Values Fund. DOB:
05/09/48. Address: 211 Overlook Drive, Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner in the law
firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was formerly a
partner with Abrams, Blatz, Gran, Hendricks & Reina, P.A. DOB:
10/29/35. Address: 308 East Broad Street, PO Box 2007, Westfield, New
Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a radiologist with
Kaiser Permanente. Prior to that, he was a radiologist at Bethlehem
Medical Imaging in Allentown, Pennsylvania. DOB: 07/23/49. Address:
2040 Nuuanu Avenue #1805, Honolulu, Hawaii, 96817.
1 CHARLES E. DIEHL, Trustee. Mr. Diehl is Vice President and Treasurer
Emeritus of the George Washington University, and has retired from University
Support Services, Inc. of Herndon, Virginia. He is also a Director of Acacia
Mutual Life Insurance Company. DOB:10/13/22. Address: 1658 Quail Hollow Court,
McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices head and neck
reconstructive surgery in the Washington, D.C., metropolitan area. DOB:
05/23/48. Address: 7536 Pepperell Drive, Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian was a principal of Gavian De
Vaux Associates, an investment banking firm. He continues to be
President of with Corporate Finance of Washington, Inc. DOB: 12/08/32.
Address: 3005 Franklin Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey is chairman of the Calvert
Social Investment Foundation, organizing director of the Community
Capital Bank in Brooklyn, New York, and a financial consultant to
various organizations. In addition, he is a Director of the Community
Bankers Mutual Fund of Denver, Colorado, and the Treasurer and Director
of Silby, Guffey, and Co., Inc., a venture capital firm. Mr. Guffey is
a trustee/director of each of the other investment companies in the
Calvert Group of Funds, except for Acacia Capital Corporation and
Calvert New World Fund. DOB: 05/15/48. Address: 7205 Pomander Lane,
Chevy Chase, Maryland 20815.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President of Creative
Associates International, Inc., a firm that specializes in human
resources development, information management, public affairs and
private enterprise development. DOB: 12/08/45. Address: 5301 Wisconsin
Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh serves as a Director of Acacia
Federal Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive,
Fairfax, Virginia 22030.
1 DAVID R. ROCHAT, Senior Vice President and Trustee. Mr. Rochat is
Executive Vice President of Calvert Asset Management Company, Inc.,
Director and Secretary of Grady, Berwald and Co., Inc., and Director
and President of Chelsea Securities, Inc. DOB: 10/07/37. Address: Box
93, Chelsea, Vermont 05038.
1 D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a trustee/director of
each of the investment companies in the Calvert Group of Funds, except
for Acacia Capital Corporation and Calvert New World Fund. Mr. Silby is
an officer, director and shareholder of Silby, Guffey & Company, Inc.,
which serves as general partner of Calvert Social Venture Partners
("CSVP"). CSVP is a venture capital firm investing in socially
responsible small companies. He is also a Director of Acacia Mutual
Life Insurance Company. DOB: 07/20/48. Address: 1715 18th Street, N.W.,
Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a director and
Senior Vice President of Calvert Group, Ltd., and Senior Vice President
and Chief Investment Officer of Calvert Asset Management Company, Inc.
Mr. Martini is also a director and President of Calvert-Sloan Advisers,
L.L.C., and a director and officer of Calvert New World Fund. DOB:
1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior Vice
President and Controller of Calvert Group, Ltd. and its subsidiaries
and an officer of each of the other investment companies in the Calvert
Group of Funds. Mr. Wolfsheimer is Vice President and Treasurer of
Calvert-Sloan Advisers, L.L.C., and a director of Calvert Distributors,
Inc. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Assistant Secretary. Mr.
Tartikoff is an officer of each of the investment companies in the
Calvert Group of Funds, and is Senior Vice President, Secretary, and
General Counsel of Calvert Group, Ltd., and each of its subsidiaries.
Mr. Tartikoff is also Vice President and Secretary of Calvert-Sloan
Advisers, L.L.C., a director of Calvert Distributors, Inc., and is an
officer of Acacia National Life Insurance Company. DOB: 08/12/47.
EVELYNE S. STEWARD, Vice President. Ms. Steward is a director and
Senior Vice President of Calvert Group, Ltd., and a director of
Calvert-Sloan Advisers, L.L.C. She is the sister of Philip J.
Schewetti, the portfolio manager of the CSIF Equity Portfolio. DOB:
11/14/52.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of Calvert
Asset Management Company, Inc., and is an officer of each of the other
investment companies in the Calvert Group of Funds, except for Calvert
New World Fund, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is Associate
General Counsel of Calvert Group, Ltd. and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer
of each of the other investment companies in the Calvert Group of
Funds. DOB: 01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is Associate
General Counsel of Calvert Group and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer
of each of the other investment companies in the Calvert Group of
Funds. DOB: 10/21/56
LISA CROSSLEY, Esq., Assistant Secretary and Compliance Officer. Ms.
Crossley is Associate General Counsel of Calvert Group and an officer
of each of its subsidiaries and Calvert-Sloan Advisers, L.L.C. She is
also an officer of each of the other investment companies in the
Calvert Group of Funds. DOB: 12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary Ms. Duke is Assistant
Counsel of Calvert Group and an officer of each of its subsidiaries and
Calvert-Sloan Advisers. L.L.C. She is also an officer of each of the
other investment companies in the Calvert Group of Funds. DOB:
09/07/68.
1 Directors deemed to be "interested persons" of the Fund under the
Investment Company Act of 1940, by virtue of their affiliation with the
Fund's Advisor.
Each of the above directors and officers is a trustee/director or
officer of each of the investment companies in the Calvert Group of
Funds with the exception of Calvert Social Investment Fund, of which
only Messrs. Baird, Guffey, and Silby are among the trustees, Acacia
Capital Corporation, of which only Messrs. Blatz, Diehl, and Pugh are
among the directors, Calvert World Values Fund, Inc., of which only
Messrs. Guffey, and Silby are among the directors, and Calvert New
World Fund, Inc., of which only Mr. Martini is among the directors. The
address of directors and officers, unless otherwise noted, is 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
The Audit Committee of the Board of Directors is composed of Messrs.
Baird, Blatz, Feldman, Guffey, and Pugh. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat, and
Silby.
Directors and officers of the Fund as a group own less than 1%
of Calvert California Municipal Intermediate Fund's outstanding shares.
During fiscal 1996, directors of the Fund not affiliated with the
Fund's Advisor were paid $3,625. Directors of the Fund not affiliated
with the Advisor currently receive an annual fee of $20,500 for service
as a member of the Board of Trustees/Directors of the Calvert Group of
Funds plus a fee of $750 to $1,500 for each Board and Committee meeting
attended; such fees are allocated among the Funds on the basis of their
net assets.
Directors of the Series not affiliated with the Series' Advisor may
elect to defer receipt of all or a percentage of their fees and invest
them in any fund in the Calvert of Funds through the Directors/Trustees
Deferred Compensation Plan (shown as "Pension or Retirement Benefits
Accrued as part of Fund Expenses," below). Deferral of the fees is
designed to maintain the parties in the same position as if the fees
were paid on a current basis. Management believes this will have a
negligible effect on the Fund's assets, liabilities, net assets, and
net income per share, and will ensure that there is no duplication of
advisory fees.
Director Compensation Table
<TABLE>
<CAPTION>
Fiscal Year 1996 Aggregate Pension or Total
(unaudited numbers) Compensation Retirement Compensation from
Name of Director from Registrant Benefits Registrant and Fund
for service as Accrued as part Complex paid to
Director of Registrant Directors<F3>
Expenses <F2>
<S> <C> <C> <C>
Richard L. Baird, Jr. $1898 $0 $34,925
Frank H. Blatz, Jr. $1935 $1935 $37,875
Frederick T. Borts $1793 $0 $32,675
Charles E. Diehl $1807 $1807 $35,475
Douglas E. Feldman $1873 $0 $34,175
Peter W. Gavian $1872 $560 $34,175
M. Charito Kruvant $905 $0 $24,313
John G. Guffey, Jr. $1816 $0 $49,433
Arthur J. Pugh $2011 $0 $36,736
D. Wayne Silby $1710 $0 $56,398
<FN>
<F2> Messrs. Blatz, Diehl, and Gavian have chosen to defer a portion of
their compensation. As of December 31, 1996, total deferred
compensation, including dividends and capital appreciation, was
$428,689.46, $428,442.42, and $96,332.93, for each named director,
respectively.
<F3> As of December 31, 1996, the Fund Complex consists of nine (9)
registered investment companies.
</FN>
</TABLE>
INVESTMENT ADVISOR
The Fund's Investment Advisor is Calvert Asset Management
Company, Inc., 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland
20814, a subsidiary of Calvert Group, Ltd., which is a subsidiary of
Acacia Mutual Life Insurance Company of Washington, D.C. ("Acacia
Mutual").
The Advisory Contract between the Fund and the Advisor will
remain in effect indefinitely, provided continuance is approved at
least annually by the vote of the holders of a majority of the
outstanding shares of the Fund, or by the directors of the Fund; and
further provided that such continuance is also approved annually by the
vote of a majority of the directors of the Fund who are not parties to
the Contract or interested persons of such parties, cast in person at a
meeting called for the purpose of voting on such approval. The Contract
may be terminated without penalty by either party on 60 days' prior
written notice; it automatically terminates in the event of its
assignment.
Under the Contract, the Advisor manages the investment and
reinvestment of the Fund's assets, subject to the direction and control
of the Fund's Board of Directors. For its services, the Advisor
receives an annual fee of 0.60% of the first $500 million of the
Series' average daily net assets, 0.50% of the next $500 million of
such assets, and 0.40% of all assets over $1 billion.
The advisory fee is payable monthly. The Advisor reserves the
right (i) to waive all or a part of its fee and (ii) to compensate, at
its expense, broker-dealers in consideration of their promotional and
administrative services. The Advisor may recapture in later years, to
the extent permitted by law, fees it waived and expenses it paid in
prior years. Specifically, the Advisor may recapture fees waived or
deferred and expenses reimbursed for the prior two-year period, but in
no event may it recapture fees or expenses for any period later than
the two-year period ending December 31, 1996. Recapture is permitted
only to the extent it does not result in the Series' aggregate expenses
exceeding an annual expense limit of 2.00% of its average daily net
assets. The advisory fee incurred in any given year will be paid in
full before any recapture fees are paid for a prior year. Recaptured
fees will apply to the most recent suspension/reimbursement period.
The Advisor provides the Fund with investment advice and
research, pays the salaries and fees of all directors and executive
officers of the Fund who are principals of the Advisor, and pays
certain Fund advertising and promotional expenses. The Fund pays all
other administrative and operating expenses, including: custodial fees;
shareholder servicing, dividend disbursing and transfer agency fees;
administrative service fees; federal and state securities registration
fees; insurance premiums; trade association dues; interest, taxes and
other business fees; legal and audit fees; and brokerage commissions
and other costs associated with the purchase and sale of portfolio
securities.
The Advisor has agreed to reimburse CCMIF for all expenses, excluding
brokerage, taxes, interest, and extraordinary items exceeding, on a pro
rata basis, the most restrictive expense limitation in those states
which the Series' shares are qualified for sale (currently, 2.5% of the
Series' first $30 million of average net assets, decreasing to 1.5% for
assets over $100 million). During fiscal 1994, the Advisor received
advisory fees of $194,484, and waived advisory fees of $53,268. The
Advisor also reimbursed the Series $7,343 for other expenses. During
fiscal 1995, the Advisor received advisory fees of $233,024. During
fiscal 1996, the Advisor received advisory fees of $217,159.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company, a wholly-owned subsidiary of
Calvert Group, Ltd., has been retained by the Fund to provide certain
administrative services necessary to the conduct of the Series'
affairs. Such services include the preparation of corporate and
regulatory reports and filings, portfolio accounting, and the daily
determination of net investment income and net asset value per share.
Calvert Administrative Services Company receives an annual fee of 0.10%
of the Series' average net assets for providing such services. The fees
paid by the Series to Calvert Administrative Services Company. for
fiscal years 1994, 1995, and 1996, were $41,292, $38,837, and $36,193,
respectively.
METHOD OF DISTRIBUTION
The Series has entered into an agreement with Calvert Distributors,
Inc. ("CDI"), whereby CDI, acting as principal underwriter for the
Series, makes a continuous offering of the Series' securities on a
"best efforts" basis. Prior to April 1, 1995, the principal underwriter
was Calvert Securities Corporation ("CSC"). Under the terms of the
agreement, CDI bears all its expenses of providing services pursuant to
the agreement, including payment of any commissions and service fees.
CDI receives all sales charges imposed on the Series' shares and
compensates broker-dealer firms for sales of such shares (see
"Alternative Sales Options" in the Prospectus). CDI is entitled to
receive reimbursement of distribution expenses pursuant to the
Distribution Plans (see below). For the 1994, 1995, and 1996 fiscal
periods, the Series paid no Distribution Plan expenses. For the fiscal
periods ending December 31, 1994, CSC received sales charges in excess
of the dealer reallowance of $16,975, respectively. For fiscal 1995 and
1996, CDI received sales charges in excess of the dealer reallowance of
$5,163 and $14,066.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940
Act"), the Series has adopted a Distribution Plan (the "Plan") which
permit it to pay certain expenses associated with the distribution of
its shares. Such expenses may not exceed, on an annual basis, 0.15% of
the Series daily net assets. As of May 29, 1997, expenses may not
exceed, on an annual basis, 0.25% of the Series daily net assets.
The Plans were approved by the Board of Directors/Trustees, including
the Directors/Trustees who are not "interested persons" of the Funds
(as that term is defined in the 1940 Act) and who have no direct or
indirect financial interest in the operation of the Plans or in any
agreements related to the Plans. The selection and nomination of the
Directors/Trustees who are not interested persons of the Fund is
committed to the discretion of such disinterested Directors/Trustees.
In establishing the Plan, the Directors/Trustees considered various
factors including the amount of the distribution fee. The
Directors/Trustees determined that there is a reasonable likelihood
that the Plan will benefit the Funds and their shareholders.
The Plan may be terminated by vote of a majority of the non-interested
Directors/Trustees who have no direct or indirect financial interest in
the Plan, or by vote of a majority of the outstanding shares of the
Series. Any change in the Plan that would materially increase the
distribution cost to the Series requires approval of the shareholders;
otherwise, the Plan may be amended by the Directors/Trustees, including
a majority of the non-interested Directors/Trustees as described above.
The Plan will continue in effect successive one-year terms, provided
that such continuance is specifically approved by (i) the vote of a
majority of the Directors/Trustees who are not parties to the Plan or
interested persons of any such party and who have no direct or indirect
financial interest in the Plan, and (ii) the vote of a majority of the
entire Board of Directors/Trustees.
Apart from the Plan, the Advisor, at its expense, may incur costs and
pay expenses associated with the distribution of shares of the Fund.
TRANSFER AND SHAREHOLDER SERVICING AGENT
Calvert Shareholder Services, Inc., a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, has been retained by the Fund to act as
transfer agent, dividend disbursing agent and shareholder servicing
agent. These responsibilities include: responding to shareholder
inquiries and instructions concerning their accounts; crediting and
debiting shareholder accounts for purchases and redemptions of Fund
shares and confirming such transactions; daily updating of shareholder
accounts to reflect declaration and payment of dividends; and preparing
and distributing semi-annual statements to shareholders regarding their
accounts. For such services, Calvert Shareholder Services, Inc.,
receives compensation based on the number of shareholder accounts and
the number of transactions. The fees paid by the Series to Calvert
Shareholder Services, Inc. for fiscal periods 1994, 1995, and 1996 were
$22,368, $24,388, and $24,472, respectively.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers and Lybrand L.L.P. has been selected by the Board of Directors
to serve as independent accountants of the Fund for fiscal year 1997.
State Street Bank & Trust Company, N.A., 225 Franklin Street, Boston,
MA 02110, serves as custodian of the Fund's investments. First National
Bank of Maryland, 25 South Charles Street, Baltimore, Maryland 21203
acts as custodian of certain of the Series' cash assets. Neither
custodian has any part in deciding the Fund's investment policies or
the choice of securities that are to be purchased or sold by the Fund.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. Investment decisions and
the choice of brokers and dealers are made by the Fund's Advisor under
the direction and supervision of the Fund's Board of Directors.
Broker-dealers who execute portfolio transactions on behalf of the Fund
are selected on the basis of their professional capability and the
value and quality of their services. The Advisor reserves the right to
place orders for the purchase or sale of portfolio securities with
broker-dealers who have sold shares of CCMIF or who provide it with
statistical, research, or other information and services. Although any
statistical research or other information and services provided by
broker-dealers may be useful to the Advisor, the dollar value of such
information and services is generally indeterminable, and its
availability or receipt does not serve to materially reduce the
Advisor's normal research activities or expenses. No brokerage
commissions have been paid to any officer or director of the Fund or
any of their affiliates, or broker-dealers for the 1994, 1995 or 1996
fiscal periods.
The Advisor may also execute portfolio transactions with or
through broker-dealers who have sold shares of the Fund. However, such
sales will not be a qualifying or disqualifying factor in a
broker-dealer's selection nor will the selection of any broker-dealer
be based on the volume of Fund shares sold. The Advisor or its
affiliate may compensate, at its expense, such broker-dealers in
consideration of their promotional and administrative services.
The portfolio turnover for the 1994, 1995, and 1996 fiscal periods was
68%, 47%, and 25%, respectively.
GENERAL INFORMATION
The Fund was organized as a corporation under the General
Corporation Law of the State of Maryland on February 4, 1992. The
Fund's other series are: Calvert National Municipal Intermediate Fund,
Calvert Arizona Municipal Intermediate Fund, Calvert Maryland Municipal
Intermediate Fund, Calvert Michigan Municipal Intermediate Fund,
Calvert New York Municipal Intermediate Fund, Calvert Pennsylvania
Municipal Intermediate Fund, and Calvert Virginia Municipal
Intermediate Fund. Prior to March 1, 1994, Calvert National Municipal
Intermediate Fund was known as Calvert Intermediate Municipal Fund.
CCMIF will send its shareholders unaudited semi-annual and
audited annual reports that will include the Series' net asset value
per share, portfolio securities, income and expenses, and other
financial information.
This Statement of Additional Information does not contain all
the information in the Fund's registration statement. The registration
statement is on file with the Securities and Exchange Commission and is
available to the public.
Each share of the Series represents an equal proportionate interest in
that Series with each other share and is entitled to such dividends and
distributions out of the income belonging to the Series as declared by
the Board. Upon any liquidation of the Series, shareholders are
entitled to share pro rata in the net assets available for
distribution.
FINANCIAL STATEMENTS
The audited financial statements in the Series' Annual Report to
Shareholders, dated December 31, 1996, are expressly incorporated by
reference and made a part of this Statement of Additional Information.
A copy of the Annual Report may be obtained free of charge by writing
or calling the Series.
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states,
cities, municipalities, and their agencies to obtain funds for various
public purposes. Such purposes include the construction of a wide range
of public facilities, the refunding of outstanding obligations, the
obtaining of funds for general operating expenses, and the lending of
funds to other public institutions and facilities. In addition, certain
types of industrial development bonds are issued by or on behalf of
public authorities to obtain funds for many types of local, privately
operated facilities. Such debt instruments are considered municipal
obligations if the interest paid on them is exempt from federal income
tax in the opinion of bond counsel to the issuer. Although the interest
paid on the proceeds from private activity bonds used for the
construction, equipment, repair or improvement of privately operated
industrial or commercial facilities may be exempt from federal income
tax, current federal tax law places substantial limitations on the size
of such issues.
Municipal obligations are generally classified as either
"general obligation" or "revenue'' bonds. General obligation bonds are
secured by the issuer's pledge of its faith, credit and taxing power
for the payment of principal and interest. Revenue bonds are payable
from the revenues derived from a particular facility or class of
facilities or, in some cases, from the proceeds of a special excise tax
or other specific revenue source, but not from the general taxing
power. Tax-exempt industrial development bonds are in most cases
revenue bonds and do not generally carry the pledge of the credit of
the issuing municipality. There are, of course, variations in the
security of municipal obligations, both within a particular
classification and among classifications.
Municipal obligations are generally traded on the basis of a
quoted yield to maturity, and the price of the security is adjusted so
that relative to the stated rate of interest it will return the quoted
rate to the purchaser.
Short-term and limited-term municipal obligations include Tax
Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation
Notes, Construction Loan Notes, and Discount Notes. The maturities of
these instruments at the time of issue generally will range between
three months and one year. Pre-Refunded Bonds with longer nominal
maturities that are due to be retired with the proceeds of an escrowed
subsequent issue at a date within one year and three years of the time
of acquisition are also considered short-term and limited-term
municipal obligations.
Municipal Bond and Note Ratings
Description of Moody's Investors Service, Inc.'s 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.'s/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.
LETTER OF INTENT
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the
Letter of Intent option on my Fund Account Application Form, I agree to
be bound by the terms and conditions applicable to Letters of Intent
appearing in the Prospectus and the Statement of Additional Information
for the Fund and the provisions described below as they may be amended
from time to time by the Fund. Such amendments will apply automatically
to existing Letters of Intent.
I intend to invest in the shares of: (Fund or Portfolio name*)
during the thirteen (13) month period from the date of my
first purchase pursuant to this Letter (which cannot be more than
ninety (90) days prior to the date of this Letter or my Fund Account
Application Form, whichever is applicable), an aggregate amount
(excluding any reinvestments of distributions) of at least fifty
thousand dollars ($50,000) which, together with my current holdings of
the Fund (at public offering price on date of this Letter or my Fund
Account Application Form, whichever is applicable), will equal or
exceed the amount checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms
of escrow, to which I hereby agree, each purchase occurring after the
date of this Letter will be made at the public offering price
applicable to a single transaction of the dollar amount specified
above, as described in the Fund's prospectus. No portion of the sales
charge imposed on purchases made prior to the date of this Letter will
be refunded.
I am making no commitment to purchase shares, but if my
purchases within thirteen months from the date of my first purchase do
not aggregate the minimum amount specified above, I will pay the
increased amount of sales charges prescribed in the terms of escrow
described below. I understand that 4.75% of the minimum dollar amount
specified above will be held in escrow in the form of shares (computed
to the nearest full share). These shares will be held subject to the
terms of escrow described below.
From the initial purchase (or subsequent purchases if
necessary), 4.75% of the dollar amount specified in this Letter shall
be held in escrow in shares of the Fund by the Fund's transfer agent.
For example, if the minimum amount specified under the Letter is
$50,000, the escrow shall be shares valued in the amount of $2,375
(computed at the public offering price adjusted for a $50,000
purchase). All dividends and any capital gains distribution on the
escrowed shares will be credited to my account.
If the total minimum investment specified under the Letter is
completed within a thirteen month period, escrowed shares will be
promptly released to me. However, shares disposed of prior to
completion of the purchase requirement under the Letter will be
deducted from the amount required to complete the investment commitment.
Upon expiration of this Letter, the total purchases pursuant
to the Letter are less than the amount specified in the Letter as the
intended aggregate purchases, Calvert Distributors, Inc. ("CDI") will
bill me for an amount equal to the difference between the lower load I
paid and the dollar amount of sales charges which I would have paid if
the total amount purchased had been made at a single time. If not paid
by the investor within 20 days, CDI will debit the difference from my
account. Full shares, if any, remaining in escrow after the
aforementioned adjustment will be released and, upon request, remitted
to me.
I irrevocably constitute and appoint CDI as my
attorney-in-fact, with full power of substitution, to surrender for
redemption any or all escrowed shares on the books of the Fund. This
power of attorney is coupled with an interest.
The commission allowed by Calvert Distributors, Inc. to the
broker-dealer named herein shall be at the rate applicable to the
minimum amount of my specified intended purchases.
The Letter may be revised upward by me at any time during the
thirteen-month period, and such a revision will be treated as a new
Letter, except that the thirteen-month period during which the purchase
must be made will remain unchanged and there will be no retroactive
reduction of the sales charges paid on prior purchases.
In determining the total amount of purchases made hereunder,
shares disposed of prior to termination of this Letter will be
deducted. My broker-dealer shall refer to this Letter of Intent in
placing any future purchase orders for me while this Letter is in
effect.
Dealer
Name of Investor(s)
By
Authorized Signer
Address
Date
Signature of Investor(s)
Date
Signature of Investor(s)
*Fund" in this Letter of Intent shall refer to the Fund or
Portfolio, as the case may be, here indicated.
Calvert Municipal Fund, Inc.
CALVERT CALIFORNIA MUNICIPAL
INTERMEDIATE FUND
Statement of Additional Information
April 30, 1997
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
217 E. Redwood Street
Baltimore, Maryland 21202-3316
TRANSFER AGENT
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 3
Purchases and Redemptions of Shares 5
Dividends and Distributions 5
Tax Matters 6
Valuation of Shares 7
Calculation of Yield and Total Return 7
Advertising 9
Directors and Officers 9
Investment Advisor 12
Administrative Services 13
Method of Distribution 13
Transfer and Shareholder Servicing Agent 14
Independent Accountants and Custodians 14
Portfolio Transactions 14
General Information 15
Financial Statements 15
Appendix 15
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1997
CALVERT MUNICIPAL INTERMEDIATE FUNDS:
ARIZONA, FLORIDA, MARYLAND,
MICHIGAN, NEW YORK, PENNSYLVANIA AND VIRGINIA
4550 Montgomery Avenue, Bethesda, Maryland 20814
New Account (800) 368-2748
Information: (301) 951-4820
Shareholder
Services: (800) 368-2745
Broker (800) 368-2746
Services: (301) 951-4850
TDD for the Hearing-
Impaired: (800) 541-1524
This Statement of Additional Information is not a prospectus. Investors should
read the Statement of Additional Information in conjunction with the Fund's
Prospectus, dated April 30, 1997, which may be obtained free of charge by
writing the Fund at the above address or calling the telephone numbers listed
above.
INVESTMENT OBJECTIVE
The Calvert Municipal Intermediate Funds ("Funds" or "Fund") are
designed to provide individual and institutional investors with the highest
level of interest income exempt from federal and specific state income taxes
as is consistent with prudent investment management, preservation of capital,
and the quality and maturity characteristics of the Fund. There is, of course,
no assurance that the Funds will be successful in meeting their investment
objectives; there are inherent risks in the ownership of any investment.
Dividends paid by the Funds will fluctuate with income earned on
investments. In addition, dividends and distributions paid and the value of
each share will vary by class of shares: the share values will fluctuate to
reflect changes in the market value of investments. Each Fund will attempt,
through careful management, to reduce these risks and enhance the
opportunities for higher income and greater price stability.
INVESTMENT POLICIES
Each Fund invests primarily in a nondiversified portfolio of
municipal obligations, including some with interest that may be subject to
alternative minimum tax. A complete explanation of municipal obligations and
municipal bond and note ratings appears in the Appendix.
Under normal market conditions, each Fund will attempt to invest at
least 65% of its total assets in municipal obligations with interest that is
exempt from federal and specific state income tax, including those issued by
or on behalf of the state for which the Fund is named and the state's
political subdivisions. Each Fund will also attempt to invest the remaining
35% of its total assets in these obligations, but may invest it in municipal
obligations of other states, territories and possessions of the United States,
the District of Columbia, and their respective authorities, agencies,
instrumentalities and political subdivisions. Dividends you receive from the
Fund that are derived from interest on tax-exempt obligations of other
governmental issuers will be exempt from federal income tax, but will be
subject to state income taxes.
Variable Rate Demand Notes
The Boards of Directors/Trustees have approved investments in
floating and variable rate demand notes upon the following conditions: each
Fund has right of demand, upon notice not to exceed thirty days, against the
issuer to receive payment; the issuer will be able to make payment upon such
demand, either from its own resources or through an unqualified commitment
from a third party; and the rate of interest payable is calculated to ensure
that the market value of such notes will approximate par value on the
adjustment dates. The remaining maturity of such demand notes is deemed the
period remaining until such time as the Fund has the right to dispose of the
notes at a price which approximates par and market value. Notes with a right
of demand exceeding seven days are considered illiquid and are subject to
purchase restrictions.
Municipal Leases
The Funds may invest in municipal leases, or structured instruments
where the underlying security is a municipal lease. A municipal lease is an
obligation of a government or governmental authority, not subject to voter
approval, used to finance capital projects or equipment acquisitions and
payable through periodic rental payments. The Funds may purchase unrated
leases. The Funds' Advisor, under the supervision of the Boards of
Directors/Trustees, is responsible for determining the credit quality of such
leases on an ongoing basis, including an assessment of the likelihood that the
lease will not be canceled. Certain municipal leases may be considered
illiquid and subject to a Fund's limit on illiquid securities. The Boards of
Directors/Trustees have directed the Advisor to treat a municipal lease as a
liquid security if it satisfies the following conditions: (A) such treatment
must be consistent with the Fund's investment restrictions; (B) the Advisor
should be able to conclude that the obligation will maintain its liquidity
throughout the time it is held by the Fund, based on the following factors:
(1) whether the lease may be terminated by the lessee; (2) the potential
recovery, if any, from a sale of the leased property upon termination of the
lease; (3) the lessee's general credit strength (e.g., its debt,
administrative, economic and financial characteristics and prospects); (4) the
likelihood that the lessee will discontinue appropriating funding for the
leased property because the property is no longer deemed essential to its
operations (e.g., the potential for an "event of nonappropriation"), and (5)
any credit enhancement or legal recourse provided upon an event of
nonappropriation or other termination of the lease; (C) the Advisor should
determine whether the obligation can be disposed of within seven days in the
ordinary course of business at approximately the amount at which the Fund has
valued it for purposes of calculating the Fund's net asset value, taking into
account the following factors: (1) the frequency of trades and quotes; (2) the
volatility of quotations and trade prices; (3) the number of dealers willing
to purchase or sell the security and the number of potential purchasers; (4)
dealer undertakings to make a market in the security; (5) the nature of the
security and the nature of the marketplace trades (e.g., the time needed to
dispose of the security, the method of soliciting offers, and the mechanics of
the transfer); (6) the rating of the security and the financial condition and
prospects of the issuer; and (7) other factors relevant to the Fund's ability
to dispose of the security; and (D) the Advisor should have reasonable
expectations that the municipal lease obligation will maintain its liquidity
throughout the time the instrument is held by the Fund.
Temporary Investments
Short-term money market type investments consist of: obligations of
the U.S. Government, its agencies and instrumentalities; certificates of
deposit of banks with assets of one billion dollars or more; commercial paper
or other corporate notes of investment grade quality; and any of such items
subject to short-term repurchase agreements.
When-Issued Purchases
Securities purchased on a when-issued basis and the securities held
in a Fund's portfolio are subject to changes in market value based on the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in both changing in value
in the same way, i.e., both experiencing appreciation when interest rates
decline and depreciation when interest rates rise). Therefore, if in order to
achieve higher interest income, the Funds remain substantially fully invested
at the same time that it has purchased securities on a when-issued basis,
there will be a greater possibility that the market value of their assets may
vary. No new when-issued commitments will be made if more than 50% of a Fund's
net assets would become so committed.
The Funds will meet their obligations to pay for when-issued
securities from then- available cash flow, sale of securities or, although the
Funds would not normally expect to do so, from sale of the when-issued
securities themselves (which may have a market value greater or less than the
Fund's payment obligation). Sale of securities to meet such obligations
carries with it a greater potential for the realization of capital losses and
capital gains which are not exempt from federal income tax.
Transactions in Futures Contracts
The Funds may engage in the purchase and sale of futures contracts on
an index of municipal bonds or on U.S. Treasury securities, or options on such
futures contracts, for hedging purposes only. A Fund may sell such futures
contracts in anticipation of a decline in the cost of municipal bonds it holds
or may purchase such futures contracts in anticipation of an increase in the
value of municipal bonds the Fund intends to acquire. The Funds also are
authorized to purchase and sell other financial futures contracts which in the
opinion of the Investment Advisor provide an appropriate hedge for some or all
of the Funds' securities.
Because of low initial margin deposits made upon the opening of a
futures position, futures transactions involve substantial leverage. As a
result, relatively small movements in the price of the futures contract can
result in substantial unrealized gains or losses. Because the Funds will
engage in the purchase and sale of financial futures contracts solely for
hedging purposes, however, any losses incurred in connection therewith should,
if the hedging strategy is successful, be offset in whole or in part by
increases in the value of securities held by a Fund or decreases in the price
of securities the Fund intends to acquire.
Municipal bond index futures contracts commenced trading in June
1985, and it is possible that trading in such futures contracts will be less
liquid than that in other futures contracts. The trading of futures contracts
and options thereon is subject to certain market risks, such as trading halts,
suspensions, exchange or clearing house equipment failures, government
intervention or other disruptions of normal trading activity, which could at
times make it difficult or impossible to liquidate existing positions.
The liquidity of a secondary market in futures contracts may be
further adversely affected by "daily price fluctuation limits" established by
contract markets, which limit the amount of fluctuation in the price of a
futures contract or option thereon during a single trading day. Once the daily
limit has been reached in the contract, no trades may be entered into at a
price beyond the limit, thus preventing the liquidation of open positions.
Prices of existing contracts have in the past moved the daily limit on a
number of consecutive trading days. A Fund will enter into a futures position
only if, in the judgment of the Investment Advisor, there appears to be an
actively traded secondary market for such futures contracts.
The successful use of transactions in futures contracts and options
thereon depends on the ability of the Investment Advisor to correctly forecast
the direction and extent of price movements of these instruments, as well as
price movements of the securities held by a Fund within a given time frame. To
the extent these prices remain stable during the period in which a futures or
option contract is held by a Fund, or move in a direction opposite to that
anticipated, a Fund may realize a loss on the hedging transaction which is not
fully or partially offset by an increase in the value of the Fund's
securities. As a result, the Fund's total return for such period may be less
than if it had not engaged in the hedging transaction.
Description of Financial Futures Contracts
Futures Contracts. A futures contract obligates the seller of a
contract to deliver and the purchaser of a contract to take delivery of the
type of financial instrument called for in the contract or, in some instances,
to make a cash settlement, at a specified future time for a specified price.
Although the terms of a contract call for actual delivery or acceptance of
securities, or for a cash settlement, in most cases the contracts are closed
out before the delivery date without the delivery or acceptance taking place.
The Funds intend to close out any futures contracts prior to the delivery date
of such contracts.
A Fund may sell futures contracts in anticipation of a decline in the
value of its investments in municipal bonds. The loss associated with any such
decline could be reduced without employing futures as a hedge by selling
long-term securities and either reinvesting the proceeds in securities with
shorter maturities or by holding assets in cash. This strategy, however,
entails increased transaction costs in the form of brokerage commissions and
dealer spreads and will typically reduce the Fund's average yields as a result
of the shortening of maturities.
The purchase or sale of a futures contract differs from the purchase
or sale of a security, in that no price or premium is paid or received.
Instead, an amount of cash or securities acceptable to the Fund's futures
commission merchant and the relevant contract market, which varies but is
generally about 5% or less of the contract amount, must be deposited with the
broker. This amount is known as "initial margin," and represents a "good
faith" deposit assuring the performance of both the purchaser and the seller
under the futures contract. Subsequent payments to and from the broker, known
as "variation margin," are required to be made on a daily basis as the price
of the futures contract fluctuates, making the long or short positions in the
futures contract more or less valuable, a process known as "marking to the
market." Prior to the settlement date of the futures contract, the position
may be closed out by taking an opposite position which will operate to
terminate the position in the futures contract. A final determination of
variation margin is then made, additional cash is required to be paid to or
released by the broker, and the purchaser realizes a loss or gain. In
addition, a commission is paid on each completed purchase and sale transaction.
The sale of financial futures contracts provides an alternative means
of hedging a Fund against declines in the value of its investments in
municipal bonds. As such values decline, the value of the Fund's position in
the futures contracts will tend to increase, thus offsetting all or a portion
of the depreciation in the market value of the Fund's fixed income investments
which are being hedged. While a Fund will incur commission expenses in
establishing and closing out futures positions, commissions on futures
transactions may be significantly lower than transaction costs incurred in the
purchase and sale of fixed income securities. In addition, the ability of a
Fund to trade in the standardized contracts available in the futures market
may offer a more effective hedging strategy than a program to reduce the
average maturing of portfolio securities, due to the unique and varied credit
and technical characteristics of the municipal debt instruments available to
the Fund. Employing futures as a hedge may also permit a Fund to assume a
hedging posture without reducing the yield on its investments, beyond any
amounts required to engage in futures trading.
The Funds may engage in the purchase and sale of futures contracts on
an index of municipal securities. These instruments provide for the purchase
or sale of a hypothetical portfolio of municipal bonds at a fixed price in a
stated delivery month. Unlike most other futures contracts, however, a
municipal bond index futures contract does not require actual delivery of
securities but results in a cash settlement based upon the difference in value
of the index between the time the contract was entered into and the time it is
liquidated.
The municipal bond index underlying the futures contracts traded by
the Portfolio is The Bond Buyer Municipal Bond Index, developed by The Bond
Buyer and the Chicago Board of Trade ("CBT"), the contract market on which the
futures contracts are traded. As currently structured, the index is comprised
of 40 tax-exempt term municipal revenue and general obligation bonds. Each
bond included in the index must be rated either A- or higher by Standard &
Poor's or A or higher by Moody's Investors Service and must have a remaining
maturity of 19 years or more. Twice a month new issues satisfying the
eligibility requirements are added to, and an equal number of old issues will
be deleted from, the index. The value of the index is computed daily according
to a formula based upon the price of each bond in the index, as evaluated by
four dealer-to-dealers brokers.
The Funds may also purchase and sell futures contracts on U.S.
Treasury bills, notes and bonds for the same types of hedging purposes. Such
futures contracts provide for delivery of the underlying security at a
specified future time for a fixed price, and the value of the futures contract
therefore generally fluctuates with movements in interest rates.
The municipal bond index futures contract, futures contracts on U.S.
Treasury securities and options on such futures contracts are traded on the
CBT, which, like other contract markets, assures the performance of the
parties to each futures contract through a clearing corporation, a nonprofit
organization managed by the exchange membership, which is also responsible for
handling daily accounting of deposits or withdrawals of margin.
The Funds may also purchase financial futures contracts when not
fully invested in municipal bonds, in anticipation of an increase in the cost
of securities a Fund intends to purchase. As such securities are purchased, an
equivalent amount of futures contracts will be closed out. In a substantial
majority of these transactions, a Fund will purchase municipal bonds upon
termination of the futures contracts. Due to changing market conditions and
interest rate forecasts, however, a futures position may be terminated without
a corresponding purchase of securities. Nevertheless, all purchases of futures
contracts by a Fund will be subject to certain restrictions, described below.
Options on Futures Contracts. An option on a futures contract
provides the purchaser with the right, but not the obligation, to enter into a
long position in the underlying futures 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 contract. 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 for the same
types of hedging purposes described above in connection with futures
contracts. For example, in order to protect against an anticipated decline in
the value of securities it holds, a Fund could purchase put options on futures
contracts, instead of selling the underlying futures contracts. 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 and the value of securities held by the Portfolio.
Restrictions on the Use of Futures Contracts and Options on Futures
Contracts. Under regulations of the Commodity Futures Trading Commission
("CFTC"), the futures trading activities described herein will not result in a
Fund being deemed to be a "commodity pool," as defined under such regulations,
provided that certain trading restrictions are adhered to. In particular, CFTC
regulations require that all futures and option positions entered into by a
Fund qualify as bona fide hedge transactions, as defined under CFTC
regulations, or, in the case of long positions, that the value of such
positions not exceed an amount of segregated funds determined by reference to
certain cash and securities positions maintained by a Fund and accrued profits
on such positions. In addition, a Fund may not purchase or sell any such
instruments if, immediately thereafter, the sum of the amount of initial
margin deposits on the Fund's existing futures positions would exceed 5% of
the market value of its net assets.
When a Fund purchases a futures contract, it will maintain an amount
of cash, cash equivalents (for example, commercial paper and daily tender
adjustable notes) or short-term high-grade fixed income securities in a
segregated account with the Fund's custodian, so that the amount so segregated
plus the amount of initial and variation margin held in the account of its
broker equals the market value of the futures contract, thereby ensuring that
the use of such futures is unleveraged.
Risk Factors in Transactions in Futures Contracts. The particular
municipal bonds comprising the index underlying the municipal bond index
futures contract may vary from the bonds held by a Fund. In addition, the
securities underlying futures contracts on U.S. Treasury securities will not
be the same as securities held by the Fund. As a result, a Fund's ability
effectively to hedge all or a portion of the value of its municipal bonds
through the use of futures contracts will depend in part on the degree to
which price movements in the index underlying the municipal bond index futures
contract, or the U.S. Treasury securities underlying other futures contracts
trade, correlate with price movements of the municipal bonds held by the Fund.
For example, where prices of securities in a Fund do not move in the
same direction or to the same extent as the values of the securities or index
underlying a futures contract, the trading of such futures contracts may not
effectively hedge the Fund's investments and may result in trading losses. The
correlation may be affected by disparities in the average maturity, ratings,
geographical mix or structure of the Fund's investments as compared to those
comprising the index, and general economic or political factors. In addition,
the correlation between movements in the value of the index underlying a
futures contract may be subject to change over time, as additions to and
deletions from the index alter its structure. In the case of futures contracts
on U.S. Treasury securities and options thereon, the anticipated correlation
of price movements between the U.S. Treasury securities underlying the futures
or options and municipal bonds may be adversely affected by economic,
political, legislative or other developments that have a disparate impact on
the respective markets for such securities. In the event that the Investment
Advisor determines to enter into transactions in financial futures contracts
other than the municipal bond index futures contract or futures on U.S.
Treasury securities, the risk of imperfect correlation between movements in
the prices of such futures contracts and the prices of municipal bonds held by
a Fund may be greater.
The trading of futures contracts on an index also entails the risk of
imperfect correlation between movements in the price of the futures contract
and the value of the underlying index. The anticipated spread between the
prices may be distorted due to differences in the nature of the markets, such
as margin requirements, liquidity and the participation of speculators in the
futures markets. The risk of imperfect correlation, however, generally
diminishes as the delivery month specified in the futures contract approaches.
Prior to exercise or expiration, a position in futures contracts or
options thereon may be terminated only by entering into a closing purchase or
sale transaction. This requires a secondary market on the relevant contract
market. The Funds will enter into a futures or option position only if there
appears to be a liquid secondary market therefor, although there can be no
assurance that such a liquid secondary market will exist for any particular
contract at any specific time. Thus, it may not be possible to close out a
position once it has been established. Under such circumstances, a Fund could
be required to make continuing daily cash payments of variation margin in the
event of adverse price movements. In such situation, if a Fund has
insufficient cash, it may be required to sell portfolio securities to meet
daily variation margin requirements at a time when it may be disadvantageous
to do so. In addition, a Fund may be required to perform under the terms of
the futures or option contracts it holds. The inability to close out futures
or options positions also could have an adverse impact on the Fund's ability
effectively to hedge its 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.
Noninvestment-Grade Debt Securities
The Funds may invest in lower quality debt securities (generally
those rated BB or lower by S&P or Ba or lower by Moody's), subject to the
Funds' investment policy which provides that they may not invest more than 35%
of their assets in securities rated below BBB by either rating service, or in
unrated securities determined by the Advisor to be comparable to securities
rated below BBB by either rating service. These securities have moderate to
poor protection of principal and interest payments and have speculative
characteristics. These securities involve greater risk of default or price
declines due to changes in the issuer's creditworthiness than investment-grade
debt securities. Because the market for lower-rated securities may be thinner
and less active than for higher-rated securities, there may be market price
volatility for these securities and limited liquidity in the resale market.
Market prices for these securities may decline significantly in periods of
general economic difficulty or rising interest rates. Unrated debt securities
may fall into the lower quality category. Unrated securities usually are not
attractive to as many buyers as are rated securities, which may make them less
marketable.
The quality limitation set forth in the investment policy is
determined immediately after a Fund's acquisition of a security. Accordingly,
any later change in ratings will not be considered when determining whether an
investment complies with the Fund's investment policy.
When purchasing high-yielding securities, rated or unrated, the
Advisors prepare their own careful 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.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The following investment restrictions and fundamental policies may
not be changed without the consent of the holders of a majority of a Fund's
outstanding shares. Shares have equal rights as to voting. A majority of the
shares means the lesser of (i) 67% of the shares represented at a meeting at
which more than 50% of the outstanding shares are represented or (ii) more
than 50% of the outstanding shares. The Funds may not:
(1) Purchase common stocks, preferred stocks, warrants, or other
equity securities;
(2) Issue senior securities, borrow money, or pledge, mortgage, or
hypothecate its assets, except as may be necessary to secure
borrowings from banks for temporary or emergency (not leveraging)
purposes and then in an amount not greater than 10% of the value of
the Fund's total assets at the time of the borrowing. Investment
securities will not be purchased while any borrowings are outstanding;
(3) Sell securities short, purchase securities on margin, or write
put or call options, except to the extent permitted under
"Transactions in Futures Contracts" or elsewhere in the Prospectus or
SAI. The Funds reserve the right to purchase securities with puts
attached. See "Obligations with Puts Attached";
(4) Underwrite the securities of other issuers, except to the extent
that the purchase of municipal obligations in accordance with the
Fund's investment objective and policies, either directly from the
issuer, or from an underwriter for an issuer, may be deemed an
underwriting;
(5) Make loans to others, except in accordance with the Fund's
investment objective and policies or pursuant to contracts providing
for the compensation of service providers by compensating balances;
(6) Purchase or sell real estate, real estate investment trust
securities, commodities, or commodity contracts, or oil and gas
interests, but this shall not prevent a Fund from investing in
municipal obligations secured by real estate or interests therein;
(7) Invest 25% or more of its assets in the securities of any one
issuer. Each Funds may invest more than 25% of its assets in
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities but will invest in more than 20% of such
obligations only during abnormal market conditions. For purposes of
this limitation, the entity which has the ultimate responsibility for
the payment of principal and interest on a particular security will
be treated as its issuer;
(8) Invest 25% or more of its assets in any particular industry or
industries. Each Fund may invest more than 25% of its assets in
obligations issued or guaranteed by the U.S. Government, its agencies
or instrumentalities but will invest in more than 20% of such
obligations only during abnormal market conditions. Industrial
development bonds, where the payment of principal and interest is the
responsibility of companies within the same industry, are grouped
together as an "industry."
Nonfundamental Investment Restrictions
Each Fund has adopted the following operating (i.e., nonfundamental)
investment policies and restrictions which may be changed by the Board of
Directors/Trustees without shareholder approval. The Funds may not:
(1) Purchase illiquid securities if more than 15% of the value of its
net assets would be invested in such securities;
(2) Invest more than 5% of the value of its total assets in
securities where the payment of principal and interest is the
responsibility of a company or companies with less than three years'
operating history.
(3) Purchase or retain securities of an issuer if those directors of
the Fund, each of whom owns more than 1/2 of 1% of the outstanding
securities of such issuer, together own more than 5% of such
outstanding securities;
(4) Invest in companies for the purpose of exercising control; or
invest in securities of other investment companies, except as
permitted under the Investment Company Act or in connection with a
director's/trustee's deferred compensation plan, as long as there is
no duplication of advisory fees.
PURCHASES AND REDEMPTIONS OF SHARES
Share certificates will be issued at no charge if requested in
writing by the investor. No certificates will be issued for fractional shares.
Purchases by bank wire received by 4:00 p.m., Eastern time are immediately
available federal funds. Your purchases must be made in U.S. dollars and
checks must be drawn on U.S. banks.
Amounts redeemed by check redemption may be mailed to the investor
without charge. Amounts of more than $50 and less than $300,000 may be
transferred electronically at no charge to the investor. Amounts of $1,000 or
more will be transmitted by wire, without charge by Calvert, to the investor's
account at a domestic commercial bank that is a member of the Federal Reserve
System or to a correspondent bank. A charge of $5 is imposed on wire transfers
of less than $1,000. If the investor's bank is not a Federal Reserve System
member, failure of immediate notification to that bank by the correspondent
bank could result in a delay in crediting the funds to the investor's bank
account.
Telephone redemption requests that would require the redemption of
shares purchased by check or electronic funds transfer within the previous 10
business days may not be honored. The Funds reserve the right to modify the
telephone redemption privilege.
To change redemption instructions already given, you must send a
written notice addressed to Calvert Group, c/o NFDS, 6th Floor, 1004
Baltimore, Kansas City, MO 64105, with a voided copy of a check for the bank
wiring instructions to be added. If a voided check does not accompany the
request, then the request must be signature guaranteed by a commercial bank,
savings and loan association, trust company, member firm of any national
securities exchange, or certain credit unions. Additional documentation may be
required from corporations, fiduciaries, and institutional investors.
The right of redemption may be suspended or the date of payment
postponed for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when trading on the New
York Stock Exchange is restricted, or an emergency exists, as determined by
the SEC, or if the Commission has ordered such a suspension for the protection
of shareholders. Redemption proceeds are normally mailed or wired the next
business day after a proper redemption request has been received, unless
redemptions have been suspended or postponed as described above.
Redemption proceeds are normally paid in cash. However, a Fund has
the right to redeem shares in assets other than cash for redemption amounts
exceeding, in any 90-day period, $250,000 or 1% of the net asset value of the
Fund, whichever is less.
Reduced Sales Charges
Each Fund imposes reduced sales charges for Fund shares in certain situations
in which the Principal Underwriter (which offers the Fund's shares
continuously and on a "best efforts" basis) and the dealers selling Fund
shares may expect to realize significant economies of scale with respect to
such sales. Generally, sales costs do not increase in proportion to the dollar
amount of the shares sold; the per-dollar transaction cost for a sale to an
investor of shares worth, for example, $5,000 is generally much higher than
the per-dollar cost for a sale of shares worth $1,000,000. Thus, the
applicable sales charge declines as a percentage of the dollar amount of
shares sold as the dollar amount increases.
When a shareholder agrees to make purchases of shares over a period
of time totaling a certain dollar amount pursuant to a Letter of Intent, the
Underwriter and selling dealers can expect to realize the economies of scale
applicable to that stated goal amount. Thus, the Fund imposes the sales charge
applicable to the goal amount. Similarly, the Underwriter and selling dealers
also experience cost savings when dealing with existing shareholders, enabling
the Fund to afford existing shareholders the Right of Accumulation. The
Underwriter and selling dealers can also expect to realize economies of scale
when making sales to the members of certain qualified groups which agree to
facilitate distribution of Fund's shares to their members. See "Exhibit A -
Reduced Sales Charges" in the Prospectus.
DIVIDENDS AND DISTRIBUTIONS
Each Fund declares and pays monthly dividends of its net income to
shareholders of record as of the close of business on each designated monthly
record date. Net investment income consists of the interest income earned on
investments (adjusted for amortization of original issue discounts or premiums
or market premiums), less estimated expenses. Capital gains, if any, are
normally paid once a year and will be automatically reinvested at net asset
value in additional shares. Dividends and any distributions are automatically
reinvested in additional shares of the Fund, unless you elect to have the
dividends of $10 or more paid in cash (by check or by Calvert Money
Controller). You may also request to have your dividends and distributions
from the Fund invested in shares of any other Calvert Group Fund at no
additional charge. If you elect to have dividends and/or distributions paid in
cash, and the U.S. Postal Service cannot deliver the check, or if it remains
uncashed for six months, it, as well as future dividends and distributions,
will be reinvested in additional shares.
TAX MATTERS
Each Fund intends to qualify as a "regulated investment company"
under Subchapter M of the Internal Revenue Code (the "Code"). By so
qualifying, the Fund will not be subject to federal income tax, nor to the
federal excise tax imposed by the Tax Reform Act of 1986 (the "Act"), to the
extent that it distributes its net investment income and realized capital
gains.
The Funds' dividends of net investment income constitute
exempt-interest dividends on which shareholders are not generally subject to
federal income tax; however under the Act, dividends attributable to interest
on certain private activity bonds must be included in federal alternative
minimum taxable income for the purpose of determining liability (if any) for
individuals and for corporations. Further, for corporations, all tax-exempt
income must be taken into account in calculating "adjusted current earnings"
for purposes of the federal alternative minimum tax. Fund dividends derived
from taxable interest and distributions of net short-term capital gains,
whether taken in cash or reinvested in additional shares, are taxable to
shareholders as ordinary income and do not qualify for the dividends received
deduction for corporations. If you held shares for six months or less, losses
must be offset by the amount of exempt-interest dividends you received, and,
to the extent of capital gain distributions you received, the loss amount not
offset (disallowed) must be treated as long-term capital loss. A shareholder
may also be subject to some state and local taxes on dividends and
distributions from the Funds. The Funds will notify shareholders annually
about the tax status of dividends and distributions paid by the Fund and the
amount of dividends withheld, if any, during the previous year.
The Code provides that interest on indebtedness incurred or continued
in order to purchase or carry shares of a regulated investment company which
distributes exempt-interest dividends during the year is not deductible.
Entities or persons who are "substantial users" (or persons related to
"substantial users") of facilities financed by private activity bonds should
consult their tax advisors before purchasing shares of the Fund. "Substantial
user" is generally defined as including a "non-exempt person" who regularly
uses in trade or business a part of a facility financed from the proceeds of
private activity bonds.
Investors should note that the Revenue Reconciliation Act of 1989 may
require investors to exclude the initial sales charge, if any, paid on the
purchase of Fund shares from the tax basis of those shares if the shares are
exchanged for shares of another Calvert Group Fund within 90 days of purchase.
This requirement applies only to the extent that the payment of the original
sales charge on the shares of the Fund causes a reduction in the sales charge
otherwise payable on the shares of the Calvert Group Fund acquired in the
exchange, and investors may treat sales charges excluded from the basis of the
original sales as incurred to acquire the new shares.
The Funds may be required to withhold 31% of any long-term capital
gain dividends and 31% of each redemption transaction occurring in a Fund if:
(a) the shareholder's social security number or other taxpayer identification
number ("TIN") is not provided or an obviously incorrect TIN is provided; (b)
the shareholder does not certify under penalties of perjury that the TIN
provided is the shareholder's correct TIN and that the shareholder is not
subject to backup withholding under section 3406(a)(1)(C) of the Code because
of underreporting (however, failure to provide certification as to the
application of section 3406(a)(1)(C) will result only in backup withholding on
capital gain dividends, not on redemptions); or (c) a Fund is notified by the
Internal Revenue Service that the TIN provided by the shareholder is incorrect
or that there has been underreporting of interest or dividends by the
shareholder. Affected shareholders will receive statements at least annually
specifying the amount withheld.
In addition, each Fund is required to report to the Internal Revenue
Service the following information with respect to redemption transactions in
the Fund: (a) the shareholder's name, address, account number and taxpayer
identification number; (b) the total dollar value of the redemptions; and (c)
the Fund's identifying CUSIP number.
Certain shareholders are, however, exempt from the backup withholding
and broker reporting requirements. Exempt shareholders include: corporations;
financial institutions; tax-exempt organizations; individual retirement plans;
the U.S., a State, the District of Columbia, a U.S. possession, a foreign
government, an international organization, or any political subdivision,
agency, or instrumentality of any of the foregoing; U.S. registered
commodities or securities dealers; real estate investment trusts; registered
investment companies; bank common trust funds; certain charitable trusts; and
foreign central banks of issue. Non-resident aliens also are generally not
subject to either requirement but, along with certain foreign partnerships and
foreign corporations, may instead be subject to withholding under section 1441
of the Code. Shareholders claiming exemption from backup withholding and
broker reporting should call or write the Funds for further information.
VALUATION OF SHARES
Fund assets are valued utilizing the average bid dealer market
quotation as furnished by an independent pricing service. Securities and other
assets for which market quotations are not readily available are valued based
on the current market for similar securities or assets, as determined in good
faith by the Fund's Advisor under the supervision of the Board of
Directors/Trustees.
Each Fund determines the net asset value for its shares every business day at
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. They do not determine net asset value on certain national
holidays or other day on which the New York Stock Exchange is closed: New
Year's Day, Presidents' Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Valuations, market quotations and market equivalents are provided the
Funds by Kenny S&P Evaluation Services, a subsidiary of McGraw-Hill. The use
of Kenny as a pricing service by the Funds has been approved by the Boards of
Directors/Trustees. Valuations provided by Kenny are determined without
exclusive reliance on quoted prices and take into consideration appropriate
factors such as institution-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics,
and other market data.
Net Asset Value and Offering Price Per Share
<TABLE>
<CAPTION>
Arizona
<S> <C>
Net asset value per share
($2,634,802/523,621 shares) $5.03
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.17
Florida
Net asset value per share
($5,516,388/1,098,333 shares) $5.02
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.16
Maryland
Net asset value per share
($12,023,007/2,388,381 shares) $5.03
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.17
Michigan
Net asset value per share
($5,803,799/1,137,278 shares) $5.10
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.24
New York
Net asset value per share
($6,217,955/1,221,688 shares) $5.09
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.23
Pennsylvania
Net asset value per share
($4,486,116/883,146 shares) $5.08
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.22
Virginia
Net asset value per share
($12,617,575/2,475,015 shares) $5.10
Maximum sales charge
(2.75% of offering price) 0.14
Offering price per share $5.24
</TABLE>
CALCULATION OF YIELD AND TOTAL RETURN
Each Fund may advertise its "total return." Total return is calculated
separately for each series. Total return is historical in nature and is not
intended to indicate future performance. Total return will be quoted for the
most recent one-year period, five-year period, and period from inception of
the Fund's offering of shares. Return quotations for periods in excess of one
year represent the average annual total return for the period included in the
particular quotation. Total return is a computation of a Fund's dividend
yield, plus or minus realized or unrealized capital appreciation or
depreciation, less fees and expenses. Total return quotations reflect the
deduction of the Fund's maximum sales charge ("return with maximum load"),
except quotations of "return without maximum load" which do not deduct the
sales charge. Note: "Total Return" as quoted in the Financial Highlights
section of the Funds' Annual Report to Shareholders, however, per SEC
instructions, does not reflect deduction of the sales charge, and corresponds
to "return without maximum load" as referred to herein. Return without maximum
load should be considered only by investors, such as participants in certain
pension plans, to whom the sales charge does not apply, or for purposes of
comparison only with comparable figures which also do not reflect sales
charges, such as Lipper averages. Total return is computed according to the
following formula:
P(1 + T)n = ERV
where P = a hypothetical initial payment of $1,000; T = total return; n =
number of years; and ERV = the ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1, 5 or 10 year periods at the end
of such periods (or portions thereof, if applicable).
Returns with maximum load (average annual total returns) are as follows:
<TABLE>
<CAPTION>
Periods Ended
December 31, 1996 One Year Since Inception
<S> <C> <C>
Arizona .40% 3.27% (12/31/93)
Florida .74% 3.58% (12/31/93)
Maryland 1.16% 3.90% (9/30/93)
Michigan 1.42% 4.19% (9/30/93)
New York 1.03% 4.06% (9/30/93)
Pennsylvania 1.14% 4.10% (12/31/93)
Virginia .87% 4.27% (9/30/93)
</TABLE>
Returns without maximum load are as follows:
<TABLE>
<CAPTION>
Periods Ended
December 31, 1996 One Year Since Inception
<S> <C> <C>
Arizona 3.17% 4.23% (12/31/93)
Florida 3.53% 4.54% (12/31/93)
Maryland 3.96% 4.78% (9/30/93)
Michigan 4.19% 5.08% (9/30/93)
New York 3.79% 4.95% (9/30/93)
Pennsylvania 3.92% 5.06% (12/31/93)
Virginia 3.82% 5.16% (9/30/93)
</TABLE>
A Fund may also advertise its "yield" and "taxable equivalent yield." As with
total return, both yield figures are historical and are not intended to
indicate future performance. "Yield" quotations refer to the aggregate imputed
yield-to-maturity of each of the Fund's investments based on the market value
as of the last day of a given thirty-day or one-month period less accrued
expenses (net of reimbursement), divided by the average daily number of
outstanding shares times the maximum offering price on the last day of the
period (so that the effect of the sales charge is included in the
calculation), compounded on a "bond equivalent," or semi-annual, basis. Yield
is computed according to the following formula:
Yield = 2[(a-b/cd +1)6 - 1]
where a = dividends and interest earned during the period; b = expenses
accrued for the period (net of reimbursement); c = the average daily number of
shares outstanding during the period that were entitled to receive dividends;
and d = the maximum offering price per share on the last day of the period.
The taxable equivalent yield is the yield an investor would be
required to obtain from taxable investments to equal the Fund's yield, all or
a portion of which may be exempt from federal income taxes. The double taxable
equivalent yield for the combined federal and state level is computed for each
class by taking the portion of the yield exempt from regular federal and the
specific state income taxes and multiplying the exempt yield by a factor based
on a stated income tax rate, then adding the portion of the yield that is not
exempt from regular federal and specific state income taxes. The taxable
equivalent yield for the federal level only is computed for each class by
taking the portion of the yield exempt from federal income taxes and
multiplying the exempt yield by a factor based on a stated income tax rate,
then adding the portion of the yield that is not exempt from federal income
taxes. The factor which is used to calculate the tax equivalent yield is the
reciprocal of the difference between 1 and the applicable income tax rate,
which will be stated in the advertisement.
The yield and tax equivalent yield for the Fund's Class A shares for the
thirty days ending December 31, 1996 is as follows:
<TABLE>
<CAPTION>
SEC Tax Equivalent Tax Equivalent
Yield Yield at 36% Yield at 39.6%
Federal Tax RateFederal Tax Rate
<S> <C> <C> <C>
Arizona 3.78% 5.90% 6.26%
Florida 4.55% 7.11% 7.53%
Maryland 4.23% 6.61% 7.00%
Michigan 4.06% 6.34% 6.72%
New York 4.11% 6.42% 6.80%
Pennsylvania 4.24% 6.63% 7.02%
Virginia 3.80% 5.94% 6.29%
</TABLE>
ADVERTISING
The Funds or their affiliates may provide information such as, but
not limited to, the economy, investment climate, investment principles,
sociological conditions and political ambiance. Discussion may include
hypothetical scenarios or lists of relevant factors designed to aid the
investor in determining whether the Funds are compatible with the investor's
goals. The Funds may list portfolio holdings or give examples or securities
that may have been considered for inclusion in the Funds, whether held or not.
The Funds or their affiliates may supply comparative performance data
and rankings from independent sources such as Donoghue's Money Fund Report,
Bank Rate Monitor, Money, Forbes, Lipper Analytical Services, Inc., CDA
Investment Technologies, Inc., Wiesenberger Investment Companies Service,
Russell 2000/Small Stock Index, Mutual Fund Values Morningstar Ratings, Mutual
Fund Forecaster, Barron's, The Wall Street Journal, and Schabacker Investment
Management, Inc. Such averages generally do not reflect any front- or back-end
sales charges that may be charged by Funds in that grouping. The Funds may
also cite to any source, whether in print or on-line, such as Bloomberg, in
order to acknowledge origin of information. The Funds may compare themselves
or their portfolio holdings to other investments, whether or not issued or
regulated by the securities industry, including, but not limited to,
certificates of deposit and Treasury notes. The Funds, their Advisor, and
their affiliates reserve the right to update performance rankings as new
rankings become available.
DIRECTORS/TRUSTEES AND OFFICERS
RICHARD L. BAIRD, JR., Trustee. Mr. Baird is Director of Finance for the
Family Health Council, Inc. in Pittsburgh, Pennsylvania, a non-profit
corporation which provides family planning services, nutrition, maternal/child
health care, and various health screening services. Mr. Baird is a
trustee/director of each of the investment companies in the Calvert Group of
Funds, except for Acacia Capital Corporation, Calvert New World Fund and
Calvert World Values Fund. DOB: 05/09/48. Address: 211 Overlook Drive,
Pittsburgh, Pennsylvania 15216.
FRANK H. BLATZ, JR., Esq., Trustee. Mr. Blatz is a partner in the law firm of
Snevily, Ely, Williams, Gurrieri & Blatz. He was formerly a partner with
Abrams, Blatz, Gran, Hendricks & Reina, P.A. DOB: 10/29/35. Address: 308 East
Broad Street, PO Box 2007, Westfield, New Jersey 07091.
FREDERICK T. BORTS, M.D., Trustee. Dr. Borts is a radiologist with Kaiser
Permanente. Prior to that, he was a radiologist at Bethlehem Medical Imaging
in Allentown, Pennsylvania. DOB: 07/23/49. Address: 2040 Nuuanu Avenue #1805,
Honolulu, Hawaii, 96817.
1 CHARLES E. DIEHL, Trustee. Mr. Diehl is Vice President and Treasurer
Emeritus of the George Washington University, and has retired from University
Support Services, Inc. of Herndon, Virginia. He is also a Director of Acacia
Mutual Life Insurance Company. DOB: 10/13/22. Address: 1658 Quail Hollow Court,
McLean, Virginia 22101.
DOUGLAS E. FELDMAN, M.D., Trustee. Dr. Feldman practices head and neck
reconstructive surgery in the Washington, D.C., metropolitan area. DOB:
05/23/48. Address: 7536 Pepperell Drive, Bethesda, Maryland 20817.
PETER W. GAVIAN, CFA, Trustee. Mr. Gavian was a principal of Gavian De Vaux
Associates, an investment banking firm. He continues to be President of with
Corporate Finance of Washington, Inc. DOB: 12/08/32. Address: 3005 Franklin
Road North, Arlington, Virginia 22201.
JOHN G. GUFFEY, JR., Trustee. Mr. Guffey is chairman of the Calvert Social
Investment Foundation, organizing director of the Community Capital Bank in
Brooklyn, New York, and a financial consultant to various organizations. In
addition, he is a Director of the Community Bankers Mutual Fund of Denver,
Colorado, and the Treasurer and Director of Silby, Guffey, and Co., Inc., a
venture capital firm. Mr. Guffey is a trustee/director of each of the other
investment companies in the Calvert Group of Funds, except for Acacia Capital
Corporation and Calvert New World Fund. DOB: 05/15/48. Address: 7205 Pomander
Lane, Chevy Chase, Maryland 20815.
M. CHARITO KRUVANT, Trustee. Ms. Kruvant is President of Creative Associates
International, Inc., a firm that specializes in human resources development,
information management, public affairs and private enterprise development.
DOB: 12/08/45. Address: 5301 Wisconsin Avenue, N.W., Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh serves as a Director of Acacia Federal
Savings Bank. DOB: 09/24/37. Address: 4823 Prestwick Drive, Fairfax, Virginia
22030.
1 DAVID R. ROCHAT, Senior Vice President and Trustee. Mr. Rochat is
Executive Vice President of Calvert Asset Management Company, Inc., Director and
Secretary of Grady, Berwald and Co., Inc., and Director and President of Chelsea
Securities, Inc. DOB: 10/07/37. Address: Box 93, Chelsea, Vermont 05038.
1 D. WAYNE SILBY, Esq., Trustee. Mr. Silby is a trustee/director of each of
the investment companies in the Calvert Group of Funds, except for Acacia
Capital Corporation and Calvert New World Fund. Mr. Silby is an officer,
director and shareholder of Silby, Guffey & Company, Inc., which serves as
general partner of Calvert Social Venture Partners ("CSVP"). CSVP is a venture
capital firm investing in socially responsible small companies. He is also a
Director of Acacia Mutual Life Insurance Company. DOB: 07/20/48. Address: 1715
18th Street, N.W., Washington, D.C. 20009.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a director and Senior
Vice President of Calvert Group, Ltd., and Senior Vice President and Chief
Investment Officer of Calvert Asset Management Company, Inc. Mr. Martini is
also a director and President of Calvert-Sloan Advisers, L.L.C., and a
director and officer of Calvert New World Fund. DOB: 1/13/50.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior Vice
President and Controller of Calvert Group, Ltd. and its subsidiaries and an
officer of each of the other investment companies in the Calvert Group of
Funds. Mr. Wolfsheimer is Vice President and Treasurer of Calvert-Sloan
Advisers, L.L.C., and a director of Calvert Distributors, Inc. DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and Assistant Secretary. Mr.
Tartikoff is an officer of each of the investment companies in the Calvert
Group of Funds, and is Senior Vice President, Secretary, and General Counsel
of Calvert Group, Ltd., and each of its subsidiaries. Mr. Tartikoff is also
Vice President and Secretary of Calvert-Sloan Advisers, L.L.C., a director of
Calvert Distributors, Inc., and is an officer of Acacia National Life
Insurance Company. DOB: 08/12/47.
EVELYNE S. STEWARD, Vice President. Ms. Steward is a director and Senior Vice
President of Calvert Group, Ltd., and a director of Calvert-Sloan Advisers,
L.L.C. She is the sister of Philip J. Schewetti, the portfolio manager of the
CSIF Equity Portfolio. DOB: 11/14/52.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of Calvert Asset
Management Company, Inc., and is an officer of each of the other investment
companies in the Calvert Group of Funds, except for Calvert New World Fund,
Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is Associate
General Counsel of Calvert Group, Ltd. and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of each
of the other investment companies in the Calvert Group of Funds. DOB:
01/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is Assistant Counsel
of Calvert Group and an officer of each of its subsidiaries and Calvert-Sloan
Advisers, L.L.C. She is also an officer of each of the other investment
companies in the Calvert Group of Funds. DOB: 10/21/56.
LISA CROSSLEY, Esq., Assistant Secretary and Compliance Officer. Ms. Crossley
is Assistant Counsel of Calvert Group and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of each
of the other investment companies in the Calvert Group of Funds. DOB:
12/31/61.
IVY WAFFORD DUKE, Esq., Assistant Secretary Ms. Duke is Assistant Counsel of
Calvert Group and an officer of each of its subsidiaries and Calvert-Sloan
Advisers. L.L.C. She is also an officer of each of the other investment
companies in the Calvert Group of Funds. DOB: 09/07/68.
1 Directors deemed to be "interested persons" of the Fund under the
Investment Company Act of 1940, by virtue of their affiliation with the Fund's
Advisor.
Each of the above directors/trustees and officers is a director/trustee or
officer of each of the investment companies in the Calvert Group of Funds with
the exception of Calvert Social Investment Fund, of which only Messrs. Baird,
Guffey and Silby are among the trustees, Acacia Capital Corporation, of which
only Messrs. Blatz, Diehl and Pugh are among the directors, Calvert World
Values Fund, Inc., of which only Messrs. Guffey and Silby are among the
directors, and Calvert New World Fund, Inc., of which only Mr. Martini is
among the directors. The address of directors and officers, unless otherwise
noted, is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
The Audit Committee of the Board of Directors/Trustees is composed of Messrs.
Baird, Blatz, Feldman, Guffey and Pugh. The Board's Investment Policy
Committee is composed of Messrs. Borts, Diehl, Gavian, Rochat and Silby.
Directors/Trustees and officers of the Fund as a group own less than
1% of each Fund's outstanding shares.
Directors/Trustees of the Fund not affiliated with the Advisor currently
receive an annual fee of $20,500 for service as a member of the Board of
Directors/Trustees of the Calvert Group of Funds plus a fee of $750 to $1,500
for each Board and Committee meeting attended; such fees are allocated among
the Funds on the basis of their net assets. For the 1996 fiscal period, the
Funds paid director/trustee fees of $279, $501, $1,205, $600, $635, $444, and
$1,190, for the Arizona, Florida, Maryland, Michigan, New York, Pennsylvania,
and Virginia Portfolios, respectively.
Directors/Trustees of the Fund not affiliated with the Fund's Advisor may
elect to defer receipt of all or a percentage of their fees and invest them in
any fund in the Calvert of Funds through the Directors/Trustees Deferred
Compensation Plan (shown as "Pension or Retirement Benefits Accrued as part of
Fund Expenses," below). Deferral of the fees is designed to maintain the
parties in the same position as if the fees were paid on a current basis.
Management believes this will have a negligible effect on the Fund's assets,
liabilities, net assets, and net income per share, and will ensure that there
is no duplication of advisory fees.
Director Compensation Table
<TABLE>
<CAPTION>
Fiscal Year 1996 Aggregate Pension or Total
(unaudited numbers) Compensation Retirement Compensation from
Name of Director from Registrant Benefits Registrant and Fund
for service as Accrued as part Complex paid to
Director of Registrant Directors<F3>
Expenses <F2>
<S> <C> <C> <C>
Richard L. Baird, Jr. $1898 $0 $34,925
Frank H. Blatz, Jr. $1935 $1935 $37,875
Frederick T. Borts $1793 $0 $32,675
Charles E. Diehl $1807 $1807 $35,475
Douglas E. Feldman $1873 $0 $34,175
Peter W. Gavian $1872 $560 $34,175
M. Charito Kruvant $905 $0 $24,313
John G. Guffey, Jr. $1816 $0 $49,433
Arthur J. Pugh $2011 $0 $36,736
D. Wayne Silby $1710 $0 $56,398
<FN>
<F2> Messrs. Blatz, Diehl, and Gavian have chosen to defer a portion of their
compensation. As of December 31, 1996, total deferred compensation, including
dividends and capital appreciation, was $428,689.46, $428,442.42, and
$96,332.93, for each named director, respectively.
<F3> As of December 31, 1996, the Fund Complex consists of nine (9) registered
investment companies.
</FN>
</TABLE>
INVESTMENT ADVISOR
The Fund's Investment Advisor is Calvert Asset Management Company,
Inc., 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814, a
subsidiary of Calvert Group, Ltd., which is a subsidiary of Acacia Mutual Life
Insurance Company of Washington, D.C.
The Investment Advisory Agreement between the Fund and the Advisor
will remain in effect indefinitely, provided continuance is approved at least
annually by the vote of the holders of a majority of the outstanding shares of
the Funds, or by the directors/trustees of the Funds; and further provided
that such continuance is also approved annually by the vote of a majority of
the directors/trustees of the Funds who are not parties to the Agreement or
interested persons of such parties, cast in person at a meeting called for the
purpose of voting on such approval. The Agreement may be terminated without
penalty by either party on 60 days' prior written notice; it automatically
terminates in the event of its assignment.
Under the Agreement, the Advisor manages the investment and
reinvestment of the Fund's assets, subject to the direction and control of the
Funds' Boards of Directors/Trustees. For its services, the Advisor receives an
annual fee of 0.60% of the first $500 million of the Fund's average daily net
assets, 0.50% of the next $500 million of such assets, and 0.40% of all assets
over $1 billion.
The advisory fee is payable monthly. The Advisor reserves the right (i) to
waive all or a part of its fee and (ii) to compensate, at its expense,
broker-dealers in consideration of their promotional and administrative
services. The Advisor may recapture in later years, to the extent permitted by
law, fees it waived and expenses it paid in prior years. Specifically, the
Advisor may recapture any fees waived or deferred and expenses reimbursed for
the prior two-year period, but in no event may it recapture fees or expenses
for any period later than the two-year period ending December 31, 1996.
Recapture is permitted only to the extent it does not result in the Fund's
aggregate expenses exceeding an annual expense limit of 2.00% of its average
daily net assets. The advisory fee incurred in any given year will be paid in
full before any recapture fees are paid for a prior year. Recaptured fees will
apply to the most recent suspension/reimbursement period. During the 1994
fiscal period, the Advisor received advisory fees of $0, $43, $2,444, $1,690,
$659, $109, and $2,392, for the Arizona, Florida, Maryland, Michigan, New
York, Pennsylvania, and Virginia Portfolios, respectively, and, for the same
period, waived advisory fees of $12,272, $19,011, $50,168, $42,150, $19,257,
$12,665, and $41,569, for the Arizona, Florida, Maryland, Michigan, New York,
Pennsylvania, and Virginia Portfolios, respectively. For the 1995 fiscal
period, the Advisor received advisory fees of $17,286, $25,034, $270,912,
$37,455, $29,584, $21,720, and $59,769, for the Arizona, Florida, Maryland,
Michigan, New York, Pennsylvania, and Virginia Portfolios, respectively, and,
for the same period, waived advisory fees of $14,027, $15,204, $38,349,
$19,899, $21,022, $16,922, and $29,520, for the Arizona, Florida, Maryland,
Michigan, New York, Pennsylvania, and Virginia Portfolios, respectively. For
the 1996 fiscal period, the Advisor received advisory fees of $16,538,
$30,771, $72,423, $36,078, $38,381, $27,180, and $72,322, for the Arizona,
Florida, Maryland, Michigan, New York, Pennsylvania, and Virginia Portfolios,
respectively.
The Advisor provides each Fund with investment advice and research,
pays the salaries and fees of all directors/trustees and executive officers of
the Fund who are principals of the Advisor, and pays certain Fund advertising
and promotional expenses. The Funds pay all other administrative and operating
expenses, including: custodial fees; shareholder servicing, dividend
disbursing and transfer agency fees; administrative service fees; federal and
state securities registration fees; insurance premiums; trade association
dues; interest, taxes and other business fees; legal and audit fees; and
brokerage commissions and other costs associated with the purchase and sale of
portfolio securities.
The Advisor has agreed to reimburse the Funds for all expenses,
excluding brokerage, taxes, interest, and extraordinary items exceeding, on a
pro rata basis, the most restrictive expense limitation in those states which
the Fund's shares are qualified for sale.
ADMINISTRATIVE SERVICES
Calvert Administrative Services Company, a wholly-owned subsidiary of Calvert
Group, Ltd., has been retained by the Fund to provide certain administrative
services necessary to the conduct of the Fund's affairs. Such services include
the preparation of corporate and regulatory reports and filings, portfolio
accounting, and the daily determination of net investment income and net asset
value per share. Calvert Administrative Services Company receives an annual
fee of 0.10% of each Fund's average net assets for providing such services.
The Funds waived the fee for the 1994 and 1995 fiscal periods. For the 1996
fiscal period, Calvert Administrative Services Company received an annual fee
of $2,756, $5,128, $12,071, $6,013, $6,397, $4,530, $12,054 for the Arizona,
Florida, Maryland, Michigan, New York, Pennsylvania, and Virginia Portfolios,
respectively.
METHOD OF DISTRIBUTION
The Funds have entered into an agreement with Calvert Distributors, Inc.
("CDI"), whereby CDI, acting as principal underwriter for the Series, makes a
continuous offering of the Series' securities on a "best efforts" basis. Prior
to April 1, 1995, the principal underwriter was Calvert Securities Corporation
("CSC"). Under the terms of the agreement, CDI bears all its expenses of
providing services pursuant to the agreement, including payment of any
commissions and service fees. CDI receives all sales charges imposed on the
Funds' shares and compensates broker-dealer firms for sales of such shares
(see "Alternative Sales Options" in the Prospectus). CDI is entitled to
receive reimbursement of distribution expenses pursuant to the Distribution
Plans (see below). For the 1994, 1995, and 1996 fiscal periods, the Fund paid
no Distribution Plan expenses. In fiscal 1994, CSC received sales charges in
excess of the dealer reallowance of $7,757, $20,467, $29,470, $0, $7,872,
$718, and $43,471, for the Arizona, Florida, Maryland, Michigan, New York,
Pennsylvania, and Virginia Portfolios, respectively. For fiscal 1995, CDI
received sales charges in excess of the dealer reallowance of $3,016, $287,
$6,482, $1,441, $3,925, $2,788, and $6,479, for the Arizona, Florida, Maryland,
Michigan, New York, Pennsylvania, and Virginia Portfolios, respectively. For
fiscal 1996, CDI received sales charges in excess of the dealer reallowance of
$1,262, $849, $4,214, $670, $1,977, $1,228, and $9,039, for the Arizona,
Florida, Maryland, Michigan, New York, Pennsylvania, and Virginia Portfolios,
respectively.
Pursuant to Rule 12b-1 under the Investment Company Act of 1940 ("1940 Act"),
the Funds have adopted Distribution Plans (the "Plans") which permit them to
pay certain expenses associated with the distribution of its shares. Such
expenses may not exceed, on an annual basis, 0.15% of the Funds' average daily
net assets. As of October 1, 1998, expenses may not exceed, on an annual
basis, 0.25% of the Funds' average daily net assets.
The Plans were approved by the Board of Directors/Trustees, including
the Directors/Trustees who are not "interested persons" of the Funds (as that
term is defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of the Plans or in any agreements related to the
Plans. The selection and nomination of the Directors/Trustees who are not
interested persons of the Fund is committed to the discretion of such
disinterested Directors/Trustees. In establishing the Plans, the
Directors/Trustees considered various factors including the amount of the
distribution fee. The Directors/Trustees determined that there is a reasonable
likelihood that the Plans will benefit the Funds and their shareholders.
The Plans may be terminated by vote of a majority of the non-interested
Directors/Trustees who have no direct or indirect financial interest in the
Plans, or by vote of a majority of the outstanding shares. Any change in the
Plans that would materially increase the distribution cost to the Funds
requires approval of the shareholders; otherwise, the Plans may be amended by
the Directors/Trustees, including a majority of the non-interested
Directors/Trustees as described above.
The Plans will continue in effect successive one-year terms, provided
that such continuance is specifically approved by (i) the vote of a majority
of the Directors/Trustees who are not parties to the Plans or interested
persons of any such party and who have no direct or indirect financial
interest in the Plans, and (ii) the vote of a majority of the entire Board of
Directors/Trustees.
Apart from the Plans, the Advisor, at its expense, may incur costs
and pay expenses associated with the distribution of shares of the Funds.
TRANSFER AND SHAREHOLDER SERVICING AGENT
Calvert Shareholder Services, Inc. ("CSSI"), a subsidiary of Calvert Group,
Ltd., and Acacia Mutual, has been retained by the Funds to act as transfer
agent, dividend disbursing agent and shareholder servicing agent. These
responsibilities include: responding to shareholder inquiries and instructions
concerning their accounts; crediting and debiting shareholder accounts for
purchases and redemptions of Fund shares and confirming such transactions;
daily updating of shareholder accounts to reflect declaration and payment of
dividends; and preparing and distributing semi-annual statements to
shareholders regarding their accounts. For such services, Calvert Shareholder
Services, Inc., receives compensation based on the number of shareholder
accounts and the number of transactions. The fees paid by the Series to
Calvert Shareholder Services, Inc. In fiscal 1994, CSSI received $1,495,
$1,143, $6,690, $2,771, $3,207, $2,022, and $5,258, for the Arizona, Florida,
Maryland, Michigan, New York, Pennsylvania, and Virginia Portfolios,
respectively. For the 1995 fiscal period, CSSI received $4,131, $3,389,
$9,630, $5,414, $6,915, $4,711, and $8,735, for the Arizona, Florida, Maryland,
Michigan, New York, Pennsylvania, and Virginia Portfolios, respectively. For
the 1996 fiscal period, CSSI received $2,759, $2,162, $9,807, $4,739, $7,183,
$3,841, and $8,953, for the Arizona, Florida, Maryland, Michigan, New York,
Pennsylvania, and Virginia Portfolios, respectively.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
Coopers and Lybrand L.L.P. has been selected by the Board of Directors to
serve as independent accountants for all portfolios of the Fund for fiscal
year 1997. State Street Bank & Trust Company, N.A., 225 Franklin Street,
Boston, MA 02110, serves as custodian of the Series's investments. First
National Bank of Maryland, 25 South Charles Street, Baltimore, Maryland 21203
acts as custodian of certain of the Series's cash assets. Neither custodian
has any part in deciding the Fund's investment policies or the choice of
securities that are to be purchased or sold by the Series.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. Investment decisions and the
choice of brokers and dealers are made by the Fund's Advisor under the
direction and supervision of the Fund's Board of Directors/Trustees.
Broker-dealers who execute portfolio transactions on behalf of the
Funds are selected on the basis of their professional capability and the value
and quality of their services. The Advisor may execute portfolio transactions
with or through broker-dealers who have sold shares of the Fund. However, such
sales will not be a qualifying or disqualifying factor in a broker-dealer's
selection nor will the selection of any broker-dealer be based on the volume
of Fund shares sold. The Advisor or its affiliate may compensate, at their
expense, such broker-dealers in consideration of their promotional and
administrative services.
In fiscal 1994, the portfolio turnover was 22%, 93%, 77%, 65%, 56%, 96%, and
65%, for the Arizona, Florida, Maryland, Michigan, New York, Pennsylvania, and
Virginia Portfolios, respectively. For the 1995 fiscal period, the portfolio
turnover was 10%, 44%, 11%, 22%, 13%, 17%, and 11%, for the Arizona, Florida,
Maryland, Michigan, New York, Pennsylvania, and Virginia Portfolios,
respectively. For the 1996 fiscal period, the portfolio turnover was 18%, 19%,
8%, 18%, 19%, 9%, and 4%, for the Arizona, Florida, Maryland, Michigan, New
York, Pennsylvania, and Virginia Portfolios, respectively.
GENERAL INFORMATION
Calvert Municipal Fund, Inc., was organized as a corporation under
the General Corporation Law of the State of Maryland on February 4, 1992. The
Fund includes the following series: (list all except Florida) Calvert National
Municipal Intermediate Fund and Calvert California Municipal Intermediate
Fund, Calvert Maryland Municipal Intermediate Fund. Prior to March 1, 1994,
Calvert National Municipal Intermediate Fund was known as Calvert Intermediate
Municipal Fund.
First Variable Rate Fund for Government Income was originally
organized as a Maryland corporation, and became a Massachusetts business trust
on April 30, 1984. It has two series, one doing business as Calvert First
Government Money Market Fund, and the other, Calvert Florida Municipal
Intermediate Fund.
Each share of each Fund represents an equal proportionate interest in that
Fund with each other share and is entitled to such dividends and distributions
out of the income belonging to such series as declared by the Board. Upon any
liquidation of the Funds, shareholders are entitled to share pro rata in the
net assets belonging to that Fund available for distribution.
The Funds will send shareholders unaudited semi-annual and audited
annual reports that will include the Funds' net asset value per share,
portfolio securities, income and expenses, and other financial information.
The Funds' registration statements, containing additional
information, are on file with the Securities and Exchange Commission and are
available to the public.
FINANCIAL STATEMENTS
The audited financial statements in the Funds' Annual Report to Shareholders,
dated December 31, 1996, are expressly incorporated by reference and made a
part of this Statement of Additional Information. A copy of the Annual Report
may be obtained free of charge by writing or calling the Funds.
APPENDIX
Municipal Obligations
Municipal obligations are debt obligations issued by states, cities,
municipalities, and their agencies to obtain funds for various public
purposes. Such purposes include the construction of a wide range of public
facilities, the refunding of outstanding obligations, the obtaining of funds
for general operating expenses, and the lending of funds to other public
institutions and facilities. In addition, certain types of industrial
development bonds are issued by or on behalf of public authorities to obtain
funds for many types of local, privately operated facilities. Such debt
instruments are considered municipal obligations if the interest paid on them
is exempt from federal income tax in the opinion of bond counsel to the
issuer. Although the interest paid on the proceeds from private activity bonds
used for the construction, equipment, repair or improvement of privately
operated industrial or commercial facilities may be exempt from federal income
tax, current federal tax law places substantial limitations on the size of
such issues.
Municipal obligations are generally classified as either "general
obligation" or "revenue'' bonds. General obligation bonds are secured by the
issuer's pledge of its faith, credit and taxing power for the payment of
principal and interest. Revenue bonds are payable from the revenues derived
from a particular facility or class of facilities or, in some cases, from the
proceeds of a special excise tax or other specific revenue source, but not
from the general taxing power. Tax-exempt industrial development bonds are in
most cases revenue bonds and do not generally carry the pledge of the credit
of the issuing municipality. There are, of course, variations in the security
of municipal obligations, both within a particular classification and among
classifications.
Municipal obligations are generally traded on the basis of a quoted
yield to maturity, and the price of the security is adjusted so that relative
to the stated rate of interest it will return the quoted rate to the purchaser.
Short-term and limited-term municipal obligations include Tax
Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes,
Construction Loan Notes, and Discount Notes. The maturities of these
instruments at the time of issue generally will range between three months and
one year. Pre-Refunded Bonds with longer nominal maturities that are due to be
retired with the proceeds of an escrowed subsequent issue at a date within one
year and three years of the time of acquisition are also considered short-term
and limited-term municipal obligations.
Municipal Note and Bond Ratings
Description of Moody's Investors Service, Inc.'s 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.'s/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.
LETTER OF INTENT
Date
Calvert Distributors, Inc.
4550 Montgomery Avenue
Bethesda, MD 20814
Ladies and Gentlemen:
By signing this Letter of Intent, or affirmatively marking the Letter
of Intent option on my Fund Account Application Form, I agree to be bound by
the terms and conditions applicable to Letters of Intent appearing in the
Prospectus and the Statement of Additional Information for the Fund and the
provisions described below as they may be amended from time to time by the
Fund. Such amendments will apply automatically to existing Letters of Intent.
I intend to invest in the shares of:(Fund or Portfolio name*) during
the thirteen (13) month period from the date of my first purchase
pursuant to this Letter (which cannot be more than ninety (90) days prior to
the date of this Letter or my Fund Account Application Form, whichever is
applicable), an aggregate amount (excluding any reinvestments of
distributions) of at least fifty thousand dollars ($50,000) which, together
with my current holdings of the Fund (at public offering price on date of this
Letter or my Fund Account Application Form, whichever is applicable), will
equal or exceed the amount checked below:
__ $50,000 __ $100,000 __ $250,000 __ $500,000 __ $1,000,000
Subject to the conditions specified below, including the terms of
escrow, to which I hereby agree, each purchase occurring after the date of
this Letter will be made at the public offering price applicable to a single
transaction of the dollar amount specified above, as described in the Fund's
prospectus. No portion of the sales charge imposed on purchases made prior to
the date of this Letter will be refunded.
I am making no commitment to purchase shares, but if my purchases
within thirteen months from the date of my first purchase do not aggregate the
minimum amount specified above, I will pay the increased amount of sales
charges prescribed in the terms of escrow described below. I understand that
4.75% of the minimum dollar amount specified above will be held in escrow in
the form of shares (computed to the nearest full share). These shares will be
held subject to the terms of escrow described below.
From the initial purchase (or subsequent purchases if necessary),
4.75% of the dollar amount specified in this Letter shall be held in escrow in
shares of the Fund by the Fund's transfer agent. For example, if the minimum
amount specified under the Letter is $50,000, the escrow shall be shares
valued in the amount of $2,375 (computed at the public offering price adjusted
for a $50,000 purchase). All dividends and any capital gains distribution on
the escrowed shares will be credited to my account.
If the total minimum investment specified under the Letter is
completed within a thirteen month period, escrowed shares will be promptly
released to me. However, shares disposed of prior to completion of the
purchase requirement under the Letter will be deducted from the amount
required to complete the investment commitment.
Upon expiration of this Letter, the total purchases pursuant to the
Letter are less than the amount specified in the Letter as the intended
aggregate purchases, Calvert Distributors, Inc. ("CDI") will bill me for an
amount equal to the difference between the lower load I paid and the dollar
amount of sales charges which I would have paid if the total amount purchased
had been made at a single time. If not paid by the investor within 20 days,
CDI will debit the difference from my account. Full shares, if any, remaining
in escrow after the aforementioned adjustment will be released and, upon
request, remitted to me.
I irrevocably constitute and appoint CDI as my attorney-in-fact, with
full power of substitution, to surrender for redemption any or all escrowed
shares on the books of the Fund. This power of attorney is coupled with an
interest.
The commission allowed by Calvert Distributors, Inc. to the
broker-dealer named herein shall be at the rate applicable to the minimum
amount of my specified intended purchases.
The Letter may be revised upward by me at any time during the
thirteen-month period, and such a revision will be treated as a new Letter,
except that the thirteen-month period during which the purchase must be made
will remain unchanged and there will be no retroactive reduction of the sales
charges paid on prior purchases.
In determining the total amount of purchases made hereunder, shares
disposed of prior to termination of this Letter will be deducted. My
broker-dealer shall refer to this Letter of Intent in placing any future
purchase orders for me while this Letter is in effect.
Dealer
Name of Investor(s)
By
Authorized Signer
Address
Date
Signature of Investor(s)
Date
Signature of Investor(s)
* "Fund" in this Letter of Intent shall refer to the Fund or Portfolio, as
the case may be, here indicated.
CALVERT ARIZONA MUNICIPAL INTERMEDIATE FUND
CALVERT FLORIDA MUNICIPAL INTERMEDIATE FUND
CALVERT MARYLAND MUNICIPAL INTERMEDIATE FUND
CALVERT MICHIGAN MUNICIPAL INTERMEDIATE FUND
CALVERT NEW YORK MUNICIPAL INTERMEDIATE FUND
CALVERT PENNSYLVANIA MUNICIPAL INTERMEDIATE FUND
CALVERT VIRGINIA MUNICIPAL INTERMEDIATE FUND
Statement of Additional Information
April 30, 1997
INVESTMENT ADVISOR
Calvert Asset Management Company, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P.
217 E. Redwood Street
Baltimore, Maryland 21202-3316
TRANSFER AGENT
Calvert Shareholder Services, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
PRINCIPAL UNDERWRITER
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000N
Bethesda, Maryland 20814
TABLE OF CONTENTS
Investment Objective 1
Investment Policies 1
Investment Restrictions 7
Purchases and Redemptions of Shares 8
Dividends and Distributions 10
Tax Matters 10
Valuation of Shares 11
Calculation of Yield and Total Return 11
Advertising 14
Directors and Officers 15
Investment Advisor 17
Administrative Services 18
Method of Distribution 18
Transfer and Shareholder Servicing Agent 19
Independent Accountants and Custodians 19
Portfolio Transactions 20
General Information 20
Financial Statements 20
Appendix 21
<PAGE>
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial statements
Financial statements incorporated by reference to:
Registrant's Annual Report to Shareholders of the Calvert
Municipal Fund, Inc., dated December 31, 1996, and filed
March 5, 1997.
Schedules II-VII, inclusive, for which provision is made in
the applicable accounting regulation of the Securities and
Exchange Commission, are omitted because they are not
required under the related instructions, or they are
inapplicable, or the required information is presented in
the financial statements or notes thereto.
(b) Exhibits:
1. Articles of Incorporation, (incorporated by
reference to Registrant's Pre-Effective Amendment
No. 2, April 27, 1992, and as amended, incorporated
by reference to Registrant's Pre-Effective
Amendment No. 3, May 21, 1992).
2. By-Laws (incorporated by reference to Registrant's
Pre-Effective Amendment No. 2, April 27, 1992).
4. Specimen Stock Certificate for Calvert California
Municipal Intermediate Fund, (incorporated by
reference to Registrant's Post-Effective Amendment
No. 1, filed July 27, 1992).
5. Investment Advisory Contract (incorporated by
reference to Registrant's Pre-Effective Amendment
No. 2, April 27, 1992).
6. Underwriting Agreement, (incorporated by reference
to Registant's Post-Effective Amendment No. ).
7. Directors' Deferred Compensation Agreement
(incorporated by reference to Registrant's
Pre-Effective Amendment No. 2, April 27, 1992).
8. Custodial Contract (incorporated by reference to
Registrant's Pre-Effective Amendment No. 2, April
27, 1992).
9.a. Transfer Agency Contract (incorporated by reference
to Registrant's Pre-Effective Amendment No. 2,
April 27, 1992).
9.b. Administrative Services Agreement (incorporated by
reference to Registrant's Pre-Effective Amendment
No. 2, April 27, 1992).
10. Opinion and Consent of Counsel as to Legality of
Shares Being Registered (filed herewith).
11. Consent of Independent Auditors to Use of Report
(filed herewith).
15. Plan of Distribution (incorporated by reference to
Registrant's Post-Effective Amendment No. 13,
January 25, 1996).
16. Schedule for Computation of Performance Quotation,
(incorporated by reference to Registrant's
Post-Effective Amendment No. 4, August 2, 1993).
17. Rule 414 Statement of Successor Entity
(incorporated by reference to Registrant's
Pre-Effective Amendment No. 3, May 21, 1992).
(i) Financial Data Schedules (filed herewith).
Exhibits 3 and 12 through 14 are omitted because they are
inapplicable.
Item 25. Persons Controlled By or Under Common Control With Registrant
Registrant is controlled by its Board of Directors. Some members of
Registrant's Board also serve on the Board of Trustees/Directors for Calvert
Social Investment Fund, Calvert World Values Fund, Inc., Calvert New World
Fund, Inc., or Acacia Capital Corporation, and/or a common Board with four
other registered investment companies, First Variable Rate Fund for Government
Income, Calvert Tax-Free Reserves Money Management Plus, and The Calvert Fund.
Item 26. Number of Holders of Securities
As of February 28, 1997, there were 1,063 holders of record of
Registrant's common stock for the Calvert California Municipal Intermediate
Fund series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 1,404 holders of record of
Registrant's common stock for the Calvert National Municipal Intermediate Fund
series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 408 holders of record of
Registrant's common stock for the Calvert Maryland Municipal Intermediate Fund
series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 157 holders of record of
Registrant's common stock for the Calvert Michigan Municipal Intermediate Fund
series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 250 holders of record of
Registrant's common stock for the Calvert New York Municipal Intermediate Fund
series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 398 holders of record of
Registrant's common stock for the Calvert Virginia Municipal Intermediate Fund
series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 99 holders of record of
Registrant's common stock for the Calvert Arizona Municipal Intermediate Fund
series of Calvert Municipal Fund, Inc.
As of February 28, 1997, there were 144 holders of record of
Registrant's common stock for the Calvert Pennsylvania Municipal Intermediate
Fund series of Calvert Municipal Fund, Inc.
Item 27. Indemnification
Registrant's Bylaws, Exhibit 2 to this Registration Statement,
provide that officers and directors will be indemnified by the Fund against
liabilities and expenses incurred by such persons in connection with actions,
suits, or proceedings arising out of their offices or duties of employment,
except that no indemnification can be made to a person who has been adjudged
liable of willful misfeasance, bad faith, gross negligence, or reckless
disregard of duties. In the absence of such an adjudication, the
determination of eligibility for indemnification shall be made by independent
counsel in a written opinion or by the vote of a majority of a quorum of
directors who are neither "interested persons" of Registrant, as that term is
defined in Section 2(a)(19) of the Investment Company Act of 1940, nor parties
to the proceeding.
Registrant's Articles of Incorporation also provide that Registrant
may purchase and maintain liability insurance on behalf of any officer,
trustee, employee or agent against any liabilities arising from such status.
In this regard, Registrant maintains a Directors & Officers (Partners)
Liability Insurance Policy with Chubb Group of Insurance Companies, 15
Mountain View Road, Warren, New Jersey 07061, providing Registrant with $5
million in directors and officers liability coverage, plus $3 million in
excess directors and officers liability coverage for the independent
trustees/directors only. Registrant also maintains a $8 million Investment
Company Blanket Bond issued by ICI Mutual Insurance Company, P.O. Box 730,
Burlington, Vermont, 05402.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Ronald M. First Variable Rate Fund for Government Income
Wolfsheimer Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
--------------
Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Officer
Services, Inc.
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Officer
Services Company and
Service Company Director
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Director
Broker-Dealer and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Md. 20814
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
David R. Rochat First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus and
The Calvert Fund Trustee
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Municipal Fund, Inc. Officer
Investment Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Asset Management Officer
Company, Inc. and
Investment Advisor Director
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Chelsea Securities, Inc. Officer
Securities Firm and
Post Office Box 93 Director
Chelsea, Vermont 05038
---------------
Grady, Berwald & Co. Officer
Holding Company and
43A South Finley Avenue Director
Basking Ridge, NJ 07920
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Reno J. Martini Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert New World Fund, Inc. Director
Investment Company and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Director
Investment Advisor and
4550 Montgomery Avenue Officer
Bethesda, Md. 20814
---------------
Charles T. Nason Acacia Mutual Life Insurance Officer
Acacia National Life Insurance and
Director
Insurance Companies
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
Acacia Financial Corporation Officer
Holding Company and
51 Louisiana Avenue, NW Director
Washington, D.C. 20001
---------------
Gardner Montgomery Company Director
Tax Return Preparation Services
51 Louisiana Avenue, NW
Washington, D.C. 20001
----------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Charles T. Nason Acacia Federal Savings Bank Director
(continued) Savings Bank
7600-B Leesburg Pike
Falls Church, Virginia 22043
---------------
Enterprise Resources, Inc. Director
Business Support Services
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
Acacia Insurance Management
Services Corporation Officer
Service Corporation and
51 Louisiana Avenue, N.W. Director
Washington, D.C. 20001
---------------
Calvert Group, Ltd. Director
Holding Company
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Administrative Director
Services Co.
Service Company
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Asset Management Co., Inc. Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Shareholder Services, Inc. Director
Transfer Agent
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Social Investment Fund Trustee
Investment Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
-----------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Robert John. Acacia National Life Insurance Officer
H. Sands Insurance Company and
51 Louisiana Avenue, NW Director
Washington, D.C. 20001
----------------
Acacia Mutual Life Insurance Officer
Insurance Company
51 Louisiana Avenue, NW
Washington, D.C. 20001
----------------
Acacia Financial Corporation Officer
Holding Company and
51 Louisiana Avenue, NW Director
Washington, D.C. 20001
----------------
Acacia Federal Savings Bank Officer
Savings Bank
7600-B Leesburg Pike
Falls Church, Virginia 22043
---------------
Enterprise Resources, Inc. Director
Business Support Services
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
Acacia Realty Corporation Officer
Real Estate Investments
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
Acacia Insurance Management
Services Corporation Officer
Service Corporation and
51 Louisiana Avenue, N.W Director
Washington, D.C. 20001
---------------
Gardner Montgomery Company Officer
Tax Return Preparation Services and
51 Louisiana Avenue, NW Director
Washington, D.C. 20001
----------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Robert-John H. Calvert Group, Ltd. Director
Sands Holding Company
(continued) 4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Administrative Director
Services, Co.
Service Company
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Asset Management Co., Inc. Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Shareholder Services, Inc. Director
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
William M. Tartikoff Acacia National Life Insurance Officer
Insurance Company
51 Louisiana Avenue, NW
Washington, D.C. 20001
----------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
William M. Calvert Administrative Officer
Tartikoff Services Company
(continued) Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Officer
Services, Inc.
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Director
Broker-Dealer and
4550 Montgomery Avenue Officer
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, L.L.C. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Susan Walker Calvert Group, Ltd. Officer
Bender Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Officer
Services Company
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Officer
Services, Inc.
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, L.L.C. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Katherine Calvert Group, Ltd. Officer
Stoner Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Officer
Services Company
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Officer
Services, Inc.
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, L.L.C. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Lisa Crossley Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Officer
Services Company
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Officer
Services, Inc.
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, L.L.C. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Ivy Wafford Calvert Group, Ltd. Officer
Duke Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Officer
Services Company
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Officer
Services, Inc.
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, L.L.C. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Daniel K. Hayes Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
First Variable Rate Fund for Government Income
Calvert Tax-Free Reserves Officer
Money Management Plus
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Geoffrey Ashton Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Lee Mahfouz Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Annette Krakovitz Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
John Nichols Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
David Leach Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
<PAGE>
Item 29. Principal Underwriters
(a) Registrant's principal underwriter, Calvert Distributors, Inc.,
underwrites the securities of each of Registrant's series, as well as the
securities of First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Social Investment Fund, Money Management Plus, Calvert
Municipal Fund, Inc., Calvert World Values Fund, Inc., and Calvert New World
Fund, Inc., and Acacia Capital Corporation.
(b) Positions of Underwriter's Officers and Directors
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
Steven J. Schueth President None
Ronald M. Wolfsheimer Senior Vice President Treasurer
and Chief Financial Officer
William M. Tartikoff Director, Senior Vice Vice President
President and Secretary and Secretary
Karen Becker Vice President None
Steven Cohen Vice President None
Geoffrey Ashton Regional Vice President None
Lee Mahfouz Regional Vice President None
Timothy McCabe Regional Vice President None
Susan Walker Bender Assistant Secretary Assistant
Secretary
Katherine Stoner Assistant Secretary Assistant
Secretary
Lisa Crossley Assistant Secretary Assistant
Secretary
and Compliance Officer and Compliance
Officer
Ivy Wafford Duke Assistant Secretary Assistant
Secretary
The principal business address of the above individuals is 4550 Montgomery
Avenue, Suite 1000N, Bethesda, Maryland 20814.
(c) Inapplicable.
Item 30. Location of Accounts and Records
Ronald M. Wolfsheimer, Controller
and
William M. Tartikoff, Secretary
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
Item 31. Management Services
Not Applicable
Item 32. Undertakings
a) Not Applicable
b) Not Applicable
c) The Registrant undertakes to furnish to each person to whom
a Prospectus is delivered, a copy of the Registrant's latest
Annual Report to Shareholders, upon request and without
charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this registration statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
registration statement to be signed on its behalf by the undersigned, thereto
duly authorized in the City of Bethesda, and State of Maryland, on the 28th
day of April, 1997.
CALVERT MUNICIPAL FUND, INC.
By: _________________________________
William M. Tartikoff
Vice President & Secretary
SIGNATURES
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated.
Signature Title Date
_________**_____________ Principal Accounting 04/28/97
Ronald M. Wolfsheimer Officer
__________**____________ Director 04/28/97
Richard L. Baird, Jr.
__________**____________ Director 04/28/97
Frank H. Blatz, Jr., Esq.
__________**____________ Director 04/28/97
Frederick T. Borts, M.D.
__________**____________ Director 04/28/97
Charles E. Diehl
__________**____________ Director 04/28/97
Douglas E. Feldman
__________**____________ Director 04/28/97
Peter W. Gavian
__________**____________ Director 04/28/97
John G. Guffey, Jr.
__________**____________ Director 04/28/97
Arthur J. Pugh
__________**____________ Director 04/28/97
David R. Rochat
__________**____________ Director 04/28/97
D. Wayne Silby
______________________ Director 04/29/97
M. Charito Kruvant
** Signed by Susan Walker Bender
pursuant to power of attorney, attached hereto.
<PAGE>
EXHIBIT INDEX
Form N-1A
Item No.
Ex-23
24(b)(10) Form of Opinion and Consent of Counsel
Ex-23
24(b)(11) Independent Auditors' Consent
Ex-24 Power of Attorney
Ex-27
24(17) Financial Data Schedules
Exhibit 10
April 28, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Exhibit 10, Form N-1A
Calvert Municipal Fund, Inc.
File Numbers 811-6525 and 33-44968
Ladies and Gentlemen:
As counsel to Calvert Group, Ltd., it is my opinion that the
securities being registered by this Post-Effective Amendment No. 14 will be
legally issued, fully paid and non-assessable when sold. My opinion is based
on an examination of documents related to Calvert Municipal Fund, Inc. (the
"Fund"), including its Articles of Incorporation, other original or
photostatic copies of Fund records, certificates of public officials,
documents, papers, statutes, or authorities as I deemed necessary to form the
basis of this opinion.
I therefore consent to filing this opinion of counsel with the
Securities and Exchange Commission as an Exhibit to the Fund's Post-Effective
Amendment No. 14 to its Registration Statement.
Sincerely,
Susan Walker Bender
Associate General Counsel
COOPERS Coopers & Lybrand L.L.P.
&LYBRAND a professional services firm
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
The Calvert Municipal Fund, Inc. and
Board of Trustees of First Variable Rate Fund
for Government Income
We consent to the incorporation by reference in Post-Effective Amendment
No. 14 to the Registration Statement of Calvert Municipal Fund, Inc. (comprised
of the Calvert National, Arizona, California, Florida, Maryland, Michigan, New
York, Pennylvania, and Virginia Municipal Intermediate Funds) on Form N-1A
(File Numbers 33-44968 and 811-6525) of our reports dated February 7, 1997, on
our audits of the financial statements and financial highlights of the Funds,
which reports are included in the Annual Report to Shareholders for the year
ended December 31, 1996, which is incorporated by reference in the
Registration Statement. We also consent to the reference to our Firm under the
caption "Independent Accountants and Custodians" in the Statement of Additional
Information.
COOPERS & LYBRAND, L.L.P.
/Coopers & Lybrand, L.L.P./
Baltimore, Maryland
April 15, 1997
Coopers & Lybrand L.L.P. is a member of Coopers & Lybrand International, a
limited liability association incorporated in Switzerland
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Richard L. Baird, Jr.
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Frank H. Blatz, Jr.
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Frederick T. Borts
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Charles E. Diehl
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Douglas E. Feldman
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Peter W. Gavian
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
John G. Guffey, Jr.
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
Arthur J. Pugh
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
David R. Rochat
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of First Variable Rate Fund for
Government Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing
business as Money Management Plus), The Calvert Fund, and Calvert Municipal
Fund, Inc. (collectively, the "Funds"), hereby constitute Ronald M. Wolfsheimer,
William M. Tartikoff, Susan Walker Bender, Beth-ann Roth, and Katherine Stoner
my true and lawful attorneys, with full power to each of them, to sign for me
and in my name in the appropriate capacities, all registration statements and
amendments filed by the Funds with any federal or state agency, and to do all
such things in my name and behalf necessary for registering and maintaining
registration or exemptions from registration of the Funds with any government
agency in any jurisdiction, domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
May 4, 1994
Date Signature
D. Wayne Silby
Witness Name of Trustee/Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Officer of First Variable Rate Fund for Government
Income, Calvert Tax-Free Reserves, Calvert Cash Reserves (doing business as
Money Management Plus), The Calvert Fund, and Calvert Municipal Fund, Inc.
(collectively, the "Funds"), hereby constitute William M. Tartikoff, Susan
Walker Bender, Beth-ann Roth, and Katherine Stoner my true and lawful attorneys,
with full power to each of them, to sign for me and in my name in the
appropriate capacities, all registration statements and amendments filed by the
Funds with any federal or state agency, and to do all such things in my name and
behalf necessary for registering and maintaining registration or exemptions from
registration of the Funds with any government agency in any jurisdiction,
domestic or foreign.
The same persons are authorized generally to do all such things in my name
and behalf to comply with the provisions of all federal, state and foreign laws,
regulations, and policy pronouncements affecting the Funds, including, but not
limited to, the Securities Act of 1933, the Securities Exchange Act of 1934, the
Investment Company Act of 1940, the Investment Advisers Act of 1940, and all
state laws regulating the securities industry.
The same persons are further authorized to sign my name to any document
needed to maintain the lawful operation of the Funds in connection with any
transaction approved by the Board of Trustee/Directors.
When any of the above-referenced attorneys signs my name to any document in
connection with maintaining the lawful operation of the Funds, the signing is
automatically ratified and confirmed by me by virtue of this Power of Attorney.
WITNESS my hand on the date set forth below.
March 1, 1995
Date Signature
Ronald M. Wolfsheimer
Witness Name of Officer
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