ACACIA CAPITAL CORPORATION
--CALVERT RESPONSIBLY INVESTED BOND PORTFOLIO
4550 MONTGOMERY AVENUE
SUITE 1000N
BETHESDA, MARYLAND 20814
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON February 16, 1996
Notice is hereby given that a Special Meeting (the "Meeting")
of Shareholders of the Calvert Responsibly Invested ("CRI") Bond
Portfolio (the "Bond Portfolio") of Acacia Capital Corporation (the
"Company") will be held at the offices of the Company, 4550 Montgomery
Avenue, Suite 1000N, Bethesda, Maryland 20814 on February 16, 1996 at 10:00
a.m., Eastern Time, for the following purposes:
1. To consider and act upon an amendment to the Company's
Articles of Incorporation to, in effect, combine the Bond Portfolio into
the Company's existing CRI Balanced Portfolio (the "Balanced Portfolio")
by a reclassification of Bond Portfolio shares. A vote in favor of the
proposed amendment is a vote in favor of the elimination of the Bond
Portfolio; and
2. To transact any other business which may properly come
before the Meeting or any adjournments thereof.
The Directors of the Company have fixed the close of business
on December 18, 1995 as the record date for the determination of
shareholders of the Bond Portfolio entitled to notice of and to vote at
the Meeting and any adjournment thereof.
IT IS IMPORTANT THAT VOTING INSTRUCTIONS BE RETURNED PROMPTLY.
SHAREHOLDERS WHO DO NOT EXPECT TO ATTEND THE MEETING IN PERSON ARE URGED
WITHOUT DELAY TO SIGN AND RETURN THE ENCLOSED VOTING INSTRUCTION FORM IN
THE ENCLOSED ENVELOPE, WHICH REQUIRES NO POSTAGE, SO THAT THEIR SHARES
MAY BE REPRESENTED AND VOTED AT THE MEETING. YOUR PROMPT ATTENTION TO
THE ENCLOSED VOTING INSTRUCTION FORM WILL HELP TO AVOID THE EXPENSE OF
FURTHER SOLICITATION.
By Order of the Board of Directors
William M. Tartikoff, Esq.
Secretary
December 30, 1995
INSTRUCTIONS FOR EXECUTING VOTING INSTRUCTION FORM
The following general rules for signing voting instruction
forms may be of assistance to you and may help to avoid the time and
expense involved in validating your vote if you fail to sign your voting
instruction form properly.
1. INDIVIDUAL ACCOUNTS: Sign your name exactly as it appears in
the registration on the voting instruction form.
2. JOINT ACCOUNTS: Either party may sign, but the name of the
party signing should conform exactly to a name shown in the registration
on the voting instruction form.
3. ALL OTHER ACCOUNTS: The capacity of the individual signing
the voting instruction form should be indicated unless it is reflected
in the form of registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
(1) ABC Corp. ABC Corp.
(2) ABC Corp. John Doe, Treasurer
(3) ABC Corp.
c/o John Doe, Treasurer John Doe, Treasurer
(4) ABC Corp. Profit Sharing Plan John Doe, Trustee
TRUST ACCOUNTS
(1) ABC Trust Jane B. Doe, Trustee
(2) Jane B. Doe, Trustee Jane B. Doe
u/t/d 12/28/78
CUSTODIAL OR ESTATE ACCOUNTS
(1) John B. Smith, Cust. John B. Smith
f/b/o John B. Smith, Jr. UGMA
(2) John B. Smith, Jr. John B. Smith, Jr., Executor
<PAGE>
PROSPECTUS/PROXY STATEMENT DATED December 30, 1995
CALVERT RESPONSIBLY INVESTED BOND PORTFOLIO
ACACIA CAPITAL CORPORATION
4550 MONTGOMERY AVENUE
SUITE 1000N
BETHESDA, MARYLAND 20814
This Prospectus/Proxy Statement is being furnished to
shareholders of the Calvert Responsibly Invested ("CRI") Bond Portfolio
(the "Bond Portfolio") of Acacia Capital Corporation (the "Company"), in
connection with a proposed amendment to the Company's Articles of
Incorporation that would, in effect, combine the Bond Portfolio into the
Company's existing CRI Balanced Portfolio (the "Balanced Portfolio")
(the "Proposed Merger"). The Proposed Merger would be accomplished by a
reclassification of shares and tax-free transfer of all assets and
liabilities of the Bond Portfolio in exchange for shares of the Balanced
Portfolio. As a result of the Proposed Merger, shareholders of the Bond
Portfolio would exchange their shares and become shareholders of the
Balanced Portfolio and the Bond Portfolio would be eliminated. Each
Portfolio will pay its respective expenses attributable to the Proposed
Merger.
The Company is an open-end management investment company
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Company currently consists of 7 portfolios, each with a
different investment objective. The Bond Portfolio and the Balanced
Portfolio have different investment objectives, policies and
restrictions. The Balanced Portfolio seeks to achieve a total return
above the rate of inflation through an actively managed portfolio of
stocks, bonds and money market instruments, including repurchase
agreements secured by such instruments, selected with a concern for the
investment and social impact of each investment. The Balanced Portfolio,
unlike the Bond Portfolio, is non-diversified.
This Prospectus/Proxy Statement, which should be retained for
future reference, sets forth concisely the information about the
Balanced Portfolio that shareholders of the Bond Portfolio should know
before voting on the Proposed Merger. Certain relevant documents listed
below, which have been filed with the Securities and Exchange Commission
(the "SEC"), are incorporated in whole or in part by reference. A
Statement of Additional Information dated May 1, 1995, relating to this
Prospectus/Proxy Statement and the Proposed Merger, incorporating by
reference the financial statements of the Balanced Portfolio and the
Bond Portfolio (each a "Portfolio" and together, the "Portfolios"),
dated December 31, 1994 has been filed with the SEC and is incorporated
by reference in its entirety into this Prospectus/Proxy Statement. A
copy of such Statement of Additional Information is available upon
request and without charge by writing to the Company at 4550 Montgomery
Avenue, Suite 1000N, Bethesda, Maryland 20814 or by calling toll-free
1-800-368-2748.
The Prospectus of the CRI Balanced Portfolio of the Company,
dated May 1, 1995, and the Company's Annual Report for such CRI Portfolio
for the fiscal year ended December 31, 1994 are incorporated herein by
reference in their entirety, insofar as they relate to the Balanced
Portfolio only, and not to any other portfolios described therein.
Included as Exhibit A to this Prospectus/Proxy Statement is a
copy of the Plan of Reclassification (the "Plan") and included as
Exhibit B to this Prospectus/Proxy Statement is the form of amendment to
the Company's Articles of Incorporation to be filed with the State of
Maryland if shareholders of the Bond Portfolio approve the Plan.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT
DEPOSITS OR OBLIGATIONS OF OR ENDORSED OR GUARANTEED BY ANY BANK, AND
ARE NOT INSURED OR OTHERWISE PROTECTED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT AGENCY.
INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS. WHEN INVESTORS
SELL SHARES OF THE FUND, THE VALUE MAY BE HIGHER OR LOWER THAN THE
AMOUNT ORIGINALLY PAID.
<PAGE>
TABLE OF CONTENTS
VOTING INFORMATION...............................................
SUMMARY..........................................................
THE COMPANY.................................................
THE PROPOSED MERGER........................................
TAX CONSEQUENCES............................................
INVESTMENT OBJECTIVES AND POLICIES OF THE BALANCED PORTFOLIO
AND THE BOND PORTFOLIO......................................
MANAGEMENT OF THE PORTFOLIOS...............................
INVESTMENT ADVISORS AND SUBADVISORS.............
PORTFOLIO MANAGEMENT........................................
DISTRIBUTION OF SHARES......................................
PURCHASE AND REDEMPTION PROCEDURES..........................
DIVIDENDS AND DISTRIBUTIONS.................................
FINANCIAL HIGHLIGHTS.............................................
PRINCIPAL RISKS..................................................
INFORMATION ABOUT THE PROPOSED MERGER............................
DESCRIPTION OF THE MERGER...................................
REASONS FOR THE PROPOSED MERGER.............................
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES.................
PERFORMANCE INFORMATION
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS..................
FORM OF ORGANIZATION........................................
CAPITALIZATION..............................................
SHAREHOLDER MEETINGS AND VOTING RIGHTS..........................
LIQUIDATION OR DISSOLUTION..................................
RIGHTS OF INSPECTION...................................
ADDITIONAL INFORMATION...........................................
FINANCIAL STATEMENTS AND EXPERTS.................................
LEGAL MATTERS....................................................
OTHER BUSINESS...................................................
<PAGE>
VOTING INFORMATION
This Prospectus/Proxy Statement solicits the accompanying
voting instructions ("Proxy") on behalf of the Board of Directors of the
Company for use at the Special Meeting of Shareholders of the Bond
Portfolio to be held February 16, 1996 at 10:00 a.m.,
Eastern Time, and any adjournments thereof (the "Meeting"). The Bond
Portfolio will bear all expenses in connection with the solicitation of
Proxies. Employees of Calvert Asset Management Company, Inc. ("CAMCO"),
the Portfolios' investment advisor, and Providian Life and Health Insurance
Company ("Providian") will solicit Proxies. The solicitation will be
by mail and may also be by telephone, telegram or personal interview.
Outstanding Shares and Voting Requirements
The Board of Directors of the Company has fixed the close of
business on December 18, 1995 as the record date (the "Record
Date") for determination of shareholders entitled to notice of and to
vote at the Meeting and any adjournments thereof. All outstanding shares
of the Bond Portfolio are owned of record by Providian Separate
Account V, which is registered with the Securities and Exchange Commission
(the "SEC"), (the "Separate Account"), to fund variable annuity contracts
(the "contracts") issued by Providian.
Approval of the Proposed Merger requires the affirmative vote
of the holders of at least a majority (as defined in the Investment Company Act
of 1940, as amended (the "1940 Act")), of the interest of the Bond Portfolio
shares entitled to vote.
Providian holds through its Separate Account all of
the Bond Portfolio shares entitled to vote. Providian will attend
the Meeting and vote the Bond Portfolio shares held by its Separate
Account in accordance with instructions received from contract owners
having values allocated to the Bond Portfolio, as provided in the
contracts. Providian will vote Bond Portfolio shares for which no
instructions are received in the same proportion as to which
instructions are received with respect to Separate Account.
Each contract participant (other than participants under
contracts issued in connection with non-qualified and unfunded deferred
compensation plans or contracts issued in connection with a deferred
compensation plan) has the right to give instructions as to how shares
of the Bond Portfolio attributable to the participant's account should
be voted, notwithstanding that the contract owner may be the
participant's employer. Contract owners will instruct the Separate
Account in accordance with such instructions. Fractional shares also
will be voted in accordance with instructions received. A contract owner
or participant who has given voting instructions may revoke such voting
instructions only through the Separate Account prior to the Meeting
date. There are no appraisal rights.
The number of Bond Portfolio shares deemed attributable to a
participant's account prior to the annuity date and during the lifetime
of the annuitant will be determined on the basis of the value of
accumulation units credited to the participant's account as of the
Record Date. On or after the annuity date or after the death of the
participant, the number of Bond Portfolio shares deemed attributable to
the participant's account will be based on the liability for future
variable annuity payments to the payee under the contract as of the
Record Date. Such liability for future payments will be calculated on
the basis of the mortality assumptions and the assumed investment rate
used in determining the number of annuity units credited to the
participant's account and the applicable annuity unit value on the
Record Date.
As of the close of business on the Record Date, there were outstanding
209,179.316 shares of common stock of the Bond Portfolio. Each share is
entitled to one vote. To the Company's knowledge no person owns annuity
contracts or interests therein entitling that person to give voting
instructions regarding five percent or more of the total outstanding shares
of the Bond Portfolio.
Directors and officers of the Company as a group own annuity
contracts or interests therein entitling them to give voting
instructions regarding less than one percent of the total outstanding
shares of the Bond Portfolio.
The cost of this proxy solicitation, including the printing and
mailing of the proxy materials, will be borne by the Bond Portfolio. A proxy
may be revoked at any time before or during the meeting by oral or written
notice to William M. Tartikoff, Esq., Secretary of the company, located at
4550 Montgomery Ave., Suite 1000N, Bethesda, MD 20814. This Prospectus/Proxy
Statement was first mailed to contract owners on or about December 30, 1995.
If you have any questions about the proposed merger, please call 1-800-866-6007.
<PAGE>
SUMMARY
THE COMPANY
The Bond Portfolio and the Balanced Portfolio are each a series
of the Company, an open-end management investment company organized as a
Maryland corporation on December 22, 1982. The Company currently
consists of seven separate investment portfolios, each of which is, in
effect, a separate mutual fund issuing its own separate class of common
stock. By investing in a portfolio, an investor becomes entitled to a
pro-rata share of all dividends and distributions arising from the net
income and capital gains on the investments of that portfolio. Each
portfolio is governed by the Company's Articles of Incorporation, its
Bylaws and applicable Maryland law.
THE PROPOSED MERGER
The Board of Directors of the Company has approved a Plan of
Reclassification (the "Plan") providing for the Company to amend its
Articles of Incorporation, subject to the approval of the shareholders
of the Bond Portfolio, to reclassify the issued and unissued shares of
the class of the Company's common stock currently designated as CRI Bond
Portfolio into the class of the Company's common stock currently
designated as CRI Balanced Portfolio. In effect, shareholders of the
Bond Portfolio would exchange their shares for shares of the Balanced
Portfolio and the Bond Portfolio would be eliminated.
The Plan contemplates a Proposed Merger in which shares of the
Bond Portfolio will be reclassified and the Bond Portfolio will transfer
all of its assets and liabilities to the Balanced Portfolio in exchange
for shares of the Balanced Portfolio. The number of shares of the
Balanced Portfolio to be issued to the Bond Portfolio will be determined
on the basis of the relative net asset values of the Bond Portfolio and
the Balanced Portfolio calculated as of the close of business on the
business day immediately preceding the effective date of the Proposed
Merger, currently scheduled for February 26, 1996. The Bond
Portfolio will then distribute the Balanced Portfolio shares it receives
to Bond Portfolio shareholders in exchange for their Bond Portfolio
shares, on a pro-rata basis.
The Directors of the Company, including the Directors who are
not "interested persons," as such term is defined in the 1940 Act (the
"Independent Directors"), have concluded that the Proposed Merger would
be in the best interests of shareholders of the Bond Portfolio and that
the interests of the shareholders of the Bond Portfolio and the Balanced
Portfolio will not be economically diluted as a result of the
transactions contemplated by the Reorganization. Accordingly, the
Directors have submitted the Plan for the approval of the BOND
Portfolio's shareholders. THE DIRECTORS OF THE COMPANY RECOMMEND
APPROVAL BY SHAREHOLDERS OF THE BOND PORTFOLIO OF THE PLAN EFFECTING THE
PROPOSED MERGER.
If the shareholders of the Bond Portfolio do not vote to
approve the Proposed Merger, the Directors of the Company will consider
other possible courses of action in the best interests of shareholders.
TAX CONSEQUENCES
The completion of the Proposed Merger is contingent upon the
receipt by the Company of an opinion of outside tax counsel to the
effect that the Proposed Merger will qualify as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986,
as amended (the "Code"). As such, the Proposed Merger will not result in
the recognition, for federal income tax purposes, of any gain or loss to
the Bond Portfolio or its shareholders, the aggregate tax basis of the
shares of the Balanced Portfolio received by shareholders of the Bond
Portfolio will be the same as the tax basis of those shareholders' Bond
Portfolio shares and the aggregate tax basis of the assets of the Bond
Portfolio in the hands of the Balanced Portfolio will be the same as the
tax basis of such assets in the hands of the Bond Portfolio prior to the
Proposed Merger. In addition, the Proposed Merger will not result in the
recognition of any gain or loss to contract owners.
INVESTMENT OBJECTIVES AND POLICIES OF THE BALANCED PORTFOLIO AND THE
BOND PORTFOLIO
The Balanced Portfolio. The Balanced Portfolio seeks to achieve
a total return above the rate of inflation through an actively managed
portfolio of stocks, bonds and money market instruments (including
repurchase agreements secured by such instruments) selected with a
concern for the investment and social impact of each investment. It is
not the policy of the Balanced Portfolio to take risks to obtain
speculatively or aggressively high returns. There is no predetermined
percentage of assets allocated to stocks, bonds or money market
instruments, although, as an operating policy, the Balanced Portfolio
will have at least 25% of its assets in fixed income senior securities.
Fixed-income investments are selected by the Advisor Calvert Asset
Management Company, Inc. ("CAM" or "Advisor"). The Balanced Portfolio's
Subadvisor, NCM Capital Management Group, Inc. ("NCM"), selects equity
investments for the portfolio, subject to direction and control by the
Portfolio's Advisor and the Board of Directors of the Company. CAM and
NCM determine the mix for the Balanced Portfolio depending on their view
of market conditions and the economic outlook.
The Balanced Portfolio may purchase both common and preferred
stock. For its fixed-income investments, the Portfolio normally invests
in bonds which are considered investment grade, including bonds which
are direct or indirect obligations of the U.S. Government, or which at
the date of investment are rated AAA, AA, A, or BBB by Standard & Poor's
Corporation ("S&P") or Aaa, Aa, A, or Baa by Moody's Investors Service
Inc. ("Moody's"). Bonds rated Baa or BBB are considered medium grade
obligations and possess speculative characteristics. The Portfolio may
purchase lower-rated obligations but no more than 20% of its assets may
be invested in obligations rated lower than B. The Portfolio may
purchase without limitation bonds which are unrated but of comparable
quality to bonds rated B or better as determined by the Advisors under
the supervision of the Board of Directors. See the Company's CRI Statement
of Additional Information for additional information concerning bond ratings.
The Balanced Portfolio may invest in foreign securities, including emerging
markets, to a limited extent.
The Bond Portfolio. The Bond Portfolio seeks to provide as high
a level of current income as is consistent with prudent investment risk
and preservation of capital though investment in bonds and other
straight debt securities, selected pursuant to the Portfolio's
investment and social criteria. The Bond Portfolio is neither
speculative nor conservative in its investment policies and will take
reasonable risks in seeking to achieve its investment objective of
current income and preservation of capital. Debt securities may be
long-term, intermediate-term, short-term, or any combination thereof,
depending on the Advisors' evaluation of current and anticipated market
patterns and trends; the Advisors expect that the Bond Portfolio's
average weighted maturity will range between 5 and 20 years. The value
of the Portfolio generally will vary inversely with changes in interest
rates.
In seeking to achieve these objectives, it is anticipated that
under normal conditions the Bond Portfolio will invest at least 80% of
the value of its assets in publicly-traded straight debt securities
which have a rating within the four highest grades as determined by a
nationally recognized rating service such as S&P or Moody's; obligations
issued or guaranteed by the United States Government or its agencies or
instrumentalities; or cash and cash equivalents. Up to 20% of the
Portfolio's total assets may be invested in straight debt securities
which are not rated within the four highest grades as described above
(including unrated securities), in convertible debt securities,
convertible preferred and preferred stocks, or other securities. The
Bond Portfolio does not currently hold or intend to invest more than 5%
of its assets in non-investment grade securities.
MANAGEMENT OF THE PORTFOLIOS
The overall management of the Company and the Portfolios is the
responsibility of, and is supervised by, the Board of Directors of the
Company.
INVESTMENT ADVISORS AND SUBADVISORS
Calvert Asset Management Company, Inc. ("CAM"), 4550 Montgomery
Avenue, Suite 1000N, Bethesda, Maryland 20814, is the investment advisor
to both Portfolios. CAM is a wholly-owned subsidiary of The Calvert
Group, Ltd., of the same address, which is in turn an indirect
wholly-owned subsidiary of Acacia Mutual Life Insurance Company, 51
Louisiana Avenue, N.W., Washington, D.C. 20001. As of October 31, 1995,
CAM had assets under management and administration in excess of $4.9
billion. Pursuant to its investment advisory agreement with the Company,
CAM manages the investment and reinvestment of the assets of each
Portfolio and is responsible for the overall management of the business
affairs of each Portfolio, subject to the direction and authority of the
Company's Board of Directors. CAM also serves as investment advisor to
seven other registered investment companies in the Calvert Group of
Funds: First Variable Rate Fund for Government Income, Calvert Cash
Reserves (doing business as Money Management Plus), Calvert Social
Investment Fund, Calvert Tax-Free Reserves, The Calvert Fund, Calvert
Municipal Fund, Inc., and Calvert World Values Fund, Inc. CAM has
retained certain investment Subadvisors ("Subadvisors") for the
Portfolios.
The Balanced Portfolio
The Subadvisor to the Balanced Portfolio is NCM Capital
Management Group, Inc. ("NCM") located at 103 W. Main Street., Durham, NC 27701.
Pursuant to its Investment Sub-Advisory Agreement with the Investment Advisor,
NCM manages the equity portion of the portfolio selections for the Balanced
Portfolio. NCM was founded by Maceo K. Sloan in 1986 as a subsidiary of North
Carolina Mutual Life Insurance Company, which was established by Mr.
Sloan's ancestors in 1898 and is one of the oldest and largest
minority-owned financial institutions in the country. NCM has been an
employee-owned subsidiary of Sloan Financial Group since 1991. Sloan
Financial Group is controlled by Mr. Sloan and Justin F. Beckett,
Executive Vice President and a Director of NCM. NCM is one of the
largest minority-owned investment management firms in the country, and
provides products in equity, fixed-incomed and balanced portfolio
management. It is also one of the industry leaders in the employment and
training of minority and women investment professionals. NCM has served
as Subadvisor to the Balanced Portfolio since February 1995.
Wendell E. Mackey, Vice President of NCM, is the portfolio
manager with respect to the Portfolio's equity investments. Mr. Mackey
earned his B.B.A. degree from Howard University, and his M.M. degree
from Kellogg Graduate School of Management at Northwestern University.
He subsequently worked with several securities firms before joining NCM
as an equity portfolio manager in 1993. He has managed the Balanced
Portfolio since February 1995.
Fixed-income Investment selections for the Portfolio are made by
Stephen N. Van Order. Mr. Van Order joined Calvert Group in October 1992
as the head of the trading desk. He oversees the day-to-day investments and
operations of the department and participates in setting market and portfolio
strategy. Previously, Mr. Van Order was Director of Long Term Funding at
Federal National Mortgage Association (Fannie Mae). In his former capacity,
Mr. Van Order was responsible for Fannie Mae's long term borrowing programs,
hedging programs and debt marketing program. He has managed the Portfolio's
fixed income investments since December 1995.
The Bond Portfolio
The Subadvisor to the Bond Portfolio is United States Trust
Company of Boston ("US Trust") Address. US Trust is a wholly-owned
subsidiary of UST Corporation, a Massachusetts bank holding company. The
address of UST Corporation is 30 court Street Boston, MA 02108. The individual
portfolio manager responsible for the Bond Portfolio is Cheryl Smith, Vice
President of US Trust. Ms. Smith joined US Trust in 1992. In addition to
the management of the Bond Portfolio, her duties at US Trust include
management of institutional and individual client investment portfolios
and integration of client social criteria into the portfolio management
process. She served as Vice President of Franklin Research & Development
from 1987 to 1992. Ms. Smith has managed the Bond Portfolio since August
1994. She is a Chartered Financial Analyst and holds a Ph.D. in
Economics from Yale University.
Fees
For its services, CAM, as the Portfolios' investment advisor,
is entitled to receive a fee based on a percentage of the average daily
net assets of each of the Portfolios. CAM is currently entitled to
receive an annual base fee, paid monthly, of 0.65% of average daily net
assets of the Bond Portfolio and 0.70% of the average daily net assets
of the Balanced Portfolio.
CAM will pay the Subadvisor of the Balanced Portfolio an annual base
fee of 0.25% of one-half of the Balanced Portfolio's average daily net
assets. In addition, under the circumstances described below, CAM and
NCM, as the Advisor and Subadvisor, respectively, to the Balanced
Portfolio may earn (or have their respective fees reduced by)
performance fee adjustments based on the extent to which performance of
the Balanced Portfolio exceeds or trails the Lipper Balanced Funds
Index. The specific adjustments are as follows:
The Balanced Portfolio: CAM's Performance Fee Adjustment
Performance versus the Performance Fee
Lipper Balanced Funds Index Adjustment
6% to less than 12% 0.05%
12% to less than 18% 0.10%
18% or more 0.15%
CAM's performance fee adjustment will be paid directly from the
Portfolio to CAM.
The Balanced Portfolio: NCM's Performance Fee Adjustment:
Performance versus Performance Fee
Lipper Balanced Funds' Index Adjustment
6% to less than 12% 0.05%
12% to less than 18% 0.10%
18% or more 0.15%
Payment of an upward performance fee adjustment to the Subadvisor is
paid out of the fee CAM receives from the Balanced Portfolio. The
initial performance period is the twelve month period between July 1,
1995 and July 1, 1996. Each month an additional month's performance will
be factored into the calculation until a total of 36 months comprises
the performance computation period. Payment by the Portfolio of the
performance adjustment will be conditioned on: (1) the performance of
the Portfolio as a whole having exceeded the Lipper Balanced Funds
Index; and (2) payment of the performance adjustment not causing the
Portfolio's performance to fall below the Lipper Balanced Funds Index.
CAM pays an annual fee of 0.25% of the average daily net assets of the
Bond Portfolio to US Trust as a subadvisory fee.
PORTFOLIO MANAGEMENT
See "Investment Advisor and Subadvisors" above.
FUND EXPENSE COMPARISON
Annual Fund operating expenses of the Bond Portfolio and the Balanced
Portfolio are shown below. Expenses are unaudited and are based on
year-to-date actual expenses through November 30, 1995, expressed as a
percentage of average net assets.
Bond Balanced Pro Forma Combined
Portfolio Portfolio After Merger
Management
fees 0.65% 0.70% 0.70%
Other
expenses 0.07% 0.11% 0.11%
Total Fund
operating
expenses 0.72% 0.81% 0.81%
Management fees include sub-advisor fees. Although the fees in the Balanced
Portfolio are higher than those in the Bond Portfolio, the Fund's Board of
Directors believes that the proposed merger is in the best interests of the
shareholders of both the Bond Portfolio and the Balanced Portfolio,
particularly in terms of the comparative performance records of each of the
Portfolios; relative compatibility of their investment objectives and
policies; the relative size of the portfolios in terms of assets; and the
investment experience, expertise and resources of the Advisor and Subadvisors.
DISTRIBUTION OF SHARES
With regard to the Portfolios, the Company's shares are sold to
Providian for allocation to the Separate Account to fund the
benefits under certain variable annuity and variable life insurance
policies (the "Variable Accounts"). Shares of the Portfolios may also be
sold to other insurance companies for the same purpose. In this
Prospectus/Proxy Statement, Providian and any other applicable
companies may be referred to as the "Insurance Companies," and the
variable annuity and variable life insurance policies may be referred to
as the "Policies."
Shares of the Portfolios may only be sold to the Insurance
Companies for their Separate Accounts, and not to individual investors.
As such, the "shareholders" referred to in this prospectus are the
Insurance Companies. Nevertheless, as a policyholder you have an
opportunity to choose among the various Portfolios in order to fund the
benefits under any Policies you purchase, subject to any limitations
described in the Insurance Companies' prospectuses.
Shares are purchased by the Variable Accounts at the net asset
value of a Portfolio next determined after the Insurance Company
receives the premium payment. The Company continuously offers its shares
in the Portfolios at a price equal to the net asset value per share.
Initial and subsequent payments allocated to a Portfolio are subject to
the limits applicable in the Policies issued by the Insurance Companies.
It is conceivable that in the future it may be disadvantageous
for both annuity Variable Accounts and life insurance Variable Accounts,
or for Variable Accounts of different Insurance Companies, to invest
simultaneously in a Portfolio, although currently neither the Insurance
Companies nor the Company foresees any such disadvantages to either
variable annuity or variable life insurance policyholders of any
Insurance Company. The Company's Directors intend to monitor events in
order to identify any material conflict between such policyholders and
to determine what action, if any, should be taken in response to the
problem.
PURCHASE AND REDEMPTION PROCEDURES
Information concerning the purchase of shares is described
above.
The Insurance Companies redeem shares of the Portfolios to make
benefit and surrender payments under the terms of their Policies.
Redemptions are processed on any day on which the Company is open for
business (each day the New York Stock Exchange is open), and are made at
a Portfolio's net asset value next determined after the appropriate
Insurance Company receives a surrender request in acceptable form.
Payment for redeemed shares will be made promptly, and in no
event later than seven days. However, the right of redemption may be
suspended or the date of payment postponed in accordance with the Rules
under the 1940 Act. The amount received on redemption of the shares of a
Portfolio may be more or less than the amount paid for the shares,
depending on the fluctuations in the market value of the assets owned by
the Portfolio. The Company redeems all full and fractional shares of the
Portfolios for cash.
The net asset value of the shares of each Portfolio is
determined once daily as of the close of business of the New York Stock
Exchange, on days when the Exchange is open for business, or for any
other day when there is a sufficient degree of trading in the
investments of a Portfolio to affect materially net asset value per
share (except on days when no orders to purchase or redeem shares of the
Portfolio have been received). The net asset value is determined by
adding the values of all securities and other assets of a Portfolio,
subtracting liabilities and expenses, and dividing by the number of
outstanding shares of the Portfolio.
Except for money market instruments maturing in 60 days or
less, securities held by the Portfolios are valued at their market value
if market quotations are readily available. Otherwise, securities are
valued at fair value as determined in good faith by the Board of
Directors, although the actual calculations may be made by persons
acting pursuant to the direction of the Board of Directors of the
Company. All money market instruments with a remaining maturity of 60
days or less held by a Portfolio, are valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Company's intention to distribute substantially all
of the net investment income, if any, of the Portfolios. Net investment
income consists of all payments of dividends or interest received by a
Portfolio less estimated expenses, including the investment advisory
fee. All net realized capital gains, if any, are declared and
distributed periodically, at least annually. All dividends and
distributions are reinvested in additional shares of the Portfolio at
net asset value.
FINANCIAL HIGHLIGHTS
The following tables provide information about the Balanced
Portfolio's financial history. They express the information in terms of a
single share outstanding throughout each period. The table has been audited by
those independent accountants whose reports are included in the Fund's
Annual Report to Shareholders, for each of the respective periods
presented, except for the six month period ended June 30, 1995 which is
unaudited. The tables should be read in conjunction with the financial
statements and their related notes. The current Annual Report to
Shareholders is incorporated by reference into the Statement of
Additional Information.
<PAGE>
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1995
(unaudited)
<S> <C>
Net asset value, beginning of period $ 1.440
Income from investment operations
Net investment income .025
Net realized and unrealized gain
(loss) on investments .226
Total from investment operations
.251
Distributions to shareholders
Dividends from net investment income
--
Total increase (decrease) in net asset value .251
Net asset value, end of period $ 1.691
Total return<F1> 17.43%
Ratio of expenses to average net assets .93%(a)
Ratio of net income to average net assets 3.25%(a)
Increase reflected in net income ratio due
to expense reimbursement --
Portfolio turnover 83%
Net assets, end of period $87,719,128
Number of shares outstanding at end of
period (in thousands) 51,873
<FN>
<F1>Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies. Total return
has not been audited prior to 1989.
(a) Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
---------------------------------
---------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.537 $ 1.465
Income from investment operations
Net investment income .046 .045
Net realized and unrealized gain
(loss) on investments (.097) .072
Total from investment operations
(.051) .117
Distributions to shareholders
Dividends from net investment income
(.046) (.045)
Total increase (decrease) in net asset value (.097) .072
Net asset value, end of period $$ 1.440 $ 1.537
Total return<F1> (3.30)% 8.00%
Ratio of expenses to average net assets .80% .81%
Ratio of net income to average net assets 3.39% 3.69%
Increase reflected in net income ratio due
to expense reimbursement -- --
Portfolio turnover 43% 14%
Net assets, end of period $$66,592,680 $53,999,759
Number of shares outstanding at end of
period (in thousands) 46,244 35,142
<FN>
<F1>Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies. Total return
has not been audited prior to 1989.
(a) Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1992 1991
----------------------------------
----------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.403 $ 1.249
Income from investment operations
Net investment income .044 .050
Net realized and unrealized gain on
investments .062 .154
Total from investment operations
.106 .204
Distributions to shareholders
Dividends from net investment income
(.044) (.050)
Total increase in net asset value .062 .154
Net asset value, end of period $ 1.465 $ 1.403
Total return<F2> 7.61% 16.40%
Ratio of expenses to average net assets .85% .85%
Ratio of net income to average net assets 4.05% 4.49%
Increase reflected in net income ratio due
to expense reimbursement -- --
Portfolio turnover 15% 12%
Net assets, end of period $28,471,358 $14,945,973
Number of shares outstanding at end of
period (in thousands) 19,433 10,656
<FN>
<F2>Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies. Total return
has not been audited prior to 1989.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1990
------------------
------------------
<S> <C>
Net asset value, beginning of period $ 1.247
Income from investment operations
Net investment income .050
Net realized and unrealized gain on
investments .002
Total from investment operations
.052
Distributions to shareholders
Dividends from net investment income
(.050)
Total increase in net asset value .002
Net asset value, end of period $ 1.249
Total return<F2> 4.18%
Ratio of expenses to average net assets .77%
Ratio of net income to average net assets 5.69%
Increase reflected in net income ratio due
to expense reimbursement --
Portfolio turnover 11%
Net assets, end of period $6,759,546
Number of shares outstanding at end of
period (in thousands) 5,410
<FN>
<F2>Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies. Total return
has not been audited prior to 1989.
</FN>
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31,
1989 1988
---------------------------------
---------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 1.068 $ 1.004
Income from investment operations
Net investment income .042 .054
Net realized and unrealized gain
(loss) on investments .179 .064
Total from investment operations
.221 .118
Distributions to shareholders
Dividends from net investment income
(.042) (.054)
Total increase (decrease) in net asset value
.179 .064
Net asset value, end of period $ 1.247 $ 1.068
Total return<F3> 20.69% 11.75%
Ratio of expenses to average net assets
.50% .50%
Ratio of net income to average net assets
4.85% 4.95%
Increase reflected in net income ratio due
to expense reimbursement .46% .30%
Portfolio turnover 28% 40%
Net assets, end of period $2,572,761 $1,293,692
Number of shares outstanding at end of
period (in thousands) 2,064 1,211
<FN>
<F3>Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies. Total return
has not been audited prior to 1989.
(a) = Annualized
</FN>
</TABLE>
<TABLE>
<CAPTION>
From inception
(Sept. 2, 1986)
to Dec. 31,
Year Ended December 31,
1987 1986
-----------------------------------
-----------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 0.958 $ 1.000
Income from investment operations
Net investment income .019 .010
Net realized and unrealized gain
(loss) on investments .046 (.042)
Total from investment operations
.065 (.032)
Distributions to shareholders
Dividends from net investment income
(.019) (.010)
Total increase (decrease) in net asset value
.046 (.042)
Net asset value, end of period $ 1.004 $ 0.958
Total return<F3> 6.78% 3.31%
Ratio of expenses to average net assets
.50% .10%(a)
Ratio of net income to average net assets
3.72% 1.59%(a)
Increase reflected in net income ratio due
to expense reimbursement .82% 1.41%(a)
Portfolio turnover 17% --
Net assets, end of period $1,022,484 $143,745
Number of shares outstanding at end of
period (in thousands) 1,018 150
<FN>
<F3>Total return is for the Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies. Total return
has not been audited prior to 1989.
(a) = Annualized
</FN>
</TABLE>
PRINCIPAL RISKS
The Bond Portfolio and the Balanced Portfolio have different and
distinct investment objectives that they pursue through their separate
investment policies, as stated above. There can be no assurance that the
objectives of either the Bond Portfolio or the Balanced Portfolio will
be achieved. The differences in objectives and policies between the Bond
Portfolio and the Balanced Portfolio can be expected to affect the
return of each. As described below under "Comparison of Investment
Objectives and Policies", the Balanced Portfolio maintains an actively
managed nondiversified portfolio of stocks, bonds and money market
instruments and as such may be viewed as more aggressive and
concomitantly more volatile than the Bond Portfolio for the following
principal reasons.
First, the Balanced Portfolio is "non-diversified" which means that,
as opposed to the "diversified" Bond Portfolio, a higher percentage of
its assets may be invested in a more limited number of issuers, with the
result that its shares are more susceptible to any single economic,
political or regulatory event than the shares of the Bond Portfolio.
Second, while there is no predetermined percentage of assets
allocated to stocks, bonds or money market instruments held by the
Balanced Portfolio, as an operating policy, the Balanced Portfolio will
have at least 25% of its assets in fixed income securities. This means
that the Balanced Portfolio could have up to 75% of its assets invested
in common stocks which, historically, have been more volatile than the
types of fixed income securities in which the Bond Portfolio invests.
Third, the Balanced Portfolio may purchase non-investment grade
fixed income securities (i.e., those rated lower than BBB, also known as
"junk bonds") without limitation, although no more than 20% of its assets may
be invested in fixed income securities rated lower than B. The Bond Portfolio
may invest 20% of its assets in non-investment grade fixed income securities.
However, neither the Balanced nor the Bond Portfolio currently holds nor
intends to invest more than 5% of its respective assets in non-investment grade
securities. See "Non-Investment Grade Debt Securities and the Portfolios'
Statement of Additional Information concerning bond ratings.
INFORMATION ABOUT THE PROPOSED MERGER
DESCRIPTION OF THE PROPOSED MERGER
The Plan provides that after the Effective Time on the Closing
Date the Bond Portfolio will transfer all of its assets and liabilities
to the Balanced Portfolio if all of the conditions of the Plan are
fulfilled and are not waived and the Closing Date is not extended. In
exchange for the Bond Portfolio assets and liabilities, the Balanced
Portfolio will issue to the Bond Portfolio shareholders a number of
Balanced Portfolio shares having a value equal to the aggregate net
assets of the Bond Portfolio acquired. The Closing Date is currently
scheduled for February 26, 1996 and may be changed as determined by
officers of the Company. As part of the Plan, the Company's shareholders
are being asked to approve a proposed amendment to the Company's
Articles of Incorporation to reclassify the issued and unissued shares
of the class of the Company's common stock currently designated as the
CRI Bond Portfolio into the class of common stock currently designated
as the CRI Balanced Portfolio. Copies of the Plan and the proposed
amendment to the Company's Articles of Incorporation are attached as
Exhibits A and B, respectively, to this Prospectus/Proxy Statement.
The number of shares of the Balanced Portfolio to be issued in
the Proposed Merger will be determined on the basis of the relative net
asset values of the Bond Portfolio and the Balanced Portfolio calculated
as of the Valuation Date. The net asset value of each Portfolio will be
determined by dividing the value of that Portfolio's portfolio
securities, cash and other assets (including accrued but uncollected
interest and dividends), less all liabilities (including accrued
expenses but excluding capital and surplus) by the number of shares of
that Portfolio outstanding.
Balanced Portfolio shares will be distributed to Bond Portfolio
shareholders in exchange for their Bond Portfolio shares, on a pro rata
basis. The number of such full and fractional Balanced shares issued to
each Bond Portfolio shareholder will be determined by multiplying the
number of Bond Portfolio shares to be exchanged by a fraction, the
numerator of which is the net asset value per share of the Bond
Portfolio and the denominator of which is the net asset value per share
of the Balanced Portfolio. Thus, the Bond Portfolio shares of each Bond
Portfolio shareholder will be exchanged for the number of full and
fractional shares of the Balanced Portfolio which, when multiplied by
the net asset value per share of the Balanced Portfolio, will have a
value equal to the aggregate net asset value of that shareholder's
shares in the Bond Portfolio at the Effective Time on the Closing Date.
The aggregate value of the Balanced Portfolio shares attributable to
shareholders previously holding Bond Portfolio shares will be the same
immediately after the Proposed Merger as the aggregate value of the Bond
Portfolio shares attributable to such shareholders immediately before
the Proposed Merger.
The Proposed Merger as provided in the Plan is subject to
approval of the shareholders of the Bond Portfolio. Approval requires
the affirmative vote of the holders of at least a majority (as defined
in the 1940 Act) of the Bond Portfolio shares entitled to vote. The Plan
is also conditioned on: (i) acceptance of the amendment to the Company's
Articles of Incorporation by the Maryland Department of Assessments and
Taxation and the amendment's having become effective; (ii) receipt of
any necessary regulatory approvals from the SEC; (iii) receipt of an
opinion of outside counsel that the Proposed Merger qualifies as a
tax-free reorganization under the Code; and (iv) receipt of any
necessary regulatory approvals by relevant state insurance authorities.
REASONS FOR THE PROPOSED MERGER
The Directors of the Company have considered and approved the
Proposed Merger, as recommended by CAM, including entry by the Company
on behalf of each Portfolio into the Plan, as in the best interests of
the shareholders.
In making their recommendation to the Directors, the
representatives of CAM reviewed with the Directors various factors about
the Company and its Portfolios and the Proposed Merger. In terms of
total net assets the Bond Portfolio at October 31, 1995 had net assets
of approximately $3.4 million. The Balanced Portfolio's net assets at
such date were approximately $102 million. The Bond Portfolio has not,
since its inception in 1992 achieved asset levels on a continuing basis
that would permit it to operate economically and generate a competitive
return.
The Directors of the Company met on August 2, 1995 and
considered the recommendation of CAM, and, in addition, considered among
other things in general, (i) the terms and conditions of the Proposed
Merger; (ii) whether the Proposed Merger would result in the economic
dilution of shareholder interests; (iii) the comparative performance
records of each of the Portfolios; relative compatibility of their
investment objectives and policies; the investment experience, expertise
and resources of CAM and the Subadvisor; and the personnel and financial
resources of CAM and the Subadvisor; (iv) the fact that the Balanced
Portfolio will assume certain identified liabilities of the Bond
Portfolio; (v) the expected federal income tax consequences of the
Proposed Merger; and (vi) the fact that the Balanced Portfolio was the most
similar to the bond Portfolio in terms of investment objective of the
Company's seven portfolios.
The Directors also considered the benefits to be derived by
shareholders of the Bond Portfolio from the transfer of its assets to
the Balanced Portfolio. In this regard, the Directors considered the
economies of scale that could be realized by the participation by
shareholders of the Bond Portfolio in the combined portfolio. They also
considered that for small funds such as the Bond Portfolio, it is
difficult for the portfolio manager to fine profitable investments of
small denomination that will comply with regulatory requirements for
diversification.
During their consideration of the Proposed Merger, the
Directors met with members of the legal staff at CAM, as well as counsel
to the Independent Directors, regarding the legal issues involved. The
Directors also concluded at a meeting on August 2, 1995 that the
Proposed Merger would be in the best interests of shareholders of the
Balanced Portfolio and that the interests of the shareholders of the
Balanced Portfolio will not be diluted as a result of the transactions
contemplated by the Proposed Merger.
THE DIRECTORS OF THE COMPANY RECOMMEND THAT THE SHAREHOLDERS OF
THE BOND PORTFOLIO APPROVE THE PROPOSED MERGER.
PRO-FORMA CAPITALIZATION
The following tables show the capitalization of the Balanced
Portfolio and the Bond Portfolio as of October 31, 1995 individually and
on a pro forma basis as of that date, giving effect to the proposed
acquisition of assets and liabilities of the Bond Portfolio at the then
net asset value:
<TABLE>
<CAPTION>
CAPITALIZATION OF THE BOND PORTFOLIO
AND THE BALANCED PORTFOLIO
BOND BALANCED PRO FORMA FOR BALANCED
PORTFOLIO PORTFOLIO PORTFOLIO
<S> <C> <C> <C>
Net Assets..........$3,396,914 $102,812,724 $106,209,638
Shares Outstanding..$ 205,571 $ 56,987,022 $ 58,869,524
Net Asset Value per
Share................. $16.52 $1.804 $1.804
The table above should be read in conjunction with the
Portfolios' Annual Report for the fiscal year ended December 31, 1994
which is hereby incorporated herein by reference, and the unaudited
balance sheet and income statement for June 30, 1995.
</TABLE>
On the Record Date, there were 209,179.316 and 58,386,542.411
shares of the Bond Portfolio and the Balanced Portfolio, respectively,
outstanding.
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
The following discussion is based upon by the descriptions of the
respective investment objectives, policies and restrictions set forth in the
Company's CRI Prospectus and Statement of Additional Information for the CRI
portfolios. The Company also offers additional portfolios which are not
involved in the Proposed Merger, and their investment objectives, policies
and restrictions are not discussed in this Prospectus/Proxy Statement and
their shares are not offered hereby.
The Bond Portfolio invests primarily in corporate bonds and
other straight debt securities while the Balanced Portfolio maintains an
actively managed portfolio of stocks, bonds and money market
instruments. Each Portfolio may invest in non-investment grade debt
securities.
The Bond Portfolio may, in pursuit of its investment
objectives, purchase put and call options and engage in the writing of
covered call options and secured put options on securities of issuers
that meet its social criteria, and employ a variety of other investment
techniques, including the purchase and sale of market index futures
contracts, financial futures contracts and options on such futures. The
Bond Portfolio may engage in futures contracts and related options only
to protect against market declines. The Bond Portfolio does not engage
in such transactions for speculation or leverage. It is an operating
policy of the Company that the Bond Portfolio may not invest in options
and futures contracts if as a result more than 5% of its assets would be
so invested.
Each Portfolio may engage in repurchase agreements and reverse
repurchase agreements. No more than 10% of either Portfolio's assets may
be invested in repurchase agreements not terminable within seven days.
The Portfolios may borrow no more than 10% of the value of
their assets from banks (and pledge their assets to secure such
borrowings) for temporary or emergency purposes, but not for leverage.
Each Portfolio may also make loans of the securities it holds.
Each Portfolio may lend its securities to New York Stock
Exchange member firms and to commercial banks with assets of $1 billion
or more. The Portfolios may only make loans if the value of the
securities loaned does not exceed 10% of the Portfolio's assets.
The Bond Portfolio may invest up to 25% of its assets in the
securities of foreign issuers and the Balanced Portfolio may invest up
to 10% of its assets in such securities.
The Bond Portfolio may write exchange-traded call options on
its securities. Call options may be written on portfolio securities,
securities indices, or foreign currencies. With respect to securities
and foreign currencies, the Bond Portfolio may write call and put
options on an exchange or over-the-counter. The Bond Portfolio may not
write options on more than 50% of its total assets. Management presently
intends to cease writing options if and as long as 25% of such total
assets are subject to outstanding options contracts or if required under
regulations of state securities administrators.
Each Portfolio may write call and put options in order to
obtain a return on its investments from the premiums received and will
retain the premiums whether or not the options are exercised.
The Bond Portfolio may invest up to an aggregate of 5% of its
total assets in exchange-traded or over-the-counter call and put options
on securities and securities indices and foreign currencies. Purchases
of such options may be made for the purpose of hedging against changes
in the market value of the underlying securities or foreign currencies.
The Bond Portfolios may sell a call option or a put option which it has
previously purchased prior to the purchase (in the case of a call) or
the sale (in the case of a put) of the underlying security or foreign
currency.
Each Portfolio may invest up to 5% of its net assets in
warrants and stock rights, but no more than 2% of its net assets in
warrants and stock rights not listed on the New York Stock Exchange or
the American Stock Exchange.
The Bond Portfolio may enter into financial futures contracts
and related options as a hedge against anticipated changes in the market
value of its portfolio securities or securities which it intends to
purchase or in the exchange rate of foreign currencies.
The Bond Portfolio may purchase and sell financial futures
contracts which are traded on a recognized exchange or board of trade
and may purchase exchange or board-traded put and call options in
financial futures contracts. The Bond Portfolio may engage in
transactions in financial futures contracts and related options only for
hedging purposes and not for speculation. In addition, the Bond
Portfolio will not purchase or sell any financial futures contract or
related option if, immediately thereafter, the sum of the cash or U.S.
Treasury bills committed with respect to the Bond Portfolio's existing
futures and related options positions and the premiums paid for related
options would exceed 5% of the market value of its total assets.
The value of each Portfolio's assets as measured in United
States dollars may be affected favorably or unfavorably by changes in
foreign currency exchange rates and exchange control regulations, and
the Portfolios may incur costs in connection with conversions between
various currencies. The Portfolios conduct their foreign currency
exchange transactions either on a spot (i.e., cash) basis at the spot
rate prevailing in the foreign currency exchange market, or through
forward contracts to purchase or sell foreign currencies.
The Bond Portfolio may also hedge its foreign currency exchange
rate risk by engaging in currency financial futures and options
transactions.
When CAM or a Subadvisor believes that the currency of a
particular foreign country may suffer a substantial decline against the
United States dollar, it may enter into a forward contract to sell an
amount of foreign currency approximating the value of some or all of a
Portfolio's portfolio securities denominated in such foreign currency.
Each Portfolio may invest up to less than 1% of its assets in
investments in securities that offer a rate of return below the then
prevailing market rate and that present attractive opportunities for
furthering the Portfolios' social criteria.
Neither Portfolio may purchase illiquid securities if more than
10%, of the value of its net assets would be invested in such securities.
The Bond Portfolio is diversified while the Balanced Portfolio
is not diversified. There are risks associated with the Balanced
Portfolio being non-diversified. Specifically, since a relatively high
percentage of the assets of the Balanced Portfolio may be invested in
the obligations of a limited number of issuers, the value of the shares
of the Balanced Portfolio may be more susceptible to any single
economic, political or regulatory event than the shares of a diversified
Portfolio.
All fixed income instruments are subject to interest-rate risk:
that is, if 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 will be.
Noninvestment-grade securities tend to be less sensitive to
interest rate changes than higher-rated investments, but are more
sensitive to adverse economic changes and individual corporate
developments. This may affect the issuer's ability to make principal and
interest payments on the debt obligation. There is also a greater risk
of price declines due to changes in the issue's creditworthiness.
Because the market for lower-rated securities may be less active
("thinner") than for higher-rated securities, it may be difficult for a
Portfolio to sell the securities. Because of a lack of objective data, a
thinly-traded market may make it difficult to value the securities, so
that the Board of Directors may have to exercise its judgment in
assigning a value. See the Appendix in the Statement of Additional
Information for more information on bond ratings.
The Balanced Portfolio and the Bond Portfolio are subject to
the same investment screens. Each investment is selected with a concern
for its social impact. Both Portfolios invest in accordance with their
philosophy that long-term rewards to investors will come from those
organizations whose products, services, and methods enhance the human
condition and the traditional American values of individual initiative,
equality of opportunity and cooperative effort. The Portfolios have
developed the criteria for the selection of organizations in
which they invest. The Portfolios recognize, however, that these
criteria represent standards of behavior which few, if any,
organizations totally satisfy and that, as a matter of practice,
evaluation of a particular organization in the context of these criteria
will involve subjective judgment by the Portfolios' Investment Advisor
and Subadvisor.
The characteristics of each investment policy and the
associated risks are described in the Company's CRI Prospectus and
Statement of Additional Information. Both Portfolios have other
investment policies and restrictions which are also set forth in the
Company's CRI Prospectus and Statement of Additional Information, which
are hereby incorporated herein by reference and available upon request.
PERFORMANCE INFORMATION
NCM Capital Management and CAM assumed portfolio management
responsibility of the equity and fixed-income portions of the Balanced
Portfolio, respectively, on February 9, 1995. For the 12 months ended
December 31, 1994, when the Portfolio was managed by its former sub-advisor,
U.S. Trust Company, the Portfolio returned -3.30%. This was a bit behind that
of Lipper Balanced Funds Average, which returned -2.50% for the year.
This was attributed to a wrong call by U.S. Trust Company on long term
interest rates.
For the six months ended June 30, 1995, the Balanced Portfolio return
17.35%. This return compares favorably to the 13.72% return of the Lipper
Balanced Funds Average. This performance was due to substantial equity
investments in the better performing market sectors, including technology,
financials, consumer staples and capital goods. In addition, the Portfolio's
holdings of major foreign growth stocks, such as Ericsson and Philips, also
contributed positive returns. The fixed-income portion also made a strong
contribution as the Portfolio's duration was taking out to a position
longer than that of the benchmarks. Positions were also added in corporate
bonds, which enhanced diversification and boosted yields.
The line graph below is comparing a hypothetical $10,000 investment of the
Balanced Portfolio:
CALVERT RESPONSIBLY INVESTED
CAPITAL ACCUMULATION PORTFOLIO
Comparison of change in value of a
hypothetical $10,000 investment.
$28,000
====================================
$15,000
==================================== (not able to show graph)
$10,000
====================================
9/86 87 88 89 90 91 92 93 94 95
......Calvert Responsibly Invested Balanced Portfolio
------90 Day T-Bill
====== L. Aggregate Bond
++++++S&P 500
___________________________________________________________________
Average Annual Total Returns
Period Ending
12/31/94 6/30/95
One Year -3.30% 19.21%
Five year 6.39% 9.39
Life of Portfolio (9/86) 8.00% 9.51%
Performance information is for the Balanced Portfolio only
and does not reflect chganges and expenses of the variable annuity.
Past performance does not indicate future results. The current Sub-advisers
have managed the Portfolio since February 1995.
COMPARATIVE INFORMATION ON SHAREHOLDERS' RIGHTS
FORM OF ORGANIZATION
The Company was incorporated in Maryland on September 27, 1982,
and is an open-end management investment company registered under the
1940 Act. The Company has seven CRI portfolios, including the
Portfolios, each designed to provide opportunities for investing in
enterprises that make a significant contribution to society through
their products and services and through the way they do business.
CAPITALIZATION
The total number of shares of stock of all classes which the
Company is currently authorized to issue is 100 million shares. The par
value of each share is $1.00. The Balanced Portfolio currently has
75,000,000 authorized shares and the Bond Portfolio currently has
1,000,000 authorized shares. Fractional shares may be issued. Each
Portfolio's shares have equal voting rights and represent equal
proportionate interests in the assets belonging to the Portfolio.
Shareholders of each Portfolio are entitled to receive dividends and
other amounts as determined by the Directors of the Company.
Shareholders of each Portfolio vote separately, as to matters, that
affect only their particular Portfolio such as approval or amendments of
investment advisory agreements or proposed reclassifications, that
affect only their particular portfolio.
SHAREHOLDER MEETINGS AND VOTING RIGHTS
The Company is not required to hold annual meetings of
shareholders. The Company does not permit cumulative voting. A majority
of shares entitled to vote on a matter constitutes a quorum for
consideration of such matter. In either case, a majority of the shares
voting is sufficient to act on a matter (unless otherwise specifically
required by the applicable governing documents or other law, including
the 1940 Act).
LIQUIDATION OR DISSOLUTION
In the event of the liquidation of a portfolio the shareholders
are entitled to receive, when, and as declared by the Directors, the
excess of the assets belonging to such portfolio over the liabilities
belonging to the portfolio. The assets so distributable to shareholders
of a Portfolio will be distributed among the shareholders in proportion
to the number of shares of the Portfolio held by them and recorded on
the books of the Company.
RIGHTS OF INSPECTION
Shareholders of the respective Portfolios have the same right to
inspect in Maryland the governing documents, records of meetings of
shareholders, shareholder lists, share transfer records, accounts and
books of the Company as are permitted shareholders of a corporation
under the Maryland corporation law. The purpose of inspection must be
for interests of shareholders relative to the affairs of the Portfolios.
The foregoing is only a summary of certain characteristics of
the operations of the Company's Articles of Incorporation, its By-Laws
and Maryland law and is not a complete description of those documents or
the law. Shareholders should refer to the provisions of such respective
Articles of Incorporation, By-Laws, and Maryland law directly for more
complete information.
ADDITIONAL INFORMATION
Information concerning the operation and management of the
Company and the Portfolios is incorporated herein by reference from the
Prospectus dated May 1, 1995, a copy of which is enclosed, and the
Statement of Additional Information dated as of the same date. A copy of
such Statement of Additional Information is available upon request and
without charge by writing to the Company, at the address listed on the
cover page of this Prospectus/Proxy Statement or by calling toll-free
1-800-368-2748.
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended and the 1940 Act, and in
accordance therewith files reports and other information including proxy
material, and charter documents with the SEC. These items can be
inspected and copies obtained at the Public Reference Facilities
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549.
FINANCIAL STATEMENTS AND EXPERTS
The Statement of Additional Information relating to this
Prospectus/Proxy Statement includes the following financial statements:
(i) financial statements for the fiscal year ended December 31, 1994,
included in the Company's Annual Report for that period; and (ii)
unaudited financial statements for the six-months ended June 30, 1995.
The financial statements included in the Company's Annual Report are
incorporated by reference into the Statement of Additional Information.
The financial statements for the year ended December 31, 1994 included
in the Company's Annual Report have been audited by Coopers & Lybrand
LLP, independent accountants, and have been included in the Statement of
Additional Information in reliance upon the report of Coopers & Lybrand
LLP given upon the authority of such firm as experts in accounting and
auditing.
LEGAL MATTERS
Certain legal matters concerning the issuance of shares of the
Company will be passed upon by William M. Tartikoff, Esq., General
Counsel of The Calvert Group, Ltd. Sullivan & Worcester, Washington,
D.C., has advised the Company on certain federal income tax matters.
OTHER BUSINESS
The Directors of the Company do not intend to present any other
business at the Meeting. If, however, any other matters are properly
brought before the Meeting, the persons named in the accompanying form
of proxy will vote thereon in accordance with their judgment.
THE BOARD OF DIRECTORS OF THE COMPANY, INCLUDING THE
INDEPENDENT DIRECTORS, RECOMMENDS APPROVAL OF THE PROPOSED MERGER, ANY
UNMARKED PROXIES WITHOUT INSTRUCTIONS TO THE CONTRARY WILL BE VOTED IN
FAVOR OF APPROVAL OF THE PROPOSED MERGER.
December 30, 1995
<PAGE>
EXHIBIT A
Ex-99.17
ACACIA CAPITAL CORPORATION
(the "Company")
PLAN OF RECLASSIFICATION
(the "Plan")
I. RECITALS
The Company is a Maryland corporation whose shares of common
stock are currently classified into seven classes or series
("Portfolios"), including the Calvert Responsibly Invested ("CRI") Bond
Portfolio (the "Bond Portfolio") and the CRI Balanced Portfolio (the
"Balanced Portfolio").
The Company is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end management investment
company, and its shares of common stock are registered under the
Securities Act of 1933, as amended (the "1933 Act").
The Company offers shares of certain Portfolios to Providian Life
and Health Insurance Company ("Providian") and its Separate Accounts
and other insurance companies and their separate accounts.
Providian issues, or intends to issue, variable annuity
contracts ("contracts") through its Separate Account or Accounts. The
Company understands that Providian votes the shares of the Bond
Portfolio held by its Separate Account that are attributable to
contracts in accordance with instructions received from holders of
interests in the contracts (hereinafter, "shareholders"). The Company
further understands that Providian votes shares of the Bond
Portfolio as to which no instructions have been received in the same
proportion as the shares of the relevant Separate Account as to which
instructions have been received.
The Directors of the Company have determined that it is
advisable to amend the Articles of Incorporation of the Company to
reclassify the issued and unissued shares of common stock currently
designated as the Bond Portfolio into the class of common stock
currently designated as the Balanced Portfolio (the
"Reclassification") and have directed that the proposed amendment be
submitted for consideration at a special meeting of shareholders.
The Directors of the Company have determined - independently
for the Bond Portfolio and for the Balanced Portfolio - that the
Reclassification, including the consideration, is reasonable and fair,
does not involve overreaching on the part of any person concerned, and
will not dilute the interests of shareholders. Furthermore, the
Directors have determined that the Reclassification would be in the best
interests of shareholders and is consistent with the general purposes of
the 1940 Act, the protection of investors, and the purposes fairly
intended by the policies and provisions of the 1940 Act.
It is intended that the Reclassification shall qualify as a
tax-free reorganization under Section 368 of the Internal Revenue Code
of 1986, as amended (the "Code").
II. MECHANICS OF RECLASSIFICATION
A. Approval of Shareholders.
1. Meeting Date. In accordance with Section 2-604 of the
Maryland General Corporation Law (the "Maryland Law") and the Company's
Articles of Incorporation, the Reclassification shall be submitted to
the shareholders of the Bond Portfolio for their approval at a special
meeting (the "Meeting") to be held on or about February 16, 1996,
1996 at 10:00 a.m., Eastern Time, at the offices of the Company, 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
2. Record Date. The close of business on December 18, 1995,
shall be the record date (the "Record Date") for the Meeting and only
shareholders of record of the Bond Portfolio on such date shall be
entitled to notice of and be permitted to give voting instructions at
the Meeting.
3. Required Vote. The Reclassification shall not become
effective without the affirmative vote of the holders of a majority (as
defined in the 1940 Act) of the Bond Portfolio shares outstanding and
entitled to vote thereon.
4. Form N-14 Registration Statement/Proxy Materials. The
appropriate officers of the Company shall take all actions necessary or
appropriate to solicit the approval of the shareholders of the Bond
Portfolio, including the preparation and execution of a registration
statement on Form N-14 of the Securities and Exchange Commission (the
"SEC"), and any amendments thereto, containing a notice of meeting,
proxy statement, and voting instruction forms (collectively, the "proxy
materials"), and the filing of such proxy materials with the SEC.
5. Mailing of Proxy Materials. The appropriate officers of the
Company shall cause the proxy materials to be mailed on or about
December 30, 1995, as appropriate, to each shareholder of the Bond
Portfolio of record on the Record Date.
B. Amendment of Articles of Incorporation.
In accordance with Maryland Law, the Company shall effect the
Reclassification by amending its Articles of Incorporation.
1. Form of Amendment. The amendment to the Company's Articles
of Incorporation (the "Amendment") shall be substantially in the form
attached hereto and made a part hereof, with such modifications as the
officers executing the same deem necessary or appropriate, consistent
with the purposes of this Plan.
2. Date of Filing. The appropriate officers of the Company
shall execute, acknowledge, verify and file the Amendment with the
Maryland State Department of Assessments and Taxation (the "Maryland
State Department") on or about February 19, 1996, following
shareholder approval, for effectiveness at 12:01 a.m. on
February 26, 1996.
C. Transfer of Assets.
In connection with the Reclassification of shares, the Bond
Portfolio shall transfer all of its assets and liabilities to the
Balanced Portfolio, in exchange for which the Balanced Portfolio shall
issue to the Bond Portfolio a number of the Balanced Portfolio shares
having a value equal to the aggregate net assets of the Bond Portfolio
acquired.
1. Time of Transfer. The above-described transfer shall occur
on February 26, 1996 (the "Closing Date"), or such other time and
date as determined by the appropriate officers of the Company.
2. Issuance of Balanced Portfolio Shares to the Bond Portfolio.
The number of shares of the Balanced Portfolio to be issued to the Bond
Portfolio shall be determined on the basis of the relative net asset
values of the Balanced Portfolio and the Bond Portfolio calculated as of
the close of business on the business day immediately preceding the
Closing Date. The net asset value of each Portfolio shall be determined
by dividing the value of that Portfolio's securities, cash, and other
assets (including accrued but uncollected interest and dividends), less
all liabilities (including accrued expenses but excluding capital and
surplus) by the number of shares of that Portfolio outstanding.
3. Distribution of Balanced Portfolio Shares to Bond Portfolio
Shareholders. Upon effectiveness of the Amendment, the Bond Portfolio
shall distribute the Balanced Portfolio shares it receives to the Bond
Portfolio shareholders in exchange for their Bond Portfolio shares, on a
pro rata basis. The number of such full and fractional Balanced
Portfolio shares issued to each Bond Portfolio shareholder shall be
determined by multiplying the number of Bond Portfolio shares to be
exchanged by a fraction, the numerator of which is the net asset value
per share of the Balanced Portfolio and the denominator of which is the
net asset value per share of the Bond Portfolio. Thus, the Bond
Portfolio shares of each Bond Portfolio shareholder shall be exchanged
for the number of full and fractional shares of the Balanced Portfolio
which, when multiplied by the net asset value per share of the Balanced
Portfolio, will have a value equal to the aggregate net asset value of
that shareholder's shares in the Bond Portfolio on the Closing Date.
D. Costs of Effecting the Reclassification.
The Bond Portfolio and the Balanced Portfolio shall each pay
its portion of the expenses attributable to the Reclassification.
E. Miscellaneous.
1. Termination of Agreements. The appropriate officers of the
Company shall cause all agreements with the Bond Portfolio or the
Company to be terminated as they relate to the Bond Portfolio.
2. General Authority. The appropriate officers of the Company
shall, in the name and on behalf of the Company or either of the
Portfolios, do and perform such further acts and things, modify any
dates or deadlines, and execute and deliver or file such other
instruments, certificates, and documents as they shall determine to be
necessary, appropriate, or desirable to carry out the foregoing, any
such determination to be conclusively evidenced by the doing or
performing of any such act or thing or the execution and delivery or
filing of any such instrument, certificate, or document.
III. CONDITIONS PRECEDENT
The Reclassification shall not become effective unless each of
the following has occurred:
A. The Amendment shall have been approved by the affirmative
vote of the holders of a majority (as defined in the 1940 Act) of Bond
Portfolio shares outstanding and entitled to vote thereon;
B. The Amendment shall have been accepted for filing by the
Maryland Department of Assessments and Taxation and become effective;
C. The Company shall have received any necessary regulatory
approvals of the proposed Reclassification by the SEC;
D. The Company shall have received an opinion of counsel
reasonably satisfactory to it that the Reclassification shall qualify as
a tax-free reorganization under Section 368 of the Code; and
E. The Insurance Companies shall have received any necessary
regulatory approvals of the proposed Reclassification by relevant state
insurance authorities.
At the Closing Date, the Balanced Portfolio shall succeed,
without any transfer other than that contemplated in Section II.C above,
to all the assets belonging to the Bond Portfolio (or allocated to the
Bond Portfolio by the Board of Directors of the Company pursuant to
Article Ninth of the Company's Articles of Incorporation) and shall be
subject to all the liabilities of the Bond Portfolio in the same manner
as if the liabilities had been incurred by, or allocated to, the
Balanced Portfolio in the first instance.
Upon effectiveness of the Amendment, all of the Shares of the
Bond Portfolio shall be reclassified as Balanced Portfolio shares, and
the Bond Portfolio shall cease to be a separate class of stock of the
Company.
Acacia Capital Corporation
By:
William M. Tartikoff
Vice President
FORM OF AMENDMENT TO
THE RESTATED ARTICLES OF INCORPORATION
OF ACACIA CAPITAL CORPORATION
Acacia Capital Corporation, a Maryland corporation, having its
principal office in the State of Maryland in Baltimore City, Maryland
(hereafter called the "Corporation"), hereby amends, effective
February 26, 1996 its Articles of Incorporation, (the "Articles of
Incorporation"), to redesignate and reclassify the issued and unissued
shares of the Corporation which were divided and classified as the class
of common stock bearing the designation CRI Bond Portfolio into the
class of common stock bearing the designation CRI Balanced Portfolio.
All of such shares have the powers, preferences, other special rights,
qualifications, restrictions and limitations set forth in Article Tenth
of the Articles of Incorporation
ARTICLE NINTH, of the Articles of Incorporation of the Company
is amended to read as follows:
(1) The total number of shares of stock of all classes which
the Corporation is authorized to issue is one hundred million
(100,000,000) shares of capital stock. The par value of each share shall
be One Dollar ($1.00). The shares shall be allocated as follows for each
series:
No. of Shares per Series
CRI Balanced Portfolio
76,000,000
CRI Money Market Portfolio 9,000,000
CRI Global Equity Portfolio 4,000,000
CRI Capital Accumulation Portfolio 4,000,000
CRI Equity Portfolio 2,000,000
CRI Strategic Growth Portfolio 5,000,000
Total Shares Authorized 100,000,000
The Board of Directors shall have the authority to classify or
reclassify and issue authorized stock in such other classes as it may
determine, each comprising such number of shares and having such
designations, powers, preferences and rights and such qualifications,
limitations and restrictions thereof, as may be fixed or determined from
time to time by resolution or resolutions providing for the issue of
such stock. The Board of Directors may increase or decrease the number
of shares of any class provided that it may not decrease the number of
shares of any class below the number of shares thereof then outstanding.
The foregoing amendment was advised by the Board of Directors
of the Company and approved by the affirmative vote of the holders of a
majority of the total number of shares outstanding and entitled to vote
on the proposed amendment.
IN WITNESS WHEREOF, the Company has caused these presents to be
signed in its name and on its behalf by its President and witnessed by
its Secretary on the ___ day of ______, 199_ to be effective on the ___
day of _____, 1996.
WITNESS: ACACIA CAPITAL CORPORATION
/s/ William M. Tartikoff /s/ Clifton S. Sorrell, Jr.
William M. Tartikoff Clifton S. Sorrell
Secretary President
