Page 1 of __
SEC Registration Nos.
811-3591 and 2-80154
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 32 XX
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940
Amendment No. 32 XX
Acacia Capital Corporation
(Exact Name of Registrant as Specified in Charter)
4550 Montgomery Avenue
Bethesda, Maryland 20814
(Address of Principal Executive Offices)
Registrant's Telephone Number: (301) 951-4800
William M. Tartikoff
4550 Montgomery Avenue
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)
(Acceleration request enclosed) 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 a Rule 24f-2 Notice for its fiscal year ended December
31, 1996.
<PAGE>
Acacia Capital Corporation
Form N-1A Cross Reference Sheet
Item number Prospectus
Caption
1. Cover Page
2. *
3. Financial Highlights
4. The Fund
Investment Objectives and Policies
of the Series
5. The Fund and Its Management
Transfer and Dividend Disbursing Agent
6. The Fund and Its Management
Dividends and Distributions
Total Return and Yield Information
Taxes
7. Purchase and Redemption of Shares
8. Purchase and Redemption of Shares
9. *
Statement of Additional
Information Caption
10. Cover Page
11. Table of Contents
12. General Information
13. Investment Objectives and Policies
Investment Restrictions
Investment Selection Process
Portfolio Turnover
14. Management of the Fund
15. General Information
16. Investment Advisor
Independent Accountants and Custodians
17. Investment Advisor
Securities Transactions and Brokerage
18. General Information
19. Determination of Net Asset Value
Purchase and Redemption of Shares
20. Taxes
21. *
22. Calculation of Yield and Total Return
23. Financial Statements
* Inapplicable or negative answer
<PAGE>
PROSPECTUS - April 30, 1997
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED BALANCED PORTFOLIO
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814 (800)
368-2748
The Calvert Responsibly Invested Balanced Portfolio (formerly the
Calvert Responsibly Invested Managed Growth Portfolio or Calvert
Socially Responsible Series) (the "Portfolio") is a series of Acacia
Capital Corporation (the "Fund"), an open-end management investment
company whose investment advisor is Calvert Asset Management Company,
Inc. (the "Investment Advisor").
The investment objective of the Portfolio is to achieve a total return
above the rate of inflation through an actively managed, nondiversified
portfolio of common and preferred stocks, bonds, and money market
instruments which offer income and capital growth opportunity and which
satisfy the social concern criteria established for the Portfolio. There
can be no assurance that the objective of the Portfolio will be
realized. See "Investment Objective and Policies."
This Prospectus sets forth the information that a prospective
policyholder should know before directing investment in the Portfolio
and it should be read and kept for future reference. A Statement of
Additional Information dated April 30, 1997, which contains further
information about the Fund, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling the Fund at the number above, or by
writing the Fund at 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814.
Shares of the Fund are offered only to insurance companies for
allocation to certain of their variable separate accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND 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 SELL SHARES
OF THE FUND, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY
PAID.
TABLE OF CONTENTS
Page
Financial Highlights 2
Investment Objective and Policies 7
The Fund and Its Management 10
Purchase and Redemptions of Shares 12
Dividends and Distributions 13
Total Return Information 13
Taxes 13
Transfer and Dividend Disbursing Agent 13
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's financial
history. It expresses 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. The
table 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.
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C>
1996 1995
Net asset value, beginning $ 1.703 $ 1.440
Income from investment operations
Net investment income .040 .050
Net realized and unrealized gain (loss) .175 .380
Total from investment operations .215 .430
Distributions from
Net investment income (.042) (.040)
Net realized gains (.102) (.127)
Total distributions (.144) (.167)
Total increase (decrease) in net asset value .071 .263
Net asset value, ending $ 1.774 $ 1.703
Total return* 12.62% 29.87%
Ratio to average net assets:
Net investment income 2.71% 3.08%
Total expenses<F1> .81% .83%
Net expenses .78% .81%
Portfolio turnover 99% 163%
Average commission rate paid $ .0481 $ --
Net assets, ending (in thousands) $ 161,473 $ 110,237
Number of shares outstanding, ending (in
thousands) 91,045 64,728
* Total return is for this Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies.
<FN>
<F1> 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>
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C>
1994 1993
Net asset value, beginning $ 1.537 $ 1.465
Income from investment operations
Net investment income .046 .045
Net realized and unrealized gain (loss) (.097) .072
Total from investment operations (.051) .117
Distributions from
Net investment income (.046) (.045)
Net realized gains -- --
Total distributions (.046) (.045)
Total increase (decrease) in net asset value (.097) .072
Net asset value, ending $ 1.440 $ 1.537
Total return* (3.30)% 8.00%
Ratio to average net assets:
Net investment income 3.39% 3.69%
Total expenses<F1> -- --
Net expenses .80% .81%
Portfolio turnover 43% 14%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 66,593 $ 54,000
Number of shares outstanding, ending (in
thousands) 46,244 35,142
* Total return is for this Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies.
<FN>
<F1> 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>
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C>
1992 1991
Net asset value, beginning $ 1.403 $ 1.249
Income from investment operations
Net investment income .044 .050
Net realized and unrealized gain (loss) .062 .154
Total from investment operations .106 .204
Distributions from
Net investment income (.044) (.050)
Net realized gains -- --
Total distributions (.044) (.050)
Total increase (decrease) in net asset value .062 .154
Net asset value, ending $ 1.465 $ 1.403
Total return* 7.61% 16.40%
Ratio to average net assets:
Net investment income 4.05% 3.08%
Total expenses<F1> .-- .83%
Net expenses .85% .81%
Expenses reimbursed .87% .85%
Portfolio turnover 15% 12%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 28,471 $ 14,946
Number of shares outstanding, ending (in
thousands) 19,433 10,656
* Total return is for this Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies.
<FN>
<F1> 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>
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C>
1990 1989
Net asset value, beginning $ 1.247 $ 1.068
Income from investment operations
Net investment income .050 .042
Net realized and unrealized gain (loss) .002 .179
Total from investment operations .052 .221
Distributions from
Net investment income (.050) (.042)
Net realized gains -- --
Total distributions (.050) (.042)
Total increase (decrease) in net asset value .002 .179
Net asset value, ending $ 1.249 $ 1.247
Total return* 4.18% 20.69%
Ratio to average net assets:
Net investment income 5.69% 4.85%
Total expenses<F1> -- .96%
Net expenses .77% .50%
Portfolio turnover 11% 28%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 6,760 $ 2,573
Number of shares outstanding, ending (in
thousands) 5,410 2,064
* Total return is for this Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies.
<FN>
<F1> 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>
<TABLE>
<CAPTION>
Year Ended December 31,
<S> <C> <C>
1988 1987
Net asset value, beginning $ 1.004 $ 0.958
Income from investment operations
Net investment income .054 .019
Net realized and unrealized gain (loss) .064 .046
Total from investment operations .118 .065
Distributions from
Net investment income (.054) (.019)
Net realized gains -- --
Total distributions (.054) .019)
Total increase (decrease) in net asset value .064 .046
Net asset value, ending $ 1.068 $ 1.004
Total return* 11.75% 6.78%
Ratio to average net assets:
Net investment income 4.95% 3.72%
Total expenses<F1> .80% 1.32%
Net expenses .50% .50%
Portfolio turnover 40% 17%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 1,294 $ 1,022
Number of shares outstanding, ending (in
thousands) 1,211 1,018
* Total return is for this Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies.
<FN>
<F1> 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>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Portfolio discussed below is not
fundamental and may be changed upon 60 days' written notice to
shareholders without a shareholder vote. There can be no assurance that
the investment objective of the Portfolio will be realized.
The investment objective of the Portfolio is to achieve a total return
above the rate of inflation through an actively managed, nondiversified
portfolio of common and preferred stocks, bonds, and money market
instruments which offer income and capital growth opportunity and which
satisfy the social concern criteria established for the Portfolio. The
Portfolio invests in enterprises that make a significant contribution to
society through their products and services and through the way they do
business. The Portfolio is designed for long-term investment. It is not
the policy of the Portfolio to take great risks to obtain speculatively
or aggressively high returns. There is no predetermined percentage of
assets allocated to either stocks or bonds or money market instruments,
although, as an operating policy, the Portfolio will have at least 25%
of its assets in fixed income senior securities. Equity investments are
selected by the Subadvisor, NCM Capital Management Group, Inc., subject
to direction and control by the Fund's Advisor and Board of Directors.
Fixed-income investments are selected by the Advisor. The Investment
Advisors determine the mix for the Portfolio depending upon their view
of market conditions and the economic outlook.
To implement its investment objectives, the Portfolio uses the following
strategies which, unless otherwise specified as a fundamental policy,
are operating policies and may be changed without shareholder vote. The
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
or Aaa, Aa, A, or Baa by Moody's Investors Service, Inc. 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 Additional Risk Factors--Non-Investment Grade Securities,
and the Statement of Additional Information for additional information
concerning bond ratings.
The Portfolio may purchase money market instruments, including
repurchase agreements with recognized securities dealers and banks
secured by such instruments, selected in accordance with the Portfolio's
social criteria. Such money market instruments may include: obligations
issued or guaranteed as to principal by the U.S. Government, its
agencies and instrumentalities; U.S. dollar-denominated certificates of
deposit, time deposits and bankers' acceptances of U.S. banks, generally
banks with assets in excess of $1 billion; and commercial paper which at
the date of investment is rated A-1 by Standard and Poor's Corporation
or Prime-1 by Moody's Investors Service, Inc., or if not rated, is of
comparable quality.
Due to the particular social objective of the Portfolio, opportunities
may exist to promote promising approaches to social goals through
privately placed instruments. Since private placement investments are
restricted securities and have no readily available market, the
Portfolio has a fundamental policy that such investments in the
Portfolio are limited to no more than 10% of the Portfolio's assets.
All investments for the Portfolio are selected with a concern for the
social impact of each investment. The Portfolio has developed the
following criteria for the selection of organizations in which the
Portfolio invests. The Portfolio seeks to invest in a producer or
service provider which:
1. Delivers safe products and services in ways that sustain our
natural environment.
2. Is managed with participation throughout the organization in
defining and achieving objectives.
3. Negotiates fairly with its workers, provides an environment
supportive of their wellness, does not discriminate on the
basis of race, gender, religion, age, disability, ethnic origin
or sexual orientation, does not consistently violate
regulations of the Equal Employment Opportunity Commission, and
provides opportunities for women, disadvantaged minorities and
others from whom equal opportunities have often been denied.
4. Fosters awareness of a commitment to human goals, such as
creativity, productivity, self-respect, and responsibility,
within the organization and the world, and continually
recreates a context within which these goals can be realized.
The Portfolio will not invest in an issuer primarily engaged in the
production of nuclear energy or in the manufacture of equipment to
produce nuclear energy, business activities in support of repressive
regimes, or the manufacture of weapons systems.
Each investment is selected on the basis of its abilities to contribute
to the dual objective of the Portfolio. All potential investments are
first screened for financial soundness and then evaluated according to
the Portfolio's social criteria. To the greatest extent possible,
investments are made in companies exhibiting unusual, positive
accomplishment with respect to one or more of the criteria. All
companies must meet the Portfolio's minimum standards for all the
criteria. It should be noted that the Portfolio's social criteria tend
to limit the availability of investment opportunities more than is
customary with other investment companies.
The selection of an organization for investment by the Portfolio does
not constitute endorsement or validation by the Fund, nor does the
exclusion of an organization necessarily reflect failure to satisfy the
Portfolio's social criteria. Policyholders directing investment in the
Portfolio are invited to send brief descriptions of companies they
believe might be suitable for investment by the Portfolio.
Risks of Foreign Securities
The Portfolio may invest up to 10% of its assets in the securities of
foreign issuers. There are substantial and different risks involved in
investing in foreign securities. You should consider these risks
carefully. For example, there is generally less publicly available
information about foreign companies than is available about companies in
the U.S. Foreign companies are generally not subject to uniform audit
and financial reporting standards, practices and requirements comparable
to those in the U.S.
Foreign securities involve currency risks. The U.S. dollar value of a
foreign security tends to decrease when the value of the dollar rises
against the foreign currency in which the security is denominated and
tends to increase when the value of the dollar falls against such
currency. Fluctuations in exchange rates may also affect the earning
power and asset value of the foreign entity issuing the security.
Dividend and interest payments may be returned to the country of origin,
based on the exchange rate at the time of disbursement, and restrictions
on capital flows may be imposed. Losses and other expenses may be
incurred in converting between various currencies in connections with
purchases and sales of foreign securities.
Foreign stock markets are generally not as developed or efficient as
those in the U.S. In most foreign markets volume and liquidity are less
than in the U.S. and, at times, volatility of price can be greater than
that in the U.S. Fixed commissions on foreign stock exchanges are
generally higher than the negotiated commissions on U.S. exchanges.
There is generally less government supervision and regulation of foreign
stock exchanges, brokers and companies than in the U.S.
There is also the possibility of adverse changes in investment or
exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, political or social
instability, or diplomatic developments which could adversely affect
investments, assets or securities transactions of the Portfolio in some
foreign countries. The Portfolio is not aware of any investment or
exchange control regulations which might substantially impair the
operations of the Portfolio as described, although this could change at
any time.
Investing in emerging markets in particular, those countries whose
economies and capital markets are not as developed as those of more
industrialized nations, carries its own special risks. Among other
risks, the economies of such countries may be affected to a greater
extent than in other countries by price fluctuations of a single
commodity, by severe cyclical climatic conditions, lack of significant
history in operating under a market-oriented economy, or by political
instability, including risk of expropriation.
For many foreign securities, there are U.S. dollar-denominated American
Depositary Receipts ("ADRs"), which are traded in the U.S. on exchanges
or over the counter and are generally sponsored and issued by domestic
banks. ADRs represent the right to receive securities of foreign issuers
deposited in a domestic bank or a correspondent bank. ADRs do not
eliminate all the risk inherent in investing in the securities of
foreign issuers. However, by investing in ADRs rather than directly in
foreign issuers' stock, the Portfolio may avoid currency risks during
the settlement period for either purchases or sales. In general, there
is a large, liquid market in the U.S. for many ADRs. The information
available for ADRs is subject to the accounting, auditing and financial
reporting standards of the domestic market or exchange on which they are
traded, which standards are more uniform and more exacting than those to
which many foreign issuers may be subject. The Portfolio may also invest
in European Depositary Receipts ("EDRs"), which are receipts evidencing
an arrangement with a European bank similar to that for ADRs and are
designed for use in the European securities markets. EDRs are not
necessarily denominated in the currency of the underlying security.
The dividends and interest payable on certain of the Portfolio's foreign
securities may be subject to foreign withholding taxes, thus reducing
the net amount available for distribution to the Portfolio's
shareholders. You should understand that the expense ratio of the
Portfolio can be expected to be higher than those of investment
companies investing only in domestic securities since the costs of
operations are higher.
Additional Risk Factors
Nondiversified Portfolio
There may be risks associated with the Portfolio being nondiversified.
Specifically, since a relatively high percentage of the assets of the
Portfolio may be invested in the obligations of a limited number of
issuers, the value of the shares of a nondiversified Portfolio may be
more susceptible to any single economic, political or regulatory event
than the shares of a diversified Portfolio would be.
Interest Rate Risk
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.
Non-Investment Grade Securities
Non-investment 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 issuer's creditworthiness. Because the market for
lower-rated securities may be less active ("thinner") than for
higher-rated securities, it may be difficult for the 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.
Repurchase Agreements
A repurchase agreement is a transaction where the Portfolio buys a
security at one price and simultaneously agrees to sell that same
security back to the original owner at a higher price. Under the
direction and supervision of the Fund's Board of Directors, the
Investment Advisor reviews the creditworthiness of the other party to
the agreement and must find it satisfactory before engaging in a
repurchase agreement. In all instances the Portfolio holds underlying
securities with a value equal to the total repurchase price the other
party has agreed to pay. However, in the event of the bankruptcy of the
other party, the Portfolio could experience delays in recovering its
money, may realize only a partial recovery or even no recovery, and may
also incur disposition costs. The Portfolio is not expected generally to
invest more than a very small portion of its assets in repurchase
agreements.
Other Information
In addition to the investment policies described above, the investment
program is subject to further policies and restrictions which are
described in the Statement of Additional Information. The Portfolio may,
to a limited extent, lend its portfolio securities and engage in reverse
repurchase agreements.
Unless otherwise specified, the policies and restrictions for the
Portfolio are not fundamental and may be changed without shareholder
approval. Policyholder inquiries should be directed to the Portfolio at
(800) 368-2745, 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland
20814.
THE FUND AND ITS MANAGEMENT
Acacia Capital Corporation (the "Fund") is an open-end investment
company. The Fund was incorporated under the laws of the State of
Maryland on September 27, 1982. The Fund is a series fund which issues
classes of stock, one for each Portfolio. The shares of the Fund
currently are sold only to insurance companies (collectively, the
"Insurance Companies") for allocation to their separate accounts
(collectively, the "Variable Accounts") to fund the benefits under
certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly,
the interest of a policy owner in the shares is subject to the terms of
the particular annuity or life insurance policy and is described in the
attached prospectus for one of the Policies, which should be reviewed
carefully by a person considering the purchase of a Policy. The rights
of the Insurance Companies as shareholders should be distinguished from
the rights of a policy owner which are described in the Policies. Policy
owners should consider that the investment return experience of the
Portfolio will affect the value of the policy and the amount of annuity
payments or life insurance benefits received under a policy. See the
attached prospectus(es) for the Policies for a description of the
relationship between increases or decreases in the net asset value of
Portfolio shares (and any distributions on such shares) and the benefits
provided under a policy.
Investment Advisor
The Fund's investment advisor is Calvert Asset Management Company, Inc.
(the "Investment Advisor"), which is located at 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814. Calvert Asset Management is a
wholly-owned subsidiary of Calvert Group, Ltd., which is in turn an
indirect wholly-owned subsidiary of Acacia Mutual Life Insurance
Company. As of December 31, 1996, Calvert Group, Ltd. had assets in
excess of $5.2 billion under management and administration. Pursuant to
its investment advisory agreement with the Fund, the Investment Advisor
manages the fixed-income investments of the Portfolio and is responsible
for the overall management of the business affairs of each Portfolio,
subject to the direction and authority of the Fund's Board of Directors.
The Subadvisor to the Portfolio is NCM Capital Management Group, Inc.
("NCM"). Pursuant to its Investment Subadvisory Agreement with the
Investment Advisor, NCM manages the equity portion of the 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-income 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
Portfolio since February 1995. Sloan Holdings, also controlled by
Messrs. Sloan and Beckett, receives a 0.05% consultation fee, paid by
the Advisor (not the Fund) for non-investment advice, such as marketing
assistance.
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 Portfolio since
February 1995.
Reno J. Martini, Senior Vice President and Chief Investment Officer of
the Advisor, heads the fixed-income portion of the Portfolio. Mr.
Martini oversees the management of all Calvert portfolios and has served
as manager of the Portfolio Investment Department since 1985. He has
extensive experience evaluating and purchasing fixed-income securities.
Advisory Fee
For fiscal year 1996, the Investment Advisor received from the Portfolio
a monthly base fee, computed on a daily basis at an annual rate of 0.70%
of the average daily net assets of the Portfolio, plus a performance fee
adjustment of 0.01% as described below.
The Advisor pays the Subadvisor a base fee of 0.25% of one-half of the
Portfolio's average net assets. In addition, under the circumstances
described below, the Advisor and Subadvisor may earn (or have their fees
reduced by) performance fee adjustments based on the extent to which
performance of the Portfolio exceeds or trails the Lipper Balanced Funds
Index. Payment of the performance fee adjustment began July 1, 1996. The
specific adjustments are as follows, and are calculated monthly:
Advisor'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%
Subadvisor'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%
The performance fee adjustment to the Subadvisor is paid out of the fee
the Advisor receives from the Portfolio. The initial performance period
is the twelve month period from 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.
Expenses
The Advisor provides the Fund with investment supervision and
management; certain administrative services and office space; furnishes
executive and other personnel to the Fund; and pays the salaries and
fees of all Directors 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. The Fund pays all other operating expenses, including the fee
of the Investment Advisor; costs of executing portfolio transactions;
pricing costs; interest; taxes; custodian and transfer agent fees; legal
and auditing fees; bookkeeping and dividend disbursing expenses; and
certain other expenses relating to operations. Certain expenses are paid
by the Portfolio that incurs them, while other expenses are allocated
among each of the Fund's Portfolios on the basis of its relative size
(that is, the amount of its net assets), or by the Board of Directors as
appropriate.
Expenses constituted 0.81% of the average net assets of the Portfolio
for 1996, including fees paid indirectly, and 0.78% net of fees paid
indirectly.
Capital Stock
The Fund issues separate shares of stock for each of its Portfolios.
Shares of each of the series have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to
that series. No series has preference over another series. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The Fund's shareholders,
the Insurance Companies, will vote Fund shares allocated to the Variable
Accounts in accordance with instructions received from policy owners.
Under certain circumstances, which are described in the accompanying
prospectus of the variable life policy, the voting instructions received
from variable life insurance policy owners may be disregarded.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for purchase by
the Insurance Companies for allocation to their Variable Accounts.
Shares are purchased by the Variable Accounts at the net asset value of
the Portfolio next determined after the Insurance Company receives the
premium payment. The Fund continuously offers its shares in the
Portfolio at a price equal to the net asset value per share. Initial and
subsequent payments allocated to the Fund 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 the Fund, although currently neither the Insurance
Companies nor the Fund foresee any such disadvantages to either variable
annuity or variable life insurance policy owners of any Insurance
Company. The Fund's Board of Directors intends to monitor events in
order to identify any material conflicts between such policy owners and
to determine what action, if any, should be taken in response thereto.
The Insurance Companies redeem shares of the Portfolio to make benefit
and surrender payments under the terms of Policies. Redemptions are
processed on any day on which the Fund is open for business (each day
the New York Stock Exchange is open), and are effected at the
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, but 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 upon redemption of the shares of the Fund
may be more or less than the amount paid for the shares, depending upon
the fluctuations in the market value of the assets owned by the Fund.
The Fund redeems all full and fractional shares of the Portfolio for
cash. The redemption price is the net asset value per share.
The net asset value of the shares of the 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 the
Portfolio to affect materially its 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 the 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 Portfolio are valued at their market value if
market quotations are readily available. Otherwise, such 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. All money market
instruments with a remaining maturity of 60 days or less are valued on
an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of the net
investment income, if any, of the Portfolio. For dividend purposes, net
investment income of the Portfolio consists of all payments of dividends
or interest received by such Portfolio less estimated expenses
(including the investment advisory fee). All net realized capital gains,
if any, of each Portfolio are declared and distributed periodically, no
less frequently than annually. All dividends and distributions are
reinvested in additional shares of the Portfolio at net asset value.
TOTAL RETURN INFORMATION
The Portfolio may advertise its "total return" from time to time. Total
return refers to the total change in value of an investment in the
Portfolio over a specified period. It differs from yield in that yield
figures measure only the income component of the Portfolio's portfolio
investments, while 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. The total return of the Portfolio is the ratio
of the increase (or decrease) in value of a hypothetical investment in
the Portfolio at the end of a measuring period to the amount initially
invested in the Portfolio. Total return is computed by taking the total
number of shares purchased by a hypothetical $1,000 investment, adding
all additional shares purchased within the period with reinvested
dividends and distributions, calculating the value of those shares at
the end of the period, and dividing the result by the initial $1,000
investment. For periods of more than one year, the cumulative total
return is then adjusted for the number of years, taking compounding into
account, to calculate average annual total return during that period.
Total return is historical in nature and is not intended to indicate
future performance.
Actual total return quotations may also be advertised for other
specified periods, such as calendar years and calendar quarters.
Cumulative total return for periods of more than one year may also be
quoted. These figures will be accompanied by the standard, average
annual total return quotations. The total return of the Portfolio does
not include the effect of paying the charges and expenses on the
particular insurance policy or annuity contract for which the Portfolio
serves as the investment vehicle.
TAXES
As a "regulated investment company" under the provisions of Subchapter M
of the Internal Revenue Code, as amended, the Fund is not subject to
federal income tax, nor to the federal excise tax imposed by the Tax
Reform Act of 1986, to the extent that it distributes its net investment
income and realized capital gains. Since the only shareholders of the
Fund are the Insurance Companies, no discussion is included herein as to
the federal income tax consequences at the shareholder level. For
information concerning the federal tax consequences to purchasers of the
annuity or life insurance policies, see the prospectuses for the
Policies.
TRANSFER AND DIVIDEND DISBURSING AGENT
Calvert Shareholder Services, Inc., 4550 Montgomery Avenue, Bethesda,
Maryland 20814, is the Fund's transfer agent and dividend disbursing
agent.
<PAGE>
PROSPECTUS - April 30, 1997
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED GLOBAL EQUITY PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814 (800) 368-2748
The Calvert Responsibly Invested Global Equity Portfolio (the
"Portfolio" or "CRI Global") is a series of Acacia Capital Corporation
(the "Fund"), an open-end management investment company whose investment
advisor is Calvert Asset Management Company, Inc. (the "Investment
Advisor").
The investment objective of the Portfolio is to achieve a high
total return consistent with reasonable risk by investing primarily in a
globally diversified portfolio. There can be no assurance that the
objective of the Portfolio will be realized. See "Investment Objective
and Policies."
This Prospectus sets forth the information that a prospective
policyholder should know before directing investment in the Portfolio
and it should be read and kept for future reference. A Statement of
Additional Information dated April 30, 1997, which contains further
information about the Fund, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling the Fund at the numbers above, or by
writing the Fund at 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814.
Shares of the Fund are offered only to insurance companies for
allocation to certain of their variable separate accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. WHEN INVESTORS SELL SHARES OF THE FUND, THE VALUE MAY BE HIGHER
OR LOWER THAN THE AMOUNT ORIGINALLY PAID.
TABLE OF CONTENTS
Page
Financial Highlights 2
Investment Objective and Policies 5
Investment Screens 10
The Fund and Its Management 10
Purchase and Redemption of Shares 11
Dividends and Distributions 12
Total Return Information 12
Taxes 12
Transfer and Dividend Disbursing Agent 13
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's
financial history. It expresses 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. The table 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.
<TABLE>
<CAPTION>
Year Ended
December 31,
1996
<S> <C>
Net asset value, beginning $ 17.15
Income from investment operations
Net investment income .17
Net realized and unrealized gain (loss) 2.40
Total from investment operations 2.57
Distributions from
Net investment income (.14)
Net realized gains (.84)
Total distributions (.98)
Total increase (decrease) in net asset value 1.59
Net asset value, ending $ 18.74
Total return 14.99%
Ratio to average net assets:
Net investment income 1.02%
Total expenses<F1> 1.59%
Net expenses 1.18%
Expenses reimbursed .23%
Portfolio turnover 85%
Average commission rate paid $ .0352
Net assets, ending (in thousands) $ 14,027
Number of shares outstanding, ending (in
thousands) 748
<FN>
<F1>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>
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1995 1994
<S> <C> <C>
Net asset value, beginning $ 15.89 $ 17.72
Income from investment operations
Net investment income .27 .11
Net realized and unrealized gain (loss) 1.69 (.49)
Total from investment operations 1.96 (.38)
Distributions from
Net investment income (.25) (.13)
Net realized gains (.45) (1.32)
Total distributions (.70) (1.45)
Total increase (decrease) in net asset value 1.26 (1.83)
Net asset value, ending $ 17.15 $ 15.89
Total return 12.35% (2.13)%
Ratio to average net assets:
Net investment income 1.48% .59%
Total expenses<F2> 1.51% --
Net expenses 1.12% 1.24%
Expenses reimbursed .39% .29%
Portfolio turnover 90% 84%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 9,831 $ 7,765
Number of shares outstanding, ending (in
thousands) 573 489
<FN>
<F2>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>
<TABLE>
<CAPTION>
Year Ended From Inception
December 31, June 30, 1992
1993 through
December 31,
1992
<S> <C> <C>
Net asset value, beginning $ 14.57 $ 15.00
Income from investment operations
Net investment income .11 (.02)
Net realized and unrealized gain (loss) 4.07 (.41)
Total from investment operations 4.18 (.43)
Distributions from
Net investment income (.08) --
Net realized gains (.95) --
Total distributions (1.03) --
Total increase (decrease) in net asset value 3.15 (.43)
Net asset value, ending $ 17.72 $ 14.57
Total return 29.72% (3.27)%
Ratio to average net assets:
Net investment income 1.00% (.98%)(a)
Total expenses<F3> -- --
Net expenses .94% .98%(a)
Expenses reimbursed .10% 1.07%(a)
Portfolio turnover 64% --
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 4,529 $ 236
Number of shares outstanding, ending (in
thousands) 256 16
(a) Annualized
<FN>
<F3> 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>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective described below is fundamental and may
not be changed without the approval of the holders of a majority of the
outstanding shares of the Portfolio. As a Policyholder, you may be given
an opportunity to indicate how you believe the Insurance Company should
vote the shares which underlie your Policy.
The investment objective of CRI Global is to provide a high
total return consistent with reasonable risk by investing primarily in a
globally diversified portfolio of equity securities. The Portfolio seeks
total return through a globally diversified investment portfolio. It is
designed to provide growth of capital or current income by investing in
enterprises that make a significant contribution to society through
their products and services and through the way they do business. All
investments are screened for financial and social criteria. The
Portfolio may engage in hedging transactions involving options, futures
contracts and foreign currency transactions to reduce its risk exposure
(see "Investment Techniques").
Under normal circumstances, CRI Global will invest at least 65%
of its assets in equity securities. The Portfolio will invest primarily
in common stocks of established foreign and U.S. companies believed to
have potential for capital growth, income or both. However, it may
invest in any other type of security including, but not limited, to
convertible securities, preferred stocks, bonds, notes and other debt
securities of companies (including Euro-currency instruments and
securities), or of any international agency (such as the Asian
Development Bank or Inter-American Development Bank) or obligations of
domestic or foreign governments and their political subdivisions, and in
foreign currency transactions. The Portfolio may establish and maintain
reserves for temporary defensive purposes or to enable it to take
advantage of buying opportunities. CRI Global's reserves may be invested
in domestic as well as foreign short-term money market instruments
including, but not limited to, government obligations, certificates of
deposit, bankers' acceptances, time deposits, commercial paper,
short-term corporate debt securities and repurchase and reverse
repurchase agreements. The Portfolio may also engage in certain options
transactions, and enter into futures contracts and related options for
hedging purposes and lend portfolio securities. See "Additional
Fundamental Investment Policies, Risks of Foreign Securities, Foreign
Currency Transactions, and Additional Non-Fundamental Investment
Policies."
Under normal circumstances, CRI Global will invest at least 65%
of its assets in the securities of issuers in no less than three
countries, one of which may be the USA. Under normal circumstances,
business activities in a number of different foreign countries will be
represented in the Portfolio's investments. The Portfolio may, from time
to time, have more than 25% of its assets invested in any major
industrial or developed country which in the view of the Subadvisor
poses no unique investment risk. Under exceptional economic or market
conditions, CRI Global may invest substantially all of its assets in
only one or two countries, or in U.S. government obligations or
securities of companies incorporated in and having their principal
activities in the U.S.
In determining the appropriate distribution of investments
among various countries and geographic regions, the Subadvisor
ordinarily will consider the following factors: prospects for relative
economic growth among foreign countries; expected levels of inflation;
relative price levels of the various capital markets; government
policies influencing business conditions; the outlook for currency
relationships and the range of individual investment opportunities
available to the global investor. The Portfolio may make investments in
developing countries, which involve exposure to economic structures that
are generally less diverse and mature than in the United States, and to
political systems which may be less stable. A developing country can be
considered to be a country which is in the initial stages of its
industrialization cycle. In the past, markets of developing countries
have been more volatile than the markets of developed countries;
however, such markets often have provided higher long-term rates of
return to investors. The Subadvisor believes that these characteristics
can be expected to continue in the future.
Generally, CRI Global will not trade in securities for
short-term profits, but, when circumstances warrant, securities may be
sold without regard to the length of time held. The Portfolio may write
covered call options and purchase call and put options on securities and
security indices, and may write secured put options and enter into
option transactions on foreign currency. It may also engage in
transactions in financial futures contracts and related options for
hedging purposes, and invest in repurchase agreements. These investment
techniques and the related risks are summarized below and are described
in more detail in the Statement of Additional Information.
CRI Global may purchase unrated debt instruments, if the
Advisor or Subadvisor determines they are of comparable quality to
permissible rated instruments. Although the Portfolio may invest up to
5% of its assets in non-investment grade bonds (those rated below BBB by
Standard & Poor's or equivalent), it does not intend to purchase any
such bonds unless the instrument provides an opportunity to invest in an
attractive company in which an equity investment is not currently
available or desirable. (See "Noninvestment-Grade Debt Securities.")
Additional Fundamental Investment Policies
CRI Global 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. Investing in
options may involve a greater degree of risk than those inherent in more
conservative investment approaches. The Portfolio will engage in futures
contracts and related options only to protect against market declines.
The Portfolio will not engage in such transactions for speculation or
leverage. It is an operating policy of the Fund that no Portfolio may
invest in options and futures contracts if as a result more than 5% of
its assets would be so invested.
The Portfolio may engage in repurchase agreements and reverse
repurchase agreements. In a repurchase agreement, the Portfolio buys a
security subject to the right and obligation to sell it back at a higher
price. In order to minimize any risk involved, the Portfolio engages in
such transactions only with recognized securities dealers and banks
determined by the Advisor to present a minimal credit risk. Repurchase
agreements are fully collateralized and always have a maturity of less
than one year. No more than 10 percent of the Portfolio's assets may be
invested in repurchase agreements not terminable within seven days. In a
reverse repurchase agreement, the Portfolio sells a security subject to
the right and obligation to buy it back at a higher price. The Portfolio
then invests the proceeds from the transaction in another obligation in
which it is authorized to invest. For reverse repurchase agreements, the
Portfolio maintains a segregated account with liquid assets equal in
value to the repurchase price.
The Portfolio may borrow money from banks (and pledge its
assets to secure such borrowing) for temporary or emergency purposes,
but not for leverage. This type of borrowing may not exceed 10% of the
value of the Portfolio's total assets. The Portfolio may also make loans
of the securities it holds. The advantage of loaning securities is that
the Portfolio continues to receive the equivalent of the interest earned
or dividends paid by the issuers while at the same time earning interest
on the cash or equivalent collateral that may be invested in accordance
with the Portfolio's investment objective, policies, and restrictions.
The purpose of the loans is usually to facilitate the delivery of
securities. As with any extension of credit, there may be risks of delay
in recovery and possible loss of rights in the loaned security if the
borrower fails financially. The Investment Advisor attempts to reduce
the risk by lending only to borrowers that it deems creditworthy and
only on terms that it believes compensates for any risk inherent in the
transaction.
The Portfolio may lend its securities to New York Stock
Exchange member firms and to commercial banks with assets of one billion
dollars or more. All loans must be secured continuously in the form of
cash or cash equivalents such as U.S. Treasury bills. In addition, the
amount of collateral must, on a current basis, equal or exceed the
market value of the loaned securities, and the Portfolio may only make
the loan if the value of the securities loaned does not exceed 10% of
its assets. The Portfolio must be able to terminate loans at any time
with appropriate notice. The Portfolio will exercise its right to
terminate a securities loan in order to preserve its right to vote on
matters of importance affecting holders of the securities. All
securities must be returned to the Portfolio when a loan terminates, and
the Portfolio absorbs any gain or loss in the market value of the
securities during the loan period.
Risks of Foreign Securities
CRI Global may invest all of its assets in foreign securities,
although the Portfolio intends to invest part of its assets in
securities of U.S. issuers. There are substantial and different risks
involved in investing in foreign securities. You should consider these
risks carefully. For example, there is generally less publicly available
information about foreign companies than is available about companies in
the U.S. Foreign companies are generally not subject to uniform audit
and financial reporting standards, practices and requirements comparable
to those in the U.S.
Foreign securities involve currency risks. The U.S. dollar
value of a foreign security tends to decrease when the value of the
dollar rises against the foreign currency in which the security is
denominated and tends to increase when the value of the dollar falls
against such currency. Fluctuations in exchange rates may also affect
the earning power and asset value of the foreign entity issuing the
security. Dividend and interest payments may be returned to the country
of origin, based on the exchange rate at the time of disbursement, and
restrictions on capital flows may be imposed. Losses and other expenses
may be incurred in converting between various currencies in connections
with purchases and sales of foreign securities.
Foreign stock markets are generally not as developed or
efficient as those in the U.S. In most foreign markets volume and
liquidity are less than in the U.S. and, at times, volatility of price
can be greater than that in the U.S. Fixed commissions on foreign stock
exchanges are generally higher than the negotiated commissions on U.S.
exchanges. There is generally less government supervision and regulation
of foreign stock exchanges, brokers and companies than in the U.S.
There is also the possibility of adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, political or social
instability, or diplomatic developments which could adversely affect
investments, assets or securities transactions of the Fund in some
foreign countries. The Fund is not aware of any investment or exchange
control regulations which might substantially impair the operations of
the Fund as described, although this could change at any time.
Investing in emerging markets in particular, those countries
whose economies and capital markets are not as developed as those of
more industrialized nations, carries its own special risks. Among other
risks, the economies of such countries may be affected to a greater
extent than in other countries by price fluctuations of a single
commodity, by severe cyclical climatic conditions, lack of significant
history in operating under a market-oriented economy, or by political
instability, including risk of expropriation.
For many foreign securities, there are U.S. dollar-denominated
American Depositary Receipts ("ADRs"), which are traded in the U.S. on
exchanges or over the counter and are generally sponsored and issued by
domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank.
ADRs do not eliminate all the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, the Portfolio may avoid currency
risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the U.S. for many ADRs. The
information available for ADRs is subject to the accounting, auditing
and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject. The
Portfolio may also invest in European Depositary Receipts ("EDRs"),
which are receipts evidencing an arrangement with a European bank
similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency
of the underlying security.
The dividends and interest payable on certain of the
Portfolio's foreign securities may be subject to foreign withholding
taxes, thus reducing the net amount available for distribution to
shareholders. You should understand that the expense ratio of the
Portfolio can be expected to be higher than those of investment
companies investing only in domestic securities since the costs of
operations are higher.
Writing (Selling) Call and Put Options. A call option on a
security, security index or a foreign currency gives the purchaser of
the option, in return for the premium paid to the writer (seller), the
right to buy the underlying security, index or foreign currency at the
exercise price at any time during the option period. Upon exercise by
the purchaser, the writer of a call option on an individual security or
foreign currency has the obligation to sell the underlying security or
currency at the exercise price. A call option on a securities index is
similar to a call option on an individual security, except that the
value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash. A
call option may be terminated by the writer (seller) by entering into a
closing purchase transaction in which it purchases an option of the same
series as the option previously written.
A put option on a security, security index, or foreign currency
gives the purchaser of the option, in return for the premium paid to the
writer (seller), the right to sell the underlying security, index, or
foreign currency at the exercise price at any time during the option
period.
Upon exercise by the purchaser, the writer of a put option has
the obligation to purchase the underlying security or foreign currency
at the exercise price. A put option on a securities index is similar to
a put option on an individual security, except that the value of the
option depends on the weighted value of the group of securities
comprising the index and all settlements are made in cash.
The 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 Portfolio may write call and put options on
an exchange or over-the-counter. Call options on portfolio securities
will be covered since the Portfolio will own the underlying securities
or other securities that are acceptable for escrow at all times during
the option period. Call options on securities indices will be written
only to hedge in an economically appropriate way portfolio securities
which are not otherwise hedged with options or financial futures
contracts and will be "covered" by identifying the specific portfolio
securities being hedged. Call options on foreign currencies and put
options on securities and foreign currencies will be covered by
securities acceptable for escrow. The 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.
The Portfolio will 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. Any
decline in the market value of portfolio securities or foreign
currencies will be offset to the extent of the premiums received (net of
transaction costs). If an option is exercised, the premium received on
the option will effectively increase the exercise price or reduce the
difference between the exercise price and market value.
During the option period, the writer of a call option gives up
the opportunity for appreciation in the market value of the underlying
security or currency above the exercise price. It retains the risk of
loss should the price of the underlying security or foreign currency
decline. Writing call options also involves risks relating to the
Portfolio's ability to close out options it has written.
During the option period, the writer of a put option has
assumed the risk that the price of the underlying security or foreign
currency will decline below the exercise price. However, the writer of
the put option has retained the opportunity for appreciation above the
exercise price should the market price of the underlying security or
foreign currency increase. Writing put options also involves risks
relating to the Portfolio's ability to close out options it has written.
Purchasing Call and Put Options, Warrants and Stock Rights. The
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 Portfolio
may invest in call and put options whenever, in the opinion of the
Advisor or Subadvisor, a hedging transaction is consistent with its
investment objectives. The Portfolio 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. Any such sale would result in a net gain
or loss depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid on the call or
put which is sold. Purchasing a call or put option involves the risk
that the Portfolio may lose the premium it paid plus transaction costs.
Warrants and stock rights are almost identical to call options
in their nature, use and effect except that they are issued by the
issuer of the underlying security rather than an option writer, and they
generally have longer expiration dates than call options. The 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.
Financial Futures and Related Options. The Portfolio may enter
into financial futures contracts and related options as a hedge against
anticipated changes in the market value of its securities or securities
which it intends to purchase or in the exchange rate of foreign
currencies. Hedging is the initiation of an offsetting position in the
futures market which is intended to minimize the risk associated with a
position's underlying securities in the cash market. Investment
techniques related to financial futures and options are summarized below
and are described more fully in the Statement of Additional Information.
Financial futures contracts consist of interest rate futures
contracts, foreign currency futures contracts and securities index
futures contracts. An interest rate futures contract obligates the
seller of the contract to deliver, and the purchaser to take delivery
of, the interest rate securities called for in the contract at a
specified future time and at a specified price. A foreign currency
futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the foreign currency called for in
the contract at a specified future time and at a specified price. A
securities index assigns relative values to the securities included in
the index, and the index fluctuates with changes in the market values of
the securities so included. A securities index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times
the difference between the index value at the close of the last trading
day of the contract and the price at which the futures contract is
originally struck. An option on a financial futures contract gives the
purchaser the right to assume a position in the contract (a long
position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the
option.
The 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 on financial
futures contracts. It will engage in transactions in financial futures
contracts and related options only for hedging purposes and not for
speculation. In addition, the 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 its
existing futures and related options positions and the premiums paid for
related options would exceed 5% of the market value of its total assets.
At the time of purchase of a futures contract or a call option on a
futures contract, an amount of cash, U.S. Government securities or other
appropriate high-grade debt obligations equal to the market value of the
futures contract minus the Portfolio's initial margin deposit with
respect thereto, will be deposited in a segregated account with the
Fund's custodian bank to collateralize fully the position and thereby
ensure that it is not leveraged. The extent to which the Portfolio may
enter into financial futures contracts and related options may also be
limited by requirements of the Internal Revenue Code of 1986 for
qualification as a regulated investment company.
Engaging in transactions in financial futures contracts
involves certain risks, such as the possibility of an imperfect
correlation between futures market prices and cash market prices and the
possibility that the Advisor or Subadvisor could be incorrect in its
expectations as to the direction or extent of various interest rate
movements or foreign currency exchange rates, in which case the
Portfolio's return might have been greater had hedging not taken place.
There is also the risk that a liquid secondary market may not exist. The
risk in purchasing an option on a financial futures contract is that the
Portfolio will lose the premium it paid. Also, there may be
circumstances when the purchase of an option on a financial futures
contract would result in a loss to the Portfolio while the purchase or
sale of the contract would not have resulted in a loss.
Foreign Currency Transactions
The value of the 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 Portfolio may incur costs in connection with conversions between
various currencies. The Portfolio will conduct its 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. A forward
foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number
of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and
their customers.
When the Portfolio enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may want to
establish the United States dollar cost or proceeds, as the case may be.
By entering into a forward contract in United States dollars for the
purchase or sale of the amount of foreign currency involved in the
underlying security transaction, the Portfolio is able to protect itself
against a possible loss between trade and settlement dates resulting
from an adverse change in the relationship between the United States
dollar and such foreign currency. However, this tends to limit potential
gains which might result from a positive change in such currency
relationships. The Portfolio may also hedge its foreign currency
exchange rate risk by engaging in currency financial futures and options
transactions.
When the Advisor or the 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
the Portfolio's portfolio securities denominated in such foreign
currency. The forecasting of short-term currency market movement is
extremely difficult and whether such a short-term hedging strategy will
be successful is highly uncertain.
It is impossible to forecast with precision the market values
of portfolio securities at the expiration of a contract. Accordingly, it
may be necessary for the Portfolio to purchase additional currency on
the spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver when a decision is made to sell the
security and make delivery of the foreign currency in settlement of a
forward contract. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign
currency the Portfolio is obligated to deliver.
If the Portfolio retains the portfolio security and engages in
an offsetting transaction, it will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract
prices. If the Portfolio engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign
currency. Should forward prices decline during the period between the
Portfolio's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, it would realize gains to the extent
the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the
Portfolio would suffer a loss to the extent the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed
to sell. Although such contracts tend to minimize the risk of loss due
to a decline in the value of the hedged currency, they also tend to
limit any potential gain which might result should the value of such
currency increase. The Portfolio may have to convert its holdings of
foreign currencies into United States dollars from time to time.
Although foreign exchange dealers do not charge a fee for conversion,
they do realize a profit based on the difference (the "spread") between
the prices at which they are buying and selling various currencies.
Additional Nonfundamental Investment Policies
CRI Global has adopted the following operating (i.e.,
nonfundamental) investment policies which may be changed by the Board of
Directors without shareholder approval:
The Portfolio may not purchase illiquid securities if more than
15% of the value of its net assets would be invested in such securities.
Further, the Portfolio may not acquire private placement investments
until the value of its assets exceeds $20 million.
For further information on the Portfolio's investment policies
and restrictions, as well as a description of the types of securities
that may be purchased, see the Statement of Additional Information.
Additional Risk Factors
Interest Rate Risk
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
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 issuer's creditworthiness.
Because the market for lower-rated securities may be less active
("thinner") than for higher-rated securities, it may be difficult for
the 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.
INVESTMENT SCREENS
The Portfolio carefully reviews a company's policies and
behavior in the following social issues: environment, nuclear energy,
weapons systems, health care, human rights, and alcohol/tobacco. The
Portfolio currently observes the following operating policies which may
be changed by the Portfolio's Board of Directors without shareholder
approval: (1) the Portfolio actively seeks to invest in companies that
achieve excellence in both financial return and environmental soundness,
selecting issuers that take positive steps toward preserving our
environment and avoiding companies with poor environmental records; (2)
the Portfolio will not invest in issuers primarily engaged in the
manufacture of weapons systems, the production of nuclear energy, or the
manufacture of equipment to produce nuclear energy; and (3) the
Portfolio actively seeks to invest in companies whose products or
services improve the quality of or access to health care, including
public health and preventative medicine.
The Portfolio believes that there are long-term benefits
inherent in an investment philosophy that demonstrates concern for the
environment, human rights, economic priorities, and international
relations. Those enterprises which exhibit a social awareness measured
in terms of the above attributes and considerations should be better
prepared to meet future societal needs for goods and services. By
responding to social concerns, these enterprises should not only avoid
the liability that may be incurred when a product or services is
determined to have a negative social impact or has outlived its
usefulness, but also be better positioned to develop opportunities to
make a profitable contribution to society. These enterprises should be
ready to respond to external demands and ensure that over the longer
term they will be viable to provide a positive return to both investors
and society as a whole.
THE FUND AND ITS MANAGEMENT
Acacia Capital Corporation (the "Fund"), a Maryland
corporation, is an open-end investment company, which was incorporated
under the laws of the State of Maryland on September 27, 1982. The Board
of Directors supervises the business affairs and investments of the
Fund, which are managed on a daily basis by the Fund's Investment
Advisor. The Fund has several investment Portfolios, each issuing one
class of stock. The shares of the Fund currently are sold only to
insurance companies (collectively, the "Insurance Companies") for
allocation to their separate accounts (collectively, the "Variable
Accounts") to fund the benefits under certain variable annuity and
variable life insurance policies (collectively, the "Policies") issued
by such companies. Accordingly, the interest of a policy owner in the
shares is subject to the terms of the particular annuity or life
insurance policy and is described in the attached prospectus for one of
the Policies, which should be reviewed carefully by a person considering
the purchase of a Policy. The rights of the Insurance Companies as
shareholders should be distinguished from the rights of a policy owner
which are described in the Policies. Policy owners should consider that
the investment return experience of the Portfolio will affect the value
of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for
the Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any
distributions on such shares) and the benefits provided under a policy.
Investment Advisor and Subadvisor
Calvert Asset Management Company, Inc. ("the Advisor"), located
at 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814, is the
Investment Advisor to all of the Fund's Portfolios. It is a wholly-owned
subsidiary of Calvert Group, Ltd., which is in turn an indirect
wholly-owned subsidiary of Acacia Mutual Life Insurance Company. As of
December 31, 1996, Calvert Group, Ltd. had assets under management and
administration in excess of $5.2 billion. Pursuant to its investment
advisory agreement with the Fund, the Investment Advisor 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 Fund's Board of
Directors. The Advisor has retained an investment subadvisor
("Subadvisor") for CRI Global. The Advisor will continuously monitor and
evaluate the performance and investment style of the Subadvisor.
The Subadvisor to CRI Global is Murray Johnstone International,
Ltd. of Glasgow, Scotland, which has its principal U.S. office in
Chicago, Illinois, and is a wholly-owned subsidiary of United Asset
Management Company. Murray Johnstone manages the investment and
reinvestment of the assets of CRI Global, although the Advisor may
manage part of CRI Global's cash reserves required for liquidity
purposes. Andrew Preston, CRI Global Portfolio Manager, studied at
Melbourne University in Australia and Ritsumeikan University in Japan
prior to working for the Australian Department of Foreign Affairs. He
joined Murray Johnstone in 1985 as an analyst in the U.K. and U.S.
departments, became Fund Manager in the Japanese Department, and played
a prominent role in the establishment and operation of Yamaichi-Murray
Johnstone.
Advisory Fee
For its services, the Advisor receives a fee based on a
percentage of the average daily net assets of the Portfolio. For 1996,
the Advisor received a fee of 1.00% of net assets of CRI Global, and from
this paid a fee of 0.45% of the net assets of CRI Global to Murray
Johnstone International, Ltd. as a subadvisory fee.
Calvert Administrative Services Company ("CASC"), an affiliate
of the Advisor, has been retained by CRI Global to provide certain
administrative services necessary to the conduct of their affairs,
including the preparation of regulatory filings and shareholder reports,
the daily determination of net asset value per share and dividends, and
the maintenance of portfolio and general accounting records. For
providing such services, CASC is entitled to receive a fee from the
Portfolio of 0.10% of net assets per year with a minimum fee of $40,000
for CRI Global. During 1996, CASC received a fee of 0.10%.
Expenses
The Portfolio's expenses, which are accrued daily, include: the
fee of the Investment Advisor; costs of executing portfolio
transactions; pricing costs; interest; taxes; custodian and transfer
agent fees; legal and auditing fees; bookkeeping and dividend disbursing
expenses; and certain other expenses relating to the Portfolio's
operations. Certain expenses are paid by the particular Portfolio that
incurs them, while other expenses are allocated among each Portfolio on
the basis of their relative size (based on net assets), or as designated
by the Board of Directors, as appropriate. Expenses constituted 1.59% of
the average net assets of the Portfolio for 1996, including fees paid
indirectly, and 1.18% net of fees paid indirectly and reimbursements.
Capital Stock
The Fund issues separate stock for each of its Portfolios.
Shares of each of the Portfolios have equal rights with regard to
voting, redemptions, dividends, distributions, and liquidations. No
Portfolio has preference over another Portfolio. When issued, shares are
fully paid and nonassessable and do not have preemptive or conversion
rights or cumulative voting rights. The Insurance Companies and the
Fund's shareholders will vote Fund shares allocated to registered
separate accounts in accordance with instructions received from
policyholders. Providian Life and Health Insurance Company owns more
than 25% of the outstanding stock of the Portfolio. Under certain
circumstances, which are described in the accompanying prospectus of the
variable life or annuity policy, the voting instructions received from
variable life or annuity policyholders may be disregarded.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for
purchase by various Insurance Companies for allocation to their Variable
Accounts. Shares are purchased by the Variable Accounts at the net asset
value of the Portfolio next determined after the Insurance Company
receives the premium payment. The Fund continuously offers its shares in
the Portfolio 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 the Fund, although currently neither the Insurance
Companies nor the Fund foresee any such disadvantages to either variable
annuity or variable life insurance policyholders of any Insurance
Company. The Fund's Board of Directors intends 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.
The Insurance Companies redeem shares of the Fund to make
benefit and surrender payments under the terms of their Policies.
Redemptions are processed on any day on which the Fund is open for
business (each day the New York Stock Exchange is open), and are made at
the 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 Investment Company Act of 1940. The amount received on
redemption of the shares of the 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 Fund redeems all full
and fractional shares of the Portfolio for cash.
The net asset value of the shares of the 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 the Portfolio to affect materially its 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 the 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 Portfolio are valued at 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. All money market
instruments with a remaining maturity of 60 days or less held by any
Portfolio, are valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Portfolio's intention to distribute substantially all
of the net investment income, if any. The net investment income consists
of all payments of dividends or interest received by the 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.
TOTAL RETURN INFORMATION
Total Return and Other Quotations
CRI Global may advertise ''total return." Total return refers
to the total change in value of an investment in the Portfolio over a
specified period. Total return shows its overall change in value,
including changes in share price and assuming all of the Portfolio's
dividends and capital gain distributions are reinvested. A cumulative
total return reflects the Portfolio's performance over a stated period
of time. An average annual total return reflects the hypothetical annual
compounded return that would have produced the same cumulative total
return if the Portfolio's performance had been constant over the entire
period. Because average annual returns tend to smooth out variations in
the Portfolio's returns, you should recognize that they are not the same
as actual year-by-year results. The total return of a Portfolio
generally does not include the effect of paying the charges and expenses
on the particular insurance policy or annuity contract for which the
Portfolio serves as the investment vehicle.
TAXES
As a "regulated investment company" under the Internal Revenue
Code of 1986, as amended, the Fund is not subject to federal income or
excise tax to the extent that it distributes its net investment income
and net capital gains. Each Portfolio is treated as a separate entity
for federal income tax purposes. Since the sole shareholders of the Fund
are Insurance Companies, no discussion is included here as to the
federal income tax consequences at the shareholder level. For
information concerning the federal tax consequences to purchasers of the
annuity or life insurance policies, see the prospectuses for the
Policies.
TRANSFER AND DIVIDEND DISBURSING AGENT
Calvert Shareholder Services, Inc., 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, is the transfer agent and
dividend disbursing agent.
<PAGE>
PROSPECTUS - APRIL 30, 1997
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED CAPITAL ACCUMULATION PORTFOLIO
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814
(800)368-2748
Calvert Responsibly Invested Capital Accumulation Portfolio
(the "Portfolio") seeks long-term capital appreciation by investing
primarily in a nondiversified portfolio of the equity securities of
small- to medium-sized companies. It is a portfolio of Acacia Capital
Corporation (the "Fund"), an open-end management investment company. Of
course, there can be no assurance that the Portfolio will be successful
in meeting its investment objective.
This Prospectus sets forth basic information about the
Portfolio that a prospective investor should know before investing and
should be read and retained for future reference. A Statement of
Additional Information, dated April 30, 1997, and incorporated by
reference into this Prospectus, has been filed with the Securities and
Exchange Commission and may be obtained free of charge by writing or
calling the Fund at the address or telephone number listed above. Shares
of the Portfolio are offered only to insurance companies for allocation
to certain of their variable separate accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION, NOR HAS ANY FEDERAL OR STATE SECURITIES COMMISSION PASSED ON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE FUND 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.
TABLE OF CONTENTS
Page
Financial Highlights 2
Investment Objective and Policies 5
Investment Screens 7
The Fund and Its Management 7
Purchase and Redemption of Shares 9
Dividends and Distributions 10
Total Return Information 10
Taxes 10
Transfer and Dividend Disbursing Agent 11
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's financial
history. It expresses the information in terms of a single share
outstanding throughout each period. The table has been audited by those
independent accountants whose report is included in the Portfolio's
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>
Year Ended December 31,
1996 1995
<S> <C> <C>
Net asset value, beginning $ 22.42 $ 16.97
Income from investment operations
Net investment income (.12) (.15)
Net realized and unrealized gain (loss) 1.79 6.85
Total from investment operations 1.67 6.70
Distributions from
Net investment income -- (.01)
Net realized gains (.04) (1.24)
Total distributions (.04) (1.25)
Total increase (decrease) in net asset value 1.63 5.45
Net asset value, ending $ 24.05 $ 22.42
Total return 7.44% 39.46%
Ratio to average net assets:
Net investment income (.60%) (.84%)
Total expenses<F1> 1.33% 1.56%
Net expenses 1.00% 1.25%
Expenses reimbursed -- .10%
Portfolio turnover** 124% 135%
Average commission rate paid $ .0563 $ --
Net assets, ending (in thousands) $ 19,904 $ 8,935
Number of shares outstanding, ending (in
thousands) 828 398
<FN>
<F1>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>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
<S> <C> <C>
Net asset value, beginning $ 18.95 $ 17.87
Income from investment operations
Net investment income .10 .08
Net realized and unrealized gain (loss) (1.98) 1.27
Total from investment operations (1.88) 1.35
Distributions from
Net investment income (.10) (.08)
Net realized gains -- (.19)
Total distributions (.10) (.27)
Total increase (decrease) in net asset value (1.98) 1.08
Net asset value, ending $ 16.97 $ 18.95
Total return (9.92)% 7.56%
Ratio to average net assets:
Net investment income .68% .66%
Total expenses<F2> -- --
Net expenses .79% .80%
Expenses reimbursed -- --
Portfolio turnover 79% 26%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 5,689 $ 4,986
Number of shares outstanding, ending (in
thousands) 335 263
<FN>
<F2> 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>
<TABLE>
<CAPTION>
From Inception
Year Ended July 16, 1991
December 31, through Dec. 31,
1992 1991
<S> <C> <C>
Net asset value, beginning $ 15.82 $ 15.00
Income from investment operations
Net investment income .09 .26
Net realized and unrealized gain (loss) 2.09 .82
Total from investment operations 2.18 1.08
Distributions from
Net investment income (.09) (.26)
Net realized gains (.04) --
Total distributions (.13) (.26)
Total increase (decrease) in net asset value 2.05 .82
Net asset value, ending $ 17.87 $ 15.82
Total return 13.73% 7.25%
Ratio to average net assets:
Net investment income 1.19% .84%(a)
Total expenses<F3> -- --
Net expenses .39% --
Expenses reimbursed .87% 4.23%(a)
Portfolio turnover 2% 5%
Average commission rate paid $ -- $ --
Net assets, ending (in thousands) $ 870 $ 268
Number of shares outstanding, ending (in
thousands) 49 17
(a) Annualized
** Portfolio turnover excludes transactions in connection with the
February 1996 merger of CRI Equity Portfolio.
<FN>
<F3> 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>
INVESTMENT OBJECTIVE AND POLICIES
CRI CAPITAL ACCUMULATION seeks to provide long-term capital
appreciation by investing primarily in a nondiversified portfolio of the
equity securities of small- to mid-sized companies that are undervalued
but demonstrate a potential for growth. The Portfolio will rely on its
proprietary research to identify stocks that may have been overlooked by
analysts, investors, and the media, and which generally have a market
value between $100 million and $5 billion, but which may be larger or
smaller as deemed appropriate. Investments may also include, but are not
limited to, preferred stocks, foreign securities, convertible
securities, bonds, notes and other debt securities. The Portfolio may
use certain futures and options, invest in repurchase agreements, and
lend its portfolio securities. The Portfolio will take reasonable risks
in seeking to achieve its investment objective. There is, of course, no
assurance that the Portfolio will be successful in meeting its objective
since there is risk involved in the ownership of all equity securities.
The Portfolio's investment objective is not fundamental and may be
changed without shareholder approval. The Portfolio will notify
shareholders at least thirty days in advance of a change in the
investment objective of the Portfolio so that shareholders may determine
whether the Portfolio's goals continue to meet their own.
The Portfolio will use the services of one or more investment
subadvisors as portfolio managers in selecting companies in which to
invest. The portfolio managers will select investments by examining such
factors as company growth prospects, industry economic outlook, new
product development, management, security value, risk, and financial
characteristics.
The securities of small-cap issuers tend to be less actively
traded than the securities of larger issuers, may trade in a more
limited volume, and may change in value more abruptly than securities of
larger companies. Information concerning these securities may not be
readily available so that the companies may be less actively followed by
stock analysts. Small-cap issuers do not usually participate in market
rallies to the same extent as more widely-known securities, and they
tend to have a relatively higher percentage of insider ownership. There
is no limit on the percentage of assets that may be invested in
small-cap issuers.
Under normal market conditions the Portfolio strives to be
fully invested in securities. However, for temporary defensive purposes
- -- which may include a lack of adequate purchase candidates or an
unfavorable market environment -- the Portfolio may invest up to 100% of
its assets in cash or cash equivalents. Cash equivalents include
instruments such as, but not limited to, U.S. government and agency
obligations, certificates of deposit, bankers' acceptances, time
deposits, commercial paper, short-term corporate debt securities and
repurchase agreements.
Although the Portfolio invests primarily in equity securities,
it may invest in debt securities. These debt securities may consist of
investment-grade and noninvestment-grade 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). Noninvestment-grade securities are those rated below Baa or
BBB, or unrated obligations that the investment subadvisor has
determined are not investment-grade; such securities are speculative,
and the Portfolio currently intends to limit such investments to 5% of
its assets. The Portfolio will not buy debt securities rated lower than
C. See "Additional Risk Factors - Non-Investment Grade Securities."
CRI Capital Accumulation 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 the Portfolio's 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. Investing in options may involve a greater degree of risk than
those inherent in more conservative investment approaches. The Portfolio
will engage in futures contracts and related options only to protect
against market declines. The Portfolio will not engage in such
transactions for speculation or leverage. It is an operating policy of
the Fund that no Portfolio may invest in options and futures contracts
if as a result more than 5% of its assets would be so invested.
The Portfolio may invest up to 25% of its assets in foreign
securities. There are substantial and different risks involved in
investing in foreign securities. You should consider these risks
carefully. For example, there is generally less publicly available
information about foreign companies than is available about companies in
the U.S. Foreign companies are generally not subject to uniform audit
and financial reporting standards, practices, and requirements
comparable to those in the U.S.
For many foreign securities, there are U.S. dollar-denominated
American Depositary Receipts ("ADRs"), which are traded in the U.S. on
exchanges or over the counter and are generally sponsored and issued by
domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank.
ADRs do not eliminate all the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, the Portfolio may avoid currency
risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the U.S. for many ADRs. The
information available for ADRs is subject to the accounting, auditing
and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject. The
Portfolio may also invest in European Depositary Receipts ("EDRs"),
which are receipts evidencing an arrangement with a European bank
similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency
of the underlying security.
The dividends and interest payable on certain of the
Portfolio's foreign securities may be subject to foreign withholding
taxes, thus reducing the net amount available for distribution to the
Portfolio's shareholders. You should understand that the expense ratio
of the Portfolio can be expected to be higher than those of investment
companies investing only in domestic securities since the costs of
operations are higher.
Repurchase agreements are arrangements under which the
Portfolio buys securities and the seller simultaneously agrees to
repurchase the securities at a specified time and price. The Portfolio
may engage in repurchase agreements to earn a higher rate of return than
it could earn simply by investing in the obligation which is the subject
of the repurchase agreement. In order to minimize the risk of investing
in repurchase agreements, the Portfolio may engage in such transactions
only with recognized securities dealers and banks and in all instances
holds underlying securities with a value equal to the total repurchase
price the dealer or bank has agreed to pay. Repurchase agreements are
always for periods of less than one year, and are considered illiquid if
not terminable within seven days.
The Portfolio may lend its portfolio securities to member firms
of the New York Stock Exchange and commercial banks with assets of one
billion dollars or more, provided the value of the securities loaned
from the Portfolio will not exceed 10% of the Portfolio's assets. Any
such loans must be secured continuously in the form of cash or cash
equivalents such as U.S. Treasury bills; the amount of the collateral
must on a current basis equal or exceed the market value of the loaned
securities, and the Portfolio must be able to terminate such loans upon
notice at any time. The Portfolio will exercise its right to terminate a
securities loan in order to preserve its right to vote on matters of
importance affecting holders of the securities.
The advantage of such loans is that the Portfolio continues to
receive the equivalent of the interest earned or dividends paid by the
issuers on the loaned securities while at the same time earning interest
on the cash or equivalent collateral which may be invested in accordance
with the Portfolio's investment objective, policies and restrictions.
Securities loans are usually made to broker-dealers and other
financial institutions to facilitate their delivery of such securities.
As with any extension of credit, there may be risks of delay in recovery
and possible loss of rights in the loaned securities should the borrower
of the loaned securities fail financially. However, the Portfolio will
make loans of its portfolio securities only to those firms the Advisor
deems creditworthy and only on such terms the Advisor believes should
compensate for such risk. On termination of the loan the borrower is
obligated to return the securities to the Portfolio. The Portfolio will
realize any gain or loss in the market value of the securities during
the loan period. The Portfolio may pay reasonable custodial fees in
connection with the loan.
The Portfolio seeks to achieve its stated objectives by
following the investment policies established for that purpose. The
investment returns and degrees of market and financial risk depend on
the types of investments the Portfolio undertakes to make as established
by its policies. Policies that are designated fundamental may not be
changed without the approval of the holders of a majority of the
outstanding shares of each portfolio affected by the proposed change. As
a Policyholder, you may be given an opportunity to indicate how you
believe the Insurance Company should vote the shares underlying your
Policy.
Additional Risk Factors
Nondiversified Portfolio
There may be risks associated with the Portfolio being
nondiversified. Specifically, since a relatively high percentage of the
assets of the Portfolio may be invested in the obligations of a limited
number of issuers, the value of the shares of a nondiversified Portfolio
may be more susceptible to any single economic, political or regulatory
event than the shares of a diversified Portfolio would be.
Interest Rate Risk
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
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 issuer's creditworthiness.
Because the market for lower-rated securities may be less active
("thinner") than for higher-rated securities, it may be difficult for
the 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.
INVESTMENT SCREENS
Once securities are determined to fall within the investment
objective of the Portfolio and are deemed financially viable
investments, they are screened according to the social criteria
described below. These social screens are applied to potential
investment candidates by the Advisor in consultation with the
Subadvisors.
The following criteria may be changed by the Portfolio's Board
of Directors without shareholder approval:
(1) The Portfolio avoids investing in companies that, in the
Advisor's opinion, have significant or historical patterns of
violating environmental regulations, or otherwise have an
egregious environmental record. Additionally, the Portfolio
will avoid investing in nuclear power plant operators and
owners, or manufacturers of key components in the nuclear power
process.
(2) The Portfolio will not invest in companies that are
significantly engaged in weapons production. This includes
weapons systems contractors and major nuclear weapons systems
contractors.
(3) The Portfolio will not invest in companies that, in the
Advisor's opinion, have significant or historical patterns of
discrimination against employees on the basis of race, gender,
religion, age, disability or sexual orientation, or that have
major labor-management disputes.
(4) The Portfolio will not invest in companies that are
significantly involved in the manufacture of tobacco or alcohol
products. The Portfolio will not invest in companies that make
products or offer services that, under proper use, in the
Advisor's opinion, are considered harmful.
The Advisor will seek to review companies' overseas operations
consistent with the social criteria stated above. While the Portfolio
may invest in companies that exhibit positive social characteristics, it
makes no explicit claims to seek out companies with such practices.
THE FUND AND ITS MANAGEMENT
Acacia Capital Corporation (the "Fund") is an open-end
management investment company registered under the Investment Company
Act of 1940, as amended. The Fund was incorporated under the laws of the
State of Maryland on September 27, 1982. Capital Accumulation (formerly
known as Calvert-Ariel Appreciation II) is one of the Fund's portfolios,
and is 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. Shares of the
Portfolio are sold only to insurance companies (collectively, the
"Insurance Companies") for allocation to their separate accounts to fund
the benefits under certain variable annuity and variable life insurance
policies (collectively, the "Policies").
Shares of the Portfolio may only be sold to Insurance Companies
for their separate accounts, and not to individual investors. As such,
the "shareholders" referred to in this prospectus are the Insurance
Companies. The Insurance Companies' prospectuses explain the
relationship between changes in the net asset value of the Portfolio's
shares and the benefits provided under a policy. The prospectuses also
detail your interests as a policyholder in the shares of the separate
account and your ability to determine the type of investment underlying
the Policy. You should carefully review the appropriate prospectus when
you consider buying a Policy.
The Fund has several other portfolios or series, which are sold
to other insurance companies to fund the benefits under certain variable
annuity and variable life insurance policies issued by the insurance
companies. The Board of Directors supervises the business affairs and
investments of the Portfolio, which is managed on a daily basis by the
Investment Advisor.
Investment Advisor
Calvert Asset Management Company, Inc. (the "Advisor"), 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814, is the
Investment Advisor to all of the Portfolios. It is a wholly-owned
subsidiary of Calvert Group, Ltd., which is in turn an indirect
wholly-owned subsidiary of Acacia Mutual Life Insurance Company. As of
December 31, 1996, Calvert Group, Ltd. had assets under management and
administration in excess of $5.2 billion. Pursuant to its investment
advisory agreement with the Fund, the Investment Advisor 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 Fund's Board of
Directors.
Subadvisors
The Portfolio is managed by Brown Capital Management, Inc., a
subadvisor, and from time to time, may also be managed by one or more of
the other subadvisors in the pre-approved pool. The Subadvisors are
listed below, the asterisks indicating those comprising the current
portfolio management team.
Subadvisor Ownership
*Brown Capital African American
Apodaca Investment Group, Inc. Hispanic American
Fortaleza Asset Management Hispanic/Women
New Amsterdam Women
Sturdivant African American
The Advisor will select which Subadvisors will manage the Portfolio's
assets at any given time and the allocation of assets among the
managers. The Advisor has retained a consultant, Progress Investment
Management Company, to aid it in making these determinations. Progress
is a California state-certified minority business enterprise, registered
as an investment advisor with the Securities and Exchange Commission,
that evaluates and monitors emerging minority/women-owned investment
management firms. Each firm has selected a performance index against
which it will be measured with respect to payment of a performance fee,
as explained in the next section.
Brown Capital Management, Inc.: Brown Capital Management, Inc. of
Baltimore, Maryland believes that capital can be enhanced in times of
opportunity and preserved in times of adversity without timing the
market. The firm uses a bottom-up approach that incorporates
growth-adjusted price earnings. Stocks purchased are generally
undervalued and have momentum, have EPS growth rates greater than the
market, are more profitable than the market, and have relatively low
price-earnings ratios. Its performance index is a blend: 60% Russell
1000 Growth and 40% Russell 2000.
Mr. Brown is founder and President of Brown Capital Management.
He has over 22 years of investment experience, having served as a Vice
President and Portfolio Manager for 10 years at T. Rowe Price Associates
immediately prior to starting his own firm. Mr. Brown holds an M.S. in
Business Administration from the Indiana University School of Business.
Additionally, he is a professionally-designated Chartered Financial
Analyst ("CFA") and Chartered Investment Counselor.
Mr. Oppenheim has had 25 years' investment experience for
institutions, including the State of Maryland, T. Rowe Price Associates,
Inc., the National Rural Electric Pension and Brown Capital Management.
He holds a B.S. in Economics and Juris Doctor from the University of
Wisconsin, and is a CFA.
Mr. Hall has over 30 years' investment experience including 18
years with T. Rowe Price Associates, Inc., seven years with Emerging
Growth Partners, Inc., and four years with The Investment Center, prior
to joining Brown Capital Management. Mr. Hall is a former Trustee of the
Peabody Institute of Johns Hopkins University.
For information on the other subadvisors, see the Statement of
Additional Information.
Advisory Fee
For fiscal year 1996, the Advisor received from the Portfolio a
base fee of 0.80% of the average daily net assets of the Portfolio. From
this base fee, the Advisor pays the Subadvisors a base fee of 0.25% of
average net assets. In addition, under the circumstances described
below, the Advisor and the Subadvisors may earn (or have their fees
reduced by) performance fee adjustments based on the extent to which
performance of the Portfolio exceeds or trails the index against which
it is measured. The performance fee adjustment began February 1997. The
specific adjustments are as follows, and are calculated monthly:
CRI Capital Accumulation: Advisor's Performance Fee Adjustment
Performance versus the Performance Fee
S&P 400 Mid-Cap Index Adjustment
10% to less than 25% 0.01%
25% to less than 40% 0.03%
40% or more 0.05%
CRI Capital Accumulation: Subadvisor's Performance Fee Adjustment
Performance versus Performance Fee
the Index Adjustment
10% to less than 25% 0.02%
25% to less than 40% 0.05%
40% or more 0.10%
Payment of an upward performance fee adjustment will be from the
Portfolio to the Advisor, and the Advisor will pass on the appropriate
amount to the Subadvisor; fees adjusted downward from the base fee as a
result of under-performance will be retained by the Portfolio. Payment
of an upward performance adjustment will be conditioned on: (1) the
performance of the Portfolio as a whole having exceeded the S&P 400
Mid-Cap Index; and (2) payment of the performance adjustment not causing
the Portfolio's performance to fall below the S&P 400 Mid-Cap Index.
Calvert Administrative Services Company ("CASC"), an affiliate
of the Advisor, has been retained by the Portfolio to provide certain
administrative services necessary to the conduct of its affairs,
including the preparation of regulatory filings and shareholder reports,
the daily determination of net asset value per share and dividends, and
the maintenance of portfolio and general accounting records. For
providing such services, CASC is entitled to receive a fee from the
Portfolio of 0.10% of net assets per year.
Expenses
The Advisor provides the Fund with investment supervision and
management; certain administrative services and office space; furnishes
executive and other personnel to the Fund; and pays the salaries and
fees of all Directors 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. The Fund pays all other operating expenses, including the fee
of the Investment Advisor; costs of executing portfolio transactions;
pricing costs; interest; taxes; custodian and transfer agent fees; legal
and auditing fees; bookkeeping and dividend disbursing expenses; and
certain other expenses relating to operations. Certain expenses are paid
by the Portfolio, while other expenses are allocated among the various
portfolios of the Fund on the basis of their relative size (based on net
assets), or as designated by the Board of Directors, as appropriate.
Expenses constituted 1.33% of the average net assets of the Portfolio
for 1996, including fees paid indirectly, and 1.00% net of fees paid
indirectly.
Capital Stock
The Fund issues separate shares of stock for each of its
Portfolios. Shares of each of the series have equal rights with regard
to voting, redemptions, dividends, distributions, and liquidations. No
series has preference over another series. When issued, shares are fully
paid and nonassessable and do not have preemptive or conversion rights
or cumulative voting rights. The Insurance Companies will vote Portfolio
shares allocated to registered separate accounts in accordance with
instructions received from policyholders. Shares for which the Portfolio
does not receive voting instructions will be voted in proportion to
shares for which it has already received votes. Providian Life and
Health Insurance Company owns more than 25% of the outstanding stock of
the Portfolio. Under certain circumstances, which are described in the
accompanying prospectus of the variable life or annuity policy, the
voting instructions received from variable life or annuity policyholders
may be disregarded.
PURCHASE AND REDEMPTION OF SHARES
The Portfolio offers its shares, without sales charge, only for
purchase by various Insurance Companies for allocation to their Variable
Accounts. Shares are purchased by the Variable Accounts at the net asset
value of the Portfolio next determined after the Insurance Company
receives the premium payment. The Fund continuously offers its shares in
the Portfolio at a price equal to the net asset value per share. Initial
and subsequent payments allocated to the 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 the Portfolio, although currently neither the
Insurance Companies nor the Fund foresee any such disadvantages to
either variable annuity or variable life insurance policyholders of any
Insurance Company. The Fund's Board of Directors intends 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.
The Insurance Companies redeem shares of the Portfolio to make
benefit and surrender payments under the terms of their Policies.
Redemptions are processed on any day on which the Fund is open for
business (each day the New York Stock Exchange is open), and are made at
the 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 Investment Company Act of 1940. The amount received on
redemption of the shares of the 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 Fund redeems all full
and fractional shares of the Portfolio for cash.
The net asset value of the shares of the 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 the Portfolio to affect materially its 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 the 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 Portfolio 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.
DIVIDENDS AND DISTRIBUTIONS
It is the Fund's intention to distribute substantially all of
the net investment income, if any, of the Portfolio. The net investment
income consists of all payments of dividends or interest received by the
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.
TOTAL RETURN INFORMATION
The Portfolio may advertise "total return." Total return refers
to the total change in value of an investment in the Portfolio over a
specified period. It 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 the Portfolio's overall change in
value, including changes in share price and assuming all of the
Portfolio's dividends and capital gain distributions are reinvested. A
cumulative total return reflects the Portfolio's performance over a
stated period of time. An average annual total return reflects the
hypothetical annual compounded return that would have produced the same
cumulative total return if the Portfolio's performance had been constant
over the entire period. Because average annual returns tend to smooth
out variations in the Portfolio's returns, you should recognize that
they are not the same as actual year-by-year results. The total return
of the Portfolio does not include the effect of paying the charges and
expenses on the particular insurance policy or annuity contract for
which the Portfolio serves as the investment vehicle.
TAXES
As a "regulated investment company" under the Internal Revenue
Code of 1986, as amended, the Fund is not subject to federal income or
excise tax to the extent that it distributes its net investment income
and net capital gains. The Portfolio is treated as a separate entity for
federal income tax purposes. Since the sole shareholders of the Fund are
Insurance Companies, no discussion is included here as to the federal
income tax consequences at the shareholder level. For information
concerning the federal tax consequences to purchasers of the annuity or
life insurance policies, see the prospectuses for the Policies.
TRANSFER AND DIVIDEND DISBURSING AGENT
Calvert Shareholder Services, Inc., 4550 Montgomery Avenue,
Bethesda, Maryland 20814, is the Fund's transfer agent and dividend
disbursing agent.
<PAGE>
PROSPECTUS -- April 30, 1997
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED MONEY MARKET PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814 (800) 368-2748
The Calvert Responsibly Invested Money Market Portfolio (the
"Portfolio" or "CRI Money Market") is a series of Acacia Capital
Corporation (the "Fund"), an open-end management investment company
whose investment advisor is Calvert Asset Management Company, Inc. (the
"Investment Advisor").
The Portfolio invests in money market instruments, including
repurchase agreements with banks and brokers secured by money market
instruments, and seeks to maintain a constant net asset value of $1.00
per share. An investment in the Portfolio is neither insured nor
guaranteed by the U.S. Government, and there can be no assurance that
the Portfolio will be able to maintain a stable net asset value of $1.00
per share. See "Investment Objective and Policies."
This Prospectus sets forth the information that a prospective
policyholder should know before directing investment in the Portfolio
and it should be read and kept for future reference. A Statement of
Additional Information dated April 30, 1997, which contains further
information about the Fund, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling the Fund at the number above, or by
writing the Fund at 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814.
Shares of the Fund are offered only to insurance companies for
allocation to certain of their variable separate accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY.
TABLE OF CONTENTS
Page
Financial Highlights 2
Investment Objective and Policies 4
Investment Screens 5
The Fund and Its Management 6
Purchase and Redemption of Shares 7
Dividends and Distributions 7
Yield Information 7
Taxes 7
Transfer and Dividend Disbursing Agent 8
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's
financial history. It expresses 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. The table 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.
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Net asset value, beginning $ 1.000 $ 1.000
Income from investment operations
Net investment income .048 .055
Net realized gain (loss) -- --
Total from investment operations .048 .055
Distributions from
Net investment income (.048) (.055)
Total increase in net asset value -- --
Net asset value, ending $ 1.000 $ 1.000
Total return 4.95% 5.37%
Ratio to average net assets:
Net investment income 4.82% 5.23%
Total expenses<F1> .75% .66%
Net expenses .62% .59%
Expenses reimbursed -- --
Net assets, ending (in thousands) $ 4,378 $ 5,129
Number of shares outstanding, ending (in
thousands) 4,382 5,133
<FN>
<F1> 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>
<TABLE>
<CAPTION>
Year Ended December 31,
1994 1993
<S> <C> <C>
Net asset value, beginning $ 1.000 $ 1.000
Income from investment operations
Net investment income .039 .031
Net realized gain (loss) -- --
Total from investment operations .039 .031
Distributions from
Net investment income (.039) (.031)
Total increase (decrease) in net asset value -- --
Net asset value, ending $ 1.000 $ 1.000
Total return 3.96% 3.09%
Ratio to average net assets:
Net investment income 3.91% 3.07%
Total expenses<F1> -- --
Net expenses .45% --
Expenses reimbursed .36% .11%
Net assets, ending (in thousands) $ 6,479 $ 4,032
Number of shares outstanding, ending (in
thousands) 6,484 4,032
<FN>
<F1> 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>
<TABLE>
<CAPTION>
From Inception
June 30, 1992 through
Dec. 31, 1992
<S> <C>
Net asset value, beginning $ 1.000
Income from investment operations
Net investment income .009
Net realized gain (loss) --
Total from investment operations .009
Distributions from
Net investment income (.009)
Total increase (decrease) in net asset value --
Net asset value, ending $ 1.000
Total return 2.11%
Ratio to average net assets:
Net investment income 3.02%(a)
Total expenses<F1> --
Net expenses --
Expenses reimbursed .85%(a)
Net assets, ending (in thousands) $ 1,795
Number of shares outstanding, ending (in
thousands) 1,795
(a) = Annualized
<FN>
<F1> 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>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective described below is fundamental and may
not be changed without the approval of the holders of a majority of the
outstanding shares of the Portfolio. As a Policyholder, you may be given
an opportunity to indicate how you believe the Insurance Company should
vote the shares which underlie your Policy.
The investment objective of the Portfolio is to provide current
income by investing in enterprises that make a significant contribution
to society through their products and services and through the way they
do business. The Portfolio aims for short-term cash management and
stability of principal. The Portfolio seeks to provide the highest level
of current income, consistent with liquidity, safety and security of
capital, by investing in money market instruments, including repurchase
agreements with recognized securities dealers and banks secured by such
instruments, selected in accordance with its investment and social
criteria. The Portfolio attempts to maintain a constant net asset value
of $1.00 per share.
The Portfolio invests only in high grade, short-term money
market instruments which may include: obligations issued or guaranteed
as to principal by the United States Government, its agencies and
instrumentalities; U.S. dollar-denominated certificates of deposit, time
deposits and bankers' acceptances of U.S. banks, generally banks with
assets in excess of $1 billion; and commercial paper (including
participation interests in loans extended by banks to issuers of
commercial paper) that at the date of investment is rated A-1 by
Standard & Poor's Corporation or Prime-1 by Moody's Investors Service,
Inc., or, if not rated, is of comparable quality.
Additional Fundamental Investment Policies
The Portfolio may engage in repurchase agreements and reverse
repurchase agreements. In a repurchase agreement, the Portfolio buys a
security subject to the right and obligation to sell it back at a higher
price. In order to minimize any risk involved, the Portfolio engages in
such transactions only with recognized securities dealers and banks
determined by the Advisor to present a minimal credit risk. Repurchase
agreements are fully collateralized and always have a maturity of less
than one year. No more than 10 percent of Portfolio assets may be
invested in repurchase agreements not terminable within seven days. In a
reverse repurchase agreement, the Portfolio sells a security subject to
the right and obligation to buy it back at a higher price. The Portfolio
then invests the proceeds from the transaction in another obligation in
which it is authorized to invest. For reverse repurchase agreements, the
Portfolio maintains a segregated account with liquid assets equal in
value to the repurchase price.
The Portfolio may borrow money from banks (and pledge its
assets to secure such borrowing) for temporary or emergency purposes,
but not for leverage. This type of borrowing may not exceed 10% of the
value of the Portfolio's total assets. The Portfolio may also make loans
of the securities it holds. The advantage of loaning securities is that
the Portfolio continues to receive the equivalent of the interest earned
or dividends paid by the issuers while at the same time earning interest
on the cash or equivalent collateral that may be invested in accordance
with the Portfolio's investment objective, policies, and restrictions.
The purpose of the loans is usually to facilitate the delivery of
securities. As with any extension of credit, there may be risks of delay
in recovery and possible loss of rights in the loaned security if the
borrower fails financially. The Investment Advisor attempts to reduce
the risk by lending only to borrowers that it deems creditworthy and
only on terms that it believes compensates for any risk inherent in the
transaction.
The Portfolio may lend its securities to New York Stock
Exchange member firms and to commercial banks with assets of one billion
dollars or more. All loans must be secured continuously in the form of
cash or cash equivalents such as U.S. Treasury bills. In addition, the
amount of collateral must, on a current basis, equal or exceed the
market value of the loaned securities, and the Portfolio may only make
the loan if the value of the securities loaned does not exceed 10% of
its assets. The Portfolio must be able to terminate loans at any time
with appropriate notice. The Portfolio will exercise its right to
terminate a securities loan in order to preserve its right to vote on
matters of importance affecting holders of the securities. All
securities must be returned to the Portfolio when a loan terminates, and
the Portfolio absorbs any gain or loss in the market value of the
securities during the loan period.
Risks of Foreign Securities
CRI Money Market may invest up to 25% of its assets in the
securities of foreign issuers, provided it purchases only high quality,
U.S. dollar-denominated instruments.
Additional Nonfundamental Investment Policies
CRI Money Market has adopted the following operating (i.e.,
nonfundamental) investment policies which may be changed by the Board of
Directors without shareholder approval:
The Portfolio may not purchase illiquid securities if more than
10% of the value of its net assets would be invested in such securities.
Further, the Portfolio may not acquire private placement investments
until the value of the Portfolio's assets exceeds $20 million.
For further information on the Portfolio's investment policies
and restrictions, as well as a description of the types of securities
that may be purchased, see the Statement of Additional Information.
INVESTMENT SCREENS
Each investment is selected with a concern for its social
impact. The Portfolio invests in accordance with its 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 Portfolio has developed the following criteria for the
selection of organizations in which they invest. The Portfolio
recognizes, 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 Portfolio's
Investment Advisor.
Given these considerations, the Portfolio seeks to invest in
producers or service providers that:
1. Deliver safe products and services in ways
that sustain our natural environment.
2. Are managed with participation throughout the
organization in defining and achieving
objectives.
3. Negotiate fairly with their workers, provide
an environment supportive of their wellness,
do not discriminate on the basis of race,
gender, religion, age, disability, ethnic
origin, or sexual orientation, do not
consistently violate regulations of the Equal
Employment Opportunity Commission, and provide
opportunities for women, disadvantaged
minorities, and others for whom equal
opportunities have often been denied.
4. Foster awareness of a commitment to human
goals, such as creativity, productivity,
self-respect and responsibility, within the
organization and the world, and continually
recreate a context within which these goals
can be realized.
The Portfolio will not invest in an issuer primarily engaged in:
1. The production of nuclear energy or the
manufacture of equipment to produce nuclear
energy.
2. Business activities in support of repressive
regimes.
3. The manufacture of weapons systems.
In addition, the Portfolio will not, as a matter of operating
policy which may be changed without the approval of a majority of the
outstanding shares, invest in an issuer primarily engaged in the
manufacture of alcoholic beverages or tobacco products, or the operation
of gambling casinos.
The Portfolio believes that social and technological change
will continue to transform America and the world for the balance of this
century. Those enterprises that exhibit a social awareness measured in
terms of the above attributes and considerations should be better
prepared to meet future societal needs for goods and services. By
responding to social concerns, these enterprises should maintain
flexibility and further social goals. In so doing they may not only
avoid the liability that may be incurred when a product or service is
determined to have a negative social impact or has outlived its
usefulness, but should also be better positioned to develop
opportunities to make a profitable contribution to society. The
Portfolio believes that these enterprises will be ready to respond to
external demands and ensure that over the longer term they will be able
to provide a positive return to both investors and society as a whole.
In selecting investments under the four positive and three
negative factors outlined above, the Advisor will consider the
investments' ability to contribute to the dual objective of the
Portfolio. Potential investments are first screened for financial
soundness and then evaluated according to social criteria. To the
greatest extent possible investments are made in companies exhibiting
unusual, positive accomplishments with respect to one or more of the
criteria. Companies must meet the Portfolio's minimum standards for all
the criteria. It should be noted that the Portfolio's social criteria
tend to limit the availability of investment opportunities more than is
customary with other investment portfolios.
The selection of an organization for investment by the
Portfolio does not constitute endorsement or validation, nor does the
exclusion of an organization necessarily reflect failure to satisfy the
Portfolio's social criteria. Investors in the Portfolio are invited to
send brief descriptions of companies they believe might be suitable
investments.
THE FUND AND ITS MANAGEMENT
Acacia Capital Corporation (the "Fund"), a Maryland
corporation, is an open-end investment company, which was incorporated
under the laws of the State of Maryland on September 27, 1982. The Board
of Directors supervises the business affairs and investments of the
Fund, which are managed on a daily basis by the Fund's Investment
Advisor. The Fund has several investment Portfolios, each issuing one
class of stock. The shares of the Fund currently are sold only to
insurance companies (collectively, the "Insurance Companies") for
allocation to their separate accounts (collectively, the "Variable
Accounts") to fund the benefits under certain variable annuity and
variable life insurance policies (collectively, the "Policies") issued
by such companies. Accordingly, the interest of a policy owner in the
shares is subject to the terms of the particular annuity or life
insurance policy and is described in the attached prospectus for one of
the Policies, which should be reviewed carefully by a person considering
the purchase of a Policy. The rights of the Insurance Companies as
shareholders should be distinguished from the rights of a policy owner
which are described in the Policies. Policy owners should consider that
the investment return experience of the Portfolio will affect the value
of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for
the Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any
distributions on such shares) and the benefits provided under a policy.
Investment Advisor
Calvert Asset Management Company, Inc. ("The Advisor"), 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814, is the
Investment Advisor to the Portfolio. Calvert Asset Management is a
wholly-owned subsidiary of Calvert Group, Ltd., which is in turn an
indirect wholly-owned subsidiary of Acacia Mutual Life Insurance
Company. As of December 31, 1996, Calvert Group, Ltd. had assets under
management and administration in excess of $5.2 billion. Pursuant to its
investment advisory agreement with the Fund, the Investment Advisor
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 Fund's
Board of Directors.
Advisory Fee
For its services, the Advisor during 1996, received an annual
fee of 0.50% of net assets based on a percentage of the average daily
net assets of the Portfolio.
Expenses
The Portfolio's expenses, which are accrued daily, include: the
fee of the Investment Advisor; costs of executing portfolio
transactions; pricing costs; interest; taxes; custodian and transfer
agent fees; legal and auditing fees; bookkeeping and dividend disbursing
expenses; and certain other expenses relating to the Portfolio's
operations. Certain expenses are paid by the particular Portfolio that
incurs them, while other expenses are allocated among each Portfolio on
the basis of their relative size (based on net assets), or as designated
by the Board of Directors, as appropriate. Expenses constituted 0.75% of
the average net assets of the Portfolio for 1996, including fees paid
indirectly, and 0.62% net of fees paid indirectly.
Capital Stock
The Fund issues separate stock for each of its Portfolios.
Shares of each of the Portfolios have equal rights with regard to
voting, redemptions, dividends, distributions, and liquidations. No
Portfolio has preference over another Portfolio. When issued, shares are
fully paid and nonassessable and do not have preemptive or conversion
rights or cumulative voting rights. The Insurance Companies and the
Fund's shareholders will vote Fund shares allocated to registered
separate accounts in accordance with instructions received from
policyholders. Providian Life and Health Insurance Company owns more
than 25% of the outstanding stock of the Portfolio. Under certain
circumstances, which are described in the accompanying prospectus of the
variable life or annuity policy, the voting instructions received from
variable life or annuity policyholders may be disregarded.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for
purchase by various Insurance Companies for allocation to their Variable
Accounts. Shares are purchased by the Variable Accounts at the net asset
value of the Portfolio next determined after the Insurance Company
receives the premium payment. The Fund continuously offers its shares in
the Portfolio 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 the Fund, although currently neither the Insurance
Companies nor the Fund foresee any such disadvantages to either variable
annuity or variable life insurance policyholders of any Insurance
Company. The Fund's Board of Directors intends 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.
The Insurance Companies redeem shares of the Fund to make
benefit and surrender payments under the terms of their Policies.
Redemptions are processed on any day on which the Fund is open for
business (each day the New York Stock Exchange is open), and are made at
the 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 Investment Company Act of 1940. The Fund redeems all full and
fractional shares of the Portfolio for cash.
The net asset value of the shares of the 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 the Portfolio to affect materially its 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 the Portfolio,
subtracting liabilities and expenses, and dividing by the number of
outstanding shares of the Portfolio. All instruments held by CRI Money
Market are valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Portfolio's intention to distribute substantially all
of its net investment income, if any. For dividend purposes, net
investment income consists of the interest income earned on investments,
plus or minus amortized purchase discount or premium, plus or minus
realized and unrealized gains and loss, less estimated expenses. 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.
YIELD INFORMATION
From time to time CRI Money Market advertises its "yield" and
"effective yield." The "yield" of the Portfolio refers to the actual
income generated by an investment in the Portfolio over a particular
base period of time, which will be stated in the advertisement. If the
base period is less than one year, the yield is then "annualized." That
is, the amount of income generated by the investment during the base
period is assumed to be generated over a one-year period and is shown as
a percentage of the investment. The "effective yield" is calculated
similarly but, when annualized, the income earned by an investment in
the Portfolio is assumed to be reinvested. The "effective yield" will be
slightly higher than the "yield'' because of the compounding effect of
this assumed reinvestment.
TAXES
As a "regulated investment company" under the Internal Revenue
Code of 1986, as amended, the Fund is not subject to federal income or
excise tax to the extent that it distributes its net investment income
and net capital gains. Each Portfolio is treated as a separate entity
for federal income tax purposes. Since the sole shareholders of the Fund
are Insurance Companies, no discussion is included here as to the
federal income tax consequences at the shareholder level. For
information concerning the federal tax consequences to purchasers of the
annuity or life insurance policies, see the prospectuses for the
Policies.
TRANSFER AND DIVIDEND DISBURSING AGENT
Calvert Shareholder Services, Inc., 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, is the transfer agent and
dividend disbursing agent.
<PAGE>
PROSPECTUS - April 30, 1997
ACACIA CAPITAL CORPORATION
CALVERT RESPONSIBLY INVESTED STRATEGIC GROWTH PORTFOLIO
4550 Montgomery Avenue, Bethesda, Maryland 20814 (800) 368-2748
The Calvert Responsibly Invested Strategic Growth Portfolio
(the "Portfolio" or "CRI Strategic Growth") is a series of Acacia
Capital Corporation (the "Fund"), an open-end management investment
company whose investment advisor is Calvert Asset Management Company,
Inc. (the "Investment Advisor").
The Portfolio invests in a nondiversified portfolio of equity
securities and may attempt to protect against market declines using
techniques such as establishing short positions, writing covered calls,
and entering into index future or option contracts. There can be no
assurance that the Portfolio will be successful in meeting its
investment objectives. See "Investment Objective and Policies."
This Prospectus sets forth the information that a prospective
policyholder should know before directing investment in the Portfolio
and it should be read and kept for future reference. A Statement of
Additional Information dated April 30, 1997, which contains further
information about the Fund, has been filed with the Securities and
Exchange Commission and is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be
obtained without charge by calling the Fund at the number above, or by
writing the Fund at 4550 Montgomery Avenue, Suite 1000N, Bethesda,
Maryland 20814.
Shares of the Fund are offered only to insurance companies for
allocation to certain of their variable separate accounts.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION, NOR HAS THE COMMISSION PASSED ON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND ARE NOT INSURED BY THE FDIC OR ANY OTHER
AGENCY. WHEN INVESTORS SELL SHARES OF THE FUND, THE VALUE MAY BE HIGHER
OR LOWER THAN THE AMOUNT ORIGINALLY PAID.
TABLE OF CONTENTS
Page
Financial Highlights 2
Investment Objective and Policies 3
Investment Screens 10
The Fund and Its Management 11
Purchase and Redemption of Shares 13
Dividends and Distributions 13
Total Return Information 14
Taxes 14
Transfer and Dividend 14
Disbursing Agent 14
<PAGE>
FINANCIAL HIGHLIGHTS
The following table provides information about the Portfolio's
financial history. It expresses 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. The table 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.
<TABLE>
<CAPTION>
Year Ended From Inception
December 31, March 1,1995
1996 through
December 31,
1995
<S> <C> <C>
Net asset value, beginning $ 10.94 $ 10.00
Income from investment operations
Net investment income (.15) .25
Net realized and unrealized gain (loss) 3.90 .93
Total from investment operations 3.75 1.18
Distributions from
Net investment income (.00) (.24)
Net realized gains (.04) --
Total distributions (.04) (.24)
Total increase (decrease) in net asset value 3.71 .94
Net asset value, ending $ 14.65 $ 10.94
Total return* 34.33% 9.65%
Ratio to average net assets:
Net investment income (1.60)% .43%(a)
Total expenses<F1> 2.27% .17%(a)
Net expenses 1.81% 1.64%(a)
Expenses reimbursed .20% .20%(a)
Portfolio turnover 120% 223%
Average commission rate paid $ .0499 $ --
Net assets, ending (in thousands) $ 3,031 $ 1,209
Number of shares outstanding, ending (in
thousands) 207 111
(a) Annualized
<FN>
* Total return is for this Portfolio only and does not reflect sales
charges and expenses deducted by the Insurance Companies.
<F1> 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>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective described below is not fundamental and
may be changed upon 60 days' written notice to shareholders without a
shareholder vote. There is, of course, no assurance that the Portfolio
will be successful in meeting its objective.
The investment objective of the Portfolio is to seek maximum
long-term growth through investments primarily in the equity securities
of companies that have little or no debt, high relative strength and
substantial management ownership. The Portfolio is designed to provide
long-term growth of capital by investing in enterprises that make a
significant contribution to society through their products and services
and through the way they do business. The Portfolio considers issuers of
all sizes, industries, and geographic markets, and does not seek
interest income or dividends. In selecting equity investments, the
Portfolio focuses on individual companies by screening over seven
thousand stocks traded on all major U.S. stock exchanges in addition to
stocks traded on the NASDAQ National Market System. The Portfolio
invests primarily in common stocks traded in the U.S. securities
markets, including American Depositary Receipts (ADRs). While the
Portfolio does not presently invest in foreign securities, it may do so
in the future. By applying proprietary stock selection criteria, the
Portfolio identifies suitable investments to buy or sell short. The
Portfolio may invest in securities other than equities including, but
not limited to, convertible securities, preferred stocks, bonds, notes
and other debt securities. The Portfolio may hold cash or cash
equivalents for temporary defensive purposes or to enable it to take
advantage of buying opportunities. The Portfolio may engage in certain
options and futures transactions as part of a defensive strategy and may
invest in precious metals.
Among the companies identified for investment may be some small
cap issuers. The securities of small cap issuers may be less actively
traded than the securities of larger issuers, and they accordingly will
not usually participate in market rallies to the same extent as more
widely-known securities. There is also somewhat less readily available
information concerning these securities. The issuers of these securities
tend to have a relatively higher percentage of insider ownership.
Although the Portfolio invests primarily in equity securities,
it may invest up to 35% of its assets in debt securities, excluding
money market instruments. These debt securities may consist of
investment-grade and noninvestment-grade 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). Noninvestment-grade securities are those rated below Baa or
BBB, or unrated obligations that the investment subadvisor has
determined are not investment-grade; such securities have speculative
characteristics. The Portfolio will not buy debt securities rated lower
than C. See "Additional Risk Factors - Noninvestment-Grade Securities."
The Portfolio may employ an econometric forecasting model
called the "Five Market Principles," developed by the Subadvisor. This
model consists of contrarian indicators, long- and short-term momentum
factors, fundamental value, monetary policy, and smart money activity.
The degree to which these principles are, on balance, positive or
negative, determines the extent to which the Portfolio would commit
funds to individual equity positions or initiate defensive strategies.
The contrarian principle contains "psychological" indicators
that track the level of optimism among traders. Elements include the
put/call ratio (gauging the sentiment of speculative option traders),
put/call premium spread (monitoring the spread between the relative time
premium of puts or calls), advisory sentiment (tracking the proportion
of bullish versus bearish stock market advisory services), mutual fund
cash ratio (cash and cash equivalents held in mutual funds divided by
total assets of the funds), individual investor sentiment (measured by
following the weekly poll by the American Association of Individual
Investors), and short interest ratio (an indication of existing
sentiment and potential buying power, calculated by dividing the total
short sales on the New York Stock Exchange ("NYSE") by the NYSE's
average daily trading volume for the relevant period).
Fundamental value measures the valuation of stock prices
relative to historical standards, as well as the supply of stock
outstanding. Its elements include stock offerings (excessive amounts of
new offerings can lead to oversupply and a market downturn), stock
buybacks (excessive amounts indicate a bullish market), dividend yields
(as compared with the S&P 500 Index), and price/earnings ratios (an
indicator of a stock's value, calculated by dividing a stock's current
price by earnings per share over the last twelve months).
Monetary policy examines behavior in credit markets for shifts
in the Federal Reserve Board's policy on interest rates, which influence
stock prices. Elements of this principle include the discount rate index
(what the Federal Reserve Board charges its member banks for direct
loans, a change in rate indicating a shift in monetary policy), discount
rate/Treasury-bill spread (a sensitive intermediate-term indicator,
computed by subtracting the current 90-day Treasury bill yield from the
Federal Reserve Board Discount Rate), M2 money supply (the total of all
money held by the public - indirectly controlled by the Federal Reserve
Board and a good indicator for the stock market), free reserves (the
measure of liquidity within the U.S. banking system, liquidity
indicating availability of money for financial growth), and yield curve
(a graphic representation of the different yields among debt instruments
of varying maturities).
Momentum measures the stock market's internal strength,
monitored on a real-time basis. Indicators include the weekly
advance/decline line (a measure of total market performance, calculated
by subtracting the total number of NYSE issues advancing in price for
the week versus those declining), absolute market strength (gauged by
following the relative strength of the NASDAQ Composite and the NYSE's
weekly advance/decline line versus the Dow Jones Industrials), the
McClellan oscillator (short-term market momentum indicator), the
summation index (to confirm intermediate-term moves in the market), the
moving average convergence/divergence (indicates swings in the market),
and the high low logic index (a forecaster of market tops and bottoms,
indicating bullishness when there is internal uniformity in the market).
Smart money trades measure the level of optimism among traders.
Pieces of this measure include the behavior of company insiders (heavy
insider buying generally demonstrating a stock that will outperform the
market), the member activity index (measuring trading activity by all
members of the NYSE other than specialists and floor traders, infrequent
massive buying indicating a bullish market), the specialist/public short
ratio (greater volume of shorting relative to the public short generally
indicating a decline in prices), and money flow (tracking "smart money"
trades in the last hour versus "irrational" trading in the first hour).
Many of the investment techniques used by the Portfolio are
aggressive, and may involve higher levels of risk than found in funds
not employing these techniques. Some of the techniques, such as short
sales, options and futures trading, and investment in
high-yield/high-risk securities may be considered speculative and could
result in higher operating expenses.
Under normal market conditions the Portfolio strives to be
fully invested in securities. However, for temporary defensive purposes
- -- which may include a lack of adequate purchase candidates or an
unfavorable market environment -- the Portfolio may invest up to 100% of
its assets in cash or cash equivalents. Cash equivalents include
instruments such as, but not limited to, U.S. government and agency
obligations, certificates of deposit, bankers' acceptances, time
deposits, commercial paper, short-term corporate debt securities and
repurchase agreements.
Additional Fundamental Investment Policies
CRI Strategic Growth 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 the Portfolio's 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. Investing in options may involve a greater degree of risk than
those inherent in more conservative investment approaches. The Portfolio
may engage in futures contracts and related options in the ordinary
course as part of an investment strategy.
The Portfolio may engage in repurchase agreements and reverse
repurchase agreements. In a repurchase agreement, the Portfolio buys a
security subject to the right and obligation to sell it back at a higher
price. In order to minimize any risk involved, the Portfolio engages in
such transactions only with recognized securities dealers and banks
determined by the Advisor to present a minimal credit risk. Repurchase
agreements are fully collateralized and always have a maturity of less
than one year. Repurchase agreements not terminable within seven days
are considered illiquid. In a reverse repurchase agreement, the
Portfolio sells a security subject to the right and obligation to buy it
back at a higher price. The Portfolio then invests the proceeds from the
transaction in another obligation in which it is authorized to invest.
For reverse repurchase agreements, the Portfolio maintains a segregated
account with liquid assets equal in value to the repurchase price.
The Portfolio may borrow money from banks (and pledge its
assets to secure such borrowing) for temporary or emergency purposes,
but not for leverage. This type of borrowing may not exceed one-third of
the value of the Portfolio's total assets. The Portfolio may also make
loans of the securities it holds. The advantage of loaning securities is
that the Portfolio continues to receive the equivalent of the interest
earned or dividends paid by the issuers while at the same time earning
interest on the cash or equivalent collateral that may be invested in
accordance with the Portfolio's investment objective, policies, and
restrictions. The purpose of the loans is usually to facilitate the
delivery of securities. As with any extension of credit, there may be
risks of delay in recovery and possible loss of rights in the loaned
security if the borrower fails financially. The Investment Advisor
attempts to reduce the risk by lending only to borrowers that it deems
creditworthy and only on terms that it believes compensates for any risk
inherent in the transaction.
The Portfolio may lend its securities to New York Stock
Exchange member firms and to commercial banks with assets of one billion
dollars or more. All loans must be secured continuously in the form of
cash or cash equivalents such as U.S. Treasury bills. In addition, the
amount of collateral must, on a current basis, equal or exceed the
market value of the loaned securities, and the Portfolio may only make
the loan if the value of the securities loaned does not exceed one-third
of the Portfolio's assets. The Portfolio must be able to terminate loans
at any time with appropriate notice. The Portfolio will exercise its
right to terminate a securities loan in order to preserve its right to
vote on matters of importance affecting holders of the securities. All
securities must be returned to the Portfolio when a loan terminates, and
the Portfolio absorbs any gain or loss in the market value of the
securities during the loan period.
CRI Strategic Growth may establish short positions in an
attempt to protect against market declines, and will choose from among
securities that are fully listed on a national securities exchange
(unless otherwise allowed by law). The Portfolio establishes a short
position by selling a security it does not own and makes delivery by
borrowing the security it sold. It then repays the lender of the
securities by covering its purchase in the marketplace, ideally at a
lower price than that for which it sold the securities, thereby taking
advantage of declining values. Conversely, if the price of the security
goes up after CRI Strategic Growth establishes its short position, it
will lose money. The Portfolio may hold up to 25% of its assets in short
positions, and will not normally sell short more than 2% of a class of
securities of any issuer or 2% of its Portfolio's net assets, whichever
is less. These restrictions may change to reflect amendments to the law.
Funds for short-sale transactions (other than those for which
CRI Strategic Growth already owns a long position, or "sales against the
box") are maintained in a segregated account with its custodian. In that
account CRI Strategic Growth attempts to maintain, on a daily basis,
liquid assets (such as cash, U.S. government securities or other
high-grade debt obligations) in an amount sufficient to cover the
current value of the securities to be replaced as well as any dividends,
interest and/or transaction costs due to the broker upon completion of
the transaction. In determining the amount to be held in the segregated
account, the securities that have been sold short are marked to market
daily. To the extent the market price of the security increases,
additional assets will be put into the segregated account to ensure
adequate reserves.
Risks of Foreign Securities
CRI Strategic Growth may invest all of its assets in foreign
securities, although the Portfolio does not presently intend to invest
in foreign securities. There are substantial and different risks
involved in investing in foreign securities. You should consider these
risks carefully. For example, there is generally less publicly available
information about foreign companies than is available about companies in
the U.S. Foreign companies are generally not subject to uniform audit
and financial reporting standards, practices and requirements comparable
to those in the U.S.
Foreign securities involve currency risks. The U.S. dollar
value of a foreign security tends to decrease when the value of the
dollar rises against the foreign currency in which the security is
denominated and tends to increase when the value of the dollar falls
against such currency. Fluctuations in exchange rates may also affect
the earning power and asset value of the foreign entity issuing the
security. Dividend and interest payments may be returned to the country
of origin, based on the exchange rate at the time of disbursement, and
restrictions on capital flows may be imposed. Losses and other expenses
may be incurred in converting between various currencies in connections
with purchases and sales of foreign securities.
Foreign stock markets are generally not as developed or
efficient as those in the U.S. In most foreign markets volume and
liquidity are less than in the U.S. and, at times, volatility of price
can be greater than that in the U.S. Fixed commissions on foreign stock
exchanges are generally higher than the negotiated commissions on U.S.
exchanges. There is generally less government supervision and regulation
of foreign stock exchanges, brokers and companies than in the U.S.
There is also the possibility of adverse changes in investment
or exchange control regulations, expropriation or confiscatory taxation,
limitations on the removal of funds or other assets, political or social
instability, or diplomatic developments which could adversely affect
investments, assets or securities transactions of the Portfolio in some
foreign countries. The Portfolio is not aware of any investment or
exchange control regulations which might substantially impair the
operations of the Portfolio as described, although this could change at
any time.
Investing in emerging markets in particular, those countries
whose economies and capital markets are not as developed as those of
more industrialized nations, carries its own special risks. Among other
risks, the economies of such countries may be affected to a greater
extent than in other countries by price fluctuations of a single
commodity, by severe cyclical climatic conditions, lack of significant
history in operating under a market-oriented economy, or by political
instability, including risk of expropriation.
For many foreign securities, there are U.S. dollar-denominated
American Depositary Receipts ("ADRs"), which are traded in the U.S. on
exchanges or over the counter and are generally sponsored and issued by
domestic banks. ADRs represent the right to receive securities of
foreign issuers deposited in a domestic bank or a correspondent bank.
ADRs do not eliminate all the risk inherent in investing in the
securities of foreign issuers. However, by investing in ADRs rather than
directly in foreign issuers' stock, the Portfolio may avoid currency
risks during the settlement period for either purchases or sales. In
general, there is a large, liquid market in the U.S. for many ADRs. The
information available for ADRs is subject to the accounting, auditing
and financial reporting standards of the domestic market or exchange on
which they are traded, which standards are more uniform and more
exacting than those to which many foreign issuers may be subject. The
Portfolio may also invest in European Depositary Receipts ("EDRs"),
which are receipts evidencing an arrangement with a European bank
similar to that for ADRs and are designed for use in the European
securities markets. EDRs are not necessarily denominated in the currency
of the underlying security.
The dividends and interest payable on certain of the
Portfolio's foreign securities may be subject to foreign withholding
taxes, thus reducing the net amount available for distribution to
shareholders. You should understand that the expense ratio of the
Portfolio can be expected to be higher than those of investment
companies investing only in domestic securities since the costs of
operations are higher.
Writing (Selling) Call and Put Options. A call option on a
security, security index or a foreign currency gives the purchaser of
the option, in return for the premium paid to the writer (seller), the
right to buy the underlying security, index or foreign currency at the
exercise price at any time during the option period. Upon exercise by
the purchaser, the writer of a call option on an individual security or
foreign currency has the obligation to sell the underlying security or
currency at the exercise price. A call option on a securities index is
similar to a call option on an individual security, except that the
value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash. A
call option may be terminated by the writer (seller) by entering into a
closing purchase transaction in which it purchases an option of the same
series as the option previously written.
A put option on a security, security index, or foreign currency
gives the purchaser of the option, in return for the premium paid to the
writer (seller), the right to sell the underlying security, index, or
foreign currency at the exercise price at any time during the option
period.
Upon exercise by the purchaser, the writer of a put option has
the obligation to purchase the underlying security or foreign currency
at the exercise price. A put option on a securities index is similar to
a put option on an individual security, except that the value of the
option depends on the weighted value of the group of securities
comprising the index and all settlements are made in cash.
The 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 Portfolio may write call and put options on
an exchange or over-the-counter. Call options on portfolio securities
will be covered since the Portfolio will own the underlying securities
or other securities that are acceptable for escrow at all times during
the option period. Call options on securities indices will be written
only to hedge in an economically appropriate way portfolio securities
which are not otherwise hedged with options or financial futures
contracts and will be "covered" by identifying the specific portfolio
securities being hedged. Call options on foreign currencies and put
options on securities and foreign currencies will be covered by
securities acceptable for escrow. A 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.
The Portfolio will 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. Any
decline in the market value of portfolio securities or foreign
currencies will be offset to the extent of the premiums received (net of
transaction costs). If an option is exercised, the premium received on
the option will effectively increase the exercise price or reduce the
difference between the exercise price and market value.
During the option period, the writer of a call option gives up
the opportunity for appreciation in the market value of the underlying
security or currency above the exercise price. It retains the risk of
loss should the price of the underlying security or foreign currency
decline. Writing call options also involves risks relating to the
Portfolio's ability to close out options it has written.
During the option period, the writer of a put option has
assumed the risk that the price of the underlying security or foreign
currency will decline below the exercise price. However, the writer of
the put option has retained the opportunity for appreciation above the
exercise price should the market price of the underlying security or
foreign currency increase. Writing put options also involves risks
relating to the Portfolio's ability to close out options it has written.
Purchasing Call and Put Options, Warrants and Stock Rights. The
Portfolio may invest 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 Portfolio may invest in call and put options whenever,
in the opinion of the Advisor or Subadvisor, a hedging transaction is
consistent with its investment objectives. The Portfolio 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. Any such sale would result
in a net gain or loss depending on whether the amount received on the
sale is more or less than the premium and other transaction costs paid
on the call or put which is sold. Purchasing a call or put option
involves the risk that the Portfolio may lose the premium it paid plus
transaction costs.
Warrants and stock rights are almost identical to call options
in their nature, use and effect except that they are issued by the
issuer of the underlying security rather than an option writer, and they
generally have longer expiration dates than call options. A 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.
Financial Futures and Related Options. The Portfolio may enter
into financial futures contracts and related options as a hedge against
anticipated changes in the market value of their portfolio securities or
securities which they intend to purchase or in the exchange rate of
foreign currencies. Hedging is the initiation of an offsetting position
in the futures market which is intended to minimize the risk associated
with a position's underlying securities in the cash market. Investment
techniques related to financial futures and options are summarized below
and are described more fully in the Statement of Additional Information.
Financial futures contracts consist of interest rate futures
contracts, foreign currency futures contracts and securities index
futures contracts. An interest rate futures contract obligates the
seller of the contract to deliver, and the purchaser to take delivery
of, the interest rate securities called for in the contract at a
specified future time and at a specified price. A foreign currency
futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the foreign currency called for in
the contract at a specified future time and at a specified price. A
securities index assigns relative values to the securities included in
the index, and the index fluctuates with changes in the market values of
the securities so included. A securities index futures contract is a
bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount times
the difference between the index value at the close of the last trading
day of the contract and the price at which the futures contract is
originally struck. An option on a financial futures contract gives the
purchaser the right to assume a position in the contract (a long
position if the option is a call and a short position if the option is a
put) at a specified exercise price at any time during the period of the
option.
The 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 on financial
futures contracts. It will engage in transactions in financial futures
contracts and related options only for hedging purposes and not for
speculation. In addition, the 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 its
existing futures and related options positions and the premiums paid for
related options would exceed 5% of the market value of its total assets.
At the time of purchase of a futures contract or a call option on a
futures contract, an amount of cash, U.S. Government securities or other
appropriate high-grade debt obligations equal to the market value of the
futures contract minus the Portfolio's initial margin deposit with
respect thereto, will be deposited in a segregated account with the
Fund's custodian bank to collateralize fully the position and thereby
ensure that it is not leveraged. The extent to which the Portfolio may
enter into financial futures contracts and related options may also be
limited by requirements of the Internal Revenue Code of 1986 for
qualification as a regulated investment company.
Engaging in transactions in financial futures contracts
involves certain risks, such as the possibility of an imperfect
correlation between futures market prices and cash market prices and the
possibility that the Advisor or Subadvisor could be incorrect in its
expectations as to the direction or extent of various interest rate
movements or foreign currency exchange rates, in which case the
Portfolio's return might have been greater had hedging not taken place.
There is also the risk that a liquid secondary market may not exist. The
risk in purchasing an option on a financial futures contract is that the
Portfolio will lose the premium it paid. Also, there may be
circumstances when the purchase of an option on a financial futures
contract would result in a loss to the Portfolio while the purchase or
sale of the contract would not have resulted in a loss.
Foreign Currency Transactions
The value of the 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 Portfolio may incur costs in connection with conversions between
various currencies. The Portfolio will conduct its 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. A forward
foreign currency exchange contract involves an obligation to purchase or
sell a specific currency at a future date, which may be any fixed number
of days from the date of the contract agreed upon by the parties, at a
price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and
their customers.
When the Portfolio enters into a contract for the purchase or
sale of a security denominated in a foreign currency, it may want to
establish the United States dollar cost or proceeds, as the case may be.
By entering into a forward contract in United States dollars for the
purchase or sale of the amount of foreign currency involved in the
underlying security transaction, the Portfolio is able to protect itself
against a possible loss between trade and settlement dates resulting
from an adverse change in the relationship between the United States
dollar and such foreign currency. However, this tends to limit potential
gains which might result from a positive change in such currency
relationships. The Portfolio may also hedge its foreign currency
exchange rate risk by engaging in currency financial futures and options
transactions.
When the Advisor or the 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
the Portfolio's portfolio securities denominated in such foreign
currency. The forecasting of short-term currency market movement is
extremely difficult and whether such a short-term hedging strategy will
be successful is highly uncertain.
It is impossible to forecast with precision the market values
of portfolio securities at the expiration of a contract. Accordingly, it
may be necessary for the Portfolio to purchase additional currency on
the spot market (and bear the expense of such purchase) if the market
value of the security is less than the amount of foreign currency the
Portfolio is obligated to deliver when a decision is made to sell the
security and make delivery of the foreign currency in settlement of a
forward contract. Conversely, it may be necessary to sell on the spot
market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign
currency the Portfolio is obligated to deliver.
If the Portfolio retains the portfolio security and engages in
an offsetting transaction, it will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract
prices. If the Portfolio engages in an offsetting transaction, it may
subsequently enter into a new forward contract to sell the foreign
currency. Should forward prices decline during the period between the
Portfolio's entering into a forward contract for the sale of a foreign
currency and the date it enters into an offsetting contract for the
purchase of the foreign currency, it would realize gains to the extent
the price of the currency it has agreed to sell exceeds the price of the
currency it has agreed to purchase. Should forward prices increase, the
Portfolio would suffer a loss to the extent the price of the currency it
has agreed to purchase exceeds the price of the currency it has agreed
to sell. Although such contracts tend to minimize the risk of loss due
to a decline in the value of the hedged currency, they also tend to
limit any potential gain which might result should the value of such
currency increase. The Portfolio may have to convert its holdings of
foreign currencies into United States dollars from time to time.
Although foreign exchange dealers do not charge a fee for conversion,
they do realize a profit based on the difference (the "spread") between
the prices at which they are buying and selling various currencies.
Additional Nonfundamental Investment Policies
CRI Strategic Growth has adopted the following operating (i.e.,
nonfundamental) investment policies which may be changed by the Board of
Directors without shareholder approval:
The Portfolio may not purchase illiquid securities if more than
15% of the value of its net assets would be invested in such securities.
Further, the Portfolio may not acquire private placement investments
until the value of its assets exceeds $20 million.
For further information on the Portfolio's investment policies
and restrictions, as well as a description of the types of securities
that may be purchased, see the Statement of Additional Information.
Additional Risk Factors
Nondiversification
There may be risks associated with the Portfolio being
nondiversified. Specifically, since a relatively high percentage of the
assets of the Portfolio may be invested in the obligations of a limited
number of issuers, the value of the shares of a nondiversified Portfolio
may be more susceptible to any single economic, political or regulatory
event than the shares of a diversified Portfolio would be.
Interest Rate Risk
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.
Non-Investment Grade Securities
Non-investment 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 issuer's creditworthiness.
Because the market for lower-rated securities may be less active
("thinner") than for higher-rated securities, it may be difficult for
the 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.
INVESTMENT SCREENS
Once equity and debt securities are determined to fall within
the investment objective of the Portfolio and are deemed financially
viable investments, they are screened according to the social criteria
described below. These social screens are applied to potential
investment candidates by the Advisor in consultation with the
Subadvisor. However, the Portfolio may purchase instruments used for
defensive purposes, such as short positions, options and futures
contracts, without regard to the social criteria.
The following criteria may be changed by the Fund's Board of
Directors without shareholder approval:
(1) The Portfolio avoids investing in companies
that, in the Advisor's opinion, have
significant or historical patterns of
violating environmental regulations, or
otherwise have an egregious environmental
record. Additionally, the Portfolio will avoid
investing in nuclear power plant operators and
owners, or manufacturers of key components in
the nuclear power process.
(2) The Portfolio will not invest in companies
that are listed among the top 100 weapons
systems contractors, or major nuclear weapons
systems contractors.
(3) The Portfolio will not invest in companies
that, in the Advisor's opinion, have
significant or historical patterns of
discrimination against employees on the basis
of race, gender, religion, age, disability or
sexual orientation, or in companies that have
major labor-management disputes.
(4) The Portfolio will not invest in companies
that are significantly involved in the
manufacture of tobacco or alcohol products.
The Portfolio will not invest in companies
that make products or offer services that,
under proper use, in the Advisor's opinion,
are considered harmful.
While the Portfolio may invest in companies that exhibit
positive social characteristics, it makes no explicit claims to seek out
companies with such practices.
THE FUND AND ITS MANAGEMENT
Acacia Capital Corporation (the "Fund"), a Maryland
corporation, is an open-end investment company, which was incorporated
under the laws of the State of Maryland on September 27, 1982. The Board
of Directors supervises the business affairs and investments of the
Fund, which are managed on a daily basis by the Fund's Investment
Advisor. The Fund has several investment Portfolios, each issuing one
class of stock. The shares of the Fund currently are sold only to
insurance companies (collectively, the "Insurance Companies") for
allocation to their separate accounts (collectively, the "Variable
Accounts") to fund the benefits under certain variable annuity and
variable life insurance policies (collectively, the "Policies") issued
by such companies. Accordingly, the interest of a policy owner in the
shares is subject to the terms of the particular annuity or life
insurance policy and is described in the attached prospectus for one of
the Policies, which should be reviewed carefully by a person considering
the purchase of a Policy. The rights of the Insurance Companies as
shareholders should be distinguished from the rights of a policy owner
which are described in the Policies. Policy owners should consider that
the investment return experience of the Portfolio will affect the value
of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for
the Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any
distributions on such shares) and the benefits provided under a policy.
Investment Advisor and Subadvisors
Calvert Asset Management Company, Inc. ("the Advisor"), 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814, is the
Investment Advisor to all of the Fund's Portfolios. It is a wholly-owned
subsidiary of Calvert Group, Ltd., which is in turn an indirect
wholly-owned subsidiary of Acacia Mutual Life Insurance Company. As of
December 31, 1996, Calvert Group, Ltd. had assets under management and
administration in excess of $5.2 billion. Pursuant to its investment
advisory agreement with the Fund, the Investment Advisor 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 Fund's Board of
Directors. The Advisor has retained an investment subadvisor
("Subadvisor") for CRI Strategic Growth. The Advisor will continuously
monitor and evaluate the performance and investment style of the
Subadvisor.
The Subadvisor to the Portfolio is Portfolio Advisory Services,
Inc. ("PASI"). PASI's principal business office is 811 Wilshire
Boulevard, Suite 810, Los Angeles, California, 90017. The Subadvisor
manages the investment and reinvestment of the assets of the Portfolio,
although the Advisor may screen potential investments for compatibility
with the Portfolio's social criteria.
The Portfolio manager for CRI Strategic Growth is Cedd Moses,
Director and Chief Executive Officer of PASI, and PASI's principal
shareholder. Mr. Moses earned a Bachelor of Science in Mechanical
Engineering from UCLA in 1982, and subsequently worked with several
securities firms before joining PASI in 1988. Mr. Moses also manages the
Calvert Strategic Growth Fund series of The Calvert Fund, an open-end
investment company sponsored by Calvert Group, Ltd.
Advisory Fee
For fiscal year 1996, the Investment Advisor received from the
Portfolio a monthly base fee, computed on a daily basis at an annual
rate of 1.50% of the average daily net assets of the Portfolio, plus a
performance fee adjustment of 0.01% as described below.
The Advisor pays the Subadvisor a base fee of 0.95% of the Portfolio's
average net assets. In addition, under the circumstances described
below, the Advisor and Subadvisor may earn (or have their fees reduced
by) performance fee adjustments based on the extent to which performance
of the Portfolio exceeds or trails the Russell 2000 Index. Payment of
the performance fee adjustment began April 1, 1996. The specific
adjustments are as follows, and are calculated monthly:
CRI Strategic Growth: Advisor's Performance Fee Adjustment
Performance versus the Performance Fee Adjustment
Russell 2000 Index
30% to less than 60% 0.05%
60% to less than 90% 0.10%
90% or more 0.15%
CRI Strategic Growth: Subadvisor's Performance Fee Adjustment
Performance versus the Performance Fee Adjustment
Russell 2000 Index
30% to less than 60% 0.025%
60% to less than 90% 0.050%
90% or more 0.075%
The performance fee adjustment to the Subadvisor is paid out of the fee
the Advisor receives from the Portfolio. The initial performance period
is the twelve month period ended April 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.
Administrative Services
Calvert Administrative Services Company ("CASC"), an affiliate
of the Advisor, has been retained by CRI Strategic Growth to provide
certain administrative services necessary to the conduct of its affairs,
including the preparation of regulatory filings and shareholder reports,
the daily determination of net asset value per share and dividends, and
the maintenance of portfolio and general accounting records. For
providing such services, CASC is entitled to receive a fee from the
Portfolio of 0.20% of net assets per year, but waived this fee for
fiscal year 1996.
Expenses
The Portfolio's expenses, which are accrued daily, include: the
fee of the Investment Advisor; costs of executing portfolio
transactions; pricing costs; interest; taxes; custodian and transfer
agent fees; legal and auditing fees; bookkeeping and dividend disbursing
expenses; and certain other expenses relating to the Fund's operations.
Certain expenses are paid by the particular Portfolio that incurs them,
while other expenses are allocated among each Portfolio on the basis of
their relative size (based on net assets), or as designated by the Board
of Directors, as appropriate. Expenses constituted 2.27%, annualized, of
the average net assets of the Portfolio for 1996, including fees paid
indirectly, and 1.81%, annualized, net of fees paid indirectly.
Capital Stock
The Fund issues separate stock for each of its Portfolios.
Shares of each of the Portfolios have equal rights with regard to
voting, redemptions, dividends, distributions, and liquidations. No
Portfolio has preference over another Portfolio. When issued, shares are
fully paid and nonassessable and do not have preemptive or conversion
rights or cumulative voting rights. The Insurance Companies and the
Fund's shareholders will vote Fund shares allocated to registered
separate accounts in accordance with instructions received from
policyholders. Providian Life and Health Insurance Company owns more
than 25% of the outstanding stock of the Portfolio. Under certain
circumstances, which are described in the accompanying prospectus of the
variable life or annuity policy, the voting instructions received from
variable life or annuity policyholders may be disregarded.
PURCHASE AND REDEMPTION OF SHARES
The Fund offers its shares, without sales charge, only for
purchase by various Insurance Companies for allocation to their Variable
Accounts. Shares are purchased by the Variable Accounts at the net asset
value of the Portfolio next determined after the Insurance Company
receives the premium payment. The Fund continuously offers its shares in
the Portfolio at a price equal to the net asset value per share. Initial
and subsequent payments allocated to the 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 the Fund, although currently neither the Insurance
Companies nor the Fund foresee any such disadvantages to either variable
annuity or variable life insurance policyholders of any Insurance
Company. The Fund's Board of Directors intends 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.
The Insurance Companies redeem shares of the Fund to make
benefit and surrender payments under the terms of their Policies.
Redemptions are processed on any day on which the Fund is open for
business (each day the New York Stock Exchange is open), and are made at
the 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 Investment Company Act of 1940. The amount received on
redemption of the shares of the 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 Fund redeems all full
and fractional shares of each Portfolio for cash.
The net asset value of the shares of each Portfolio of the Fund
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 the Portfolio to affect materially its 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 the 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 Portfolio 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. Money market instruments
with a remaining maturity of 60 days or less held by the Portfolio are
valued on an amortized cost basis.
DIVIDENDS AND DISTRIBUTIONS
It is the Portfolio's intention to distribute substantially all
of its net investment income, if any. For dividend purposes, net
investment income consists of all payments of dividends or interest
received by the 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.
TOTAL RETURN INFORMATION
Total Return and Other Quotations
CRI Strategic Growth may advertise ''total return." Total
return refers to the total change in value of an investment in the
Portfolio over a specified period. It differs from yield in that yield
figures measure only the income component of the Portfolio's
investments, while 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 its overall change in
value, including changes in share price and assuming all of the
Portfolio's dividends and capital gain distributions are reinvested. A
cumulative total return reflects the Portfolio's performance over a
stated period of time. An average annual total return reflects the
hypothetical annual compounded return that would have produced the same
cumulative total return if the Portfolio's performance had been constant
over the entire period. Because average annual returns tend to smooth
out variations in the Portfolio's returns, you should recognize that
they are not the same as actual year-by-year results. The total return
of the Portfolio generally does not include the effect of paying the
charges or expenses on the particular insurance policy or annuity
contract for which the Portfolio serves as the investment vehicle.
TAXES
As a "regulated investment company" under the Internal Revenue
Code of 1986, as amended, the Fund is not subject to federal income or
excise tax to the extent that it distributes its net investment income
and net capital gains. Each Portfolio is treated as a separate entity
for federal income tax purposes. Since the sole shareholders of the Fund
are Insurance Companies, no discussion is included here as to the
federal income tax consequences at the shareholder level. For
information concerning the federal tax consequences to purchasers of the
annuity or life insurance policies, see the prospectuses for the
Policies.
TRANSFER AND DIVIDEND DISBURSING AGENT
Calvert Shareholder Services, Inc., 4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814, is the transfer agent and
dividend disbursing agent.
<PAGE>
ACACIA CAPITAL CORPORATION'S
CALVERT RESPONSIBLY INVESTED PORTFOLIOS
Statement of Additional Information
April 30, 1997
This Statement of Additional Information is not a prospectus.
Investors should read the Statement of Additional Information in
conjunction with each of the separate Calvert Responsibly Invested
Portfolio Prospectuses, dated April 30, 1997, which may be obtained free
of charge by calling (800) 368-2748 or by writing to the Portfolio at
4550 Montgomery Avenue, Bethesda, Maryland 20814.
TABLE OF CONTENTS
Investment Objectives and Policies 1
Investment Restrictions 9
Investment Selection Process 16
Portfolio Turnover 19
Purchase and Redemption of Shares 19
Determination of Net Asset Value 19
Taxes 20
Calculation of Yield and Total Return 21
Investment Advisory Agreement 22
Directors and Officers 24
Method of Distribution 26
Transfer Agent 26
General Information 26
Reports to Shareholders and Policyholders 27
Additional Information 27
Financial Statements 27
Independent Accountants and Custodians 27
Appendix 27
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INVESTMENT OBJECTIVES AND POLICIES
Acacia Capital Corporation ("the Fund") offers investors the
opportunity to invest in several professionally managed securities
portfolios which may be more diversified, stable and liquid than might
be obtainable by an investor on an individual basis. In addition, the
Fund's Calvert Responsibly Invested ("CRI") Portfolios offer the
opportunity for growth of capital or current income through investment
in enterprises that make a significant contribution to society through
their products and services and through the way they do business. The
Calvert Responsibly Invested Portfolios offer investors a choice of five
separate portfolios selected with a concern for the social impact of
each investment: CRI Money Market, Balanced, Capital Accumulation,
Global and Strategic Growth Portfolios. References to the "Investment
Advisor" refer to the advisor appropriate to the Portfolio being
discussed. (See "Investment Advisors")
Foreign Securities
CRI Global and Strategic Growth may invest all of their assets
in foreign securities, although CRI Global intends to invest part of its
assets in securities of U.S. issuers, and CRI Strategic Growth does not
presently intend to invest in foreign securities. CRI Money Market,
Balanced and Capital Accumulation may each invest up to 25%, and CRI
Balanced may invest up to 10% of its assets in the securities of foreign
issuers. CRI Money Market may purchase only high quality, U.S.
dollar-denominated instruments. Investments in foreign securities may
present risks not typically involved in domestic investments. Foreign
securities may be affected by such circumstances as possible adverse
changes in exchange control or investment regulations, expropriation or
confiscatory taxation, political or economic instability, and diplomatic
or other developments. In purchasing foreign securities, the Portfolios
may purchase American Depositary Receipts for such securities. These are
certificates issued by United States banks evidencing the right to
receive securities of the foreign issuer deposited in that bank or its
correspondent bank.
It is contemplated that the Portfolios may trade foreign
securities on U.S. securities markets and stock exchanges located in the
countries in which the respective principal offices of the issuers of
the various securities are located, if that is the best available
market. Foreign securities markets may not be as developed or efficient
as those in the United States. While growing in volume, they usually
have substantially less volume than U.S. securities markets, and
securities of some foreign companies are less liquid and more volatile
than securities of comparable United States companies. Similarly, volume
and liquidity in most foreign bond markets is less than in the United
States and, at times, volatility of price can be greater than in the
United States.
Additional costs may be incurred which are related to any
international investment, since foreign brokerage commissions and the
custodial costs associated with maintaining foreign portfolio securities
are generally higher than in the United States. Fee expense may also be
incurred on currency exchanges when the Portfolios change investments
from one country to another or convert foreign securities holdings into
U.S. dollars. Foreign companies and foreign investment practices are not
generally subject to uniform accounting, auditing and financial
reporting standards and practices or regulatory requirements comparable
to those applicable to United States companies. There may be less public
information available about foreign companies.
United States Government policies have at times, in the past,
through imposition of interest equalization taxes and other
restrictions, discouraged certain investments abroad by United States
investors. While such taxes or restrictions are not presently in effect,
they may be reinstituted from time to time as a means of fostering a
favorable United States balance of payments. In addition, foreign
countries may impose withholding and taxes on dividends and interest.
Since investments in securities of issuers domiciled in foreign
countries usually involve currencies of the foreign countries, and since
the Portfolios may temporarily hold funds in foreign currencies during
the completion of investment programs, the value of the assets of the
Portfolios as measured in United States dollars may be affected
favorably or unfavorably by changes in foreign currency exchange rates
and exchange control regulations. For example, if the value of the
foreign currency in which a security is denominated declines in relation
to the value of the U.S. dollar, the value of the security in U.S.
dollars will decline. Similarly, if the value of the foreign currency in
which a security is denominated appreciates in relation to the value of
the U.S. dollar, the value of the security in U.S. dollars will
appreciate. The Portfolios will conduct foreign currency exchange
transactions either on a spot (i.e., cash) basis at the spot rate
prevailing in the foreign exchange market, or through entering into
forward contracts to purchase or sell foreign currencies. A forward
foreign currency contract involves an obligation to purchase or sell a
specific currency at a future date which may be any fixed number of days
from the date of the contract agreed upon by the parties, at a price set
at the time of the contract. These contracts are traded in the interbank
market conducted directly between currency traders (usually large,
commercial banks) and their customers. A forward foreign currency
contract generally has no deposit requirement, and no commissions are
charged at any stage for trades.
A Portfolio may enter into forward foreign currency contracts
for two reasons. First, the Portfolio may desire to preserve the United
States dollar price of a security when it enters into a contract for the
purchase or sale of a security denominated in a foreign currency. The
Portfolio will be able to protect itself against possible losses
resulting from changes in the relationship between the United States
dollar and foreign currencies during the period between the date the
security is purchased or sold and the date on which payment is made or
received by entering into a forward contract for the purchase or sale,
for a fixed amount of dollars, of the amount of the foreign currency
involved in the underlying security transactions.
Second, when the Advisor or Subadvisor believes that the
currency of a particular foreign country may suffer a substantial
decline against the United States dollar, the Portfolio enters into a
forward foreign currency contract to sell, for a fixed amount of
dollars, the amount of foreign currency approximating the value of some
or all of the Portfolio's investment securities denominated in such
foreign currency. The precise matching of the forward foreign currency
contract amounts and the value of the portfolio securities involved will
not generally be possible since the future value of the securities will
change as a consequence of market movements between the date the forward
contract is entered into and the date it matures. The projection of
short-term currency market movement is difficult, and the successful
execution of this short-term hedging strategy is uncertain. Although
forward foreign currency contracts tend to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they
tend to limit any potential gain which might result should the value of
such currency increase. The Portfolios do not intend to enter into such
forward contracts under this circumstance on a regular or continuous
basis.
Foreign Money Market Instruments
CRI Money Market may invest without limitation in money market
instruments of banks, whether foreign or domestic, including obligations
of U.S. branches of foreign banks ("Yankee" instruments) and obligations
of foreign branches of U.S. banks ("Eurodollar" instruments). All such
instruments must be high-quality, U.S. dollar-denominated obligations.
It is an operating (i.e., nonfundamental) policy of CRI Money Market
that it may invest only in foreign money market instruments if they are
of comparable quality to the obligations of domestic banks. Although
these instruments are not subject to foreign currency risk since they
are U.S. dollar-denominated, investments in foreign money market
instruments may involve risks that are different than investments in
securities of U.S. issuers. See "Foreign Securities" above.
Private Placements and Illiquid Securities
Due to the particular social objective of the Portfolios,
opportunities may exist to promote especially promising approaches to
social goals through privately-placed investments. The private placement
investments undertaken by the Portfolios, if any, may be subject to a
high degree of risk. Such investments may involve relatively small and
untried enterprises that have been selected in the first instance
because of some attractive social objectives or policies. The Investment
Advisors seek to structure the Portfolios' investments to provide the
greatest assurance of attaining the intended investment return. It is an
operating policy of the Portfolios that no private placements shall be
acquired until the value of that Portfolio's investments exceeds $20
million.
Many private placement investments have no readily available
market and may therefore be considered illiquid. It is an operating
policy of the Portfolios not to purchase illiquid securities if more
than a certain percentage of the value of its net assets would be
invested in such securities. Securities eligible for resale pursuant to
Rule 144A under the Securities Act of 1933 may be determined by the
Board of Directors to be liquid. The Board may delegate such
determinations of liquidity to the Advisor, pursuant to guidelines and
oversight by the Board. Portfolio investments in private placements and
other securities for which market quotations are not readily available
are valued at fair market value as determined by the Advisor under the
direction and control of the Board.
Repurchase Agreements
The Portfolios may purchase debt securities subject to
repurchase agreements, which are arrangements under which the Portfolio
buys a security and the seller simultaneously agrees to repurchase the
security at a specified time and price. The Portfolios engage in
repurchase agreements in order to earn a higher rate of return than it
could earn simply by investing in the obligation which is the subject of
the repurchase agreement. Repurchase agreements are not, however,
without risk. In the event of the bankruptcy of a seller during the term
of a repurchase agreement, a legal question exists as to whether the
Portfolio would be deemed the owner of the underlying security or would
be deemed only to have a security interest in and lien upon such
security. The Portfolios will only engage in repurchase agreements with
recognized securities dealers and banks determined to present minimal
credit risk by the Advisor under the direction and supervision of the
Board of Directors. In addition, the Portfolios will only engage in
repurchase agreements reasonably designed to secure fully during the
term of the agreement the seller's obligation to repurchase the
underlying security and will monitor the market value of the underlying
security during the term of the agreement. If the value of the
underlying security declines and is not at least equal to the repurchase
price due the Portfolio pursuant to the agreement, the Portfolio will
require the seller to pledge additional securities or cash to secure the
seller's obligations pursuant to the agreement. If the seller defaults
on its obligation to repurchase and the value of the underlying security
declines, the Portfolio may incur a loss and may incur expenses in
selling the underlying security. Repurchase agreements are always for
periods of less than one year. Repurchase agreements not terminable
within seven days are considered illiquid.
Reverse Repurchase Agreements
The Portfolios may also engage in reverse repurchase
agreements. Under a reverse repurchase agreement, a Portfolio sells
securities to a bank or securities dealer and agrees to repurchase those
securities from such party at an agreed upon date and price reflecting a
market rate of interest. The Portfolio invests the proceeds from each
reverse repurchase agreement in obligations in which it is authorized to
invest. The Portfolios intend to enter into a reverse repurchase
agreement only when the interest income provided for in the obligation
in which the Portfolio invests the proceeds is expected to exceed the
amount the Portfolio will pay in interest to the other party to the
agreement plus all costs associated with the transactions. The
Portfolios do not intend to borrow for leverage purposes. The Portfolios
will only be permitted to pledge assets to the extent necessary to
secure borrowings and reverse repurchase agreements.
During the time a reverse repurchase agreement is outstanding,
the Portfolio will maintain in a segregated custodial account an amount
of cash, U.S. Government securities or other liquid, high-quality debt
securities equal in value to the repurchase price. The Portfolio will
mark to market the value of assets held in the segregated account, and
will place additional assets in the account whenever the total value of
the account falls below the amount required under applicable regulations.
The Portfolios' use of reverse repurchase agreements involves
the risk that the other party to the agreements could become subject to
bankruptcy or liquidation proceedings during the period the agreements
are outstanding. In such event, the Portfolio may not be able to
repurchase the securities it has sold to that other party. Under those
circumstances, if at the expiration of the agreement such securities are
of greater value than the proceeds obtained by the Portfolio under the
agreements, the Portfolio may have been better off had it not entered
into the agreement. However, the Portfolio will enter into reverse
repurchase agreements only with banks and dealers which the Advisor
believes present minimal credit risks under guidelines adopted by the
Fund's Board of Directors. In addition, the Portfolio bears the risk
that the market value of the securities sold by the Portfolio may
decline below the agreed-upon repurchase price, in which case the dealer
may request the Portfolio to post additional collateral.
GNMA Certificates-CRI Balanced
The CRI Balanced Portfolio is not expected generally to invest
more than a small portion of its assets in GNMA Certificates. GNMA
Certificates are mortgage-backed securities representing part ownership
of a pool of mortgage loans that are issued by lenders such as mortgage
bankers, commercial banks and savings and loan associations and are
either insured by the Federal Housing Administration or guaranteed by
the Veterans Housing Administration. A "pool" or group of such mortgages
is assembled and, after being approved by GNMA, is offered to investors
through securities dealers.
Once approved by GNMA, the timely payment of interest and
principal on each mortgage is guaranteed by GNMA and backed by the full
faith and credit of the U.S. Government. GNMA Certificates differ from
bonds in that principal is paid back monthly by the borrower over the
term of the loan rather than returned in a lump sum at maturity. GNMA
Certificates are called "pass-through" securities because both interest
and principal payments (including prepayments) are passed through to the
holder of the Certificate. Upon receipt, principal payments will be
reinvested by the Series in additional securities.
Because interest and principal payments on the underlying
mortgages pass through to holders, the average life of GNMA Certificates
varies with the maturities of the underlying mortgage instruments, which
have maximum maturities of 30 years. However, because unscheduled
principal payments on the underlying mortgages resulting from
prepayment, refinancing or foreclosure are also passed through to
holders, the average life of GNMA Certificates is normally substantially
shorter than the original maturity of the underlying mortgage pools.
The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, the degree of the increase or
decrease in interest rates over time, general economic conditions, the
location and age of the mortgage, and social and demographic conditions.
Prepayments generally occur when interest rates have fallen; thus,
reinvestments of principal prepayments will usually be at lower rates.
Prepayments also tend to occur more frequently in mortgage pools with
rates significantly higher than prevailing mortgage rates. The coupon
rate of GNMA Certificates is lower than the interest rate paid on the
underlying mortgages only by the amount of the fee paid to GNMA and the
issuer, usually 1/2 of 1%. Therefore, GNMA Certificates trading at a
premium, which are usually Certificates with coupon rates significantly
higher than the rates of Certificates being issued at the time of
purchase, are subject to greater risk of prepayment at par.
The Investment Advisor will attempt, through careful evaluation
of available GNMA issues and prevailing market conditions, to invest in
GNMA Certificates which provide a high income return but are not subject
to substantial risk of loss of principal. Accordingly, the Advisor may
forego the opportunity to invest in certain issues of GNMA Certificates
which would provide a high current income yield if the Advisor
determines that such issues would be subject to a risk of prepayment and
loss of principal over the long term that would outweigh the short-term
increment in yield.
Noninvestment-grade Debt Securities
CRI Balanced 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 Portfolio's investment policy provides that it may not
invest more than 20% of its assets in securities rated below B by either
rating service, or in unrated securities determined by the Advisor to be
comparable to securities rated below B by either rating service. CRI
Global may invest up to 5% of its assets in lower quality debt
securities, and CRI Strategic Growth may invest up to 35% of its assets
in debt securities without regard to investment grade.
Noninvestment-grade securities have moderate to poor protection of
principal and interest payments and have speculative characteristics.
(See Appendix for a description of the ratings.) 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 rated securities are,
which may make them less marketable.
The quality limitation set forth in the Portfolios' investment
policy is determined immediately after a Portfolio's acquisition of a
given security. Accordingly, any later change in ratings will not be
considered when determining whether an investment complies with the
Portfolio'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.
Options and Futures Contracts
CRI Global, Strategic Growth and Capital Accumulation may, in
pursuit of their investment objectives, purchase put and call options
and engage in the writing of covered call options and secured put
options on securities which meet the Portfolios' social criteria, and
employ a variety of other investment techniques. Specifically, these
Portfolios may also engage in the purchase and sale of stock index
future contracts, foreign currency futures contracts, interest rate
futures contracts, and options on such futures, as described more fully
below.
These Portfolios will engage in such transactions only to hedge
the existing positions in the respective Portfolios. They will not
engage in such transactions for the purposes of speculation or leverage.
Such investment policies and techniques may involve a greater degree of
risk than those inherent in more conservative investment approaches.
These Portfolios will not engage in such options or futures
transactions unless they receive appropriate regulatory approvals
permitting them to engage in such transactions. CRI Global, Strategic
Growth and Capital Accumulation may not write options on more than 50%
of their total assets. These Portfolios may write "covered options" on
securities in standard contracts traded on national securities
exchanges. These Portfolios will write such options in order to receive
the premiums from options that expire and to seek net gains from closing
purchase transactions with respect to such options.
Put and Call Options - These Portfolios may purchase put and
call options, in standard contracts traded on national securities
exchanges, on securities of issuers which meet the Portfolios' social
criteria. These Portfolios will purchase such options only to hedge
against changes in the value of securities the Portfolios hold and not
for the purposes of speculation or leverage. In buying a put, a
Portfolio has the right to sell the security at the exercise price, thus
limiting its risk of loss through a decline in the market value of the
security until the put expires. The amount of any appreciation in the
value of the underlying security will be partially offset by the amount
of the premium paid for the put option and any related transaction
costs. Prior to its expiration, a put option may be sold in a closing
sale transaction and any profit or loss from the sale will depend on
whether the amount received is more or less than the premium paid for
the put option plus the related transaction costs.
These Portfolios may purchase call options on securities that
they may intend to purchase and that meet the Portfolios' social
criteria. Such transactions may be entered into in order to limit the
risk of a substantial increase in the market price of the security which
the Portfolio intends to purchase. Prior to its expiration, a call
option may be sold in a closing sale transaction. Any profit or loss
from such a sale will depend on whether the amount received is more or
less than the premium paid for the call option plus the related
transaction costs.
Covered Options - These Portfolios may write only covered
options on equity and debt securities in standard contracts traded on
national securities exchanges. For call options, this means that so long
as a Portfolio is obligated as the writer of a call option, that
Portfolio will own the underlying security subject to the option and, in
the case of put options, that Portfolio will, through its custodian,
deposit and maintain either cash or securities with a market value equal
to or greater than the exercise price of the option.
When a Portfolio writes a covered call option, the Portfolio
gives the purchaser the right to purchase the security at the call
option price at any time during the life of the option. As the writer of
the option, the Portfolio receives a premium, less a commission, and in
exchange foregoes the opportunity to profit from any increase in the
market value of the security exceeding the call option price. The
premium serves to mitigate the effect of any depreciation in the market
value of the security. Writing covered call options can increase the
income of the Portfolio and thus reduce declines in the net asset value
per share of the Portfolio if securities covered by such options decline
in value. Exercise of a call option by the purchaser, however, will
cause the Portfolio to forego future appreciation of the securities
covered by the option.
When a Portfolio writes a secured put option, it will gain a
profit in the amount of the premium, less a commission, so long as the
price of the underlying security remains above the exercise price.
However, the Portfolio remains obligated to purchase the underlying
security from the buyer of the put option (usually in the event the
price of the security funds below the exercise price) at any time during
the option period. If the price of the underlying security falls below
the exercise price, the Portfolio may realize a loss in the amount of
the difference between the exercise price and the sale price of the
security, less the premium received.
These Portfolios may purchase securities that may be covered by
call options solely on the basis of considerations consistent with the
investment objectives and policies of the Portfolios. The Portfolio
turnover rate may increase through the exercise of a call option; this
will generally occur if the market value of a "covered" security
increases and the portfolio has not entered into a closing purchase
transaction.
To preserve the Portfolio's status as a regulated investment
company under Subchapter M of the Internal Revenue Code, it is the
Portfolio's policy to limit any gains on put or call options and other
securities held less than three months to less than 30% of a Portfolio's
annual gross income.
Risks Related to Options Transactions - The Portfolios can
close out their respective positions in exchange-traded options only on
an exchange which provides a secondary market in such options. Although
these Portfolios intend to acquire and write only such exchange-traded
options for which an active secondary market appears to exist, there can
be no assurance that such a market will exist for any particular option
contract at any particular time. This might prevent the Portfolios from
closing an options position, which could impair the Portfolios' ability
to hedge effectively. The inability to close out a call position may
have an adverse effect on liquidity because the Portfolio may be
required to hold the securities underlying the option until the option
expires or is exercised.
Futures Transactions - These Portfolios may purchase and sell
futures contracts ("futures contracts") but only when, in the judgment
of the Advisor, such a position acts as a hedge against market changes
which would adversely affect the securities held by the Portfolios.
These futures contracts may include, but are not limited to, market
index futures contracts and futures contracts based on U.S. Government
obligations.
A futures contract is an agreement between two parties to buy
and sell a security on a future date which has the effect of
establishing the current price for the security. Although futures
contracts by their terms require actual delivery and acceptance of
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery of securities.
Upon buying or selling a futures contract, the Portfolio deposits
initial margin with its custodian, and thereafter daily payments of
maintenance margin are made to and from the executing broker. Payments
of maintenance margin reflect changes in the value of the futures
contract, with the Portfolio being obligated to make such payments if
its futures position becomes less valuable and entitled to receive such
payments if its positions become more valuable.
These Portfolios may only invest in futures contracts to hedge
their respective existing investment positions and not for income
enhancement, speculation or leverage purposes. Although some of the
securities underlying the futures contract may not necessarily meet the
Portfolios' social criteria, any such hedge position taken by these
Portfolios will not constitute a direct ownership interest in the
underlying securities.
Futures contracts have been designed by boards of trade which
have been designated "contracts markets" by the Commodity Futures
Trading Commission ("CFTC"). As series of a registered investment
company, the Portfolios are eligible for exclusion from the CFTC's
definition of "commodity pool operator," meaning that the Portfolios may
invest in futures contracts under specified conditions without
registering with the CFTC. Among these conditions are requirements that
each Portfolio invest in futures only for hedging purposes and that the
aggregate initial margin on futures contracts and premium on options
relating to futures shall not exceed 5% of the Portfolio's assets.
Futures contracts trade on contracts markets in a manner that is similar
to the way a stock trades on a stock exchange and the boards of trade,
through their clearing corporations, guarantee performance of the
contracts.
Options on Futures Contracts - These Portfolios may purchase
and write put or call options and sell call options on futures contracts
in which a Portfolio could otherwise invest and which are traded on a
U.S. exchange or board of trade. The Portfolios may also enter into
closing transactions with respect to such options to terminate an
existing position; that is, to sell a put option already owned and to
buy a call option to close a position where the Portfolio has already
sold a corresponding call option.
The Portfolios may only invest in options on futures contracts
to hedge their respective existing investment positions and not for
income enhancement, speculation or leverage purposes. Although some of
the securities underlying the futures contract underlying the option may
not necessarily meet the Portfolios' social criteria, any such hedge
position taken by these Portfolios will not constitute a direct
ownership interest in the underlying securities.
An option on a futures contract gives the purchaser the right,
in return for the premium paid, to assume a position in a futures
contract -- a long position if the option is a call and a short position if
the option is a put -- at a specified exercise price at any time during the
period of the option. The Portfolios will pay a premium for such options
purchased or sold. In connection with such options bought or sold, the
Portfolios will make initial margin deposits and make or receive
maintenance margin payments which reflect changes in the market value of
such options. This arrangement is similar to the margin arrangements
applicable to futures contracts described above.
Put Options on Futures Contracts - The purchase of put options
on futures contracts is analogous to the sale of futures contracts and
is used to protect the portfolio against the risk of declining prices.
These Portfolios may purchase put options and sell put options on
futures contracts that are already owned by that Portfolio. The
Portfolios will only engage in the purchase of put options and the sale
of covered put options on market index futures for hedging purposes.
Call Options on Futures Contracts - The sale of call options on
futures contracts is analogous to the sale of futures contracts and is
used to protect the portfolio against the risk of declining prices. The
purchase of call options on futures contracts is analogous to the
purchase of a futures contract. These Portfolios may only buy call
options to close an existing position where the Portfolio has already
sold a corresponding call option, or for a cash hedge. The Portfolios
will only engage in the sale of call options and the purchase of call
options to cover for hedging purposes.
Writing Call Options on Futures Contracts - The writing of call
options on futures contracts constitutes a partial hedge against
declining prices of the securities deliverable upon exercise of the
futures contract. If the futures contract price at expiration is below
the exercise price, the Portfolio will retain the full amount of the
option premium which provides a partial hedge against any decline that
may have occurred in the Portfolio's securities holdings.
Risks of Options and Futures Contracts - If one of these
Portfolios has sold futures or takes options positions to hedge its
portfolio against decline in the market and the market later advances,
the Portfolio may suffer a loss on the futures contracts or options
which it would not have experienced if it had not hedged. Correlation is
also imperfect between movements in the prices of futures contracts and
movements in prices of the securities which are the subject of the
hedge. Thus the price of the futures contract or option may move more
than or less than the price of the securities being hedged. Where a
Portfolio has sold futures or taken options positions to hedge against
decline in the market, the market may advance and the value of the
securities held in the Portfolio may decline. If this were to occur, the
Portfolio might lose money on the futures contracts or options and also
experience a decline in the value of its portfolio securities. However,
although this might occur for a brief period or to a slight degree, the
value of a diversified portfolio will tend to move in the direction of
the market generally.
The Portfolios can close out futures positions only on an
exchange or board of trade which provides a secondary market in such
futures. Although the Portfolios intend to purchase or sell only such
futures for which an active secondary market appears to exist, there can
be no assurance that such a market will exist for any particular futures
contract at any particular time. This might prevent the Portfolios from
closing a futures position, which could require a Portfolio to make
daily cash payments with respect to its position in the event of adverse
price movements.
Options on futures transactions bear several risks apart from
those inherent in options transactions generally. The Portfolios'
ability to close out their options positions in futures contracts will
depend upon whether an active secondary market for such options develops
and is in existence at the time the Portfolios seek to close their
positions. There can be no assurance that such a market will develop or
exist. Therefore, the Portfolios might be required to exercise the
options to realize any profit.
Foreign Currency Transactions (Not applicable to CRI Money Market
Portfolio)
Forward Foreign Currency Exchange Contracts. A forward foreign
currency exchange contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of
days ("Term") from the date of the contract agreed upon by the parties,
at a price set at the time of the contract. These contracts are traded
directly between currency traders (usually large commercial banks) and
their customers.
The Portfolios will not enter into such forward contracts or
maintain a net exposure in such contracts where it would be obligated to
deliver an amount of foreign currency in excess of the value of its
portfolio securities and other assets denominated in that currency. The
Advisors and Subadvisors believes that it is important to have the
flexibility to enter into such forward contract when it determines that
to do so is in a Portfolio's best interests.
Foreign Currency Options (Not applicable to CRI Money Market or
Balanced Portfolios).
A foreign currency option provides the option buyer with the right to
buy or sell a stated amount of foreign currency at the exercise price on
or before a specified date. A call option gives its owner the right, but
not the obligation, to buy the currency, while a put option gives its
owner the right, but not the obligation, to sell the currency. The
option seller buyer may close its position any time prior to expiration
of the option period. A call rises in value if the underlying currency
appreciates. Conversely, a put rises in value if the underlying currency
depreciates. Purchasing a foreign currency option can protect a
Portfolio against adverse movement in the value of a foreign currency.
Foreign Currency Futures Transactions. The Portfolio may use
foreign currency futures contracts and options on such futures
contracts. Through the purchase or sale of such contracts, it may be
able to achieve many of the same objectives attainable through the use
of foreign currency forward contracts, but more effectively and possibly
at a lower cost.
Unlike forward foreign currency exchange contracts, foreign
currency futures contracts and options on foreign currency futures
contracts are standardized as to amount and delivery period and are
traded on boards of trade and commodities exchanges. It is anticipated
that such contracts may provide greater liquidity and lower cost than
forward foreign currency exchange contracts.
INVESTMENT RESTRICTIONS
CRI BALANCED
Fundamental Investment Restrictions
The Portfolio has adopted the following investment restrictions
which, together with the foregoing investment objectives and fundamental
policies, cannot be changed without the approval of the holders of a
majority of the outstanding shares of the Portfolio. As defined in the
Investment Company Act of 1940, this means the lesser of the vote of (a)
67% of the shares of the Portfolio at a meeting where more than 50% of
the outstanding shares are present in person or by proxy or (b) more
than 50% of the outstanding shares of the Portfolio. Shares have equal
rights as to voting, except that only shares of a Portfolio are entitled
to vote on matters affecting only that Portfolio (such as changes in
investment objective, policies or restrictions).
The Portfolio may not:
1. Issue senior securities (except that it may
borrow money as described in restriction 11 below).
2. With respect to at least 75% of the value of
its total assets, invest more than 5% of its total
assets in the securities (other than securities issued
or guaranteed by the United States Government or its
agencies or instrumentalities) of any one issuer
(including repurchase agreements with any one bank).
3. Purchase more than either (1) 10% in principal
amount of the outstanding debt securities of an issuer,
or (ii) 10% of the outstanding voting securities of an
issuer, except that such restrictions shall not apply
to securities issued or guaranteed by the United States
Government or its agencies or instrumentalities.
4. Invest more than 25% of its total assets in
the securities of issuers primarily engaged in the same
industry. For purposes of this restriction, gas, gas
transmission, electric, water, and telephone utilities
each will be considered a separate industry. This
restriction does not apply to obligations of domestic
branches of domestic banks or savings and loan
associations or to obligations issued or guaranteed by
the United States Government, its agencies or
instrumentalities.
5. Invest in companies for the purpose of
exercising control (along or together with the other
Portfolios).
6. Purchase securities of other investment
companies, [except in connection with a
trustee's/director's deferred compensation plan, as
long as there is no duplicaton of advisory fees; or]
except in connection with a merger, consolidation,
acquisition or reorganization, or by purchase in the
open market of securities of closed-end investment
companies where no underwriter or dealer's commission
or profit, other than customary broker's commission, is
involved, if immediately thereafter the Portfolio would
own: (a) securities of investment companies having an
aggregate value in excess of 10% of such Portfolio's
total assets; (b) more than 3% of the outstanding
voting stock of the investment company; or (c)
securities of the investment company having an
aggregate value in excess of 5% of the Portfolio's
total assets.
7. Purchase or sell interests in oil, gas or
other mineral exploration or development programs,
commodities, commodity contracts, real estate mortgage
loans, except that each Portfolio may purchase
securities of issuers which invest or deal in any of
the above, and except that each Portfolio may invest in
securities that are secured by real estate or real
estate mortgages. This restriction does not apply to
obligations issued or guaranteed by the United States
Government, its agencies or instrumentalities.
8. Purchase any securities on margin (except that
the Portfolio may obtain such short-term credit as may
be necessary for the clearance of purchases and sales
of portfolio securities) or make short sales of
securities or maintain a short position.
9. Make loans, except as provided in (10) below
or through the purchase of obligations in private
placements or by entering into repurchase agreements
(the purchase of publicly-traded obligations are not to
be considered the making of a loan).
10. Lend its securities in excess of 10% of its
total assets, provided that such loan shall be made in
accordance with the guidelines set forth below under
"Lending of Portfolio Securities."
11. Borrow amounts in excess of 10% of its total
assets taken at market value at the time of the
borrowing, and then only from banks as a temporary
measure for extraordinary or emergency purposes, or to
meet redemption requests that might otherwise require
the untimely disposition of securities, and not for
investment or leveraging, except by entering into
reverse repurchase agreements. Borrowings and reverse
repurchase agreements combined will not exceed 1/3 of a
Portfolio' total assets, and additional investments
will not be made by a Portfolio if borrowings exceed 5%
of its total assets.
12. Mortgage, pledge, hypothecate or in any manner
transfer, as security for indebtedness, any securities
owned or held by such Portfolio except as may be
necessary in connection with reverse repurchase
agreements or borrowings mentioned in (11) above, and
then such mortgaging, pledging or hypothecating may not
exceed 10% of such Portfolio' total assets. In order to
comply with certain state statutes, such Portfolio will
not, as a matter of operating policy, mortgage, pledge
or hypothecate its securities to the extent that at any
time the percentage of the value of pledged securities
plus the maximum sales charge will exceed 10% of the
value of such Portfolio shares at the maximum offering
price.
13. Underwrite securities of other issuers except
insofar as the Portfolio may be deemed an underwriter
under the Securities Act of 1933 in selling shares of
each Portfolio, and except as it may be deemed such in
a sale of restricted securities.
14. Write, purchase or sell puts, calls or
combinations thereof, except in connection with
when-issued securities.
15. Invest in securities of foreign issuers if at
the time of acquisition more than 10% of its total
assets taken at market value at the time of the
investment, would be invested in such securities.
16. Participate on a joint (or a joint and
several) basis in any trading account in securities
(but this does not prohibit the "bunching" of orders
for the sale or purchase of Portfolio securities with
the other Portfolio or with other accounts advised or
sponsored by the Investment Advisor or any of its
affiliates to reduce brokerage commissions or otherwise
to achieve best overall execution; see "Investment
Advisor," below):
17. Purchase or retain the securities of any
issuer, if, to the knowledge of the Portfolio, officers
and directors of the Portfolio, the Investment Advisor,
or any subsidiary thereof, each owning beneficially
more than 1/2 of 1% of the securities of such issuer,
own in the aggregate more than 5% of the securities of
such issuer.
18. Invest more than 10% of its total assets in
repurchase agreements maturing in more than seven days
and other illiquid investments.
To comply with certain state investment restrictions, the
Portfolio will not, as a matter of operating policy, permit any
Portfolio to purchase or otherwise acquire the securities of any issuer,
other than securities issued or guaranteed as to principal and interest
by the United States, if immediately after such purchase or acquisition
the value of such investment, together with prior investments of that
Portfolio in the securities of such issuer, would exceed 10% of the
value of the Portfolio's assets. The Portfolio may change or modify this
policy only if the Portfolio obtains a waiver of the applicable
requirement from the commissioner of insurance of the state imposing the
requirement.
CRI MONEY MARKET AND GLOBAL
Fundamental Investment Restrictions
The Portfolios have adopted the following investment
restrictions which, together with the foregoing investment objectives
and fundamental policies, cannot be changed without the approval of the
holders of a majority of the outstanding shares of the Portfolio. As
defined in the Investment Company Act of 1940, this means the lesser of
the vote of (a) 67% of the shares of the Portfolio at a meeting where
more than 50% of the outstanding shares are present in person or by
proxy or (b) more than 50% of the outstanding shares of the Portfolio.
Shares have equal rights as to voting, except that only shares of a
Portfolio are entitled to vote on matters affecting only that Portfolio
(such as changes in investment objective, policies or restrictions).
The Portfolios may not:
1. With respect to 75% of assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its
agencies or instrumentalities) if, as a result, more
than 5% of the value of its total assets would be
invested in securities of that issuer.
2. Concentrate more than 25% of the value of its
assets in any one industry; provided, however, that
there is no limitation with respect to investments in
obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, and
repurchase agreements secured thereby or with respect
to investments in money market instruments of banks.
3. Purchase more than 10% of the outstanding
voting securities of any issuer.
4. 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 the 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.
5. Underwrite the securities of other issuers,
except to the extent that in connection with the
disposition of its portfolio securities, the Portfolio
may be deemed to be an underwriter.
6. Purchase from or sell to any of the Fund's
officers or Directors, or firms of which any of them
are members, any securities (other than capital stock
of the Portfolio), but such persons or firms may act as
brokers for the Portfolio for customary commissions.
7. Borrow money, except from banks for temporary
or emergency purposes and then only in an amount up to
10% of the value of the Portfolio's total assets and
except by engaging in reverse repurchase agreements;
provided, however, that it may only engage in reverse
repurchase agreements so long as, at the time it enters
into a reverse repurchase agreement, the aggregate
proceeds from outstanding reverse repurchase
agreements, when added to other outstanding borrowings
permitted by this section, do not exceed 33 1/3% of the
Portfolio's total assets. In order to secure any
permitted borrowings and reverse repurchase agreements
under this section, the Portfolio may pledge, mortgage
or hypothecate its assets.
8. Make short sales of securities or purchase any
securities on margin except that the Portfolio may
obtain such short-term credits as may be necessary for
the clearance of purchases and sales of securities. The
deposit or payment by the Portfolio of initial or
maintenance margin in connection with financial futures
contracts or related options transactions is not
considered the purchase of a security on margin.
9. Write, purchase or sell puts, calls or
combinations thereof except that the Portfolio may (a)
write exchange-traded covered call options on portfolio
securities and enter into closing purchase transactions
with respect to such options, and the Portfolio may
write exchange-traded covered call options on foreign
currencies and secured put options on securities and
foreign currencies and write covered call and secured
put options on securities and foreign currencies traded
over the counter, and enter into closing purchase
transactions with respect to such options, (b) purchase
exchange-traded call options and put options and
purchase call and put options traded over the counter,
provided that the premiums on all outstanding call and
put options do not exceed 5% of its total assets, and
enter into closing sale transaction with respect to
such options, and (c) engage in financial futures
contracts and related options transactions, provided
that the sum of the initial margin deposits on the
Portfolio's existing futures and related options
positions and the premiums paid for related options
would not exceed 5% of its total assets.
10. Invest for the purpose of exercising control
or management of another issuer.
11. Invest in commodities, commodities futures
contracts, or real estate, although it may invest in
securities which are secured by real estate or real
estate mortgages and securities of issuers which invest
or deal in commodities, commodity futures, real estate
or real estate mortgages and provided that it may
purchase or sell stock index futures, foreign currency
futures, interest rate futures and options thereon.
12. Purchase or retain securities issued by
investment companies except to the extent permitted by
the Investment Company Act of 1940, as amended; or in
connection with a trustee's/director's deferred
compensation plan, as long as there is no duplication
of advisory fees.
Nonfundamental Investment Restrictions
CRI Money Market and Global have adopted the following
operating (i.e., non-fundamental) investment policies and restrictions
which may be changed by the Board of Directors without shareholder
approval. None of these Portfolios may:
1. Purchase the securities of any issuer with
less than three years' continuous operation if, as a
result, more than 5% of the value of its total assets
would be invested in securities of such issuers.
2. Purchase illiquid securities if more than 10%
(15% for Global) of the value of a Portfolio's net
assets would be invested in such securities. A Portfolio
may buy and sell securities outside the U.S. that are
not registered with the SEC or marketable in the U.S.
3. Purchase or retain securities of any issuer if
the officers, directors of the Portfolio or its
Advisors, owning beneficially more than 1/2 of 1% of
the securities of such issuer, together own
beneficially more than 5% of such issuer's securities.
4. Invest in warrants if more than 5% of the
value of the Portfolio's net assets would be invested
in such securities.
5. Invest in interests in oil, gas, or other
mineral exploration or development programs or leases
although it may invest in securities of issuers which
invest in or sponsor such programs.
Any investment restriction that involves a maximum percentage
of securities or assets will not be considered to be violated unless an
excess over the applicable percentage occurs immediately after an
acquisition of securities or utilization of assets, and the excess is
attributable to that event.
CRI STRATEGIC GROWTH
Fundamental Investment Restrictions
The Portfolio has adopted the following investment restrictions
which cannot be changed without the approval of the holders of a
majority of the outstanding shares of the Portfolio. As defined in the
Investment Company Act of 1940, this means the lesser of the vote of (a)
67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy or (b) more than
50% of the outstanding shares of the Portfolio. The Portfolio may not:
1. With respect to 50% of its assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its
agencies or instrumentalities) if, as a result, more
than 5% of the value of its total assets would be
invested in securities of that issuer. (The remaining
50% of its total assets may be invested without
restriction except to the extent other investment
restrictions may be applicable).
2. Concentrate 25% or more of the value of its
assets in any one industry; provided, however, that
there is no limitation with respect to investments in
obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, and
repurchase agreements secured thereby.
3. Make loans of more than one-third of the
assets of the Fund, or as permitted by law. The
purchase by the Fund 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 as permitted by the Board of Trustees within
applicable law, and except to the extent that in
connection with the disposition of its portfolio
securities, the Fund may be deemed to be an underwriter.
5. Purchase from or sell to any of the Fund's
officers or trustees, or companies of which any of them
are directors, officers or employees, any securities
(other than shares of beneficial interest of the Fund),
but such persons or firms may act as brokers for the
Fund for customary commissions.
6. Except as required in connection with
permissible options, futures and commodity activities
of the Fund, invest in commodities, commodity futures
contracts, or real estate, although it may invest in
securities which are secured by real estate or real
estate mortgages and securities of issuers which invest
or deal in commodities, commodity futures, real estate
or real estate mortgages and provided that it may
purchase or enter into futures contracts and options on
futures contracts, foreign currency futures, interest
rate futures and options thereon.
Nonfundamental Investment Restrictions
The Portfolio has adopted the following operating (i.e.,
non-fundamental) investment policies and restrictions which may be
changed by the Board of Trustees without shareholder approval. The
Portfolio may not:
7. Purchase the securities of any issuer with
less than three years continuous operation if, as a
result, more than 5% of the value of its total assets
would be invested in securities of such issuers.
8. Invest, in the aggregate, more than 15% of its
net assets in illiquid securities. Purchases of
securities outside the U.S. that are not registered
with the SEC or marketable in the U.S. are not per se
illiquid.
9. Invest, in the aggregate, more than 5% of its
net assets in the securities of issuers restricted from
selling to the public without registration under the
Securities Act of 1933, excluding restricted securities
eligible for resale pursuant to Rule 144A under that
statute.
10. Purchase or retain securities of any issuer if
the officers, Trustees of the Fund or its Advisors,
owning beneficially more than 1/2 of 1% of the
securities of such issuer, together own beneficially
more than 5% of such issuer's securities.
11. Invest in warrants if more than 5% of the
value of the Fund's net assets would be invested in
such securities.
12. Invest in interests in oil, gas, or other
mineral exploration or development programs or leases
although it may invest in securities of issuers which
invest in or sponsor such programs.
13. Borrow money in an amount exceeding one-third
of the Fund's total assets, or as permitted by law. In
order to secure any permitted borrowings under this
section, the Fund may pledge, mortgage or hypothecate
its assets.
14. Invest for the purpose of exercising control
or management of another issuer.
15. Invest in the shares of other investment
companies, except as permitted by the 1940 Act or
pursuant to Calvert's nonqualified deferred
compensation plan adopted by the Board of Trustees.
16. Purchase more than 10% of the outstanding
voting securities of any issuer.
For purposes of the Portfolio's concentration policy contained
in restriction (2), above, the Portfolio intends to comply with the SEC
staff position that securities issued or guaranteed as to principal and
interest by any single foreign government are considered to be
securities of issuers in the same industry.
CRI CAPITAL ACCUMULATION
Fundamental Investment Restrictions
The Portfolio has adopted the following investment restrictions
which cannot be changed without the approval of the holders of a
majority of the outstanding shares of the Portfolio. As defined in the
Investment Company Act of 1940, this means the lesser of the vote of (a)
67% of the shares of the Fund at a meeting where more than 50% of the
outstanding shares are present in person or by proxy or (b) more than
50% of the outstanding shares of the Portfolio. The Portfolio may not:
1. With respect to 50% of its assets, purchase
securities of any issuer (other than obligations of, or
guaranteed by, the United States Government, its
agencies or instrumentalities) if, as a result, more
than 5% of the value of its total assets would be
invested in securities of that issuer. The remaining
50% of its total assets may be invested without
restriction, except as disclosed elsewhere in the
Prospectus or SAI and except that no more than 25% may
be invested in the securities of any one issuer.
2. Concentrate 25% or more of the value of its
assets in any one industry; provided, however, that
there is no limitation with respect to investments in
obligations issued or guaranteed by the United States
Government or its agencies and instrumentalities, and
repurchase agreements secured thereby.
3. Make loans of more than one-third of the
assets of the Portfolio, or as permitted by law. The
purchase by the 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 as permitted by the Board of Directors within
applicable law, and except to the extent that in
connection with the disposition of its portfolio
securities, the Fund may be deemed to be an underwriter.
5. Purchase from or sell to any of the Fund's
officers or directors, or companies of which any of
them are directors, officers or employees, any
securities (other than shares of beneficial interest of
the Portfolio), but such persons or firms may act as
brokers for the Fund for customary commissions.
6. Except as required in connection with
permissible options, futures and commodity activities
of the Portfolio, invest in commodities, commodity
futures contracts, real estate or real estate limited
partnerships, although it may invest in securities
which are secured by real estate or real estate
mortgages and securities of issuers which invest or
deal in commodities, commodity futures, real estate or
real estate mortgages and provided that it may purchase
or sell stock index futures, foreign currency futures,
interest rate futures and options thereon.
7. Invest in the shares of other investment
companies, except as permitted by the 1940 Act or other
applicable law, or pursuant to Calvert's nonqualified
deferred compensation plan adopted by the Board of
Directors in an amount not to exceed 10% or as
permitted by law.
8. Purchase more than 10% of the outstanding
voting securities of any issuer.
Nonfundamental Investment Restrictions
Capital Accumulation has adopted the following operating (i.e.,
nonfundamental) investment policies and restrictions which may be
changed by the Board of Directors without shareholder approval. The Fund
may not:
9. Purchase the securities of any issuer with
less than three years' continuous operation if, as a
result, more than 5% of the value of its total assets
would be invested in securities of such issuers.
10. Invest, in the aggregate, more than 15% of its
net assets in illiquid securities. Purchases of
securities outside the U.S. that are not registered
with the SEC or marketable in the U.S. are not per se
illiquid.
11. Invest, in the aggregate, more than 5% of its
net assets in the securities of issuers restricted from
selling to the public without registration under the
Securities Act of 1933, excluding restricted securities
eligible for resale pursuant to Rule 144A under that
statute. Purchases of securities outside the U.S. that
are not registered with the SEC or marketable in the
U.S. are not per se restricted.
12. Make short sales of securities or purchase any
securities on margin except that the Fund may obtain
such short-term credits as may be necessary for the
clearance of purchases and sales of securities. The
depositor payment by the Fund of initial or maintenance
margin in connection with financial futures contracts
or related options transactions is not considered the
purchase of a security on margin.
13. Purchase or retain securities of any issuer if
the officers, Directors of the Fund or its Advisors,
owning beneficially more than 1/2 of 1% of the
securities of such issuer, together own beneficially
more than 5% of such issuer's securities.
14. Invest in warrants if more than 5% of the
value of the Portfolio's net assets would be invested
in such securities.
15. Invest in interests in oil, gas, or other
mineral exploration or development programs or leases
although it may invest in securities of issuers which
invest in or sponsor such programs.
16. Borrow money, except from banks for temporary
or emergency purposes, and then only in an amount not
to exceed one-third of the Portfolio's total assets, or
as permitted by law. In order to secure any permitted
borrowings under this section, the Portfolio may
pledge, mortgage or hypothecate its assets.
17. Invest for the purpose of exercising control
or management of another issuer.
For purposes of the Portfolio's concentration policy contained
in restriction (2), above, the Fund intends to comply with the SEC staff
position that securities issued or guaranteed as to principal and
interest by any single foreign government are considered to be
securities of issuers in the same industry.
Any investment restriction which involves a maximum percentage
of securities or assets shall not be considered to be violated unless an
excess over the applicable percentage occurs immediately after an
acquisition of securities or utilization of assets and results therefrom.
Virginia Law Restrictions
In addition to the investment restrictions described above, the
Portfolios will comply with restrictions contained in the current
Virginia Insurance Laws in order that the assets of the Variable
Accounts may be invested in Portfolio shares. The Virginia Insurance
Laws currently permit the Variable Accounts to invest in Portfolio
shares without restricting the Portfolios' investments. However, those
laws or their interpretation may change.
Lending of Portfolio Securities
Subject to the investment restrictions above, a Portfolio may
lend its securities to brokers, dealers and financial institutions and
receive as collateral cash or United States Treasury securities. At all
times while the loan is outstanding, collateral will be maintained in
amounts equal to at least 100% of the current market value of the loaned
securities. Any cash collateral will be invested in short-term
securities, which will increase the current income the Portfolio lending
its securities. Such loans will be terminable by the Portfolio at any
time and will not be made to affiliates of the Portfolio. The Portfolio
will have the right to regain record ownership of loaned securities to
exercise beneficial rights such as voting rights, subscription rights
and rights to dividends, interest or other distributions. The Portfolio
may pay reasonable fees to persons unaffiliated with the Portfolio for
arranging loans. The dividends, interest and other distributions
received by the Portfolio on loaned securities, for tax purposes, may be
treated as income other than qualified income for purposes of the 90%
test discussed below under "Taxes." The Portfolios intend to lend their
securities only to the extent that such activity does not jeopardize
their qualification as a regulated investment company under certain
provisions of the Internal Revenue Code. Loans of securities will be
made only to firms that the Investment Advisor deems creditworthy.
However, as with any extensions of credit, there are risks of delay in
recovery and even loss of rights in the collateral should the borrower
of securities fail financially.
When-Issued and Delayed Delivery Securities
From time to time, in the ordinary course of business, each
Portfolio may purchase securities on a when-issued or delayed delivery
basis -- that is, delivery and payment can take place a month or more
after the date of the transactions. The securities purchased in this
manner are subject to market fluctuation and no interest accrues to the
purchaser during this period. At the time a Portfolio makes a commitment
to purchase securities on a when-issued or delayed delivery basis, the
price is fixed and the Portfolio will record the transaction and
thereafter reflect the value, each day, of the security in determining
the net asset value of the Portfolio. At the time of delivery of the
securities, the value may be more or less than the purchase price.
The Portfolio will enter commitments for when-issued or delayed
delivery securities only when it intends to acquire the securities.
Accordingly, each Portfolio will establish a segregated account with the
Portfolio's custodian bank in which it will maintain cash or cash
equivalents or other portfolio securities equal in value to commitments
for such when-issued or delayed delivery securities. Subject to this
restriction, a Portfolio may purchase these securities without limit.
INVESTMENT SELECTION PROCESS
Investments in the Portfolios are selected on the basis of
their ability to contribute to the dual objective of the Portfolios. The
Subadvisors have each developed a number of techniques for evaluating
the performance of issuers in each of these areas. The primary sources
of information are reports published by the issuers themselves, the
reports of public agencies, and the reports of groups which monitor
performance in particular areas. These sources of information are
sometimes augmented with direct interviews or written questionnaires
addressed to the issuers. It should be recognized, however, that there
are few generally accepted measures by which achievement in these areas
can be readily distinguished; therefore, the development of suitable
measurement techniques is largely within the discretion and judgment of
the Advisors and Subadvisors of the Portfolio.
In making investment selections, each Portfolio Manager
determines and evaluates the appropriate portfolio composition on the
basis of asset prices and the perceived consequences and probabilities
of various economic outcomes that it deems possible. It then evaluates
numerous individual securities as candidates to fulfill the Portfolio's
investment objective and policies. Securities remain candidates for
inclusion in the Portfolios only if their prices and other
characteristics indicate that they have the potential to perform in a
way that is representative of their class of securities under the
different economic outcomes considered more probable by the Advisor or
Subadvisor.
Candidates for inclusion in any particular class of assets are
then examined according to the social criteria. The issuers are
classified into three categories of suitability under the social
criteria. In the first category are those issuers which exhibit unusual
positive accomplishment with respect to some of the criteria and do not
fail to meet minimum standards with respect to the remaining criteria.
To the greatest extent possible, investment selections are made from
this group. In the second category are those issuers which meet minimum
standards with respect to all the criteria but do not exhibit
outstanding accomplishment with respect to any criterion. This category
includes issuers which may lack an affirmative record of accomplishment
in these areas but which are not known by the Advisor or Subadvisor to
violate any of the social criteria. The third category under the social
criteria consists of issuers which flagrantly violate, or have violated,
one or more of those values, for example, a company which repeatedly
engages in unfair labor practices. The Portfolios will not knowingly
purchase the securities of issuers in this third category.
It should be noted that the Portfolios' social criteria tend to
limit the availability of investment opportunities more than is
customary with other investment companies. The Advisor and Subadvisors,
however, believe that within the first and second categories there are
sufficient investment opportunities to permit full investment among
issuers that satisfy the Portfolios' social investment objective.
To the greatest extent possible, the same social criteria is
applied to the purchase of non-equity securities as to equity
investments. Bank certificates of deposit, commercial paper, repurchase
agreements, and corporate bonds are judged in the same way as a
prospective purchase of the bank's or issuing company's common stock.
The Portfolios may invest, however, in certificates of deposit of banks
and savings and loan associations in which the Portfolios would not
otherwise invest because such institutions have assets of $1 billion or
less, but generally only to the extent all such investments are fully
insured as to principal by the Federal Deposit Insurance Corporation.
Obligations issued by the U.S. Treasury, such as U.S. Treasury
bills, notes and bonds, are supported by the full faith and credit of
the U.S. Government. Certain obligations issued or guaranteed by a U.S.
Government agency or instrumentality are supported by the full faith and
credit of the U.S. Government. These include obligations issued by the
Export-Import Bank, Farmers Home Administration, Government National
Mortgage Association, Postal Service, Merchant Marine, and Washington
Metropolitan Area Transit Authority. The Portfolios may also invest in
other U.S. Government agency or instrumentality obligations which are
supported only by the credit of the agency or instrumentality and may be
further supported by the right of the issuer to borrow from the U.S.
Treasury. Such obligations include securities issued by the Bank for
Cooperatives, Federal Intermediate Credit Bank, Federal Land Bank,
Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.
The Portfolio's current Subadvisors are described in the
Prospectus. See "The Fund And Its Management." The remaining pool of
Subadvisors are described below.
Apodaca Investment Group, Inc. ("Apodaca").: Apodaca of San Francisco,
California is a small-cap growth manager that seeks to discover
compelling investment ideas by focusing on those entrepreneurial
companies that identify and capitalize on positive trends. It looks for
companies that are experiencing a powerful acceleration in earnings,
exhibit a strong, high quality balance sheet or decidedly improving
financial statements and demonstrate strong relative price strength. Its
performance index is the Russell 2000.
Mr. Apodaca is Vice President of Apodaca-Johnston. He earned a
B.A. from the University of New Mexico in 1983, and has had active
business experience since that time.
Fortaleza Asset Management, Inc.: Fortaleza Asset Management, Inc., of
Chicago, Illinois, is a small-cap growth manager that bases its
investment principles on three key elements: (1) a proprietary stock
valuation system that incorporates technical and market sentiment
indicators to determine optimal buy points; (2) an emphasis on the
preservation of capital through the implementation of a strict selling
discipline to lock in capital gains and reduce losses; and (3) a
discipline that does not force equity commitment in overvalued markets.
The investment approach is based on a bottom-up stock selection process.
Its performance index is the Russell 2000.
Ms. Perez is the founder, President and Portfolio Manager of
Fortaleza, and has over 14 years of investment experience. Prior to
forming Fortaleza, Ms. Perez was Vice President and Portfolio Manager
for Monetta Financial Services, Inc., where she was directly involved in
the management of equity accounts totaling in excess of $100 million.
Ms. Perez is a native of Puerto Rico. She earned an MBA from
DePaul University School of Commerce. Ms. Perez is a member of various
professional organizations including the American Institute of CPAs,
National Society of Hispanic MBAs, Association for Investment Management
and Research, and the National Association of Securities Professionals.
She is also a trustee of the Chicago Historical Society.
Mr. Boves brings over 25 years of investment management and
research experience to Fortaleza. He has a master's degree in Economics
from Northern Illinois University and is a member of the Investment
Analysts Society in Chicago.
New Amsterdam Partners, L.P.: New Amsterdam Partners, L.P. is a mid-cap
value investment manager in New York, New York. New Amsterdam Partners
is a quantitative investment firm, evaluating investment opportunities
by comparing expected investment returns. The firm believes that the
disciplined use of their valuation techniques, in conjunction with
fundamental analysis of companies, is the key to understanding and
maximizing investment returns.
Michelle Clayman, General Partner of New Amsterdam, was a
founding partner of the company, which was started in 1986. Prior to
co-founding New Amsterdam, Ms. Clayman was a Vice President of Salomon
Brothers in charge of STOCKFACTS, an on-line computer system that
combines analytical tools for equity analysis and databases and was
designed and developed by Ms. Clayman. Ms. Clayman received her Bachelor
of Arts from Oxford University and an MBA from Stanford University. She
is a CFA and is past President of the Society of Quantitative Analysts.
Keith Graham is Vice President and Special Limited Partner of
New Amsterdam. Before joining the company in 1987, Mr. Graham was an
Assistant Treasurer at the Bankers Trust Company, first in the Trust
Administration Group and later in the Investment Management Consulting
Group.
Sturdivant & Co., Inc.: Sturdivant & Co., Inc., of Clementon, New
Jersey, seeks to identify undervalued companies or companies undergoing
significant changes that will enhance shareholder value. The company
utilizes a conservative, disciplined and consistently-applied decision
making process designed to achieve lower risk than the market.
Ralph Sturdivant is Chairman and CEO who, prior to founding the
firm, was a Vice President at Prudential-Bache Securities and an Account
Executive with Merrill Lynch. Mr. Sturdivant holds a Bachelor of Arts
from Morgan State University and is a member of the Financial Analysts
of Philadelphia.
Albert Sturdivant is President and CIO, and was a principal and
manager of the capital markets division of Grigsby, Brandford & Company
prior to co-founding Sturdivant & Co. Mr. Sturdivant earned an MBA from
the Wharton Business School of the University of Pennsylvania.
PORTFOLIO TURNOVER
Each Portfolio has a different expected annual rate of
portfolio turnover. Portfolio turnover is defined as the lesser of
annual purchases or sales of portfolio securities divided by the monthly
average of the value of the Portfolios' securities (excluding from the
computation all securities, including options, with maturities or
expiration dates at the time of acquisition of one year or less). A high
rate of portfolio turnover generally involves correspondingly greater
brokerage commission expenses, which must be borne directly by the
Portfolio. Notwithstanding increased brokerage commission expenses,
particular holdings may be sold at any time if investment judgment or
Portfolio operations make a sale advisable.
For the fiscal years 1994, 1995, and 1996, the portfolio
turnover rates for CRI Balanced were 43%, 163%, and 99%, respectively.
For the same time periods, the portfolio turnover rates for CRI Capital
Accumulation were 79%, 135%, and 124%, respectively. For the same time
periods, the portfolio turnover rates for the Global Equity series were
84%, 90%, and 85%, respectively. For the period from inception (March 1,
1995) through December 31, 1995, and for fiscal year 1996, the portfolio
turnover rates for Strategic Growth were 223% and 120%, respectively.
No Portfolio turnover rate can be calculated for CRI Money
Market due to the short maturities of the instruments purchased.
Portfolio turnover should not affect the income or net asset value of
CRI Money Market because brokerage commissions are not normally charged
on the purchase or sale of money market instruments.
PURCHASE AND REDEMPTION OF SHARES
The Portfolios continuously offer their shares at prices equal
to the respective net asset values of the Portfolios determined in the
manner set forth below under "Determination of Net Asset Value." The
Portfolios offer their shares, without sales charge, only for purchase
by various Insurance Companies for allocation to their Variable
Accounts. It is conceivable that in the future it may be disadvantageous
for both annuity Variable Accounts and life insurance Variable Accounts
of different Insurance Companies, to invest simultaneously in the
Portfolios, although currently neither the Insurance Companies nor the
Portfolio foresee any such disadvantages to either variable annuity or
variable life insurance policy holders of any Insurance Company. The
Portfolio's Board of Directors intends to monitor events in order to
identify any material conflicts between such policyholders and to
determine what action, if any, should be taken in response to any
conflicts.
The Portfolios are required to redeem all full and fractional
shares for cash. The redemption price is the net asset value per share,
which may be more or less than the original cost, depending on the
investment experience of the Portfolio. Payment for shares redeemed will
generally be made within seven days after receipt of a proper notice of
redemption. The right to redeem shares or to receive payment with
respect to any redemption may only be suspended for any period during
which (a) trading on the New York Stock Exchange is restricted as
determined by the Securities and Exchange Commission, or the Exchange is
closed for other than weekends and holidays; (b) an emergency exists, as
determined by the Securities and Exchange Commission, as a result of
which disposal of Portfolio securities or determination of the net asset
value of a Portfolio is not practicable; or (c) the Securities and
Exchange Commission by order permits postponement for the protection of
shareholders.
DETERMINATION OF NET ASSET VALUE
The net asset value of the shares of each Portfolio of the Fund
is determined by adding the values of all securities and other assets of
the Portfolio, subtracting liabilities and expenses, and dividing by the
number of shares of the Portfolio outstanding. Expenses are accrued
daily, including the investment advisory fee. CRI Money Market attempts
to maintain a constant net asset value of $1.00 per share; the net asset
values of CRI Balanced, Global, Strategic Growth and Capital
Accumulation fluctuate based on the respective market value of the
Portfolio's investments. The net asset value per share of each of the
Portfolios is determined every business day as of the close of the
regular session of the New York Stock Exchange (generally 4:00 p.m.
Eastern time), and at such other times as may be necessary or
appropriate. The Portfolios do 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. Each
Portfolio's net asset value per share is determined by dividing that
Portfolio's total net assets (the value of its assets net of
liabilities, including accrued expenses and fees) by the number of
shares outstanding.
The assets of CRI Balanced, Global Equity, Capital Accumulation
and Strategic Growth are valued as follows: (a) securities for which
market quotations are readily available are valued at the most recent
closing price, mean between bid and asked price, or yield equivalent as
obtained from one or more market makers for such securities; (b)
securities maturing within 60 days may be valued at cost, plus or minus
any amortized discount or premium, unless the Board of Directors
determines such method not to be appropriate under the circumstances;
and (c) all other securities and assets for which market quotations are
not readily available will be fairly valued by the Advisor in good faith
under the supervision of the Board of Directors. Securities primarily
traded on foreign securities exchanges are generally valued at the
preceding closing values on their respective exchanges where primarily
traded. Equity options are valued at the last sale price unless the bid
price is higher or the asked price is lower, in which event such bid or
asked price is used. Exchange traded fixed income options are valued at
the last sale price unless there is no sale price, in which event
current prices provided by market makers are used. Over-the-counter
fixed income options are valued based upon current prices provided by
market makers. Financial futures are valued at the settlement price
established each day by the board of trade or exchange on which they are
traded. Because of the need to obtain prices as of the close of trading
on various exchanges throughout the world, the calculation of the
Portfolio's net asset value does not take place for contemporaneously
with the determination of the prices of U.S. portfolio securities. For
purposes of determining the net asset value all assets and liabilities
initially expressed in foreign currency values will be converted into
United States dollar values at the mean between the bid and offered
quotations of such currencies against United States dollars at last
quoted by any recognized dealer. If an event were to occur after the
value of an investment was so established but before the net asset value
per share was determined which was likely to materially change the net
asset value, then the instrument would be valued using fair value
consideration by the Directors or their delegates.
CRI Money Market's assets, including securities subject to
repurchase agreements, are normally valued at their amortized cost which
does not take into account unrealized capital gains or losses. This
involves valuing an instrument at its cost and thereafter assuming a
constant amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value of the
instrument. While this method provides certainty in valuation, it may
result in periods during which value, as determined by amortized cost,
is higher or lower than the price that would be received upon sale of
the instrument.
Rule 2a-7 under the Investment Company Act of 1940 permits CRI
Money Market's assets to be valued at amortized cost if the Portfolio
maintains a dollar-weighted average maturity of 90 days or less and only
purchases obligations having remaining maturities of thirteen months or
less. Rule 2a-7 requires, as a condition of its use, that CRI Money
Market invest only in obligations determined by the Directors to be of
good quality with minimal credit risks and requires the Directors to
establish procedures designed to stabilize, to the extent reasonably
possible, the Portfolio's price per share as computed for the purpose of
sales and redemptions at $1.00. Such procedures include review of the
Portfolio's investment holdings by the Directors, at such intervals as
they may deem appropriate, to determine whether the Portfolio's net
asset value calculated by using available market quotations or
equivalents deviates from $1.00 per share based on amortized cost. If
such deviation exceeds 0.50%, the Directors will promptly consider what
action, if any, will be initiated. In the event the Directors determine
that a deviation exists which may result in material dilution or other
unfair results to investors or existing shareholders, the Directors will
take such corrective action as they regard as necessary and appropriate,
including: the sale of portfolio instruments prior to maturity to
realize capital gains or losses or to shorten average portfolio
maturity; the withholding of dividends or payment of distributions from
capital or capital gains; redemptions of shares in kind; or the
establishment of a net asset value per share based upon available market
quotations.
TAXES
In 1996 the Portfolios qualified, and in 1997 the Portfolios
intend to qualify, as a "regulated investment company" under the
provisions of Subchapter M of the Internal Revenue Code (the "Code"). To
qualify for treatment as a regulated investment company, each Portfolio
must, among other things, have assets that meet certain requirements
specified in the Code and (i) derive in each taxable year at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, and gains (without deduction for losses) from the sale
or other disposition of stock or securities, and (ii) derive less than
30% of its gross income in each taxable year from gains (without
deduction for losses) from the sale or other disposition of stock or
securities held less than three months. If the Portfolio distributes
substantially all of its net ordinary and capital gains income, the
Portfolio qualifies as a regulated investment company and is relieved
from paying federal income tax on amounts distributed. Each Portfolio
will be taxed as a separate entity.
Since the shareholders of the Portfolios are Insurance
Companies, this Statement of Additional Information does not contain a
discussion of the federal income tax consequences at the shareholder
level. For information concerning the federal tax consequences to
purchasers of annuity or life insurance policies, see the prospectus for
the policies.
CALCULATION OF YIELD AND TOTAL RETURN
CRI Money Market: Yield
From time to time CRI Money Market advertises its "yield" and
"effective yield." Both yield figures are based on historical earnings
and are not intended to indicate future performance. The "yield" of CRI
Money Market refers to the actual income generated by an investment in
the Portfolio over a particular base period of time. If the base period
is less than one year, the yield is then "annualized." That is, the net
change, exclusive of capital changes, in the value of a share during the
base period is divided by the net asset value per share at the beginning
of the period, and the result is multiplied by 365 and divided by the
number of days in the base period. Capital changes excluded from the
calculation of yield are: (1) realized gains and losses from the sale of
securities, and (2) unrealized appreciation and depreciation. CRI Money
Market's "effective yield" for a seven-day period is its annualized
compounded yield during the period, calculated according to the
following formula:
Effective yield = [(base period return) + 1]365/7 -- 1
For the seven-day period ended December 31, 1996, CRI Money
Market's yield was 4.88% and its effective yield was 5.00%.
The yield of the Money Market Portfolio will fluctuate in
response to changes in interest rates and general economic conditions,
portfolio quality, portfolio maturity, and operating expenses. Yield is
not fixed or insured and therefore is not comparable to a savings or
other similar type of account. Yield during any particular time period
should not be considered an indication of future yield. It is, however,
useful in evaluating a Portfolio's performance in meeting its investment
objective.
CRI Balanced, Global, Capital Accumulation and Strategic Growth: Total
Return and Other Quotations
CRI Balanced, Global, Capital Accumulation and Strategic Growth
may each advertise "total return." Total return is computed by taking
the total number of shares purchased by a hypothetical $1,000
investment, adding all additional shares purchased within the period
with reinvested dividends and distributions, calculating the value of
those shares at the end of the period, and dividing the result by the
initial $1,000 investment. For periods of more than one year, the
cumulative total return is then adjusted for the number of years, taking
compounding into account, to calculate average annual total return
during that period.
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 period. Total
return is historical in nature and is not intended to indicate future
performance. Total return for the Series for the periods indicated are
as follows:
<TABLE>
<CAPTION>
<S> <C>
Periods Ended
December 31, 1996 SEC Average Annual Return
CRI Balanced
One Year 12.62%
Five Years 10.45%
Ten Years 11.11%
CRI Global Equity
One Year 14.99%
From Inceptio<F1> 10.71%
CRI Capital Accumulation (formerly
known as CRI Ariel)
One Year 7.40%
Five Years 10.55%
From Inception<F2> 11.10%
CRI Strategic Growth
One Year 34.46%
From Inception<F3> 24.04%
<FN>
<F1>Average annual total return from June 30, 1992.
<F2>Average annual total return from July 16, 1991.
<F3>Average annual total return from March 15, 1995.
</FN>
</TABLE>
Total return, like yield and net asset value per share,
fluctuates in response to changes in market conditions. Neither total
return nor yield for any particular time period should be considered an
indication of future return.
INVESTMENT ADVISORY AGREEMENT
The Investment Advisory agreement between the Fund's original
investment advisor, Acacia Investment Management Corporation, and the
Fund regarding CRI Balanced was approved by the Fund's Board of
Directors, including a majority of the Directors who were not interested
persons of Acacia Investment Management Corporation, and by the
shareholder of the Portfolio. The Investment Advisory Agreement was also
approved on July 9, 1986, by Acacia National pursuant to the
instructions of variable annuity and variable life insurance
policyowners. On February 29, 1988, Calvert Asset Management Company,
Inc. acquired all the assets and liabilities of Acacia Investment
Management Corporation, including the rights and duties under the
Advisory Agreement, pursuant to merger (see "Investment Advisor"). An
amendment to the Investment Agreement adding CRI Money Market and Global
were presented to the Fund's Board for approval in May 1992. Unless
earlier terminated as described below, the Agreement will remain in
effect indefinitely if approved annually (a) by the Board of Directors
of the Fund or by a majority of the outstanding shares of the Portfolio,
including a majority of the outstanding shares of each Portfolio, and
(b) by a majority of the Directors who are not parties to such contract
or interested persons (as defined by the Investment Company Act of 1940)
of any such party. The Agreement is not assignable and may be terminated
without penalty on 60 days' written notice at the option of either party
or by the vote of the shareholders of the Portfolio.
The investment advisory fee described in the Prospectus will be
accrued daily and allocated to the various Portfolios on the basis of
the size of the respective Portfolio, as determined each day. There is
no assurance that the Portfolio will reach a net asset level high enough
to realize reduction to each Portfolio regardless of size on a "uniform
percentage" basis. Determination of the portion of the net assets of
each Portfolio to which a reduced rate is applicable is made by
multiplying the net assets of that Portfolio by the "uniform
percentage," which is derived by dividing the amount of the combined
assets of all Portfolios to which such rate applies by such combined
assets.
The Investment Advisory Agreement provides that the Advisor
will not be liable to the Portfolio or to any shareholder or policy
owner for any error of judgment or mistake of law or for any loss
suffered by the Portfolio or by any shareholder or policy owner in
connection with matters to which the Investment Advisory Agreement
relates, except a loss resulting from willful misfeasance, bad faith,
gross negligence, or reckless disregard on the part of the advisor in
the performance of its duties thereunder.
For the Fund's fiscal years ended December 31, 1994, 1995, and
1996, respectively, CRI Balanced paid CAM fees of $425,429, $610,216,
and $963,829. For 1994, 1995, and 1996, respectively, CRI Money Market
paid investment adviser fees of $14,484, $27,591, and $24,348,
respectively. For 1994, CRI Global paid investment advisory fees of
$46,185, and received expense reimbursements from CAM of $307. In 1995,
CRI Global paid CAM $93,418, and received expense reimbursements from
CAM of $36,720. In 1996, CRI Global paid CAM $122,600, and received
expense reimbursements from CAM of $27,740. For 1994, 1995, and 1996,
CRI Capital Accumulation (formerly CRI Ariel) paid investment advisory
fees of $39,358, $55,003, and $126,374. For fiscal year 1996, CRI
Strategic Growth paid CAM $28,564, and received expense reimbursements
from CAM of $3,794.
Securities Activities of the Investment Advisor
Securities held by the Portfolios may also be held by the
Insurance Companies, their separate accounts or mutual funds for which
the Investment Advisor or a Subadvisor acts as an investment advisor.
Because of different investment objectives or other factors, any of
these parties may buy shares of the Portfolios when one or more other
clients are selling the same security. Such transactions will be done in
a manner deemed equitable to all parties. To the extent that such
transactions increase the demand for a Portfolio's shares, there may be
an effect on share prices.
When deemed to be in the best interest of the Portfolios, the
Investment Advisors or Subadvisors may aggregate the securities with
those to be sold or purchased for other accounts or companies in order
to obtain favorable execution and low brokerage commissions. In that
event, allocation of the securities purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Investment
Advisor or Subadvisor in the manner it considers to be most equitable
and consistent with its fiduciary obligations to the Portfolios and to
the other accounts or companies involved. In some cases this procedure
may adversely affect the size of the position obtainable for a Portfolio.
Payment of Expenses
In addition to the portfolio management and investment advice
described above, CAM also is obligated to perform certain administrative
and management services and to provide all executive, administrative,
clerical and other personnel necessary to operate the Portfolio and to
pay the salaries of all these persons. CAM will furnish the Portfolio
with office space, facilities, and equipment and pay the day-to-day
expenses related to the operation and maintenance of such office space,
facilities and equipment. Legal, accounting and all other expenses
incurred in the organization of the Portfolio, including costs of
registering under federal and state securities laws, will also be paid
by CAM except with respect to those administrative services provided by
Calvert Administrative Services Company to CRI Global, CRI Capital
Accumulation, and CRI Strategic Growth pursuant to their Administrative
Services Agreements.
Expenses of the Fund will be accrued daily. Expenses that the
respective Portfolios of the Fund will pay individually include, but are
not limited to the following: brokerage commissions, dealer markups and
other expenses incurred in the acquisition or disposition of any
securities, printing costs (including the daily calculation of net asset
value), interest, certain taxes, charges of the custodian and transfer
agent, and other expenses attributable to a particular Portfolio.
Expenses which will be allocated to the various Portfolios on the basis
of the size of the respective portfolio, determined each day, include
legal and auditing fees, expenses of shareholder and director meetings,
independent director fees, bookkeeping expenses related to shareholder
accounts, insurance charges, cost of printing and mailing shareholder
reports and proxy statements, the cost to pay dividends and capital gain
distributions, the costs of printing and mailing registration
statements, the cost to pay dividends and capital gain distributions,
the costs of printing and mailing registration statements and updated
prospectuses to current shareholders, and the fees of any trade
association of which the Portfolio is a member. Expenses resulting form
legal actions involving the Portfolio and any amount for which it may be
obligated to indemnify its officers, directors and employees, may either
be directly applicable to particular Portfolios or allocated on the
basis of the size of the respective Portfolios, depending on the nature
of the legal action.
Securities Transactions and Brokerage
The Investment Advisor, and in some cases the Subadvisor, is
primarily responsible for the investment decisions of each Portfolio,
including decisions to buy and sell securities, the selection of brokers
and dealers to effect the transactions, the placing of investment
transactions, and the negotiation of brokerage commissions, if any. No
Portfolio has any obligation to deal with any dealer or group of dealers
in the execution of transactions in Portfolio securities. In placing
orders, it is the policy of each Portfolio to obtain the most favorable
net results, taking into account various factors, including price,
dealer spread or commission, the size of the transaction, and difficulty
of execution. While the Investment Advisor and Subadvisors generally
seek reasonably competitive spreads or commissions, the Portfolios will
not necessarily be paying the lowest spread or commission available.
If the securities in which a particular Portfolio invests are
traded primarily in the over-the-counter market, the Portfolio will
deal, where possible, with the dealers who make a market in the
securities involved unless better prices and execution are available
elsewhere. These "market makers" usually act as principals for their own
account. On occasion, the Portfolios may purchase securities directly
from the issuer. Bonds and money market securities are generally traded
on a net basis and do not normally involve either brokerage commission
or transfer taxes. The cost of Portfolio securities transactions will
consist primarily of brokerage commissions or dealer or underwriter
spreads.
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 and Subadvisors
under the direction and supervision of the Board of Directors. The
Advisor and Subadvisors select broker-dealers on the basis of their
professional capability and the value and quality of their services. The
Advisor and Subadvisor reserve the right to place orders for the
purchase or sale of portfolio securities with broker-dealers that have
sold shares of the Portfolios or that provide the Portfolios 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 and the Subadvisors, the
dollar value of such information and services is generally
indeterminable, and its availability or receipt does not serve
materially to reduce the Advisor's or Subadvisor's normal research
activities or expenses.
The Advisors and Subadvisors may also execute portfolio
transactions with or through broker-dealers that have sold shares of the
Portfolio. 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 Portfolio shares sold. The
Advisors or Subadvisors may compensate such broker-dealers at their own
expense in consideration of their promotional and administrative
services.
DIRECTORS AND OFFICERS
The directors and officers of the Fund and their principal
occupations are set forth below. Directors and Officers who are active
employees of the Investment Advisor or its affiliates will not receive
any additional compensation for their services to the Fund.
<F1> CHARLES E. DIEHL, Director. 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. Address: 1658 Quail
Hollow Court, McLean, Virginia 22101. DOB: 10/13/22.
ARTHUR J. PUGH, Director. Mr. Pugh also serves as a Director of
Acacia Federal Savings Bank. Address: 4823 Prestwick Drive, Fairfax,
Virginia 22030. DOB: 09/24/37.
SOUTH TRIMBLE, III, Director. Mr. Trimble has been a partner in
the law firm of Reasoner, Davis & Fox since 1956. Address: 888 17th
Street, N.W., Suite 800, Washington, DC 20006. DOB: 06/25/25.
FRANK H. BLATZ, JR., Esq., Director. Mr. Blatz is a partner in
the law firm of Abrams, Blatz, Gran, Hendricks, & Reina, P.A. He is also
a director/trustee of The Calvert Fund, Calvert Cash Reserves d/b/a
Money Management Plus, First Variable Rate Fund, Calvert Tax-Free
Reserves, and Calvert Municipal Fund, Inc. Address: 900 Oak Tree Road,
South Plainfield, New Jersey 07080. DOB: 10/29/35.
1 RONALD M. WOLFSHEIMER, Treasurer. Mr. Wolfsheimer is an
officer of each of the Calvert Group Funds. He is also Senior Vice
President and Controller of Calvert Group, Ltd. and its affiliated
companies. Mr. Wolfsheimer is Vice President and Treasurer of
Calvert-Sloan Advisers, L.L.C.
1 WILLIAM M. TARTIKOFF, Esq., Vice President and Secretary. Mr.
Tartikoff is General Counsel, Secretary, and Senior Vice President of
Calvert Group, Ltd., and its subsidiaries, and is an officer of each of
the other investment companies in the Calvert Group of Funds. Mr.
Tartikoff is Vice President and Secretary of Calvert-Sloan Advisers,
L.L.C., and is an officer of Acacia National Life Insurance Company.
1 RENO J. MARTINI, Senior Vice President. Mr. Martini is 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 officer of Calvert-Sloan Advisers, L.L.C.
1 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.
1 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.
1 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.
1 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.
1 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..
The address of Directors and Officers, unless otherwise noted,
is 4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814.
Directors and Officers as a group beneficially own less than 1% of the
outstanding shares of the Fund.
During fiscal 1996, directors of the Fund not affiliated with
the Fund's Advisor were paid $435 by CRI Money Market, $11,108 by CRI
Balanced, $40,000 by CRI Global Equity, $1,259 by CRI Capital
Accumulation and $150 by CRI Strategic Growth. Each Director of the Fund
who is not affiliated with the Advisor receives a meeting fee of $750
for each Board meeting attended; such fees are allocated among the
Series based upon their relative net assets. Directors not on any other
Calvert Group Fund Boards receive an annual fee of $3,000.
Directors of the Fund not affiliated with the Fund's Advisor
("noninterested persons") may elect to defer receipt of all or a
percentage of their annual fees and invest them in any fund in the
Calvert Family 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.
<TABLE>
<CAPTION>
Director Compensation Table - Fiscal Year 1996
<S> <C> <C> <C>
Aggregate Pension or Total
Compensation Retirement Compensation
from Fund for Benefits from Registrant
Name of Director service as Accrued as part and Fund Complex
Director of Fund paid to
Expenses<F5> Directors<F6>
Frank H. Blatz, Jr. $2,575 $2,575 $37,875
Charles E. Diehl $2,500 $2,500 $35,475
Arthur J. Pugh $2,639 $2,639 $36,736
South Trimble, III $5,750 $5,750 $ 5,750
<FN>
<F1> Directors or Officers deemed to be "interested persons" of the fund,
as defined in the Investment Company Act of 1940.
<F5> No Directors have chosen to defer a portion of their compensation.
<F6> As of December 31, 1996, the Fund Complex consists of nine (9)
registered investment companies.
</FN>
</TABLE>
METHOD OF DISTRIBUTION
The Fund has entered into an agreement with Calvert
Distributors, Inc. ("CDI") whereby CDI, acting as principal underwriter
for the Fund, makes a continuous offering of the Fund's securities on a
"best efforts" basis. Under the terms of the agreement, CDI is entitled
to receive a fee from the Fund of $15,000 per year. However, in the past
CDI has waived this fee. No associated person or broker-dealer may have
an interest in the fees payable to CDI. CDI is responsible for paying
(i) all commissions or other fees to its associated persons which are
due for the sale of the Policies, and (ii) any compensation to other
broker-dealers and their associated persons due under the terms of any
sales agreement between CDI and the broker-dealers.
TRANSFER AGENT
Calvert Shareholder Services, Inc., an affiliate of the
Advisor, serves as transfer agent. It receives a fee, from the Fund, of
0.03% of average annual assets of the Portfolio, payable monthly.
GENERAL INFORMATION
The Fund was incorporated in Maryland on September 27, 1982.
The authorized capital stock of the Fund consists of three hundred fifty
million shares of stock, par value of $1.00 per share. The Fund's Board
of Directors may, from time to time, authorize the issuance of
additional shares having the descriptions, powers and rights, and the
qualifications, limitations, and restrictions thereof, as the Board of
Directors may determine. The Board of Directors may also change the
designation of any portfolio and may increase or decrease the number of
shares of any portfolio, but may not decrease the number of shares of
any Portfolio below the number of shares of that portfolio then
outstanding. All shares of common stock have equal voting rights
(regardless of the net asset value per share) except that only shares of
the respective portfolio are entitled to vote on matters concerning only
that portfolio. Pursuant to the Investment Company Act of 1940 and the
rules and regulations thereunder, certain matters approved by a vote of
all shareholders of the Fund may not be binding on a portfolio whose
shareholders have not approved that matter. Each issued and outstanding
share is entitled to one vote and to participate equally in dividends
and distributions declared by the respective portfolio and, upon
liquidation or dissolution, in net assets of such portfolio remaining
after satisfaction of outstanding liabilities. The shares of each
portfolio, when issued, will be fully paid and non-assessable and have
no preemptive or conversion rights. Holders of shares of any portfolio
are entitled to redeem their shares as set forth above under "Purchase
and Redemption of Shares." The shares do not have cumulative voting
rights and the holders of more than 50% of the shares of the Fund voting
for the election of directors can elect all of the directors of the Fund
if they choose to do so and in such event the holders of the remaining
shares would not be able to elect any directors.
The Fund's Board of Directors has adopted a "proportionate
voting" policy, meaning that Insurance Companies will vote all of the
Fund's shares, including shares the Insurance Companies hold, in return
for providing the Fund with its capital and in payment of charges made
against the variable annuity or variable life separate accounts, in
proportion to the votes received from contractholders or policyowners.
REPORTS TO SHAREHOLDERS AND POLICYHOLDERS
The Fund will issue unaudited semi-annual reports showing the
Fund's investments and other information, and it will issue annual
reports containing financial statements audited by independent certified
public auditors.
ADDITIONAL INFORMATION
The Prospectus and this Statement of Additional Information do
not contain all the information set forth in the registration statement
and exhibits relating thereto, which the Fund has filed with the
Securities and Exchange Commission, Washington, D.C. under the
Securities Act of 1933 and the Investment Company Act of 1940, to which
reference is hereby made.
FINANCIAL STATEMENTS
The audited financial statements for the Fund included in the
Annual Report to Shareholders dated December 31, 1996, are expressly
incorporated by reference and made a part of this Statement of
Additional Information. Copies of the Annual Report may be obtained free
of charge by writing or calling the Fund.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
The Board of Directors has appointed Coopers & Lybrand, L.L.P.
as the Fund's independent accountants for fiscal year 1997. State Street
Bank and Trust Company of Boston, Massachusetts is custodian of the
Fund's assets. First National Bank of Maryland acts as custodian of
certain of the Fund's cash assets.
APPENDIX
Corporate Bond Ratings
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.
Commercial Paper Ratings
Moody's Investors Services, Inc.
A Prime rating is the highest commercial paper rating assigned
by Moody's Investors Service, Inc. Issuers rated Prime are further
referred to by use of numbers 1, 2, and 3 to denote relative strength
within this highest classification. Among the factors considered by
Moody's in assigning ratings for an issuer are the following: (1)
management; (2) economic evaluation of the inherent uncertain areas; (3)
competition and customer acceptance of products; (4) liquidity; (5)
amount and quality of long-term debt; (6) ten year earnings trends; (7)
financial strength of a parent company and the relationships which exist
with the issuer; and (8) recognition by management of obligations which
may be present or may arise as a result of public interest questions and
preparations to meet such obligations.
Standard & Poor's Corporation
Commercial paper rated A by Standard & Poor's Corporation has
the following characteristics: Liquidity ratios are better than the
industry average. Long term senior debt rating is "A" or better. In some
cases BBB credits may be acceptable. The issuer has access to at least
two additional channels of borrowing. Basic earnings and cash flow have
an upward trend with allowance made for unusual circumstances.
Typically, the issuer's industry is well established, the issuer has a
strong position within its industry and the reliability and quality of
management is unquestioned. Issuers rated A are further referred to by
use of numbers 1, 2, and 3 to denote relative strength within this
classification.
<PAGE>
ACACIA CAPITAL CORPORATION
PART C. OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements
Financial statements incorporated by reference
to:
All financial statements for Acacia Capital Corporation
are incorporated by reference to Registrant's Annual
Report to Shareholders 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 of Acacia Capital
Corporation, incorporated by reference to
Initial Filing, dated 11/3/82.
(a) Restated Articles of Incorporation of Acacia
Capital Corporation, incorporated by reference
to Post-Effective Amendment No. 31, dated
11/25/95.
(b) Articles Supplementary of Acacia Capital
Corporation, incorporated by reference to
Post-Effective Amendment No. 31, dated 2/22/96.
(i) Articles Supplementary of Acacia Capital
Corporation (filed herewith).
(2) By-laws of Acacia Capital Corporation,
incorporated by reference to Pre-Effective
Amendment No. 1, dated 8/10/83.
(a) Amended By-laws of Acacia Capital Corporation,
incorporated by reference to Post-Effective
Amendment No. 31, dated 2/7/96.
(4) Specimen Stock Certificate, incorporated by
reference to Pre-Effective Amendment No. 1,
dated 8/10/83.
(5) Investment Advisory Agreement and
Sub-Investment Advisory Agreements, incorporated
by reference to Post-Effective Agreement No. 31.
(7) Deferred Compensation Agreement, incorporated
by reference to Post-Effective Agreement No. 31.
(8) Custody Agreement incorporated by reference to
Pre-Effective Amendment No. 1, dated 8/10/83.
(9) Shared Funding Agreement, incorporated by
reference to Post-Effective Amendment No. 10,
dated 3/2/89.
(10) Opinion and Consent of Counsel (filed
herewith).
(11) Consent of Independent Auditors to Use of
Report (filed herewith).
(13) Letter Regarding Initial Capital, incorporated
by reference to Pre-Effective Amendment No. 1,
dated 8/10/83.
(16) Schedule for Computation of Performance
Quotation incorporated by reference to
Registrant's Post-Effective Amendment No. 9,
dated 5/2/88, and Post-Effective Amendment No.
11, 4/20/90.
(17) Financial Data Schedules (filed herewith).
Exhibits 3, 6, 12, 14, 15, and 18 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. Members of
the Board may also serve on a Board of Trustees/Directors with other
registered investment companies, including First Variable Rate Fund,
Calvert Tax-Free Reserves, Calvert Social Investment Fund, Money
Management Plus, The Calvert Fund, Calvert Municipal Fund, Inc., Calvert
New World Fund, Inc., and Calvert World Values Fund, Inc.
Insurance Companies that invest in the Fund will vote Fund
shares they hold in accordance with instructions received from variable
annuity contractholders and variable life insurance policyowners.
Item 26. Number of Holders of Securities
Number of Record-
Holders as of
Title of Class February 28, 1997
Calvert Responsibly Invested Balanced Series
(formerly Calvert Socially Responsible Series)...........25
Calvert Responsibly Invested Capital Accumulation Series........10
Calvert Responsibly Invested Money Market Series.................6
Calvert Responsibly Invested Strategic Growth Series.............7
Calvert Responsibly Invested Global Equity Series................5
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, director, 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 $9 million Investment Company Blanket Bond issued by ICI
Mutual Insurance Company, P.O. Box 730, Burlington, Vermont, 05402, and
an additional $5 million in excess of $9 million blanket bond with Chubb
Group of Insurance Companies, 15 Mountain View Road, Warren, New Jersey
07061.
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
Calvert Cash Reserves
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
---------------
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
Calvert Cash Reserves 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
---------------
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 Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
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
Insurance Companies Director
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
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.
Investment Advisor Director
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Shareholder Services, Inc.
Transfer Agent Director
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Social Investment Fund
Investment Company Trustee
4550 Montgomery Avenue
Bethesda, Maryland 20814
-----------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Robert-John H. Acacia National Life Insurance Officer
Sands Insurance Company and
51 Louisiana Avenue, NW Director
Washington, D.C. 20001
----------------
Acacia Mutual Life Insurance
Insurance Company Officer
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 Officer
Services Corporation and
Service Corporation Director
51 Louisiana Avenue, N.W.
Washington, D.C. 20001
---------------
Gardner Montgomery Company Officer
Tax Return Preparation and
Services Director
51 Louisiana Avenue, NW
Washington, D.C. 20001
----------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
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.
Investment Advisor Director
4550 Montgomery Avenue
Bethesda, MD 20814
---------------
Calvert Shareholder Services, Inc.
Transfer Agent Director
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
William M. Tartikoff Acacia National Life Insurance
Insurance Company Officer
51 Louisiana Avenue, NW
Washington, D.C. 20001
---------------
First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
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
---------------
Calvert Administrative Officer
Services Company
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address
Capacity
William M. Tartikoff Calvert Asset Management Officer
(continued) 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.
Investment Advisor Officer
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
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
----------------
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Susan Walker Bender Calvert-Sloan Advisers, L.L.C.
(continued) Investment Advisor Officer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
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
---------------
Katherine Stoner 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
----------------
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Katherine Stoner First Variable Rate Fund for
Government Income
(continued) Calvert Tax-Free Reserves Officer
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Acacia Capital Corporation
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Calvert Sloan Advisers, L.L.C.
Investment Advisor Officer
4550 Montgomery Avenue
Bethesda, Maryland 20814
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
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
---------------
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Lisa Crossley Calvert-Sloan Advisers, L.L.C.
(continued) Investment Advisor Officer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
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
---------------
Ivy Wafford Duke 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
---------------
Item 28. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Ivy Wafford Duke Calvert-Sloan Advisers, L.L.C.
(continued) Investment Advisor Officer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
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
---------------
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 Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
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
------------------
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
------------------
Item 29. Principal Underwriters
(a) Registrant's principal underwriter also underwrites the securities
of each of Registrant's series, as well as the securities of First Variable Rate
Fund for Government Income, Calvert Social Investment Fund, Calvert Cash
Reserves, Calvert Municipal Fund, Inc., Calvert World Values Fund, Inc., 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 Director, Senior Vice Treasurer
President, and Controller
William M. Tartikoff Director, Senior Vice Vice President and
President, and Secretary 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 and Assistant Secretary
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, Treasurer
and
William M. Tartikoff, Secretary
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
Item 31. Management Services
All management-related service contracts are discussed in Part
A or B of this Registration Statement.
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.
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 22nd day of April, 1997.
ACACIA CAPITAL CORPORATION
By: ___________________________
William M. Tartikoff
Vice President & Secretary
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
________________________ Vice President & Secretary 04/22/97
William M. Tartikoff
________________________ Principal Accounting 04/22/97
Ronald M. Wolfsheimer Officer
__________**____________ Director 04/22/97
Charles E. Diehl
__________**____________ Director 04/22/97
Arthur J. Pugh
__________**____________ Director 04/22/97
South Trimble, III
__________**____________ Director 04/22/97
Frank H. Blatz, Jr.
** Signed by Susan Walker Bender
pursuant to power of attorney, attached hereto.
/s/Susan Walker Bender
<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(b)(17)(i) Financial Data Schedules
Ex99 Articles of Supplementary
Exhibit 10
24(b)(10)
April 22, 1997
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Exhibit 10, Form N-1A
Acacia Capital Corporation
File numbers 811-3591, 2-80154
Ladies and Gentlemen:
As Counsel to Acacia Capital Corporation, it is my opinion,
based upon an examination of the Articles of Incorporation and By-Laws
and such other original or photostatic copies of Fund records,
certificates of public officials, documents, papers, statutes, and
authorities as I deemed necessary to form the basis of this opinion,
that the securities being registered by this Post-Effective Amendment
No. 32 will, when sold, be legally issued, fully paid and non-assessable.
Consent is hereby given to file this opinion of counsel with
the Securities and Exchange Commission as an Exhibit to the Fund's
Post-Effective Amendment No. 32 to its Registration Statement.
Sincerely,
/s/ Susan Walker Bender
Susan Walker Bender
Assistant Counsel
Exhibit 11
24(b)(11)
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of
Acacia Capital Corporation
We consent to the incorporation by reference in Post-Effective Amendment
No. 32 to the Registration Statement of Acacia Capital Corporation (comprised of
the Calvert Responsibly Invested Capital Accumulation, Strategic Growth,
Balanced, Global Equity, and Money Market Portfolios) on Form N-1A (File Numbers
2-80154 and 811-3591) of our reports dated January 31, 1997, on our audits of
the financial statements and financial highlights of the Portfolios, 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.
Baltimore, Maryland
April 15, 1997
POWER OF ATTORNEY
I, the undersigned Director of Acacia Capital Corporation (the
"Fund"), 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 Fund 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 Fund
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 Fund, 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, the Internal Revenue Code of 1986, 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 Fund in
connection with any transaction approved by the Board of Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the
Fund, 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.
April 22, 1997 /s/South Trimble, III
Date Signature
/s/Arthur James Pugh South Trimble, III
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Acacia Capital Corporation (the
"Fund"), 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 Fund 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 Fund
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 Fund, 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, the Internal Revenue Code of 1986, 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 Fund in
connection with any transaction approved by the Board of Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the
Fund, 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.
April 22, 1997 /s/Arthur James Pugh
Date Signature
/s/South Trimble III Arthur James Pugh
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Acacia Capital Corporation (the
"Fund"), 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 Fund 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 Fund
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 Fund, 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, the Internal Revenue Code of 1986, 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 Fund in
connection with any transaction approved by the Board of Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the
Fund, 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.
April 22, 1997 /s/Charles E. Diehl
Date Signature
/s/Frank H. Blatz, Jr. Charles E. Diehl
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Director of Acacia Capital Corporation (the
"Fund"), 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 Fund 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 Fund
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 Fund, 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, the Internal Revenue Code of 1986, 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 Fund in
connection with any transaction approved by the Board of Directors.
When any of the above-referenced attorneys signs my name to any
document in connection with maintaining the lawful operation of the
Fund, 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.
April 22, 1997 /s/Frank H. Blatz, Jr.
Date Signature
/s/Charles E. Diehl Frank H. Blatz, Jr.
Witness Name of Director
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<OVERDISTRIBUTION-GAINS> 0
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<INTEREST-INCOME> 3929
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<EXPENSES-NET> 1047
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ARTICLES SUPPLEMENTARY
ACACIA CAPITAL CORPORATION
FIRST: Acacia Capital Corporation (the "Corporation"), whose mailing
address is 4550 Montgomery Avenue, Suite 1000N, Bethesda, MD 20814, does hereby
increase the number of authorized shares of stock of the Corporation's various
classes in accordance with Sections 2-105(c) and 2-208.1 of the Corporations and
Associations Article of the Laws of the State of Maryland.
SECOND: The Corporation is registered as an open-end company under the
Investment Company Act of 1940.
THIRD: Immediately prior to this action, the total number of shares of
stock of all classes ("portfolios"), which the Corporation is authorized to
issue is One Hundred Million (100,000,000) shares of stock. The par value of
each share is One Dollar ($1.00). The aggregate par of all the shares of all the
portfolios is $100,000,000. Each portfolio was allocated the following number of
authorized shares:
CRI Balanced Portfolio 92,000,000
CRI Money Market Portfolio 5,000,000
CRI Global Equity Portfolio 1,000,000
CRI Capital Accumulation Portfolio 1,000,000
CRI Strategic Growth Portfolio 1,000,000
TOTAL SHARES AUTHORIZED 100,000,000
FOURTH: The Board of Directors has approved the increase in authorized
shares among the Corporation's portfolios in accordance with Section 2-105(c)
and 2-208.1 of the Corporations and Associations Article of the Laws of the
State of Maryland. The par value of each share is $1.00. The aggregate par value
of all the shares of all the portfolios is $325,000,000. After the respective
increase of authorized shares, each of the portfolios below has been allocated
shares as follows:
CRI Balanced Portfolio 300,000,000
CRI Money Market Portfolio 10,000,000
CRI Global Equity Portfolio 5,000,000
CRI Capital Accumulation Portfolio 5,000,000
CRI Strategic Growth Portfolio 5,000,000
TOTAL SHARES AUTHORIZED 325,000,000
IN WITNESS WHEREOF, Acacia Capital Corporation has caused this Articles
Supplementary to be signed in its name and on its behalf by its Vice President
on this 19th day of March 1997. Under penalties of perjury, the matters and
facts set forth herein are true in all material respects.
Acacia Capital Corporation
Acknowledgment:
Reno J. Martini
Senior Vice President
ATTEST:
Susan Walker Bender
Assistant Secretary
