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. 37 XX
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940
Amendment No. 37 XX
Calvert Variable Series, Inc.
(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, 1999
pursuant to paragraph (b) pursuant to paragraph (b)
__ 60 days after filing __ on (date)
pursuant to paragraph (a) pursuant to paragraph (a)
of Rule 485.
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PROSPECTUS
April 30, 1999
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL PORTFOLIOS
1 SOCIAL MONEY MARKET PORTFOLIO
10 SOCIAL SMALL CAP PORTFOLIO
23 SOCIAL MID CAP GROWTH PORTFOLIO
36 SOCIAL INTERNATIONAL EQUITY PORTFOLIO
50 SOCIAL BALANCED PORTFOLIO
These securities have not been approved or disapproved by the Securities and
Exchange Commission ("SEC") or any state securities commission nor has the
SEC or any state securities commission passed upon the accuracy or adequacy
of this prospectus. Any representation to the contrary is a criminal offense.
<PAGE>
SOCIAL MONEY MARKET PORTFOLIO
About the Portfolio
2 Investment Objective, Strategy, Past Performance
4 Principal Investment Practices and Risks
About Social Investing
4 Investment Selection Process
4 Socially Responsible Investment Criteria
About Your Investment
6 The Fund and Its Management
6 Advisory Fee and Expenses
6 A Word About the Year 2000 (Y2K)
7 Purchases and Redemptions of Shares
8 Dividends and Distributions
8 Taxes
8 Financial Highlights
Calvert Social Money Market Portfolio of Calvert Variable Series, Inc.
(the "Fund") should not be confused with the Calvert Social Investment Fund
Money Market Portfolio. Performance of the two portfolios will differ.
<PAGE>
CVS SOCIAL MONEY MARKET
Advisor: Calvert Asset Management Company, Inc.
Objective
CVS Social Money Market seeks 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.
Principal Investment Strategies
CVS Social Money Market invests in high quality, money market instruments,
such as commercial paper, variable rate demand notes, corporate, agency and
taxable municipal obligations. All investments must comply with the SEC
money market fund requirements.
The Portfolio invests with the 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.
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria. See "Investment
Selection Process."
Principal Risks
o The Portfolio's yield will change in response to market interest
rates. In general, as market rates go up so will the Portfolio's yield, and
vice versa.
o Although the Portfolio tries to keep the value of its shares
constant at $1.00 per share, extreme changes in market rates, and or sudden
credit deterioration of a holding could cause the value to decrease.
o The Portfolio limits the amount it invests in any one issuer to try
to lessen its exposure.
An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency. Although the Portfolio seeks to preserve the value of
your investment at $1.00 per share, it is still possible to lose money by
investing in the Portfolio.
Past Performance
The bar chart and table below show the Portfolio's annual returns and its
long-term performance. The chart shows how the performance has varied from
year to year and provides an indication of the risk of investing in the
Portfolio. The table compares the Portfolio's returns over time to the
Lipper Variable Annuity Money Market Funds Index, a composite index of the
annual return of mutual funds that have an investment goal similar to that
of the Portfolio. The Portfolio's past performance does not necessarily
indicate how the Portfolio will perform in the future.
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[Bar Chart]
CVS Social Money Market
Year-by-Year Total Return
1993 3.12%
1994 3.96%
1995 5.37%
1996 4.95%
1997 5.20%
1998 5.14%
Best Quarter (of periods shown) Q1 '95 1.36%
Worst Quarter (of periods shown) Q3 '92 0.15%
Average Annual Total Returns (for the periods ended December 31, 1998)
1 year 5 years Since Inception*
CVS Social
Money Market 5.14% 4.92% 4.40%
Lipper VA Money
Market Funds Average 4.02% 4.92% 4.44%
*Fund inception 6/30/92.
For current yield information call 800-368-2745, or visit Calvert Group's
website at www.calvertgroup.com
Separate account expenses may differ so that the Portfolio's return could be
lower.
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Principal Investment Practices and Risks
The most concise description of the Portfolio's principal investment
strategies and associated risks is under the risk-return summary. The
Portfolio is also permitted to invest in certain other investments and to
use certain investment techniques that have higher risks associated with
them.
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 ("SAI").
Investment Selection Process
Each investment is selected with a concern for it's social input.
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.
Socially Responsible Investment Criteria
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.
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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 into the next 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.
<PAGE>
The Fund and Its Management
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.
Calvert Asset Management Company, Inc. ("CAMCO") (4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814) is the Portfolio's investment advisor
and provides day-to-day investment management services to the Portfolio. It
has been managing mutual funds since 1976. CAMCO is the investment advisor
for over 25 mutual funds, including the first and largest family of socially
screened funds. As of December 31, 1998, CAMCO had $6 billion in assets
under management.
Advisory Fee and Expenses
The annual advisory fee paid to CAMCO by the Portfolio for the most recent
fiscal year was 0.50% of the Portfolio's average daily net assets. Effective
March 1, 1999, the advisory fee will be 0.30%. The new lower advisory fee,
when added to the new administrative fee, equals the previous advisory fee.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, CAMCO and its service providers use computer
systems for all aspects of our business -- processing shareholder and fund
transactions, fund accounting, executing trades, and pricing securities just
to name a few. Many current software programs cannot distinguish between the
year 2000 and the year 1900. This can cause problems with retirement plan
distributions, dividend payment software, transaction software, and numerous
other areas that could impact the Fund. Calvert Group has been reviewing all
of its computer systems for Y2K compliance. Although, at this time, there
can be no assurance that there will be no negative impact on the Fund, the
Advisor, the underwriter, transfer agent and custodian have advised the Fund
that they have been
<PAGE>
actively working on any necessary changes to their computer systems to
prepare for Y2K and expect that their systems, and those of their outside
service providers, will be adapted in time for that event. For more
information, please visit our website at www.calvertgroup.com
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.
<PAGE>
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. 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 Social Money Market 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. 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.
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.
Financial Highlights
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past 5 years. Certain information
reflects financial results for a single share, by Portfolio. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in a Portfolio (assuming reinvestment of all
dividends and distributions), and does not reflect any applicable charges or
expenses deducted by the Insurance Companies. This information has been
audited by PricewaterhouseCoopers LLP whose report, along with a Portfolio's
financial statements, are included in the Portfolio's annual report, which
is available upon request.
<PAGE>
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .050 .051 .048
Total from investment
operations .050 .051 .048
Distributions from
Net investment income (.050) (.051) (.048)
Total increase (decrease) in
net asset value -- -- --
Net asset value, ending $1.00 $1.00 $1.00
Total return 5.14% 5.20% 4.95%
Ratios to average net assets:
Net investment income 5.01% 5.10% 4.82%
Total expenses + .66% .69% .75%
Net expenses .63% .59% .62%
Net assets, ending
(in thousands) $11,205 $6,242 $4,378
Number of shares outstanding,
ending (in thousands) 11,209 6,246 4,382
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .055 .039
Total from investment operations .055 .039
Distributions from
Net investment income (.055) (.039)
Total increase (decrease) in net asset value -- --
Net asset value, ending $1.00 $1.00
Total return 5.37% 3.96%
Ratios to average net assets:
Net investment income 5.23% 3.91%
Total expenses + .66% NA
Net expenses .59% .45%
Expenses reimbursed -- .36%
Net assets, ending (in thousands) $5,129 $6,479
Number of shares outstanding,
ending (in thousands) 5,133 6,484
+ 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. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
SOCIAL SMALL CAP GROWTH PORTFOLIO
About the Portfolio
11 Investment Objective, Strategy, Past Performance
13 Principal Investment Practices and Risks
About Social Investing
17 Investment Selection Process
17 Socially Responsible Investment Criteria
About Your Investment
18 The Fund and its Management
19 Advisory Fee and Expenses
19 A Word About the Year 2000 (Y2K)
20 Purchases and Redemptions of Shares
21 Dividends and Distributions
21 Taxes
21 Financial Highlights
Calvert Social Small Cap Portfolio of Calvert Variable Series, Inc. (the
"Fund") should not be confused with the Calvert New Vision Small Cap
Portfolio. Performance of the two portfolios will differ.
<PAGE>
CVS SOCIAL SMALL CAP GROWTH
Advisor: Calvert Asset Management Company, Inc.
Subadvisor: Awad Asset Management, Inc.
Objective
CVS Social Small Cap Growth seeks to provide long-term capital appreciation
by investing primarily in equity securities of companies that have small
market capitalizations. This objective may be changed by the Fund's Board of
Directors without shareholder approval.
Principal investment strategies
At least 65% of CVS Social Small Cap Growth's assets will be invested in the
common stocks of small-cap companies. Returns in the Portfolio will be
mostly from the changes in the price of the Portfolio's holdings (capital
appreciation).
The Portfolio currently defines small-cap companies as those with market
capitalization of $1 billion or less at the time the Portfolio initially
invests.
The Portfolio invests with the 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.
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria. See "Investment
Selection Process."
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
o The stock market goes down.
o The individual stocks in the Portfolio do not perform as well as
expected.
o Prices of small-cap stocks may respond to market activity
differently than larger more established companies.
An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Past Performance
The bar chart and table below show the Portfolio's annual returns and its
long-term performance. The chart shows how the performance has varied from
year to year and provides an indication of the risk of investing in the
Portfolio. The table compares the Portfolio's performance over time to that
of the Russell 2000 Index. This is a widely recognized, unmanaged index of
common stock prices. It also shows the Portfolio's returns compared to the
Lipper Variable Annuity Small-Cap Funds Index, a composite index of the
annual return of mutual funds that have an investment goal similar to that of
the Portfolio. The Portfolio's past performance does not necessarily
indicate how the Portfolio will perform in the future.
<PAGE>
[bar chart]
CVS Social Small Cap Growth
Year-by-Year Total Return
1996 34.46%
1997 -9.93%
1998 -6.15%
Best Quarter (of periods shown) Q4 '98 18.90%
Worst Quarter (of periods shown) Q1 '94 -27.24%
Average Annual Total Returns (for the periods ended December 31, 1998)
1 year 5 years Since Inception*
CVS Social Small Cap Growth -6.15% N/A 6.02%
Russell 2000 Index -2.55% N/A 15.30%
Lipper VA Small-cap
Funds Average 1.48% N/A 16.68%
*The month end date of 3/31/95 is used for comparison purposes only, actual
Fund inception is 3/15/95.
Separate account expenses may differ so that the Portfolio's return could be
lower.
<PAGE>
Principal Investment Practices and Risks
The most concise description of the Portfolio's principal investment
strategies and associated risks is under the risk-return summary. The
Portfolio is also permitted to invest in certain other investments and to
use certain investment techniques that have higher risks associated with
them. On the following pages are brief descriptions of the investments and
techniques, summarized in the risk-return summary along with certain
additional investment techniques and their risks.
For each of the investment practices listed, the table below shows the
Portfolio's limitations as a percentage of its assets and the principal
types of risk involved. (See the pages following the table for a description
of the types of risks). Numbers in this table show maximum allowable amount
only; for actual usage, consult the Portfolio's annual/semi-annual reports.
Key to Table
@ Portfolio currently uses
0 Permitted, but not typically used
(% of assets allowable, if restricted)
- -- Not permitted
xN Allowed up to x% of Portfolio's net assets
xT Allowed up to x% of Portfolio's total assets
NA Not applicable to this type of fund
Investment Practices
Active Trading Strategy/Turnover involves selling a security
soon after purchase. An active trading strategy causes a 0
fund to have higher portfolio turnover compared to other
funds and higher transaction costs, such as commissions and
custodian and settlement fees, and may increase a Fund's tax
liability. Risks: Opportunity, Market and Transaction.
Temporary Defensive Positions.
During adverse market, economic or political conditions, the 0
Fund may depart from its principal investment strategies by 35T
increasing its investment in U.S. government securities and
other short-term interest-bearing securities. During times
of any temporary defensive positions, a Fund may not be able
to achieve its investment objective Risks: Opportunity.
<PAGE>
Conventional Securities
Foreign Securities. Securities issued by companies located
outside the U.S. and/or traded primarily on a foreign 15T1
exchange. Risks: Market, Currency, Transaction, Liquidity,
Information and Political.
Small Cap Stocks. Investing in small companies involves
greater risk than with more established companies. Small cap @
stock prices are more volatile and the companies often have
limited product lines, markets, financial resources, and
management experience. Risks: Market, Liquidity and
Information.
Investment grade bonds. Bonds rated BBB/Baa or higher or 0
comparable unrated bonds. Risks: Interest Rate, Market and 35N
Credit.
Below-investment grade bonds. Bonds rated below BBB/Baa or
comparable unrated bonds are considered junk bonds. They are 35N
subject to greater credit risk than investment grade bonds.
Risks: Credit, Market, Interest Rate, Liquidity and
Information.
Unrated debt securities. Bonds that have not been rated by a
recognized rating agency; the Advisor has determined the 0
credit quality based on its own research. Risks: Credit,
Market, Interest Rate, Liquidity and Information.
Illiquid securities. Securities which cannot be readily sold
because there is no active market. Risks: Liquidity, Market 15N
and Transaction.
Unleveraged derivative securities
Asset-backed securities. Securities are backed by unsecured
debt, such as credit card debt. These securities are often 0
guaranteed or over-collateralized to enhance their credit
quality. Risks: Credit, Interest Rate and Liquidity.
<PAGE>
Mortgage-backed securities. Securities are backed by pools
of mortgages, including passthrough certificates, and other 0
senior classes of collateralized mortgage obligations
(CMOs). Risks: Credit, Extension, Prepayment, Liquidity and
Interest Rate.
Participation interests. Securities representing an interest
in another security or in bank loans. Risks: Credit, 0
Interest Rate and Liquidity.
Leveraged derivative instruments
Currency contracts. Contracts involving the right or
obligation to buy or sell a given amount of foreign currency --
at a specified price and future date. Risks: Currency,
Leverage, Correlation, Liquidity and Opportunity.
Options on securities and indices. Contracts giving the
holder the right but not the obligation to purchase or sell 5T2
a security (or the cash value, in the case of an option on
an index) at a specified price within a specified time. In
the case of selling (writing) options, the Funds will write
call options only if they already own the security (if it is
"covered"). Risks: Interest Rate, Currency, Market,
Leverage, Correlation, Liquidity, Credit and Opportunity.
Futures contract. Agreement to buy or sell a specific amount
of a commodity or financial instrument at a particular price 0
on a specific future date. Risks: Interest Rate, Currency, 5N
Market, Leverage, Correlation, Liquidity and Opportunity.
1 CVS Social Small Cap Growth may invest only in American Depositary
Receipts (ADRs), dollar-denominated receipts representing shares of a
foreign issuer. ADRs are traded on U.S. exchanges. See the Statement of
Additional Information ("SAI").
2Based on net premium payments.
The Portfolio has additional investment policies and restrictions that are
not principal to their investment strategies (for example, repurchase
agreements, real estate investment trusts, borrowing, pledging, and reverse
repurchase agreements, securities lending, when-issued securities and short
sales.) These policies and restrictions are discussed in the SAI.
<PAGE>
Types of Investment Risk
Correlation risk
This occurs when a Portfolio "hedges"- uses one investment to offset the
Portfolio's position in another. If the two investments do not behave in
relation to one another the way portfolio managers expect them to, then
unexpected or undesired results may occur. For example, a hedge may
eliminate or reduce gains as well as offset losses.
Credit risk
The risk that the issuer of a security or the counterparty to an investment
contract may default or become unable to pay its obligations when due.
Currency risk
Currency risk occurs when a Portfolio buys, sells or holds a security
denominated in foreign currency. Foreign currencies "float" in value against
the U.S. dollar. Adverse changes in foreign currency values can cause
investment losses when a Portfolio's investments are converted to U.S.
dollars.
Extension risk
The risk that an unexpected rise in interest rates will extend the life of a
mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
Information risk
The risk that information about a security or issuer or the market might not
be available, complete, accurate or comparable.
Interest rate risk
The risk that changes in interest rates will adversely affect the value of
an investor's securities. When interest rates rise, the value of
fixed-income securities will generally fall. Conversely, a drop in interest
rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities and zero coupon/"stripped" coupon
securities ("strips") are subject to greater interest rate risk.
Leverage risk
The risk that occurs in some securities or techniques which tend to magnify
the effect of small changes in an index or a market. This can result in a
loss that exceeds the amount actually invested.
Liquidity risk
The risk that occurs when investments cannot be readily sold. A Portfolio
may have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
<PAGE>
Management risk
This risk exists in all mutual funds and means that a Portfolio's investment
management practices might not work to achieve their desired result.
Market risk
The risk that exists in all mutual funds and means the risk that securities
prices in a market, a sector or an industry will fluctuate, and that such
movements might reduce an investment's value.
Opportunity risk
The risk of missing out on an investment opportunity because the assets
needed to take advantage of it are committed to less advantageous
investments or strategies.
Political risk
The risk that may occur with foreign investments, and means that the value
of an investment may be adversely affected by nationalization, taxation,
war, government instability or other economic or political actions or
factors.
Prepayment risk
The risk that unanticipated prepayments may occur, reducing the value of a
mortgage-backed security. The Portfolio must then reinvest those assets at
the current, market rate which may be lower.
Transaction risk
The risk that a Portfolio may be delayed or unable to settle a transaction
or that commissions and settlement expenses may be higher than usual.
Investment Selection Process
The selection of an investment by a Portfolio does not constitute
endorsement or validation by the Portfolio, nor does the exclusion of an
investment necessarily reflect failure to satisfy the Portfolio's social
criteria. Investors are invited to send a brief description of companies
they believe might be suitable for
investment.
Socially Responsible Investment Criteria
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:
<PAGE>
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
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.
Calvert Asset Management Company, Inc. ("CAMCO") (4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814) is the Portfolio's investment advisor
and provides day-to-day investment management services to the Portfolio. It
has been managing mutual funds since 1976. CAMCO is the
<PAGE>
investment advisor for over 25 mutual funds, including the first and largest
family of socially screened funds. As of December 31, 1998, CAMCO had $6
billion in assets under management.
Subadvisor and Portfolio Manager
Awad Asset Management, Inc. ("Awad"), 250 Park Avenue, New York, New York
10177, a subsidiary of Raymond James & Associates, has managed CVS Social
Small Cap Growth since 1997. The firm specializes in the management of
small-capitalization growth stocks. They emphasize a
growth-at-a-reasonable-price investment philosophy.
James Awad, President of Awad, founded the firm in 1992. He heads the
portfolio management team for Social Small Cap Growth. Mr. Awad has more
than 30 years experience in the investment business, holding positions with
firms such as Neuberger & Berman and First Investors Corporation.
The Portfolio has obtained an exemptive order from the Securities and
Exchange Commission to permit the Fund, pursuant to approval by the Board of
Directors, to enter into and materially amend contracts with the Portfolio's
Subadvisor without shareholder approval. See "Investment Advisor and
Subadvisor" in the SAI for further details.
Advisory Fee and Expenses
For fiscal year 1998, the Investment Advisor received from the Portfolio a
monthly base fee, computed on a daily basis at an annual rate of 0.90% of
the average daily net assets of the Portfolio. Effective March 1, 1999, the
advisory fee is 0.75%. The new lower advisory fee, when added to the new
administrative fee, equals the previous advisory fee.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, CAMCO and its service providers use computer
systems for all aspects of our business -- processing shareholder and fund
transactions, fund accounting, executing trades, and pricing securities just
to name a few. Many current software programs cannot distinguish between the
year 2000 and the year 1900. This can cause problems with retirement plan
distributions, dividend payment software, transaction software, and numerous
other areas that could impact the Fund. Calvert Group has been reviewing all
of its computer systems for Y2K compliance. Although, at this time, there
can be no assurance that there will be no negative impact on the Fund, the
Advisor, the underwriter, transfer agent and custodian have advised the Fund
that they have been actively working on any necessary changes to their
computer systems to prepare for Y2K and expect that their systems, and those
of their outside service providers, will be adapted in time for that event.
For more information, please visit our website at www.calvertgroup.com
<PAGE>
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. 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
<PAGE>
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. 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.
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.
Financial Highlights
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past 5 years (or if shorter, the
period of the Portfolio's operations). Certain information reflects
financial results for a single share, by Portfolio. The total returns in the
table represent the rate that an investor would have earned (or lost) on an
investment in a Portfolio (assuming reinvestment of all dividends and
distributions), and does not reflect any charges or expenses deducted by the
Insurance Companies. This information has been audited by
PricewaterhouseCoopers LLP whose report, along with a Portfolio's financial
statements, are included in the Portfolio's annual report, which is
available upon request.
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31,
1998 1997
Net asset value, beginning $12.02 $14.65
Income from investment operations
Net investment income .02 (.12)
Net realized and unrealized gain (loss) (.77) (1.32)
Total from investment operations (.75) (1.44)
Distributions from
Net investment income (.01) --
Net realized gains (.14) (1.19)
Total distributions (.15) (1.19)
Total increase (decrease) in net asset value (.90) (2.63)
Net asset value, ending $11.12 $12.02
Total return (6.23%) (9.86%)
Ratios to average net assets:
Net investment income .12% (1.19%)
Total expenses + 1.33% 1.92%
Net expenses 1.12% 1.61%
Expenses reimbursed -- .18%
Portfolio turnover 72% 292%
Net assets, ending (in thousands) $3,626 $4,146
Number of shares outstanding,
ending (in thousands) 326 345
Periods Ended
December 31, December 31,
1996 1995*
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 -- (.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%
Ratios to average net assets:
Net investment income (1.60%) .43%(a)
Total expenses + 2.27% 2.17%(a)
Net expenses 1.81% 1.64%(a)
Expenses reimbursed .20% .20%(a)
Portfolio turnover 120% 223%
Net assets, ending (in thousands) $3,031 $1,209
Number of shares outstanding,
ending (in thousands) 207 111
(a) Annualized
+ 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. Total expenses are presented net of expense waivers
and reimbursements.
* From March 1, 1995 inception.
NA Disclosure not applicable to prior periods.
<PAGE>
SOCIAL MID CAP GROWTH PORTFOLIO
About the Portfolio
24 Investment Objective, Strategy, Past Performance
26 Principal Investment Practices and Risks
About Social Investing
30 Investment Selection Process
31 Socially Responsible Investment Criteria
About Your Investment
31 The Fund and Its Management
32 Advisory Fee and Expenses
32 A Word About the Year 2000 (Y2K)
33 Purchases and Redemptions of Shares
34 Dividends and Distributions
34 Taxes
34 Financial Highlights
Calvert Social Mid Cap Growth Portfolio of Calvert Variable Series, Inc.
(the "Fund") should not be confused with the Calvert World Values Capital
Accumulation Fund. Performance of the two portfolios will differ.
<PAGE>
CVS SOCIAL MID CAP GROWTH
Advisor: Calvert Asset Management Company, Inc.
Subadvisor: Brown Capital Management, Inc.
Objective
CVS Social Mid Cap Growth seeks to provide long-term capital appreciation by
investing primarily in a nondiversified portfolio of the equity securities
of mid-sized companies that are undervalued but demonstrate a potential for
growth. This objective may be changed by the Portfolio's Board of Directors
without shareholder approval.
Principal investment strategies
Investments are primarily in the common stocks of mid-size companies.
Returns in the Portfolio will be mostly from the changes in the price of the
Portfolio's holdings (capital appreciation.)
CVS Social Mid Cap Growth currently defines mid-cap companies as those
within the range of market capitalizations of the S&P's Mid-Cap 400 Index.
Most companies in the Index have a capitalization of $500 million to $10
billion. Stocks chosen for the Portfolio combine growth and value
characteristics or offer the opportunity to buy growth at a reasonable price.
The Subadvisor favors companies which have an above market average
prospective growth rate, but sell at below market average valuations. The
Subadvisor evaluates each stock in terms of its growth potential, the return
for risk free investments, and the risk and reward potential for the company
to determine a reasonable price for the stock.
The Portfolio invests with the 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.
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria. See "Investment
Selection Process."
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
o The stock market goes down.
o The individual stocks in the Portfolio do not perform as well as
expected.
o The Portfolio is non-diversified. Compared to other funds, the
Portfolio may invest more of its assets in a smaller number of companies.
Gains or losses on a single stock may have greater impact on the Portfolio.
<PAGE>
An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
Past Performance
The bar chart and table below show the Portfolio's annual returns and its
long-term performance. The chart shows how the performance has varied from
year to year and provides an indication of the risk of investing in the
portfolio. The table compares the Portfolio's performance over time to that
of the S&P Mid-Cap 400 Index. This is a widely recognized, unmanaged index
of common stock prices. It also shows the Portfolio's returns compared to
the Lipper Variable Annuity Midcap Funds Index, a composite index of the
annual return of mutual funds that have an investment goal similar to that
of the Portfolio. The Portfolio's past performance does not necessarily
indicate how the Portfolio will perform in the future.
CVS Social Mid Cap Growth
Year-by-Year Total Return
[BAR CHART]
1992 13.73%
1993 7.56%
1994 -9.97%
1995 39.60%
1996 7.40%
1997 23.61%
1998 29.78%
Best Quarter (of periods shown) Q4 '98 25.32%
Worst Quarter (of periods shown) Q3 '98 -14.26%
Average Annual Total Returns (for the periods ended December 31, 1998)
1 year 5 years Since Inception*
CVS Social Mid Cap Growth 29.78% 16.71% 15.20%
S&P Midcap 400 Index 18.25% 18.67% 18.31%
Lipper VA Midcap
Funds Average 19.30% 14.17% 13.37%
*The month end date of 7/31/91 is used for comparison purposes only.
Actual Fund inception is 7/16/91.
Separate account expenses may differ so that the Portfolio's return could be
lower.
<PAGE>
Principal Investment Practices and Risks
The most concise description of the Portfolio's principal investment
strategies and associated risks is under the risk-return summary. The
Portfolio is also permitted to invest in certain other investments and to
use certain investment techniques that have higher risks associated with
them. On the following pages are brief descriptions of the investments and
techniques, summarized in the risk-return summary along with certain
additional investment techniques and their risks.
For each of the investment practices listed, the table below shows the
Portfolio's limitations as a percentage of its assets and the principal
types of risk involved. (See the pages following the table for a description
of the types of risks). Numbers in this table show maximum allowable amount
only; for actual usage, consult the Portfolio's annual/semi-annual reports.
Key to Table
@ Portfolio currently uses
0 Permitted, but not typically used
(% of assets allowable, if restricted)
- -- Not permitted
xN Allowed up to x% of Portfolio's net assets
xT Allowed up to x% of Portfolio's total assets
NA Not applicable to this type of fund
Investment Practices
Temporary Defensive Positions.
During adverse market, economic or political conditions, the 0
Fund may depart from its principal investment strategies by
increasing its investment in U.S. government securities and
other short-term interest-bearing securities. During times
of any temporary defensive positions, a Fund may not be able
to achieve its investment objective Risks: Opportunity.
Foreign Securities. Securities issued by companies located
outside the U.S. and/or traded primarily on a foreign 25N
exchange. Risks: Market, Currency, Transaction, Liquidity,
Information and Political.
<PAGE>
Conventional Securities
Small Cap Stocks. Investing in small companies involves
greater risk than with more established companies. Small cap 0
stock prices are more volatile and the companies often have
limited product lines, markets, financial resources, and
management experience. Risks: Market, Liquidity and
Information.
Investment grade bonds. Bonds rated BBB/Baa or higher or 0
comparable unrated bonds. Risks: Interest Rate, Market and
Credit.
Below-investment grade bonds. Bonds rated below BBB/Baa or
comparable unrated bonds are considered junk bonds. They are 5N
subject to greater credit risk than investment grade bonds.
Risks: Credit, Market, Interest Rate, Liquidity and
Information.
Unrated debt securities. Bonds that have not been rated by a
recognized rating agency; the Advisor has determined the 0
credit quality based on its own research. Risks: Credit,
Market, Interest Rate, Liquidity and Information.
Illiquid securities. Securities which cannot be readily sold
because there is no active market. Risks: Liquidity, Market 15N
and Transaction.
Unleveraged derivative securities
Asset-backed securities. Securities are backed by unsecured
debt, such as credit card debt. These securities are often 0
guaranteed or over-collateralized to enhance their credit
quality. Risks: Credit, Interest Rate and Liquidity.
<PAGE>
Mortgage-backed securities. Securities are backed by pools
of mortgages, including passthrough certificates, and other 0
senior classes of collateralized mortgage obligations
(CMOs). Risks: Credit, Extension, Prepayment, Liquidity and
Interest Rate.
Participation interests. Securities representing an interest
in another security or in bank loans. Risks: Credit, 0
Interest Rate and Liquidity.
Leveraged derivative instruments
Currency contracts. Contracts involving the right or
obligation to buy or sell a given amount of foreign currency 5T
at a specified price and future date. Risks: Currency,
Leverage, Correlation, Liquidity and Opportunity.
Options on securities and indices. Contracts giving the
holder the right but not the obligation to purchase or sell 5T1
a security (or the cash value, in the case of an option on
an index) at a specified price within a specified time. In
the case of selling (writing) options, the Funds will write
call options only if they already own the security (if it is
"covered"). Risks: Interest Rate, Currency, Market,
Leverage, Correlation, Liquidity, Credit and Opportunity.
Futures contract. Agreement to buy or sell a specific amount
of a commodity or financial instrument at a particular price 0
on a specific future date. Risks: Interest Rate, Currency, 5N
Market, Leverage, Correlation, Liquidity and Opportunity.
1Based on net premium payments.
The Portfolio has additional investment policies and restrictions that are
not principal to their investment strategies (for example, repurchase
agreements, real estate investment trusts, borrowing, pledging, and reverse
repurchase agreements, securities lending, when-issued securities and short
sales.) These policies and restrictions are discussed in the Statement of
Additional Information ("SAI").
<PAGE>
Types of Investment Risk
Correlation risk
This occurs when a Portfolio "hedges"- uses one investment to offset the
Portfolio's position in another. If the two investments do not behave in
relation to one another the way portfolio managers expect them to, then
unexpected or undesired results may occur. For example, a hedge may
eliminate or reduce gains as well as offset losses.
Credit risk
The risk that the issuer of a security or the counterparty to an investment
contract may default or become unable to pay its obligations when due.
Currency risk
Currency risk occurs when a Portfolio buys, sells or holds a security
denominated in foreign currency. Foreign currencies "float" in value against
the U.S. dollar. Adverse changes in foreign currency values can cause
investment losses when a Portfolio's investments are converted to U.S.
dollars.
Extension risk
The risk that an unexpected rise in interest rates will extend the life of a
mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
Information risk
The risk that information about a security or issuer or the market might not
be available, complete, accurate or comparable.
Interest rate risk
The risk that changes in interest rates will adversely affect the value of
an investor's securities. When interest rates rise, the value of
fixed-income securities will generally fall. Conversely, a drop in interest
rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities and zero coupon/"stripped" coupon
securities ("strips") are subject to greater interest rate risk.
Leverage risk
The risk that occurs in some securities or techniques which tend to magnify
the effect of small changes in an index or a market. This can result in a
loss that exceeds the amount actually invested.
Liquidity risk
The risk that occurs when investments cannot be readily sold. A Portfolio
may have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
<PAGE>
Management risk
This risk exists in all mutual funds and means that a Portfolio's investment
management practices might not work to achieve their desired result.
Market risk
The risk that exists in all mutual funds and means the risk that securities
prices in a market, a sector or an industry will fluctuate, and that such
movements might reduce an investment's value.
Opportunity risk
The risk of missing out on an investment opportunity because the assets
needed to take advantage of it are committed to less advantageous
investments or strategies.
Political risk
The risk that may occur with foreign investments, and means that the value
of an investment may be adversely affected by nationalization, taxation, war,
government instability or other economic or political actions or factors.
Prepayment risk
The risk that unanticipated prepayments may occur, reducing the value of a
mortgage-backed security. The Portfolio must then reinvest those assets at
the current, market rate which may be lower.
Transaction risk
The risk that a Portfolio may be delayed or unable to settle a transaction
or that commissions and settlement expenses may be higher than usual.
Investment Selection Process
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria.
Although the Portfolio's social criteria tend to limit the availability of
investment opportunities more than is customary with other investment
companies, CAMCO and the Subadvisor believe there are sufficient investment
opportunities to permit full investment among issuers which satisfy the
Portfolio's investment and social objectives.
The selection of an investment by a Portfolio does not constitute
endorsement or validation by the Portfolio, nor does the exclusion of an
investment necessarily reflect failure to satisfy the Portfolio's social
criteria. Investors are invited to send a brief description of companies
they believe might be suitable for investment.
<PAGE>
Socially Responsible Investment Criteria
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
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
<PAGE>
asset value of Portfolio shares (and any distributions on such shares) and
the benefits provided under a policy.
Calvert Asset Management Company, Inc. ("CAMCO") (4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814) is the Portfolio's investment advisor
and provides day-to-day investment management services to the Portfolio. It
has been managing mutual funds since 1976. CAMCO is the investment advisor
for over 25 mutual funds, including the first and largest family of socially
screened funds. As of December 31, 1998, CAMCO had $6 billion in assets
under management.
Subadvisor and Portfolio Manager
Brown Capital Management, Inc., 809 Cathedral Street, Baltimore, Maryland,
has managed the Portfolio since 1996. It uses a bottom-up approach that
incorporates growth-adjusted price earnings, concentrating on mid-/large-cap
growth stocks.
Eddie C. Brown, founder and President of Brown Capital Management, Inc.,
heads the portfolio management team for Capital Accumulation and Brown
Capital's portion of CSIF Balanced. He brings over 24 years of management
experience to the Portfolio, and has held positions with T. Rowe Price
Associates and Irwing Management Company. Mr. Brown is a frequent panelist
on "Wall Street Week with Louis Rukeyser" and is a member of the Wall Street
Week Hall of Fame.
The Portfolio has obtained an exemptive order from the Securities and
Exchange Commission to permit the Fund, pursuant to approval by the Board of
Directors, to enter into and materially amend contracts with the Portfolio's
Subadvisor without shareholder approval. See "Investment Advisor and
Subadvisor" in the SAI for further details.
Advisory Fee and Expenses
For fiscal year 1998, the Advisor received from the Portfolio a monthly base
fee, computed on a daily basis at an annual rate of 0.80% of the average
daily net assets of the Portfolio. Effective March 1, 1999, the advisory fee
will be 0.65%. The lower advisory fee, when added to the new administrative
fee, equals the previous advisory fee.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, CAMCO and its service providers use computer
systems for all aspects of our business -- processing shareholder and fund
transactions, fund accounting, executing trades, and pricing securities just
to name a few. Many current software programs cannot distinguish between the
year 2000 and the year 1900. This can cause problems with retirement plan
distributions,
<PAGE>
dividend payment software, transaction software, and numerous other areas
that could impact the Fund. Calvert Group has been reviewing all of its
computer systems for Y2K compliance. Although, at this time, there can be no
assurance that there will be no negative impact on the Fund, the Advisor,
the underwriter, transfer agent and custodian have advised the Fund that
they have been actively working on any necessary changes to their computer
systems to prepare for Y2K and expect that their systems, and those of their
outside service providers, will be adapted in time for that event. For more
information, please visit our website at www.calvertgroup.com
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.
<PAGE>
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. 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 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.
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.
Financial Highlights
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past 5 years. Certain information
reflects financial results for a single share, by Portfolio. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in a Portfolio (assuming reinvestment of all
dividends and distributions), and does not reflect any applicable charges or
expenses by the Insurance Companies. This information has been audited by
PricewaterhouseCoopers LLP whose report, along with a Portfolio's financial
statements, are included in the Portfolio's annual report, which is
available upon request.
MID CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $26.63 $24.05 $22.42
Income from investment operations
Net investment income (.14) (.04) (.12)
Net realized and unrealized
gain (loss) 8.00 5.70 1.79
Total from investment
operations 7.86 5.66 1.67
Distributions from
Net investment income -- -- --
Net realized gains (4.06) (3.08) (.04)
Total distributions (4.06) (3.08) (.04)
Total increase (decrease) in
net asset value 3.80 2.58 1.63
Net asset value, ending $30.43 $26.63 $24.05
Total return 29.88% 23.53% 7.44%
Ratios to average net assets:
Net investment income (.60%) (.17%) (.60%)
Total expenses + 1.05% 1.04% 1.33%
Net expenses 1.00% .96% 1.00%
Expenses reimbursed -- -- --
Portfolio turnover 65% 96% 124%
Net assets, ending
(in thousands) $39,538 $26,117 $19,904
Number of shares outstanding,
ending (in thousands) 1,299 981 828
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $16.97 $18.95
Income from investment operations
Net investment income (.15) .10
Net realized and unrealized gain (loss) 6.85 (1.98)
Total from investment operations 6.70 (1.88)
Distributions from
Net investment income (.01) (.10)
Net realized gains (1.24) --
Total distributions (1.25) (.10)
Total increase (decrease) in net asset value 5.45 (1.98)
Net asset value, ending $22.42 $16.97
Total return 39.46% (9.92%)
Ratios to average net assets:
Net investment income (.84%) .68%
Total expenses + 1.56% NA
Net expenses 1.25% .79%
Expenses reimbursed .10% --
Portfolio turnover 135% 79%
Net assets, ending (in thousands) $8,935 $5,689
Number of shares outstanding,
ending (in thousands) 398 335
+ 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. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
SOCIAL INTERNATIONAL EQUITY PORTFOLIO
About the Portfolio
37 Investment Objective, Strategy, Past Performance
39 Principal Investment Practices and Risks
About Social Investing
43 Investment Selection Process
44 Socially Responsible Investment Criteria
About Your Investment
44 The Fund and Its Management
45 Advisory Fee and Expenses
45 A Word About the Year 2000 (Y2K)
46 Purchases and Redemptions of Shares
47 Dividends and Distributions
47 Taxes
48 Financial Highlights
Calvert Social International Equity Portfolio of Calvert Variable Series,
Inc.
(the "Fund") should not be confused with the Calvert World Values
International Equity Portfolio. Performance of the two portfolios will
differ.
<PAGE>
CVS SOCIAL INTERNATIONAL EQUITY
Advisor: Calvert Asset Management Company, Inc.
Subadvisor: Murray Johnstone International, Ltd.
Objective
CVS Social International Equity seeks to provide a high total return
consistent with reasonable risk by investing primarily in a globally
diversified portfolio for equity securities.
Principal investment strategies
CVS Social International Equity invests primarily in the common stocks of
mid- to large-cap companies using a value approach. The Portfolio identifies
those countries with markets and economies that it believes currently
provide the most favorable climate for investing. The Subadvisor selects
countries based on a "20 questions" model which uses macro-and
micro-economic inputs to rank the attractiveness of markets in various
countries. Within each country, the Subadvisor uses valuation techniques
that have been shown to best determine value within that market. In some
countries, the valuation process may favor the comparison of
price-to-cash-flow while in other countries, price-to-sales or price-to-book
may be more useful in determining which stocks are undervalued.
The Portfolio invests primarily in more developed economies and markets. No
more than 5% of Portfolio assets are invested in the U.S.
The Portfolio invests with the 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.
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria. See "Investment
Selection Process."
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
o The stock markets go down (including those outside the U.S.).
o The individual stocks in the Portfolio do not perform as well as
expected.
o Foreign currency values go down versus the U.S. dollar.
An investment in the Portfolio is not a bank deposit and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.
<PAGE>
Past Performance
The bar chart and table below show the Portfolio's annual returns and its
long-term performance. The chart shows how the performance has varied from
year to year and provides an indication of the risk of investing in the
portfolio. The table compares the Portfolio's performance over time to that
of the MSCI EAFE Index GD. This is a widely recognized, unmanaged index of
common stock prices. It also shows the Portfolio's returns compared to the
Lipper Variable Annuity International Funds Index, a composite index of the
annual return of mutual funds that have an investment goal similar to that
of the Portfolio. The Portfolio's past performance does not necessarily
indicate how the Portfolio will perform in the future.
CVS Social International Equity
Year-by-Year Total Return
[BAR CHART]
1993 28.66%
1994 -2.13%
1995 12.35%
1996 14.99%
1997 12.81%
1998 18.53%
Best Quarter (of periods shown) Q4 '98 18.34%
Worst Quarter (of periods shown) Q3 '98 -13.95%
Average Annual Total Returns (for the periods ended December 31, 1998)
1 year 5 years Since
Inception*
CVS Social International Equity 18.53% 11.07% 12.18%
MSCI EAFE Index GD 20.33% 9.50% 11.65%
Lipper VA International Funds Average 13.26% 9.58% 11.69%
*Fund inception 6/30/92.
Separate account expenses may differ so that the Portfolio's return could be
lower.
<PAGE>
Principal Investment Practices and Risks
The most concise description of the Portfolio's principal investment
strategies and associated risks is under the risk-return summary. The
Portfolio is also permitted to invest in certain other investments and to
use certain investment techniques that have higher risks associated with
them. On the following pages are brief descriptions of the investments and
techniques, summarized in the risk-return summary along with certain
additional investment techniques and their risks.
For each of the investment practices listed, the table below shows the
Portfolio's limitations as a percentage of its assets and the principal
types of risk involved. (See the pages following the table for a description
of the types of risks). Numbers in this table show maximum allowable amount
only; for actual usage, consult the Portfolio's annual/semi-annual reports.
Key to Table
@ Portfolio currently uses
0 Permitted, but not typically used
(% of assets allowable, if restricted)
- -- Not permitted
xN Allowed up to x% of Portfolio's net assets
xT Allowed up to x% of Portfolio's total assets
NA Not applicable to this type of fund
Investment Practices
Active Trading Strategy/Turnover involves selling a security
soon after purchase. An active trading strategy causes a 0
fund to have higher portfolio turnover compared to other
funds and higher transaction costs, such as commissions and
custodian and settlement fees, and may increase a Fund's tax
liability. Risks: Opportunity, Market and Transaction.
Temporary Defensive Positions.
During adverse market, economic or political conditions, the 0
Fund may depart from its principal investment strategies by
increasing its investment in U.S. government securities and
other short-term interest-bearing securities. During times
of any temporary defensive positions, a Fund may not be able
to achieve its investment objective Risks: Opportunity.
<PAGE>
Conventional Securities
Foreign Securities. Securities issued by companies located
outside the U.S. and/or traded primarily on a foreign @
exchange. Risks: Market, Currency, Transaction, Liquidity,
Information and Political.
Small Cap Stocks. Investing in small companies involves
greater risk than with more established companies. Small cap 0
stock prices are more volatile and the companies often have
limited product lines, markets, financial resources, and
management experience. Risks: Market, Liquidity and
Information.
Investment grade bonds. Bonds rated BBB/Baa or higher or 0
comparable unrated bonds. Risks: Interest Rate, Market and 35N
Credit.
Below-investment grade bonds. Bonds rated below BBB/Baa or
comparable unrated bonds are considered junk bonds. They are 5N
subject to greater credit risk than investment grade bonds.
Risks: Credit, Market, Interest Rate, Liquidity and
Information.
Unrated debt securities. Bonds that have not been rated by a
recognized rating agency; the Advisor has determined the 0
credit quality based on its own research. Risks: Credit,
Market, Interest Rate, Liquidity and Information.
Illiquid securities. Securities which cannot be readily sold
because there is no active market. Risks: Liquidity, Market 15N
and Transaction.
Unleveraged derivative securities
Asset-backed securities. Securities are backed by unsecured
debt, such as credit card debt. These securities are often 0
guaranteed or over-collateralized to enhance their credit
quality. Risks: Credit, Interest Rate and Liquidity.
<PAGE>
Mortgage-backed securities. Securities are backed by pools
of mortgages, including passthrough certificates, and other 0
senior classes of collateralized mortgage obligations
(CMOs). Risks: Credit, Extension, Prepayment, Liquidity and
Interest Rate.
Participation interests. Securities representing an interest
in another security or in bank loans. Risks: Credit, 0
Interest Rate and Liquidity.
Leveraged derivative instruments
Currency contracts. Contracts involving the right or
obligation to buy or sell a given amount of foreign currency 5T
at a specified price and future date. Risks: Currency,
Leverage, Correlation, Liquidity and Opportunity.
Options on securities and indices. Contracts giving the
holder the right but not the obligation to purchase or sell 5T1
a security (or the cash value, in the case of an option on
an index) at a specified price within a specified time. In
the case of selling (writing) options, the Funds will write
call options only if they already own the security (if it is
"covered"). Risks: Interest Rate, Currency, Market,
Leverage, Correlation, Liquidity, Credit and Opportunity.
Futures contract. Agreement to buy or sell a specific amount
of a commodity or financial instrument at a particular price 0
on a specific future date. Risks: Interest Rate, Currency, 5N
Market, Leverage, Correlation, Liquidity and Opportunity.
1Based on net premium payments.
<PAGE>
Types of Investment Risk
Correlation risk
This occurs when a Portfolio "hedges"- uses one investment to offset the
Portfolio's position in another. If the two investments do not behave in
relation to one another the way portfolio managers expect them to, then
unexpected or undesired results may occur. For example, a hedge may
eliminate or reduce gains as well as offset losses.
Credit risk
The risk that the issuer of a security or the counterparty to an investment
contract may default or become unable to pay its obligations when due.
Currency risk
Currency risk occurs when a Portfolio buys, sells or holds a security
denominated in foreign currency. Foreign currencies "float" in value against
the U.S. dollar. Adverse changes in foreign currency values can cause
investment losses when a Portfolio's investments are converted to U.S.
dollars.
Extension risk
The risk that an unexpected rise in interest rates will extend the life of a
mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
Information risk
The risk that information about a security or issuer or the market might not
be available, complete, accurate or comparable.
Interest rate risk
The risk that changes in interest rates will adversely affect the value of
an investor's securities. When interest rates rise, the value of
fixed-income securities will generally fall. Conversely, a drop in interest
rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities and zero coupon/"stripped" coupon
securities ("strips") are subject to greater interest rate risk.
Leverage risk
The risk that occurs in some securities or techniques which tend to magnify
the effect of small changes in an index or a market. This can result in a
loss that exceeds the amount actually invested.
Liquidity risk
The risk that occurs when investments cannot be readily sold. A Portfolio
may have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
<PAGE>
Management risk
This risk exists in all mutual funds and means that a Portfolio's investment
management practices might not work to achieve their desired result.
Market risk
The risk that exists in all mutual funds and means the risk that securities
prices in a market, a sector or an industry will fluctuate, and that such
movements might reduce an investment's value.
Opportunity risk
The risk of missing out on an investment opportunity because the assets
needed to take advantage of it are committed to less advantageous
investments or strategies.
Political risk
The risk that may occur with foreign investments, and means that the value
of an investment may be adversely affected by nationalization, taxation,
war, government instability or other economic or political actions or
factors.
Prepayment risk
The risk that unanticipated prepayments may occur, reducing the value of a
mortgage-backed security. The Portfolio must then reinvest those assets at
the current, market rate which may be lower.
Transaction risk
The risk that a Portfolio may be delayed or unable to settle a transaction
or that commissions and settlement expenses may be higher than usual.
Investment Selection Process
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria.
Although the Portfolio's social criteria tend to limit the availability of
investment opportunities more than is customary with other investment
companies, CAMCO and the Subadvisor believe there are sufficient investment
opportunities to permit full investment among issuers which satisfy the
Portfolio's investment and social objectives.
The selection of an investment by a Portfolio does not constitute
endorsement or validation by the Portfolio, nor does the exclusion of an
investment necessarily reflect failure to satisfy the Portfolio's social
criteria. Investors are invited to send a brief description of companies
they believe might be suitable for investment.
<PAGE>
Socially Responsible Investment Criteria
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.
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
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
<PAGE>
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.
Calvert Asset Management Company, Inc. ("CAMCO") (4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814) is the Portfolio's investment advisor
and provides day-to-day investment management services to the Portfolio. It
has been managing mutual funds since 1976. CAMCO is the investment advisor
for over 25 mutual funds, including the first and largest family of socially
screened funds. As of December 31, 1998, CAMCO had $6 billion in assets
under management.
Subadvisor and Portfolio Manager
Murray Johnstone International, Ltd., 875 North Michigan Ave., Suite 3415,
Chicago, Illinois 60611. The firm has managed CVS Social International
Equity since its inception.
Andrew Preston heads the portfolio management team for the Portfolio. He
joined Murray Johnstone International in 1985, and has held positions as
investment analyst in the United Kingdom and U.S. Department, and Fund
Manager in the Japanese Department. He was appointed director of the company
in 1993. Prior to joining Murray Johnstone, he was a member of the
Australian Foreign Service and attended University in Australia and Japan.
The Portfolio has obtained an exemptive order from the Securities and
Exchange Commission to permit the Fund, pursuant to approval by the Board of
Directors, to enter into and materially amend contracts with the Portfolio's
Subadvisor without shareholder approval. See "Investment Advisor and
Subadvisor" in the SAI for further details.
Advisory Fee and Expenses
For fiscal year 1998, the Advisor received from the Portfolio a monthly base
fee, computed on a daily basis at an annual rate of 1.00% of the average
daily net assets of the Portfolio. Effective March 1, 1999, the advisory fee
is 0.75%. The lower advisory fee, when added to the new administrative fee,
equals the previous advisory fee.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, CAMCO and its service providers use computer
systems for all aspects of our business -- processing shareholder and fund
transactions, fund accounting, executing trades, and pricing securities just
to name a
<PAGE>
few. Many current software programs cannot distinguish between the year 2000
and the year 1900. This can cause problems with retirement plan
distributions, dividend payment software, transaction software, and numerous
other areas that could impact the Fund. Calvert Group has been reviewing all
of its computer systems for Y2K compliance. Although, at this time, there
can be no assurance that there will be no negative impact on the Fund, the
Advisor, the underwriter, transfer agent and custodian have advised the Fund
that they have been actively working on any necessary changes to their
computer systems to prepare for Y2K and expect that their systems, and those
of their outside service providers, will be adapted in time for that event.
For more information, please visit our website at www.calvertgroup.com
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
<PAGE>
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, 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.
The Portfolio holds securities that are primarily listed on foreign
exchanges that trade on days when the NYSE is closed. The Portfolio does not
price shares on days when the NYSE is closed, even if foreign markets may be
open. As a result, the value of the Portfolio shares may change on days when
you will not be able to buy or sell your shares.
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.
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.
<PAGE>
Financial Highlights
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past 5 years. Certain information
reflects financial results for a single share, by Portfolio. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in a Portfolio (assuming reinvestment of all
dividends and distributions), and does not reflect any applicable charges or
expenses by the Insurance Companies. This information has been audited by
PricewaterhouseCoopers LLP whose report, along with a Portfolio's financial
statements, are included in the Portfolio's annual report, which is
available upon request.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $19.10 $18.74 $17.15
Income from investment operations
Net investment income .10 .19 .17
Net realized and unrealized
gain (loss) 3.35 2.28 2.40
Total from investment
operations 3.45 2.47 2.57
Distributions from
Net investment income (.07) (.20) (.14)
Net realized gains (1.67) (1.91) (.84)
Total distributions (1.74) (2.11) (.98)
Total increase (decrease) in
net asset value 1.71 .36 1.59
Net asset value, ending $20.81 $19.10 $18.74
Total return 18.09% 13.23% 14.99%
Ratios to average net assets:
Net investment income .49% .85% 1.02%
Total expenses + 1.65% 1.56% 1.59%
Net expenses 1.56% 1.17% 1.18%
Expenses reimbursed .15% .17% .23%
Portfolio turnover 92% 35% 85%
Net assets, ending
(in thousands) $17,109 $14,450 $14,027
Number of shares outstanding,
ending (in thousands) 822 757 748
Years Ended
December 31, December 31,
1995 1994
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%)
Ratios to average net assets:
Net investment income 1.48% .59%
Total expenses + 1.51% NA
Net expenses 1.12% 1.24%
Expenses reimbursed .39% .29%
Portfolio turnover 90% 84%
Net assets, ending (in thousands) $9,831 $7,765
Number of shares outstanding,
ending (in thousands) 573 489
+ 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. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
SOCIAL BALANCED PORTFOLIO
About the Portfolio
51 Investment Objective, Strategy, Past Performance
54 Principal Investment Practices and Risks
About Social Investing
58 Investment Selection Process
59 Socially Responsible Investment Criteria
About Your Investment
60 The Fund and Its Management
61 Advisory Fee and Expenses
61 A Word About the Year 2000 (Y2K)
61 Purchases and Redemptions of Shares
63 Dividends and Distributions
63 Taxes
63 Financial Highlights
Calvert Social Balanced Portfolio of Calvert Variable Series, Inc. (the
"Fund") should not be confused with the Calvert Social Investment Fund
Balanced Portfolio. Performance of the two portfolios will differ.
<PAGE>
CVS Social Balanced
Advisor: Calvert Asset Management Company, Inc.
Subadvisor: NCM Capital Management, Inc.
Objective
CVS Social Balanced seeks to achieve a competitive total return through an
actively managed portfolio of stocks, bonds and money market instruments
which offer income and capital growth opportunity and which satisfy the
investment and social criteria. This objective may be changed by the
Portfolio's Board of Directors without shareholder approval.
Principal investment strategies
CVS Social Balanced typically invests about 60% of its assets in stocks and
40% in bonds or other fixed-income investments. Stock investments are
primarily common stock in large-cap companies, while the fixed-income
investments are primarily a wide variety of investment grade bonds.
The Portfolio invests in a combination of stocks, bonds and money market
instruments in an attempt to provide a complete investment portfolio in a
single product. The Advisor rebalances the Portfolio quarterly to adjust for
changes in market value. The Portfolio is a large-cap, growth-oriented U.S.
domestic portfolio, although it may have other investments, including some
foreign securities and some mid-cap stocks. For the equity portion, the
Portfolio seeks companies with better than average expected growth rates at
lower than average valuations. The fixed-income portion reflects an active
trading strategy, seeking total return.
Equity investments are selected by the Subadvisor, while the Advisor manages
the fixed-income assets and determines the overall mix for the Portfolio
depending upon its view of market conditions and economic outlook.
The Portfolio invests with the 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.
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria. See "Investment
Selection Process."
<PAGE>
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
o The stock or bond market goes down.
o The individual stocks and bonds in the Portfolio do not perform as
well as expected.
o For the fixed-income portion of the Portfolio, the Advisor's
forecast as to interest rates is not correct.
o For the foreign securities held in the Portfolio, if foreign
currency values go down versus the U.S. dollar.
o The Advisor's allocation among different sectors of the stock and
bond markets does not perform as well as expected.
o The Portfolio is non-diversified. Compared to other funds, the
Portfolio may invest more of its assets in a smaller number of companies.
Gains or losses on a single stock may have greater impact on the Portfolio.
Past Performance
The bar chart and table below show the Portfolio's annual returns and its
long-term performance. The chart shows how the performance has varied from
year to year and provides an indication of the risk of investing in the
portfolio. The table compares the Portfolio's performance over time to that
of the S&P 500 Index Monthly Reinvested and the Lehman Aggregate Bond Index,
TR. These are widely recognized, unmanaged indexes of common stock and bond
prices. It also shows the Portfolio's returns compared to the Lipper
Variable Annuity Balanced Funds Index, a composite index of the annual
return of mutual funds that have an investment goal similar to that of the
Portfolio. The Portfolio's past performance does not necessarily indicate
how the Portfolio will perform in the future.
<PAGE>
CVS Social Balanced
Year-by-Year Total Return
[BAR CHART]
1989 20.72%
1990 4.18%
1991 16.32%
1992 7.61%
1993 8.00%
1994 -3.24%
1995 29.78%
1996 12.62%
1997 20.08%
1998 16.27%
Best Quarter (of periods shown) Q2 '97 12.64%
Worst Quarter (of periods shown) Q3 '98 -5.82%
Average Annual Total Returns (for the periods ended December 31, 1998)
1 year 5 years 10 years
CVS Social Balanced 16.27% 14.58% 12.87%
S&P 500 Index Monthly Reinvested 28.74% 24.08% 19.20%
Lipper VA Balanced Funds Average 14.79% 13.73% 12.21%
Separate account expenses may differ so that the Portfolio's return could be
lower.
<PAGE>
Principal Investment Practices and Risks
The most concise description of the Portfolio's principal investment
strategies and associated risks is under the risk-return summary. The
Portfolio is also permitted to invest in certain other investments and to
use certain investment techniques that have higher risks associated with
them. On the following pages are brief descriptions of the investments and
techniques, summarized in the risk-return summary along with certain
additional investment techniques and their risks.
For each of the investment practices listed, the table below shows the
Portfolio's limitations as a percentage of its assets and the principal
types of risk involved. (See the pages following the table for a description
of the types of risks). Numbers in this table show maximum allowable amount
only; for actual usage, consult the Portfolio's annual/semi-annual reports.
Key to Table
@ Portfolio currently uses
0 Permitted, but not typically used
(% of assets allowable, if restricted)
- -- Not permitted
xN Allowed up to x% of Portfolio's net assets
xT Allowed up to x% of Portfolio's total assets
NA Not applicable to this type of fund
Investment Practices
Active Trading Strategy/Turnover involves selling a security
soon after purchase. An active trading strategy causes a @
fund to have higher portfolio turnover compared to other
funds and higher transaction costs, such as commissions and
custodian and settlement fees, and may increase a Fund's tax
liability. Risks: Opportunity, Market and Transaction.
Temporary Defensive Positions.
During adverse market, economic or political conditions, the 0
Fund may depart from its principal investment strategies by
increasing its investment in U.S. government securities and
other short-term interest-bearing securities. During times
of any temporary defensive positions, a Fund may not be able
to achieve its investment objective Risks: Opportunity.
<PAGE>
Conventional Securities
Foreign Securities. Securities issued by companies located
outside the U.S. and/or traded primarily on a foreign 10N
exchange. Risks: Market, Currency, Transaction, Liquidity,
Information and Political.
Small Cap Stocks. Investing in small companies involves
greater risk than with more established companies. Small cap 0
stock prices are more volatile and the companies often have
limited product lines, markets, financial resources, and
management experience. Risks: Market, Liquidity and
Information.
Investment grade bonds. Bonds rated BBB/Baa or higher or @
comparable unrated bonds. Risks: Interest Rate, Market and
Credit.
Below-investment grade bonds. Bonds rated below BBB/Baa or
comparable unrated bonds are considered junk bonds. They are 20N
subject to greater credit risk than investment grade bonds.
Risks: Credit, Market, Interest Rate, Liquidity and
Information.
Unrated debt securities. Bonds that have not been rated by a
recognized rating agency; the Advisor has determined the @
credit quality based on its own research. Risks: Credit,
Market, Interest Rate, Liquidity and Information.
Illiquid securities. Securities which cannot be readily sold
because there is no active market. Risks: Liquidity, Market 15N
and Transaction.
Unleveraged derivative securities
Asset-backed securities. Securities are backed by unsecured
debt, such as credit card debt. These securities are often @
guaranteed or over-collateralized to enhance their credit
quality. Risks: Credit, Interest Rate and Liquidity.
<PAGE>
Mortgage-backed securities. Securities are backed by pools
of mortgages, including passthrough certificates, and other 0
senior classes of collateralized mortgage obligations
(CMOs). Risks: Credit, Extension, Prepayment, Liquidity and
Interest Rate.
Participation interests. Securities representing an interest
in another security or in bank loans. Risks: Credit, 0
Interest Rate and Liquidity.
Leveraged derivative instruments
Currency contracts. Contracts involving the right or
obligation to buy or sell a given amount of foreign currency 5T
at a specified price and future date. Risks: Currency,
Leverage, Correlation, Liquidity and Opportunity.
Options on securities and indices. Contracts giving the
holder the right but not the obligation to purchase or sell 0
a security (or the cash value, in the case of an option on 5N1
an index) at a specified price within a specified time. In
the case of selling (writing) options, the Funds will write
call options only if they already own the security (if it is
"covered"). Risks: Interest Rate, Currency, Market,
Leverage, Correlation, Liquidity, Credit and Opportunity.
Futures contract. Agreement to buy or sell a specific amount
of a commodity or financial instrument at a particular price 0
on a specific future date. Risks: Interest Rate, Currency,
Market, Leverage, Correlation, Liquidity and Opportunity.
1Based on net premium payments.
The Portfolio has additional investment policies and restrictions that are
not principal to its investment strategies (for example, repurchase
agreements, borrowing, pledging, and reverse repurchase agreements,
securities lending and when-issued securities.) These policies and
restrictions are discussed in the SAI.
<PAGE>
Types of Investment Risk
Correlation risk
This occurs when a Portfolio "hedges"- uses one investment to offset the
Portfolio's position in another. If the two investments do not behave in
relation to one another the way portfolio managers expect them to, then
unexpected or undesired results may occur. For example, a hedge may
eliminate or reduce gains as well as offset losses.
Credit risk
The risk that the issuer of a security or the counterparty to an investment
contract may default or become unable to pay its obligations when due.
Currency risk
Currency risk occurs when a Portfolio buys, sells or holds a security
denominated in foreign currency. Foreign currencies "float" in value against
the US dollar. Adverse changes in foreign currency values can cause
investment losses when a Fund's investments are converted to US dollars.
Extension risk
The risk that an unexpected rise in interest rates will extend the life of a
mortgage-backed security beyond the expected prepayment time, typically
reducing the security's value.
Information risk
The risk that information about a security or issuer or the market might not
be available, complete, accurate or comparable.
Interest rate risk
The risk that changes in interest rates will adversely affect the value of
an investor's securities. When interest rates rise, the value of
fixed-income securities will generally fall. Conversely, a drop in interest
rates will generally cause an increase in the value of fixed-income
securities. Longer-term securities and zero coupon/"stripped" coupon
securities ("strips") are subject to greater interest rate risk.
Leverage risk
The risk that occurs in some securities or techniques which tend to magnify
the effect of small changes in an index or a market. This can result in a
loss that exceeds the amount actually invested.
Liquidity risk
The risk that occurs when investments cannot be readily sold. A Portfolio
may have to accept a less-than-desirable price to complete the sale of an
illiquid security or may not be able to sell it at all.
<PAGE>
Management risk
This risk exists in all mutual funds and means that portfolio management
practices might not work to achieve their desired result.
Market risk
The risk that exists in all mutual funds and means the risk that securities
prices in a market, a sector or an industry will fluctuate, and that such
movements might reduce an investment's value.
Opportunity risk
The risk of missing out on an investment opportunity because the assets
needed to take advantage of it are committed to less advantageous
investments or strategies.
Political risk
The risk that may occur with foreign investments, and means that the value
of an investment may be adversely affected by nationalization, taxation,
war, government instability or other economic or political actions or
factors, including risk of expropriation.
Prepayment risk
The risk that unanticipated prepayments may occur, reducing the value of a
mortgage-backed security. The Portfolio must then reinvest those assets at
the current, market rate which may be lower.
Transaction risk
The risk that a Portfolio may be delayed or unable to settle a transaction
or that commissions and settlement expenses may be higher than usual.
Investment Selection Process
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria.
Although the Portfolio's social criteria tend to limit the availability of
investment opportunities more than is customary with other investment
companies, CAMCO and the Subadvisor believe there are sufficient investment
opportunities to permit full investment among issuers which satisfy the
Portfolio's investment and social objectives.
The selection of an investment by a Portfolio does not constitute
endorsement or validation by the Portfolio, nor does the exclusion of an
investment necessarily reflect failure to satisfy the Portfolio's social
criteria. Investors are invited to send a brief description of companies
they believe might be suitable for investment.
<PAGE>
Socially Responsible Investment Criteria
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.
<PAGE>
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.
The Fund and Its Management
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.
Calvert Asset Management Company, Inc. ("CAMCO") (4550 Montgomery Avenue,
Suite 1000N, Bethesda, Maryland 20814) is the Portfolio's investment advisor
and provides day-to-day investment management services to the Portfolio. It
has been managing mutual funds since 1976. CAMCO is the investment advisor
for over 25 mutual funds, including the first and largest family of socially
screened funds. As of December 31, 1998, CAMCO had $6 billion in assets
under management.
CAMCO uses a team approach to its management of the Portfolio. Reno J.
Martini, Senior Vice President and Chief Investment Officer, heads this team
and oversees the management of all Calvert Funds for CAMCO. Mr. Martini has
over 15 years of experience in the investment industry and has been the head
of CAMCO's asset management team since 1985.
Subadvisor and Portfolio Manager
NCM Capital Management Group, Inc., 103 West Main Street, Durham, North
Carolina 27701, has managed part of the equity investments of CVS Social
Balanced since 1995. NCM is one of the largest minority-owned
<PAGE>
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's portfolio management team consists of several members, headed by Maceo
K. Sloan. Mr. Sloan has more than 10 years of experience in the investment
industry, and is a frequent panelist on Wall Street Week with Louis Rukeyser.
The Portfolio has obtained an exemptive order from the Securities and
Exchange Commission to permit the Fund, pursuant to approval by the Board of
Directors, to enter into and materially amend contracts with the Portfolio's
Subadvisor without shareholder approval. See "Investment Advisor and
Subadvisor" in the SAI for further details.
Advisory Fee and Expenses
For fiscal year 1998, the 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. Effective March 1, 1999, the advisory fee
is 0.425%. The lower advisory fee, when added to the new administrative fee,
equals the previous advisory fee.
A Word About the Year 2000 (Y2K) and Our Computer Systems
Like other mutual funds, CAMCO and its service providers use computer
systems for all aspects of our business -- processing shareholder and fund
transactions, fund accounting, executing trades, and pricing securities just
to name a few. Many current software programs cannot distinguish between the
year 2000 and the year 1900. This can cause problems with retirement plan
distributions, dividend payment software, transaction software, and numerous
other areas that could impact the Fund. Calvert Group has been reviewing all
of its computer systems for Y2K compliance. Although, at this time, there
can be no assurance that there will be no negative impact on the Fund, the
Advisor, the underwriter, transfer agent and custodian have advised the Fund
that they have been actively working on any necessary changes to their
computer systems to prepare for Y2K and expect that their systems, and those
of their outside service providers, will be adapted in time for that event.
For more information, please visit our website at www.calvertgroup.com
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
<PAGE>
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
<PAGE>
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.
The Portfolio holds securities that are primarily listed on foreign
exchanges that trade on days when the NYSE is closed. The Portfolio does not
price shares on days when the NYSE is closed, even if foreign markets may be
open. As a result, the value of the Portfolio shares may change on days when
you will not be able to buy or sell your shares.
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.
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.
Financial Highlights
The financial highlights table is intended to help you understand the
Portfolio's financial performance for the past 5 years. Certain information
reflects financial results for a single share, by Portfolio. The total
returns in the table represent the rate that an investor would have earned
(or lost) on an investment in a Portfolio (assuming reinvestment of all
dividends and distributions), and does not reflect any applicable charges or
expenses by the Insurance Companies. This information has been audited by
PricewaterhouseCoopers LLP whose report, along with a Portfolio's financial
statements, are included in the Portfolio's annual report, which is
available upon request.
<PAGE>
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $1.982 $1.774 $1.703
Income from investment operations
Net investment income .052 .047 .040
Net realized and unrealized
gain (loss) .271 .309 .175
Total from investment
operations .323 .356 .215
Distributions from
Net investment income (0.52) (.047) (.042)
Net realized gains (.115) (.101) (.102)
Total distributions (.167) (.148) (.144)
Total increase (decrease) in
net asset value .156 .208 .071
Net asset value, ending $2.138 $1.982 $1.774
Total return 16.33% 20.08% 12.62%
Ratios to average net assets:
Net investment income 2.66% 2.66% 2.71%
Total expenses + .87% .80% .81%
Net expenses .85% .77% .78%
Portfolio turnover 539% 905% 99%
Net assets, ending
(in thousands) $303,954 $227,834 $161,473
Number of shares outstanding,
ending (in thousands) 142,201 114,967 91,045
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $1.440 $1.537
Income from investment operations
Net investment income .050 .046
Net realized and unrealized gain (loss) .380 (.097)
Total from investment operations .430 (.051)
Distributions from
Net investment income (.040) (.046)
Net realized gains (.127) --
Total distributions (.167) (.046)
Total increase (decrease) in net asset value .263 (.097)
Net asset value, ending $1.703 $1.440
Total return 29.87% (3.30%)
Ratios to average net assets:
Net investment income 3.08% 3.39%
Total expenses + .83% NA
Net expenses .81% .80%
Portfolio turnover 163% 43%
Net assets, ending (in thousands) $110,237 $66,593
Number of shares outstanding,
ending (in thousands) 64,728 46,244
+ 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. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
For investors who want more information about the Portfolio, the following
documents are available free upon request:
Annual/Semi-Annual Reports: Additional information about the Portfolio's
investments is available in the Portfolio's Annual and Semi-Annual reports
to shareholders. In the Portfolio's annual report, you will find a
discussion of the market conditions and investment strategies that
significantly affected the Portfolio's performance during its last fiscal
year.
Statement of Additional Information (SAI): The SAI for the Portfolio
provides more detailed information about the Portfolio and is incorporated
into this prospectus by reference.
You can get free copies of reports and the SAI, request other information
and discuss your questions about the Portfolio by contacting your broker, or
the Portfolio at:
Calvert Group
4550 Montgomery Ave, Suite 1000N
Bethesda, Md. 20814
Telephone: 1-800-368-2745
Calvert Group Web-Site
Address: http://www.calvertgroup.com
You can review the Portfolio's reports and SAI at the public Reference Room
of the Securities and Exchange Commission. You can get text-only copies:
For a fee, by writing to or calling the Public Reference Room of the
Commission, Washington, D.C. 20549-6009, Telephone: 1-800-SEC-0330.
Free from the Commission's Internet website at http://www.sec.gov.
Investment Company Act File No.: 811-3591
<PAGE>
29
Calvert Variable Series, Inc.
(Social Money Market, Small Cap Growth, Mid Cap Growth, International Equity
and Balanced Portfolios)
Statement of Additional Information
April 30, 1999
This Statement of Additional Information ("SAI") is not a
prospectus. Investors should read the Statement of Additional Information in
conjunction with the Fund's Prospectus, dated April 30, 1999. The Fund's
audited financial statements included in its most recent Annual Report to
Shareholders, are expressly incorporated by reference, and made a part of
this SAI. The prospectus and the most recent shareholder report may be
obtained free of charge by calling (800) 368-2748 or by writing the Fund at
4550 Montgomery Avenue, Bethesda, Maryland 20814.
TABLE OF CONTENTS
Investment Policies and Risks 1
Investment Restrictions 10
Investment Selection Process 11
Purchase and Redemption of Shares 12
Net Asset Value 12
Taxes 13
Calculation of Yield and Total Return 13
Directors and Officers 15
Investment Advisor and Subadvisors 17
Portfolio Transactions 18
Method of Distribution 19
Transfer and Shareholder Servicing Agent 20
Independent Accountants and Custodians 20
General Information 20
Appendix 21
INVESTMENT POLICIES AND RISKS
Calvert Variable Series, Inc., ("the Fund") offers investors the
opportunity to invest in several professionally managed securities
portfolios which 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 Social Portfolios offer investors a choice
of five separate portfolios selected with a concern for the social impact of
each investment: Calvert Social Money Market, Small Cap Growth, Mid Cap
Growth, International Equity and Balanced Portfolios. References to the
"Investment Advisor" refer to the advisor appropriate to the Portfolio being
discussed. (See "Investment Advisors")
Foreign Securities
Calvert Social International Equity and Small Cap Growth may invest
all of their assets in foreign securities, although Calvert Social Small Cap
Growth does not presently intend to invest in foreign securities. Calvert
Social Money Market may purchase only high quality, US dollar-denominated
instruments.
Under normal circumstances, Calvert Social International Equity
will invest at least 65% of its assets in equity securities and at least 65%
of its assets in the securities of issuers in no less than three countries,
other than the U.S. 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, Calvert Social International Equity 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.
Investments in foreign securities may present risks not typically
involved in domestic investments. The Fund may purchase foreign securities
directly, on foreign markets, or those represented by American Depositary
Receipts ("ADRs"), or other receipts evidencing ownership of foreign
securities, such as International Depository Receipts and Global Depositary
Receipts. ADRs are US dollar-denominated and traded in the US on exchanges
or over the counter. By investing in ADRs rather than directly in foreign
issuers' stock, the Fund may possibly avoid some currency and some liquidity
risks. The information available for ADRs is subject to the more uniform and
more exacting accounting, auditing and financial reporting standards of the
domestic market or exchange on which they are traded.
Additional costs may be incurred in connection with 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 Fund changes investments from one country to
another or converts foreign securities holdings into US dollars.
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.
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 climactic conditions, lack of significant history in operating
under a market-oriented economy, or by political instability, including risk
of expropriation.
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.
Since investments in securities of issuers domiciled in foreign
countries usually involve currencies of the foreign countries, and since the
Fund may temporarily hold funds in foreign currencies during the completion
of investment programs, the value of the assets of the Fund 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 increases or declines in relation to the value of the US dollar,
the value of the security in US dollars will increase or decline
correspondingly. The Fund will conduct its 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. A Portfolios may 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, a Portfolio may enter 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 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.
Eurocurrency Conversion Risk
European countries that are members of the European Monetary Union
have agreed to use a common currency unit, the "euro," beginning in 1999.
Currently, each of these countries has its own currency unit. Although the
Advisor does not anticipate any problems in conversion from the old
currencies to the euro, there may be issues involved in settlement,
valuation, and numerous other areas that could impact the Fund. Calvert has
been reviewing all of its computer systems for Eurocurrency conversion
compliance. There can be no assurance that there will be no negative impact
on the Fund, however, the Advisor and custodian have advised the Fund that
they have been actively working on any necessary changes to their computer
systems to prepare for the conversion, and expect that their systems, and
those of their outside service providers, will be adapted in time for that
event.
Foreign Money Market Instruments
Calvert Social Money Market may invest without limitation in money
market instruments of banks, whether foreign or domestic, including
obligations of US branches of foreign banks ("Yankee" instruments) and
obligations of foreign branches of US banks ("Eurodollar" instruments). All
such instruments must be high-quality, US dollar-denominated obligations. It
is an operating (i.e., nonfundamental) policy of Calvert Social 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 US
dollar-denominated, investments in foreign money market instruments may
involve risks that are different than investments in securities of US
issuers. See "Foreign Securities" above.
Small Cap Issuers
The securities of small cap issuers may 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.
Investing in smaller, new issuers generally involves greater risk
than investing in larger, established issuers. Companies in which the
Portfolio is likely to invest may have limited product lines, markets or
financial resources and may lack management depth. The securities in such
companies may also have limited marketability and may be subject to more
abrupt or erratic market movements than securities of larger, more
established companies or the market averages in general.
Real Estate Investment Trusts
Calvert Social Small Cap Growth may invest in real estate
investment trusts ("REITs"), including equity REITs, which own real estate
properties, and mortgage REITs, which make construction, development, and
long-term mortgage loans. The value of an equity REIT may be affected by
changes in the value of the underlying property, while a mortgage REIT may
be affected by the quality of the credit extended. The performance of both
types of REITs depends upon conditions in the real estate industry,
management skills, and the amount of cash flow. The risks associated with
REITs include default by borrowers, self-liquidation, failure to qualify as
a pass-through entity under the Federal tax law, failure to qualify as an
exempt entity under the Investment Company Act of 1940 (the "1940 Act"), and
the fact that REITs are not diversified.
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.
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.
Temporary Defensive Positions
For temporary defensive purposes - which may include a lack of
adequate purchase candidates or an unfavorable market environment - the Fund
may invest in cash or cash equivalents. Cash equivalents include instruments
such as, but not limited to, US government and agency obligations,
certificates of deposit, banker's acceptances, time deposits commercial
paper, short-term corporate debt securities, and repurchase agreements.
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 Fund's 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,
US 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.
U.S. Government-Backed Obligations
Calvert Social Balanced may, in pursuit of its investment
objective, invest in Ginnie Maes which, issued by the Government National
Mortgage Association, are typically interests in pools of mortgage loans
insured by the Federal Housing Administration or guaranteed by the Veterans
Administration. A "pool" or group of such mortgages is assembled and, after
approval from GNMA, is offered to investors through various securities
dealers. GNMA is a U.S. Government corporation within the Department of
Housing and Urban Development. Ginnie Maes are backed by the full faith and
credit of the United States, which means that the U.S. Government guarantees
that interest and principal will be paid when due.
The 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. Calvert Social
Balanced is not expected generally to invest more than a small portion of
its assets in GNMA Certificates.
Non-Investment Grade Debt Securities
Calvert Social Balanced may invest in lower quality debt securities
(generally those rated BB or lower by S&P or Ba or lower by Moody's, known
as "junk bonds"). 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. Calvert
Social International Equity may invest up to 5% of its assets in lower
quality debt securities. Calvert Social Small Cap Growth and Mid Cap Growth
may each invest up to 35% of its assets in debt securities without regard to
investment grade, but will not purchase any debt securities rated below C.
Non-investment grade debt securities are lower quality debt securities.
These 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.
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.
Derivatives
Each Portfolio can use various techniques to increase or decrease
its exposure to changing security prices, interest rates, or other factors
that affect security values. These techniques may involve derivative
transactions such as buying and selling options and futures contracts and
leveraged notes, entering into swap agreements, and purchasing indexed
securities. The Portfolios can use these practices either as substitution or
as protection against an adverse move in the Portfolio to adjust the risk
and return characteristics of the Portfolio. If the Advisor and/or
Subadvisor (as applicable) judges market conditions incorrectly or employs a
strategy that does not correlate well with a Portfolio's investments, or if
the counterparty to the transaction does not perform as promised, these
techniques could result in a loss. These techniques may increase the
volatility of a Portfolio and may involve a small investment of cash
relative to the magnitude of the risk assumed. Derivatives are often
illiquid.
Options and Futures Contracts
Calvert Social International Equity, Small Cap Growth and Mid Cap
Growth 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. 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.
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 US 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. 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 US
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 Calvert Social Money Market)
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 Calvert Social Money
Market or Balanced). 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.
Lending Portfolio Securities
The Fund 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. Any such loans must be secured continuously in the form of
cash or cash equivalents such as US Treasury bills. The amount of the
collateral must on a current basis equal or exceed the market value of the
loaned securities, and the Fund must be able to terminate such loans upon
notice at any time. The Fund will exercise its right to terminate a
securities loan in order to preserve its right to vote upon matters of
importance affecting holders of the securities.
The advantage of such loans is that the Fund 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 Fund'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
possibly loss of rights in the loaned securities should the borrower of the
loaned securities fail financially. However, the Fund will make loans of its
portfolio securities only to those firms the Advisor deems creditworthy and
only on terms the Advisor believes should compensate for such risk. On
termination of the loan, the borrower is obligated to return the securities
to the Fund. The Fund will recognize any gain or loss in the market value of
the securities during the loan period. The Fund may pay reasonable custodial
fees in connection with the loan.
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, when a Portfolio purchases a when-issued security, it will
maintain an amount of cash, cash equivalents (for example, commercial paper
and daily tender adjustable notes) or short-term high-grade fixed income
securities in a segregated account with the Portfolio's custodian, so that
the amount so segregated plus the amount of initial and variation margin
held in the account of its broker equals the market value of the when-issued
purchase, thereby ensuring the transaction is unleveraged.
INVESTMENT RESTRICTIONS
Fundamental Investment Restrictions
The Portfolios have adopted the following fundamental investment
restrictions. These restrictions cannot be changed without the approval of
the holders of a majority of the outstanding shares of each Portfolio:
(1) Each Portfolio may not make any investment
inconsistent with its classification as a diversified
investment company under the 1940 Act.
(2) Each Portfolio may not concentrate its investments in
the securities of issuers primarily engaged in any
particular industry (other than securities issued or
guaranteed by the U.S. Government or its agencies or
instrumentalities and repurchase agreements secured
thereby, or, for Calvert Social Money Market, with respect
to investments in money market instruments).
(3) Each Portfolio may not issue senior securities or
borrow money, except from banks for temporary or emergency
purposes and then only in an amount up to 33 1/3% of the
value of its total assets or as permitted by law and
except by engaging in reverse repurchase agreements, where
allowed. In order to secure any permitted borrowings and
reverse repurchase agreements under this section, a
Portfolio may pledge, mortgage or hypothecate its assets.
(4) Each Portfolio may not underwrite the securities of
other issuers, except as allowed by law or to the extent
that the purchase of obligations in accordance with a
Portfolio's investment objective and policies, either
directly from the issuer, or from an underwriter for an
issuer, may be deemed an underwriting.
(5) Each Portfolio may not invest directly in commodities
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 the Social Mid Cap, International
Equity, and Small Cap Portfolios may purchase or sell
stock index futures, foreign currency futures, interest
rate futures and options thereon.
(6) Each Portfolio may not 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, or as permitted by law. The
purchase of all or a portion of an issue of publicly or
privately distributed debt obligations in accordance with
a Portfolio's investment objective, policies and
restrictions, shall not constitute the making of a loan.
Nonfundamental Investment Restrictions
The Board of Directors has adopted the following nonfundamental
investment restrictions. A nonfundamental investment restriction can be
changed by the Board at any time without a shareholder vote.
(1) Each Portfolio does not intend to make any purchases
of securities if borrowing exceeds 5% of a portfolio's
total assets.
(2) Each Portfolio may not acquire private placement
investments until the value of the Portfolio's assets
exceeds $20 million.
(3) Calvert Social International Equity, Small Cap Growth
and Mid Cap Growth may not write options on more than 50%
of their total assets.
(4) Calvert Social International Equity, Small Cap Growth,
and Mid Cap Growth may not purchase illiquid securities if
more than 15% of the value of net assets would be invested
in such securities.
(5) Calvert Social Balanced and Calvert Social Money
Market may not purchase illiquid securities if more than
10% of the value of net assets would be invested in such
securities.
(6) Calvert Social International Equity and Calvert Social
Mid Cap Growth may not make short sales of securities or
purchase any securities on margin except that each
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 a 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.
(7) Calvert Social Money Market may invest only in foreign
money market instruments if they are of comparable quality
to the obligations of domestic banks.
(8) Calvert Social Balanced may not 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.
(9) Calvert Social Balanced may not write, purchase or
sell puts, calls or combinations thereof except in
connection with when-issued securities.
(10) Calvert Social Balanced may not purchase any
securities on margin (except that it 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.
(11) Calvert Social International Equity may not 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.
(12) Calvert Social International Equity will limit its
investment in securities of U.S. issuers to 5% of its net
assets.
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
Portfolios have 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.
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 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 US Treasury, such as US Treasury bills,
notes and bonds, are supported by the full faith and credit of the US
Government. Certain obligations issued or guaranteed by a US Government
agency or instrumentality are supported by the full faith and credit of the
US 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 US 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 US 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 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 "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 of redemption may be suspended or the date of payment
postponed for any period during which the New York Stock Exchange is closed
(other than customary weekend and holiday closings), when trading on the New
York Stock Exchange is restricted, or an emergency exists, as determined by
the Commission, or if the Commission has ordered such a suspension for the
protection of shareholders.
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. Calvert Social Money Market attempts
to maintain a constant net asset value of $1.00 per share; the net asset
values of Calvert Social Balanced, International Equity, Small Cap Growth
and Mid Cap Growth 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, Dr. Martin Luther King, Jr. 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 Calvert Social Small Cap Growth, Mid Cap Growth,
International Equity and Balanced 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 US 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.
Calvert Social 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.
TAXES
In 1998 the Portfolios qualified, and in 1999 the Portfolios intend
to qualify, as a "regulated investment company" under the provisions of
Subchapter M of the Internal Revenue Code (the "Code"). If for any reason
the Fund should fail to qualify, it would be taxed as a corporation at the
Fund level, rather than passing through its income and gains to shareholders.
Distributions of realized net capital gains, if any, are normally
paid once a year; however, the Portfolios do not intend to make any such
distributions unless available capital loss carryovers, if any, have been
used or have expired. Capital loss carryforwards as of December 31, 1998,
for Calvert Social Money Market was $0, Small Cap Growth was $263,528, Mid
Cap Growth was $0, International Equity was $0, and Balanced was $0.
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
Calvert Social Money Market: Yield
From time to time Calvert Social 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
Calvert Social 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. Calvert Social 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
The "effective yield" is calculated like yield, but assumes
reinvestment of earned income. The effective yield will be slightly higher
than the yield because of the compounding effect of this assumed
reinvestment. For the seven-day period ended December 31, 1998, Calvert
Social Money Market's yield was 4.85% and its effective yield was 4.97%.
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.
Calvert Social Small Cap, Mid Cap Growth, International Equity, and
Balanced: Total Return and Other Quotations
Calvert Social Small Cap Growth, Mid Cap Growth, International
Equity and Balanced 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 $10,000; T = total return; n =
number of years; and ERV = the ending redeemable value of a hypothetical
$10,000 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 Portfolios for the periods indicated are as follows:
Periods Ended
December 31, 1998 SEC Average Annual Return
Calvert Social Small Cap Growth
One Year -6.23%
From Inception
(March 15, 1995) 5.93%
Calvert Social Mid Cap Growth
One Year 29.88%
Five Years 16.71%
From Inception
(July 16, 1991) 15.05%
Calvert Social International Equity
One Year 18.09%
Five Years 11.07%
From Inception
(June 30, 1992) 12.18%
Calvert Social Balanced
One Year 16.33%
Five Years 14.58%
Ten Years 12.87%
From Inception 11.60%
(September 2, 1986)
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.
DIRECTORS AND OFFICERS
The Fund's Board of Directors supervises the Fund's activities and
reviews its contracts with companies that provide it with services. 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.
FRANK H. BLATZ, JR., Esq., Director. Mr. Blatz is a partner in the
law firm of Snevily, Ely, Williams, Gurrieri & Blatz. He was formerly a
partner with Abrams, Blatz, Gran, Hendricks & Reina, P.A. He is also a
director/trustee of The Calvert Fund, Calvert Cash Reserves, First Variable
Rate Fund, Calvert Tax-Free Reserves, and Calvert Municipal Fund, Inc.
Address: 308 East Broad Street, Westfield, New Jersey 07091. DOB: 10/29/35.
ALICE GRESHAM BULLOCK, Director. Ms. Bullock is a Dean and
Professor at Howard University School of Law. She was formerly Deputy
Director of the Association of American Law Schools. Ms. Bullock is a member
of the Board of Visitors of J. Reuben Clark Law School, Brigham Young
University and the Board of Directors of Council on Legal Education
Opportunity. Address: 6127 Utah Avenue, Washington, D.C. 20015. DOB:
05/17/50.
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.
*BARBARA J. KRUMSIEK, President and Director. Ms. Krumsiek serves
as President, Chief Executive Officer and Vice Chairman of Calvert Group,
Ltd. and as an officer and director of each of its affiliated companies. She
is a director of Calvert-Sloan Advisers, L.L.C., and a trustee/director of
each of the investment companies in the Calvert Group of Funds. Prior to
joining Calvert Group, Ms. Krumsiek served as Senior Vice President of
Alliance Capital LP's Mutual Fund Division. DOB: 08/09/52.
M. CHARITO KRUVANT, Director. Ms. Kruvant is President of Creative
Associates International, Inc., a firm that specializes in human resources
development, information management, public affairs and private enterprise
development. She is also a director of Acacia Federal Savings Bank. DOB:
12/08/45. Address: 5301 Wisconsin Avenue, N.W. Washington, D.C. 20015.
ARTHUR J. PUGH, Trustee. Mr. Pugh serves as a director of Acacia
Federal Savings Bank. Address: 4823 Prestwick Drive, Fairfax, Virginia
22030. DOB: 09/24/37.
SOUTH TRIMBLE, III, Director. Mr. Trimble is special counsel to and
formerly was a partner in the law firm of Reasoner & Fox. Address: 888 17th
Street, N.W., Suite 800, Washington, DC 20006. DOB: 06/25/25.
RONALD M. WOLFSHEIMER, CPA, Treasurer. Mr. Wolfsheimer is Senior
Vice President and Chief Financial Officer of Calvert Group, Ltd. and its
subsidiaries and an officer of each of the other investment companies in the
Calvert Group of Funds. Mr. Wolfsheimer is Vice President and Treasurer of
Calvert-Sloan Advisers, L.L.C., and a director of Calvert Distributors, Inc.
DOB: 07/24/47.
WILLIAM M. TARTIKOFF, Esq., Vice President and 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., a director
of Calvert Distributors, Inc., and is an officer of Acacia National Life
Insurance Company. DOB: 08/12/47.
RENO J. MARTINI, Senior Vice President. Mr. Martini is a director
and Senior Vice President of Calvert Group, Ltd., and Senior Vice President
and Chief Investment Officer of Calvert Asset Management Company, Inc. Mr.
Martini is also a director and President of Calvert-Sloan Advisers, L.L.C.,
and a director and officer of Calvert New World Fund, Inc. DOB: 1/13/50.
DANIEL K. HAYES, Vice President. Mr. Hayes is Vice President of
Calvert Asset Management Company, Inc., and is an officer of each of the
other investment companies in the Calvert Group of Funds, except for Calvert
New World Fund, Inc. DOB: 09/09/50.
SUSAN WALKER BENDER, Esq., Assistant Secretary. Ms. Bender is
Associate General Counsel of Calvert Group, 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:
1/29/59.
KATHERINE STONER, Esq., Assistant Secretary. Ms. Stoner is
Associate General Counsel of Calvert Group and an officer of each of its
subsidiaries and Calvert-Sloan Advisers, L.L.C. She is also an officer of
each of the other investment companies in the Calvert Group of Funds. DOB:
10/21/56.
IVY WAFFORD DUKE, Esq., Assistant Secretary. Ms. Duke is Associate
General Counsel of Calvert Group and an officer of each of its subsidiaries
and Calvert-Sloan Advisers, L.L.C. She is also an officer of each of the
other investment companies in the Calvert Group of Funds. Prior to working
at Calvert Group, Ms. Duke was an Associate in the Investment Management
Group of the Business and Finance Department at Drinker Biddle and Reath.
DOB: 9/7/68.
VICTOR FRYE, Esq., Assistant Secretary and Compliance Officer. Mr.
Frye is Counsel and Compliance Officer of Calvert Group and an officer of
each of its subsidiaries and Calvert-Sloan Advisers, L.L.C. He is also an
officer of each of the other investment companies in the Calvert Group of
Funds. Prior to working at Calvert Group, Mr. Frye was Counsel and Manager
of the Compliance Department at The Advisors Group. DOB: 10/15/58.
The address of directors and officers, unless otherwise noted, is
4550 Montgomery Avenue, Suite 1000N, Bethesda, Maryland 20814. Directors and
officers of the Fund as a group own less than 1% of the Fund's outstanding
shares. Directors marked with an *, above, are "interested persons" of the
Fund, under the 1940 Act.
During fiscal 1998, directors of the Fund not affiliated with the
Fund's Advisor were paid $958 by Calvert Social Money Market, $335 by
Calvert Social Small Cap Growth, $3,043 by Calvert Social Mid Cap Growth,
$1,416 by Calvert Social International Equity and $24,590 by Calvert Social
Balanced. 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.
Director Compensation Table
Fiscal Year 1998 Aggregate Pension or Total Compensation
Compensation Retirement from Benefits
(unaudited numbers) from Registrant Accrued as Registrant and Fund
for Service part of Complex paid to
as Director of Registrant Director **
Expenses*
Name of Director
Frank H. Blatz, Jr. $5,250 $5,250 $42,100
Alice Gresham
Bullock $0 $0 $0
Charles E. Diehl $5,250 $5,250 $41,500
M. Charito Kruvant $0 $0 $36,250
Arthur J. Pugh $5,250 $5,250 $41,500
South Trimble, III $8,250 $8,250 $8,250
*Messrs. Blatz, Diehl, and Pugh and Ms. Kruvant have chosen to defer a
portion of their compensation. As of December 31, 1998, total deferred
compensation, including dividends and capital appreciation, was $644,247.37,
$672,374.09, $216,322.53, and $23,295.55, for each director, respectively.
**The Fund Complex consists of nine (9) registered investment companies.
INVESTMENT ADVISOR AND SUBADVISORS
The Fund's Investment Advisor is Calvert Asset Management Company,
Inc., 4550 Montgomery Avenue, 1000N, Bethesda, Maryland 20814, a subsidiary
of Calvert Group Ltd., which is a subsidiary of Acacia Mutual Life Insurance
Company of Washington, D.C. ("Acacia Mutual"). Effective January 1, 1999,
Acacia merged with and became a subsidiary of Ameritas Acacia Mutual Holding
Company.
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.
Subadvisors
CAMCO has retained Awad Asset Management, Inc. as Subadvisor for
Calvert Social Small Cap Growth is controlled by Raymond James. It receives
a subadvisory fee, paid by the Advisor, of 0.40% of net assets.
CAMCO has retained Brown Capital Management, Inc. as Subadvisor for
Calvert Social Mid Cap Growth. Brown Capital Management, Inc. is controlled
by Eddie C. Brown. It receives a subadvisory fee, paid by the Advisor, of
0.25% of net assets.
CAMCO has retained Murray Johnstone International, Ltd. as
Subadvisor for Calvert Social International Equity. Murray Johnstone
International, Ltd. is controlled by United Asset Management Company. It
receives a subadvisory fee, paid by the Advisor, of 0.45% of net assets.
CAMCO has retained NCM Capital Management Group, Inc. as Subadvisor
for Calvert Social Balanced. NCM Capital Management Group, Inc. is a
subsidiary of the North Carolina Mutual Life Insurance Company. It receives
a subadvisory fee, paid by the Advisor, of 0.25% of net assets.
The Fund has received an exemptive order to permit the Fund and the
Advisor to enter into and materially amend an Investment Subadvisory
Agreement without shareholder approval. Authorization for the Advisor to act
on the order with respect to the other Portfolios is currently pending
shareholder approval. If approved, then within 90 days of the hiring of any
Subadvisor or the implementation of any proposed material change in an
Investment Subadvisory Agreement, the Portfolio will furnish its
shareholders information about the new Subadvisor or Investment Subadvisory
Agreement that would be included in a proxy statement. Such information will
include any change in such disclosure caused by the addition of a new
Subadvisor or any proposed material change in the Investment Subadvisory
Agreement of the Portfolio. The Portfolio will meet this condition by
providing shareholders, within 90 days of the hiring of the Subadvisor or
implementation of any material change to the terms of an Investment
Subadvisory Agreement, with an information statement to this effect.
For the Fund's fiscal years ended December 31, 1996, 1997, and
1998, Calvert Social Balanced paid CAMCO fees of $963,829, $1,339,136, and
$1,826,036, respectively. For 1996, 1997 and 1998, Calvert Social Money
Market paid investment adviser fees of $24,348, $30,309, and $48,868,
respectively. For 1996, 1997 and 1998, Calvert Social International Equity
paid CAMCO fees of $122,600, $148,107 and $161,550, respectively, and
received expense reimbursements from CAMCO of $27,740, $25,189 and $23,845,
respectively. For 1996, 1997 and 1998, Calvert Social Mid Cap Growth paid
investment advisory fees of $126,374, $179,053 and $250,773, respectively.
For 1996, 1997 and 1998, Calvert Social Small Cap Growth paid CAMCO $28,564,
$48,611, and $35,088, respectively, and received expense reimbursements from
CAMCO of $3,794, $6,208, and $0, respectively.
Calvert Administrative Services Company ("CASC"), an affiliate of
the Advisor, has been retained by the Fund to provide certain administrative
services necessary to the conduct of its affairs, including the preparation
of regulatory filings and shareholder reports. For providing such services,
CASC receives an annual administrative service fee payable monthly (as a
percentage of net assets) as follows:
Social Money Market 0.20%
Social Small Cap Growth 0.75%
Social Mid Cap Growth 0.25%
Social International Equity 0.35%
Social Balanced 0.275%
For 1996, 1997 and 1998, Calvert Social Small Cap Growth paid
$3,794, $6,554 and $3,899, respectively, Mid Cap Growth paid $15,797,
$22,493 and $31,572, respectively, and International Equity paid $40,000
each year to CASC in administrative fees. Calvert Social Money Market and
Balanced will begin to pay CASC an administrative service fee in 1999.
PORTFOLIO TRANSACTIONS
Portfolio transactions are undertaken on the basis of their
desirability from an investment standpoint. The Fund's Advisor and
Subadvisors make investment decisions and the choice of brokers and dealers
under the direction and supervision of the Fund's Board of Trustees.
Broker-dealers who execute portfolio transactions on behalf of the
Fund are selected on the basis of their execution capability and trading
expertise considering, among other factors, the overall reasonableness of
the brokerage commissions, current market conditions, size and timing of the
order, difficulty of execution, per share price, etc.
For the last three fiscal years, total brokerage commissions paid
are as follows:
1996 1997 1998
Social Small Cap Growth $1,990 $12,275 $9,209
Social Mid Cap Growth $17,869 $26,905 $37,585
Social International Equity $76,714 $83,107 $69,583
Social Balanced $189,738 $156,483 $242,112
For the last three fiscal years, Calvert Social Small Cap Growth
paid brokerage commissions to Raymond James, an affiliated person and the
controlling parent company of the Fund's Subadvisor as follows:
1996 1997 1998
Social Small Cap Growth NA NA $4,095
For the fiscal year ended December 31, 1998, aggregate brokerage
commissions paid to Raymond James represented 0.44% of the Portfolio's total
commissions and 0.001% of the Portfolio's total dollar amount of commission
transactions.
While the Fund's Advisor and Subadvisor(s) select brokers primarily
on the basis of best execution, in some cases they may direct transactions
to brokers based on the quality and amount of the research and
research-related services which the brokers provide to them. These services
are of the type described in Section 28(e) of the Securities Exchange Act of
1934 and may include analyses of the business or prospects of a company,
industry or economic sector, or statistical and pricing services. Other such
services are designed primarily to assist the Advisor in monitoring the
investment activities of the Subadvisor(s) of the Fund. Such services
include portfolio attribution systems, return-based style analysis, and
trade-execution analysis.
If, in the judgment of the Advisor or Subadvisor(s), the Fund or
other accounts managed by them will be benefited by supplemental research
services, they are authorized to pay brokerage commissions to a broker
furnishing such services which are in excess of commissions which another
broker may have charged for effecting the same transaction. These research
services include advice, either directly or through publications or
writings, as to the value of securities, the advisability of investing in,
purchasing or selling securities, and the availability of securities or
purchasers or sellers of securities; furnishing of analyses and reports
concerning issuers, securities or industries; providing information on
economic factors and trends; assisting in determining portfolio strategy;
providing computer software used in security analyses; providing portfolio
performance evaluation and technical market analyses; and providing other
services relevant to the investment decision making process. It is the
policy of the Advisor that such research services will be used for the
benefit of the Fund as well as other Calvert Group funds and managed
accounts.
The Portfolio turnover rates for the last two fiscal years are as
follows:
19971998
Social Small Cap Growth 292%72%
Social Mid Cap Growth 96% 65%
Social International Equity 35% 92%
Social Balanced* 905%539%
* Calvert Social Balanced's fixed-income investment strategies caused it to
have a relatively high portfolio turnover compared to other portfolios.
No Portfolio turnover rate can be calculated for Calvert Social
Money Market due to the short maturities of the instruments purchased.
Portfolio turnover should not affect the income or net asset value of
Calvert Social Money Market because brokerage commissions are not normally
charged on the purchase or sale of money market instruments.
METHOD OF DISTRIBUTION
Calvert Distributors, Inc. ("CDI"), 4550 Montgomery Avenue, Suite
1000N, Bethesda, Maryland 20814, is the principal underwriter and
distributor for the Fund. Under the terms of its underwriting agreement with
the Funds, CDI markets and distributes the Fund's shares and is responsible
for preparing advertising and sales literature, and printing and mailing
prospectuses to prospective investors. CDI is entitled to compensation for
services performed and expenses assumed. Payments to CDI may be authorized
by the Fund's Board of Directors from time to time in accordance with
applicable law. No payments were authorized in 1998. 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. The Advisor and CDI, at their
own expense, may incur costs or pay expenses associated with the
distribution of the Fund's shares.
TRANSFER AND SHAREHOLDER SERVICING AGENT
National Financial Data Services, Inc. ("NFDS"), 1004 Baltimore,
6th Floor, Kansas City, Missouri 64105, a subsidiary of State Street Bank &
Trust, has been retained by the Fund to act as transfer agent and dividend
disbursing agent. These responsibilities include: responding to certain
shareholder inquiries and instructions, crediting and debiting shareholder
accounts for purchases and redemptions of Fund shares and confirming such
transactions, and daily updating of shareholder accounts to reflect
declaration and payment of dividends.
Calvert Shareholder Services, Inc. ("CSSI"), 4550 Montgomery
Avenue, Suite 1000N, Bethesda, Maryland 20814, a subsidiary of Calvert
Group, Ltd. and Acacia Mutual, has been retained by the Fund to act as
shareholder servicing agent. Shareholder servicing responsibilities include
responding to shareholder inquiries and instructions concerning their
accounts, entering any telephoned purchases or redemptions into the NFDS
system, maintenance of broker-dealer data, and preparing and distributing
statements to shareholders regarding their accounts. Calvert Shareholder
Services, Inc. was the sole transfer agent prior to January 1, 1998.
For these services, CSSI and NFDS receive a total fee of $14.00 per
shareholder account and $1.60 per shareholder transaction.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
PricewaterhouseCoopers LLP, 250 West Pratt Street, Baltimore,
Maryland 21201, has been selected by the Board of Directors to serve as
independent accountants for fiscal year 1999. State Street Bank and Trust
Company, N.A., 225 Franklin Street, Boston, Massachusetts 02110, serves as
custodian of the Fund's investments. First National Bank of Maryland, 25
South Charles Street, Baltimore, Maryland 21203 also serves as custodian of
certain of the Fund's cash assets. The custodians have no part in deciding
the Fund's investment policies or the choice of securities that are to be
purchased or sold for the Fund's Portfolios.
The Fund is an open-end, management investment company,
incorporated in Maryland on September 27, 1982. Calvert Social Money Market,
Small Cap Growth and International Equity are diversified. Calvert Social
Mid Cap Growth and Balanced are non-diversified. The Fund was formerly known
as "Acacia Capital Corporation" and the Portfolios, Calvert Social Money
Market, Small Cap Growth, Mid Cap Growth, International Equity and Balanced,
were formerly known as Calvert Responsibly Invested Money Market, Strategic
Growth, Capital Accumulation, Global Equity and Balanced, respectively.
The Fund issues separate stock for each Portfolio. 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. The Insurance Companies and the Fund's shareholders will
vote Fund shares allocated to registered separate accounts in accordance
with instructions received from policyholders. 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.
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 1940 Act 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.
The Fund is not required to hold annual policyholder meetings, but
special meetings may be called for certain purposes such as electing
Directors, changing fundamental policies, or approving a management
contract. As a policyholder, you receive one vote for each share you own.
APPENDIX
Corporate Bond Ratings
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>
PART C. OTHER INFORMATION
Item 23. Exhibits
(1) Underwriting Agreement, incorporated by reference to
Post-Effective Amendment No. 34, dated 4/30/98, accession number
0000708950-98-000006.
(3)(i) (a) Restated Articles of Incorporation of Acacia Capital
Corporation, incorporated by reference to Post-Effective Amendment No. 31,
dated 4/25/96, accession number 0000708950-96-000005.
(b) Articles Supplementary of Acacia Capital Corporation,
incorporated by reference to Post-Effective Amendment No. 31, dated 4/25/96,
accession number 0000708950-96-000005.
(c) Articles Supplementary of Acacia Capital Corporation
incorporated by reference to Post-Effective Amendment No. 32, dated 4/22/97,
accession number 0000708950-97-000006.
(d) Articles of Amendment of Acacia Capital Corporation to change
name to Calvert Variable Series, Inc., and to change the name of each
series, incorporated by reference to Post-Effective Amendment No. 33, dated
2/12/98, accession number 0000708950-98-000002.
(3)(ii) Amended By-laws of Calvert Variable Series, Inc., filed herewith.
(23) Opinion and Consent of Counsel, filed herewith.
(23A) Consent of Independent Auditors to Use of Report, filed herewith.
(99.B5) Investment Advisory Agreement , filed herewith.
(99.B5a) Sub-Investment Advisory Agreements, incorporated by reference to
Post-Effective Agreement No. 31, dated 4/25/96, accession number
0000708950-96-000005.
(99.B8) Custody Agreement, filed herewith.
(99.B9a) Transfer Agency Contract and Shareholder Servicing Contract,
incorporated by reference to Post-Effective Amendment No. 34, dated 4/30/98,
accession number 0000708950-98-000006.
(99.B9b) Deferred Compensation Agreement, incorporated by reference to
Post-Effective Agreement No. 31, dated 4/25/96, accession number
0000708950-96-000005.
Item 24. Persons Controlled by or Under Common Control With Registrant
Not applicable.
Item 25. 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 provides that
Registrant may purchase and maintain liability insurance on behalf of any
officer, trustee, employee or agent against any liabilities arising from
such status. In this regard, Registrant maintains a Directors & Officers
(Partners) Liability Insurance Policy with Chubb Group of Insurance
Companies, 15 Mountain View Road, Warren, New Jersey 07061, providing
Registrant with $5 million in directors and officers liability coverage,
plus $5 million in excess directors and officers liability coverage for the
independent trustees/directors only. Registrant also maintains an $8 million
Investment Company Blanket Bond issued by ICI Mutual Insurance Company, P.O.
Box 730, Burlington, Vermont, 05402.
Item 26. Business and Other Connections of Investment Adviser
Name of Company, Principal
Name Business and Address Capacity
Barbara J. Krumsiek Calvert Variable Series, Inc. Officer
Calvert Municipal Fund, Inc. and
Calvert World Values Fund, Inc. Director
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income and
Calvert Tax-Free Reserves Trustee
Calvert Social Investment Fund
Calvert Cash Reserves
The Calvert Fund
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
----------------
Calvert Group, Ltd. Officer
Holding Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Officer
Broker-Dealer and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert New World Fund, Inc. Director
Investment Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
--------------
Alliance Capital Mgmt. L.P. Sr. Vice President
Mutual Fund Division Director
1345 Avenue of the Americas
New York, NY 10105
--------------
Ronald M. Wolfsheimer First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
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 Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert Distributors, Inc. Officer
Broker-Dealer and
4550 Montgomery Avenue Director
Bethesda, Maryland 20814
---------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
David R. Rochat First Variable Rate Fund Officer
for Government Income and
Calvert Tax-Free Reserves Trustee
Calvert Cash Reserves
The Calvert Fund
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 Co., Inc. Officer
Investment Advisor and
4550 Montgomery Avenue Director
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
---------------
Reno J. Martini Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Director
Holding Company and
4550 Montgomery Avenue Officer
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
Calvert Variable Series, Inc.
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, Maryland 20814
---------------
Charles T. Nason Ameritas Acacia Mutual Holding Co. Officer
Acacia National Life Insurance and
Director
Insurance Companies
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Acacia Financial Corporation Officer
Holding Company and
7315 Wisconsin Avenue Director
Bethesda, Maryland 20814
---------------
Acacia Federal Savings Bank Director
Savings Bank
7600-B Leesburg Pike
Falls Church, Virginia 22043
---------------
Enterprise Resources, Inc. Director
Business Support Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Acacia Realty Square, L.L.C. Director
Realty Investments
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Gardner Montgomery Company Director
Tax Return Preparation Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Director
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Director
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Services, Inc. Director
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Social Investment Fund Trustee
Investment Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
-----------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Robert-John H. Acacia National Life Insurance Officer
Sands Insurance Company and
7315 Wisconsin Avenue Director
Bethesda, Maryland 20814
----------------
Ameritas Acacia Mutual Holding Co. Officer
Insurance Company
7315 Wisconsin Avenue
Bethesda, Maryland 20814
----------------
Acacia Financial Corporation Officer
Holding Company and
7315 Wisconsin Avenue Director
Bethesda, Maryland 20814
----------------
Acacia Federal Savings Bank Officer
Savings Bank
7600-B Leesburg Pike
Falls Church, Virginia 22043
---------------
Enterprise Resources, Inc. Director
Business Support Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Acacia Realty Square, L.L.C. Director
Realty Investments
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
The Advisors Group, Inc. Director
Broker-Dealer and
Investment Advisor
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Gardner Montgomery Company Director
Tax Return Preparation Services
7315 Wisconsin Avenue
Bethesda, Maryland 20814
---------------
Calvert Group, Ltd. Director
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Director
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management, Co., Inc. Director
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Shareholder Services, Inc. Director
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
William M. Tartikoff Acacia National Life Insurance Officer
Insurance Company
7315 Wisconsin Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
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
---------------
Calvert Asset Management Co. Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
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, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Susan Walker Bender Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
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 Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
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 Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert-Sloan Advisers, LLC Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Victor Frye Calvert Group, Ltd. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Administrative Services Co. Officer
Service Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Shareholder Services, Inc. Officer
Transfer Agent
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
Calvert Distributors, Inc. Officer
Broker-Dealer
4550 Montgomery Avenue
Bethesda, Maryland 20814
----------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Calvert New World Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
The Advisors Group, Inc. Counsel
Broker-Dealer and and
Investment Advisor Compliance
7315 Wisconsin Avenue Manager
Bethesda, Maryland 20814
---------------
Daniel K. Hayes Calvert Asset Management Co., Inc. Officer
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
First Variable Rate Fund for Officer
Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
Calvert Variable Series, Inc.
Calvert Municipal Fund, Inc.
Calvert World Values Fund, Inc.
Investment Companies
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Steve Van Order 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
------------------
Matthew D. Gelfand Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Strategic Investment Management Officer
Investment Advisor
1001 19th Street North
Arlington, Virginia 20009
------------------
Andrea Hagans Calvert Asset Management Officer
Company, Inc.
Investment Advisor
4550 Montgomery Avenue
Bethesda, Maryland 20814
------------------
Item 27. Principal Underwriters
(a) Registrant's principal underwriter underwrites shares of
First Variable Rate Fund for Government Income, Calvert Tax-Free Reserves,
Calvert Social Investment Fund, Calvert Cash Reserves, The Calvert Fund,
Calvert Municipal Fund, Inc., Calvert World Values Fund, Inc., Calvert New
World Fund, Inc., and Calvert Variable Series, Inc. (formerly named Acacia
Capital Corporation).
(b) Positions of Underwriter's Officers and Directors
Name and Principal Position(s) with Position(s) with
Business Address Underwriter Registrant
Barbara J. Krumsiek Director and President President and
Trustee
Ronald M. Wolfsheimer Director, Senior Vice Treasurer
President and Chief Financial Officer
William M. Tartikoff Director, Senior Vice Vice President and
President and Secretary Secretary
Craig Cloyed Senior Vice President None
Karen Becker Vice President, Operations None
Steve Cohen Vice President None
Geoffrey Ashton Regional Vice President None
Martin Brown Regional Vice President None
Bill Hairgrove Regional Vice President None
Janet Haley Regional Vice President None
Steve Himber Regional Vice President None
Ben Ogbogu Regional Vice President None
Tom Stanton Regional Vice President None
Christine Teske Regional Vice President None
Susan Walker Bender Assistant Secretary Assistant Secretary
Katherine Stoner Assistant Secretary Assistant Secretary
Ivy Wafford Duke Assistant Secretary Assistant Secretary
Victor Frye Assistant Secretary Assistant Secretary
& Compliance Officer & Compliance Ofcr.
(c) Inapplicable.
Item 28. Location of Accounts and Records
Ronald M. Wolfsheimer, Treasurer
and
William M. Tartikoff, Secretary
4550 Montgomery Avenue, Suite 1000N
Bethesda, Maryland 20814
Item 29. Management Services
Not Applicable
Item 30. Undertakings
Not Applicable
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 under
Rule 485(b) under the Securities Act and has duly caused this registration
statement to be signed on its behalf by the undersigned, duly authorized, in
the City of Bethesda, and State of Maryland, on the 23rd day of April, 1999.
CALVERT VARIABLE SERIES, INC.
(formerly named Acacia Capital Corporation)
By:
_______________**__________________
Barbara J. Krumsiek
President and Director
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following
persons in the capacities and on the date indicated.
Signature Title Date
__________**____________ President and 4/23/99
Barbara J. Krumsiek Trustee (Principal Executive Officer)
__________**____________ Principal Accounting 4/23/99
Ronald M. Wolfsheimer Officer
__________**____________ Director 4/23/99
Charles E. Diehl
__________**____________ Director 4/23/99
Arthur J. Pugh
__________**____________ Director 4/23/99
South Trimble, III
__________**____________ Director 4/23/99
Frank H. Blatz, Jr.
**By Ivy Wafford Duke as Attorney-in-fact, pursuant to Power of Attorney
Forms on file.
<PAGE>
EXHIBIT INDEX
Form N-1A
Item No.
Ex-3(ii) Amended By-Laws
Ex-23
24(b)(10) Form of Opinion and Consent of Counsel
Ex-23a
Auditors' Consent to file
Ex-24 Power of Attorney
Ex-27 Financial Data Schedules
Ex-99.B5 Investment Advisory Contract
Ex-99.B8 Custodial Contract
POWER OF ATTORNEY
I, the undersigned Director of Calvert Variable Series, Inc. (the
"Fund"), hereby constitute Ronald M. Wolfsheimer, William M. Tartikoff,
Susan Walker Bender, Katherine Stoner, Lisa Crossley, and Ivy Wafford Duke
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.
June 3, 1998
Date /Signature/
Mary P. Walls South Trimble, III
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Variable Series,
Inc., First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke 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.
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.
June 3, 1998
Date /Signature/
Frank H. Blatz, Jr. Arthur J. Pugh
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Variable Series,
Inc., First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke 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.
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.
June 3, 1998
Date /Signature/
Frank H. Blatz, Jr. Charles E. Diehl
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Variable Series,
Inc., First Variable Rate Fund for Government Income, Calvert Tax-Free
Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert Municipal
Fund, Inc. (each, respectively, the "Fund"), hereby constitute Ronald M.
Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine Stoner,
Lisa Crossley Newton, and Ivy Wafford Duke 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.
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.
June 3, 1998
Date /Signature/
Elizabeth G. Murray Frank H. Blatz, Jr.
Witness Name of Director
<PAGE>
POWER OF ATTORNEY
I, the undersigned officer of Calvert Social Investment Fund,
Calvert World Values Fund, Inc., Calvert Variable Series, Inc., Calvert New
World Fund, Inc., First Variable Rate Fund for Government Income, Calvert
Tax-Free Reserves, Calvert Cash Reserves, The Calvert Fund and Calvert
Municipal Fund, Inc. (each, respectively, the "Fund"), hereby constitute
Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker Bender, Katherine
Stoner, Lisa Crossley Newton, and Ivy Wafford Duke 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.
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.
June 2, 1998
Date /Signature/
Edwidge Saint-Felix Ronald M. Wolfsheimer
Witness Name of Officer
<PAGE>
POWER OF ATTORNEY
I, the undersigned Trustee/Director of Calvert Social Investment
Fund, Calvert World Values Fund, Inc., Calvert Variable Series, Inc.,
Calvert New World Fund, Inc., First Variable Rate Fund for Government
Income, Calvert Tax-Free Reserves, Calvert Cash Reserves, The Calvert Fund
and Calvert Municipal Fund, Inc. (each, respectively, the "Fund"), hereby
constitute Ronald M. Wolfsheimer, William M. Tartikoff, Susan Walker Bender,
Katherine Stoner, Lisa Crossley Newton, and Ivy Wafford Duke 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.
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.
June 2, 1998
Date /Signature/
Katherine Stoner Barbara J. Krumsiek
Witness Name of Director
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<CIK> 0000708950
<NAME> CALVERT VARIABLE SERIES
<SERIES>
<NUMBER> 225
<NAME> CALVERT SOCIAL SMALL-CAP GROWTH
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
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<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
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<ACCUMULATED-NET-GAINS> (267)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (60)
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<INTEREST-INCOME> 5
<OTHER-INCOME> 0
<EXPENSES-NET> 44
<NET-INVESTMENT-INCOME> 5
<REALIZED-GAINS-CURRENT> (267)
<APPREC-INCREASE-CURRENT> 36
<NET-CHANGE-FROM-OPS> (226)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 3
<DISTRIBUTIONS-OF-GAINS> 44
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 111
<NUMBER-OF-SHARES-REDEEMED> (135)
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 52
<AVERAGE-NET-ASSETS> 3419
<PER-SHARE-NAV-BEGIN> 12.02
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> (0.77)
<PER-SHARE-DIVIDEND> (0.01)
<PER-SHARE-DISTRIBUTIONS> (0.14)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.12
<EXPENSE-RATIO> 1.12
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
Exhibit 10
24(b)(10)
April 23, 1999
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Exhibit 10, Form N-1A
Calvert Variable Series, Inc.
(formerly named Acacia Capital Corporation)
File numbers 811-3591, 2-80154
Ladies and Gentlemen:
As Counsel to Calvert Variable Series, Inc., it is my opinion,
based upon an examination of the Articles of Incorporation, Amendments,
Restatements 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. 37
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. 37 to its Registration Statement.
Sincerely,
/s/ Ivy Wafford Duke
Ivy Wafford Duke
Associate General Counsel
PricewaterhouseCoopers logo
PricewaterhouseCoopers LLP
250 West Pratt Street
Suite 2100
Baltimore MD 21201-2304
Telephone (410) 783 7600
Facsimile (410) 783 7680
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Post-Effective Amendment No.
37 to the Registration Statement of Calvert Variable Series, Inc. (comprised
of the Social Money Market, Social Small Cap, Social Mid Cap Growth, Social
International Equity Portfolio and Social Balanced Portfolio) on Form N-1A
(File Number 2-80154 and 811-3591) of our reports dated February 5, 1999, on
our audit of the financial statements and financial highlights of the
Portfolios, which report is included in the Annual Report to Shareholders for
the year ended December 31, 1998, which is incorporated by reference in the
Registration Statement. We also consent to the reference to our firm under the
caption "Financial Highlights" in the Prospectus and "Independent Accountants"
in the Statement of Additional Information.
/s/
PricewaterhouseCoopers LLP
Baltimore, Maryland
April 23, 1999
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<NAME> CALVERT VARIABLE SERIES
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<NUMBER> 232
<NAME> CALVERT SOCIAL MONEY MARKET
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
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<INVESTMENTS-AT-VALUE> 11163
<RECEIVABLES> 45
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<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.63
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
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<NAME> CALVERT VARIABLE SERIES
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<ACCUMULATED-NET-GAINS> 120
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<OTHER-INCOME> 0
<EXPENSES-NET> 251
<NET-INVESTMENT-INCOME> 79
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<APPREC-INCREASE-CURRENT> 1335
<NET-CHANGE-FROM-OPS> 2583
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<DISTRIBUTIONS-OF-INCOME> 53
<DISTRIBUTIONS-OF-GAINS> 1265
<DISTRIBUTIONS-OTHER> 0
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<SHARES-REINVESTED> 63
<NET-CHANGE-IN-ASSETS> 65
<ACCUMULATED-NII-PRIOR> 19
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 162
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 290
<AVERAGE-NET-ASSETS> 16595
<PER-SHARE-NAV-BEGIN> 19.10
<PER-SHARE-NII> 0.10
<PER-SHARE-GAIN-APPREC> 3.35
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 1.67
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 20.81
<EXPENSE-RATIO> 1.56
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
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<NAME> CALVERT VARIABLE SERIES
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 30328
<INVESTMENTS-AT-VALUE> 38433
<RECEIVABLES> 30
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<TOTAL-ASSETS> 39579
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<SENIOR-LONG-TERM-DEBT> 0
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<TOTAL-LIABILITIES> 41
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 30943
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<SHARES-COMMON-PRIOR> 981
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<INTEREST-INCOME> 7
<OTHER-INCOME> 0
<EXPENSES-NET> 316
<NET-INVESTMENT-INCOME> (188)
<REALIZED-GAINS-CURRENT> 5089
<APPREC-INCREASE-CURRENT> 3487
<NET-CHANGE-FROM-OPS> 8388
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 573
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<SHARES-REINVESTED> 158
<NET-CHANGE-IN-ASSETS> 318
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 251
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 330
<AVERAGE-NET-ASSETS> 37101
<PER-SHARE-NAV-BEGIN> 26.63
<PER-SHARE-NII> (0.14)
<PER-SHARE-GAIN-APPREC> 8.00
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 4.06
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</TABLE>
BYLAWS
OF
CALVERT VARIABLE SERIES, INC.
(as amended, March 18, 1999)
<PAGE>
CALVERT VARIABLE SERIES, INC.
TABLE OF CONTENTS
ARTICLE Page
ARTICLE I
OFFICES 5
ARTICLE II
STOCK OF THE CORPORATION 5
ARTICLE III
SHAREHOLDERS 5
Section 1. Special Meetings 5
Section 2. Notice of Meetings 6
Section 3. Quorum 6
Section 4. Voting 6
Section 5. Action Without a Meeting 6
ARTICLE IV
DIRECTORS 7
Section 1. Number, Term of Office, 7
and Eligibility
Section 2. Election of the 7
Chairman of the Board
Section 3. Meetings 7
Section 4. Notice of Meetings 7
Section 5. Quorum and Vote 8
Section 6. Action Without a Meeting 8
Section 7. Powers and Duties8
Section 8. Compensation of Directors 8
Section 9. Removal of Directors 8
Section 10. Vacancies 9
ARTICLE V 9
COMMITTEES 9
ARTICLE VI 9
OFFICERS 9
Section 1. Elected Officers 9
Section 2. Duties 9
(a) President 9
(b) Vice Presidents 10
(c) Secretary 10
(d) Treasurer 10
Section 3. Compensation 10
Section 4. Removal 11
Section 5. Vacancies 11
ARTICLE VII 11
BONDING AND INDEMNIFICATION 11
Section 1. Bonding 11
Section 2.1 Indemnification - Proceeding 11
Not Brought By or on Behalf
of Corporation
Section 2.2 Proceeding Brought By or on 12
Behalf of Corporation
Section 2.3 Indemnification for 12
Successful Defense
Section 2.4 Authorization 12
Section 2.5 Advance Reimbursement 13
Section 2.6 Non-Exclusive Rights 13
Section 2.7 Insurance 13
Section 2.8 Report of Indemnification to 14
Stockholders
Section 2.9 Limitations Imposed By the 14
Investment Company Act
of 1940
ARTICLE VIII 14
CERTIFICATE FOR SHARES 14
Section 1. Shares Represented 14
By Certificates
Section 2. Signature of Former Officer 14
Section 3. Lost, Destroyed, 15
or Stolen Certificates
Section 4. Shareholders Accounts 15
Section 5. Transfer of Shares 15
Section 6. Fixing a Record Date 15
Section 7. Registered Ownership 16
Section 8. Stock Regulations16
ARTICLE IX 16
DIVIDENDS 16
ARTICLE X 16
REDEMPTION OF SHARES 16
Section 1. Redemption 16
Section 2. Status of Selling Stockholder 17
ARTICLE XI 17
NET ASSET VALUE 17
Section 1. Determination 17
Section 2. Valuation of Assets 17
ARTICLE XII 18
CUSTODIAN 18
ARTICLE XIII 18
EXECUTION OF CONTRACTS AND 18
OTHER DOCUMENTS
Section 1. Contracts 18
Section 2. Checks and Other 18
Commercial Papers
ARTICLE XIV 18
FISCAL YEAR 18
ARTICLE XV 19
NOTICE AND WAIVER OF NOTICES 19
ARTICLE XVI 19
AMENDMENTS 19
<PAGE>
BY-LAWS
OF
CALVERT VARIABLE SERIES, INC.
ARTICLE I
OFFICES
The principal office of the Corporation shall be located in the City of
Bethesda, Maryland. The Corporation may also have offices at such other
places as the Board of Directors may from time to time determine or as the
business of the Corporation may require.
ARTICLE II
STOCK OF THE CORPORATION
The stock of the Corporation shall be issued in two or more classes,
referred to in the Articles of Incorporation and these By-Laws as series.
The Board of Directors from time to time may issue stock in new series with
a series designation and shall allocate the number of shares to such series.
The Board of Directors may increase or decrease the number of shares of any
series, provided that the aggregate number of shares so allocated to all
series does not exceed the total authorized number of shares.
Shares, upon issuance and sale, shall be fully paid and non-assessable.
Certificates for shares be fully transferable and redeemable.
ARTICLE III
SHAREHOLDERS
Section 1. Special Meetings.
Meetings of the shareholders, for any purpose, may at any time be called by
the Chairman of the Board of Directors at the direction of the Board of
Directors, or by the Secretary upon written request of holders of not less
than 25% of all the outstanding shares entitled to vote at the meeting, or
as required by law or regulation. Special meetings of shareholders may be
held within or without the Maryland. The business transacted at any special
meeting of shareholders shall be limited to the purpose stated in the notice
of such special meeting.
Section 2. Notice of Meetings.
Written or printed notice of shareholders' meetings stating the place, date
and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than ninety (90) days before the date of the meetings
either personally or by mail, to each shareholder of record entitled to vote
at such meeting.
Section 3. Quorum.
The holders of a majority of the shares of stock issued and outstanding and
entitled to vote, represented in person or by proxy, shall constitute a
quorum at all meetings of the shareholders for the transaction of business.
At any meeting of shareholders at which a quorum is present, the affirmative
vote of the majority of the shares of the stock represented at meeting shall
be the act of the shareholders, unless the vote of a greater or lesser
number of shares of stock is required by law. At any meeting of shareholders
at which a quorum is not present, the shareholders present or represented by
proxy may adjourn the meeting from time to time, without notice other than
announcement at the meeting until a quorum is present. At such adjourned
meeting at which a quorum is present any business may be transacted that may
have been transacted at the meeting as originally called.
Section 4. Voting.
Each outstanding share of stock, regardless of the series designation, is
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders and shall have a fractional vote for each fraction of a share
held. Within each series, each share shall have equal voting rights with
each other. However, in accordance with the Investment Company Act of 1940
and the rules and regulations of the Securities and Exchange Commission, in
some instances the vote of a majority of the outstanding shares of any
series on matters affecting such series shall be effective for that series,
notwithstanding that the matter does not receive a majority of the
outstanding shares of any other series or a majority of the outstanding
shares of the Corporation.
The shares of each series shall have non-cumulative voting rights. A
shareholder may vote in person or by proxy executed in writing by the
shareholder or by such shareholder's duly authorized attorney-in-fact.
Section 5. Action Without a Meeting.
Whenever shareholders are required or permitted to take any action by vote,
such action may be taken without a meeting on written consent, setting forth
the action so taken, signed by the holders of all outstanding shares
entitled to vote. Such consent shall be filed in the Minute Book of the
Secretary and shall have the same force and effect as a unanimous action of
the shareholders.
ARTICLE IV
DIRECTORS
Section 1. Number, Term of Office, and Eligibility.
The number of Directors shall be up to twelve (12), which number may be
changed from time to time by amendment to the By-Laws but shall never be
less than three. The Directors shall be at least twenty-one (21) years of
age and need not be residents of Maryland nor shareholders of the
Corporation. Directors, other than the Directors of the first Board of
Directors, shall be elected at a meeting of the shareholders, except as
otherwise provided, to serve until their successors shall have been elected
and qualified.
Section 2. Election of the Chairman of the Board of Directors.
The Directors shall elect a Chairman of the Board of Directors to preside at
future meetings of the Executive Committee, the Board of Directors and the
shareholders.
Section 3. Meetings.
Meetings of the Board of Directors, regular or special, may be held either
within or without the State of Maryland. Unless otherwise stated in the
notice of such meeting, the meeting shall be held at the principal office of
the Corporation. Commencing with October 1983, regular meetings of the Board
of Directors shall be held quarterly, unless otherwise stated in the notice
of such meeting. If any such meeting day falls on a legal holiday, the
meeting shall occur on the next work day.
Special meetings of the Board of Directors may be called by the Chairman of
the Board of Directors or by a majority of the Directors.
Section 4. Notice of Meetings.
Notice shall be given to each Director either personally, by telephone or in
writing. Attendance of a Director at a meeting shall constitute a waiver of
notice of such meeting, except where such Director attends the meeting for
the express purpose of objecting to the transaction of any business because
the meeting was unlawfully called or convened. Neither the business to be
transacted, nor the purpose of any regular or special meeting, need be
specified in a notice or waiver of notice of such meeting.
Section 5. Quorum and Vote.
A majority of the number of Directors then authorized by these By-Laws shall
constitute a quorum for the transaction of business. The vote of a majority
of the Directors present by person or telephone shall be the act of the
Board of Directors, unless the vote of a greater number is required by these
By-Laws or by statute. At any meeting of Directors at which a quorum is not
present, the Directors present may adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall
be present. At such adjourned meeting at which a quorum is present, any
business may be transacted that may have been transacted at the meeting as
originally called.
Section 6. Action Without A Meeting.
Whenever Directors are required or permitted to take any action at a
meeting, such action may be taken by the Board of Directors without a
meeting on the written consent of all of the members of the Board of
Directors, and such consent shall be filed in the minute Book of the
Secretary. Such action shall have the same force and effect as a unanimous
action of the Board of Directors.
Section 7. Powers and Duties.
The business affairs of the Corporation shall be managed by the Board of
Directors which shall exercise all such powers of the Corporation and do all
such lawful acts and things as are not by statute or by these By-Laws
directed or required to be exercised or done by the shareholders.
Section 8. Compensation of Directors.
The Board of Directors, pursuant to the affirmative vote of a majority of
the Directors then in office, and irrespective of any personal interests of
any of its members, may establish reasonable compensation of all Directors
for services rendered to the Corporation in their capacity as Director,
officer or otherwise.
Section 9. Removal of Directors.
Any or all of the Directors may be removed, with or without cause, at any
time by the vote of the shareholders at a special meeting called for that
purpose. Any Director may be removed for cause by the action of the
Directors at a special meeting of the Board of Directors called for that
purpose.
Section 10. Vacancies.
A newly created vacancy resulting from an increase in the number of
Directors shall be filled by the Board of Directors and such Director shall
serve until the next succeeding meeting of shareholders or until such
Director's successor shall have been qualified and elected. Any other
vacancy may be filled by the affirmative vote of a majority of the remaining
Directors, though the number of remaining Directors is less than a quorum of
the Board of Directors, and such Director shall serve until such Director's
successor shall have been qualified and elected.
ARTICLE V
COMMITTEES
The Board of Directors may from time to time create such committees as it
deems necessary for the conduct of the business of the Corporation and may
vest in the committee such power and authority as it deems necessary to
carry out the purposes for which the committees are created.
ARTICLE VI
OFFICERS
Section 1. Elected Officers.
The elected officers of the Corporation shall be a President, one or more
Vice Presidents, a Secretary, a Treasurer and such other officers as the
Board of Directors may from time to time deem necessary, each of whom shall
be elected by the Board of Directors at its initial meeting. Such officers
shall serve for one year until their successors are elected. Any person may
hold at one time more than one office, except that no person shall hold at
one time the offices of President and Secretary.
The President of the Corporation shall have the authority to appoint such
officers as deemed necessary in carrying out the Corporation's business.
An appointed officer may be removed at any time by the President.
Section 2. Duties.
(a) President.
The President shall be the Chief Executive Officer of the
Corporation and under the direction of the Board of
Directors, shall manage and conduct the Corporation's
business. In the absence of the Chairman of the Board of
Directors, the President shall preside at all meetings of
shareholders, the Board of Directors and the Executive
Committee.
(b) Vice Presidents.
Vice Presidents shall perform such duties as the Board of
Directors or the President may prescribe. In the absence of
the President, the Vice President, the Vice President or, if
there shall be more than one, the Vice President designated
by the Board of Directors, shall perform the duties and
exercise the powers of the President.
(c) Secretary.
The Secretary shall attend all meetings of the Board of
Directors, the Executive Committee and all meetings of the
shareholders and record all the proceedings of such meetings
in a Minute Book to be kept by the Secretary for that
purpose. The Secretary shall notify all shareholders of the
special meetings and keep records of elections and votes.
The Secretary shall give, or cause to be given, notice of
all meetings of the shareholders and of the Board of
Directors and shall perform such other duties as may be
prescribed by the Board of Directors or by the President.
The Secretary shall have custody of the Corporate Seal and
shall have authority to affix the same to any instrument
requiring it, and, when so affixed, it may be attested by
the Secretary's signature. The Board of Directors may give
authority to any other officer to affix the seal of the
Corporation and to attest the affixing of such officer's
signature.
(d) Treasurer.
The Treasurer shall have the custody of all of the Corporate
funds and securities and shall keep full and accurate
accounts of receipts and disbursements in books belonging to
the Corporation and shall deposit all funds and other
valuable effects in the name and to the credit Corporation
in such depository as may be designated by the Board of
Directors. Under the direction of the Board of Directors or
the President, the Treasurer shall disburse funds of the
Corporation, taking proper voucher for such disbursement.
The Treasurer shall render to the Board of Directors
whenever the Board of Directors so requires, an account of
all transactions as Treasurer and of the financial condition
of the Corporation.
Section 3. Compensation.
Compensation of officers, if any, shall be fixed from time to time by the
Board of
Directors.
Section 4. Removal.
Any officer elected by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the Board of Directors.
Section 5. Vacancies.
If any officer's position becomes vacant, it may be filled by the Board of
Directors.
ARTICLE VII
BONDING AND INDEMNIFICATION
Section 1. Bonding.
The President, any Vice Presidents, the Secretary and the Treasurer shall be
bonded for the faithful performance of their respective duties, with
sufficient sureties and in such amounts as shall be determined by the Board
of Directors. The Board of Directors may also require a bond of any other
officer or employee of the Corporation with such surety as it may deem
proper. Such bond shall be approved at least annually by the Board.
Section 2.1 Indemnification - Proceeding Not Brought By or on Behalf
of Corporation.
Subject to the provisions of Section 2.4 of this Article, the Corporation
shall indemnify any person who was or is a party or is threatened to be made
a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an
action brought by or on behalf of the Corporation) by reason of the fact
that he or she is or was a director, officer, employee or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses, including
attorneys' fees, judgments, penalties, fines and amounts paid in settlement
actually and reasonably incurred by him or her in connection with such
action, suit or proceeding if he or she acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests
of the Corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order,
settlement, or conviction, or upon a plea of nolo contendere or its
equivalent, creates a rebuttable presumption that the director did not meet
the requisite standard of conduct set forth in the subsection.
Section 2.2 Proceeding Brought by or on Behalf of Corporation.
Subject to provisions of Section 2.4 of this Article, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit brought by or
on behalf of the Corporation to obtain a judgment or decree on its favor by
reason of the fact that he or she is or was a director, officer, employee or
agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, penalties, fines, and
amounts paid in settlement, actually and reasonably incurred by him or her
in connection with the defense or settlement of such action or suit if he or
she acted in good faith and in manner he or she reasonably believed to be in
or not opposed to the best interests of the Corporation. However, no
indemnification shall be provided in respect to any claim, issue or matter
as to which such person shall have been adjudged liable for negligence or
misconduct in performing his or her duty to the Corporation, except to the
extent that the court in which the action, suit or proceeding was brought or
any other court in which the action, suit or proceeding was brought or any
other court of equity in the county in which the Corporation has its
principal office, determines on application that, despite the adjudication
of liability but in view of all circumstances of the case, the person is
fairly and reasonably entitled to indemnify for those expenses which the
court shall deem proper. However, indemnification with respect to any
proceeding by or in the right of the corporation or in which liability shall
have been adjudged against a director in an action, suit or proceeding
charging improper personal benefit to the director whether or not involving
action in the director's official capacity on the basis that personal
benefit was improperly received shall be limited to expenses.
Section 2.3 Indemnification for Successful Defense.
To the extent that a director, officer, employee or agent of the Corporation
successfully defends on the merits or otherwise any action, suit or
proceeding referred to in Sections 2.1 and 2.2 of this Article, or in
defense of any claim, issue or matter raised in the proceeding, the
Corporation shall indemnify him or her against expenses, including
attorney's fees, actually and reasonably incurred by him or her in
connection therewith.
Section 2.4 Authorization.
Any indemnification under Sections 2.1 and 2.2 of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in
the specific case after determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in said Sections 2.1
and 2.2. Such determination shall be made (a) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to
such action, suit or proceeding, or (b) if the required quorum is not
obtained, then by a majority vote of a committee of the board consisting
solely of two or more directors not, at the time, parties to such proceeding
and who were duly designated to act in the matter by a majority vote of the
full Board in which the designated directors who are parties may
participate, or (c) by a special counsel selected by the Board of Directors
or a committee of the Board by vote as set forth in subpart (a) of this
Section, or, if the requisite quorum of the full Board cannot be obtained,
therefore and the committee cannot be established, by a majority vote of the
full Board in which directors who are parties may participate; or (d) by the
stockholders of the Corporation.
Shares held by directors who are parties to the proceeding may not be voted
on the subject matter under this Article.
Section 2.5 Advance Reimbursement.
Expenses, including attorneys' fees, incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation before
the final disposition thereof if authorized in the specific case by a
preliminary determination following one of the procedures set forth in
Section 2.4 that there is a reasonable basis for a belief that the director,
officer, employee or agent met the applicable standard of conduct set forth
in Sections 2.1 and 2.2 above, and upon receipt by the corporation of (a)
written affirmation by the director of the director's good faith belief that
the standard of conduct necessary for indemnification by the corporation as
authorized in this section has been met; and (b) an undertaking is given to
the Corporation by or on behalf of the director, officer, employee or agent
reasonably assuring that the advance will be repaid if it is not ultimately
determined that he or she is entitled to be indemnified by the Corporation
as authorized in this Article.
Section 2.6 Non-Exclusive Rights.
The indemnification provided by this Article continues as to a person who
has ceased to be a director, officer, employee or agent and insures to the
benefit of his or her heirs and personal representative, and does not
exclude any other rights to which a defendant or other person may be
entitled under any By-Laws, agreement, vote of stockholders or directors who
were not parties to such action, suit or proceeding, or otherwise both as to
(a) action in his or her official capacity, and (b) action in another
capacity while holding the office.
Section 2.7 Insurance.
The Corporation may, upon resolution of a majority of the Corporation's
Board of Directors, purchase and maintain insurance on behalf of any person
who is or was a director, officer, employee or agent of the Corporation, or
who is or was serving at the request of the Corporation as a director,
officer, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust, other enterprise, or employee benefit
plan against any liability asserted against him or her or incurred by him or
her, or arising out of his or her position, whether or not the Corporation
would have the power to indemnify him or her against such liability under
the provisions of this Article VIII.
Section 2.8 Report of Indemnification to Stockholders.
Any indemnification of, or advance of expenses to, a director in accordance
with this section, if arising out of a proceeding by or in the right of the
corporation, shall be reported in writing to the stockholders with the
notice of the next stockholder's meeting or prior to the meeting.
Section 2.9 Limitations Imposed By the Investment Company Act of 1940.
Notwithstanding anything to the contrary stated herein, nothing in this
Article protects or porports to protect any director or officer of the
Corporation against any liability to the Corporation or its security holders
to which he would otherwise be subject by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his or her office.
ARTICLE VIII
CERTIFICATE FOR SHARES
Section 1. Shares Represented by Certificates.
The shares of the Corporation shall be represented by certificates signed by
the President and the Secretary of the Corporation and shall contain the
seal of the Corporation or a facsimile of the seal. Each shareholder shall
be entitled, upon request, to a certificate or certificates for full shares
of the Corporation owned by such shareholder. Each certificate will indicate
the series designation for the shares purchased. If a certificate is
countersigned by a transfer agent or registrar other than the Corporation,
the signature of the officers set forth above upon such certificate may be a
facsimile.
Section 2. Signature of Former Officer.
In case any officer who has signed any certificate ceases to be an officer
of the Corporation before such certificate is issued, the certificate may
nevertheless be issued by the Corporation with the same effect as if the
officer had not ceased to be such officer of the Corporation as of the date
of its issue.
Section 3. Lost, Destroyed, or Stolen Certificates.
The Board of Directors may direct new certificates to be issued in the place
of any certificates theretofore issued by the Corporation alleged to have
been lost, stolen or destroyed upon such terms and conditions and under such
procedures as the Board may prescribe.
Section 4. Shareholders Accounts.
The Corporation shall maintain or cause to be maintained an account for
every shareholder in which shall be recorded such shareholder's ownership of
shares of each series of stock of the Corporation and all changes therein.
Certificates will not be issued for shares so recorded in a shareholder's
account unless and until requested by the shareholder.
Section 5. Transfer of Shares.
Transfers of shares for which certificates have been issued will be made
only upon surrender to the Corporation or the transfer agent of a
certificate for shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, whereupon the Corporation
will issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction on its books. Transfer of shares for
which certificates have not been issued will be made upon delivery to the
Corporation or the transfer agent of the Corporation of instructions for
transfer or evidence of assignment or succession, in each case executed in
such manner and with such supporting evidence as the Corporation or transfer
agent may reasonably require.
Section 6. Fixing a Record Date.
Shareholder of record means the holder of a share of outstanding stock of
the Corporation on the record date described below.
For the purpose of determining shareholders entitled to notice of, or to
vote at any meeting of shareholders, or for the purpose of determining
shareholders entitled to receive payment of any dividend or allotment of
rights, or in order to make a determination of shareholders for any other
proper purpose, the Board may fix in advance a date as the record date for
any other such determination of shareholders. Such date shall not be more
than ninety (90) days, nor less than ten (10) days before the date of any
such meeting or the date of the particular action to be taken. When a
determination of shareholders of record entitled to notice of, or to vote at
any meeting of shareholders has been made or provided in this section, such
determination shall apply to any adjourned meeting unless the Board fixes a
new record date for such adjourned meeting.
Only such shareholders as shall be shareholders of record as of the close of
business on the date fixed shall be entitled to such notice of, and to vote
at, such meeting, or any adjourned meeting, or to receive payments of such
dividend, or to receive such allotment of rights, or to exercise such
rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the Corporation after any such record
date fixed as aforesaid.
Section 7. Registered Ownership.
The Corporation shall be entitled to recognize the exclusive right of a
person registered to vote as the shareholder of record, and shall not be
bound to recognize any equitable or other claim to or interest in such share
or shares on the part of any other person whether or not it shall have
express or other notice thereof, except as otherwise provided by the laws of
Maryland.
Section 8. Stock Regulations.
The Board of Directors shall have the authority to make rules and
regulations concerning the issue, transfer and registration of certificates,
representing shares of the Corporation.
ARTICLE IX
DIVIDENDS
Dividends may be declared by the Board of Directors at any regular or
special meeting, pursuant to law.
ARTICLE X
REDEMPTION OF SHARES
Section 1. Redemption.
The Corporation shall redeem such shares as are offered by any shareholder
for redemption, upon a written request therefor, duly executed in the full
name of the shareholder's account, with such signature guarantee as required
by the Corporation, to the principal place of business of the Corporation.
If the shareholder has received certificates, the request must be
accompanied by the certificates, duly endorsed in the full name of the
account. The redemption price shall be the net asset value of the shares
next determined following receipt of the request, along with any other
requirements.
Such redemption price will be paid by check within seven days after receipt
of the above requirements, except when further postponement of payment is
permissible under the Investment Company Act of 1940.
Section 2. Status of Selling Stockholder.
From and after the close of business on the date when the shares are
properly tendered for redemption, the owner shall, with respect to such
shares, cease to be a shareholder of the Corporation and shall have only the
right to receive the redemption price, in accordance with provisions hereof.
ARTICLE XI
NET ASSET VALUE
Section 1. Determination.
(a) The net asset value of each series of the Corporation shall be
calculated once on each day the New York Stock Exchange is open for
trading, by deducting from the assigned assets of each series (as
described in the Articles of Incorporation), and specific
liabilities of each series (including brokerage fees, reserves for
contingencies and taxes on the unrealized appreciation of the
assigned assets of each series) and general liabilities of the
Corporation in proportion to the net asset value of the respective
series. The net asset value of assets of each series so determined
shall be final and conclusive.
(b) The net asset value of each series of the Corporation shall be
divided by the number of shares of such series then outstanding
(whether or not certificates therefor have been issued), and
adjusted to the nearest whole cent, to determine the net asset
value per share of that series.
Section 2. Valuation of Assets.
Any security listed on a national securities exchange will be vested at its
closing sales price on the exchange where it is principally traded or, if
there has been no such sale, at the mean between the last bid and asked
prices. All other securities for which market quotations are readily
available will be valued on the basis of the last bid price. When market
quotations are not readily available, securities are valued at their fair
value as determined in good faith by the Board of Directors of the
Corporation.
ARTICLE XII
CUSTODIAN
All securities and cash owned by the Corporation shall be held by or
deposited with a bank or trust company having (according to its last
published report) not less than two million dollars ($2,000,000) aggregate
capital, surplus and undivided profits. The Corporation shall enter into a
written contract with the Custodian regarding the powers, duties and
compensation of the Custodian with respect to the cash and securities of the
Corporation held by the Custodian. Said contract and all amendments thereto
shall be approved by the Board of Directors of this Corporation. The
Corporation, upon the resignation or inability of its Custodian to serve, or
upon change of the Custodian, shall:
(a) Use its best efforts to obtain a successor Custodian, and
(b) Require that the cash and securities owned by this Corporation be
delivered directly to the successor Custodian.
ARTICLE XIII
EXECUTION OF CONTRACTS AND OTHER DOCUMENTS
Section 1. Contracts.
The President, a Vice President, Treasurer or such other officers of the
Corporation as may be specified by the Board of Directors, are authorized on
behalf of the Corporation to sign all deeds, bonds, contracts, mortgages and
other instruments or documents.
Section 2. Checks and Other Commercial Paper.
All checks, drafts, notes, bonds, bills of exchange or other orders,
instruments or obligations for the receipt of or the payment of money shall
be endorsed by or signed by either the President, a Vice President, the
Treasurer, or such other person as may be designated by the Board of
Directors.
ARTICLE XIV
FISCAL YEAR
The fiscal year of the Corporation shall be fixed by resolution of the Board
of Directors.
ARTICLE XV
NOTICE AND WAIVER OF NOTICES
Whenever any notice required by these By-Laws or by statute is given by
mail, such notice shall be good and sufficient if deposited in the United
States mail, addressed in the case of a shareholder, to the shareholder's
address as it appears on the record of the Corporation, or in the case of a
Director, to the Director at the address of the Corporation.
Whenever any notice required to be given by these By-Laws or by statute, a
waiver of such notice given in writing signed by the person or persons
entitled to such notice, whether before or after the time stated in such
By-Law or statute, shall be deemed equivalent to the giving of such notice.
ARTICLE XVI
AMENDMENTS
These By-Laws may be amended or repealed, or new By-Laws may be adopted, by
the affirmative vote of two-thirds of the Board of Directors present at any
meeting of the Board of Directors.
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<NAME> CALVERT VARIABLE SERIES
<SERIES>
<NUMBER> 212
<NAME> CALVERT SOCIAL BALANCED
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 250358
<INVESTMENTS-AT-VALUE> 301891
<RECEIVABLES> 2291
<ASSETS-OTHER> 63
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 304245
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 291
<TOTAL-LIABILITIES> 291
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 250191
<SHARES-COMMON-STOCK> 142201
<SHARES-COMMON-PRIOR> 114967
<ACCUMULATED-NII-CURRENT> 714
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1513
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 51536
<NET-ASSETS> 303954
<DIVIDEND-INCOME> 1350
<INTEREST-INCOME> 7879
<OTHER-INCOME> 0
<EXPENSES-NET> 2240
<NET-INVESTMENT-INCOME> 6989
<REALIZED-GAINS-CURRENT> 15582
<APPREC-INCREASE-CURRENT> 17878
<NET-CHANGE-FROM-OPS> 40449
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 6780
<DISTRIBUTIONS-OF-GAINS> 15195
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 25653
<NUMBER-OF-SHARES-REDEEMED> 8755
<SHARES-REINVESTED> 10336
<NET-CHANGE-IN-ASSETS> 27234
<ACCUMULATED-NII-PRIOR> 515
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1826
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 2297
<AVERAGE-NET-ASSETS> 291459
<PER-SHARE-NAV-BEGIN> 1.982
<PER-SHARE-NII> 0.052
<PER-SHARE-GAIN-APPREC> 0.271
<PER-SHARE-DIVIDEND> 0.052
<PER-SHARE-DISTRIBUTIONS> 0.115
<RETURNS-OF-CAPITAL> 0
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<EXPENSE-RATIO> 0.85
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</TABLE>
Exhibit 99.B5
Investment Advisory Agreement
Calvert Variable Series, Inc.
INVESTMENT ADVISORY AGREEMENT, made this 1st day of March, 1999, by
and between CALVERT ASSET MANAGEMENT COMPANY, INC., a Delaware corporation
(the "Advisor"), and Calvert Variable Series, Inc., a Maryland corporation
(the "Corporation"), both having their principal place of business at 4550
Montgomery Avenue, Bethesda, Maryland.
WHEREAS, the Corporation is registered as an investment company
under the Investment Company Act of 1940, as amended (the "1940 Act"), for
the purpose of investing and reinvesting its assets in securities, as set
forth in its Articles of Incorporation, its Bylaws and its registration
statements under the 1940 Act and the Securities Act of 1933 (the "1933
Act"), as amended; offering separate series ("Fund(s)"), and the Corporation
desires to avail itself of the services, information, advice, assistance and
facilities of an investment advisor and to have an investment advisor
perform for it various investment advisory, research services and other
management services; and
WHEREAS, the Advisor is an investment advisor registered under the
Investment Advisers Act of 1940, as amended, and is engaged in the business
of rendering management, and investment advisory services to investment
companies and desires to provide such services to the Corporation;
NOW, THEREFORE, in consideration of the terms and conditions
hereinafter set forth, it is agreed as follows:
1. Employment of the Advisor. The Corporation hereby employs the
Advisor to manage the investment and reinvestment certain of the Corporation
assets, subject to the control and direction of the Corporation's Board of
Directors, for the period and on the terms hereinafter set forth. The
Advisor hereby accepts such employment and agrees during such period to
render the services and to assume the obligations in return for the
compensation herein provided. The Advisor shall for all purposes herein be
deemed to be an independent contractor and shall, except as expressly
provided or authorized (whether herein or otherwise), have no authority to
act for or represent the Corporation in any way or otherwise be deemed an
agent of the Corporation.
2. Obligations of and Services to be Provided by the Advisor. The
Advisor undertakes to provide the following services and to assume the
following obligations:
a. The Advisor shall manage the investment and reinvestment of certain
of the Corporation's assets, as shown on Schedule A, subject to and in
accordance with the investment objectives and policies of each Fund, and the
social investment screening criteria, as stated in the registration
statement, and any directions which the Corporation's Board of Directors may
issue from time to time. In pursuance of the foregoing, the Advisor shall
make all determinations with respect to the investment of assets and the
purchase and sale of portfolio securities and shall take such steps as may
be necessary to implement the same. Such determination and services shall
also include determining the manner in which voting rights, rights to
consent to corporate action, any other rights pertaining to each Fund's
portfolio securities shall be exercised. The Advisor shall render regular
reports to the Corporation's Board of Directors concerning investment
activities.
b. The Advisor shall, in the name of the Corporation, on behalf of the
managed Funds, place orders for the execution of portfolio transactions in
accordance with the policies with respect thereto set forth in the
Corporation's current registration statement under the 1940 Act and the 1933
Act. In connection with the placement of orders for the execution of
portfolio transactions the Advisor shall create and maintain all necessary
brokerage records of the Corporation in accordance with all applicable laws,
rules and regulations, including but not limited to records required by
Section 31(a) of the 1940 Act. All records shall be the property of the
Corporation and shall be available for inspection and use by the SEC, the
Corporation or any person retained by the Corporation. Where applicable,
such records shall be maintained by the Advisor for the periods and the
places required by Rule 31a-2 under the 1940 Act.
c. The Advisor shall bear its expenses of providing services to the
Corporation pursuant to this Agreement except such expenses as are
undertaken by the Corporation. In addition, the Advisor shall pay the
salaries and fees of all Directors and executive officers who are employees
of the Advisor or its affiliates ("Advisor Employees").
d. In providing the services and assuming the obligations set forth
herein, the Advisor may, at its own expense, employ one or more Subadvisors,
as approved by the Board of Directors.
e. The Advisor is responsible for screening investments to determine
that they meet each Fund's social investment screening criteria, as may be
amended from time to time with the approval of the Board.
3. Expenses of each Fund. Each Fund shall pay all expenses other than
those expressly assumed by the Advisor. Expenses payable by the Fund shall
include, but are not limited to:
Fees to the Advisor as provided herein;
Legal and audit expenses;
Fees and expenses related to the registration and qualification of the
Corporation and its shares for distribution under federal and state
securities laws;
Expenses of the administrative services agent, transfer agent, registrar,
custodian, dividend disbursing agent and shareholder servicing agent;
Any telephone charges associated with shareholder servicing or the
maintenance of the Funds or Corporation;
Salaries, fees and expenses of Directors and executive officers of the
Corporation, other than Advisor Employees;
Taxes and corporate fees levied against the Corporation;
Brokerage commissions and other expenses associated with the purchase and
sale of portfolio securities for the Corporation;
Expenses, including interest, of borrowing money;
Expenses incidental to meetings of the Corporation's shareholders and the
maintenance of the Corporation's organizational existence;
Expenses of printing stock certificates representing shares of the
Corporation and expenses of preparing, printing and mailing notices, proxy
material, reports to regulatory bodies and reports to shareholders of the
Corporation;
Expenses of preparing and typesetting of prospectuses of the Corporation;
Expenses of printing and distributing prospectuses to shareholders of the
Corporation;
Association membership dues;
Insurance premiums for fidelity and other coverage;
Distribution Plan expenses, as permitted by Rule 12b-1 under the 1940 Act
and as approved by the Board; and
Such other legitimate Corporation expenses as the Board of Directors may
from time to time determine are properly chargeable to the Corporation.
4. Compensation of Advisor.
As compensation for the services rendered and obligations assumed hereunder
by the Advisor, the Trust shall pay to the Advisor within ten (10) days
after the last day of each calendar month a fee equal on an annualized basis
as shown on Schedule A. Any amendment to the Schedule pertaining to any new
or existing Fund shall not be deemed to affect the interest of any other
Fund and shall not require the approval of the shareholders of any other
Fund.
Such fee shall be computed and accrued daily. Upon termination of this
Agreement before the end of any calendar month, the fee for such period
shall be prorated. For purposes of calculating the Advisor's fee, the daily
value of a Fund's net assets shall be computed by the same method as the
Fund uses to compute the value of its net assets in connection with the
determination of the net asset value of its shares.
The Advisor reserves the right (i) to waive all or part of its fee and
assume expenses of a Fund and (ii) to make payments to brokers and dealers
in consideration of their promotional or administrative services.
5. Activities of the Advisor. The services of the Advisor to the
Corporation hereunder are not to be deemed exclusive, and the Advisor shall
be free to render similar services to others. It is understood that
Directors and officers of the Corporation are or may become interested in
the Advisor as stockholders, officers, or otherwise, and that stockholders
and officers of the Advisor are or may become similarly interested in the
Corporation, and that the Advisor may become interested in the Corporation
as a shareholder or otherwise.
6. Use of Names. The Corporation shall not use the name of the Advisor
in any prospectus, sales literature or other material relating to the
Corporation in any manner not approved prior thereto by the Advisor;
provided, however, that the Advisor shall approve all uses of its name which
merely refer in accurate terms to its appointment hereunder or which are
required by the SEC; and, provided, further, that in no event shall such
approval be unreasonably withheld. The Advisor shall not use the name of the
Corporation or any Corporation in any material relating to the Advisor in
any manner not approved prior thereto by the Corporation; provided, however,
that the Corporation shall approve all uses of its name which merely refer
in accurate terms to the appointment of the Advisor hereunder or which are
required by the SEC; and, provide, further, that in no event shall such
approval be unreasonably withheld.
7. Liability of the Advisor. Absent willful misfeasance, bad faith,
gross negligence, or reckless disregard of obligations or duties hereunder
on the part of the Advisor, the Advisor shall not be subject to liability to
the Corporation or to any shareholder of the Corporation for any act or
omission in the course of, or connected with, rendering services hereunder
or for any losses that may be sustained in the purchase, holding or sale of
any security.
8. Force Majeure. The Advisor shall not be liable for delays or errors
occurring by reason of circumstances beyond its control, including but not
limited to acts of civil or military authority, national emergencies, work
stoppages, fire, flood, catastrophe, acts of God, insurrection, war, riot,
or failure of communication or power supply. In the event of equipment
breakdowns beyond its control, the Advisor shall take reasonable steps to
minimize service interruptions but shall have no liability with respect
thereto.
9. Renewal, Termination and Amendment. This Agreement shall continue
in effect with respect to the Corporation, unless sooner terminated as
hereinafter provided, through December 31, 1999, and indefinitely thereafter
if its continuance shall be specifically approved at least annually by vote
of the holders of a majority of the outstanding voting securities of the
Corporation or by vote of a majority of the Corporation's Board of
Directors; and further provided that such continuance is also approved
annually by the vote of a majority of the Directors who are not parties to
this Agreement or interested persons of the Advisor, cast in person at a
meeting called for the purpose of voting on such approval, or as allowed by
law. This Agreement may be terminated at any time, without payment of any
penalty, by the Corporation's Board of Directors or by a vote of the
majority of the outstanding voting securities of the Corporation upon 60
days' prior written notice to the Advisor and by the Advisor upon 60 days'
prior written notice to the Corporation. This Agreement may be amended at
any time by the parties, subject to approval by the Corporation's Board of
Directors and, if required by applicable SEC rules and regulations, a vote
of a majority of the Corporation's outstanding voting securities. This
Agreement shall terminate automatically in the event of its assignment. The
terms "assignment" and "vote of a majority of the outstanding voting
securities" shall have the meaning set forth for such terms in the 1940 Act.
10. Severability. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder
of this Agreement shall not be affected thereby.
11. Miscellaneous. Each party agrees to perform such further actions
and execute such further documents as are necessary to effectuate the
purposes hereof. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the State of Maryland. The
captions in this Agreement are included for convenience only and in no way
define or delimit any of the provisions hereof or otherwise affect their
construction or effect.
IN WITNESS WHEREOF, the parties have duly executed this Agreement
as of the date first written above.
Calvert Variable Series, Inc.
By: /s/ Ron Wolfsheimer
Title: Treasurer
Calvert Asset Management Company, INC.
By: /s/ Reno Martini
Title: Senior Vice President
Investment Advisory Agreement
Calvert Asset Management Company, Inc.
Calvert Variable Series, Inc.
Schedule A
As compensation pursuant to Section 4 of the Investment Advisory Agreement
between Calvert Asset Management Company, Inc. (the "Advisor") and Calvert
Variable Series, Inc. ("CVS") dated March 1, 1999, with respect to the CVS
Portfolios shown below, the Advisor is entitled to receive from the listed
Portfolios an annual advisory fee (the "Fee") as shown below. The Fee shall
be computed daily and payable monthly, based on the average daily net assets
of the appropriate Portfolio.
CVS Social Money Market 0.30%
CVS Social Balanced 0.425%
CVS Social Mid Cap Growth 0.65%
CVS Social Small Cap Growth 0.75%
CVS Social International Equity 0.75%
CUSTODIAN AGREEMENT
This Agreement, dated as of March 5, 1992, is between State Street Bank and
Trust Company, a Massachusetts trust company, having its principal place of
business at 225 Franklin Street, Boston, Massachusetts, 02110 ("State
Street" or the "Custodian"), and Acacia Capital Corporation, a Maryland
corporation (the "Fund"), having its principal place of business at 4550
Montgomery Avenue, Suite 1000N, Bethesda, Maryland, 20814. In consideration
of the mutual covenants and agreements contained in this Agreement, the
parties agree as follows:
1. Employment of Custodian and Property to be Held by It
The Fund hereby employs State Street as the custodian of assets, including
securities, of the Fund's portfolios ("Portfolios"). The Portfolios agree to
deliver to the Custodian all securities and cash now or hereafter owned or
acquired, and all payments of income, principal or capital distributions
received by them on securities owned at any given time, and the cash
consideration received for shares of the Portfolios. The Custodian will not
be responsible for any property held or received by any Portfolio and not
delivered to the Custodian.
Upon receipt of "Proper Instructions" (as defined in Section 4), the
Custodian will employ one or more subcustodians located in the United
States, but only in accordance with an applicable vote by the Board of
Directors of the Fund, and provided that the Custodian will have no more or
less responsibility or liability to the Fund on account of any actions or
omissions of any subcustodian so employed than any such subcustodian has to
the Custodian, and further provided that the Custodian will not release the
subcustodian from any responsibility or liability unless mutually agreed on
by the parties in writing.
All duties undertaken by the Custodian will be performed in a timely manner.
What constitutes timeliness in connection with a particular action will be
determined by the standards of the industry as they apply to the specific
type of transaction in question and taking into account relevant facts and
circumstances.
2. Duties of the Custodian with Respect to Property of the Fund
2.1 Holding Securities. The Custodian will hold and physically segregate for
the account of each Portfolio all non-cash property other than (a)
securities maintained in a clearing agency acting as a securities depository
or in a book-entry system authorized by the U.S. Department of the Treasury
(collectively referred to as "Securities System;" see Section 2.10), and (b)
commercial paper of an issuer for which the Custodian acts as issuing and
paying agent ("Direct Paper") which is deposited and/or maintained in the
Direct Paper System of the Custodian (see Section 2.11).
2.2 Delivery of Securities. The Custodian will release and deliver Portfolio
securities held by the Custodian or in a Securities System account of the
Custodian or in the Custodian's Direct Paper book entry system account
("Direct Paper System Account") only upon receipt of Proper Instructions,
which may be continuing instructions when deemed appropriate by mutual
agreement of the parties, and only in the following cases:
1) Sale. Upon the sale of and receipt of payment for a Portfolio's
securities;
2) Repurchase Agreements. Upon receipt of payment in connection with any
repurchase agreement entered into by the Fund related to the securities
being held;
3) Securities System. In She case of a sale effected through a Securities
System, in accordance with the provisions of Section 2.10;
4) Tender Offer. To the depository agent or other receiving agent in
connection with tender or other similar offers for a Portfolio's securities;
5) Redemption by Issuer. To the issuer or its agent when a Portfolio's
securities are called, redeemed, retired or otherwise become payable;
provided that, in any such case, the cash or other consideration is to be
delivered to the Custodian;
6) Transfer to Issuer, Nominee; Exchange. To the issuer or its agent for
transfer into the name of a Portfolio or into the name of any nominee or
nominees of the Custodian or into the name or nominee name of any agent
appointed pursuant to this Agreement or into the name or nominee name of any
subcustodian appointed pursuant to Section 1; or for exchange for a
different number of bonds, certificates or other evidence representing the
same aggregate face amount or number of units and bearing the same interest
rate, maturity date and call provisions, if any; provided that, in any such
case, the new securities are to be delivered to the Custodian;
7) Sale to Broker or Dealer. Upon the sale of a Portfolio's securities to
the broker or its clearing agent or dealer, against a receipt, for
examination in accordance with "street delivery" custom; provided that the
Custodian will have no responsibility or liability for any loss arising from
the delivery of such securities prior to receiving payment for such
securities except as may arise from the Custodian's failure to act in
accordance with its duties as set forth in this Agreement.
8) Exchange or Conversion. For exchange or conversion pursuant to any plan
of merger, consolidation, recapitalization, reorganization, split-up of
shares, change of par value or readjustment of the securities of the issuer
of such securities, or pursuant to provisions for conversion contained in
such securities, or pursuant to any deposit agreement provided that, in any
such case, the new securities and cash, if any, are to be delivered to the
Custodian;
9) Warrants. Rights, in the case of warrants, rights or similar securities,
the surrender thereof in the exercise of such warrants, rights or similar
securities or the surrender of interim receipts or temporary securities for
definitive securities; provided that, in any such case, the new securities
and cash, if any, are to be delivered to the Custodian;
10) Loans of Securities. For delivery in connection with any loans of
securities made by a Portfolio, made only against receipt of adequate
collateral as agreed on from time to time by the Custodian and the Fund on
behalf of the Portfolio. Loans may be in the form of cash, obligations
issued by the United States government, its agencies or instrumentalities,
or such other property as mutually agreed by the parties, except that in
connection with any loans for which collateral is to be credited to the
Custodian's account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held liable or
responsible for the delivery of securities owned by the Portfolio prior to
the receipt of such collateral, unless the Custodian fails to act in
accordance with its duties set forth in this Agreement;
11) Borrowings. For delivery as security in connection with any borrowings
by a Portfolio requiring a pledge of assets by the Portfolio, made only
against receipt of amounts borrowed; except, where additional collateral is
required to secure a borrowing already made, further securities may be
released for that purpose, subject to Proper Instructions;
12) Options. For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian and a broker dealer registered under the
Securities Exchange Act of 1934 (the "Exchange Act") and a member of The
National Association of Securities Dealers, Inc. ("NASD"), relating to
compliance with the rules of The Options Clearing Corporation, any
registered national securities exchange, any similar organization or
organizations, or the Investment Company Act of 1940, regarding escrow or
other arrangements in connection with transactions by the Fund;
13) Futures. For delivery in accordance with the provisions of any agreement
among the Fund, the Custodian, and a Futures Commission merchant registered
under the Commodity Exchange Act, relating to compliance with the rules of
the Commodity Futures Trading Commission and/or any Contract Market, any
similar organization or organizations, or the Investment Company Act of
1940, regarding account deposits in connection with transactions by the Fund;
14) In-Kind Distributions. Upon receipt of instructions from the Fund's
transfer agent, for delivery to the transfer agent or to the holders of
shares in connection with distributions in kind, as may be described from
time to time in the Portfolio's currently effective prospectus and statement
of additional information, in satisfaction of shareholder requests for
repurchase or redemption;
15) Miscellaneous. For any other proper corporate purpose, made only upon
receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board of Directors signed by an officer of the Fund and
certified by the Secretary or an Assistant Secretary, specifying the
securities to be delivered, setting forth the purpose for which such
delivery is to be made, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of the securities
will be made.
In all cases, payments to the Portfolio will be made in cash, by a certified
check or a treasurer's or cashier's check of a bank, by effective bank wire
transfer through the Federal Reserve Wire System or, if appropriate, outside
of the Federal Reserve Wire System and subsequent credit to the Fund's
Custodial account, or, in case of delivery through a stock clearing company,
by book-entry credit by the stock clearing company in accordance with the
then current street custom, or such other form of payment as may be mutually
agreed on by the parties, in all such cases collected funds to be promptly
credited to the Fund.
2.3 Registration of Securities. Securities held by the Custodian (other than
bearer securities) will be registered (a) in the name of the Portfolio or
(b) in the name of any nominee of the Portfolio or of any nominee of the
Custodian assigned exclusively to the Portfolio, unless the Fund has
authorized in writing the appointment of a nominee to be used in common with
other registered investment companies having the same investment adviser as
any of the Portfolios, or in the name or nominee name of any agent appointed
pursuant to Section 2.9 or in the name or nominee name of any subcustodian
appointed pursuant to Section 1. All securities accepted by the Custodian on
behalf of a Portfolio under the terms of this Agreement will be in "street
name" or other good delivery form.
2.4 Bank Accounts. The Custodian will open and maintain a separate bank
account or accounts in the name of each Portfolio, subject only to draft or
order by the Custodian acting pursuant to the terms of this Agreement. The
Custodian will hold in the account(s), in accordance with the provisions of
this Agreement, all cash received by it from or for the account of the Fund,
other than cash maintained by the Fund in a bank account established and
used in accordance with Rule 17f-3 under the Investment Company Act of 1940.
Funds held by the Custodian for a Portfolio may be deposited for the
Portfolio's credit in the bank affiliate of the Custodian or in such other
banks or trust companies as the Custodian may in its discretion deem
necessary or desirable; provided, however, that every such bank or trust
company must be qualified to act as a custodian under the Investment Company
Act of 1940. Funds will be deposited by the Custodian in its capacity as
Custodian and will be withdrawable by the Custodian only in that capacity.
2.5 Sale of Shares and Availability of Federal Funds. Upon mutual agreement
between the Fund and the Custodian, the Custodian will, upon the receipt of
Proper Instructions, make federal funds available to the Portfolios as of
specified times agreed upon from time to time by the Fund and the Custodian
in the amount of checks received in payment for shares of the Portfolio
which are deposited into the Portfolio's account.
2.6 Collection of Income, Dividends. The Custodian will collect on a timely
basis all income and other payments with respect to registered securities
held to which the Portfolios are entitled either by law or pursuant to
custom in the securities business. The Custodian will also collect on a
timely basis all income and other payments with respect to bearer securities
if, on the date of payment by the issuer, the securities are held by the
Custodian or its agent. The Custodian will credit a Portfolio's account with
all income or other payments on securities held in a domestic depository, on
the contractual payment date, in Clearinghouse Funds or Federal Funds as the
case may be, regardless of whether the Custodian succeeds in collecting the
item on a timely basis. This credit is subject to the Custodian's right to
reverse the credit in the event of a default in the issuer's payment of such
income. Without limiting the generality of the foregoing, the Custodian will
detach and present for payment all coupons and other income items requiring
presentation as and when they become due and will collect interest when due
on securities held pursuant to this Agreement. The Custodian will also
receive and collect all stock dividends, rights and other items of like
nature as and when they become due or payable. Income due the Portfolio on
securities loaned pursuant to the provisions of Section 2.2(10) will be the
responsibility of the Portfolio; the Custodian will have no duty or
responsibility in connection with loaned securities other than to provide
the Portfolio with such information or data as may be necessary to assist
the Portfolio in arranging for the timely delivery to the Custodian of the
income to which the Fund is properly entitled.
2.7 Payment of Portfolio Monies. Upon receipt of Proper Instructions, which
may be continuing instructions when deemed appropriate by mutual agreement
of the parties, the Custodian will pay out monies of a Portfolio in the
following cases only:
1) Purchases. Upon the purchase of domestic securities, options, futures
contracts or options on futures contracts for the account of the Portfolio
but only (a) against the delivery of such securities, or evidence of title
to such options, futures contracts or options on futures contracts, to the
Custodian (or any bank, banking firm or trust company doing business in the
United States or abroad which is qualified under the Investment Company Act
of 1940, as amended, to act as a custodian and has been designated by the
Custodian as its agent for this purpose in accordance with Section 2.9 of
this Agreement) registered in the name of the Portfolio or in the name of a
nominee of the Portfolio or of the Custodian referred to in Section 2.3 of
this Agreement, or in other proper form for transfer; (b) in the case of a
purchase effected through a Securities System, in accordance with the
conditions set forth in Section 2.10 of this Agreement; (c) in the case of a
purchase involving the Direct Paper System, in accordance with the
conditions set forth in Section 2.11; or (d) in the case of repurchase
agreements entered into between the Fund and the Custodian, or another bank,
or a broker-dealer which is a member of NASD, (i) against delivery of the
securities either in certificate form or through an entry crediting the
Custodian's account at the Federal Reserve Bank with such securities or (ii)
against delivery of the receipt evidencing purchase by the Fund of
securities owned by the Custodian along with written evidence of the
agreement by the Custodian to repurchase such securities from the Fund. All
coupon bonds accepted by the Custodian must have the coupons attached or
must be accompanied by a due bill or a check payable on coupon payable date
for the interest due on that date. Payment may be made for purchases in
advance of receipt of securities when the Custodian receives authorization
to do so on a case-by-case basis; however, the Custodian will be absolutely
liable to the Portfolio for such payment in the absence of specific written
instructions to make the payment.
2) Exchanges. In connection with conversion, exchange or surrender of
securities owned by the Fund as set forth in Section 2.2 hereof;
3) Redemptions. For the redemption or repurchase of shares issued by the
Fund as set forth in this Agreement;
4) Expense and Liability. For the payment of any expense or liability
incurred by the Fund, including but not limited to the following payments
for the account of the Fund: interest, taxes, management, accounting,
transfer agent and legal fees, and operating expenses of the Fund whether or
not such expenses are to be in whole or part capitalized or treated as
deferred expenses;
5) Dividends. For the payment of any dividends or other distributions to
shareholders declared by the Fund;
6) Short Sale Dividend. For payment of the amount of dividends received in
respect of securities sold short;
7) Loan. For repayment of a loan upon redelivery of pledged securities and
upon surrender of the note(s), if any, evidencing the loan;
8) Miscellaneous. For any other proper purpose upon receipt of, in addition
to Proper Instructions, a certified copy of a resolution of the Board of
Directors signed by an officer of the Fund and certified by its Secretary or
an Assistant Secretary, specifying the amount of such payment, setting forth
the purpose for which such payment is to be made, declaring such purpose to
be a proper purpose, and naming the person or persons to whom such payment
is to be made.
2.8 Appointment of Agents. At its discretion, the Custodian may at any time
appoint (and may at any time remove) any other bank or trust company
qualified to act as a custodian under the Investment Company Act of 1940 as
its agent to carry out such of the provisions of this Section 2 as the
Custodian may from time to time direct; provided, however, that the
appointment of any agent will not relieve the Custodian of its
responsibilities or liabilities under this Agreement.
2.9 Deposit of Securities in Securities Systems. The Custodian may deposit
and/or maintain a Portfolio's securities in a Securities System in
accordance with applicable Federal Reserve Board and Securities and Exchange
Commission rules and regulations, if any, and subject to the following
provisions:
1) Account of Custodian. The Custodian may keep a Portfolio's securities in
a Securities System provided that such securities are represented in an
account of the Custodian in the Securities System that does not include any
assets of the Custodian other than assets held as a fiduciary, custodian or
otherwise for customers;
2) Records. The Custodian's records, with respect to a Portfolio's
securities maintained in a Securities System, must identify by book entry
those securities belonging to the Portfolio;
3) Payment/Delivery.
(a) Subject to Section 2.7 (Payment of Fund Monies), the Custodian will pay
for a Portfolio's securities upon (i) receipt of advice from the Securities
System that such securities have been transferred to the Account, and (ii)
the making of an entry on the records of the Custodian to reflect such
payment and transfer for the account of the Portfolio;
(b) Subject to Section 2.2 (Delivery of Securities), the Custodian will
transfer a Portfolio's securities upon (i) receipt of advice from the
Securities System that payment for such securities has been transferred to
the Custodian's account, and (ii) the making of an entry on the records of
the Custodian to reflect such transfer and payment for the account of the
Portfolio;
(c) Copies of all advices from the Securities System of transfers of a
Portfolio's securities will identify the Portfolio, be maintained for the
Portfolio by the Custodian and be provided to the Portfolio at its request.
The Custodian will furnish daily transaction sheets reflecting each day's
transactions in the Securities System for the account of the Portfolio.
4) Reports. The Custodian will provide the Portfolio with any report
obtained by the Custodian on the Securities System's accounting system,
internal accounting control and procedures for safeguarding securities
deposited in the Securities System, and further agrees to provide the
Portfolio with copies of any documentation it has relating to its
arrangements with the Securities Systems as set forth in this Agreement or
as otherwise required by the Securities and Exchange Commission or any other
regulatory agency or organization;
5) Liability. Anything to the contrary in this Agreement notwithstanding,
the Custodian will be liable to the Portfolio for any loss or expense, which
may include reasonable attorneys fees, or damage to the Portfolio resulting
from use of the Securities System by reason of any negligence, misfeasance
or misconduct of the Custodian, its agents, or any employee or agent of the
Custodian or agent, or from failure of the Custodian or any such agent to
enforce effectively such rights as it may have against the Securities
System. At the election of the Portfolio, it will be entitled to be
subrogated to the rights of the Custodian with respect to any claim against
the Securities System or any other person that the Custodian may have as a
consequence of any such loss, expense or damage if and to the extent that
the Portfolio has not been made whole for any such loss, expense or damage.
2.10 Fund Assets Held in the Custodian's Direct Paper System. The Custodian
may deposit and/or maintain securities owned by a Portfolio in the Direct
Paper System of the Custodian subject to the following provisions:
1) No transaction relating to securities in the Direct Paper System will be
effected in the absence of Proper Instructions;
2) The Custodian may keep securities of a Portfolio in the Direct Paper
System only if such securities are represented in an account of the
Custodian in the Direct Paper System that does not include any assets of the
Custodian other than assets held as a fiduciary, custodian or otherwise for
customers;
3) The records of the Custodian, with respect to securities of a Portfolio,
that are maintained in the Direct Paper System will identify by book entry
those securities belonging to the Portfolio;
4) The Custodian will pay for securities purchased for the account of a
Portfolio upon the making of an entry on the records of the Custodian to
reflect such payment and transfer of securities to the account of the
Portfolio. The Custodian will transfer securities sold for the account of
the Fund upon the making of an entry on the records of the Custodian to
reflect such transfer and receipt of payment for the account of the Fund;
5) The Custodian will furnish each Portfolio confirmation of every transfer
to or from its account, in the form of a written advice or notice, of Direct
Paper on the next business day following such transfer and will furnish to
the Portfolio copies of daily transaction sheets reflecting each day's
transaction in the Securities System for its account;
6) The Custodian will provide each Portfolio with any report on its system
of internal accounting control as the Portfolio may reasonably request from
time to time;
2.11 Segregated Account. The Custodian will, upon receipt of Proper
Instructions, establish and maintain a segregated account or accounts for
and on behalf of each Portfolio, into which may be transferred cash and/or
securities, including securities maintained in an account by the Custodian
pursuant to Section 2.9 of this Agreement: (i) in accordance with the
provisions of any agreement among the Fund, the Custodian and a
broker-dealer registered under the Exchange Act and a member of the NASD (or
any futures commission merchant registered under the Commodity Exchange
Act), relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange (or the
Commodity Futures Trading Commission or any registered contract market), or
of any similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by a Portfolio, (ii) for
purposes of segregating cash or government securities in connection with
options purchased, sold or written by a Portfolio or commodity futures
contracts or options purchased or sold by the Portfolio, (iii) for the
purposes of compliance by the Fund with the procedures required by
Investment Company Act Release No. 10666, or any subsequent release, rule or
policy of the Securities and Exchange Commission relating to the maintenance
of segregated accounts by registered investment companies and (iv) for other
proper corporate purposes, but only in the case of clause (iv) upon receipt
of, in addition to Proper Instructions, a certified copy of a resolution of
the Board of Directors setting forth the purpose or purposes of such
segregated account and declaring such purposes to be proper corporate
purposes.
2.12 Ownership Certificates for Tax Purposes. The Custodian will execute
ownership and other certificates and affidavits for all federal and state
tax purposes in connection with receipt of income or other payments for a
Portfolio's securities and in connection with transfers of such securities.
2.13 Proxies. If the securities are registered other than in the name of a
Portfolio or a nominee of the Portfolio, the Custodian will cause all
proxies promptly to be executed by the registered holder of such securities,
without indication of the manner in which such proxies are to be voted, and
will promptly deliver to the Portfolio all proxy soliciting materials and
all notices relating to such securities.
2.14 Communications Relating to Fund Securities. The Custodian will transmit
promptly to each Portfolio all written information (including, without
limitation, pendency of calls and maturities of domestic securities and
expirations of rights in connection therewith and notices of exercise of
call and put options written by the Portfolio and the maturity of futures
contracts purchased or sold by the Portfolio) received by the Custodian from
issuers of the Portfolio's securities by the Custodian, an agent appointed
under Section 2.9, or subcustodian appointed under Section 1. With respect
to tender or exchange offers, the Custodian will transmit promptly to the
Portfolio all written information received by the Custodian, an agent
appointed under Section 2.9, or subcustodian appointed under Section 1 from
issuers of the securities whose tender or exchange is sought and from the
party (or its agents) making the tender or exchange offer. If a Portfolio
desires to take action with respect to any tender offer, exchange offer or
any other similar transaction, the Portfolio will notify the Custodian of
such desired action at least three business days prior to the time such
action must be taken under the terms of the tender, exchange offer, or other
similar transaction, and it will be the responsibility of the Custodian to
timely transmit to the appropriate person(s) the Portfolio's notice. Where
the Portfolio does not notify the Custodian of its desired action within the
three business day period, the Custodian will use its best efforts to timely
transmit the Portfolio's notice to the appropriate person.
2.15 Reports to Fund by Independent Public Accountants. At the request of
the Fund, the Custodian will provide the Fund, for the benefit of each of
its Portfolios, with audited annual reports. The Custodian will further
provide the Fund, at such times as the Fund may reasonably require, with
reports by independent public accountants on the accounting system, internal
accounting control and procedures for safeguarding securities, futures
contracts and options on futures contracts, including securities deposited
and/or maintained in a Securities System, relating to the services provided
by the Custodian under this Contract. Such reports will be of sufficient
scope and in sufficient detail, as may reasonably be required by the Fund to
provide reasonable assurance that any material inadequacies existing or
arising since the prior examination would be disclosed by such examination.
The reports must describe any material inadequacies disclosed and, if there
are no such inadequacies, the reports will so state.
Payments for Redemptions of Shares of a Portfolio
From such funds as may be available for the purpose but subject to the
limitations of the Governing Documents of the Fund and any applicable votes
of the Board of Directors of the Fund pursuant to those Documents, the
Custodian will, upon receipt of instructions from the Transfer Agent, make
funds available for payment to holders of shares who have delivered to the
Transfer Agent a request for redemption of their shares. In connection with
the redemption of shares of a Portfolio, the Custodian is authorized upon
receipt of instructions from the Transfer Agent to wire funds to or through
a commercial bank designated by the redeeming shareholder.
The Custodian will receive payments for a Portfolio's shares issued or sold
from the distributor for the Portfolio's shares or from the Transfer Agent
of the Portfolio and deposit as received into the Portfolio's account such
payments as are received for shares of the Portfolio issued or sold from
time to time by the Portfolio. The Custodian will provide timely
notification to the Portfolio and the Transfer Agent of any receipt by it of
payments for shares of the Portfolio.
4. Proper Instructions
"Proper Instructions" means a writing signed or initialed by one or more
persons authorized by the Board of Directors. Each such writing must set
forth the specific transaction or type of transaction involved, including a
statement of the purpose for which such action is requested, and may be a
blanket instruction authorizing specific transactions of a routine nature or
occurring repeatedly. Oral instructions will be considered Proper
Instructions if the Custodian reasonably believes them to have been given by
a person authorized to give such instructions with respect to the
transaction involved. The Fund will cause all oral instructions to be
confirmed in writing. Upon receipt of a certificate of the Secretary or an
Assistant Secretary as to the authorization by the Board of Directors of the
Fund, accompanied by a detailed description of procedures approved by the
Board of Directors, Proper Instructions may include communications effected
directly between electromechanical or electronic devices provided that the
Board of Directors and the Custodian are satisfied that such procedures
afford adequate safeguards for the Fund's assets.
5. Actions Permitted without Express Authority
In its discretion the Custodian may, without express authority from the Fund:
1) surrender securities in temporary form for securities in definitive form;
2) endorse for collection, in the name of a Portfolio, checks, drafts and
other negotiable instruments on the same day as received: and
3) in general, attend to all nondiscretionary details in connection with the
sale, exchange, substitution, purchase, transfer and other dealings with the
securities and property of a Portfolio except as otherwise directed by the
Board of Directors of the Fund.
6. Evidence of Authority, Reliance on Documents
The Custodian will not be liable for actions taken pursuant to instructions,
notice, request, consent, certificate or other instrument or paper
reasonably and in good faith believed by it to be genuine and to have been
properly executed by or on behalf of the Fund or a Portfolio in accordance
with Proper Instructions as defined in Section 4 of this Agreement. The
Custodian may receive and accept a certified copy of a vote of the Board of
Directors of the Fund as conclusive evidence (a) of the authority of any
person to act in accordance with such vote or (b) of any determination or of
any action by the Board of Directors pursuant to the Governing Documents of
the Fund as described in such vote, and such vote may be considered as in
full force and effect until receipt by the Custodian of written notice to
the contrary. So long as and to the extent that it is in the exercise of the
standard of care set forth in Section 10 of this Agreement, the Custodian
will not be responsible for the title, validity or genuineness of any
property or evidence of title received by it or delivered by it pursuant to
this Agreement and will be held harmless in acting upon any notice, request,
consent, certificate or other instrument reasonably believed by it to be
genuine and to be signed by the proper party or parties.
7. Records, Inventory
The Custodian will create and maintain all records relating to its
activities and obligations under this Agreement in such manner as will meet
the obligations of the Fund under the Investment Company Act of 1940, with
particular attention to Section 31 and Rules 31a-1 and 31a-2 thereunder. All
such records will be the property of the Fund and will at all times during
the regular business hours of the Custodian be open for inspection and audit
by duly authorized officers, employees or agents of the Fund and employees
and agents of the Securities and Exchange Commission, and, in the event of
termination of this Agreement, will be delivered in accordance with Section
12 of this Agreement. The Custodian will, at the Fund's request, supply the
Fund with a tabulation of securities owned by any Portfolio and held by the
Custodian and will, when requested to do so by the Fund and for such
compensation as is agreed on by the Portfolio and the Custodian, include
certificate numbers in such tabulations. The Custodian will conduct a
periodic inventory of all securities and other property subject to this
Agreement and provide to the Fund a periodic reconciliation of the vaulted
position of each Portfolio to the appraised position of the Portfolio. The
Custodian will promptly report to the Fund the results of the
reconciliation, indicating any shortages or discrepancies uncovered thereby,
and take appropriate action to remedy any such shortages or discrepancies.
8. Opinion of the Fund's Independent Accountant
The Custodian will cooperate with the Fund's independent public accountants
in connection with the annual and other audits of the books and records of
the Fund and take all reasonable action, as the Fund may from time to time
request, to provide the necessary information to such accountants for the
expression of their opinion without any qualification as to the scope of
their examination, including but not limited to, any opinion in connection
with the preparation of the Fund's Form N-1A, and Form N-SAR or other
reports to the Securities and Exchange Commission or state regulatory agency
and with respect to any other legal requirements.
9. Compensation of Custodian
The Custodian will be entitled to reasonable compensation for its services
and expenses as Custodian, as detailed in the attached Addendum.
10. Responsibility of Custodian - Indemnification
Reasonable Care - Notwithstanding anything to the contrary in this
Agreement, the Custodian will be held to the exercise of reasonable care in
carrying out the provisions of this Agreement, but will be kept indemnified
by and will be without liability to the Fund for any action taken or omitted
by it in good faith without negligence.
Notice to Fund - in order for the indemnification provision contained in
this Section to apply, it is understood that if in any case the Fund may be
asked to indemnify or hold the Custodian harmless, the Fund will be fully
and promptly advised of all pertinent facts concerning the situation in
question, and it is further understood that the Custodian will use all
reasonable care to identify and notify the Fund promptly concerning any
situation which presents or appears likely to present the probability of
such a claim for indemnification against the Fund.
Defense of Custodian - The Fund will have the option to defend the Custodian
against any claim which may be the subject of this indemnification, and in
the event that the Fund so elects, it will so notify the Custodian, and
thereupon the Fund will take over complete defense of the claim and the
Custodian will in such situation initiate no further legal or other expenses
for which it will seek indemnification under this Section. The Custodian
will in no case confess any claim or make any compromise in any case in
which the Fund will be asked to indemnify the Custodian except with the
Fund's prior written consent. Nothing in this Section will be construed to
limit any right or cause of action on the part of the Custodian under this
Agreement which is independent of any right or cause of action on the part
of the Fund. The Custodian will be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund or such other counsel as
may be agreed to by the parties) on all matters, and will be without
liability for any action reasonably taken or omitted pursuant to such advice.
If the Fund requires the Custodian to take any action with respect to
securities that involves the payment of money, or that may, in the opinion
of the Custodian, result in the Custodian or its nominee assigned to the
Fund being liable for the payment of money or incurring liability of some
other form, the Fund, as a prerequisite to requiring the Custodian to take
such action, will indemnify the Custodian in an amount and form satisfactory
to it.
If a Portfolio requires the Custodian to advance cash or securities for any
purpose or in the event that the Custodian or its nominee incurs or is
assessed any taxes, charges, expenses, assessments, claims or liabilities in
connection with the performance of this Agreement, except as may arise from
the Custodian's or its agent's negligent action or omission, or willful
misconduct, any property held for the account of the Portfolio will serve as
security. If the Portfolio fails to repay the Custodian promptly, the
Custodian will be entitled to use available cash and to dispose of the
Portfolio's assets to the extent necessary for reimbursement. If the
Custodian exercises this option, it must give the Portfolio reasonable
notice so as to enable the Portfolio to repay the cash or securities
advanced. Such notice will not preclude the Custodian from asserting any
lien under this provision.
11. Effective Period, Termination and Amendment
This Agreement will become effective as of its execution, provided that the
Custodian will have received proof of initial approval of a particular
Securities System pursuant to Rule 17f-4 under the Investment Company Act of
1940 (see Section 2.9 of this Agreement) or of the Direct Paper System (see
Section 2.10 of this Agreement). The Portfolio will provide proof of annual
approval to the Custodian. This Agreement will continue in force until
terminated as provided in this Section. It may be amended at any time by
mutual agreement of the parties, and may be terminated by either party with
60 days written notice. The Fund may, by action of the Fund's Board of
Directors, immediately terminate this Agreement in the event of the
appointment of a conservator or receiver for the Custodian by the
Comptroller of the Currency or a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
In the event the Agreement terminates, the Fund will pay the Custodian
whatever compensation is due as of the date of the termination, and will
reimburse the Custodian for costs, expenses and disbursements incurred in
connection with termination, but only to the extent the Fund gives prior
approval for the expenditures. Approval will not be unreasonably withheld.
12. Successor Custodian
If a successor Custodian is appointed by the Board of Directors of the Fund,
the Custodian will, upon termination, deliver to the successor custodian at
the office of the Custodian, duly endorsed and in the form for transfer, all
securities, funds and other properties then held by it pursuant to this
Agreement, and will transfer to an account of the successor custodian all of
each Portfolio's securities held in a Securities System. The Custodian will
cooperate in assisting the successor Custodian so that it may continue any
subcustodian agreement entered into by the Custodian and any subcustodian on
behalf of the Fund.
If no successor is to be appointed, the Custodian will make the securities,
funds and other properties available as above to the Fund upon receipt of a
certified copy of a vote of the Board of Directors of the Fund.
If no written order designating a successor Custodian or certified copy of a
vote of the Board of Directors is delivered to the Custodian on or before
the effective date of the termination, the Custodian will have the right to
make delivery to a bank (as defined in the Investment Company Act of 1940)
or trust company of its own selection having aggregate capital, surplus, and
undivided profits, as shown by its last published report, of not less than
$50,000,000, which will become the successor custodian under this Agreement.
In the event the securities, funds and other properties remain in the
possession of the Custodian after the termination date due to failure by the
Fund to procure the certified copy of the appropriate vote of the Board of
Directors, the Custodian will be entitled to fair compensation for its
services during the period during which it retains possession of the
property, and the provisions of this Agreement relating to the duties and
obligations of the Custodian will remain in full force.
If during the term of this Agreement any Portfolio is liquidated pursuant to
law, the Custodian will distribute the remaining assets of the Portfolio
after satisfying all expenses and liabilities of that Portfolio. Such
distributions will be pro rata among the Portfolio's shareholders as
certified by the Transfer Agent, and will be in cash or, if the Portfolio so
orders, in portfolio securities. Section 10 (Responsibility of Custodian -
Indemnification) will survive any termination of this Agreement.
13. Interpretive and Additional Provisions
In connection with the operation of this Agreement, the Custodian and the
Fund may from time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their joint opinion
be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions will be in a writing signed by both
parties and will be annexed to this Agreement. No interpretive or additional
provisions will contravene any applicable federal or state regulations or
any provision of the Governing Documents of the Fund, nor will they be
deemed amendments to this Agreement.
14. Notice
Notice will be considered sufficient if sent by registered or certified
mail, or by such other means as the parties agree, to the other party at the
address set forth above or at any other address specified in writing and
delivered to the other party.
15. Bond
The Custodian will, at all times, maintain a bond issued by a reputable
fidelity insurance company authorized to do business in the place where the
bond is issued. The bond will be issued against larceny and embezzlement,
and will cover each officer and employee of the Custodian who may, singly or
jointly with others, have access to securities or funds of the Fund, either
directly or through authority to receive and carry out any certificate
instruction, order request, note or other instrument required or permitted
by this Agreement. The Custodian agrees that it will not cancel, terminate
or modify the bond so as to affect adversely the Fund, except after written
notice to the Fund not less than 10 days prior to the effective date of such
cancellation, termination or modification. At the request of the Fund, the
Custodian will furnish to the Fund a copy of each such bond and each
amendment thereto.
16. Confidentiality
The Custodian agrees to treat all records and other information relative to
the Portfolios and their prior, present or future shareholders as
confidential, and the Custodian, on behalf of itself and its employees,
agrees to keep confidential all such information except when requested to
divulge such information by duly constituted authorities, or when so
requested by the Fund. If requested to divulge confidential information to
anyone other than persons normally authorized by the Fund to receive
information, such as the Fund's auditors or attorneys, the Custodian will
not release the information until it notifies the Fund in writing and
receives approval in writing from the Fund, unless required by law to do
otherwise. Approval by the Fund will not be unreasonably withheld and may
not be withheld where the Custodian may be exposed to civil or criminal
contempt proceedings for failure to comply.
17. Exemption from Liens
Except as provided in Section 10 of this Agreement, the securities and other
assets held by the Custodian for a Portfolio will be subject to no lien or
charge of any kind in favor of the Custodian or any person claiming through
the Custodian, but nothing herein will be deemed to deprive the Custodian of
its right to invoke any and all remedies available at law or equity to
collect amounts due it under this Agreement. Neither the Custodian nor any
subcustodian appointed pursuant to Section 1 of this Agreement will have any
power or authority to assign, hypothecate, pledge or otherwise dispose of
any securities held by it for the Portfolio, except upon the direction of
the Fund, duly given as herein provided, and only for the account of the
Portfolio.
18. Massachusetts Law to Apply
This Agreement will be construed and the provisions thereof interpreted
under and in accordance with laws of the Commonwealth of Massachusetts.
19. Governing Documents
The term "Governing Documents" refers to the Fund's Articles of
Incorporation, Bylaws and Registration Statement filed under the Securities
Act of 1933, as amended from time to time.
20. Directors and Shareholders
Neither the holders of shares in the Portfolios nor any Directors of the
Fund will be personally liable under this Agreement.
21. Massachusetts Business Trust
With respect to the Fund, which is a party to this Agreement any which is
organized as a business trust under the laws of the Commonwealth of
Massachusetts, the term Fund means and refers to the Directors serving under
the applicable incorporation document. It is expressly agreed that the
obligations of the Fund under this Agreement will not be binding on any of
the Directors, Portfolio shareholders, nominees, officers, agents or
employees of the Fund personally, but bind only the property of the Fund's
Portfolios.
22. Successors of Parties
This Contract will be binding on and will inure to the benefit of the Fund
and the Custodian and their respective successors.
23. Integration Clause
The parties agree that all aspects of their agreement are contained in this
document, its Addendum, supplemental agreements and all amendments thereto,
and that any disputes arising in connection with this Agreement will be
decided with reference to those documents.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be affixed hereunder as of the dates indicated below.
ACACIA CAPITAL CORPORATION
By: /s/ Date: 5/18/92
William M. Tartikoff
Attest: /s/ Date: 5/18/92
Beth-ann Roth
STATE STREET BANK AND TRUST COMPANY
By: /s/ Date: 6/4/92
Ronald E. Logue
Attest: /s/ Date: 6/4/92
Illegible
<PAGE>
LETTER AGREEMENT BETWEEN
ACACIA CAPITAL CORPORATION AND
STATE STREET BANK AND TRUST COMPANY
SUPPLEMENTING THE CUSTODIAN AGREEMENT
DATED AS OF MARCH 5, 1992
The following items supplement the Custodian Agreement
("Agreement") dated March 5, 1992, and are considered part of the Agreement:
1. The initial Addendum to the Agreement, dated as of March 5, 1992,
will remain in effect for a minimum of three years; that is, until at least
March 5, 1995, unless mutually agreed by the parties.
2. The Fund is entitled to pay fees to the Custodian by analysis on
collected funds, which will earn the rate stated in the Addendum to the
Agreement.
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative
and its seal to be affixed hereunder as of the dates indicated below.
ACACIA CAPITAL CORPORATION
By: /s/ Date: 5/18/92
William M. Tartikoff
Attest: /s/ Date: 5/18/92
Beth-ann Roth
STATE STREET BANK AND TRUST COMPANY
By: /s/ Date: 6/4/92
Ronald E. Logue
Attest: /s/ Date: 6/4/92
Illegible
<PAGE>
APPENDIX A
The following Portfolios are covered by the Custodian Agreement
between Acacia Capital Corporation and State Street Bank and Trust Company:
Calvert Responsibly Invested Ariel Appreciation Portfolio (Calvert-Ariel
Appreciation II)
Calvert Responsibly Invested Bond Portfolio
Calvert Responsibly Invested Equity Portfolio
Calvert Responsibly Invested Managed Growth Portfolio (Calvert Socially
Responsible Series)
Calvert Responsibly Invested Global Equity Portfolio
Calvert Responsibly Invested Money Market Portfolio
Money Market Series
Growth Series
Bond Series
Managed Series
Government Series
Zero Coupon 1996 and 2006 Series
<PAGE>
ADDENDUM TO CUSTODIAN AGREEMENT
The Fund will pay the following fees to State Street Bank and Trust Company
pursuant to the Custodian Agreement dated as of March 5, 1992. The rates,
which may be adjusted annually according to the Consumer Price Index (CPI),
will remain in effect until March 31, 1995, or for three years from the
commencement of services by the Custodian.
1. Administration - Three levels of service are listed below. Specific
services are outlined in the proposal. Each service includes maintenance of
one demand deposit per account per portfolio. All fees will be billed
monthly and payable quarterly.
A. Custody Service
B. Custody, Portfolio and Fund Accounting Service
C. Custody and Remote Service
Annual Charges
B. Custody,
Portfolio
Portfolio and Fund C. Custody &
Assets A. Custody Accounting Remote Service
less than $25 million $500 $40,000 $6,000
$25 - 100 MM $2,000 $40,000 $7,500
more than $100 MM $3,500 $40,000 $9,000
Annual Horizon Base Charge $25,000
2. Portfolio Trades - There will be a charge for each of the following
line items processed:
State Street Bank Repos $7.00
DTC or Fed Book Entry $12.00
New York Physical Settlements $25.00
Maturity Collections $8.00
PTC Purchase, Sale, Deposit or Withdrawal $20.00
Internal Transfers $8.00
All other trades $16.00
3. Options - The following charges will apply per issue and per broker:
Option charge for each option written or closing contract price $25.00
Option expiration charge $15.00
Option exercised charge $15.00
4. Lending of Securities
Deliver loaned securities versus cash collateral $20.00
Deliver loaned securities versus securities collateral $30.00
Receive/deliver additional cash collateral $6.00
Substitutions of securities collateral $30.00
Deliver cash collateral versus receipt of loaned securities $15.00
Deliver securities collateral versus receipt of loaned securities $25.00
Loan administration - mark - to - market per day, per loan $3.00
5. Interest Rate Futures
Transactions - no security movement $8.00
6. Holdings Charge
For each issue maintained - monthly charge $5.00
7. Principal Reduction Payments
Per paydown $10.00
8. Dividend Charges
For items held at the request of traders over record date
in street form $50.00
9. Global Custody
Group l Group 2 Group 3 Group 4 Group 5
Austria Australia Denmark Indonesia Argentina
Canada Belgium Finland Korea Brazil
Euroclear Netherlands France Mexico Chile
Germany New Zealand Ireland Portugal Greece
Hong Kong Norway Italy Spain Philippines
Japan Singapore Malaysia Sweden Turkey
Switzerland Thailand Taiwan* Venezuela
United Kingdom
A. Net Assets (fees indicated in basis points)
Group l Group 2 Group 3 Group 4 Group 5
First $50 Million 12 15 18 25 30
Next $50 Million 10 13 16 25 30
Over $100 Million 8 11 14 25 30
B. Transaction Charge
Group l Group 2 Group 3 Group 4 Group 5
$30 $45 $60 $75 $125**
* Transaction fee indicated below does not include agent, depository and
local auditor's fees.
** Except Turkey, for which the transaction charge is $0.50 per security
settled with a minimum charge of $250 and a maximum charge of $7,500.
10. Special Services - Fees for activities of a nonrecurring nature,
such as fund consolidations or reorganizations, extraordinary security
shipments and the preparation of special reports, will be subject to
negotiation. Fees for automated pricing, yield calculation and other special
items will be negotiated separately.
11. Balance Credit - Balance credits for all funds will be applied
against the foregoing fees based on the 13 week Treasury bill bond
equivalent adjusted by the current federal reserve and FDIC insurance
requirements. The rate in effect at each prior month end will be used,
adjusted to a monthly basis, times the average collected balance in the
demand deposit accounts.
12. Out-of-Pocket Expenses - Billing for recovery of out-of-pocket
expenses will be made as of the end of each month, and will be payable
quarterly. Where a dollar amount is indicated below, the fee that may be
charged to the Fund is limited as noted. Out-of-pocket expenses include, but
are not limited to:
Wire charges ($4.75)
Telephone/Line Charges
Postage and Insurance
Courier Service
Duplicating
Legal Fees
Supplies Related to Fund Records
Rush Transfer ($8.00)
Transfer Fees
Subcustodian Charges
Audit Letter
Federal Reserve Fee for Return Cheek items Over $2,500 ($4.25)
GNMA Transfer ($15.00)
PTC Deposit/Withdrawal for same-day turnaround ($50.00)
Overdrafts (Prime Rate)
13. Demand Deposit Services - [Note: Demand Deposit Account Services
are charged for accounts other than the portfolio custody account(s)]
Account Maintenance $12.00
Statements (Duplicate and Additional) $4.00
Check(s) Paid $0.18
Deposit Ticket Processed $0.85
Deposit item Based
Commercial Encoded varies
Commercial Unencoded $0.10
Return Deposited Item (Commercial) $3.00
* Redeposit of Item
Per Deposit $1.00
Per Item $0.50
Pay/Return Checks Against Zero,
NFS or UNC Funds $15.00
Check Certification $7.00
Stop Payment Order (Manual) $15.00
Wire Transfer Out $4.75
Wire Transfer In $4.75
Photo Requests Adjustments $5.00
Auditors Confirmations $25.00
** FDIC $0.195/$100/yr.
Treasurers Checks $7.00
Money Orders $2.50
Counter Checks $1.50
* In addition to the charges for Redeposit of item, an adjustment to the
daily float calculation will be assessed.
** The rate utilized for FDIC compensation will reflect that which is
charged by the agency for the applicable period.
15. Cash Management
Automated Wires (via Terminal) -
Per log-on $2.00
Automated Wires (CPU to CPU) - Monthly Fees; Set-up (one-time charge)
Installation $2,500.00
Modems (2) $3,000.00
Encryption (2) $5,200.00
Outgoing wires will be charged as noted in Demand Deposit Section
Automated Clearing House (ACH) Processing
Per Tape $15.00
Per item $0.06
Controlled Disbursement
Monthly Funding and Reporting $125.00
Per Check Paid $0.08
Balance Reporting (SSCAN)
Annual-Base (Per Client) $1,000.00
Per Account, Per Report $50.00
("Report" daily, 1,000 transactions/month)
Intraday Report, per account $200.00
Reconcilement Services (Partial)
Monthly Maintenance $100.00
Per item $0.06
Monthly Minimum $140.00
Full - Electronic input
Monthly Maintenance. $145.00
Per hem $0.06
Monthly Minimum $205.00
Additional Reconcilement Services
On-line inquiry
3 Month Storage, Per item $0.01
6 Month Storage, Per item $0.02
On-line Photo Request, Per item $1.00
On-line Stop Payment, Per item $6.00
Microfilm of Check, Per item $0.02
Check Redemption, Per item $0.02
IN WITNESS WHEREOF, each of the parties has caused this instrument
to be executed in its name and behalf by its duly authorized representative
and its seal to be affixed hereunder as of the dates indicated below.
ACACIA CAPITAL CORPORATION
BY: /s/ Date: 6/24/92
William. M. Tartikoff
STATE STREET BANK AND TRUST COMPANY
BY: /s/ Date: 7/8/92
J. W. Fletcher
<PAGE>
AMENDMENT TO THE CUSTODIAN CONTRACT
AGREEMENT made by and between State Street Bank and Trust Company (the
"Custodian") and Acacia Capital Corporation (the "Fund").
WHEREAS, the Custodian and the Fund are parties to a custodian contract
dated March 5, 1992 (the "Custodian Contract") governing the terms and
conditions under which the Custodian maintains custody of the securities and
other assets of the Fund; and
WHEREAS, the Custodian and the Fund desire to amend the Custodian Contract
to provide for the maintenance of the Fund's foreign securities, and cash
incidental to transactions in such securities, in the custody of certain
foreign banking institutions and foreign securities depositories acting as
subcustodians in conformity with the requirements of Rule 1 7f-5 under the
Investment Company Act of 1940;
NOW THEREFORE, in consideration of the promises and covenants contained
herein, the Custodian and the Fund hereby amend the Custodian Contract by
the addition of the following terms and conditions:
1. Appointment of Foreign Subcustodians.
The Fund hereby authorizes and instructs the Custodian to employ as
subcustodians for the Fund's securities and other assets maintained outside
the United States the foreign banking institutions and foreign securities
depositories designated on Schedule A hereto ("foreign subcustodians"). Upon
receipt of "Proper Instructions", as defined in Section 2.17 of the
Custodian Contract, together with a certified resolution of the Fund's Board
of Directors, the Custodian and the Fund may agree to amend Schedule A
hereto from time to time to designate additional foreign banking
institutions and foreign securities depositories to act as subcustodian.
Upon receipt of Proper Instructions, the Fund may instruct the Custodian to
cease the employment of any one or more such subcustodians for maintaining
custody of the Fund's assets.
2. Assets to be Held.
The Custodian shall limit the securities and other assets maintained in the
custody of the foreign subcustodians to: (a) "foreign securities", as
defined in paragraph (c)(l) of Rule 17f-5 under the Investment Company Act
of 1940, and (b) cash and cash equivalents in such amounts as the Custodian
or the Fund may determine to be reasonably necessary to effect the Fund's
foreign securities transactions. The Custodian shall identify on its books
as belonging to the Fund, the foreign securities of the Fund held by each
foreign subcustodian.
3. Foreign Securities Depositories.
Except as may otherwise be agreed upon in writing by the Custodian and the
Fund, assets of the Funds shall be maintained in foreign securities
depositories only through arrangements implemented by the foreign banking
institutions serving as subcustodians pursuant to the terms hereof. Where
possible, such arrangements shall include entry into agreements containing
the provisions set forth in Section 5 hereof.
4. Segregation of Securities.
The Custodian shall identify on its books as belonging to the Fund, the
foreign securities of the Fund held by each foreign subcustodian. Each
agreement pursuant to which the Custodian employs a foreign banking
institution shall require that such institution establish a custody account
for the Custodian on behalf of the Fund and physically segregate in that
account, securities and other assets of the Fund, and, in the event that
such institution deposits the Fund's securities in a foreign securities
depository, that it shall identify in its books as belonging to the
Custodian, as agent for the Fund, the securities so deposited.
5. Agreements with Foreign Banking Institutions.
Each agreement with a foreign banking institution shall be substantially in
the form set forth in Exhibit 1 hereto and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest,
lien or claim of any kind in favor of the foreign banking institution or its
creditors or agents, except a claim of payment for their safe custody or
administration; (b) beneficial ownership of the Fund's assets will be freely
transferable without the payment of money or value other than for custody or
administration; (c) adequate records will be maintained identifying the
assets as belonging to the Fund; (d) officers of or auditors employed by, or
other representatives of the Custodian, including to the extent promised
under applicable law the independent public accountants for the Fund, will
be given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e)
assets of the Fund held by the foreign subcustodian will be subject only to
the instructions of the Custodian or its agents.
6. Access of Independent Accountants of the Fund.
Upon request of the Fund, the Custodian will use its best efforts to arrange
for the independent accountants of the Fund to be afforded access to the
books and records of any foreign banking institution employed as a foreign
subcustodian insofar as such books and records relate to the performance of
such foreign banking institution under its agreement with the Custodian.
7. Reports by Custodian.
The Custodian will supply to the Fund from time to time, as mutually agreed
upon, statements in respect of the securities and other assets of the Fund
held by foreign subcustodians, including but not limited to an
identification of entities having possession of the Fund's securities and
other assets and advices or notifications of any transfers of securities to
or from each custodial account maintained by a foreign banking institution
for the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession
of such securities.
8. Transactions in Foreign Custody Account.
(a) Except as otherwise provided in paragraph (b) of this Section 8, the
provision of Sections 2.2 and 2.8 of the Custodian Contract shall apply,
mutatis mutandis to the foreign securities of the Fund held outside the
United States by foreign subcustodians.
(b) Notwithstanding any provision of the Custodian Contract to the contrary,
settlement and payment for securities received for the account of the Fund
and delivery of securities maintained for the account of the Fund may be
effected in accordance with the customary established securities trading or
securities processing practices and procedures in the jurisdiction or market
in which the transaction occurs, including, without limitation, delivering
securities to the purchaser thereof or to a dealer therefor (or an agent for
such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such securities from such purchaser or dealer.
(c) Securities maintained in the custody of a foreign subcustodian may be
maintained in the name of such entity's nominee to the same extent as set
forth in Section 2.3 of the Custodian Contract and the Fund agrees to hold
any such nominee harmless from any liability as a holder of record of such
securities.
9. Liability of Foreign Subcustodians.
Each agreement pursuant to which the Custodian employs a foreign banking
institution as a foreign subcustodian shall require the institution to
exercise reasonable care in the performance of its duties and to indemnify,
and hold harmless, the Custodian and each Fund from and against any loss,
damage, cost, expense, liability or claim arising out of or in connection
with the institution's performance of such obligations. At the election of
the Fund, it shall be entitled to be subrogated to the rights of the
Custodian with respect to any claims against a foreign banking institution
as a consequence of any such loss, damage, cost, expense, liability or claim
if and to the extent that the Fund has not been made whole for any such
loss, damage, cost, expense, liability or claim.
10. Liability of Custodian.
The Custodian shall be liable for the acts or omissions of a foreign banking
institution to the same extent as set forth with respect to subcustodians
generally in the Custodian Contract and, regardless of whether assets are
maintained in the custody of a foreign banking institution, a foreign
securities depository or a branch of a U.S. bank as contemplated by
paragraph 13 hereof, the Custodian shall not be liable for any loss, damage,
cost, expense, liability or claim resulting from nationalization,
expropriation, currency restrictions, or acts of war or terrorism or any
loss where the subcustodian has otherwise exercised reasonable care.
Notwithstanding the foregoing provisions of this paragraph 10, in delegating
custody duties to State Street London Ltd., the Custodian shall not be
relieved of any responsibility to the Fund for any loss due to such
delegation, except such loss as may result from (a) political risk
(including, but not limited to, exchange control restrictions, confiscation,
expropriation, nationalization, insurrection, civil strife or armed
hostilities) or (b) other losses (excluding a bankruptcy or insolvency of
State Street London Ltd. not caused by political risk) due to Acts of God,
nuclear incident or other losses under circumstances where the Custodian and
State Street London Ltd. have exercised reasonable care.
11. Reimbursement for Advances.
If the Fund requires the Custodian to advance cash or securities for any
purpose including the purchase or sale of foreign exchange or of contracts
for foreign exchange, or in the event that the Custodian or its nominee
shall incur or be assessed any taxes, charges, expenses, assessments, claims
or liabilities in connection with the performance of this Contract except
such as may arise from its or its nominee's own negligent action, negligent
failure to act or willful misconduct, any property at any time held for the
account of the Fund shall be security therefor and should the Fund fail to
repay the Custodian promptly, the Custodian shall be entitled to utilize
available cash and to dispose of the Fund assets to the extent necessary to
obtain reimbursement.
12. Monitoring Responsibilities.
The Custodian shall furnish annually to the Fund, during the month of June,
information concerning the foreign subcustodians employed by the Custodian.
Such information shall be similar in kind and scope to that furnished to the
Fund in connection with the initial approval of this amendment to the
Custodian Contract. In addition, the Custodian will promptly inform the Fund
in the event that the Custodian learns of a material adverse change in the
financial condition of a foreign subcustodian or any material loss of the
assets of the Fund or in the case of any foreign subcustodian not the
subject of an exemptive order from the Securities and Exchange Commission is
notified by such foreign subcustodian that there appears to be a substantial
likelihood that its shareholders' equity will decline below $200 million
(U.S. dollars or the equivalent thereof) or that its shareholders' equity
has declined below $200 million (in each case computed in accordance with
generally accepted U.S. accounting principles).
13. Branches of U.S. Banks.
(a) Except as otherwise set forth in this amendment to the Custodian
Contract, the provisions hereof shall not apply where the custody of the
Fund assets is maintained in a foreign branch of a banking institution which
is a "bank" as defined by Section 2(a)(5) of the Investment Company Act of
1940 meeting the qualification set forth in Section 26(a) of said Act. The
appointment of any such branch as a subcustodian shall be governed by
paragraph 1 of the Custodian Contract.
(b) Cash held for the Fund in the United Kingdom shall be maintained in an
interest bearing account established for the Fund with the Custodian's
London branch, which account shall be subject to the direction of the
Custodian, State Street London Ltd. or both.
14. Applicability of Custodian contract.
Except as specifically superseded or modified herein, the terms and
provisions of the Custodian Contract shall continue to apply with full force
and effect.
IN WITNESS WHEREOF, each of the parties has caused this instrument to be
executed in its name and behalf by its duly authorized representative and
its seal to be hereunder affixed as of the 8th day of July, 1992.
ACACIA CAPITAL CORPORATION
By: /s/
William M. Tartikoff, Vice President and Secretary
Attest: /s/
Beth-ann Roth, Assistant Secretary
STATE STREET BANK AND TRUST COMPANY
By: /s/
Ronald E. Logue, Senior Vice President
Attest: /s/
Claire E. Rodowicz, Assistant Secretary
<PAGE>
Schedule A
The following foreign banking institutions foreign securities depositories
have been approved by the Board of Directors of Acacia Capital Corporation
for use as subcustodians for the Fund's securities and other assets:
[list of countries and banks inserted here from board book, subject to
change.]
<PAGE>
SUPPLEMENT TO CUSTODIAN AGREEMENT
This Supplement is part of the custodian agreement dated as of
March 5,1992 (the "Custodian Agreement") between the Acacia Capital
Corporation (the "Fund") and State Street Bank and Trust Company (the
"Custodian");
Whereas, the Custodian Agreement governs the terms and conditions
under which the Custodian maintains custody of the securities and other
assets of the Fund; and
Whereas, the Custodian and the Fund desire to amend and supplement
the Custodian Agreement in order to (i) accurately reflect the terms and
conditions under which the Custodian maintains the Fund's securities and
other non-cash property in the custody of certain foreign subcustodians in
conformity with the requirements of Rule 1 7f-5 under the Investment Company
Act of 1940, as amended, and (ii) recognize that the Fund's investments in
non-U.S. securities markets may involve an assessment by the Fund of certain
risks inherent in participation in such markets and a balancing by the Fund
of the possibility of am enhanced return available m such markets against
such risks;
Now, Therefore, in consideration of the promises set forth herein
and in the Custodian Agreement, the Custodian and the Fund hereby amend and
supplement the Custodian Agreement as follows:
1. Notwithstanding any provisions to the contrary set forth
in the Custodian Agreement, including, but not limited to, Section 3.4
thereof, but subject to the requirements of Rule 17f-5 under the Investment
Company Act of 1940, the Custodian may hold securities and other non-cash
property for all of its customers, including the Fund, with a foreign
sub-custodian in a single account that is identified as belonging to the
Custodian for the benefit of its customers, provided however, that (i) the
records of the Custodian with respect to securities and other non-cash
property of the Fund which are maintained in such account shall identify by
book-entry those securities and other non-cash property belonging to the
Fund and (ii) the Custodian shall require that securities and other non-cash
property so held by the foreign sub-custodian be held separately from any
assets of the foreign sub-custodian or of others.
2. Article 10 of the Custodian Agreement is hereby supplemented by
adding the following:
Emerging Markets and "Country Risk" - Except as may arise from the
Custodians own negligence or willful misconduct or the negligence or willful
misconduct of a sub-custodian or agent, the Custodian shall be without
liability to the Fund for any loss, liability, claim or expense resulting
from or caused by; (i) events or circumstances beyond the reasonable control
of the Custodian or any sub-custodian or Securities System or any agent or
nominee of any of the foregoing, including, without limitation, the
interruption, suspension or restriction of trading on or the closure of any
securities market, power or other mechanical or technological failures or
interruptions, or computer viruses or communications disruptions; (ii)
errors by the Fund or the Fund's investment Advisor(s) in their instructions
to the Custodian, provided such instructions have been in accordance with
this Contract; (iii) the insolvency of or acts or omissions by a Securities
System; (iv) any delay or failure of any broker, agent or intermediary,
central bank or other commercially prevalent payment or clearing system to
deliver to the Custodian's sub-custodian or agent securities purchased or in
the remittance or payment made m connection with securities sold; (v) any
delay or failure of any company, corporation or other body in charge or
registering or transferring securities in the name of the Custodian, the
Fund, the Custodian's sub-custodians, nominees or agents or agents or any
consequential losses arising out of such delay or failure to transfer such
securities including nonreceipt of bonus, dividends and rights and other
accretions or benefits; (vi) delays or inability to perform its duties due
to any disorder in market infrastructure with respect to any particular
security or Securities System; and (vii) any provision of any present or
future law or regulation or order of the United States of America, or any
state thereof, or any other country, or political subdivision thereof or of
any court of competent jurisdiction. Regardless of whether assets are
maintained in the custody of a foreign banking institution or a foreign
securities depository, the Custodian shall not be liable for "country risk",
i.e. any loss, damage, cost, expense, liability or claim resulting from, or
caused by, the direction of or authorization by the Fund to maintain custody
of any securities or cash of the Fund or of a Portfolio in a foreign country
Including, but not limited to, losses resulting from nationalization
expropriation, imposition of currency controls or restrictions, acts of war
or terrorism, riots, revolutions, work stoppages, natural disasters or other
similar events or acts.
3. Except as specifically superseded or modified herein, the terms
and provisions of the Custodian Agreement shall continue to apply with full
force and effect.
IN WITNESS WHEREOF, of the parties hereto has caused this
instrument to be executed as a sealed instrument in its name and behalf by
its duly authorized representative as of March 5, 1992.
ACACIA CAPITAL CORPORATION
By: /s/
William M. Tartikoff, Senior Vice President and General Counsel
STATE STREET BANK AND TRUST COMPANY
By: /s/
Ronald E. Logue, Executive Vice President
