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. 36 XX
and/or
REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940
Amendment No. 36 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 __ on (date)
pursuant to paragraph (b) pursuant to paragraph (b)
XX 60 days after filing __ on (date)
pursuant to paragraph (a) pursuant to paragraph (a)
of Rule 485.
<PAGE>
CALVERT VARIABLE SERIES, INC. (THE "FUND")
CALVERT SOCIAL PORTFOLIOS PROSPECTUSES
April 30, 1999
CALVERT SOCIAL MONEY MARKET PORTFOLIO
About the Portfolio
__ Investment objective, strategy, past performance
__ Fees and Expenses
__ Principal Investment Practices and Risks
About Social Investing
__ Investment Selection Process
__ Socially Responsible Investment Criteria
About Your Investment
__ The Fund and its Management
__ Advisory and Expenses
__ A Word About the Year 2000 (Y2K)
__ Capitol Stock
__ Purchase and Redemption of Shares
__ Dividends and Distributions
__ Yield
__ Taxes
__ Financial Highlights
CALVERT SOCIAL SMALL CAP PORTFOLIO
About the Portfolio
__ Investment objective, strategy, past performance
__ Fees and Expenses
__ Principal Investment Practices and Risks
About Social Investing
__ Investment Selection Process
__ Socially Responsible Investment Criteria
About Your Investment
__ The Fund and its Management
__ Advisory and Expenses
__ A Word About the Year 2000 (Y2K)
__ Capitol Stock
__ Purchase and Redemption of Shares
__ Dividends and Distributions
__ Yield
__ Taxes
__ Financial Highlights
CALVERT SOCIAL MID CAP GROWTH PORTFOLIO
About the Portfolio
__ Investment objective, strategy, past performance
__ Fees and Expenses
__ Principal Investment Practices and Risks
About Social Investing
__ Investment Selection Process
__ Socially Responsible Investment Criteria
About Your Investment
__ The Fund and its Management
__ Advisory and Expenses
__ A Word About the Year 2000 (Y2K)
__ Capitol Stock
__ Purchase and Redemption of Shares
__ Dividends and Distributions
__ Yield
__ Taxes
__ Financial Highlights
CALVERT SOCIAL INTERNATIONAL EQUITY PORTFOLIO
About the Portfolio
__ Investment objective, strategy, past performance
__ Fees and Expenses
__ Principal Investment Practices and Risks
About Social Investing
__ Investment Selection Process
__ Socially Responsible Investment Criteria
About Your Investment
__ The Fund and its Management
__ Advisory and Expenses
__ A Word About the Year 2000 (Y2K)
__ Capitol Stock
__ Purchase and Redemption of Shares
__ Dividends and Distributions
__ Yield
__ Taxes
__ Financial Highlights
CALVERT SOCIAL BALANCED PORTFOLIO
About the Portfolio
__ Investment objective, strategy, past performance
__ Fees and Expenses
__ Principal Investment Practices and Risks
About Social Investing
__ Investment Selection Process
__ Socially Responsible Investment Criteria
About Your Investment
__ The Fund and its Management
__ Advisory and Expenses
__ A Word About the Year 2000 (Y2K)
__ Capitol Stock
__ Purchase and Redemption of Shares
__ Dividends and Distributions
__ Yield
__ Taxes
__ Financial Highlights
These securities have not been approved or disapproved by the securities and
exchange commission, nor has the commission passed on the accuracy or
adequacy of this prospectus. Any representation to the contrary is a
criminal offense.
<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
The Portfolio aims for short-term cash management and stability of
principal. The Portfolio seeks to provide the highest level of current
income, consistent with liquidity, safety and security of capital, by
investing in money market instruments, including repurchase agreements with
recognized securities dealers and banks secured by such instruments,
selected in accordance with its investment and social criteria.
CVS Social Money Market invests only in high grade, short-term money market
instruments which may include: obligations issued or guaranteed as to
principal by the United States Government, its agencies and
instrumentalities; U.S. dollar-denominated certificates of deposit, time
deposits and bankers' acceptances of U.S. banks, generally banks with assets
in excess of $1 billion; and commercial paper (including participation
interests in loans extended by banks to issuers of commercial paper) that at
the date of investment is rated A-1 by Standard & Poor's Corporation or
Prime-1 by Moody's Investors Service, Inc., or, if not rated, is of
comparable quality.
Principal Risks
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. 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. 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.
CVS Social Money Market 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. 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.
Bar Chart with Year-by-Year Total Return
[TO BE PROVIDED]
Best Quarter (of periods shown) Q_ '__ _.__%
Worst Quarter (of periods shown) Q_ '__ _.__%
Average Annual Total Returns (as of 12-31-98)
1 year 5 years 10 years
CVS Social Money Market _.__% _.__% _.__%
Lipper VA Money Market Funds Index _.__% _.__% _.__%
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Portfolio. Shareholder fees are paid directly from your
account; annual Fund operating expenses are deducted from Portfolio assets.
Shareholder fees
Maximum sales charge (load) imposed on purchases None
(as a percentage of offering price)
Maximum deferred sales charge (load) None
(as a percentage of purchase or redemption
proceeds, whichever is lower)
Annual fund operating expenses
Management fees 0.__%
Distribution and service (12b-1) fees 0.__%
Other expenses 0.__%
Total annual fund operating expenses _.__%
Fee waiver and/or expense reimbursement -
Net Expenses _.__%
Annual Fund Operating Expenses
Expenses are based on expenses for the Portfolio's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Portfolio to Calvert Administrative Services Company, an
affiliate of the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
Example
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The example
assumes that:
You invest $10,000 in the Portfolio for the time periods
indicated;
Your investment has a 5% return each year; and
The Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Number of Years Investment is Held:
1
3
5
10
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.
The Portfolio may engage in repurchase agreements and reverse repurchase
agreements. In a repurchase agreement, the Portfolio buys a security subject
to the right and obligation to sell it back at a higher price. In order to
minimize any risk involved, the Portfolio engages in such transactions only
with recognized securities dealers and banks determined by the Advisor to
present a minimal credit risk. Repurchase agreements are fully
collateralized and always have a maturity of less than one year. No more
than 10 percent of Portfolio assets may be invested in repurchase agreements
not terminable within seven days. In a reverse repurchase agreement, the
Portfolio sells a security subject to the right and obligation to buy it
back at a higher price. The Portfolio then invests the proceeds from the
transaction in another obligation in which it is authorized to invest. For
reverse repurchase agreements, the Portfolio maintains a segregated account
with liquid assets equal in value to the repurchase price.
The Portfolio may borrow money from banks (and pledge its assets to secure
such borrowing) for temporary or emergency purposes, but not for leverage.
This type of borrowing may not exceed 10% of the value of the Portfolio's
total assets. The Portfolio may also make loans of the securities it holds.
The advantage of loaning securities is that the Portfolio continues to
receive the equivalent of the interest earned or dividends paid by the
issuers while at the same time earning interest on the cash or equivalent
collateral that may be invested in accordance with the Portfolio's
investment objective, policies, and restrictions. The purpose of the loans
is usually to facilitate the delivery of securities. As with any extension
of credit, there may be risks of delay in recovery and possible loss of
rights in the loaned security if the borrower fails financially. The
Investment Advisor attempts to reduce the risk by lending only to borrowers
that it deems creditworthy and only on terms that it believes compensates
for any risk inherent in the transaction.
The Portfolio may lend its securities to New York Stock Exchange member
firms and to commercial banks with assets of one billion dollars or more.
All loans must be secured continuously in the form of cash or cash
equivalents such as U.S. Treasury bills. In addition, the amount of
collateral must, on a current basis, equal or exceed the market value of the
loaned securities, and the Portfolio may only make the loan if the value of
the securities loaned does not exceed 10% of its assets. The Portfolio must
be able to terminate loans at any time with appropriate notice. The
Portfolio will exercise its right to terminate a securities loan in order to
preserve its right to vote on matters of importance affecting holders of the
securities. All securities must be returned to the Portfolio when a loan
terminates, and the Portfolio absorbs any gain or loss in the market value
of the securities during the loan period.
The Portfolio may invest up to 25% of its assets in the securities of
foreign issuers, provided it purchases only high quality, U.S.
dollar-denominated instruments.
The Portfolio has adopted the following operating (i.e., nonfundamental)
investment policies which may be changed by the Board of Directors without
shareholder approval:
The Portfolio may not purchase illiquid securities if more than 10% of the
value of its net assets would be invested in such securities. Further, the
Portfolio may not acquire private placement investments until the value of
the Portfolio's assets exceeds $20 million.
For further information on the Portfolio's investment policies and
restrictions, as well as a description of the types of securities that may
be purchased, see the Statement of Additional Information.
Investment Selection Process
Investments are selected on the basis of their ability to contribute to the
dual objectives of financial soundness and social criteria.
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.
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.
The Fund and its Management
The Fund is a series fund which issues classes of stock, one for each
Portfolio. The shares of the Fund currently are sold only to insurance
companies (collectively, the "Insurance Companies") for allocation to their
separate accounts (collectively, the "Variable Accounts") to fund the
benefits under certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly, the
interest of a policy owner in the shares is subject to the terms of the
particular annuity or life insurance policy and is described in the attached
prospectus for one of the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. The rights of the Insurance
Companies as shareholders should be distinguished from the rights of a
policy owner which are described in the Policies. Policy owners should
consider that the investment return experience of the Portfolio will affect
the value of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for the
Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any distributions
on such shares) and the benefits provided under a policy.
Calvert Asset Management Company, Inc. (4550 Montgomery Avenue, Suite 1000N,
Bethesda, Maryland 20814)("CAMCO") ") is the Funds' investment advisor and
provides day-to-day investment management services to the Funds. 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.
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. Pursuant
to shareholder approval on February 24, 1999, from thereafter, the advisory
fee will be 0.30%. The lower advisory fee for each Portfolio, when added to
the new administrative services fee, would equal the current advisory fee
(excluding the effect of the prior performance adjustment).
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
Capital Stock
The Fund issues separate shares of stock for each of its Portfolios. Shares
of each of the Portfolios have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to that
Portfolio. No Portfolio has preference over another Portfolio. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The Fund's shareholders, the
Insurance Companies, will vote Fund shares allocated to the Variable
Accounts in accordance with instructions received from policy owners. Under
certain circumstances, which are described in the accompanying prospectus of
the variable life policy, the voting instructions received from variable
life insurance policy owners may be disregarded.
Purchase and Redemption of Shares
The Fund offers its shares, without sales charge, only for purchase by the
Insurance Companies for allocation to their Variable Accounts. Shares are
purchased by the Variable Accounts at the net asset value of the Portfolio
next determined after the Insurance Company receives the premium payment.
The Fund continuously offers its shares in the Portfolio at a price equal to
the net asset value per share. Initial and subsequent payments allocated to
the Fund are subject to the limits applicable in the Policies issued by the
Insurance Companies.
It is conceivable that in the future it may be disadvantageous for both
annuity Variable Accounts and life insurance Variable Accounts, or for
Variable Accounts of different Insurance Companies, to invest simultaneously
in the Fund, although currently neither the Insurance Companies nor the Fund
foresee any such disadvantages to either variable annuity or variable life
insurance policy owners of any Insurance Company. The Fund's Board of
Directors intends to monitor events in order to identify any material
conflicts between such policy owners and to determine what action, if any,
should be taken in response thereto.
The Insurance Companies redeem shares of the Portfolio to make benefit and
surrender payments under the terms of Policies. Redemptions are processed on
any day on which the Fund is open for business (each day the New York Stock
Exchange is open), and are effected at the Portfolio's net asset value next
determined after the appropriate Insurance Company receives a surrender
request in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later
than seven days. However, the right of redemption may be suspended or the
date of payment postponed in accordance with the Rules under the 1940 Act.
The amount received upon redemption of the shares of the Fund may be more or
less than the amount paid for the shares, depending upon the fluctuations in
the market value of the assets owned by the Fund. The Fund redeems all full
and fractional shares of the Portfolio for cash. The redemption price is the
net asset value per share.
The net asset value of the shares of the Portfolio is determined once daily
as of the close of business of the New York Stock Exchange, on days when the
Exchange is open for business, or for any other day when there is a
sufficient degree of trading in the investments of the Portfolio to affect
materially its net asset value per share (except on days when no orders to
purchase or redeem shares of the Portfolio have been received). The net
asset value is determined by adding the values of all securities and other
assets of the Portfolio, subtracting liabilities and expenses, and dividing
by the number of outstanding shares of the Portfolio. All instruments held
by Calvert 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 (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.
Yield
From time to time CVS Social Money Market advertises its "yield" and
"effective yield." The "yield" of the Portfolio refers to the actual income
generated by an investment in the Portfolio over a particular base period of
time, which will be stated in the advertisement. If the base period is less
than one year, the yield is then "annualized." That is, the amount of income
generated by the investment during the base period is assumed to be
generated over a one-year period and is shown as a percentage of the
investment. The "effective yield" is calculated similarly but, when
annualized, the income earned by an investment in the Portfolio is assumed
to be reinvested. The "effective yield" will be slightly higher than the
"yield'' because of the compounding effect of this assumed reinvestment.
Taxes
As a "regulated investment company" under the 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 applicable front- or back-end sales
charge. 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.
[TO BE INSERTED]
<PAGE>
CVS Social Small Cap
Advisor: Calvert Asset Management Company, Inc.
Subadvisor: Awad Asset Management, Inc.
Objective
CVS Social Small Cap seeks to provide long-term capital appreciation by
investing primarily in equity securities of companies that have small market
capitalizations.
Principal investment strategies
In seeking capital appreciation, the Portfolio invests primarily in equity
securities of small capitalized growth companies that have historically
exhibited exceptional growth characteristics and that, in the Advisor's
opinion, have strong earnings potential relative to the U.S. market as a
whole. The Portfolio's investment objective is not fundamental and may be
changed without shareholder approval.
CVS Social Small Cap pursues the objective of capital appreciation by
investing primarily in equity securities of primarily small companies with
promising growth potential. These companies typically are developing
innovative products or services to seize emerging opportunities.
Companies whose capitalization increases or decreases after initial purchase
by the Portfolio continue to be considered small-capitalized for purposes of
the 65% policy. Accordingly, less than 65% of the Portfolio's total assets
may be invested in securities of issuers of companies publicly traded in the
United States (currently those with a total market capitalization of less
than $1 billion).
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
The stock market goes down
The individual stocks in the Portfolio do not perform as well as
expected
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.
CVS Social Small Cap 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. 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.
Bar Chart with Year-by-Year Total Return
[TO BE PROVIDED]
Best Quarter (of periods shown) Q_ '__ _.__%
Worst Quarter (of periods shown) Q_ '__ _.__%
Average Annual Total Returns (as of 12-31-98)
1 year 5 years 10 years
CVS Social Small Cap _.__% _.__% _.__%
Lipper VA Small-Cap Funds Index _.__% _.__% _.__%
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Portfolio. Shareholder fees are paid directly from your
account; annual Fund operating expenses are deducted from Portfolio assets.
Shareholder fees
Maximum sales charge (load) imposed on purchases None
(as a percentage of offering price)
Maximum deferred sales charge (load) None
(as a percentage of purchase or redemption
proceeds, whichever is lower)
Annual fund operating expenses
Management fees 0.__%
Distribution and service (12b-1) fees 0.__%
Other expenses 0.__%
Total annual fund operating expenses _.__%
Fee waiver and/or expense reimbursement -
Net Expenses _.__%
Annual Fund Operating Expenses
Expenses are based on expenses for the Portfolio's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Portfolio to Calvert Administrative Services Company, an
affiliate of the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
Example
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The example
assumes that:
You invest $10,000 in the Portfolio for the time periods
indicated;
Your investment has a 5% return each year; and
The Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Number of Years Investment is Held:
1
3
5
10
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 Fund'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.
Conventional Securities
15T1
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 @
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 0
Credit. (35N)
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. 0
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 0
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.
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 5T
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 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 SAI.
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.
Types of Investment Risk
Correlation risk
This occurs when a Fund "hedges"- uses one investment to offset the Fund's
position in another. If the two investments do not behave in relation to one
another the way Fund 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.
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.
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:
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 Fund is a series fund which issues classes of stock, one for each
Portfolio. The shares of the Fund currently are sold only to insurance
companies (collectively, the "Insurance Companies") for allocation to their
separate accounts (collectively, the "Variable Accounts") to fund the
benefits under certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly, the
interest of a policy owner in the shares is subject to the terms of the
particular annuity or life insurance policy and is described in the attached
prospectus for one of the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. The rights of the Insurance
Companies as shareholders should be distinguished from the rights of a
policy owner which are described in the Policies. Policy owners should
consider that the investment return experience of the Portfolio will affect
the value of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for the
Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any distributions
on such shares) and the benefits provided under a policy.
Calvert Asset Management Company, Inc. (4550 Montgomery Avenue, Suite 1000N,
Bethesda, MD 20814) ("CAMCO") is the Funds' investment advisor and provides
day-to-day investment management services to the Funds. 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
Awad Asset Management, Inc. ("Awad"), 250 Park Avenue, New York, NY 10177, a
subsidiary of Raymond James & Associates, has managed CVS Social Small Cap
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 New Vision Small Cap. 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. The Advisor pays the
Subadvisor a base fee of 0.40% of the Portfolio's average net assets.
Pursuant to shareholder approval on February 24, 1999, from thereafter, the
advisory fee will be 0.30%. The lower advisory fee for each Portfolio, when
added to the new administrative services fee, would equal the current
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
Capital Stock
The Fund issues separate shares of stock for each of its Portfolios. Shares
of each of the Portfolios have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to that
Portfolio. No Portfolio has preference over another Portfolio. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The Fund's shareholders, the
Insurance Companies, will vote Fund shares allocated to the Variable
Accounts in accordance with instructions received from policy owners. Under
certain circumstances, which are described in the accompanying prospectus of
the variable life policy, the voting instructions received from variable
life insurance policy owners may be disregarded.
Purchase and Redemption of Shares
The Fund offers its shares, without sales charge, only for purchase by the
Insurance Companies for allocation to their Variable Accounts. Shares are
purchased by the Variable Accounts at the net asset value of the Portfolio
next determined after the Insurance Company receives the premium payment.
The Fund continuously offers its shares in the Portfolio at a price equal to
the net asset value per share. Initial and subsequent payments allocated to
the Fund are subject to the limits applicable in the Policies issued by the
Insurance Companies.
It is conceivable that in the future it may be disadvantageous for both
annuity Variable Accounts and life insurance Variable Accounts, or for
Variable Accounts of different Insurance Companies, to invest simultaneously
in the Fund, although currently neither the Insurance Companies nor the Fund
foresee any such disadvantages to either variable annuity or variable life
insurance policy owners of any Insurance Company. The Fund's Board of
Directors intends to monitor events in order to identify any material
conflicts between such policy owners and to determine what action, if any,
should be taken in response thereto.
The Insurance Companies redeem shares of the Portfolio to make benefit and
surrender payments under the terms of Policies. Redemptions are processed on
any day on which the Fund is open for business (each day the New York Stock
Exchange is open), and are effected at the Portfolio's net asset value next
determined after the appropriate Insurance Company receives a surrender
request in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later
than seven days. However, the right of redemption may be suspended or the
date of payment postponed in accordance with the Rules under the 1940 Act.
The amount received upon redemption of the shares of the Fund may be more or
less than the amount paid for the shares, depending upon the fluctuations in
the market value of the assets owned by the Fund. The Fund redeems all full
and fractional shares of the Portfolio for cash. The redemption price is the
net asset value per share.
The net asset value of the shares of the Portfolio is determined once daily
as of the close of business of the New York Stock Exchange, on days when the
Exchange is open for business, or for any other day when there is a
sufficient degree of trading in the investments of the Portfolio to affect
materially its net asset value per share (except on days when no orders to
purchase or redeem shares of the Portfolio have been received). The net
asset value is determined by adding the values of all securities and other
assets of the Portfolio, subtracting liabilities and expenses, and dividing
by the number of outstanding shares of the Portfolio.
Except for money market instruments maturing in 60 days or less, securities
held by the Portfolio are valued at their market value if market quotations
are readily available. Otherwise, such securities are valued at fair value
as determined in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board. All money market instruments with a remaining maturity of 60 days or
less are valued on an amortized cost basis.
Dividends and Distributions
It is the Fund's intention to distribute substantially all of the net
investment income, if any, of the Portfolio. For dividend purposes, net
investment income of the Portfolio consists of all payments of dividends or
interest received by such Portfolio less estimated expenses (including the
investment advisory fee). All net realized capital gains, if any, of each
Portfolio are declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in additional
shares of the Portfolio at net asset value.
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 applicable front- or back-end sales
charge. 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.
[TO BE INSERTED]
<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.
Principal investment strategies
CVS Social Mid Cap Growth will rely on its proprietary research to identify
stocks that may have been overlooked by analysts, investors, and the media,
and which generally have a market capitalization within the range of the S&P
500 Mid-Cap Index, but which may be larger or smaller as deemed appropriate.
Investments may also include, but are not limited to, preferred stocks,
foreign securities, convertible securities, bonds, notes and other debt
securities.
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
The stock market goes down
The individual stocks in the Portfolio do not perform as well as
expected
Prices of mid-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.
CVS Social Mid Cap Growth 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. 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 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.
Bar Chart with Year-by-Year Total Return
[TO BE PROVIDED]
Best Quarter (of periods shown) Q_ '__ _.__%
Worst Quarter (of periods shown) Q_ '__ _.__%
Average Annual Total Returns (as of 12-31-98)
1 year 5 years 10 years
CVS Social Mid Cap Growth _.__% _.__% _.__%
Lipper VA Midcap Funds Index _.__% _.__% _.__%
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Portfolio. Shareholder fees are paid directly from your
account; annual Fund operating expenses are deducted from Portfolio assets.
Shareholder fees
Maximum sales charge (load) imposed on purchases None
(as a percentage of offering price)
Maximum deferred sales charge (load) None
(as a percentage of purchase or redemption
proceeds, whichever is lower)
Annual fund operating expenses
Management fees 0.__%
Distribution and service (12b-1) fees 0.__%
Other expenses 0.__%
Total annual fund operating expenses _.__%
Fee waiver and/or expense reimbursement -
Net Expenses _.__%
Annual Fund Operating Expenses
Expenses are based on expenses for the Portfolio's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Portfolio to Calvert Administrative Services Company, an
affiliate of the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
Example
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The example
assumes that:
You invest $10,000 in the Portfolio for the time periods
indicated;
Your investment has a 5% return each year; and
The Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Number of Years Investment is Held:
1
3
5
10
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 Fund'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 0
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.
Conventional Securities
25T1
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
comparable unrated bonds. Risks: Interest Rate, Market and 0
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. 0
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 0
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.
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, Interest 0
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 a 5T
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.
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.
Types of Investment Risk
Correlation risk
This occurs when a Fund "hedges"- uses one investment to offset the Fund's
position in another. If the two investments do not behave in relation to one
another the way Fund 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.
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.
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 Fund is a series fund which issues classes of stock, one for each
Portfolio. The shares of the Fund currently are sold only to insurance
companies (collectively, the "Insurance Companies") for allocation to their
separate accounts (collectively, the "Variable Accounts") to fund the
benefits under certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly, the
interest of a policy owner in the shares is subject to the terms of the
particular annuity or life insurance policy and is described in the attached
prospectus for one of the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. The rights of the Insurance
Companies as shareholders should be distinguished from the rights of a
policy owner which are described in the Policies. Policy owners should
consider that the investment return experience of the Portfolio will affect
the value of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for the
Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any distributions
on such shares) and the benefits provided under a policy.
Calvert Asset Management Company, Inc. (4550 Montgomery Avenue, Suite 1000N,
Bethesda, MD 20814) ("CAMCO") is the Funds' investment advisor and provides
day-to-day investment management services to the Funds. 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
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 Funds, 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. The Advisor pays the Subadvisor a base
fee of 0.25% of the Portfolio's average net assets. Pursuant to shareholder
approval on February 24, 1999, from thereafter, the advisory fee will be
0.65%. The lower advisory fee for each Portfolio, when added to the new
administrative services fee, would equal the current advisory fee (excluding
the effect of the prior performance adjustment).
Prior to February 24, 1999, in addition, the Advisor and Subadvisor could
earn (or have their fees reduced by) performance fee adjustments of up to
0.05/0.10%, respectively, based on the extent to which performance of the
Portfolio exceeded or trailed the Index.
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
Capital Stock
The Fund issues separate shares of stock for each of its Portfolios. Shares
of each of the Portfolios have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to that
Portfolio. No Portfolio has preference over another Portfolio. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The Fund's shareholders, the
Insurance Companies, will vote Fund shares allocated to the Variable
Accounts in accordance with instructions received from policy owners. Under
certain circumstances, which are described in the accompanying prospectus of
the variable life policy, the voting instructions received from variable
life insurance policy owners may be disregarded.
Purchase and Redemption of Shares
The Fund offers its shares, without sales charge, only for purchase by the
Insurance Companies for allocation to their Variable Accounts. Shares are
purchased by the Variable Accounts at the net asset value of the Portfolio
next determined after the Insurance Company receives the premium payment.
The Fund continuously offers its shares in the Portfolio at a price equal to
the net asset value per share. Initial and subsequent payments allocated to
the Fund are subject to the limits applicable in the Policies issued by the
Insurance Companies.
It is conceivable that in the future it may be disadvantageous for both
annuity Variable Accounts and life insurance Variable Accounts, or for
Variable Accounts of different Insurance Companies, to invest simultaneously
in the Fund, although currently neither the Insurance Companies nor the Fund
foresee any such disadvantages to either variable annuity or variable life
insurance policy owners of any Insurance Company. The Fund's Board of
Directors intends to monitor events in order to identify any material
conflicts between such policy owners and to determine what action, if any,
should be taken in response thereto.
The Insurance Companies redeem shares of the Portfolio to make benefit and
surrender payments under the terms of Policies. Redemptions are processed on
any day on which the Fund is open for business (each day the New York Stock
Exchange is open), and are effected at the Portfolio's net asset value next
determined after the appropriate Insurance Company receives a surrender
request in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later
than seven days. However, the right of redemption may be suspended or the
date of payment postponed in accordance with the Rules under the 1940 Act.
The amount received upon redemption of the shares of the Fund may be more or
less than the amount paid for the shares, depending upon the fluctuations in
the market value of the assets owned by the Fund. The Fund redeems all full
and fractional shares of the Portfolio for cash. The redemption price is the
net asset value per share.
The net asset value of the shares of the Portfolio is determined once daily
as of the close of business of the New York Stock Exchange, on days when the
Exchange is open for business, or for any other day when there is a
sufficient degree of trading in the investments of the Portfolio to affect
materially its net asset value per share (except on days when no orders to
purchase or redeem shares of the Portfolio have been received). The net
asset value is determined by adding the values of all securities and other
assets of the Portfolio, subtracting liabilities and expenses, and dividing
by the number of outstanding shares of the Portfolio.
Except for money market instruments maturing in 60 days or less, securities
held by the Portfolio are valued at their market value if market quotations
are readily available. Otherwise, such securities are valued at fair value
as determined in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board. All money market instruments with a remaining maturity of 60 days or
less are valued on an amortized cost basis.
Dividends and Distributions
It is the Fund's intention to distribute substantially all of the net
investment income, if any, of the Portfolio. For dividend purposes, net
investment income of the Portfolio consists of all payments of dividends or
interest received by such Portfolio less estimated expenses (including the
investment advisory fee). All net realized capital gains, if any, of each
Portfolio are declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in additional
shares of the Portfolio at net asset value.
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 applicable front- or back-end sales
charge. 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.
[TO BE INSERTED]
<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.
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.
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
The stock markets go down (including those outside the U.S.)
The individual stocks in the Portfolio do not perform as well as
expected
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.
CVS Social International Equity 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. 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 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.
Bar Chart with Year-by-Year Total Return
[TO BE PROVIDED]
Best Quarter (of periods shown) Q_ '__ _.__%
Worst Quarter (of periods shown) Q_ '__ _.__%
Average Annual Total Returns (as of 12-31-98)
1 year 5 years 10 years
CVS Social International Equity _.__% _.__% _.__%
Lipper VA International Funds Index _.__% _.__% _.__%
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Portfolio. Shareholder fees are paid directly from your
account; annual Fund operating expenses are deducted from Portfolio assets.
Shareholder fees
Maximum sales charge (load) imposed on purchases None
(as a percentage of offering price)
Maximum deferred sales charge (load) None
(as a percentage of purchase or redemption
proceeds, whichever is lower)
Annual fund operating expenses
Management fees 0.__%
Distribution and service (12b-1) fees 0.__%
Other expenses 0.__%
Total annual fund operating expenses _.__%
Fee waiver and/or expense reimbursement -
Net Expenses _.__%
Annual Fund Operating Expenses
Expenses are based on expenses for the Portfolio's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Portfolio to Calvert Administrative Services Company, an
affiliate of the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
Example
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The example
assumes that:
You invest $10,000 in the Portfolio for the time periods
indicated;
Your investment has a 5% return each year; and
The Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Number of Years Investment is Held:
1
3
5
10
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 0
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.
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 stock 0
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 0
Credit. (35N)
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.
0
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 and 15N
Transaction.
Unleveraged derivative securities
Asset-backed securities. Securities are backed by unsecured 0
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.
Mortgage-backed securities. Securities are backed by pools of
mortgages, including passthrough certificates, and other senior 0
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, Interest Rate 0
and Liquidity.
Leveraged derivative instruments Currency contracts. Contracts
involving the right or obligation to buy or sell a given amount 5T
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 a security 5T
(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 on a 0
specific future date. Risks: Interest Rate, Currency, Market, 5N
Leverage, Correlation, Liquidity and Opportunity.
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.
Types of Investment Risk
Correlation risk
This occurs when a Fund "hedges"- uses one investment to offset the Fund's
position in another. If the two investments do not behave in relation to one
another the way Fund 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.
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.
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 Fund is a series fund which issues classes of stock, one for each
Portfolio. The shares of the Fund currently are sold only to insurance
companies (collectively, the "Insurance Companies") for allocation to their
separate accounts (collectively, the "Variable Accounts") to fund the
benefits under certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly, the
interest of a policy owner in the shares is subject to the terms of the
particular annuity or life insurance policy and is described in the attached
prospectus for one of the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. The rights of the Insurance
Companies as shareholders should be distinguished from the rights of a
policy owner which are described in the Policies. Policy owners should
consider that the investment return experience of the Portfolio will affect
the value of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for the
Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any distributions
on such shares) and the benefits provided under a policy.
Calvert Asset Management Company, Inc. (4550 Montgomery Avenue, Suite 1000N,
Bethesda, MD 20814) ("CAMCO") is the Funds' investment advisor and provides
day-to-day investment management services to the Funds. 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
Murray Johnstone International, Ltd.; 875 North Michigan Ave., Suite 3415,
Chicago, IL 60611. The firm has managed CVS Social International Equity
since its inception.
Andrew Preston heads the portfolio management team for International Equity.
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. The Advisor pays the Subadvisor a base
fee of 0.45% of the Portfolio's average net assets. Pursuant to shareholder
approval on February 24, 1999, from thereafter, the advisory fee will be
0.75%. The lower advisory fee for each Portfolio, when added to the new
administrative services fee, would equal the current 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
Capital Stock
The Fund issues separate shares of stock for each of its Portfolios. Shares
of each of the Portfolios have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to that
Portfolio. No Portfolio has preference over another Portfolio. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The Fund's shareholders, the
Insurance Companies, will vote Fund shares allocated to the Variable
Accounts in accordance with instructions received from policy owners. Under
certain circumstances, which are described in the accompanying prospectus of
the variable life policy, the voting instructions received from variable
life insurance policy owners may be disregarded.
Purchase and Redemption of Shares
The Fund offers its shares, without sales charge, only for purchase by the
Insurance Companies for allocation to their Variable Accounts. Shares are
purchased by the Variable Accounts at the net asset value of the Portfolio
next determined after the Insurance Company receives the premium payment.
The Fund continuously offers its shares in the Portfolio at a price equal to
the net asset value per share. Initial and subsequent payments allocated to
the Fund are subject to the limits applicable in the Policies issued by the
Insurance Companies.
It is conceivable that in the future it may be disadvantageous for both
annuity Variable Accounts and life insurance Variable Accounts, or for
Variable Accounts of different Insurance Companies, to invest simultaneously
in the Fund, although currently neither the Insurance Companies nor the Fund
foresee any such disadvantages to either variable annuity or variable life
insurance policy owners of any Insurance Company. The Fund's Board of
Directors intends to monitor events in order to identify any material
conflicts between such policy owners and to determine what action, if any,
should be taken in response thereto.
The Insurance Companies redeem shares of the Portfolio to make benefit and
surrender payments under the terms of Policies. Redemptions are processed on
any day on which the Fund is open for business (each day the New York Stock
Exchange is open), and are effected at the Portfolio's net asset value next
determined after the appropriate Insurance Company receives a surrender
request in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later
than seven days. However, the right of redemption may be suspended or the
date of payment postponed in accordance with the Rules under the 1940 Act.
The amount received upon redemption of the shares of the Fund may be more or
less than the amount paid for the shares, depending upon the fluctuations in
the market value of the assets owned by the Fund. The Fund redeems all full
and fractional shares of the Portfolio for cash. The redemption price is the
net asset value per share.
The net asset value of the shares of the Portfolio is determined once daily
as of the close of business of the New York Stock Exchange, on days when the
Exchange is open for business, or for any other day when there is a
sufficient degree of trading in the investments of the Portfolio to affect
materially its net asset value per share (except on days when no orders to
purchase or redeem shares of the Portfolio have been received). The net
asset value is determined by adding the values of all securities and other
assets of the Portfolio, subtracting liabilities and expenses, and dividing
by the number of outstanding shares of the Portfolio.
Except for money market instruments maturing in 60 days or less, securities
held by the Portfolio are valued at their market value if market quotations
are readily available. Otherwise, such securities are valued at fair value
as determined in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board. All money market instruments with a remaining maturity of 60 days or
less are valued on an amortized cost basis.
Dividends and Distributions
It is the Fund's intention to distribute substantially all of the net
investment income, if any, of the Portfolio. For dividend purposes, net
investment income of the Portfolio consists of all payments of dividends or
interest received by such Portfolio less estimated expenses (including the
investment advisory fee). All net realized capital gains, if any, of each
Portfolio are declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in additional
shares of the Portfolio at net asset value.
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 applicable front- or back-end sales
charge. 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.
[TO BE INSERTED]
<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.
Principal investment strategies
There is no predetermined percentage of assets allocated to either stocks or
bonds or money market instruments, although, as an operating policy, the
Portfolio will have at least 25% of its assets in fixed income senior
securities. Equity investments are selected by the Subadvisor, subject to
direction and control by the Fund's Advisor and Board of Directors.
Fixed-income investments are selected by the Advisor. The Investment
Advisors determine the mix for the Portfolio depending upon their view of
market conditions and the economic outlook.
CVS Social Balanced 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.
Principal Risks
You could lose money on your investment in the Portfolio, or the Portfolio
could underperform for any of the following reasons:
The stock or bond market goes down
The individual stocks and bonds in the Portfolio do not perform as
well as expected
For the fixed-income portion of the Portfolio, the Advisor's
forecast as to interest rates is not correct
For the foreign securities held in the Portfolio, if foreign
currency values go down versus the U.S. dollar
The Advisor's allocation among different sectors of the stock and
bond markets does not perform as well as expected
CVS Social Balanced 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. 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 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.
Bar Chart with Year-by-Year Total Return
[TO BE PROVIDED]
Best Quarter (of periods shown) Q_ '__ _.__%
Worst Quarter (of periods shown) Q_ '__ _.__%
Average Annual Total Returns (as of 12-31-98)
1 year 5 years 10 years
CVS Social Balanced _.__% _.__% _.__%
Lipper VA Balanced Funds Index _.__% _.__% _.__%
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold shares of a Portfolio. Shareholder fees are paid directly from your
account; annual Fund operating expenses are deducted from Portfolio assets.
Shareholder fees
Maximum sales charge (load) imposed on purchases None
(as a percentage of offering price)
Maximum deferred sales charge (load) None
(as a percentage of purchase or redemption
proceeds, whichever is lower)
Annual fund operating expenses
Management fees 0.__%
Distribution and service (12b-1) fees 0.__%
Other expenses 0.__%
Total annual fund operating expenses _.__%
Fee waiver and/or expense reimbursement -
Net Expenses _.__%
Annual Fund Operating Expenses
Expenses are based on expenses for the Portfolio's most recent fiscal year,
unless otherwise indicated. Management fees include the administrative fee
paid by the Portfolio to Calvert Administrative Services Company, an
affiliate of the Advisor, Calvert Asset Management Company, Inc. ("CAMCO").
Example
This example is intended to help you compare the cost of investing in a
Portfolio with the cost of investing in other mutual funds. The example
assumes that:
You invest $10,000 in the Portfolio for the time periods
indicated;
Your investment has a 5% return each year; and
The Portfolio's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions
your costs would be:
Number of Years Investment is Held:
1
3
5
10
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.
Conventional Securities
25N
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 stock 0
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 and 15N
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.
Mortgage-backed securities. Securities are backed by pools of
mortgages, including passthrough certificates, and other 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, Interest Rate 0
and Liquidity.
Leveraged derivative instruments Currency contracts. Contracts
involving the right or obligation to buy or sell a given amount 0
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 a security 5T
(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 on a 0
specific future date. Risks: Interest Rate, Currency, Market, 5N
Leverage, Correlation, Liquidity and Opportunity.
Structured securities
Indexed and/or leveraged mortgage-backed and other debt 0
securities, including principal-only and interest-only
securities, leveraged floating rate securities, and others.
These securities tend to be highly sensitive to interest rate
movements and their performance may not correlate to these
movements in a conventional fashion. Risks: Credit, Interest
Rate, Extension, Prepayment, Market, Leverage, Liquidity and
Correlation.
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.
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.
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.
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.
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.
The selection of an organization for investment by the Portfolios 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 Fund is a series fund which issues classes of stock, one for each
Portfolio. The shares of the Fund currently are sold only to insurance
companies (collectively, the "Insurance Companies") for allocation to their
separate accounts (collectively, the "Variable Accounts") to fund the
benefits under certain variable annuity and variable life insurance policies
(collectively, the "Policies") issued by such companies. Accordingly, the
interest of a policy owner in the shares is subject to the terms of the
particular annuity or life insurance policy and is described in the attached
prospectus for one of the Policies, which should be reviewed carefully by a
person considering the purchase of a Policy. The rights of the Insurance
Companies as shareholders should be distinguished from the rights of a
policy owner which are described in the Policies. Policy owners should
consider that the investment return experience of the Portfolio will affect
the value of the policy and the amount of annuity payments or life insurance
benefits received under a policy. See the attached prospectus(es) for the
Policies for a description of the relationship between increases or
decreases in the net asset value of Portfolio shares (and any distributions
on such shares) and the benefits provided under a policy.
Calvert Asset Management Company, Inc. (4550 Montgomery Avenue, Suite 1000N,
Bethesda, MD 20814) ("CAMCO") is the Funds' investment advisor and provides
day-to-day investment management services to the Funds. 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, NC 27701,
has managed part of the equity investments of CVS Social Balanced since
1995. NCM is one of the largest minority-owned investment management firms
in the country and provides products in equity fixed income and balanced
portfolio management. It is also one of the industry leaders in the
employment and training of minority and women investment professionals.
NCM'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. The Advisor pays the Subadvisor a base
fee of 0.25% of the Portfolio's average net assets. Pursuant to shareholder
approval on February 24, 1999, from thereafter, the advisory fee will be
0.425%. The lower advisory fee for each Portfolio, when added to the new
administrative services fee, would equal the current advisory fee (excluding
the effect of the prior performance adjustment). In addition, on February
24, 1999, shareholders also approved the elimination of the performance fee
wherein the Advisor and Subadvisor could earn (or have their fees reduced
by) performance fee adjustments of up to 0.15% based on the extent to which
performance of the Portfolio exceeded or trailed the Lipper Balanced Funds
Index.
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
Capital Stock
The Fund issues separate shares of stock for each of its Portfolios. Shares
of each of the Portfolios have equal rights with regard to voting,
redemptions, dividends, distributions, and liquidations with respect to that
Portfolio. No Portfolio has preference over another Portfolio. When issued,
shares are fully paid and nonassessable and do not have preemptive or
conversion rights or cumulative voting rights. The Fund's shareholders, the
Insurance Companies, will vote Fund shares allocated to the Variable
Accounts in accordance with instructions received from policy owners. Under
certain circumstances, which are described in the accompanying prospectus of
the variable life policy, the voting instructions received from variable
life insurance policy owners may be disregarded.
Purchase and Redemption of Shares
The Fund offers its shares, without sales charge, only for purchase by the
Insurance Companies for allocation to their Variable Accounts. Shares are
purchased by the Variable Accounts at the net asset value of the Portfolio
next determined after the Insurance Company receives the premium payment.
The Fund continuously offers its shares in the Portfolio at a price equal to
the net asset value per share. Initial and subsequent payments allocated to
the Fund are subject to the limits applicable in the Policies issued by the
Insurance Companies.
It is conceivable that in the future it may be disadvantageous for both
annuity Variable Accounts and life insurance Variable Accounts, or for
Variable Accounts of different Insurance Companies, to invest simultaneously
in the Fund, although currently neither the Insurance Companies nor the Fund
foresee any such disadvantages to either variable annuity or variable life
insurance policy owners of any Insurance Company. The Fund's Board of
Directors intends to monitor events in order to identify any material
conflicts between such policy owners and to determine what action, if any,
should be taken in response thereto.
The Insurance Companies redeem shares of the Portfolio to make benefit and
surrender payments under the terms of Policies. Redemptions are processed on
any day on which the Fund is open for business (each day the New York Stock
Exchange is open), and are effected at the Portfolio's net asset value next
determined after the appropriate Insurance Company receives a surrender
request in acceptable form.
Payment for redeemed shares will be made promptly, but in no event later
than seven days. However, the right of redemption may be suspended or the
date of payment postponed in accordance with the Rules under the 1940 Act.
The amount received upon redemption of the shares of the Fund may be more or
less than the amount paid for the shares, depending upon the fluctuations in
the market value of the assets owned by the Fund. The Fund redeems all full
and fractional shares of the Portfolio for cash. The redemption price is the
net asset value per share.
The net asset value of the shares of the Portfolio is determined once daily
as of the close of business of the New York Stock Exchange, on days when the
Exchange is open for business, or for any other day when there is a
sufficient degree of trading in the investments of the Portfolio to affect
materially its net asset value per share (except on days when no orders to
purchase or redeem shares of the Portfolio have been received). The net
asset value is determined by adding the values of all securities and other
assets of the Portfolio, subtracting liabilities and expenses, and dividing
by the number of outstanding shares of the Portfolio.
Except for money market instruments maturing in 60 days or less, securities
held by the Portfolio are valued at their market value if market quotations
are readily available. Otherwise, such securities are valued at fair value
as determined in good faith by the Board of Directors, although the actual
calculations may be made by persons acting pursuant to the direction of the
Board. All money market instruments with a remaining maturity of 60 days or
less are valued on an amortized cost basis.
Dividends and Distributions
It is the Fund's intention to distribute substantially all of the net
investment income, if any, of the Portfolio. For dividend purposes, net
investment income of the Portfolio consists of all payments of dividends or
interest received by such Portfolio less estimated expenses (including the
investment advisory fee). All net realized capital gains, if any, of each
Portfolio are declared and distributed periodically, no less frequently than
annually. All dividends and distributions are reinvested in additional
shares of the Portfolio at net asset value.
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 applicable front- or back-end sales
charge. 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.
[TO BE INSERTED]
<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://w_Hlt440868206w_Hlt440868206w.sec.gov.
Investment Company Act File No.: 811-3591
<PAGE>
Calvert Variable Series, Inc.
(Social Money Market, Small Cap, 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 2
Investment Restrictions 10
Investment Selection Process 1_
Purchase and Redemption of Shares 1_
Net Asset Value 1_
Taxes 1_
Calculation of Yield and Total Return 1_
Directors and Officers 1_
Investment Advisor and Subadvisors 1_
Portfolio Transactions 2_
Method of Distribution 2_
Transfer and Shareholder Servicing Agent 2_
Portfolio Transactions 2_
Reports to Shareholders and Policyholders 2_
Independent Accountants and Custodians 2_
General Information 2_
Control Persons and Principal Holders of Securities 2_
Appendix 2_
<PAGE>
- ------------------------------------------------------------------------------
INVESTMENT POLICIES AND RISKS
- ------------------------------------------------------------------------------
Calvert Variable Series, Inc., ("the Fund") offers investors the
opportunity to invest in several professionally managed securities
portfolios which may be more diversified, stable and liquid than might be
obtainable by an investor on an individual basis. In addition, the Fund's
Calvert Social Portfolios offer the opportunity for growth of capital or
current income through investment in enterprises that make a significant
contribution to society through their products and services and through the
way they do business. The Calvert 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, 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 may invest all of
their assets in foreign securities, although Calvert Social Small Cap does
not presently intend to invest in foreign securities. Calvert Social Money
Market, Balanced and Mid Cap Growth may each invest up to 25%, and Calvert
Social Balanced may invest up to 10% of its assets in the securities of
foreign issuers. Calvert Social Money Market may purchase only high quality,
US dollar-denominated instruments.
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.
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.
The Fund may enter into forward foreign currency contracts for two
reasons. First, the Fund may desire to preserve the United States dollar
price of a security when it enters into a contract for the purchase or sale
of a security denominated in a foreign currency. The Fund 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, the Fund enters into a forward foreign currency
contract to sell, for a fixed amount of dollars, the amount of foreign
currency approximating the value of some or all of the Fund's 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 Fund does 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.
Private Placements and Illiquid Securities
Due to the particular social objective of the Portfolios,
opportunities may exist to promote especially promising approaches to social
goals through privately-placed investments. The private placement
investments undertaken by the Portfolios, if any, may be subject to a high
degree of risk. Such investments may involve relatively small and untried
enterprises that have been selected in the first instance because of some
attractive social objectives or policies. The Investment Advisors seek to
structure the Portfolios' investments to provide the greatest assurance of
attaining the intended investment return. It is an operating policy of the
Portfolios that no private placements shall be acquired until the value of
that Portfolio's investments exceeds $20 million.
Many private placement investments have no readily available market
and may therefore be considered illiquid. It is an operating policy of the
Portfolios not to purchase illiquid securities if more than a certain
percentage of the value of its net assets would be invested in such
securities. Securities eligible for resale pursuant to Rule 144A under the
Securities Act of 1933 may be determined by the Board of Directors to be
liquid. The Board may delegate such determinations of liquidity to the
Advisor, pursuant to guidelines and oversight by the Board. Portfolio
investments in private placements and other securities for which market
quotations are not readily available are valued at fair market value as
determined by the Advisor under the direction and control of the Board.
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.
GNMA Certificates- Calvert Social Balanced
Calvert Social Balanced is not expected generally to invest more
than a small portion of its assets in GNMA Certificates. GNMA Certificates
are mortgage-backed securities representing part ownership of a pool of
mortgage loans that are issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations and are either insured by
the Federal Housing Administration or guaranteed by the Veterans Housing
Administration. A "pool" or group of such mortgages is assembled and, after
being approved by GNMA, is offered to investors through securities dealers.
Once approved by GNMA, the timely payment of interest and principal
on each mortgage is guaranteed by GNMA and backed by the full faith and
credit of the US Government. GNMA Certificates differ from bonds in that
principal is paid back monthly by the borrower over the term of the loan
rather than returned in a lump sum at maturity. GNMA Certificates are called
"pass-through" securities because both interest and principal payments
(including prepayments) are passed through to the holder of the Certificate.
Upon receipt, principal payments will be reinvested by the Series in
additional securities.
Because interest and principal payments on the underlying mortgages
pass through to holders, the average life of GNMA Certificates varies with
the maturities of the underlying mortgage instruments, which have maximum
maturities of 30 years. However, because unscheduled principal payments on
the underlying mortgages resulting from prepayment, refinancing or
foreclosure are also passed through to holders, the average life of GNMA
Certificates is normally substantially shorter than the original maturity of
the underlying mortgage pools.
The occurrence of mortgage prepayments is affected by factors
including the level of interest rates, the degree of the increase or
decrease in interest rates over time, general economic conditions, the
location and age of the mortgage, and social and demographic conditions.
Prepayments generally occur when interest rates have fallen; thus,
reinvestments of principal prepayments will usually be at lower rates.
Prepayments also tend to occur more frequently in mortgage pools with rates
significantly higher than prevailing mortgage rates. The coupon rate of GNMA
Certificates is lower than the interest rate paid on the underlying
mortgages only by the amount of the fee paid to GNMA and the issuer, usually
1/2 of 1%. Therefore, GNMA Certificates trading at a premium, which are
usually Certificates with coupon rates significantly higher than the rates
of Certificates being issued at the time of purchase, are subject to greater
risk of prepayment at par.
The Investment Advisor will attempt, through careful evaluation of
available GNMA issues and prevailing market conditions, to invest in GNMA
Certificates which provide a high income return but are not subject to
substantial risk of loss of principal. Accordingly, the Advisor may forego
the opportunity to invest in certain issues of GNMA Certificates which would
provide a high current income yield if the Advisor determines that such
issues would be subject to a risk of prepayment and loss of principal over
the long term that would outweigh the short-term increment in yield.
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"). Subject to the Portfolio's investment policy provides that
it may not invest more than 20% of its assets in securities rated below B by
either rating service, or in unrated securities determined by the Advisor to
be comparable to securities rated below B by either rating service. Calvert
Social International Equity may invest up to 5% of its assets in lower
quality debt securities, and Calvert Social Small Cap may invest up to 35%
of its assets in debt securities without regard to investment grade.
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. Unrated securities usually are not attractive to as many buyers as
rated securities are, which may make them less marketable.
The quality limitation set forth in the Portfolios' investment
policy is determined immediately after a Portfolio's acquisition of a given
security. Accordingly, any later change in ratings will not be considered
when determining whether an investment complies with the Portfolio's
investment policy.
When purchasing high-yielding securities, rated or unrated, the
Advisors prepare their own careful credit analysis to attempt to identify
those issuers whose financial condition is adequate to meet future
obligations or is expected to be adequate in the future. Through portfolio
diversification and credit analysis, investment risk can be reduced,
although there can be no assurance that losses will not occur.
Options and Futures Contracts
Calvert Social International Equity, Small Cap 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. Calvert Social International Equity,
Small Cap and Mid Cap Growth may not write options on more than 50% of their
total assets. These Portfolios may write "covered options" on securities in
standard contracts traded on national securities exchanges. These Portfolios
will write such options in order to receive the premiums from options that
expire and to seek net gains from closing purchase transactions with respect
to such options.
Put and Call Options. These Portfolios may purchase put and call
options, in standard contracts traded on national securities exchanges, on
securities of issuers which meet the Portfolios' social criteria. These
Portfolios will purchase such options only to hedge against changes in the
value of securities the Portfolios hold and not for the purposes of
speculation or leverage. In buying a put, a Portfolio has the right to sell
the security at the exercise price, thus limiting its risk of loss through a
decline in the market value of the security until the put expires. The
amount of any appreciation in the value of the underlying security will be
partially offset by the amount of the premium paid for the put option and
any related transaction costs. Prior to its expiration, a put option may be
sold in a closing sale transaction and any profit or loss from the sale will
depend on whether the amount received is more or less than the premium paid
for the put option plus the related transaction costs.
These Portfolios may purchase call options on securities that they
may intend to purchase and that meet the Portfolios' social criteria. Such
transactions may be entered into in order to limit the risk of a substantial
increase in the market price of the security which the Portfolio intends to
purchase. Prior to its expiration, a call option may be sold in a closing
sale transaction. Any profit or loss from such a sale will depend on whether
the amount received is more or less than the premium paid for the call
option plus the related transaction costs.
Covered Options. These Portfolios may write only covered options on
equity and debt securities in standard contracts traded on national
securities exchanges. For call options, this means that so long as a
Portfolio is obligated as the writer of a call option, that Portfolio will
own the underlying security subject to the option and, in the case of put
options, that Portfolio will, through its custodian, deposit and maintain
either cash or securities with a market value equal to or greater than the
exercise price of the option.
When a Portfolio writes a covered call option, the Portfolio gives
the purchaser the right to purchase the security at the call option price at
any time during the life of the option. As the writer of the option, the
Portfolio receives a premium, less a commission, and in exchange foregoes
the opportunity to profit from any increase in the market value of the
security exceeding the call option price. The premium serves to mitigate the
effect of any depreciation in the market value of the security. Writing
covered call options can increase the income of the Portfolio and thus
reduce declines in the net asset value per share of the Portfolio if
securities covered by such options decline in value. Exercise of a call
option by the purchaser, however, will cause the Portfolio to forego future
appreciation of the securities covered by the option.
When a Portfolio writes a secured put option, it will gain a profit
in the amount of the premium, less a commission, so long as the price of the
underlying security remains above the exercise price. However, the Portfolio
remains obligated to purchase the underlying security from the buyer of the
put option (usually in the event the price of the security funds below the
exercise price) at any time during the option period. If the price of the
underlying security falls below the exercise price, the Portfolio may
realize a loss in the amount of the difference between the exercise price
and the sale price of the security, less the premium received.
These Portfolios may purchase securities that may be covered by
call options solely on the basis of considerations consistent with the
investment objectives and policies of the Portfolios. The Portfolio turnover
rate may increase through the exercise of a call option; this will generally
occur if the market value of a "covered" security increases and the
portfolio has not entered into a closing purchase transaction.
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 and that the aggregate initial margin on
futures contracts and premium on options relating to futures shall not
exceed 5% of the Portfolio's assets. Futures contracts trade on contracts
markets in a manner that is similar to the way a stock trades on a stock
exchange and the boards of trade, through their clearing corporations,
guarantee performance of the contracts.
Options on Futures Contracts. These Portfolios may purchase and
write put or call options and sell call options on futures contracts in
which a Portfolio could otherwise invest and which are traded on a 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, each Portfolio will establish a segregated account with the
Portfolio's custodian bank in which it will maintain cash or cash
equivalents or other portfolio securities equal in value to commitments for
such when-issued or delayed delivery securities. Subject to this
restriction, a Portfolio may purchase these securities without limit.
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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).
(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) The Portfolios 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) The Portfolios 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 may not purchase common stocks,
preferred stocks, warrants, or other equity securities.
(2) Each Portfolio does not intend to make any purchases
of securities if borrowing exceeds 5% of a portfolio's
total assets.
(3) Each Portfolio may not purchase illiquid securities
if more than 15% of the value of net assets would be
invested in such securities;
(4) Each Portfolio may not write, purchase or sell puts,
calls or combinations thereof except that the
Portfolios 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 affected
Portfolio's existing futures and related options
positions and the premiums paid for related options
would not exceed 5% of its total assets.
(5) 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.
Virginia Law Restrictions
In addition to the investment restrictions described above, the
Portfolios will comply with restrictions contained in the current Virginia
Insurance Laws in order that the assets of the Variable Accounts may be
invested in Portfolio shares. The Virginia Insurance Laws currently permit
the Variable Accounts to invest in Portfolio shares without restricting the
Portfolios' investments. However, those laws or their interpretation may
change.
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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.
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PURCHASE AND REDEMPTION OF SHARES
- ------------------------------------------------------------------------------
The Portfolios continuously offer their shares at prices equal to
the respective net asset values of the Portfolios determined in the manner
set forth below under "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.
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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 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, 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"). To qualify for
treatment as a regulated investment company, each Portfolio must, among
other things, have assets that meet certain requirements specified in the
Code and derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, and gains
(without deduction for losses) from the sale or other disposition of stock
or securities. If the Portfolio distributes substantially all of its net
ordinary and capital gains income, the Portfolio qualifies as a regulated
investment company and is relieved from paying federal income tax on amounts
distributed. Each Portfolio will be taxed as a separate entity. 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.
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.
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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, 1997, Calvert
Social Money Market's yield was 5.35% and its effective yield was 5.50%.
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, 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 SEC Average Annual Return
December 31, 1998
- --------------------------------------------------------------------------
Calvert Social Small Cap
One Year %
From Inception %
(March 15, 1995)
Calvert Social Mid Cap Growth
One Year %
Five Years %
From Inception %
(July 16, 1991)
Calvert Social International Equity
One Year %
Five Years %
From Inception %
(June 30, 1992)
Calvert Social Balanced
One Year %
Five Years %
Ten Years %
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.
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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. 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.
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 Investment Company Act of 1940.
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, $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. $ $ $
Charles E. Diehl $ $ $
Arthur J. Pugh $ $ $
South Trimble, III $ $ $
*Messrs. Blatz, Diehl and Pugh have chosen to defer a portion of their
compensation. As of December 31, 1998, total deferred compensation,
including dividends and capital appreciation, was $__________, $__________
and $__________, respectively.
**As of December 31, 1998, the Fund Complex consists of nine (9) registered
investment companies.
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INVESTMENT ADVISOR AND SUBADVISORS
- ------------------------------------------------------------------------------
The current Investment Agreement was entered into on June 30, 1992.
Unless earlier terminated, the Agreement will remain in effect indefinitely
if approved annually (a) by the Board of Directors of the Fund or by a
majority of the outstanding shares of the Portfolio, including a majority of
the outstanding shares of each Portfolio, and (b) by a majority of the
Directors who are not parties to such contract or interested persons (as
defined by the Investment Company Act of 1940) of any such party. The
Agreement is not assignable and may be terminated without penalty on 60
days' written notice at the option of either party or by the vote of the
shareholders of the Portfolio.
The Investment Advisory 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 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 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 0.75%
Social Mid Cap Growth 0.25%
Social International Equity 0.35%
Social Balanced 0.275%
- ------------------------------------------------------------------------------
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 Money Market
Social Small Cap
Social Mid Cap Growth
Social International Equity
Social Balanced
The Fund did not pay any brokerage commissions to affiliated
persons during the last three fiscal years.
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.
For the fiscal year ended December 31, 1999, the Fund, through its
Advisor and/or Subadvisors, directed brokerage for research services in the
following amounts:
Amount of Related
Transactions Commissions
Social Money Market
Social Small Cap
Social Mid Cap Growth
Social International Equity
Social Balanced
The Portfolio turnover rates for the last two fiscal years are as
follows:
1997 1998
Social Small Cap 292% 72%
Social Mid Cap Growth 96% 65%
Social International Equity 35% 92%
Social Balanced 905% 539%
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. No associated person or
broker-dealer may have an interest in the fees payable to CDI. CDI is
responsible for paying (i) all commissions or other fees to its associated
persons which are due for the sale of the Policies, and (ii) any
compensation to other broker-dealers and their associated persons due under
the terms of any sales agreement between CDI and the broker-dealers.
- ------------------------------------------------------------------------------
TRANSFER 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, NFDS and CSSI receive a fee based on the number
of shareholder accounts and transactions.
- ------------------------------------------------------------------------------
REPORTS TO SHAREHOLDERS AND POLICYHOLDERS
- ------------------------------------------------------------------------------
The Fund will issue unaudited semi-annual reports showing the
Fund's investments and other information, and it will issue annual reports
containing financial statements audited by independent certified public
auditors.
- ------------------------------------------------------------------------------
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.
- ------------------------------------------------------------------------------
GENERAL INFORMATION
- ------------------------------------------------------------------------------
The Fund is an open-end, management investment company,
incorporated in Maryland on September 27, 1982. The authorized capital stock
of the Fund consists of three hundred twenty five million shares of stock,
par value of $0.01 per share. The Fund's Board of Directors may, from time
to time, authorize the issuance of additional shares having the
descriptions, powers and rights, and the qualifications, limitations, and
restrictions thereof, as the Board of Directors may determine. The Board of
Directors may also change the designation of any portfolio and may increase
or decrease the number of shares of any portfolio, but may not decrease the
number of shares of any Portfolio below the number of shares of that
portfolio then outstanding. All shares of common stock have equal voting
rights (regardless of the net asset value per share) except that only shares
of the respective portfolio are entitled to vote on matters concerning only
that portfolio. Pursuant to the Investment Company Act of 1940 and the rules
and regulations thereunder, certain matters approved by a vote of all
shareholders of the Fund may not be binding on a portfolio whose
shareholders have not approved that matter. Each issued and outstanding
share is entitled to one vote and to participate equally in dividends and
distributions declared by the respective portfolio and, upon liquidation or
dissolution, in net assets of such portfolio remaining after satisfaction of
outstanding liabilities. The shares of each portfolio, when issued, will be
fully paid and non-assessable and have no preemptive or conversion rights.
Holders of shares of any portfolio are entitled to redeem their shares as
set forth above under "Purchase and Redemption of Shares." The shares do not
have cumulative voting rights and the holders of more than 50% of the shares
of the Fund voting for the election of directors can elect all of the
directors of the Fund if they choose to do so and in such event the holders
of the remaining shares would not be able to elect any directors.
The Fund's Board of Directors has adopted a "proportionate voting"
policy, meaning that Insurance Companies will vote all of the Fund's shares,
including shares the Insurance Companies hold, in return for providing the
Fund with its capital and in payment of charges made against the variable
annuity or variable life separate accounts, in proportion to the votes
received from contractholders or policyowners.
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.
- ------------------------------------------------------------------------------
CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES
- ------------------------------------------------------------------------------
As of March 31, 1999, the following shareholder owned of record 5%
or more of the class of the Portfolio shown:
Name and Address % of Ownership
[insert info]
<PAGE>
- ------------------------------------------------------------------------------
APPENDIX
- ------------------------------------------------------------------------------
Corporate Bond Ratings
Description of Moody's Investors Service Inc.'s/Standard & Poor's municipal
bond ratings:
Aaa/AAA: Best quality. These bonds carry the smallest degree of
investment risk and are generally referred to as "gilt edge." Interest
payments are protected by a large or by an exceptionally stable margin and
principal is secure. This rating indicates an extremely strong capacity to
pay principal and interest.
Aa/AA: Bonds rated AA also qualify as high-quality debt
obligations. Capacity to pay principal and interest is very strong, and in
the majority of instances they differ from AAA issues only in small degree.
They are rated lower than the best bonds because margins of protection may
not be as large as in Aaa securities, fluctuation of protective elements may
be of greater amplitude, or there may be other elements present which make
long-term risks appear somewhat larger than in Aaa securities.
A/A: Upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which make the bond somewhat more susceptible to the adverse effects of
circumstances and economic conditions.
Baa/BBB: Medium grade obligations; adequate capacity to pay
principal and interest. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay principal and interest for
bonds in this category than for bonds in the A category.
Ba/BB, B/B, Caa/CCC, Ca/CC: Debt rated in these categories is
regarded as predominantly speculative with respect to capacity to pay
interest and repay principal. There may be some large uncertainties and
major risk exposure to adverse conditions. The higher the degree of
speculation, the lower the rating.
C/C: This rating is only for no-interest income bonds.
D: Debt in default; payment of interest and/or principal is in
arrears.
Commercial Paper Ratings
Moody's Investors Services, Inc.
A Prime rating is the highest commercial paper rating assigned by
Moody's Investors Service, Inc. Issuers rated Prime are further referred to
by use of numbers 1, 2, and 3 to denote relative strength within this
highest classification. Among the factors considered by Moody's in assigning
ratings for an issuer are the following: (1) management; (2) economic
evaluation of the inherent uncertain areas; (3) competition and customer
acceptance of products; (4) liquidity; (5) amount and quality of long-term
debt; (6) ten year earnings trends; (7) financial strength of a parent
company and the relationships which exist with the issuer; and (8)
recognition by management of obligations which may be present or may arise
as a result of public interest questions and preparations to meet such
obligations.
Standard & Poor's Corporation
Commercial paper rated A by Standard & Poor's Corporation has the
following characteristics: Liquidity ratios are better than the industry
average. Long term senior debt rating is "A" or better. In some cases BBB
credits may be acceptable. The issuer has access to at least two additional
channels of borrowing. Basic earnings and cash flow have an upward trend
with allowance made for unusual circumstances. Typically, the issuer's
industry is well established, the issuer has a strong position within its
industry and the reliability and quality of management is unquestioned.
Issuers rated A are further referred to by use of numbers 1, 2, and 3 to
denote relative strength within this classification.
- --------
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
(1) (a) Restated Articles of Incorporation of Acacia Capital
Corporation, incorporated by reference to Post-Effective Amendment No. 31,
dated 11/25/95.
(b) Articles Supplementary of Acacia Capital Corporation,
incorporated by reference to Post-Effective Amendment No. 31, dated 2/22/96.
(c) Articles Supplementary of Acacia Capital Corporation
incorporated by reference to Post-Effective Amendment No. 32, dated 4/22/97.
(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
2/11/98.
(2) By-laws of Acacia Capital Corporation, incorporated by
reference to Pre-Effective Amendment No. 1, dated 8/10/83.
(a) Amended By-laws of Acacia Capital Corporation, incorporated by
reference to Post-Effective Amendment No. 31, dated 2/7/96.
(4) Specimen Stock Certificate, incorporated by reference to
Pre-Effective Amendment No. 1, dated 8/10/83.
(5) Investment Advisory Agreement and Sub-Investment Advisory
Agreements, incorporated by reference to Post-Effective Agreement No. 31,
dated 2/7/96.
(7) Deferred Compensation Agreement, incorporated by reference to
Post-Effective Agreement No. 31, dated 2/7/96.
(8) Custody Agreement incorporated by reference to Pre-Effective
Amendment No. 1, dated 8/10/83.
(9) Shared Funding Agreement, incorporated by reference to
Post-Effective Amendment No. 10, dated 3/2/89.
(9.a) Transfer Agency Contract and Shareholder Servicing Contract,
incorporated by reference to Post-Effective Amendment No. 34, dated 4/30/98.
(10) Opinion and Consent of Counsel.
(13) Letter Regarding Initial Capital, incorporated by reference
to Pre-Effective Amendment No. 1, dated 8/10/83.
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. Officer
Holding Company
4550 Montgomery Avenue
Bethesda, Maryland 20814
---------------
First Variable Rate Fund Officer
for Government Income
Calvert Tax-Free Reserves
Calvert Cash Reserves
Calvert Social Investment Fund
The Calvert Fund
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
----------------
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
------------------
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 None
and Compliance Officer
(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 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 1st day of March, 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 3/1/99
Barbara J. Krumsiek Trustee (Principal Executive Officer)
__________**____________ Principal Accounting 3/1/99
Ronald M. Wolfsheimer Officer
__________**____________ Director 3/1/99
Charles E. Diehl
__________**____________ Director 3/1/99
Arthur J. Pugh
__________**____________ Director 3/1/99
South Trimble, III
__________**____________ Director 3/1/99
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-23
24(b)(10) Form of Opinion and Consent of Counsel
Ex-24 Power of Attorney
Exhibit 10
24(b)(10)
March 1, 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. 36
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. 36 to its Registration Statement.
Sincerely,
/s/ Ivy Wafford Duke
Ivy Wafford Duke
Associate General Counsel
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
