CALVERT
VARIABLE
SERIES, INC.
CALVERT
SOCIAL
PORTFOLIOS
ANNUAL REPORT
DECEMBER 31, 1998
<PAGE>
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL MONEY MARKET PORTFOLIO
Managed by Calvert Asset Management Company, Inc.
Dear Investor:
During most of the year, the Federal Reserve remained on hold, leaving the
federal funds rate unchanged while monitoring the impact of the Asian
financial crisis on the domestic economy. As the financial crisis spread,
the negative effects on our own markets became more apparent. Buyers became
increasingly credit conscious, and liquidity in the bond markets began
drying up. There were few buyers for anything other than U.S. government
guaranteed issues. Pressure on the Federal Reserve to step in and provide
liquidity to the markets increased, and in September the Fed made the first
of three 25 basis point rate cuts.
Performance and Strategy
Your portfolio returned 5.14% (exclusive of any sales or account charges)
for the one-year period ending December 31, 1998. This was a bit above the
5.10% return for the average variable annuity money market fund tracked by
Lipper.
We continue to invest heavily in variable rate demand notes backed by
letters of credit from commercial banks. While these securities reset their
rates regularly and have therefore been more vulnerable to quick downward
adjustments during this Fed easing cycle, they have still performed very
well. The absolute yield remains high compared to many other security types,
and when measured on a spread basis to the federal funds rate, they are
cheaper than they were before the Fed easing cycle began.
Outlook
It is difficult to predict how the economy will perform in the months ahead.
The U.S. unemployment rate is extremely low by recent historical standards,
and consumers continue to spend at a robust pace. However, several of our
primary international trading partners (Canada, Mexico and Brazil in
particular) are facing economic challenges, conditions we believe will
continue to impact domestic manufacturers and eventually consumers. The
consumer has shown remarkable resilience this past year, but should the
stock market falter, this could come to an end. We can also not discount the
possibility of another international crisis spooking the markets. We believe
the Fed will continue to monitor these events closely, and, in general, we
find it more likely that interest rates will remain stable or trend down
slightly over the coming months.
We appreciate your investment in the Calvert Variable Series Social Money
Market Portfolio.
Sincerely,
/s/
Barbara J. Krumsiek
President and CEO
January 19, 1999
Calvert Social Money Market Portfolio of Calvert Variable Series, Inc.,
should not be confused with the Calvert Social Investment Fund Money Market
Portfolio. Performance of the two funds will differ.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Calvert Variable Series, Inc. and Shareholders
of Calvert Social Money Market Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statement of
operations, statement of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Calvert
Social Money Market, (one of the portfolios comprising Calvert Variable
Series, Inc., hereafter referred to as the "Fund"), at December 31, 1998,
the results of its operations, the changes in its net assets and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. Theses financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with
custodian and brokers provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
<PAGE>
MONEY MARKET PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
Principal
Corporate Obligations - 74.7% Amount Value
Alabama State Industrial Development Authority, Mitchell
Grocery, VRDN, 5.50%, 5/1/10,
LOC: Regions Bank * $300,000 $300,000
Alabama State Industrial Development Authority,
Simcala, Inc., VRDN, 5.30%, 12/1/19,
LOC: Nationsbank * 460,000 460,000
American Baptist Homes Certificate of Participation
VRDN, 5.75%, 10/1/27, LOC: Banque
Natl de Paris * 447,000 447,000
Aspen Institute, Inc., VRDN, 5.18%, 12/1/04,
LOC: First National Bank of Maryland * 440,000 440,000
Bel Air, LLC. VRDN, 5.30%, 12/1/15,
LOC: Amsouth Bank * 270,000 270,000
Betters Group LP. VRDN, 5.30%, 2/1/12,
LOC: Century National Bank and Trust,
Confirming LOC: Mellon Bank * 450,000 450,000
Blount/Strange Realty Holdings, LLC. VRDN, 5.30%, 7/1/16,
LOC: Regions Bank * 200,000 200,000
Botsford General Hospital VRDN, 5.50%, 2/15/27,
LOC: Michigan National * 350,000 350,000
Clinic Building, Inc., VRDN, 5.79%, 12/1/18
LOC: Rabobank Nederland * 450,000 450,000
Colorado Health Facilities Authority Revenue
VRDN, 5.80%, 2/1/25, LOC: Kredietbank * 375,000 375,000
IPC Industries, Inc., VRDN, 5.30%, 10/1/11,
LOC: National Bank of Canada * 370,000 370,000
La Mirada, California Industrial Development Authority,
Rykoff Sexton,VRDN, 5.70%, 12/1/26,
LOC: First National Bank of Chicago * 250,000 250,000
Massachusetts Nursing Homes LP.
VRDN, 5.70%, 11/15/13, LOC: American National
Bank and Trust * 340,000 340,000
Memphis Center City Revenue Financial Corp.,
VRDN, 5.60%, 11/1/30, LOC: National Bank
of Comm TN * 225,000 225,000
Meriter Management Services, Inc.,
VRDN, 5.70%, 12/1/16, LOC:
Firstar Bank * 200,000 200,000
Mississippi Business Financial Corp.,
VRDN, 5.50%, 11/1/06, LOC:
Marshall & Ilsley Bank * 425,000 425,000
Mississippi Business Financial Corp.,
VRDN, 5.50%, 11/1/12, LOC: Mercantile
Bank * 400,000 400,000
Montgomery Cancer Center, LLC.
VRDN, 5.30%, 10/1/12, LOC:
Southtrust Bank * 130,000 130,000
Montgomery County, Kentucky Industrial Development Revenue,
Fireblanking, VRDN, 5.30%, 8/1/06,
LOC: Fleet Bank * 209,000 209,000
Physicians Plus Medical Group
VRDN, 5.65%, 8/1/16, LOC:
LaSalle Bank * 270,000 270,000
San Jose Financing Authority Revenue
VRDN, 5.90%, 12/1/25, BPA: Bank of
Nova Scotia, INSUR: AMBAC * 350,000 350,000
Sault Ste Marie, Michigan
VRDN, 5.55%, 6/1/03, LOC: First America
Bank, MI * 120,000 120,000
<PAGE>
Principal
Corporate Obligations (Cont'd) Amount Value
St. Paul, Minnesota Housing and Redevelopment
Authority VRDN, 5.80%, 6/1/15,
LOC: Credit Local de France * $280,000 $280,000
St. Joseph County Economic Development
Revenue VRDN, 5.53%, 6/1/27,
LOC: FHLB - Indianapolis * 310,000 310,000
South Cent Communications Corp., VRDN, 5.30%, 6/1/13,
LOC: Citizens National Bank,
Confirming LOC: Suntrust Bank * 25,000 25,000
TLC Holdings, LLC.
VRDN, 5.30%, 6/1/26, LOC: Columbus
Bank and Trust * 350,000 350,000
Washington State Housing Finance Authority, Glenbrook
Apartments, VRDN, 5.70%, 7/1/29,
LOC: Bank One, AZ * 230,000 230,000
Whetstone Care Center, LLC.
VRDN, 5.44%, 1/1/18, LOC: Fifth
Third Bank * 5,000 5,000
W.L. Petrey Wholesale, Inc., Industrial Development
Bond VRDN, 5.30%, 3/1/11, LOC:
Southtrust Bank, AL * 145,000 145,000
Total Corporate Obligations (Cost $8,376,000) 8,376,000
U.S. Government Agencies and
Instrumentalities - 16.6%
Federal Farm Credit Bank, 5.03%, 2/22/99 163,000 161,816
Federal Home Loan Bank, 5.00%, 3/15/99 100,000 98,986
Federal Home Loan Mortgage Corp.,
4.98%, 3/5/99 500,000 495,642
Federal Home Loan Mortgage Corp.,
4.91%, 3/25/99 500,000 494,340
Federal National Mortgage Assn.,
5.04%, 2/4/99 308,000 306,534
Federal National Mortgage Assn.,
5.09%, 2/12/99 206,000 204,776
Federal National Mortgage Assn.,
5.00%, 3/2/99 100,000 99,167
Total U.S. Government Agencies and Instrumentalities
(Cost $1,861,261) 1,861,261
Municipal Obligations - 8.3%
Gardena, California Certificates of Participation
VRDN, 7.66%, 7/1/25, LOC: Sumitomo Trust and Banking,
Confirming LOC: Dai-Ichi Kango Bank * 400,000 400,000
Texas State VRDN, 5.66%, 12/1/27,
TOA: Citibank * 151,000 151,000
Village of Schaumberg, Illinois
VRDN, 5.75%, 12/1/20, BPA: First National
Bank Chicago * 150,000 150,000
Virginia State Housing Development Authority
VRDN, 6.00%, 1/1/47 * 225,000 225,000
Total Municipal Obligations (Cost $926,000) 926,000
TOTAL INVESTMENTS
(Cost $11,163,261) - 99.6% 11,163,261
Other assets in excess of liabilites - 0.4% 41,732
NET ASSETS - 100% $11,204,993
* Optional tender features give these securities a shorter effective
maturity date.
Explanation of Guarantees:
BPA: Bond-Purchase Agreement
LOC: Letter of Credit
TOA: Tender Option Agreement
Abbreviations:
AMBAC: American Municipal Bond Assurance Corp.
INSUR: Insurance
VRDN: Variable Rate Demand Notes
See notes to financial statements.
<PAGE>
MONEY MARKET PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets
Investments in securities, at value $11,163,261
Cash 7,572
Interest receivable 44,736
Other assets 139
Total assets 11,215,708
Liabilities
Payable to Calvert Asset Management
Company, Inc. 5,903
Payable to Calvert Shareholder Services, Inc. 289
Accrued expenses and other liabilities 4,523
Total liabilities 10,715
Net assets $11,204,993
Net Assets Consist of:
Par value and paid-in capital applicable to
11,209,260 shares of common
stock outstanding; $1 par value,
35,000,000 shares authorized $11,204,684
Undistributed net investment income (loss) 309
Net Assets $11,204,993
Net Asset Value per Share $1.00
See notes to financial statements.
<PAGE>
MONEY MARKET PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Net Investment Income
Investment Income
Interest income $551,064
Total investment income 551,064
Expenses
Investment advisory fee 48,868
Transfer agency fees and expenses 2,932
Directors' fees and expenses 958
Custodian fees 7,916
Registration fees 1,996
Reports to shareholders 578
Professional fees 1,028
Miscellaneous 319
Total expenses 64,595
Fees paid indirectly (3,457)
Net expenses 61,138
Net Investment Income 489,926
Increase (Decrease) in Net Assets
Resulting From Operations $489,926
See notes to financial statements.
<PAGE>
MONEY MARKET PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended
December 31, December 31,
Increase (Decrease) in Net Assets 1998 1997
Operations
Net investment income $489,926 $308,873
Increase (Decrease) in Net Assets
Resulting From Operations 489,926 308,873
Distributions to shareholders from
Net investment income (490,032) (308,800)
Capital share transactions
Shares sold 31,692,032 15,330,449
Reinvestment of distributions 488,559 308,800
Shares redeemed (27,217,376) (13,775,667)
Total capital share transactions 4,963,215
1,863,582
Total Increase (Decrease) in Net Assets 4,963,109 1,863,655
Net Assets
Beginning of year 6,241,884 4,378,229
End of year (including undistributed net investment
income of $309 and $415, respectively) 11,204,993 6,241,884
Capital Share Activity
Shares sold 31,692,032 15,330,449
Reinvestment of distributions 488,559 308,800
Shares redeemed (27,217,376) (13,775,667)
Total capital share activity 4,963,215 1,863,582
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A -- Significant Accounting Policies
General: Calvert Social Money Market Portfolio (formerly, Calvert
Responsibly Invested Money Market Portfolio) (the "Portfolio"), a series of
Calvert Variable Series, Inc. (formerly Acacia Capital Corporation) (the
"Fund"), is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The operations of each
series are accounted for separately. The shares of the Portfolio are sold to
affiliated and unaffiliated insurance companies for allocation to certain of
their variable separate accounts.
Security Valuation: All securities are valued at amortized cost, which
approximates market.
Repurchase Agreements: The Portfolio may enter into repurchase agreements
with recognized financial institutions or registered broker/dealers and, in
all instances, holds underlying securities with a value exceeding the total
repurchase price, including accrued interest. Although risk is mitigated by
the collateral, the Fund could experience a delay in recovering its value
and a possible loss of income or value if the counterparty fails to perform
in accordance with the terms of the agreement.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Interest income, accretion of discount and
amortization of premium are recorded on an accrual basis.
Distributions to Shareholders: Distributions to shareholders are recorded by
the Portfolio on ex-dividend date. Dividends from net investment income are
accrued daily and paid monthly. Distributions from net realized capital
gains, if any, are paid at least annually. Distributions are determined in
accordance with income tax regulations which may differ from generally
accepted accounting principles; accordingly, periodic reclassifications are
made within the Portfolio's capital accounts to reflect income and gains
available for distribution under income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees may be paid indirectly by
credits earned on the Portfolio's cash on deposit with the bank. Such a
deposit arrangement is an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life
<PAGE>
Insurance Company. The Advisor provides investment advisory services and
pays the salaries and fees of officers and affiliated Directors of the
Portfolio. For its services, the Advisor receives a monthly fee based on an
annual rate of .50% of the Portfolio's average daily net assets.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
shareholder servicing agent for the Portfolio. National Financial Data
Services, Inc. is the transfer and dividend disbursing agent.
Each Director who is not affiliated with the Advisor received a fee of $750
for each Board meeting attended plus an annual fee of $3,000 for Directors
not serving on other Calvert Fund Boards. Director's fees are allocated to
each of the portfolios served.
Note C -- Investment Activity
The cost of investments owned at December 31, 1998, was substantially the
same for federal income tax and financial reporting purposes.
As a cash management practice, the Portfolio may sell or purchase short-term
variable rate demand notes from other Portfolios managed by the Advisor. All
transactions are executed at independently derived prices.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds and State
Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is
providing an unsecured line of credit facility, in the aggregate amount of
$50 million ($25 million committed and $25 million uncommitted), to be
accessed by the Funds for temporary or emergency purposes only. Borrowings
under this facility bear interest at the overnight Federal Funds Rate plus
.50% per annum. A commitment fee of .10% per annum will be incurred on the
unused portion of the committed facility which will be allocated to all
participating funds. This fee is paid quarterly in arrears. The Fund had no
loans outstanding pursuant to this line of credit at December 31, 1998.
Note E -- Subsequent Event
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company ("Acacia Mutual"). Effective January 1, 1999,
Acacia Mutual merged with and became a controlled subsidiary of Ameritas
Acacia Mutual Holding Company.
<PAGE>
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .050 .051 .048
Total from investment
operations .050 .051 .048
Distributions from
Net investment income (.050) (.051) (.048)
Total increase (decrease) in
net asset value -- -- --
Net asset value, ending $1.00 $1.00 $1.00
Total return 5.14% 5.20% 4.95%
Ratios to average net assets:
Net investment income 5.01% 5.10% 4.82%
Total expenses + .66% .69% .75%
Net expenses .63% .59% .62%
Net assets, ending
(in thousands) $11,205 $6,242 $4,378
Number of shares outstanding,
ending (in thousands) 11,209 6,246 4,382
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .055 .039
Total from investment operations .055 .039
Distributions from
Net investment income (.055) (.039)
Total increase (decrease) in net asset value -- --
Net asset value, ending $1.00 $1.00
Total return 5.37% 3.96%
Ratios to average net assets:
Net investment income 5.23% 3.91%
Total expenses + .66% NA
Net expenses .59% .45%
Expenses reimbursed -- .36%
Net assets, ending (in thousands) $5,129 $6,479
Number of shares outstanding,
ending (in thousands) 5,133 6,484
+ Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL SMALL CAP GROWTH PORTFOLIO
Managed by Awad Asset Management, Inc.
Dear Investor:
Nineteen ninety-eight was a frustrating and trying year for small-cap
investors. Once again, the most well known and widely held large-cap issues
had the run of the market along with a handful of technology and internet
stocks. For the record, 3,351 NASDAQ-listed stocks posted negative returns
for the year, while only approximately 1,690 posted gains. Additionally, as
one looks across the spectrum from growth to value and down the
capitalization range, significant positive returns become even more scarce.
Fund Performance
The Calvert Variable Series Social Small Cap Growth Portfolio returned
- -6.23% (exclusive of any sales or account charges) for the year. The
Portfolio lagged the average variable annuity small-cap mutual fund tracked
by Lipper, which returned 1.48% for the year. We were held back in part by
our lack of exposure to technology holdings, specifically internet
companies. These issues turned in phenomenal gains; unfortunately,
valuations on these securities are astronomical, which is why we stayed away.
Our exposure in the fourth quarter to health care and some technology stocks
was positive for performance. We further benefited from our avoidance of
energy-related issues, which despite two periods of good performance,
significantly underperformed the broad market for the year.
SMALL CAP GROWTH PORTFOLIO
Comparison in change in value of a hypothetical $10,000 investment.
Two-line graph here showing growth from 3.31.95 to 12.98
Social Small Cap Growth Portfolio $12,451
Russell 2000 Index TR $17,057
AVERAGE ANNUAL TOTAL RETURN
period ended 12.31.98
1 year -6.23%
since inception 5.93%
*Performance information is for the Portfolio only and does not reflect
charges and expenses of the variable annuity or variable universal life
contract. For comparison purposes, Portfolio and Index performance shown is
from 3.31.95. Past performance does not indicate future results.
New Subadvisor assumed management of the Portfolio effective October 1997.
Strategy
We have stayed true to our discipline of seeking growth stocks trading at
value prices. The market did not favor our strategy in 1998, but we expect
to be rewarded in 1999.
<PAGE>
Going into the new year, we carefully reviewed the portfolio and made
adjustments where necessary to position the Fund for what we believe will be
an excellent year. Much of the world wide turmoil we experienced in 1998 is
now behind us (although numerous issues remain to be worked out). Other
conditions that bode well for small-cap investors include:
Companies' ability to meet earnings estimates. Small-cap stocks
continued to post healthy earnings in 1998, in most cases, meeting or
exceeding expectations.Earnings for large-cap stocks, by comparison, came under
increasing pressure as
a result of the financial turmoil overseas and corresponding decrease in
demand for company products and services.
Compelling valuations. Relative valuations for small-cap stocks are now
at their lowest levels in decades, as measured by the price/earnings ratio
of the Russell 2000 versus the price/earnings ratio of the S&P 500. The P/E
multiple is an indication of how much investors are willing to pay for a share
in the company's
earnings potential. The higher the P/E, the more investors are paying.
Increasing investor interest. Small-cap stocks, measured by the Russell
2000, outperformed large-cap stocks, measured by the S&P 500 from October 8
(market bottom) through year-end. The small-cap sector has value and
momentum heading into 1999.
Currently under-represented in institutional and individual portfolios.
As investors review their asset allocation models and rebalance their
portfolios, we expect money will flow into the small-cap area.
Outlook
We believe small-cap stocks are set to outperform the market in 1999, and we
have positioned the portfolio to be in the vanguard of the rally. We expect
and hope investors will be rewarded in 1999 for their patience in 1998.
Thank you for your confidence in Awad Asset Management, Inc. and the Calvert
Variable Series Social Small Cap Growth Portfolio. We will continue to work
hard for you.
Sincerely,
/s/
Barbara J. Krumsiek
President and CEO
Calvert Social Small Cap Growth Portfolio of Calvert Variable Series, Inc.,
should not be confused with the New Vision Small Cap Fund. Performance of
the two funds will differ.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Calvert Variable Series, Inc. and Shareholders
of Calvert Social Small Cap Growth Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statement of
operations, statement of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Calvert
Social Small Cap Growth Portfolio, (one of the portfolios comprising Calvert
Variable Series, Inc., hereafter referred to as the "Fund"), at December 31,
1998, the results of its operations, the changes in its net assets and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. Theses financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with
custodian and brokers provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
<PAGE>
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
Equity Securities - 86.6% Shares Value
Aerospace / Defense - 3.6%
Kellstrom Industries, Inc. * 4,500 $129,375
129,375
Auto Parts and Equipment - 0.8%
Danaher Corp. 500 27,156
27,156
Banks - 6.3%
Doral Financial Corp. 6,800 150,450
Investors Financial Services Corp. 1,300 77,512
227,962
Communications - 2.9%
Periphonics Corp. * 8,000 105,500
105,500
Computer Technology - 1.0%
TransAct Technologies, Inc. * 10,500 34,781
34,781
Consulting Services - 4.2%
Comdisco, Inc. 9,000 151,875
151,875
Data Processing - 4.6%
National Data Corp. 3,400 165,538
165,538
Drugs and Pharmaceuticals - 1.9%
Elan Corp. PLC, ADR * 1,000 69,562
69,562
Entertainment - 2.1%
Gaylord Entertainment Co. 2,500 75,312
75,312
Food - 4.1%
Corn Products International, Inc. 2,300 69,862
Smucker (J.M.) Co., Class B 3,500 77,438
147,300
<PAGE>
Equity Securities (Cont'd) Shares Value
Health Care Facilities - 5.4%
Assisted Living Concepts, Inc. * 3,000 $39,375
Aviron * 3,500 90,562
LTC Healthcare, Inc. * 400 1,050
Sun Healthcare Group, Inc. * 10,000 65,625
196,612
Health Care Management Services - 4.5%
American Retirement Corp. * 4,000 62,750
Health Management Systems, Inc. * 13,000 102,375
165,125
Hotel / Motel - 1.1%
Lodgian, Inc. * 8,000 39,000
39,000
Household Furnishing - 0.1%
Heilig Meyers Co. 500 3,344
3,344
Machinery and Engineering - 2.1%
Somanetics Corp. * 6,000 10,500
Tokheim Corp. * 6,900 67,275
77,775
Medical and Dental Instruments and Supplies - 4.7%
Angeion Corp. * 10,000 10,938
ATS Medical, Inc. * 15,000 105,000
Beckman Coulter, Inc. 1,000 54,250
170,188
Medical Information Systems - 5.2%
Shared Medical System 2,000 99,750
Transition Systems, Inc. * 6,000 90,000
189,750
Multi-Sector Companies - 3.2%
Annuity and Life Re Holdings 4,000 108,000
Excel Legacy Corp. * 2,000 8,000
116,000
Printers - 3.0%
Printronix, Inc. * 4,500 64,688
Zebra Technologies Corp., Class A * 1,500 43,125
107,813
Publishing - 6.7%
Houghton Mifflin Co. 2,300 108,675
Wiley (John) & Sons, Inc., Class A 2,800 135,275
243,950
<PAGE>
Equity Securities (Cont'd) Shares Value
Railroads - 1.6%
Genesee & Wyoming, Inc., Class A * 4,500 $57,375
57,375
Real Estate Investment Trusts - 2.7%
LTC Properties, Inc. 4,000 66,500
Mid Atlantic Realty Trust 2,700 33,244
99,744
Retail - 1.5%
U.S. Vision, Inc. * 7,000 54,250
54,250
Service Organizations - 6.5%
LanVision Systems, Inc. * 5,900 8,112
New Horizons Worldwide, Inc. * 7,000 161,875
StarTek, Inc. * 5,350 66,206
236,193
Telecommunications - 1.3%
IXC Communications, Inc. * 1,398 47,008
47,008
Vitamins and Nutritional Products - 4.3%
NBTY, Inc. * 12,000 85,500
Twinlabs Corp. * 5,500 72,188
157,688
Wireless Equipment - 1.2%
American Tower Corp., Class A 1,500 44,344
44,344
Total Equity Securities (Cost $3,200,082) 3,140,520
TOTAL INVESTMENTS (Cost $3,200,082) - 86.6%3,140,520
Other assets in excess of liabilities - 13.4% 485,296
Net Assets - 100% $3,625,816
* Non-income producing.
Abbreviations:
ADR: American Depository Receipts
See notes to financial statements.
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets
Investments in securities, at value $3,140,520
Cash 375,038
Receivable for securities sold 113,434
Dividends receivable 790
Other assets 38
Total assets 3,629,820
Liabilities
Payable to Calvert Asset Management Company, Inc. 2,997
Payable to Calvert Administrative Services Company 290
Payable to Calvert Shareholder Services, Inc. 87
Accrued expenses and other liabilities 630
Total liabilities 4,004
Net assets $3,625,816
Net Assets Consist of:
Par value and paid-in capital applicable to 325,942
shares of common stock outstanding; $1 par value,
5,000,000 shares authorized $3,950,797
Undistributed net investment income (loss) 1,634
Accumulated net realized gain (loss) on investments (267,053)
Net unrealized appreciation (depreciation) on investments (59,562)
Net Assets $3,625,816
Net Asset Value per Share $11.12
See notes to financial statements.
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Net Investment Income
Investment Income
Interest income $5,012
Dividend income (net of foreign taxes of $101) 43,652
Total investment income 48,664
Expenses
Investment advisory fee 35,088
Transfer agent fees and expenses 1,170
Directors' fees and expenses 335
Administrative fees 3,899
Registration fees 422
Custodian fees 9,685
Reports to shareholders 449
Professional fees 658
Miscellaneous 96
Total expenses 51,802
Fees paid indirectly (7,981)
Net expenses 43,821
Net Investment Income (Loss) 4,843
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) (267,053)
Change in unrealized appreciation or depreciation 36,357
Net Realized and Unrealized Gain
(Loss) on Investments (230,696)
Increase (Decrease) in Net Assets
Resulting From Operations $(225,853)
See notes to financial statements.
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended
December 31, December 31,
Increase (Decrease) in Net Assets 1998 1997
Operations
Net investment income (loss) $4,843 $(41,134)
Net realized gain (loss) (267,053) 464,860
Change in unrealized appreciation
or depreciation 36,357 (689,272)
Increase (Decrease) in Net Assets
Resulting From Operations (225,853) (265,546)
Distributions to shareholders from
Net investment income (3,209) --
Net realized gain on investments (44,479) (372,337)
Total distributions (47,688) (372,337)
Capital share transactions
Shares sold 1,296,087 2,108,435
Reinvestment of distributions 47,688 372,337
Shares redeemed (1,590,837) (727,112)
Total capital share transactions (247,062)
1,753,660
Total Increase (Decrease) in Net Assets (520,603) 1,115,777
Net Assets
Beginning of year 4,146,419 3,030,642
End of year (including undistributed net investment income
of $1,634 and $0, respectively) $3,625,816 $4,146,419
Capital Share Activity
Shares sold 111,161 165,387
Reinvestment of distributions 4,383 31,002
Shares redeemed (134,628) (58,203)
Total capital share activity (19,084) 138,186
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A -- Significant Accounting Policies
General: Calvert Social Small Cap Growth Portfolio (formerly, Calvert
Responsibly Invested Strategic Growth Portfolio) (the "Portfolio"), a series
of Calvert Variable Series, Inc. (formerly Acacia Capital Corporation) (the
"Fund"), is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The operations of each
series are accounted for separately. The shares of the Portfolio are sold to
affiliated and unaffiliated insurance companies for allocation to certain of
their variable separate accounts.
Security Valuation: Securities listed or traded on a national securities
exchange are valued at the last reported sale price. Unlisted securities and
listed securities for which the last sale price is not available are valued
at the most recent bid price or based on a yield equivalent obtained from
the securities' market maker. Other securities and assets for which market
quotations are not available or deemed inappropriate are valued in good
faith under the direction of the Board of Directors.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Dividend income is recorded on the ex-dividend date.
Interest income, accretion of discount and amortization of premium are
recorded on an accrual basis. Dividends declared on securities sold short
are reported as an expense.
Distributions to Shareholders: Distributions to shareholders are recorded by
the Portfolio on ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains, if any, are paid at least
annually. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles;
accordingly, periodic reclassifications are made within the Portfolio's
capital accounts to reflect income and gains available for distribution
under income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees may be paid indirectly by
credits earned on the Portfolio's cash on deposit with the bank. Such a
deposit arrangement is an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life
<PAGE>
Insurance Company. The Advisor provides investment advisory services and
pays the salaries and fees of officers and affiliated Directors of the
Portfolio. For its services, the Advisor received a monthly fee based on an
annual rate of .90% of the Portfolio's average daily net assets.
Calvert Administrative Services Company, an affiliate of the Advisor,
provides administrative services to the Portfolio for an annual fee, payable
monthly of .10% of the Portfolio's annual average daily net assets.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
shareholder servicing agent for the Portfolio. National Financial Data
Services, Inc. is the transfer and dividend disbursing agent.
Each Director who is not affiliated with the Advisor received a fee of $750
for each Board meeting attended plus an annual fee of $3,000 for Directors
not serving on other Calvert Fund Boards. Director's fees are allocated to
each of the portfolios served.
Note C -- Investment Activity
During the year, purchases and sales of investments, other than short-term
securities, were $2,624,994 and $3,050,765, respectively.
The cost of investments owned at December 31, 1998 was substantially the
same for federal income tax and financial reporting purposes. Net unrealized
depreciation aggregated $59,562, of which $505,814 related to appreciated
securities and $565,376 related to depreciated securities.
Net realized capital loss carryforward for federal income tax purposes, of
approximately $263,528 at year end may be utilized to offset future capital
gains until expiration in December 2006.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds and State
Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is
providing an unsecured line of credit facility, in the aggregate amount of
$50 million ($25 million committed and $25 million uncommitted), to be
accessed by the Funds for temporary or emergency purposes only. Borrowings
under this facility bear interest at the overnight Federal Funds Rate plus
.50% per annum. A commitment fee of .10% per annum will be incurred on the
unused portion of the committed facility which will be allocated to all
participating funds. This fee is paid quarterly in arrears. The Fund had no
loans outstanding pursuant to this line of credit at December 31, 1998.
Note E -- Subsequent Event
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company ("Acacia Mutual"). Effective January 1, 1999,
Acacia Mutual merged with and became a controlled subsidiary of Ameritas
Acacia Mutual Holding Company.
Tax Information (Unaudited)
The Portfolio Designates $11,490 as capital gain dividends paid during the
fiscal year ended December 31, 1998.
For corporate shareholders of the Portfolio, a total of 100% of the income
dividends paid during the year ended December 31, 1998 qualifies for the
dividends received deduction.
<PAGE>
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31,
1998 1997
Net asset value, beginning $12.02 $14.65
Income from investment operations
Net investment income .02 (.12)
Net realized and unrealized gain (loss) (.77) (1.32)
Total from investment operations (.75) (1.44)
Distributions from
Net investment income (.01) --
Net realized gains (.14) (1.19)
Total distributions (.15) (1.19)
Total increase (decrease) in net asset value (.90) (2.63)
Net asset value, ending $11.12 $12.02
Total return (6.23%) (9.86%)
Ratios to average net assets:
Net investment income .12% (1.19%)
Total expenses + 1.33% 1.92%
Net expenses 1.12% 1.61%
Expenses reimbursed -- .18%
Portfolio turnover 72% 292%
Net assets, ending (in thousands) $3,626 $4,146
Number of shares outstanding,
ending (in thousands) 326 345
Periods Ended
December 31, December 31,
1996 1995*
Net asset value, beginning $10.94 $10.00
Income from investment operations
Net investment income (.15) .25
Net realized and unrealized gain (loss) 3.90 .93
Total from investment operations 3.75 1.18
Distributions from
Net investment income -- (.24)
Net realized gains (.04) --
Total distributions (.04) (.24)
Total increase (decrease) in net asset value 3.71 .94
Net asset value, ending $14.65 $10.94
Total return 34.33% 9.65%
Ratios to average net assets:
Net investment income (1.60%) .43%(a)
Total expenses + 2.27% 2.17%(a)
Net expenses 1.81% 1.64%(a)
Expenses reimbursed .20% .20%(a)
Portfolio turnover 120% 223%
Net assets, ending (in thousands) $3,031 $1,209
Number of shares outstanding,
ending (in thousands) 207 111
(a) Annualized
+ Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses. Total expenses are presented net of expense waivers
and reimbursements.
* From March 1, 1995 inception.
NA Disclosure not applicable to prior periods.
<PAGE>
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL MID CAP GROWTH PORTFOLIO
Managed by Brown Capital Management, Inc.
Dear Investor:
This past year was both difficult and exhilarating. I would characterize it
as both a "hooray!" and an "oh no!" From our vantage point, the first three
quarters were a hooray as we handily outpaced our benchmark, the Standard &
Poor's 400 Stock Index. The fourth quarter was an oh no as we
underperformed. The cumulative lead we built up in the first three quarters
of the year allowed us to outperform our benchmark for the calendar year.
The equity market was particularly challenging for managers, like us, who
expect to make some headway on the strength of their stock selection. This
was difficult due to the narrowness of the market and the vicious rotation
of market capitalization segments, which we liken to a "flavor of the week"
approach. In our view, the magnitude of money flowing into equity mutual
funds continues to fuel a liquidity preference for large capitalization
stocks. There have been numerous studies dissecting the various market
indices, but this fact illustrates the point succinctly: the S&P 500
appreciated 26.7% on a capitalization-weighted basis, and 11.9% on an
equal-weighted basis in 1998. That is to say, the companies with the
greatest representation in the Index accounted for a disproportionate share
of the gains.
MID CAP GROWTH PORTFOLIO
Comparison in change in value of a hypothetical $10,000 investment.
Two-line graph here showing growth from 7.31.91 to 12.98
Social Mid Cap Growth Portfolio $28,680
S&P Midcap 400 Index TR $34,819
AVERAGE ANNUAL TOTAL RETURN
period ended 12.31.98
1 year 29.88%
5 year 16.71%
since inception 15.05%
7.16.91
*Performance information is for the Portfolio only and does not reflect
charges and expenses of the variable annuity or variable universal life
contract. For comparison purposes, Portfolio and Index performance shown is
from 7.31.91. Past performance does not indicate future results.
New Subadvisor assumed management of the Portfolio effective December 1994.
Fund Performance and Strategy
The Calvert Variable Series Social Mid Cap Growth Portfolio generated a
one-year total return of 29.88% (exclusive of any sales or account charges),
compared to a return of 19.30% for the average variable annuity mid-cap fund
tracked by Lipper. We attribute the Portfolio's above average return to our
"growth at a reasonable price" investment approach and unique valuation
process. We seek companies with revenues and earnings growth much greater
than those of the performance benchmark, and we are very conscious of the
price we pay for that growth. In addition, we use current Treasury bond
rates to assign a risk premium to individual securities. Thus, our
determination of whether a security is overvalued, fairly valued or
undervalued, takes into account the current rate available on a "risk-free"
security.
The above very thoughtful and disciplined approach keeps us out of trouble
and strives to produce above average returns over the longer term. Our
valuation methodology also dynamically incorporates the effect of changing
interest rates, in that as interest rates fall, the price we are willing to
pay for prospective earnings growth rises, and conversely as interest rates
rise, the price we are willing to pay for prospective earnings growth
declines.
Outlook
The flow of money through mutual funds, momentum investing, electronic
trading, investors' infatuation with internet-based businesses and economic
uncertainty abroad are collectively fueling increased volatility in the
domestic equity market. This condition looks to have settled in for the long
term.
We think our emphasis on fundamentals and disciplined approach will help us
weather the higher degree of volatility. We continue to seek solid companies
trading at reasonable valuations with strong growth prospects. This is in
contrast to the speculative tendencies, lofty valuations and slow growth
economy that characterize the investment arena today. In short, we are
remaining patient and sticking with our proven approach.
Sincerely,
/s/
Barbara J. Krumsiek
President and CEO
January 19, 1999
Calvert Social Mid Cap Growth Portfolio of Calvert Variable Series, Inc.,
should not be confused with the Calvert Capital Accumulation Fund.
Performance of the two funds will differ.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Calvert Variable Series, Inc. and Shareholders
of Calvert Social Mid Cap Growth Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statement of
operations, statement of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Calvert
Social Mid Cap Growth, (one of the portfolios comprising Calvert Variable
Series, Inc., hereafter referred to as the "Fund"), at December 31, 1998,
the results of its operations, the changes in its net assets and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. Theses financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with
custodian and brokers provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
<PAGE>
MID CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
Equity Securities - 97.2% Shares Value
Communication Equipment - 4.5%
ADC Telecommunications, Inc. * 31,300 $1,087,675
Northern Telecom, Ltd. 13,320 667,665
1,755,340
Computer - Peripherals - 1.9%
EMC Corp. * 8,978 763,130
763,130
Computer - Hardware - 3.3%
Network Associates, Inc. * 19,813 1,312,611
1,312,611
Computer - Software and Services - 16.0%
BMC Software, Inc. * 20,000 891,250
Compuware Corp. * 12,200 953,125
Microsoft Corp. * 4,600 637,963
Parametric Technology Corp. * 57,300 931,125
Platinum Technology, Inc. * 47,200 902,700
Sterling Commerce, Inc. * 32,200 1,449,000
Sterling Software, Inc. * 20,900 565,606
6,330,769
Consumer Staples - Miscellaneous - 2.0%
Quintiles Transnational Corp. * 15,100 805,963
805,963
Distributors - Food and Health - 2.1%
Cardinal Health, Inc. 10,800 819,450
819,450
Electrical Equipment - 2.8%
Solectron Corp. * 11,800 1,096,662
1,096,662
Electronics - Semiconductors - 2.1%
Altera Corp. * 13,500 821,812
821,812
Financial - Diversified - 2.9%
SLM Holding Corp. 23,400 1,123,200
1,123,200
<PAGE>
Equity Securities (Cont'd) Shares Value
Health Care - Hospital Management - 2.7%
Health Management Associates, Inc., Class A * 48,350 $1,045,569
1,045,569
Health Care - Medical Products and Supplies - 2.7%
Boston Scientific Corp. * 33,000 884,812
St. Jude Medical, Inc. * 6,800 188,275
1,073,087
Health Care - Special Services - 4.9%
ALZA Corp. * 22,700 1,186,075
Omnicare, Inc. 22,000 764,500
1,950,575
Home Building - 1.1%
Rouse Co. 15,500 426,250
426,250
Housewares - 2.1%
Newell Co. 19,800 816,750
816,750
Insurance - Life and Health - 2.6%
AFLAC, Inc. 23,200 1,020,800
1,020,800
Investment - Banking / Brokerage - 4.3%
Franklin Resources, Inc. 25,586 818,752
Legg Mason, Inc. 27,300 861,656
1,680,408
Investment Management - 1.9%
T. Rowe Price Associates, Inc. 22,200 760,350
760,350
Leisure Time - Products - 3.2%
Harley Davidson, Inc. 26,800 1,269,650
1,269,650
Oil and Gas - Equipment - 1.7%
Smith International, Inc. * 26,500 667,469
667,469
Restaurants - 1.7%
Cheesecake Factory, Inc. * 22,100 655,403
655,403
Retail - Building Supplies - 3.2%
Fastenal Co. 23,400 1,029,600
Home Depot, Inc. 3,900 238,631
1,268,231
<PAGE>
Equity Securities (Cont'd) Shares Value
Retail - Department Stores - 2.5%
Kohl's Corp. * 16,300 $1,001,431
1,001,431
Retail - Discounters - 1.8%
Dollar General Corp. 30,713 725,595
725,595
Retail - Specialty - 2.7%
AutoZone, Inc. * 25,600 843,200
Casey's General Stores, Inc. 3,000 39,094
Staples, Inc. * 4,500 196,594
1,078,888
Schools - 1.6%
Sylvan Learning Systems, Inc. * 21,300 649,650
649,650
Services - Advertising and Marketing - 5.6%
Acxiom Corp. * 34,900 1,081,900
Catalina Marketing Corp. * 16,800 1,148,700
2,230,600
Services - Commercial and Consumer - 2.0%
G & K Services, Inc., Class A 15,000 798,750
798,750
Services - Data Processing - 7.2%
Equifax, Inc. 27,200 929,900
Fiserv, Inc. * 15,700
807,569
Paychex, Inc. 21,900 1,126,481
2,863,950
Services - Employment - 4.1%
Interim Services, Inc. * 37,800 883,575
Robert Half International, Inc. * 16,500 737,344
1,620,919
Total Equity Securities (Cost $30,328,077) 38,433,262
TOTAL INVESTMENTS (Cost $30,328,077) - 97.2%38,433,262
Other assets in excess of liabilities - 2.8% 1,104,477
Net Assets - 100% $39,537,739
* Non-income producing.
See notes to the financial statements.
<PAGE>
MID CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets
Investments in securities, at value $38,433,262
Cash 1,116,082
Receivable for investments sold 23,624
Interest and dividends receivable 5,672
Other assets 368
Total assets 39,579,008
Liabilities
Payable to Calvert Asset Management Company, Inc. 28,793
Payable to Calvert Administrative Services Company 3,151
Payable to Calvert Shareholder Services, Inc. 945
Accrued expenses and other liabilities 8,380
Total liabilities 41,269
Net assets $ 39,537,739
Net Assets Consist of:
Par value and paid-in capital applicable to 1,299,236 shares of common
stock outstanding; $1 par value, 5,000,000
shares authorized $30,942,566
Accumulated net realized gain (loss) on investments 489,988
Net unrealized appreciation (depreciation) on investments 8,105,185
Net Assets $39,537,739
Net Asset Value per Share $30.43
<PAGE>
MID CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Net Investment Income
Investment Income
Interest income $6,998
Dividend income (net of foreign taxes of $300) 121,386
Total investment income 128,384
Expenses
Investment advisory fee 250,773
Transfer agency fees and expenses 9,472
Directors' fees and expenses 3,043
Administrative fees 31,572
Custodian fees 13,912
Registration fees 5,355
Reports to shareholders 7,099
Professional fees 3,692
Miscellaneous 5,395
Total expenses 330,313
Fees paid indirectly (13,912)
Net expenses 316,401
Net Investment Income (Loss) (188,017)
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) 5,089,060
Change in unrealized appreciation or depreciation 3,487,530
Net Realized and Unrealized Gain
(Loss) on Investments 8,576,590
Increase (Decrease) in Net Assets
Resulting From Operations $8,388,573
<PAGE>
MID CAP GROWTH PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended
December 31, December 31,
Increase (Decrease) in Net Assets 1998 1997
Operations
Net investment income (loss) $(188,017) $(37,729)
Net realized gain (loss) 5,089,060 3,036,419
Change in unrealized appreciation
or depreciation 3,487,530 1,705,146
Increase (Decrease) in Net Assets
Resulting From Operations 8,388,573 4,703,836
Distributions to shareholders from
Net realized gain on investments (4,698,137) (2,706,962)
Total distributions (4,698,137) (2,706,962)
Capital share transactions
Shares sold 17,443,253 9,334,843
Reinvestment of distributions 4,698,137 2,706,962
Shares redeemed (12,410,597) (7,826,492)
Total capital share transactions 9,730,793
4,215,313
Total Increase (Decrease) in Net Assets 13,421,229 6,212,187
Net Assets
Beginning of year 26,116,510 19,904,323
End of year $39,537,739 $26,116,510
Capital Share Activity
Shares sold 573,133 353,300
Reinvestment of distributions 157,974 101,575
Shares redeemed (412,755) (301,674)
Total capital share activity 318,352 153,201
See notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A -- Significant Accounting Policies
General: Calvert Social Mid Cap Growth Portfolio (formerly, Calvert
Responsibly Invested Capital Accumulation Portfolio) (the "Portfolio"), a
series of Calvert Variable Series, Inc. (formerly Acacia Capital
Corporation) (the "Fund"), is registered under the Investment Company Act of
1940 as a non-diversified, open-end management investment company. The
operations of each series are accounted for separately. The shares of the
Portfolio are sold to affiliated and unaffiliated insurance companies for
allocation to certain of their variable separate accounts.
Security Valuation: Securities listed or traded on a national securities
exchange are valued at the last reported sale price. Unlisted securities and
listed securities for which the last sale price is not available are valued
at the most recent bid price. Other securities and assets for which market
quotations are not available or deemed inappropriate are valued in good
faith under the direction of the Board of Directors.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Dividend income is recorded on the ex-dividend date.
Interest income, accretion of discount and amortization of premium are
recorded on an accrual basis.
Distributions to Shareholders: Distributions to shareholders are recorded by
the Portfolio on ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains, if any, are paid at least
annually. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles;
accordingly, periodic reclassifications are made within the Portfolio's
capital accounts to reflect income and gains available for distribution
under income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees may be paid indirectly by
credits earned on the Portfolio's cash on deposit with the bank. Such a
deposit arrangement is an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory
services and pays the salaries and fees of officers and affiliated Directors
of the Portfolio. For its services, the Advisor receives a monthly fee based
on an annual rate of .80% of the Portfolio's average daily net assets. The
Portfolio pays a monthly performance fee of plus or minus up to
<PAGE>
.05%, on an annual basis, of average daily net assets of the performance
period depending on the Portfolio's performance compared to the S&P Mid-Cap
400 Index.
Calvert Administrative Services Company, an affiliate of the Advisor,
provides administrative services to the Portfolio for an annual fee, payable
monthly, of .10% of the Portfolio's annual average daily net assets.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
shareholder servicing agent for the Portfolio. National Financial Data
Services, Inc. is the transfer and dividend disbursing agent.
Each Director who is not affiliated with the Advisor received a fee of $750
for each Board meeting attended plus an annual fee of $3,000 for Directors
not serving on other Calvert Fund Boards. Director's fees are allocated to
each of the portfolios served.
Note C -- Investment Activity
During the year, purchases and sales of investments, other than short-term
securities, were $24,199,132 and $20,110,020, respectively.
The cost of investments owned at December 31, 1998, was substantially the
same for federal income tax and financial reporting purposes. Net unrealized
appreciation aggregated $8,105,185, of which $9,062,577 related to
appreciated securities and $957,392 related to depreciated securities.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds and State
Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is
providing an unsecured line of credit facility, in the aggregate amount of
$50 million ($25 million committed and $25 million uncommitted), to be
accessed by the Funds for temporary or emergency purposes only. Borrowings
under this facility bear interest at the overnight Federal Funds Rate plus
.50% per annum. A commitment fee of .10% per annum will be incurred on the
unused portion of the committed facility which will be allocated to all
participating funds. This fee is paid quarterly in arrears. The Fund had no
loans outstanding pursuant to this line of credit at December 31, 1998.
Note E -- Subsequent Event
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company ("Acacia Mutual"). Effective January 1, 1999,
Acacia Mutual merged with and became a controlled subsidiary of Ameritas
Acacia Mutual Holding Company
Tax Information (Unaudited)
The Portfolio designates $4,021,166 as capital gain dividends paid during
the fiscal year ended December 31, 1998.
<PAGE>
MID CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $26.63 $24.05 $22.42
Income from investment operations
Net investment income (.14) (.04) (.12)
Net realized and unrealized
gain (loss) 8.00 5.70 1.79
Total from investment
operations 7.86 5.66 1.67
Distributions from
Net investment income -- -- --
Net realized gains (4.06) (3.08) (.04)
Total distributions (4.06) (3.08) (.04)
Total increase (decrease) in
net asset value 3.80 2.58 1.63
Net asset value, ending $30.43 $26.63 $24.05
Total return 29.88% 23.53% 7.44%
Ratios to average net assets:
Net investment income (.60%) (.17%) (.60%)
Total expenses + 1.05% 1.04% 1.33%
Net expenses 1.00% .96% 1.00%
Expenses reimbursed -- -- --
Portfolio turnover 65% 96% 124%
Net assets, ending
(in thousands) $39,538 $26,117 $19,904
Number of shares outstanding,
ending (in thousands) 1,299 981 828
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $16.97 $18.95
Income from investment operations
Net investment income (.15) .10
Net realized and unrealized gain (loss) 6.85 (1.98)
Total from investment operations 6.70 (1.88)
Distributions from
Net investment income (.01) (.10)
Net realized gains (1.24) --
Total distributions (1.25) (.10)
Total increase (decrease) in net asset value 5.45 (1.98)
Net asset value, ending $22.42 $16.97
Total return 39.46% (9.92%)
Ratios to average net assets:
Net investment income (.84%) .68%
Total expenses + 1.56% NA
Net expenses 1.25% .79%
Expenses reimbursed .10% --
Portfolio turnover 135% 79%
Net assets, ending (in thousands) $8,935 $5,689
Number of shares outstanding,
ending (in thousands) 398 335
+ Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL INTERNATIONAL EQUITY PORTFOLIO
Managed by Murray Johnstone International, Ltd.
Dear Investor:
Nineteen ninety-eight will be remembered for the diversity of major economic
and political events which beset financial markets. Weakness in Asia
continued, Russia experienced a financial collapse and the emerging markets
world-wide were dealt a severe blow. These events had a devastating impact
on Long-Term Capital Management and other hedge funds making them forced
sellers of currencies and stocks. Markets collapsed in August and September
and only recovered when the Federal Reserve Board (the Fed) made the first
of three cuts to the federal funds rate, the rate banks charge each other on
overnight loans to meet reserve requirements. The Fed's actions restored
investor confidence, and a market recovery commenced. Surprisingly, by the
end of the year the Morgan Stanley Capital International Europe, Australia
and Far East Index had returned 20.85%. This Portfolio's 18.09% return
(exclusive of any sales or account charges) was a bit short of the Index's
gain but was well ahead of the 13.26% return for the average variable
annuity international mutual fund tracked by Lipper.
SOCIAL INTERNATIONAL EQUITY PORTFOLIO
Comparison in change in value of a hypothetical $10,000 investment.
Two-line graph here showing growth from 6.30.92 to 12.98
Social International Equity Portfolio $21,126
MSCI EAFE Index GD $20,467
AVERAGE ANNUAL TOTAL RETURN
period ended 12.31.98
1 year 18.09%
5 year 11.07%
since inception 12.18%
6.30.92
*Performance information is for the Portfolio only and does not reflect
charges and expenses of the variable annuity or variable universal life
contract. For comparison purposes, Portfolio and Index performance shown is
from 6.30.92.
Past performance does not indicate future results.
Market Review
The year commenced with the markets of the Far East making a tentative
recovery after intervention by the International Monetary Fund (IMF) helped
to restore stability to currencies, some of which had been in virtual
free-fall. However, instability returned when governments proved unwilling
to introduce the austerity measures required by the IMF to guarantee the
continued dispersal of aid funds. Civil strife erupted in Indonesia and the
government in Malaysia, having rejected IMF participation in its affairs,
effectively closed down its financial markets to foreign investors by
placing onerous controls on the repatriation of sale proceeds. This put
pressure on the stronger markets of the region, Hong Kong and Singapore,
ultimately undermining their stability. Hedge fund selling of Asian stocks
and currencies added to the pressure on financial markets. Ultimately, it
was the Hong Kong Monetary Authority (HKMA) which stepped into the market
and defied the trend with heavy buying of index stocks. This program
succeeded in turning the market around.
<PAGE>
The Japanese market was a poor performer through the period ending the year
up just 5.3% in dollars; all of this derived from the sudden revaluation of
the yen from October onwards. Some of the strength in the currency was
attributed to the closure of short hedge positions but, once the change in
direction was clear, further hedging and repatriation of funds reinforced
the trend. There was little life in the equity market in spite of several
economic stimulus packages put forth by the government, culminating in the
$195 billion program announced in November. Investors believed
implementation of the program would be difficult and lacked confidence that
the authorities could at last succeed.
The area of strength during the year was Europe. Buoyed by domestic growth,
the European markets were largely immune to events in Asia and Russia until
late in the period. The consumer was enjoying the weak pricing environment
and manufacturing had yet to adjust to the lower level of demand. Other
factors were also positive in Europe: progress towards Economic and Monetary
Union (EMU) led to lower interest rates while rationalization in
manufacturing enhanced corporate profits. Europe generated steady returns
until the global market correction in August and, once stability returned,
made a strong recovery.
Impact of the Crises in Asia and Russia
There was limited direct impact on performance from the crisis in Asia since
the strategy from early in the year was to reduce exposure to the region. In
January 1998 exposure to Asia (ex-Japan) was 11.1% of assets. We reduced the
overweight exposure to the Hong Kong market and when the pressure shifted
from equity markets to currencies, we sold the balance of Hong Kong and
Australia in May 1998. Both markets and currencies in Asia came under
pressure and stocks were sold at prices some 30% above the lows reached in
September. (It was in late September that we decided to reinvest in these
markets, preceding the first cut by the Fed by days only.)
The assets were shifted to Europe, which outperformed Asia over the year.
The portfolio was not directly exposed to the Russian market but began to
feel the effects of the collapse in Russia in July and August when companies
started to admit exposure to the area. The impact was greatest in financial
stocks which were perceived to be at risk through loans outstanding. We
began to sell Credit Swisse on these grounds and also took profits in Zurich
Allied, the Swiss insurance company. Zurich had been one of the best
performers in the portfolio over the year and poor news on exposure to risk
assets led to a weakening of the prices.
Financial stocks suffered again late in the year when Long-Term Capital
Management (LTCM) failed. Many of its investors were later revealed to be
banks. European financials, in particular, had been strong performers over
previous months due to the falling interest rates and consolidation in the
sector. The impact of exposure to Russia and to LTCM led to a swift turn
around in the stock prices which was not confined to financial stocks.
Weakening corporate profits, across the board, stimulated broad
profit-taking in equities.
<PAGE>
Sell Offs and Snap Backs
The sell off in October 1997 was precipitated by the collapse of the Korean
currency and stock market. Korea was the first of the "serious" Asian
casualties since all the other countries were less significant in terms of
global trade and commerce. The collapse of Korea cut the ground from under
Japan and created a major obstacle to the recovery of its much larger
neighbor, thereby dampening prospects for the entire Far East region.
The recovery in February 1998 was initiated by an improvement in sentiment
towards the Asian markets following the intervention of the IMF and its
support for currencies. Also in February the crisis was still localized:
Europe and the US were still exhibiting strong growth and it was believed
those economies were insulated from events in Asia. This was revealed as a
fallacy later in 1998 and was one of the causes of the global collapse later
in the year.
The August collapse stemmed from the crisis in Russia which put pressure on
both financial stocks in Europe which were exposed through loans and credit
lines, and on hedge funds. The latter became forced sellers of emerging
markets globally in an attempt to cover their losses and reduce their
exposure to high risk assets. This collapse led to a flight to quality, with
investors seeking shelter in US Treasury bonds on the belief that all
investments rated less than AAA were at risk. The danger of the August
collapse was more real since it had the potential to feed on itself and
spiral into a major global crisis.
The recovery in October was entirely due to the action of Alan Greenspan and
the Fed in cutting interest rates, a difficult decision given the pace of
growth in the US economy at the time. However, the cuts to the Fed Funds
Rate were followed by cuts to rates in the UK, Europe and the Far East. This
provision of liquidity convinced investors that concerted action by global
institutions could prevent financial assets from entering a downward spiral.
This stabilized prices and brought confidence back to investors.
Market Outlook for 1999
For the coming year we see a series of broad themes which will determine the
path of financial markets. The world-wide economic slowdown will continue;
inflation will continue to fall leading to lower interest rates and bond
yields. The Fed's role in cutting rates in 1998 was critical in restoring
stability to financial markets. If growth continues to slow the Fed should
be able to keep rates at these levels although there is probably some
concern that a degree of "irrational exuberance" has returned. For now,
however, there are no signs that economic activity has rebounded so equity
markets should be able to continue to enjoy the low rate environment. The
conclusion for stocks is that the best returns will come from companies
which can grow their earnings, companies which are industry leaders with
relatively strong pricing power and those companies committed to
restructuring.
Looking at specific regions, we believe the European markets will have a
satisfactory year but are unlikely to repeat the returns of the last two
years. Although several of the positive themes will continue, the firm euro
will ultimately be a negative for this area. Still outside the single
currency, the UK could be an exception. The UK government has more
flexibility to respond to lower growth by cutting interest rates and this,
combined with a lower pound versus the euro, could provide a modest boost to
the financial and consumer sectors. The markets in the Far East have seen a
rebound in 1998 but this still leaves them below peak levels. If growth
begins to recover, there is still scope for this region to perform. Japan is
moving in the right direction although the pace remains slow but, once
again, investors will back companies where they perceive change is being
promoted. This is the market area which has yet to see a recovery. Finally,
the Latin American markets will benefit from the abundant free liquidity but
will struggle against the background of slow fiscal reform.
We appreciate your investment and confidence in our ability to deliver
competitive returns.
Sincerely,
/s/
Barbara J. Krumsiek
President and CEO
Calvert Social International Equity Portfolio of Calvert Variable Series,
Inc., should not be confused with the Calvert World Values International
Equity Fund. Performance of the two funds will differ.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Calvert Variable Series, Inc. and Shareholders
of Calvert Social International Equity Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statement of
operations, statement of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Calvert
Social International Equity Portfolio (one of the portfolios comprising
Calvert Variable Series, Inc., hereafter referred to as the "Fund"), at
December 31, 1998, the results of its operations, the changes in its net
assets and the financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles. Theses financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with
custodian and brokers provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
February 5, 1999
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
Equity Securities - 94.0% Shares Value
Argentina - 1.8%
Banco Frances Del Rio La Plata, ADR 15,000 $311,250
311,250
Australia - 2.0%
National Australia Bank 22,500 339,175
339,175
Brazil - 1.5%
Unibanco Uniao de Barncos 17,500 252,656
252,656
Chile - 1.2%
Compania de Telecom de Chile, ADR 10,000 206,875
206,875
France - 11.4%
AXA-UAP 1,611 233,395
Banque Nationale de Paris 4,437 365,213
Cap Gemini 2,232 358,094
Equant * 2,532 171,701
Legrand 889 235,487
Pinault Printemps 2,310 441,259
Vivendi 600 155,607
1,960,756
Germany - 6.7%
Allianz 957 350,850
Douglas Holdings 3,590 217,563
Linde 210 129,155
SAP 409 176,695
Volkswagen 3,310 264,149
1,138,412
Hong Kong - 2.2%
Hutchison Whampoa 29,000 204,934
Johnson Electric Holdings 70,000 179,798
384,732
<PAGE>
Equity Securities (Cont'd) Shares Value
Ireland - 2.8%
Allied Irish Banks 16,685 $296,610
Global Telesystems Group, Inc. * 3,214 179,181
475,791
Italy - 6.1%
Telecom Italia Mobile 51,707 381,615
Telecom Italia Spa 62,749 394,684
Unicredito Italian 44,034 259,951
1,036,250
Japan - 20.8%
Fuji Machine Manufacturing 8,000 252,632
Fuji Photo Film Co. 6,000 222,910
Fujitsu 22,000 292,879
Gunze Limited 83,000 199,699
ITO Yokado Co. 4,000 279,522
Matsushita Comm 6,000 282,884
Mitsubishi Estate 25,000 224,016
Nippon Tel & Tel 33 254,542
NTT Mobile Communications 4 164,529
Olympus Optical Co. 20,000 229,810
Snow Brand Milk 52,000 237,346
Sony Corp. 2,400 174,719
Sumitomo Bank 22,000 225,741
Tokyo Steel Manufacturing 44,000 220,292
Yamanouchi Pharmaceutical 9,000 289,783
3,551,304
Mexico - 1.7%
Banpais, S.A., ADR * 10,000 0
Cifra, S.A. de C.V., ADR * 19,581 237,592
Grupo Industrial Durango, S.A., ADR * 11,000 60,500
298,092
Netherlands - 6.1%
Elsevier 15,097 211,344
ING Groep 1,886 114,945
KON KPN 6,506 325,525
V.N.U. 10,550 397,584
1,049,398
Equity Securities (Cont'd) Shares Value
New Zealand - 2.0%
Telecom Corporation of New Zealand 80,000 $347,295
347,295
Norway - 1.8%
Christiania Bank 88,322 306,863
306,863
Singapore - 3.1%
City Developments 80,000 346,457
Singapore Press Holdings 16,200 176,620
523,077
South Africa - 0.7%
Liberty Life Assoc. 2,000 27,503
Standard Bank Investment 28,000 85,564
113,067
Spain - 1.9%
Superdiplo * 2,905 81,660
Telefonica de Espana 5,234 232,385
Telefonica de Espana (rights) 5,234 4,648
318,693
Switzerland - 2.7%
Zurich Allied * 619 458,268
458,268
United Kingdom - 17.5%
Anglian Group 22,700 82,216
Abbey National 9,900 211,685
Anglian Water 11,666 161,985
Bank of Scotland 15,000 178,684
Barclays 9,000 193,786
Beazer Group 18,800 47,476
Bellway 11,000 51,080
BPB Industries 1,700 6,214
British Telecom 16,000 240,704
Cadbury Schweppes 14,000 238,412
FirstGroup 22,000 145,655
<PAGE>
Equity Securities - (Cont'd) Shares Value
United Kingdom (Cont'd)
Johnson Matthey 12,000 $80,844
Kingfisher 3,300 35,665
London International Group 22,600 45,996
Mayflower Corp. 21,600 46,652
Norwich Union 26,000 188,661
Pearson 10,000 198,847
Safeway 18,400 92,321
SIG 12,100 28,345
Smithline Beecham 19,000 265,160
Somerfield 14,700 97,813
Unigate 5,500 39,475
Vodafone Group 20,000 324,306
3,001,982
Total Equity Securities (Cost $13,436,628) 16,073,936
TOTAL INVESTMENTS (Cost $13,436,628) - 94.0%16,073,936
Other assets in excess of liabilities - 6.0% 1,034,939
Net Assets - 100% $17,108,875
* Non-income producing.
Abbreviations:
ADR: American Depository Receipts
See notes to financial statements.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets
Investments in securities, at value $16,073,936
Cash 1,021,648
Receivable for securities sold 18,066
Interest and dividends receivable 28,765
Other assets 177
Total assets 17,142,592
Liabilities
Payable for securities purchased 2,004
Payable for shares redeemed 5,213
Payable to Calvert Asset Management Company, Inc. 17,784
Payable to Calvert Administrative Services Company 1,409
Payable to Calvert Shareholder Services, Inc. 423
Accrued expenses and other liabilities 6,884
Total liabilities 33,717
Net assets $17,108,875
Net Assets Consist of:
Par value and paid-in capital applicable to 822,007 shares of common
stock outstanding; $1 par value,
5,000,000 shares authorized $14,340,370
Undistributed net investment income (loss) 11,207
Accumulated net realized gain (loss) on investments and
foreign currency transactions 120,156
Net unrealized appreciation (depreciation) on investments and foreign
currencies
and assets and liabilities denominated
in foreign currencies 2,637,142
Net Assets $17,108,875
Net Asset Value per Share $20.81
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Net Investment Income
Investment Income
Interest income $34,354
Dividend income (net of foreign taxes of $41,729) 295,645
Total investment income 329,999
Expenses
Investment advisory fee 161,550
Transfer agency fees and expenses 4,847
Directors' fees and expenses 1,416
Administrative fees 40,000
Custodian fees 76,289
Registration fees 1,887
Reports to shareholders 2,286
Professional fees 1,683
Miscellaneous 537
Total expenses 290,495
Reimbursement from Advisor (23,845)
Fees paid indirectly (15,394)
Net expenses 251,256
Net Investment Income (Loss) 78,743
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 1,202,690
Foreign currency transactions (33,835)
1,168,855
Change in unrealized appreciation or depreciation on:
Investments and foreign currency transactions 1,338,761
Assets and liabilities denominated in foreign currencies (3,248)
1,335,513
Net Realized and Unrealized Gain (Loss) 2,504,368
Increase (Decrease) in Net Assets
Resulting From Operations $2,583,111
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended
December 31, December 31,
Increase (Decrease) in Net Assets 1998 1997
Operations
Net investment income $78,743 $125,995
Net realized gain (loss) 1,168,855 1,406,885
Change in unrealized appreciation
or depreciation 1,335,513 157,301
Increase (Decrease) in Net Assets
Resulting From Operations 2,583,111 1,690,181
Distributions to shareholders from
Net investment income (53,185) (138,622)
Net realized gain on investments (1,265,356) (1,299,097)
Total distributions (1,318,541) (1,437,719)
Capital share transactions
Shares sold 3,075,675 3,776,933
Reinvestment of distributions 1,318,544 1,437,719
Shares redeemed (2,999,999) (5,043,846)
Total capital share transactions 1,394,220
170,806
Total Increase (Decrease) in Net Assets 2,658,790 423,268
Net Assets
Beginning of year 14,450,085 14,026,817
End of year (including undistributed net
investment income of $11,207 and
$19,484, respectively) $17,108,875 $14,450,085
Capital Share Activity
Shares sold 142,752 182,411
Reinvestment of distributions 63,667 75,550
Shares redeemed (141,023) (249,795)
Total capital share activity 65,396 8,166
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A -- Significant Accounting Policies
General: Calvert Social International Equity Portfolio (formerly, Calvert
Responsibly Invested Global Equity Portfolio) (the "Portfolio"), a series of
Calvert Variable Series, Inc. (formerly Acacia Capital Corporation) (the
"Fund"), is registered under the Investment Company Act of 1940 as a
diversified, open-end management investment company. The operations of each
series are accounted for separately. The shares of the Portfolio are sold to
affiliated and unaffiliated insurance companies for allocation to certain of
their variable separate accounts.
Security Valuation: Securities listed or traded on a national securities
exchange are valued at the last reported sale price. Foreign security
prices, furnished by quotation services in the security's local currency,
are translated using the current US dollar exchange rate. Unlisted
securities and listed securities for which the last sale price is not
available are valued at the most recent bid price or based on a yield
equivalent obtained from the securities' market maker. Other securities and
assets for which market quotations are not available or deemed inappropriate
are valued in good faith under the direction of the Board of Directors.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Dividend income is recorded on the ex-dividend date
or, in the case of dividends on certain foreign securities, as soon as the
Portfolio is informed of the ex-dividend date. Interest income, accretion of
discount and amortization of premium are recorded on an accrual basis.
Foreign Currency Transactions: The Portfolio's accounting records are
maintained in
US dollars. For valuation of assets and liabilities on each date of net
asset value determination, foreign denominations are translated into US
dollars using the current exchange rate. Security transactions, income and
expenses are translated at the prevailing rate of exchange on the date of
the event. The effect of changes in foreign exchange rates on foreign
denominated investments and foreign currencies is included with the net
realized and unrealized gain or loss on investments and foreign currencies.
Other foreign currency gains or losses are reported separately.
Distributions to Shareholders: Distributions to shareholders are recorded by
the Portfolio on ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains, if any, are paid at least
annually. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles;
accordingly, periodic reclassifications are made within the Portfolio's
capital accounts to reflect income and gains available for distribution
under income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees may be paid indirectly by
credits earned on the
<PAGE>
Portfolio's cash on deposit with the bank. Such a deposit arrangement is an
alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory
services and pays the salaries and fees of officers and affiliated Directors
of the Portfolio. For its services, the Advisor receives a monthly fee based
on an annual rate of 1% of the Portfolio's average daily net assets.
Calvert Administrative Services Company, an affiliate of the Advisor,
provides administrative services to the Portfolio for an annual fee, payable
monthly, of the greater of $40,000 or .10% of the Portfolio's annual average
daily net assets. The Advisor voluntarily reimbursed the Portfolio $23,845
for administrative service fees.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
shareholder servicing agent for the Portfolio. National Financial Data
Services, Inc. is the transfer and dividend disbursing agent.
Each Director who is not affiliated with the Advisor received a fee of $750
for each Board meeting attended plus an annual fee of $3,000 for Directors
not serving on other Calvert Fund Boards. Director's fees are allocated to
each of the portfolios served.
Note C -- Investment Activity
During the year, purchases and sales of investments, other than short-term
securities, were $13,825,901 and $14,277,288, respectively.
The cost of investments owned at December 31, 1998, was substantially the
same for federal income tax and financial reporting purposes. Net unrealized
appreciation aggregated $2,637,308, of which $3,788,125 related to
appreciated investments and $1,150,817 related to depreciated investments.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds and State
Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is
providing an unsecured line of credit facility, in the aggregate amount of
$50 million ($25 million committed and $25 million uncommitted), to be
accessed by the Funds for temporary or emergency purposes only. Borrowings
under this facility bear interest at the overnight Federal Funds Rate plus
.50% per annum. A commitment fee of .10% per annum will be incurred on the
unused portion of the committed facility which will be allocated to all
participating funds. This fee is paid quarterly in arrears. The Fund had no
loans outstanding pursuant to this line of credit at December 31, 1998.
<PAGE>
Note E -- Subsequent Event
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company ("Acacia Mutual"). Effective January 1, 1999,
Acacia Mutual merged with and became a controlled subsidiary of Ameritas
Acacia Mutual Holding Company.
Tax Information (Unaudited)
The Portfolio designates $1,148,112 as capital gain dividends paid during
the fiscal year ended December 31, 1998.
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $19.10 $18.74 $17.15
Income from investment operations
Net investment income .10 .19 .17
Net realized and unrealized
gain (loss) 3.35 2.28 2.40
Total from investment
operations 3.45 2.47 2.57
Distributions from
Net investment income (.07) (.20) (.14)
Net realized gains (1.67) (1.91) (.84)
Total distributions (1.74) (2.11) (.98)
Total increase (decrease) in
net asset value 1.71 .36 1.59
Net asset value, ending $20.81 $19.10 $18.74
Total return 18.09% 13.23% 14.99%
Ratios to average net assets:
Net investment income .49% .85% 1.02%
Total expenses + 1.65% 1.56% 1.59%
Net expenses 1.56% 1.17% 1.18%
Expenses reimbursed .15% .17% .23%
Portfolio turnover 92% 35% 85%
Net assets, ending
(in thousands) $17,109 $14,450 $14,027
Number of shares outstanding,
ending (in thousands) 822 757 748
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $15.89 $17.72
Income from investment operations
Net investment income .27 .11
Net realized and unrealized gain (loss) 1.69 (.49)
Total from investment operations 1.96 (.38)
Distributions from
Net investment income (.25) (.13)
Net realized gains (.45) (1.32)
Total distributions (.70) (1.45)
Total increase (decrease) in net asset value 1.26 (1.83)
Net asset value, ending $17.15 $15.89
Total return 12.35% (2.13%)
Ratios to average net assets:
Net investment income 1.48% .59%
Total expenses + 1.51% NA
Net expenses 1.12% 1.24%
Expenses reimbursed .39% .29%
Portfolio turnover 90% 84%
Net assets, ending (in thousands) $9,831 $7,765
Number of shares outstanding,
ending (in thousands) 573 489
+ Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL BALANCED PORTFOLIO
Dear Investor:
The stock market, represented by the Standard & Poor's 500 Stock Index,
posted its fourth consecutive year of double-digit gains in 1998; however,
these phenomenal returns came with increased volatility. In the fourth
quarter of 1997, stocks suffered a setback when currencies and markets in
Asia collapsed. Investors came to believe the consequences of problems in
this region would be limited, and the market moved ahead through the second
quarter of 1998. In the third quarter, problems in Russia and Latin America
emerged and investors were scared off once again. The Federal Reserve
stepped in to lower rates and restore liquidity to the financial markets.
This calmed investors and supported a strong fourth quarter rally.
Performance overall was spectacular, but there were wide performance
disparities between industry groups, investment styles (growth versus value)
and capitalization ranges (large versus small). A handful of large-cap
companies led the market's advance. Growth stocks outperformed value
investments. And technology companies were the clear winners among industry
groups. Global commodity deflation caused stocks in the raw materials, basic
industries and energy sectors to underperform.
In the bond market, the worrisome state of international markets touched off
a flight to quality, with investors seeking the safe harbor of U.S.-issued
debt securities, primarily Treasuries.
BALANCED PORTFOLIO
Comparison in change in value of a hypothetical $10,000 investment.
Three-line graph here showing growth from 12.31.88 to 12.98
Social Balanced Portfolio $33,570
S&P 500 Index Monthly Reinvested $57,928
Lehman Aggregate Bond Index TR $24,240
AVERAGE ANNUAL TOTAL RETURN
period ended 12.31.98
1 year 16.33%
5 year 14.58%
10 year 12.87%
since inception 11.60%
9.2.86
*Performance information is for the Portfolio only and does not reflect
charges and expenses of the variable annuity or variable universal life
contract. Past performance does not indicate future results.
New Subadvisors assumed management of the Portfolio effective February 1995.
Fund Performance
We're pleased to report the Calvert Variable Series Social Balanced
Portfolio outperformed its peer group average and benefited from positive
12-month returns from each asset class and both managers. For the 12 months,
the Portfolio posted a gain of 16.33% (exclusive of any sales or account
charges), ahead of the 14.79% return for the average variable annuity
balanced fund tracked by Lipper. The Portfolio's asset allocation remained
fixed at approximately 60% stocks, 40% bonds.
Strategy
Fixed Income Investments - Managed by Calvert Asset Management Company, Inc.
Through early October, bond yields declined as the global crisis deepened
and the flight to quality persisted. For a time, the non-government
fixed-income market essentially closed down due to lack of demand. The bond
portion of the Portfolio significantly underperformed the higher quality
Lehman Index during this period.
Stock markets worldwide rallied, beginning with the Federal Reserve's easing
of interest rates in late September and continuing as some stability
returned to the fragile global markets. This allowed non-Treasury
fixed-income products (corporates, mortgages, agencies, etc.) to rally
significantly versus Treasuries. During the last two months of the year, the
Portfolio's holdings rallied enough to erase about half of the
underperformance experienced in the prior four months.
Given the volatile environment, the manager has taken steps to upgrade the
Portfolio's credit quality in order to lessen the impact of any additional
adverse world events. As we saw this year, the safest securities are the
winners in uncertain times.
Equity Investments - Managed by NCM Capital Management, Inc.
NCM positioned their portion of the Portfolio defensively. They pared back
positions in sectors dependent on the strength of the economy, including
basic materials and industrials, and avoided energy stocks altogether. NCM
increased exposure to less cyclical groups, including health care,
communication services and consumer staples. This strategy allowed the
Portfolio to post gains ahead of its benchmark, the Russell 3000 Index, for
the year; however, it worked against the Portfolio in the strong fourth
quarter rally.
The manager also cut back the Portfolio's exposure to technology stocks,
fearing this highly volatile group might self-destruct as investors sought
the safety of more predictable and less economically sensitive stocks. By
November, it was apparent these stocks still had room to rise, and NCM began
to selectively reinvest. By December, 25-26% of Portfolio assets managed by
NCM were invested in the technology sector, versus about 18% for the market
as a whole. With this change in strategy, the Portfolio was better able to
participate in the year-end rally.
Results thus far indicate technology companies will post good first quarter
profits. As spring approaches and sales typically slow in anticipation of
the release of new products, NCM expects to gradually reduce their position.
Proceeds will likely be redirected to financials. The Fed's easing bias and
signs of stability in world economies bode well for this group. Currently,
NCM's exposure to this sector is slightly less than that of the market's.
Outlook
We were pleased at our managers' ability to mitigate the effects of
extremely volatile markets and obtain good returns in a climate where the
best returns tended to come from just a handful of companies, industries or
security types. Looking ahead, we expect stock and bond markets will remain
choppy, as investors assess the strength of economies here and abroad, the
Fed's willingness to keep rates low and the strength of company earnings.
This Portfolio's balanced approach is a good way to participate in market
opportunities and poses considerably less risk than an all-stock portfolio.
Sincerely,
/s/
Barbara J. Krumsiek
President and CEO
Calvert Social Balanced Portfolio of Calvert Variable Series, Inc., should
not be confused with the Calvert Social Investment Fund Balanced Portfolio.
Performance of the two funds will differ.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors of Calvert Variable Series, Inc. and Shareholders
of Calvert Social Balanced Portfolio:
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments, and the related statement of
operations, statement of changes in net assets and financial highlights
present fairly, in all material respects, the financial position of Calvert
Social Balanced Portfolio, (one of the portfolios comprising Calvert
Variable Series, Inc., hereafter referred to as the "Fund"), at December 31,
1998, the results of its operations, the changes in its net assets and the
financial highlights for each of the periods presented, in conformity with
generally accepted accounting principles. Theses financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the Fund's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 1998 by correspondence with
custodian and brokers provide a reasonable basis for the opinion expressed
above.
PricewaterhouseCoopers LLP
Baltimore, Maryland
January 29, 1999
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1998
Equity Securities - 60.2% Shares Value
Banks - Major Regional - 2.2%
Banc One Corp. 75,680 $3,864,410
State Street Corp. 41,000 2,852,062
6,716,472
Banks - Money Center - 1.4%
BankAmerica Corp. 72,500 4,359,062
4,359,062
Computer - Hardware - 3.1%
Compaq Computer Corp. 82,100 3,443,069
Gateway 2000, Inc. * 30,100 1,540,744
International Business Machines Corp. 23,700 4,378,575
9,362,388
Computer - Microsystems - 1.5%
Sun Microsystems, Inc. * 51,700 4,426,812
4,426,812
Computer - Networking - 1.1%
Cisco Systems, Inc. * 37,250 3,457,266
3,457,266
Computer - Peripherals - 1.2%
EMC Corp. * 43,900 3,731,500
3,731,500
Computer - Software - 5.2%
America Online, Inc. * 23,600 3,776,000
BMC Software, Inc. * 34,700 1,546,319
Microsoft Corp. * 44,440 6,163,272
Oracle Corp. * 97,935 4,223,447
15,709,038
Consumer Finance - 0.5%
Countrywide Credit Industries, Inc. 32,300 1,621,056
1,621,056
Distributors - Food and Health - 2.0%
Cardinal Health, Inc. 58,050 4,404,544
Sysco Corp. 60,200 1,651,738
6,056,282
Electronic Companies - 0.8%
Cinergy Corp. 71,100 2,444,062
2,444,062
Equity Securities (cont'd) Shares Value
Electronics - Semiconductors - 1.4%
Intel Corp. 36,000 $4,268,250
4,268,250
Financial - Diversified - 2.7%
Federal National Mortgage Assn. 68,700 5,083,800
Umbono Investment Corp., Ltd. *^ 9,212,234 3,127,934
8,211,734
Foods - 0.9%
Hershey Foods Corp. 45,900 2,854,406
2,854,406
Health Care - Diversified - 1.7%
Johnson & Johnson 59,700 5,007,338
5,007,338
Health Care - Pharmaceutical and Drugs - 6.3%
Amgen, Inc. * 49,700 5,196,756
Merck & Co., Inc. 35,700 5,272,444
Schering Plough Corp. 93,000 5,138,250
Watson Pharmaceuticals, Inc. * 56,400 3,546,150
19,153,600
Household Produces - Non-Durable - 1.1%
Dial Corp. 113,200 3,268,650
3,268,650
Insurance - 1.3%
Conseco, Inc. 39,500 1,207,219
Marsh & McLennan Cos., Inc. 48,000 2,805,000
4,012,219
Insurance - Multi-Line - 1.7%
American International Group, Inc. 53,037 5,124,700
5,124,700
Investment Management - 0.4%
Franklin Resources, Inc. 35,600 1,139,200
1,139,200
Manufacturing - Diversified - 2.0%
Tyco International, Ltd. 80,100 6,042,544
6,042,544
Medical - Information Systems - 1.4%
IMS Health, Inc. 58,300 4,398,006
4,398,006
Multi-Media - 1.7%
Time Warner, Inc. 85,000 5,275,312
5,275,312
<PAGE>
Equity Securities (cont'd) Shares Value
Personal Care - 0.9%
Gillette Co. 55,400 $2,676,512
2,676,512
Power Producers - 0.6%
CalEnergy Co., Inc. * 49,000 1,699,688
1,699,688
Printing - 0.7%
Donnelley (R. R.) & Sons, Co. 49,500 2,168,719
2,168,719
Real Estate Investment Trust - 0.5%
Highwoods Properties, Inc., Preferred, Series A 1,500 1,386,915
1,386,915
Retail - Building Supplies - 1.9%
Home Depot, Inc. 96,140 5,882,566
5,882,566
Retail - Department Stores - 0.9%
Dayton Hudson Corp. 50,500 2,739,625
2,739,625
Retail - Discount Stores - 1.3%
Costco Cos., Inc. * 54,500 3,934,219
3,934,219
Retail - Drug Stores - 1.1%
CVS Corp. 62,400 3,432,000
3,432,000
Retail - Food Chains - 1.7%
Safeway, Inc. * 83,300 5,076,094
5,076,094
Services - Commercial and Consumer - 0.6%
Block (H & R), Inc. 37,600 1,692,000
1,692,000
Services - Data Processing - 0.9%
Automatic Data Processing, Inc. 33,500 2,686,281
2,686,281
Telephone - 7.0%
Century Telephone Enterprises, Inc. 83,897 5,663,048
Lucent Technologies, Inc. 38,600 4,246,000
MCI Worldcom, Inc. 80,438 5,771,426
SBC Communications, Inc. 105,940 5,681,032
21,361,506
<PAGE>
Equity Securities (Cont'd) Shares Value
Textiles - Apparel - 0.5%
Jones Apparel Group, Inc. * 67,200 $1,482,600
1,482,600
Total Equity Securities (Cost $130,356,113) 182,858,622
Principal
Corporate Obligations - 33.8% Amount
AGL Capital Trust, 8.17%, 6/1/37 $1,000,000 1,021,360
Aetna Services, Inc., 5.66%, 11/29/99 1,000,000 1,003,054
Allmerica Financial Corp., 7.625%, 10/15/25 3,000,000 3,287,190
AMR Corp., 9.82%, 3/7/01 25,000 26,920
Atlantic Mutual Insurance Co., 8.15%, 2/15/28 3,000,000 2,755,410
BankBoston Home Equity Loan Trust,
6.46%, 4/25/12 1,630,037 1,629,695
BNP US Funding, LLC, 7.738%, 12/31/491,000,000 964,974
Cendant Corp., 7.50%, 12/1/00 1,000,000 1,008,307
Chase Manhattan Auto Owner Trust, 5.80%,
1/15/02 500,000 502,830
Computer Associates International, Inc.,
6.25%, 4/15/03 2,000,000 1,992,416
Computer Associates International, Inc.,
6.375%, 4/15/05 3,000,000 2,968,530
Conseco, Inc., 6.40%, 2/10/03 4,000,000 3,788,480
Dime Capital Trust I, 9.33%, 5/6/27 1,775,000 1,893,712
First Data Corp., 6.75%, 7/15/05 1,000,000 1,048,750
First Data Corp., 5.80%, 12/15/08 2,000,000 1,975,920
Florida Residential Property, 7.25%, 7/1/02 1,000,000 1,033,250
Fugi JGB Investment, LLC, 9.87%, 12/31/49 3,500,000 2,555,000
Goldman Sachs Group, 7.875%, 1/15/031,000,000 1,063,028
Goldman Sachs Group, 6.625%, 12/1/042,000,000 2,056,840
Green Tree Financial Corp., 6.50%, 9/26/02 3,000,000 2,872,980
Greenpoint Capital Trust I, 9.10%, 6/1/27 1,000,000 1,037,460
GS Escrow Corp., 6.75%, 8/1/01 1,750,000 1,735,388
Homeside Lending, Inc., 6.86%, 7/2/01 2,000,000 2,043,580
International Business Machines Corp., 5.25%,
12/1/03 3,000,000 2,993,730
International Lease Finance Corp., 6.64%,
2/1/00 1,000,000 1,012,280
Interpool, Inc., 6.625%, 3/1/03 2,000,000 1,901,800
LG G Cap Corp., 5.75%, 11/1/01 2,500,000 2,490,148
Mark IV Industries, Inc., 7.50%, 9/1/07 1,000,000 952,300
MCI Communications Corp., 6.125%, 4/15/02 1,500,000 1,521,120
MCN Investment Corp., 6.30%, 4/2/11 2,000,000 2,011,750
MCN Investment Corp., 6.35%, 4/2/12 1,000,000 1,008,004
Medpartners, Inc., 6.875%, 9/1/00 4,000,000 3,400,000
Merita Bank Ltd., 7.15%, 12/29/49 4,500,000 4,424,076
Nationsbank Corp., 7.75%, 8/15/04 1,500,000 1,637,955
National Rural Utilities Coop, 5.38%, 12/15/03 1,000,000 986,770
National Rural Utilities Coop, 5.75%, 12/1/08 4,700,000 4,704,723
North America Mtg, 7.315%, 8/25/03 1,000,000 1,017,490
Onbank Capital Trust I, 9.25%, 2/1/27 4,000,000 4,661,800
Paine Webber Group, Inc., 7.00%, 3/1/001,700,000 1,716,558
Paine Webber Group, Inc., 6.55%, 4/15/08 2,000,000 2,011,920
San Mateo, CA Redevelopment Agency,
7.125%, 8/1/08 3,585,000 3,791,138
Socgen Real Estate Co., L.L.C., 7.64%,
12/29/49 4,500,000 4,218,750
Sovereign Bancorp, Inc., 6.75%, 9/1/00 1,250,000 1,255,050
Star Banc Corp., 5.86%, 11/6/01 2,000,000 2,013,552
Sun Life CDA US Trust l, 8.526%, 5/29/49 4,000,000 4,334,120
Swedbank Sparbank Svenge, 7.50%, 9/27/49 1,000,000 975,693
<PAGE>
Principal
Corporate Obligations - (Cont'd) Amount Value
Tokai Pfd Capital, LLC, 9.98%, 12/29/49$1,000,000 $850,000
Tyco International Group, 6.125%, 6/15/01 2,000,000 2,026,740
Xerox Corp., 5.25%, 12/15/03 1,900,000 1,880,202
United Utilities, 6.875%, 8/15/28 500,000 499,035
Zurich Capital Trust, 8.376%, 6/1/37 2,000,000 2,293,300
Total Corporate Obligations (Cost $103,724,426) 102,855,078
U.S. Government Agencies
and instrumentalities - 1.1%
Federal Home Loan Mortgage Corp., 7.12%,
6/25/28 1,000,000 1,034,238
Federal National Mortgage Assn., 7.19%,
5/29/26 500,000 593,265
Federal National Mortgage Assn., 6.08%,
9/1/28 1,050,000 1,088,335
WNH Ltd. Partnership, 9.40%, 10/1/99 705,000 724,860
Total U.S. Government Agencies and Instrumentalities
(Cost $3,474,903) 3,440,698
Municipal Obligations - 0.6%
Maryland State Economic Development Corp.,
8.00%, 10/1/05 905,000 941,544
Maryland State Economic Development Corp.,
8.625%, 10/1/19 750,000 883,065
Total Municipal Obligations (Cost $1,655,000) 1,824,609
U.S. Treasury - 0.3%
U.S. Treasury Bonds, 5.25%, 11/15/28 1,000,000 1,023,360
Total U.S. Treasury (Cost $1,015,308) 1,023,360
Other Debt - 0.3%
Chickasaw Nation, Oklahoma, 10.00%,
8/1/03 # 777,815 583,361
Umbono Investment, 10.00%, 1/16/02 ^ 1,799,813 305,555
Total Other Debt (Cost $1,131,830) 888,916
Repurchase Agreements - 3.0%
Donaldson, Lufkin & Jenrette, 5.00%, 1/4/99
(Collateral: $9,183,677, REVCO
STRIPS, 10/15/02) 9,000,000 9,000,000
Total Repurchase Agreements (Cost $9,000,000) 9,000,000
TOTAL INVESTMENTS
(Cost $250,357,580) - 99.3% 301,891,283
Other assets in excess of liabilities - 0.7%
2,063,124
NET ASSETS - 100% $303,954,407
* Non-income producing
# This security is in default and was valued by the Board of Directors.
See Note A.
^ See note B.
Explanation of Guarantees:
LOC: Letter of Credit
Abbreviations:
VRDN: Variable Rate Demand Notes
See notes to financial statements.
<PAGE>
BALANCED PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets
Investments in securities, at value $301,891,283
Cash 60,057
Receivable for securities sold 61,245
Interest and dividends receivable 2,229,431
Other assets 3,161
Total assets 304,245,177
Liabilities
Payable to Calvert Asset Management Company, Inc. 207,714
Payable to Calvert Shareholder Services, Inc. 7,426
Accrued expenses and other liabilities 75,630
Total liabilities 290,770
Net assets $303,954,407
Net Assets Consist of:
Par value and paid-in capital applicable to 142,200,869
shares of common stock outstanding; $1 par value,
275,000,000 shares authorized $250,191,091
Undistributed net investment income (loss) 714,433
Accumulated net realized gain (loss) on investments and
foreign currency transactions 1,513,368
Net unrealized appreciation (depreciation) on
investments and foreign currencies and assets
and liabilities denominated in foreign currencies 51,535,515
Net Assets $303,954,407
Net Asset Value per Share $2.138
<PAGE>
BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
Net Investment Income
Investment Income
Interest income $7,878,900
Dividend income (net of foreign taxes of $3,333) 1,350,006
Total investment income 9,228,906
Expenses
Investment advisory fee 1,826,036
Transfer agency fees and expenses 78,934
Directors' fees and expenses 24,590
Custodian fees 74,220
Registration fees 38,305
Reports to shareholders 189,387
Professional fees 35,395
Miscellaneous 30,047
Total expenses 2,296,914
Fees paid indirectly (57,479)
Net expenses 2,239,435
Net Investment Income 6,989,471
Realized and Unrealized Gain (Loss)
Net realized gain (loss) on:
Investments 15,592,238
Foreign currency transactions (10,454)
15,581,784
Change in unrealized appreciation or depreciation on:
Investments and foreign currencies 17,876,448
Assets and liabilities denominated
in foreign currencies 1,812
17,878,260
Net Realized and Unrealized Gain (Loss) 33,460,044
Increase (Decrease) in Net Assets
Resulting From Operations $40,449,515
<PAGE>
BALANCED PORTFOLIO
STATEMENTS OF CHANGES IN NET ASSETS
Year ended Year ended
December 31, December 31,
Increase (Decrease) in Net Assets 1998 1997
Operations
Net investment income $6,989,471 $5,135,929
Net realized gain (loss) 15,581,784 10,577,885
Change in unrealized appreciation
or depreciation 17,878,260 19,045,338
Increase (Decrease) in Net Assets
Resulting From Operations 40,449,515 34,759,152
Distributions to shareholders from
Net investment income (6,779,908) (5,000,858)
Net realized gain on investments (15,194,510) (10,847,850)
Total distributions (21,974,418) (15,848,708)
Capital share transactions
Shares sold 54,108,882 44,260,144
Reinvestment of distributions 21,974,418 15,848,708
Shares redeemed (18,437,965) (12,658,315)
Total capital share transactions 57,645,335
47,450,537
Total Increase (Decrease) in Net Assets 76,120,432 66,360,981
Net Assets
Beginning of year 227,833,975 161,472,994
End of year (including undistributed net
investment income of $714,433 and
$515,324, respectively) $303,954,407 $227,833,975
Capital Share Activity
Shares sold 25,653,403 22,441,316
Reinvestment of distributions 10,336,200 7,996,320
Shares redeemed (8,755,271) (6,516,580)
Total capital share activity 27,234,332 23,921,056
<PAGE>
NOTES TO FINANCIAL STATEMENTS
Note A -- Significant Accounting Policies
General: Calvert Social Balanced Portfolio (formerly, Calvert Responsibly
Invested Balanced Portfolio) (the "Portfolio"), a series of Calvert Variable
Series, Inc. (formerly Acacia Capital Corporation) (the "Fund"), is
registered under the Investment Company Act of 1940 as a non-diversified,
open-end management investment company. The operations of each series are
accounted for separately. The shares of the Portfolio are sold to affiliated
and unaffiliated insurance companies for allocation to certain of their
variable separate accounts.
Security Valuation: Securities listed or traded on a national securities
exchange are valued at the last reported sale price. Foreign security
prices, furnished by quotation services in the security's local currency,
are translated using the current U.S. dollar exchange rate. Unlisted
securities and listed securities for which the last sale price is not
available are valued at the most recent bid price or based on a yield
equivalent obtained from the securities' market maker. Municipal securities
are valued utilizing the average of bid prices or at bid prices based on a
matrix system (which considers such factors as security prices, yields,
maturities and ratings) furnished by dealers through an independent pricing
service. Other securities and assets for which market quotations are not
available or deemed inappropriate are valued in good faith under the
direction of the Board of Directors.
In determining fair value, the Board considers all relevant qualitative and
quantitative information available. These factors are subject to change over
time and are reviewed periodically. The values assigned to fair value
investments are based on available information and do not necessarily
represent amounts that might ultimately be realized, since such amounts
depend on future developments inherent in long-term investments. Because of
the inherent uncertainty of valuation, those estimated values may differ
significantly from the values that would have been used had a ready market
of the investments existed, and the differences could be material.
At December 31, 1998, $583,361 or 0.2% of net assets were valued by the Board
of Directors.
Repurchase Agreements: The Portfolio may enter into repurchase agreements
with recognized financial institutions or registered broker/dealers and, in
all instances, holds underlying securities with a value exceeding the total
repurchase price, including accrued interest. Although risk is mitigated by
the collateral, the Fund could experience a delay in recovering its value
and a possible loss of income or value if the counterparty fails to perform
in accordance with the terms of the agreement.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Dividend income is recorded on the ex-dividend date
or, in the case of dividends on certain foreign securities, as soon as the
Portfolio is informed of the ex-dividend date. Interest income, accretion of
discount and amortization of premium are recorded on an accrual basis.
Foreign Currency Transactions: The Portfolio's accounting records are
maintained in U.S. dollars. For valuation of assets and liabilities on each
date of net asset value determination, foreign denominations are converted
into U. S. dollars using the current exchange rate. Security transactions,
income and expenses are translated at the prevailing rate of
<PAGE>
exchange on the date of the event. The effect of changes in foreign exchange
rates on foreign denominated investments is included with the net realized
and unrealized gain or loss on investments. Other foreign currency gains or
losses are reported separately.
Distributions to Shareholders: Distributions to shareholders are recorded by
the Portfolio on ex-dividend date. Dividends from net investment income and
distributions from net realized capital gains, if any, are paid at least
annually. Distributions are determined in accordance with income tax
regulations which may differ from generally accepted accounting principles;
accordingly, periodic reclassifications are made within the Portfolio's
capital accounts to reflect income and gains available for distribution
under income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those
estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees may be paid indirectly by
credits earned on the Portfolio's cash on deposit with the bank. Such a
deposit arrangement is an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
Note B -- Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory
services and pays the salaries and fees of officers and affiliated Directors
of the Portfolio. For its services, the Advisor receives a monthly fee based
on an annual rate of .70% of the Portfolio's average daily net assets. The
Portfolio pays a monthly performance fee of plus or minus up to .15%, on an
annual basis, of average daily net assets of the performance period
depending on the Portfolio's performance compared to the Lipper Balanced
Funds Index.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
shareholder servicing agent for the Portfolio. National Financial Data
Services, Inc. is the transfer and dividend disbursing agent.
Each Director who is not affiliated with the Advisor received a fee of $750
for each Board meeting attended plus an annual fee of $3,000 for Directors
not serving on other Calvert Fund Boards. Director's fees are allocated to
each of the portfolios served.
Umbono Investment Corp., which is an affiliate because the Portfolio owns
over 17% of the voting securities, was purchased at a cost of $2,544,511 for
9,212,234 shares.
Note C -- Investment Activity
During the year, purchases and sales of investments, other than short-term
securities, were $1,383,214,876 and $1,337,497,546, respectively. U.S.
government security purchases were $847,477,413 and sales were $843,705,924.
<PAGE>
The cost of investments owned at December 31, 1998, was substantially the
same for federal income tax purposes and financial reporting purposes. Net
unrealized appreciation aggregated $51,533,703, of which $55,311,183 related
to appreciated securities and $3,777,480 related to depreciated securities.
As a cash management practice, the Portfolio may sell or purchase securities
from other Portfolios managed by the Advisor. For the year ended December
31, 1998, the Portfolio effected transactions with other Calvert Portfolios,
which resulted in net realized losses on sales of securities of $43,702.
These purchases and sales transactions, executed at independently derived
prices pursuant to Rule 17a-7 under the Investment Company Act of 1940, were
$15,598,287 and $9,599,877, respectively.
Note D -- Line of Credit
A financing agreement is in place with all Calvert Group Funds and State
Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is
providing an unsecured line of credit facility, in the aggregate amount of
$50 million ($25 million committed and $25 million uncommitted), to be
accessed by the Funds for temporary or emergency purposes only. Borrowings
under this facility bear interest at the overnight Federal Funds Rate plus
.50% per annum. A commitment fee of .10% per annum will be incurred on the
unused portion of the committed facility which will be allocated to all
participating funds. This fee is paid quarterly in arrears. The Fund had no
loans outstanding pursuant to this line of credit at December 31, 1998.
Note E -- Subsequent Event
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company ("Acacia Mutual"). Effective January 1, 1999,
Acacia Mutual merged with and became a controlled subsidiary of Ameritas
Acacia Mutual Holding Company.
Tax Information (Unaudited)
The Portfolio designates $14,786,976 as capital gain dividends paid during
the fiscal year ended December 31, 1998.
For corporate shareholders of Calvert Social Balanced Portfolio, a total of
19.59% of the income dividends paid during the fiscal year ended December
31, 1998 qualifies for the dividends received deductions.
<PAGE>
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
Years Ended
December 31, December 31, December 31,
1998 1997 1996
Net asset value, beginning $1.982 $1.774 $1.703
Income from investment operations
Net investment income .052 .047 .040
Net realized and unrealized
gain (loss) .271 .309 .175
Total from investment
operations .323 .356 .215
Distributions from
Net investment income (0.52) (.047) (.042)
Net realized gains (.115) (.101) (.102)
Total distributions (.167) (.148) (.144)
Total increase (decrease) in
net asset value .156 .208 .071
Net asset value, ending $2.138 $1.982 $1.774
Total return 16.33% 20.08% 12.62%
Ratios to average net assets:
Net investment income 2.66% 2.66% 2.71%
Total expenses + .87% .80% .81%
Net expenses .85% .77% .78%
Portfolio turnover 539% 905% 99%
Net assets, ending
(in thousands) $303,954 $227,834 $161,473
Number of shares outstanding,
ending (in thousands) 142,201 114,967 91,045
Years Ended
December 31, December 31,
1995 1994
Net asset value, beginning $1.440 $1.537
Income from investment operations
Net investment income .050 .046
Net realized and unrealized gain (loss) .380 (.097)
Total from investment operations .430 (.051)
Distributions from
Net investment income (.040) (.046)
Net realized gains (.127) --
Total distributions (.167) (.046)
Total increase (decrease) in net asset value .263 (.097)
Net asset value, ending $1.703 $1.440
Total return 29.87% (3.30%)
Ratios to average net assets:
Net investment income 3.08% 3.39%
Total expenses + .83% NA
Net expenses .81% .80%
Portfolio turnover 163% 43%
Net assets, ending (in thousands) $110,237 $66,593
Number of shares outstanding,
ending (in thousands) 64,728 46,244
+ Effective December 31, 1995, this ratio reflects total expenses before
reduction for fees paid indirectly; such reductions are included in the
ratio of net expenses. Total expenses are presented net of expense waivers
and reimbursements.
NA Disclosure not applicable to prior periods.
<PAGE>
CALVERT GROUP AND THE YEAR 2000
PLANS AND PROGRESS
We are now less than a year away from the year 2000, a problematic date for
computer systems coded for two-character year format. Entered as "00," the
year 2000 would be processed as 1900, a mistake that could foul a variety of
date-sensitive transactions.
As your mutual fund sponsor, our goal is make sure there is no interruption
in the level of service you receive. In the summary below, we've outlined
the steps Calvert Group is taking to ensure our systems perform reliably.
Step One--Assess Systems and Software. Develop an Action Plan
In 1997, we identified all systems, operating platforms and software
potentially affected by the millennium bug. These included:
Calvert Group systems--portfolio trading, sales contact and reporting
and internal management reporting
transfer agency systems--shareholder record-keeping and transaction
processing
subadvisor systems--investment accounting
other third-party data and service systems.
We also formed a Y2K task force, led by Calvert's vice president of
technology. This group has identified and prioritized our efforts to achieve
year 2000 compliance.
Step Two--Test for Compliance. Repair Systems as Necessary.
Internal systems have been tested. We've made repairs and moved modified
code into production. These systems are now fully compliant. Transfer agency
systems were re-engineered for compliance in 1989. Recent tests indicate
these are, in fact, compliant. The readiness of third-party systems,
including subadvisor systems, has been evaluated. Based on information
received from these groups, we have found no significant obstacles to
compliance.
Step Three--Confirm Compliance. Finalize Contingency Plan.
Testing of transfer agency systems will continue through 1999 to ensure
these remain compliant and continue to interact correctly with external
systems and processes. The transfer agency has established a back-up site,
should main systems fail, and compliance testing of these contingency
measures are also underway. We are developing contingency plans to ensure
that any unforeseen systems failures will not adversely affect our
operations or inconvenience our shareholders.
For more information or to get an update on remediation and testing efforts,
please visit us online at www.calvertgroup.com.
