SEC REGISTRATION NOS.
811-3591 AND 2-80154
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 39 XX
AND/OR
REGISTRATION STATEMENT UNDER THE
INVESTMENT ACT OF 1940
AMENDMENT NO. 39 XX
CALVERT VARIABLE SERIES, INC.
THIS FILING IS FOR THE AMERITAS PORTFOLIOS ONLY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER: (301) 951-4800
WILLIAM M. TARTIKOFF
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
(NAME AND ADDRESS OF AGENT FOR SERVICE)
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE
__ IMMEDIATELY UPON FILING __ ON (DATE)
PURSUANT TO PARAGRAPH (B) PURSUANT TO PARAGRAPH (B)
__ 75 DAYS AFTER FILING __ ON (DATE)
PURSUANT TO PARAGRAPH (A) PURSUANT TO PARAGRAPH (A)
OF RULE 485.
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL PORTFOLIOS
PROSPECTUS
APRIL 30, 2000
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PROSPECTUS
APRIL 30, 2000
CALVERT VARIABLE SERIES, INC.
CALVERT SOCIAL PORTFOLIOS
1 SOCIAL MONEY MARKET PORTFOLIO
6 SOCIAL SMALL CAP GROWTH PORTFOLIO
13 SOCIAL MID CAP GROWTH PORTFOLIO
20 SOCIAL INTERNATIONAL EQUITY PORTFOLIO
27 SOCIAL BALANCED PORTFOLIO
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION ("SEC") OR ANY STATE SECURITIES COMMISSION NOR HAS THE SEC
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
SOCIAL MONEY MARKET PORTFOLIO
ABOUT THE PORTFOLIO
2 INVESTMENT OBJECTIVE, STRATEGY, PAST PERFORMANCE
3 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT SOCIAL INVESTING
3 INVESTMENT SELECTION PROCESS
3 SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ABOUT YOUR INVESTMENT
3 THE FUND AND ITS MANAGEMENT
4 ADVISORY FEES
4 PURCHASE, EXCHANGE AND REDEMPTIONS OF SHARES
4 DIVIDENDS AND DISTRIBUTIONS
4 TAXES
5 FINANCIAL HIGHLIGHTS
CALVERT SOCIAL MONEY MARKET PORTFOLIO OF CALVERT VARIABLE SERIES, INC. (THE
"FUND") SHOULD NOT BE CONFUSED WITH THE CALVERT SOCIAL INVESTMENT FUND MONEY
MARKET PORTFOLIO. PERFORMANCE OF THE TWO PORTFOLIOS WILL DIFFER.
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CVS SOCIAL MONEY MARKET
ADVISOR: CALVERT ASSET MANAGEMENT COMPANY, INC.
OBJECTIVE
CVS SOCIAL MONEY MARKET SEEKS TO PROVIDE CURRENT INCOME BY INVESTING IN
ENTERPRISES THAT MAKE A SIGNIFICANT CONTRIBUTION TO SOCIETY THROUGH THEIR
PRODUCTS AND SERVICES AND THROUGH THE WAY THEY DO BUSINESS.
PRINCIPAL INVESTMENT STRATEGIES
CVS SOCIAL MONEY MARKET INVESTS IN HIGH QUALITY, MONEY MARKET INSTRUMENTS, SUCH
AS COMMERCIAL PAPER, VARIABLE RATE DEMAND NOTES, CORPORATE, AGENCY AND TAXABLE
MUNICIPAL OBLIGATIONS. ALL INVESTMENTS MUST COMPLY WITH THE SEC MONEY MARKET
FUND REQUIREMENTS.
THE PORTFOLIO INVESTS WITH THE PHILOSOPHY THAT LONG-TERM REWARDS TO INVESTORS
WILL COME FROM THOSE ORGANIZATIONS WHOSE PRODUCTS, SERVICES, AND METHODS ENHANCE
THE HUMAN CONDITION AND THE TRADITIONAL AMERICAN VALUES OF INDIVIDUAL
INITIATIVE, EQUALITY OF OPPORTUNITY AND COOPERATIVE EFFORT. INVESTMENTS ARE
SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL OBJECTIVES OF
FINANCIAL SOUNDNESS AND SOCIAL CRITERIA. SEE "INVESTMENT SELECTION PROCESS."
PRINCIPAL RISKS
- - THE PORTFOLIO'S YIELD WILL CHANGE IN RESPONSE TO MARKET INTEREST RATES. IN
GENERAL, AS MARKET RATES GO UP SO WILL THE PORTFOLIO'S YIELD, AND VICE
VERSA.
- - ALTHOUGH THE PORTFOLIO TRIES TO KEEP THE VALUE OF ITS SHARES CONSTANT AT
$1.00 PER SHARE, EXTREME CHANGES IN MARKET RATES, AND OR SUDDEN
CREDIT DETERIORATION OF A HOLDING COULD CAUSE THE VALUE TO
DECREASE.
- - THE PORTFOLIO LIMITS THE AMOUNT IT INVESTS IN ANY ONE ISSUER TO TRY TO
LESSEN ITS EXPOSURE.
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO
PAST PERFORMANCE
THE BAR CHART AND TABLE BELOW SHOW THE PORTFOLIO'S ANNUAL RETURNS AND ITS
LONG-TERM PERFORMANCE. THE CHART SHOWS HOW THE PERFORMANCE HAS VARIED FROM
YEAR TO YEAR AND PROVIDES AN INDICATION OF THE RISK OF INVESTING IN THE
PORTFOLIO. THE TABLE COMPARES THE PORTFOLIO'S RETURNS OVER TIME TO THE
LIPPER VARIABLE ANNUITY MONEY MARKET FUNDS INDEX, A COMPOSITE INDEX OF THE
ANNUAL RETURN OF MUTUAL FUNDS THAT HAVE AN INVESTMENT GOAL SIMILAR TO THAT OF
THE PORTFOLIO. THE PORTFOLIO'S PAST PERFORMANCE DOES NOT NECESSARILY
INDICATE HOW THE PORTFOLIO WILL PERFORM IN THE FUTURE. THE RETURNS SHOWN DO
NOT REFLECT FEES AND CHARGES IMPOSED UNDER THE VARIABLE ANNUITY AND LIFE
INSURANCE CONTRACTS THROUGH WHICH AN INVESTMENT MAY BE MADE. IF THESE FEES
AND CHARGES WERE INCLUDED, THEY WOULD REDUCE THESE RETURNS.
CVS SOCIAL MONEY MARKET
YEAR-BY-YEAR TOTAL RETURN
[INSERT BAR CHART HERE]
BEST QUARTER (OF PERIODS SHOWN) Q1 '95 1.36%
WORST QUARTER (OF PERIODS SHOWN) Q2 '93 0.74%
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED DECEMBER 31, 1999)
1 YEAR 5 YEARS SINCE
INCEPTION*
CVS SOCIAL
MONEY MARKET 4.82% 5.09% 4.45%
LIPPER VA MONEY MARKET
INDEX 3.66% N/A N/A
*FUND INCEPTION 6/30/92.
FOR CURRENT YIELD INFORMATION CALL 800-368-2745, OR VISIT CALVERT GROUP'S
WEBSITE AT WWW.CALVERT.COM
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PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF THE PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
AND ASSOCIATED RISKS IS UNDER THE RISK-RETURN SUMMARY. THE PORTFOLIO IS ALSO
PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND TO USE CERTAIN INVESTMENT
TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH THEM.
FOR FURTHER INFORMATION ON THE PORTFOLIO'S INVESTMENT POLICIES AND RESTRICTIONS,
AS WELL AS A DESCRIPTION OF THE TYPES OF SECURITIES THAT MAY BE PURCHASED, SEE
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI").
INVESTMENT SELECTION PROCESS
THE PORTFOLIO HAS DEVELOPED THE FOLLOWING CRITERIA FOR THE SELECTION OF
ORGANIZATIONS IN WHICH THEY INVEST. THE PORTFOLIO RECOGNIZES, HOWEVER, THAT
THESE CRITERIA REPRESENT STANDARDS OF BEHAVIOR WHICH FEW, IF ANY, ORGANIZATIONS
TOTALLY SATISFY AND THAT, AS A MATTER OF PRACTICE, EVALUATION OF A PARTICULAR
ORGANIZATION IN THE CONTEXT OF THESE CRITERIA WILL INVOLVE SUBJECTIVE JUDGMENT
BY THE PORTFOLIO'S INVESTMENT ADVISOR.
SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
GIVEN THESE CONSIDERATIONS, THE PORTFOLIO SEEKS TO INVEST IN PRODUCERS OR
SERVICE PROVIDERS THAT:
1. DELIVER SAFE PRODUCTS AND SERVICES IN WAYS THAT SUSTAIN OUR NATURAL
ENVIRONMENT.
2. ARE MANAGED WITH PARTICIPATION THROUGHOUT THE ORGANIZATION IN DEFINING
AND ACHIEVING OBJECTIVES.
3. NEGOTIATE FAIRLY WITH THEIR WORKERS, PROVIDE AN ENVIRONMENT SUPPORTIVE OF
THEIR WELLNESS, DO NOT DISCRIMINATE ON THE BASIS OF RACE, GENDER, RELIGION, AGE,
DISABILITY, ETHNIC ORIGIN, OR SEXUAL ORIENTATION, DO NOT CONSISTENTLY VIOLATE
REGULATIONS OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, AND PROVIDE
OPPORTUNITIES FOR WOMEN, DISADVANTAGED MINORITIES, AND OTHERS FOR WHOM EQUAL
OPPORTUNITIES HAVE OFTEN BEEN DENIED.
4. FOSTER AWARENESS OF A COMMITMENT TO HUMAN GOALS, SUCH AS CREATIVITY,
PRODUCTIVITY, SELF-RESPECT AND RESPONSIBILITY, WITHIN THE ORGANIZATION AND THE
WORLD, AND CONTINUALLY RECREATE A CONTEXT WITHIN WHICH THESE GOALS CAN BE
REALIZED.
THE PORTFOLIO WILL NOT INVEST IN AN ISSUER PRIMARILY ENGAGED IN:
1. THE PRODUCTION OF NUCLEAR ENERGY OR THE MANUFACTURE OF EQUIPMENT TO
PRODUCE NUCLEAR ENERGY.
2. BUSINESS ACTIVITIES IN SUPPORT OF REPRESSIVE REGIMES.
3. THE MANUFACTURE OF WEAPONS SYSTEMS.
IN ADDITION, THE PORTFOLIO WILL NOT, AS A MATTER OF OPERATING POLICY WHICH MAY
BE CHANGED WITHOUT THE APPROVAL OF A MAJORITY OF THE OUTSTANDING SHARES, INVEST
IN AN ISSUER PRIMARILY ENGAGED IN THE MANUFACTURE OF ALCOHOLIC BEVERAGES OR
TOBACCO PRODUCTS, OR THE OPERATION OF GAMBLING CASINOS.
THE PORTFOLIO BELIEVES THAT SOCIAL AND TECHNOLOGICAL CHANGE WILL CONTINUE TO
TRANSFORM AMERICA AND THE WORLD INTO THE NEXT CENTURY. THOSE ENTERPRISES THAT
EXHIBIT A SOCIAL AWARENESS MEASURED IN TERMS OF THE ABOVE ATTRIBUTES AND
CONSIDERATIONS SHOULD BE BETTER PREPARED TO MEET FUTURE SOCIETAL NEEDS FOR GOODS
AND SERVICES. BY RESPONDING TO SOCIAL CONCERNS, THESE ENTERPRISES SHOULD
MAINTAIN FLEXIBILITY AND FURTHER SOCIAL GOALS. IN SO DOING THEY MAY NOT ONLY
AVOID THE LIABILITY THAT MAY BE INCURRED WHEN A PRODUCT OR SERVICE IS DETERMINED
TO HAVE A NEGATIVE SOCIAL IMPACT OR HAS OUTLIVED ITS USEFULNESS, BUT SHOULD ALSO
BE BETTER POSITIONED TO DEVELOP OPPORTUNITIES TO MAKE A PROFITABLE CONTRIBUTION
TO SOCIETY. THE PORTFOLIO BELIEVES THAT THESE ENTERPRISES WILL BE READY TO
RESPOND TO EXTERNAL DEMANDS AND ENSURE THAT OVER THE LONGER TERM THEY WILL BE
ABLE TO PROVIDE A POSITIVE RETURN TO BOTH INVESTORS AND SOCIETY AS A WHOLE.
IN SELECTING INVESTMENTS UNDER THE CRITERIA OUTLINED ABOVE, THE ADVISOR WILL
CONSIDER THE INVESTMENTS' ABILITY TO CONTRIBUTE TO THE DUAL OBJECTIVE OF THE
PORTFOLIO. POTENTIAL INVESTMENTS ARE FIRST SCREENED FOR FINANCIAL SOUNDNESS AND
THEN EVALUATED ACCORDING TO SOCIAL CRITERIA. TO THE GREATEST EXTENT POSSIBLE
INVESTMENTS ARE MADE IN COMPANIES EXHIBITING UNUSUAL, POSITIVE ACCOMPLISHMENTS
WITH RESPECT TO ONE OR MORE OF THE CRITERIA. COMPANIES MUST MEET THE PORTFOLIO'S
MINIMUM STANDARDS FOR ALL THE CRITERIA. IT SHOULD BE NOTED THAT THE PORTFOLIO'S
SOCIAL CRITERIA TEND TO LIMIT THE AVAILABILITY OF INVESTMENT OPPORTUNITIES MORE
THAN IS CUSTOMARY WITH OTHER INVESTMENT PORTFOLIOS.
THE SELECTION OF AN ORGANIZATION FOR INVESTMENT BY THE PORTFOLIO DOES NOT
CONSTITUTE ENDORSEMENT OR VALIDATION, NOR DOES THE EXCLUSION OF AN ORGANIZATION
NECES NECESSARILY REFLECT FAILURE TO SATISFY THE PORTFOLIO'S SOCIAL CRITERIA.
INVESTORS IN THE PORTFOLIO ARE INVITED TO SEND BRIEF DESCRIPTIONS OF COMPANIES
THEY BELIEVE MIGHT BE SUITABLE INVESTMENTS.
THE FUND AND ITS MANAGEMENT
THE SHARES OF THE FUND CURRENTLY ARE SOLD ONLY TO INSURANCE COMPANIES
(COLLECTIVELY, THE "INSURANCE COMPANIES") FOR ALLOCATION TO THEIR SEPARATE
ACCOUNTS (COLLECTIVELY, THE "VARIABLE ACCOUNTS") TO FUND THE BENEFITS UNDER
CERTAIN VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE POLICIES (COLLECTIVELY, THE
"POLICIES") ISSUED BY SUCH COMPANIES. ACCORDINGLY, THE INTEREST OF A POLICY
OWNER IN THE SHARES IS SUBJECT TO THE TERMS OF THE PARTICULAR ANNUITY OR LIFE
<PAGE>
INSURANCE POLICY AND IS DESCRIBED IN THE ATTACHED PROSPECTUS FOR ONE OF THE
POLICIES, WHICH SHOULD BE REVIEWED CAREFULLY BY A PERSON CONSIDERING THE
PURCHASE OF A POLICY. THE RIGHTS OF THE INSURANCE COMPANIES AS SHAREHOLDERS
SHOULD BE DISTINGUISHED FROM THE RIGHTS OF A POLICY OWNER WHICH ARE DESCRIBED IN
THE POLICIES. POLICY OWNERS SHOULD CONSIDER THAT THE INVESTMENT RETURN
EXPERIENCE OF THE PORTFOLIO WILL AFFECT THE VALUE OF THE POLICY AND THE AMOUNT
OF ANNUITY PAYMENTS OR LIFE INSURANCE BENEFITS RECEIVED UNDER A POLICY. SEE THE
ATTACHED PROSPECTUS(ES) FOR THE POLICIES FOR A DESCRIPTION OF THE RELATIONSHIP
BETWEEN INCREASES OR DECREASES IN THE NET ASSET VALUE OF PORTFOLIO SHARES (AND
ANY DISTRIBUTIONS ON SUCH SHARES) AND THE BENEFITS PROVIDED UNDER A POLICY.
CALVERT ASSET MANAGEMENT COMPANY, INC. ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814) IS THE PORTFOLIO'S INVESTMENT ADVISOR. CAMCO
PROVIDES THE FUND WITH INVESTMENT SUPERVISION AND MANAGEMENT AND OFFICE SPACE;
FURNISHES EXECUTIVE AND OTHER PERSONNEL TO THE FUND, AND PAYS THE SALARIES AND
FEES OF ALL TRUSTEES/DIRECTORS WHO ARE AFFILIATED PERSONS OF THE ADVISOR. IT HAS
BEEN MANAGING MUTUAL FUNDS SINCE 1976. CALVERT IS THE INVESTMENT ADVISOR FOR
OVER 25 MUTUAL FUND PORTFOLIOS, INCLUDING THE FIRST AND LARGEST FAMILY OF
SOCIALLY SCREENED FUNDS. AS OF DECEMBER 31, 1999, CAMCO HAD $6.5 BILLION IN
ASSETS UNDER MANAGEMENT.
ADVISORY FEES
THE ANNUAL ADVISORY FEE PAID TO CAMCO BY THE PORTFOLIO FOR THE MOST RECENT
FISCAL YEAR WAS 0.30% OF THE PORTFOLIO'S AVERAGE DAILY NET ASSETS.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
THE FUND OFFERS ITS SHARES, WITHOUT SALES CHARGE, ONLY FOR PURCHASE BY THE
INSURANCE COMPANIES FOR ALLOCATION TO THEIR VARIABLE ACCOUNTS. SHARES ARE
PURCHASED BY THE VARIABLE ACCOUNTS AT THE NET ASSET VALUE OF THE PORTFOLIO NEXT
DETERMINED AFTER THE INSURANCE COMPANY RECEIVES THE PREMIUM PAYMENT. THE FUND
CONTINUOUSLY OFFERS ITS SHARES IN THE PORTFOLIO AT A PRICE EQUAL TO THE NET
ASSET VALUE PER SHARE. INITIAL AND SUBSEQUENT PAYMENTS ALLOCATED TO THE FUND ARE
SUBJECT TO THE LIMITS APPLICABLE IN THE POLICIES ISSUED BY THE INSURANCE
COMPANIES.
IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE DISADVANTAGEOUS FOR BOTH ANNUITY
VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE ACCOUNTS, OR FOR VARIABLE ACCOUNTS
OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE FUND, ALTHOUGH
CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE FUND FORESEE ANY SUCH
DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE POLICY
OWNERS OF ANY INSURANCE COMPANY. THE FUND'S BOARD OF DIRECTORS INTENDS TO
MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS BETWEEN SUCH POLICY
OWNERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN IN RESPONSE
THERETO.
THE INSURANCE COMPANIES REDEEM SHARES OF THE PORTFOLIO TO MAKE BENEFIT AND
SURRENDER PAYMENTS UNDER THE TERMS OF POLICIES. REDEMPTIONS ARE PROCESSED ON ANY
DAY ON WHICH THE FUND IS OPEN FOR BUSINESS (EACH DAY THE NEW YORK STOCK EXCHANGE
IS OPEN), AND ARE EFFECTED AT THE PORTFOLIO'S NET ASSET VALUE NEXT DETERMINED
AFTER THE APPROPRIATE INSURANCE COMPANY RECEIVES A SURRENDER REQUEST IN
ACCEPTABLE FORM.
PAYMENT FOR REDEEMED SHARES WILL BE MADE PROMPTLY, BUT IN NO EVENT LATER THAN
SEVEN DAYS. HOWEVER, THE RIGHT OF REDEMPTION MAY BE SUSPENDED OR THE DATE OF
PAYMENT POSTPONED IN ACCORDANCE WITH THE RULES UNDER THE 1940 ACT. THE AMOUNT
RECEIVED UPON REDEMPTION OF THE SHARES OF THE FUND MAY BE MORE OR LESS THAN THE
AMOUNT PAID FOR THE SHARES, DEPENDING UPON THE FLUCTUATIONS IN THE MARKET VALUE
OF THE ASSETS OWNED BY THE FUND. THE FUND REDEEMS ALL FULL AND FRACTIONAL SHARES
OF THE PORTFOLIO FOR CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER
SHARE.
THE NET ASSET VALUE OF THE SHARES OF THE PORTFOLIO IS DETERMINED ONCE DAILY AS
OF THE CLOSE OF BUSINESS OF THE NEW YORK STOCK EXCHANGE, ON DAYS WHEN THE
EXCHANGE IS OPEN FOR BUSINESS. THE NET ASSET VALUE IS DETERMINED BY ADDING THE
VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE PORTFOLIO, SUBTRACTING
LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF OUTSTANDING SHARES OF
THE PORTFOLIO. ALL INSTRUMENTS HELD BY SOCIAL MONEY MARKET ARE VALUED ON AN
AMORTIZED COST BASIS.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
DIVIDENDS AND DISTRIBUTIONS
IT IS THE FUND'S INTENTION TO DISTRIBUTE SUBSTANTIALLY ALL OF THE NET INVESTMENT
INCOME, IF ANY, OF THE PORTFOLIO. FOR DIVIDEND PURPOSES, NET INVESTMENT INCOME
OF THE PORTFOLIO CONSISTS OF ALL PAYMENTS OF DIVIDENDS OR INTEREST RECEIVED BY
SUCH PORTFOLIO LESS ESTIMATED EXPENSES. ALL NET REALIZED CAPITAL GAINS, IF ANY,
OF EACH PORTFOLIO ARE DECLARED AND DISTRIBUTED PERIODICALLY, NO LESS FREQUENTLY
THAN ANNUALLY. ALL DIVIDENDS AND DISTRIBUTIONS ARE REINVESTED IN ADDITIONAL
SHARES OF THE PORTFOLIO AT NET ASSET VALUE.
TAXES
AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER M OF THE
INTERNAL REVENUE CODE, AS AMENDED, THE FUND IS NOT SUBJECT TO FEDERAL INCOME
TAX, NOR TO THE FEDERAL EXCISE TAX IMPOSED BY THE TAX REFORM ACT OF 1986, TO THE
EXTENT THAT IT DISTRIBUTES ITS NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS.
SINCE THE ONLY SHAREHOLDERS OF THE FUND ARE THE INSURANCE COMPANIES, NO
DISCUSSION IS INCLUDED HEREIN AS TO THE FEDERAL INCOME TAX CONSEQUENCES AT THE
SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE FEDERAL TAX CONSEQUENCES TO
PURCHASERS OF THE ANNUITY OR LIFE INSURANCE POLICIES, SEE THE PROSPECTUSES FOR
THE POLICIES.
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FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PORTFOLIO'S FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) YEARS. THE PORTFOLIO'S
FISCAL YEAR END IS DECEMBER 31. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS
FOR A SINGLE SHARE, BY PORTFOLIO. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A
PORTFOLIO (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES
NOT REFLECT ANY APPLICABLE CHARGES OR EXPENSES DEDUCTED BY THE INSURANCE
COMPANIES. THIS INFORMATION HAS BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP WHOSE
REPORT, ALONG WITH A PORTFOLIO'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE
PORTFOLIO'S ANNUAL REPORT, WHICH IS AVAILABLE UPON REQUEST.
MONEY MARKET PORTFOLIO
FINANCIAL HIGHLIGHTS
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
NET ASSET VALUE, BEGINNING $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .047 .050
TOTAL FROM INVESTMENT OPERATIONS .047 .050
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.047) (.050)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE - -
NET ASSET VALUE, ENDING $1.00 $1.00
TOTAL RETURN 4.82% 5.14%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 4.72% 5.01%
TOTAL EXPENSES .67% .66%
EXPENSES BEFORE OFFSETS .67% .66%
NET EXPENSES .64% .63%
NET ASSETS, ENDING (IN THOUSANDS) $16,387 $11,205
YEARS ENDED
DECEMBER 31,
1997
NET ASSET VALUE, BEGINNING $1.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .051
TOTAL FROM INVESTMENT OPERATIONS .051
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.051)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE -
NET ASSET VALUE, ENDING $1.00
TOTAL RETURN 5.20%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 5.10%
TOTAL EXPENSES .69%
EXPENSES BEFORE OFFSETS .69%
NET EXPENSES .59%
NET ASSETS, ENDING (IN THOUSANDS) $6,242
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
NET ASSET VALUE, BEGINNING $1.00 $1.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .048 .055
TOTAL FROM INVESTMENT
OPERATIONS .048 .055
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.048) (.055)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE - -
NET ASSET VALUE, ENDING $1.00 $1.00
TOTAL RETURN 4.95% 5.37%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 4.82% 5.23%
TOTAL EXPENSES .75% .66%
EXPENSES BEFORE OFFSETS .75% .66%
NET EXPENSES .62% .59%
NET ASSETS, ENDING (IN THOUSANDS) $4,378 $5,129
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SOCIAL SMALL CAP GROWTH PORTFOLIO
ABOUT THE PORTFOLIO
7 INVESTMENT OBJECTIVE, STRATEGY, PAST PERFORMANCE
8 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT SOCIAL INVESTING
10 INVESTMENT SELECTION PROCESS
10 SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ABOUT YOUR INVESTMENT
10 THE FUND AND ITS MANAGEMENT
10 ADVISORY FEES
10 PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
11 DIVIDENDS AND DISTRIBUTIONS
11 TAXES
12 FINANCIAL HIGHLIGHTS
CALVERT SOCIAL SMALL CAP GROWTH PORTFOLIO OF CALVERT VARIABLE SERIES, INC. (THE
"FUND") SHOULD NOT BE CONFUSED WITH THE CALVERT NEW VISION SMALL CAP PORTFOLIO.
PERFORMANCE OF THE TWO PORTFOLIOS WILL DIFFER.
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CVS SOCIAL SMALL CAP GROWTH
ADVISOR: CALVERT ASSET MANAGEMENT COMPANY, INC.
SUBADVISOR: AWAD ASSET MANAGEMENT, INC.
OBJECTIVE
CVS SOCIAL SMALL CAP GROWTH SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN EQUITY SECURITIES OF COMPANIES THAT HAVE SMALL MARKET
CAPITALIZATIONS. THIS OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS
WITHOUT SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
AT LEAST 65% OF CVS SOCIAL SMALL CAP GROWTH'S ASSETS WILL BE INVESTED IN THE
COMMON STOCKS OF SMALL-CAP COMPANIES. RETURNS IN THE PORTFOLIO WILL BE MOSTLY
FROM THE CHANGES IN THE PRICE OF THE PORTFOLIO'S HOLDINGS (CAPITAL
APPRECIATION).
THE PORTFOLIO CURRENTLY DEFINES SMALL-CAP COMPANIES AS THOSE WITH MARKET
CAPITALIZATION OF $1 BILLION OR LESS AT THE TIME THE PORTFOLIO INITIALLY
INVESTS.
THE PORTFOLIO INVESTS WITH THE PHILOSOPHY THAT LONG-TERM REWARDS TO INVESTORS
WILL COME FROM THOSE ORGANIZATIONS WHOSE PRODUCTS, SERVICES, AND METHODS ENHANCE
THE HUMAN CONDITION AND THE TRADITIONAL AMERICAN VALUES OF INDIVIDUAL
INITIATIVE, EQUALITY OF OPPORTUNITY AND COOPERATIVE EFFORT. INVESTMENTS ARE
SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL OBJECTIVES OF
FINANCIAL SOUNDNESS AND SOCIAL CRITERIA. SEE "INVESTMENT SELECTION PROCESS."
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN.
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED.
- - PRICES OF SMALL-CAP STOCKS MAY RESPOND TO MARKET ACTIVITY DIFFERENTLY THAN
LARGER MORE ESTABLISHED COMPANIES, SO THERE IS THE POSSIBILITY IF
GREATER RISK
BY INVESTING IN SMALLER CAPITALIZED COMPANIES RATHER THAN LARGER,
MORE ESTABLISHED COMPANIES.
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
PAST PERFORMANCE
THE BAR CHART AND TABLE BELOW SHOW THE PORTFOLIO'S ANNUAL RETURNS AND ITS
LONG-TERM PERFORMANCE. THE CHART SHOWS HOW THE PERFORMANCE HAS VARIED FROM
YEAR TO YEAR AND PROVIDES AN INDICATION OF THE RISK OF INVESTING IN THE
PORTFOLIO. THE TABLE COMPARES THE PORTFOLIO'S PERFORMANCE OVER TIME TO THAT OF
THE RUSSELL 2000 INDEX. THIS IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF COMMON
STOCK PRICES. IT ALSO SHOWS THE PORTFOLIO'S RETURNS COMPARED TO THE LIPPER
VARIABLE ANNUITY SMALL CAP INDEX, A COMPOSITE INDEX OF THE ANNUAL RETURN OF
MUTUAL FUNDS THAT HAVE AN INVESTMENT GOAL SIMILAR TO THAT OF THE PORTFOLIO.
THE PORTFOLIO'S PAST PERFORMANCE DOES NOT NECESSARILY INDICATE HOW THE
PORTFOLIO WILL PERFORM IN THE FUTURE. THE RETURNS SHOWN DO NOT REFLECT FEES
AND CHARGES IMPOSED UNDER THE VARIABLE ANNUITY AND LIFE INSURANCE CONTRACTS
THROUGH WHICH AN INVESTMENT MAY BE MADE. IF THESE FEES AND CHARGES WERE
INCLUDED, THEY WOULD REDUCE THESE RETURNS.
CVS SOCIAL SMALL CAP GROWTH
YEAR-BY-YEAR TOTAL RETURN
[INSERT BAR CHART HERE]
BEST QUARTER (OF PERIODS SHOWN) Q4 '99 21.90%
WORST QUARTER (OF PERIODS SHOWN) Q1 '97 (27.24%)
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED DECEMBER 31, 1999)
1 YEAR 5 YEARS SINCE
INCEPTION*
CVS SOCIAL SMALL CAP
GROWTH 19.38% N/A 8.60%
RUSSELL 2000 INDEX 21.26% N/A 16.53%
LIPPER VA SMALL CAP
INDEX 43.03% N/A 20.11%
*THE MONTH END DATE OF 3/31/95 IS USED FOR COMPARISON PURPOSES ONLY, ACTUAL FUND
INCEPTION IS 3/15/95.
<PAGE>
PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF THE PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
AND ASSOCIATED RISKS IS UNDER THE RISK-RETURN SUMMARY. THE PORTFOLIO IS ALSO
PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND TO USE CERTAIN INVESTMENT
TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH THEM. ON THE FOLLOWING PAGES
ARE BRIEF DESCRIPTIONS OF THE INVESTMENTS AND TECHNIQUES, SUMMARIZED IN THE
RISK-RETURN SUMMARY ALONG WITH CERTAIN ADDITIONAL INVESTMENT TECHNIQUES AND
THEIR RISKS.
FOR EACH OF THE INVESTMENT PRACTICES LISTED, THE TABLE BELOW SHOWS THE
PORTFOLIO'S LIMITATIONS AS A PERCENTAGE OF ITS ASSETS AND THE PRINCIPAL TYPES OF
RISK INVOLVED. (SEE THE PAGES FOLLOWING THE TABLE FOR A DESCRIPTION OF THE TYPES
OF RISKS). NUMBERS IN THIS TABLE SHOW MAXIMUM ALLOWABLE AMOUNT ONLY; FOR ACTUAL
USAGE, CONSULT THE PORTFOLIO'S ANNUAL/SEMI-ANNUAL REPORTS.
KEY TO TABLE
J PORTFOLIO CURRENTLY USES
Q PERMITTED, BUT NOT TYPICALLY USED
(% OF ASSETS ALLOWABLE, IF RESTRICTED)
8 NOT PERMITTED
XN ALLOWED UP TO X% OF PORTFOLIO'S NET ASSETS
XT ALLOWED UP TO X% OF PORTFOLIO'S TOTAL ASSETS
NA NOT APPLICABLE TO THIS TYPE OF FUND
INVESTMENT PRACTICES
ACTIVE TRADING STRATEGY/TURNOVER INVOLVES SELLING A SECURITY SOON AFTER
PURCHASE. AN ACTIVE TRADING STRATEGY CAUSES A FUND TO HAVE HIGHER PORTFOLIO
TURNOVER COMPARED TO OTHER FUNDS AND HIGHER TRANSACTION COSTS, SUCH AS
COMMISSIONS AND CUSTODIAN AND SETTLEMENT FEES, AND MAY INCREASE A PORTFOLIO'S
TAX LIABILITY. RISKS: OPPORTUNITY, MARKET AND TRANSACTION.
Q
TEMPORARY DEFENSIVE POSITIONS. DURING ADVERSE MARKET, ECONOMIC OR POLITICAL
CONDITIONS, THE PORTFOLIO MAY DEPART FROM ITS PRINCIPAL INVESTMENT STRATEGIES BY
INCREASING ITS INVESTMENT IN U.S. GOVERNMENT SECURITIES AND OTHER SHORT-TERM
INTEREST-BEARING SECURITIES. DURING TIMES OF ANY TEMPORARY DEFENSIVE POSITIONS,
THE PORTFOLIO FUND MAY NOT BE ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE RISKS:
OPPORTUNITY.
Q
35T
CONVENTIONAL SECURITIES
FOREIGN SECURITIES. SECURITIES ISSUED BY COMPANIES LOCATED OUTSIDE THE U.S.
AND/OR TRADED PRIMARILY ON A FOREIGN EXCHANGE. RISKS: MARKET, CURRENCY,
TRANSACTION, LIQUIDITY, INFORMATION AND POLITICAL.
Q1
SMALL CAP STOCKS. INVESTING IN SMALL COMPANIES INVOLVES GREATER RISK THAN WITH
MORE ESTABLISHED COMPANIES. SMALL CAP STOCK PRICES ARE MORE VOLATILE AND THE
COMPANIES OFTEN HAVE LIMITED PRODUCT LINES, MARKETS, FINANCIAL RESOURCES, AND
MANAGEMENT EXPERIENCE. RISKS: MARKET, LIQUIDITY AND INFORMATION.
J
INVESTMENT GRADE BONDS. BONDS RATED BBB/BAA OR HIGHER OR COMPARABLE UNRATED
BONDS. RISKS: INTEREST RATE, MARKET AND CREDIT.
Q
35T
BELOW-INVESTMENT GRADE BONDS. BONDS RATED BELOW BBB/BAA OR COMPARABLE
UNRATED BONDS, ALSO KNOWN AS HIGH-YIELD BONDS. THEY ARE SUBJECT TO GREATER
CREDIT RISK THAN INVESTMENT GRADE BONDS. RISKS: CREDIT, MARKET, INTEREST RATE,
LIQUIDITY AND INFORMATION.
Q
35T
UNRATED DEBT SECURITIES. BONDS THAT HAVE NOT BEEN RATED BY A RECOGNIZED RATING
AGENCY; THE ADVISOR HAS DETERMINED THE CREDIT QUALITY BASED ON ITS OWN RESEARCH.
RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND INFORMATION.
Q
ILLIQUID SECURITIES. SECURITIES WHICH CANNOT BE READILY SOLD BECAUSE THERE IS NO
ACTIVE MARKET. RISKS: LIQUIDITY, MARKET AND TRANSACTION.
15N
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES. SECURITIES ARE BACKED BY UNSECURED DEBT, SUCH AS CREDIT
CARD DEBT. THESE SECURITIES ARE OFTEN GUARANTEED OR OVER-COLLATERALIZED TO
ENHANCE THEIR CREDIT QUALITY. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
MORTGAGE-BACKED SECURITIES. SECURITIES ARE BACKED BY POOLS OF MORTGAGES,
INCLUDING PASSTHROUGH CERTIFICATES, AND OTHER SENIOR CLASSES OF COLLATERALIZED
MORTGAGE OBLIGATIONS (CMOS). RISKS: CREDIT, EXTENSION, PREPAYMENT, LIQUIDITY AND
INTEREST RATE.
Q
PARTICIPATION INTERESTS. SECURITIES REPRESENTING AN INTEREST IN ANOTHER SECURITY
OR IN BANK LOANS. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
LEVERAGED DERIVATIVE INSTRUMENTS
CURRENCY CONTRACTS. CONTRACTS INVOLVING THE RIGHT OR OBLIGATION TO BUY OR SELL A
GIVEN AMOUNT OF FOREIGN CURRENCY AT A SPECIFIED PRICE AND FUTURE DATE. RISKS:
CURRENCY, LEVERAGE, CORRELATION, LIQUIDITY AND OPPORTUNITY.
X
<PAGE>
OPTIONS ON SECURITIES AND INDICES. CONTRACTS GIVING THE HOLDER THE RIGHT BUT NOT
THE OBLIGATION TO PURCHASE OR SELL A SECURITY (OR THE CASH VALUE, IN THE CASE OF
AN OPTION ON AN INDEX) AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. ANY OPTIONS
WRITTEN BY THE PORTFOLIO MUST BE COVERED. RISKS: INTEREST RATE, CURRENCY,
MARKET, LEVERAGE, CORRELATION, LIQUIDITY, CREDIT AND OPPORTUNITY.
5T2
FUTURES CONTRACT. AGREEMENT TO BUY OR SELL A SPECIFIC AMOUNT OF A COMMODITY OR
FINANCIAL INSTRUMENT AT A PARTICULAR PRICE ON A SPECIFIC FUTURE DATE. RISKS:
INTEREST RATE, CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY AND
OPPORTUNITY.
Q
5T
1 CVS SOCIAL SMALL CAP GROWTH MAY INVEST ONLY IN AMERICAN DEPOSITARY RECEIPTS
(ADRS), DOLLAR-DENOMINATED RECEIPTS REPRESENTING SHARES OF A FOREIGN ISSUER.
ADRS ARE TRADED ON U.S. EXCHANGES. SEE THE STATEMENT OF ADDITIONAL INFORMATION
("SAI").
2BASED ON NET PREMIUM PAYMENTS.
THE PORTFOLIO HAS ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS (FOR EXAMPLE,
REPURCHASE AGREEMENTS, REAL ESTATE INVESTMENT TRUSTS, BORROWING, PLEDGING, AND
REVERSE REPURCHASE AGREEMENTS, SECURITIES LENDING, WHEN-ISSUED SECURITIES AND
SHORT SALES.) THESE POLICIES AND RESTRICTIONS ARE DISCUSSED IN THE SAI.
TYPES OF INVESTMENT RISK
CORRELATION RISK
THIS OCCURS WHEN A PORTFOLIO "HEDGES"- USES ONE INVESTMENT TO OFFSET THE
PORTFOLIO'S POSITION IN ANOTHER. IF THE TWO INVESTMENTS DO NOT BEHAVE IN
RELATION TO ONE ANOTHER THE WAY PORTFOLIO MANAGERS EXPECT THEM TO, THEN
UNEXPECTED OR UNDESIRED RESULTS MAY OCCUR. FOR EXAMPLE, A HEDGE MAY ELIMINATE OR
REDUCE GAINS AS WELL AS OFFSET LOSSES.
CREDIT RISK
THE RISK THAT THE ISSUER OF A SECURITY OR THE COUNTERPARTY TO AN INVESTMENT
CONTRACT MAY DEFAULT OR BECOME UNABLE TO PAY ITS OBLIGATIONS WHEN DUE.
CURRENCY RISK
CURRENCY RISK OCCURS WHEN A PORTFOLIO BUYS, SELLS OR HOLDS A SECURITY
DENOMINATED IN FOREIGN CURRENCY. FOREIGN CURRENCIES "FLOAT" IN VALUE AGAINST THE
U.S. DOLLAR. ADVERSE CHANGES IN FOREIGN CURRENCY VALUES CAN CAUSE INVESTMENT
LOSSES WHEN A PORTFOLIO'S INVESTMENTS ARE CONVERTED TO U.S. DOLLARS.
EXTENSION RISK
THE RISK THAT AN UNEXPECTED RISE IN INTEREST RATES WILL EXTEND THE LIFE OF A
MORTGAGE-BACKED SECURITY BEYOND THE EXPECTED PREPAYMENT TIME, TYPICALLY REDUCING
THE SECURITY'S VALUE.
INFORMATION RISK
THE RISK THAT INFORMATION ABOUT A SECURITY OR ISSUER OR THE MARKET MIGHT NOT BE
AVAILABLE, COMPLETE, ACCURATE OR COMPARABLE.
INTEREST RATE RISK
THE RISK THAT CHANGES IN INTEREST RATES WILL ADVERSELY AFFECT THE VALUE OF AN
INVESTOR'S SECURITIES. WHEN INTEREST RATES RISE, THE VALUE OF FIXED-INCOME
SECURITIES WILL GENERALLY FALL. CONVERSELY, A DROP IN INTEREST RATES WILL
GENERALLY CAUSE AN INCREASE IN THE VALUE OF FIXED-INCOME SECURITIES. LONGER-TERM
SECURITIES AND ZERO COUPON/"STRIPPED" COUPON SECURITIES ("STRIPS") ARE SUBJECT
TO GREATER INTEREST RATE RISK.
LEVERAGE RISK
THE RISK THAT OCCURS IN SOME SECURITIES OR TECHNIQUES WHICH TEND TO MAGNIFY THE
EFFECT OF SMALL CHANGES IN AN INDEX OR A MARKET. THIS CAN RESULT IN A LOSS THAT
EXCEEDS THE AMOUNT ACTUALLY INVESTED.
LIQUIDITY RISK
THE RISK THAT OCCURS WHEN INVESTMENTS CANNOT BE READILY SOLD. A PORTFOLIO MAY
HAVE TO ACCEPT A LESS-THAN-DESIRABLE PRICE TO COMPLETE THE SALE OF AN ILLIQUID
SECURITY OR MAY NOT BE ABLE TO SELL IT AT ALL.
MANAGEMENT RISK
THIS RISK MEANS THAT A PORTFOLIO'S INVESTMENT MANAGEMENT PRACTICES MIGHT NOT
WORK TO ACHIEVE THEIR DESIRED RESULT.
MARKET RISK
THE RISK THAT SECURITIES PRICES IN A MARKET, A SECTOR OR AN INDUSTRY WILL
FLUCTUATE, AND THAT SUCH MOVEMENTS MIGHT REDUCE AN INVESTMENT'S VALUE.
OPPORTUNITY RISK
THE RISK OF MISSING OUT ON AN INVESTMENT OPPORTUNITY BECAUSE THE ASSETS NEEDED
TO TAKE ADVANTAGE OF IT ARE COMMITTED TO LESS ADVANTAGEOUS INVESTMENTS OR
STRATEGIES.
POLITICAL RISK
THE RISK THAT MAY OCCUR WITH FOREIGN INVESTMENTS, AND MEANS THAT THE VALUE OF AN
INVESTMENT MAY BE ADVERSELY AFFECTED BY NATIONALIZATION, TAXATION, WAR,
GOVERNMENT INSTABILITY OR OTHER ECONOMIC OR POLITICAL ACTIONS OR FACTORS.
PREPAYMENT RISK
THE RISK THAT UNANTICIPATED PREPAYMENTS MAY OCCUR, REDUCING THE VALUE OF A
MORTGAGE-BACKED SECURITY. THE PORTFOLIO MUST THEN REINVEST THOSE ASSETS AT THE
CURRENT, MARKET RATE WHICH MAY BE LOWER.
TRANSACTION RISK
THE RISK THAT A PORTFOLIO MAY BE DELAYED OR UNABLE TO SETTLE A TRANSACTION OR
THAT COMMISSIONS AND SETTLEMENT EXPENSES MAY BE HIGHER THAN USUAL.
<PAGE>
INVESTMENT SELECTION PROCESS
THE SELECTION OF AN INVESTMENT BY A PORTFOLIO DOES NOT CONSTITUTE ENDORSEMENT OR
VALIDATION BY THE PORTFOLIO, NOR DOES THE EXCLUSION OF AN INVESTMENT NECESSARILY
REFLECT FAILURE TO SATISFY THE PORTFOLIO'S SOCIAL CRITERIA. INVESTORS ARE
INVITED TO SEND A BRIEF DESCRIPTION OF COMPANIES THEY BELIEVE MIGHT BE SUITABLE
FOR
INVESTMENT.
SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ONCE EQUITY AND DEBT SECURITIES ARE DETERMINED TO FALL WITHIN THE INVESTMENT
OBJECTIVE OF THE PORTFOLIO AND ARE DEEMED FINANCIALLY VIABLE INVESTMENTS, THEY
ARE SCREENED ACCORDING TO THE SOCIAL CRITERIA DESCRIBED BELOW. THESE SOCIAL
SCREENS ARE APPLIED TO POTENTIAL INVESTMENT CANDIDATES BY THE ADVISOR IN
CONSULTATION WITH THE SUBADVISOR. HOWEVER, THE PORTFOLIO MAY PURCHASE
INSTRUMENTS USED FOR DEFENSIVE PURPOSES, SUCH AS SHORT POSITIONS, OPTIONS AND
FUTURES CONTRACTS, WITHOUT REGARD TO THE SOCIAL CRITERIA. THE FOLLOWING CRITERIA
MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER APPROVAL:
1. THE PORTFOLIO AVOIDS INVESTING IN COMPANIES THAT, IN THE ADVISOR'S
OPINION, HAVE SIGNIFICANT OR HISTORICAL PATTERNS OF VIOLATING ENVIRONMENTAL
REGULATIONS, OR OTHERWISE HAVE AN EGREGIOUS ENVIRONMENTAL RECORD. ADDITIONALLY,
THE PORTFOLIO WILL AVOID INVESTING IN NUCLEAR POWER PLANT OPERATORS AND OWNERS,
OR MANUFACTURERS OF KEY COMPONENTS IN THE NUCLEAR POWER PROCESS.
2. THE PORTFOLIO WILL NOT INVEST IN COMPANIES THAT ARE LISTED AMONG THE TOP
100 WEAPONS SYSTEMS CONTRACTORS, OR MAJOR NUCLEAR WEAPONS SYSTEMS CONTRACTORS.
3. THE PORTFOLIO WILL NOT INVEST IN COMPANIES THAT, IN THE ADVISOR'S
OPINION, HAVE SIGNIFICANT OR HISTORICAL PATTERNS OF DISCRIMINATION AGAINST
EMPLOYEES ON THE BASIS OF RACE, GENDER, RELIGION, AGE, DISABILITY OR SEXUAL
ORIENTATION, OR IN COMPANIES THAT HAVE MAJOR LABOR-MANAGEMENT DISPUTES.
4. THE PORTFOLIO WILL NOT INVEST IN COMPANIES THAT ARE SIGNIFICANTLY
INVOLVED IN THE MANUFACTURE OF TOBACCO OR ALCOHOL PRODUCTS. THE PORTFOLIO WILL
NOT INVEST IN COMPANIES THAT MAKE PRODUCTS OR OFFER SERVICES THAT, UNDER PROPER
USE, IN THE ADVISOR'S OPINION, ARE CONSIDERED HARMFUL.
WHILE THE PORTFOLIO MAY INVEST IN COMPANIES THAT EXHIBIT POSITIVE SOCIAL
CHARACTERISTICS, IT MAKES NO EXPLICIT CLAIMS TO SEEK OUT COMPANIES WITH SUCH
PRACTICES.
THE FUND AND ITS MANAGEMENT
THE SHARES OF THE FUND CURRENTLY ARE SOLD ONLY TO INSURANCE COMPANIES
(COLLECTIVELY, THE "INSURANCE COMPANIES") FOR ALLOCATION TO THEIR SEPARATE
ACCOUNTS (COLLECTIVELY, THE "VARIABLE ACCOUNTS") TO FUND THE BENEFITS UNDER
CERTAIN VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE POLICIES (COLLECTIVELY, THE
"POLICIES") ISSUED BY SUCH COMPANIES. ACCORDINGLY, THE INTEREST OF A POLICY
OWNER IN THE SHARES IS SUBJECT TO THE TERMS OF THE PARTICULAR ANNUITY OR LIFE
INSURANCE POLICY AND IS DESCRIBED IN THE ATTACHED PROSPECTUS FOR ONE OF THE
POLICIES, WHICH SHOULD BE REVIEWED CAREFULLY BY A PERSON CONSIDERING THE
PURCHASE OF A POLICY. THE RIGHTS OF THE INSURANCE COMPANIES AS SHAREHOLDERS
SHOULD BE DISTINGUISHED FROM THE RIGHTS OF A POLICY OWNER WHICH ARE DESCRIBED IN
THE POLICIES. POLICY OWNERS SHOULD CONSIDER THAT THE INVESTMENT RETURN
EXPERIENCE OF THE PORTFOLIO WILL AFFECT THE VALUE OF THE POLICY AND THE AMOUNT
OF ANNUITY PAYMENTS OR LIFE INSURANCE BENEFITS RECEIVED UNDER A POLICY. SEE THE
ATTACHED PROSPECTUS(ES) FOR THE POLICIES FOR A DESCRIPTION OF THE RELATIONSHIP
BETWEEN INCREASES OR DECREASES IN THE NET ASSET VALUE OF PORTFOLIO SHARES (AND
ANY DISTRIBUTIONS ON SUCH SHARES) AND THE BENEFITS PROVIDED UNDER A POLICY.
CALVERT ASSET MANAGEMENT COMPANY, INC. ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814) IS THE PORTFOLIO'S INVESTMENT ADVISOR. CAMCO
PROVIDES THE FUND WITH INVESTMENT SUPERVISION AND MANAGEMENT AND OFFICE SPACE;
FURNISHES EXECUTIVE AND OTHER PERSONNEL TO THE FUND, AND PAYS THE SALARIES AND
FEES OF ALL TRUSTEES/DIRECTORS WHO ARE AFFILIATED PERSONS OF THE ADVISOR. IT HAS
BEEN MANAGING MUTUAL FUNDS SINCE 1976. CALVERT IS THE INVESTMENT ADVISOR FOR
OVER 25 MUTUAL FUND PORTFOLIOS, INCLUDING THE FIRST AND LARGEST FAMILY OF
SOCIALLY SCREENED FUNDS. AS OF DECEMBER 31, 1999, CAMCO HAD $6.5 BILLION IN
ASSETS UNDER MANAGEMENT.
SUBADVISOR AND PORTFOLIO MANAGER
AWAD ASSET MANAGEMENT, INC. ("AWAD") (250 PARK AVENUE, NEW YORK, NEW YORK 10177)
A SUBSIDIARY OF RAYMOND JAMES & ASSOCIATES, HAS MANAGED CVS SOCIAL SMALL CAP
GROWTH SINCE 1997. THE FIRM SPECIALIZES IN THE MANAGEMENT OF
SMALL-CAPITALIZATION GROWTH STOCKS. THEY EMPHASIZE A
GROWTH-AT-A-REASONABLE-PRICE INVESTMENT PHILOSOPHY.
JAMES AWAD, PRESIDENT OF AWAD, FOUNDED THE FIRM IN 1992. HE HEADS THE PORTFOLIO
MANAGEMENT TEAM FOR SOCIAL SMALL CAP GROWTH. MR. AWAD HAS MORE THAN 30 YEARS
EXPERIENCE IN THE INVESTMENT BUSINESS, HOLDING POSITIONS WITH FIRMS SUCH AS
NEUBERGER & BERMAN AND FIRST INVESTORS CORPORATION.
THE PORTFOLIO HAS OBTAINED AN EXEMPTIVE ORDER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO PERMIT THE FUND, PURSUANT TO APPROVAL BY THE BOARD OF DIRECTORS,
TO ENTER INTO AND MATERIALLY AMEND CONTRACTS WITH THE PORTFOLIO'S SUBADVISOR
WITHOUT SHAREHOLDER APPROVAL. SEE "INVESTMENT ADVISOR AND SUBADVISOR" IN THE SAI
FOR FURTHER DETAILS.
ADVISORY FEES
FOR FISCAL YEAR 1999, THE INVESTMENT ADVISOR RECEIVED FROM THE PORTFOLIO AN
ADVISORY FEE OF 0.77% OF THE AVERAGE DAILY NET ASSETS OF THE PORTFOLIO.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
THE FUND OFFERS ITS SHARES, WITHOUT SALES CHARGE, ONLY FOR PURCHASE BY THE
INSURANCE COMPANIES FOR ALLOCATION TO THEIR VARIABLE ACCOUNTS. SHARES ARE
PURCHASED BY THE VARIABLE ACCOUNTS AT THE NET ASSET VALUE OF THE PORTFOLIO NEXT
DETERMINED AFTER THE INSURANCE COMPANY RECEIVES THE PREMIUM PAYMENT. THE FUND
CONTINUOUSLY OFFERS ITS SHARES IN THE PORTFOLIO AT A PRICE EQUAL TO THE NET
ASSET VALUE PER SHARE. INITIAL AND SUBSEQUENT PAYMENTS ALLOCATED TO THE FUND ARE
SUBJECT TO THE LIMITS APPLICABLE IN THE
<PAGE>
POLICIES ISSUED BY THE INSURANCE COMPANIES.
IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE DISADVANTAGEOUS FOR BOTH ANNUITY
VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE ACCOUNTS, OR FOR VARIABLE ACCOUNTS
OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE FUND, ALTHOUGH
CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE FUND FORESEE ANY SUCH
DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE POLICY
OWNERS OF ANY INSURANCE COMPANY. THE FUND'S BOARD OF DIRECTORS INTENDS TO
MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS BETWEEN SUCH POLICY
OWNERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN IN RESPONSE
THERETO.
THE INSURANCE COMPANIES REDEEM SHARES OF THE PORTFOLIO TO MAKE BENEFIT AND
SURRENDER PAYMENTS UNDER THE TERMS OF POLICIES. REDEMPTIONS ARE PROCESSED ON ANY
DAY ON WHICH THE FUND IS OPEN FOR BUSINESS (EACH DAY THE NEW YORK STOCK EXCHANGE
IS OPEN), AND ARE EFFECTED AT THE PORTFOLIO'S NET ASSET VALUE NEXT DETERMINED
AFTER THE APPROPRIATE INSURANCE COMPANY RECEIVES A SURRENDER REQUEST IN
ACCEPTABLE FORM.
PAYMENT FOR REDEEMED SHARES WILL BE MADE PROMPTLY, BUT IN NO EVENT LATER THAN
SEVEN DAYS. HOWEVER, THE RIGHT OF REDEMPTION MAY BE SUSPENDED OR THE DATE OF
PAYMENT POSTPONED IN ACCORDANCE WITH THE RULES UNDER THE 1940 ACT. THE AMOUNT
RECEIVED UPON REDEMPTION OF THE SHARES OF THE FUND MAY BE MORE OR LESS THAN THE
AMOUNT PAID FOR THE SHARES, DEPENDING UPON THE FLUCTUATIONS IN THE MARKET VALUE
OF THE ASSETS OWNED BY THE FUND. THE FUND REDEEMS ALL FULL AND FRACTIONAL SHARES
OF THE PORTFOLIO FOR CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER
SHARE.
THE NET ASSET VALUE OF THE SHARES OF THE PORTFOLIO IS DETERMINED ONCE DAILY AS
OF THE CLOSE OF BUSINESS OF THE NEW YORK STOCK EXCHANGE, ON DAYS WHEN THE
EXCHANGE IS OPEN FOR BUSINESS. THE NET ASSET VALUE IS DETERMINED BY ADDING THE
VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE PORTFOLIO, SUBTRACTING
LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF OUTSTANDING SHARES OF
THE PORTFOLIO. EXCEPT FOR MONEY MARKET INSTRUMENTS MATURING IN 60 DAYS OR LESS,
SECURITIES HELD BY THE PORTFOLIO ARE VALUED AT THEIR MARKET VALUE IF MARKET
QUOTATIONS ARE READILY AVAILABLE. OTHERWISE, SUCH SECURITIES ARE VALUED AT FAIR
VALUE AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS, ALTHOUGH THE ACTUAL
CALCULATIONS MAY BE MADE BY PERSONS ACTING PURSUANT TO THE DIRECTION OF THE
BOARD. ALL MONEY MARKET INSTRUMENTS WITH A REMAINING MATURITY OF 60 DAYS OR LESS
ARE VALUED ON AN AMORTIZED COST BASIS.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
DIVIDENDS AND DISTRIBUTIONS
IT IS THE FUND'S INTENTION TO DISTRIBUTE SUBSTANTIALLY ALL OF THE NET INVESTMENT
INCOME, IF ANY, OF THE PORTFOLIO. FOR DIVIDEND PURPOSES, NET INVESTMENT INCOME
OF THE PORTFOLIO CONSISTS OF ALL PAYMENTS OF DIVIDENDS OR INTEREST RECEIVED BY
SUCH PORTFOLIO LESS ESTIMATED EXPENSES. ALL NET REALIZED CAPITAL GAINS, IF ANY,
OF EACH PORTFOLIO ARE DECLARED AND DISTRIBUTED PERIODICALLY, NO LESS FREQUENTLY
THAN ANNUALLY. ALL DIVIDENDS AND DISTRIBUTIONS ARE REINVESTED IN ADDITIONAL
SHARES OF THE PORTFOLIO AT NET ASSET VALUE.
TAXES
AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER M OF THE
INTERNAL REVENUE CODE, AS AMENDED, THE FUND IS NOT SUBJECT TO FEDERAL INCOME
TAX, NOR TO THE FEDERAL EXCISE TAX IMPOSED BY THE TAX REFORM ACT OF 1986, TO THE
EXTENT THAT IT DISTRIBUTES ITS NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS.
SINCE THE ONLY SHAREHOLDERS OF THE FUND ARE THE INSURANCE COMPANIES, NO
DISCUSSION IS INCLUDED HEREIN AS TO THE FEDERAL INCOME TAX CONSEQUENCES AT THE
SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE FEDERAL TAX CONSEQUENCES TO
PURCHASERS OF THE ANNUITY OR LIFE INSURANCE POLICIES, SEE THE PROSPECTUSES FOR
THE POLICIES.
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PORTFOLIO'S FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) YEARS (OR IF SHORTERM
THE PERIOD OF THE PORTFOLIO'S OPERATIONS). THE PORTFOLIO'S FISCAL YEAR END IS
DECEMBER 31. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE SHARE,
BY PORTFOLIO. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A PORTFOLIO (ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES NOT REFLECT ANY
CHARGES OR EXPENSES DEDUCTED BY THE INSURANCE COMPANIES. THIS INFORMATION HAS
BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP WHOSE REPORT, ALONG WITH A
PORTFOLIO'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE PORTFOLIO'S ANNUAL REPORT,
WHICH IS AVAILABLE UPON REQUEST.
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
NET ASSET VALUE, BEGINNING $11.12 $12.02
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (.05) .02
NET REALIZED AND UNREALIZED
GAIN (LOSS) 2.20 (.77)
TOTAL FROM INVESTMENT
OPERATIONS 2.15 (.75)
DISTRIBUTIONS FROM
NET INVESTMENT INCOME ** (.01)
NET REALIZED GAINS - (.14)
TOTAL DISTRIBUTIONS - (.15)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE 2.15 (.90)
NET ASSET VALUE, ENDING $13.27 $11.12
TOTAL RETURN 19.38% (6.23%)
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.51%) .12%
TOTAL EXPENSES 1.58% 1.33%
EXPENSES BEFORE OFFSETS 1.58% 1.33%
NET EXPENSES 1.15% 1.12%
PORTFOLIO TURNOVER 79% 72%
NET ASSETS, ENDING
(IN THOUSANDS) $4,449 $3,626
YEARS ENDED
DECEMBER 31,
1997
NET ASSET VALUE, BEGINNING $14.65
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (.12)
NET REALIZED AND UNREALIZED GAIN (LOSS) (1.32)
TOTAL FROM INVESTMENT OPERATIONS (1.44)
DISTRIBUTIONS FROM
NET INVESTMENT INCOME -
NET REALIZED GAINS (1.19)
TOTAL DISTRIBUTIONS (1.19)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE (2.63)
NET ASSET VALUE, ENDING $12.02
TOTAL RETURN (9.86%)
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (1.19%)
TOTAL EXPENSES 2.10%
EXPENSES BEFORE OFFSETS 1.92%
NET EXPENSES 1.61%
PORTFOLIO TURNOVER 292%
NET ASSETS, ENDING (IN THOUSANDS) $4,146
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 2.47% 2.37%(A)
EXPENSES BEFORE OFFSETS 2.27% 2.17%(A)
NET EXPENSES 1.81% 1.64%(A)
PORTFOLIO TURNOVER 120% 223%
NET ASSETS, ENDING (IN THOUSANDS) $3,031 $1,209
(A) ANNUALIZED
* FROM MARCH 1, 1995 INCEPTION.
** DISTRIBUTION WAS LESS THAN .01 PER SHARE.
<PAGE>
SOCIAL MID CAP GROWTH PORTFOLIO
ABOUT THE PORTFOLIO
14 INVESTMENT OBJECTIVE, STRATEGY, PAST PERFORMANCE
15 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT SOCIAL INVESTING
16 INVESTMENT SELECTION PROCESS
17 SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ABOUT YOUR INVESTMENT
17 THE FUND AND ITS MANAGEMENT
17 ADVISORY FEES
17 PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
18 DIVIDENDS AND DISTRIBUTIONS
18 TAXES
19 FINANCIAL HIGHLIGHTS
CALVERT SOCIAL MID CAP GROWTH PORTFOLIO OF CALVERT VARIABLE SERIES, INC. (THE
"FUND") SHOULD NOT BE CONFUSED WITH THE CALVERT WORLD VALUES CAPITAL
ACCUMULATION FUND. PERFORMANCE OF THE TWO PORTFOLIOS WILL DIFFER.
<PAGE>
CVS SOCIAL MID CAP GROWTH
ADVISOR: CALVERT ASSET MANAGEMENT COMPANY, INC.
SUBADVISOR: BROWN CAPITAL MANAGEMENT, INC.
OBJECTIVE
CVS SOCIAL MID CAP GROWTH SEEKS TO PROVIDE LONG-TERM CAPITAL APPRECIATION BY
INVESTING PRIMARILY IN A NONDIVERSIFIED PORTFOLIO OF THE EQUITY SECURITIES OF
MID-SIZED COMPANIES THAT ARE UNDERVALUED BUT DEMONSTRATE A POTENTIAL FOR GROWTH.
THIS OBJECTIVE MAY BE CHANGED BY THE PORTFOLIO'S BOARD OF DIRECTORS WITHOUT
SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
INVESTMENTS ARE PRIMARILY IN THE COMMON STOCKS OF MID-SIZE COMPANIES. RETURNS IN
THE PORTFOLIO WILL BE MOSTLY FROM THE CHANGES IN THE PRICE OF THE PORTFOLIO'S
HOLDINGS (CAPITAL APPRECIATION.)
CVS SOCIAL MID CAP GROWTH CURRENTLY DEFINES MID-CAP COMPANIES AS THOSE WITHIN
THE RANGE OF MARKET CAPITALIZATIONS OF THE S&P'S MID-CAP 400 INDEX. MOST
COMPANIES IN THE INDEX HAVE A CAPITALIZATION OF $500 MILLION TO $10 BILLION.
STOCKS CHOSEN FOR THE PORTFOLIO COMBINE GROWTH AND VALUE CHARACTERISTICS OR
OFFER THE OPPORTUNITY TO BUY GROWTH AT A REASONABLE PRICE.
THE SUBADVISOR FAVORS COMPANIES WHICH HAVE AN ABOVE MARKET AVERAGE PROSPECTIVE
GROWTH RATE, BUT SELL AT BELOW MARKET AVERAGE VALUATIONS. THE SUBADVISOR
EVALUATES EACH STOCK IN TERMS OF ITS GROWTH POTENTIAL, THE RETURN FOR RISK FREE
INVESTMENTS, AND THE RISK AND REWARD POTENTIAL FOR THE COMPANY TO DETERMINE A
REASONABLE PRICE FOR THE STOCK.
THE PORTFOLIO INVESTS WITH THE PHILOSOPHY THAT LONG-TERM REWARDS TO INVESTORS
WILL COME FROM THOSE ORGANIZATIONS WHOSE PRODUCTS, SERVICES, AND METHODS ENHANCE
THE HUMAN CONDITION AND THE TRADITIONAL AMERICAN VALUES OF INDIVIDUAL
INITIATIVE, EQUALITY OF OPPORTUNITY AND COOPERATIVE EFFORT. INVESTMENTS ARE
SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL OBJECTIVES OF
FINANCIAL SOUNDNESS AND SOCIAL CRITERIA. SEE "INVESTMENT SELECTION PROCESS."
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN.
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED.
- - THE POSSIBILITY OF GREATER RISK BY INVESTING IN MEDIUM-SIZED COMPANIES
RATHER THAN LARGER, MORE ESTABLISHED COMPANIES.
- - THE PORTFOLIO IS NON-DIVERSIFIED. COMPARED TO OTHER FUNDS, THE PORTFOLIO
MAY INVEST MORE OF ITS ASSETS IN A SMALLER NUMBER OF COMPANIES. GAINS OR
LOSSES ON A SINGLE STOCK MAY HAVE GREATER IMPACT ON THE
PORTFOLIO.
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY.
PAST PERFORMANCE
THE FOLLOWING BAR CHART AND TABLE SHOW THE PORTFOLIO'S ANNUAL RETURNS AND ITS
LONG-TERM PERFORMANCE. THE CHART SHOWS HOW THE PERFORMANCE HAS VARIED FROM
YEAR TO YEAR AND PROVIDES AN INDICATION OF THE RISK OF INVESTING IN THE
PORTFOLIO. THE TABLE COMPARES THE PORTFOLIO'S PERFORMANCE OVER TIME TO THAT
OF THE S&P MID-CAP 400 INDEX. THIS IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF
COMMON STOCK PRICES. IT ALSO SHOWS THE PORTFOLIO'S RETURNS COMPARED TO THE
LIPPER VARIABLE ANNUITY MID CAP INDEX, A COMPOSITE INDEX OF THE ANNUAL RETURN
OF MUTUAL FUNDS THAT HAVE AN INVESTMENT GOAL SIMILAR TO THAT OF THE PORTFOLIO.
THE PORTFOLIO'S PAST PERFORMANCE DOES NOT NECESSARILY INDICATE HOW THE PORTFOLIO
WILL PERFORM IN THE FUTURE. THE RETURNS SHOWN DO NOT REFLECT FEES AND CHARGES
IMPOSED UNDER THE VARIABLE ANNUITY AND LIFE INSURANCE CONTRACTS THROUGH WHICH AN
INVESTMENT MAY BE MADE. IF THESE FEES AND CHARGES WERE INCLUDED, THEY WOULD
REDUCE THESE RETURNS.
CVS SOCIAL MID CAP GROWTH
YEAR-BY-YEAR TOTAL RETURN
[INSERT BAR CHART HERE]
BEST QUARTER (OF PERIODS SHOWN) Q4 '98 25.32%
WORST QUARTER (OF PERIODS SHOWN) Q3 '99 (14.71%)
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED DECEMBER 31, 1999)
1 YEAR 5 YEARS SINCE
INCEPTION*
CVS SOCIAL MID CAP
GROWTH 6.97% 20.80% 14.06%
S&P MIDCAP 400 INDEX 14.72% 23.05% 17.98%
LIPPER VA MID CAP INDEX 47.97% N/A N/A
*THE MONTH END DATE OF 7/31/91 IS USED FOR COMPARISON PURPOSES ONLY. ACTUAL FUND
INCEPTION IS 7/16/91.
<PAGE>
PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF THE PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
AND ASSOCIATED RISKS IS UNDER THE RISK-RETURN SUMMARY. THE PORTFOLIO IS ALSO
PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND TO USE CERTAIN INVESTMENT
TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH THEM. ON THE FOLLOWING PAGES
ARE BRIEF DESCRIPTIONS OF THE INVESTMENTS AND TECHNIQUES, SUMMARIZED IN THE
RISK-RETURN SUMMARY ALONG WITH CERTAIN ADDITIONAL INVESTMENT TECHNIQUES AND
THEIR RISKS.
FOR EACH OF THE INVESTMENT PRACTICES LISTED, THE TABLE BELOW SHOWS THE
PORTFOLIO'S LIMITATIONS AS A PERCENTAGE OF ITS ASSETS AND THE PRINCIPAL TYPES OF
RISK INVOLVED. (SEE THE PAGES FOLLOWING THE TABLE FOR A DESCRIPTION OF THE TYPES
OF RISKS). NUMBERS IN THIS TABLE SHOW MAXIMUM ALLOWABLE AMOUNT ONLY; FOR ACTUAL
USAGE, CONSULT THE PORTFOLIO'S ANNUAL/SEMI-ANNUAL REPORTS.
KEY TO TABLE
J PORTFOLIO CURRENTLY USES
Q PERMITTED, BUT NOT TYPICALLY USED
(% OF ASSETS ALLOWABLE, IF RESTRICTED)
8 NOT PERMITTED
XN ALLOWED UP TO X% OF PORTFOLIO'S NET ASSETS
XT ALLOWED UP TO X% OF PORTFOLIO'S TOTAL ASSETS
NA NOT APPLICABLE TO THIS TYPE OF FUND
INVESTMENT PRACTICE
TEMPORARY DEFENSIVE POSITIONS.
DURING ADVERSE MARKET, ECONOMIC OR POLITICAL CONDITIONS, THE PORTFOLIO MAY
DEPART FROM ITS PRINCIPAL INVESTMENT STRATEGIES BY INCREASING ITS INVESTMENT IN
U.S. GOVERNMENT SECURITIES AND OTHER SHORT-TERM INTEREST-BEARING SECURITIES.
DURING TIMES OF ANY TEMPORARY DEFENSIVE POSITIONS, THE PORTFOLIO FUND MAY NOT BE
ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE
RISKS: OPPORTUNITY.
Q
FOREIGN SECURITIES. SECURITIES ISSUED BY COMPANIES LOCATED OUTSIDE THE U.S.
AND/OR TRADED PRIMARILY ON A FOREIGN EXCHANGE. RISKS: MARKET, CURRENCY,
TRANSACTION, LIQUIDITY, INFORMATION AND POLITICAL.
25N
CONVENTIONAL SECURITIES
SMALL CAP STOCKS. INVESTING IN SMALL COMPANIES INVOLVES GREATER RISK THAN WITH
MORE ESTABLISHED COMPANIES. SMALL CAP STOCK PRICES ARE MORE VOLATILE AND THE
COMPANIES OFTEN HAVE LIMITED PRODUCT LINES, MARKETS, FINANCIAL RESOURCES, AND
MANAGEMENT EXPERIENCE. RISKS: MARKET, LIQUIDITY AND INFORMATION.
Q
INVESTMENT GRADE BONDS. BONDS RATED BBB/BAA OR HIGHER OR COMPARABLE UNRATED
BONDS. RISKS: INTEREST RATE, MARKET AND CREDIT.
Q
BELOW-INVESTMENT GRADE BONDS. BONDS RATED BELOW BBB/BAA OR COMPARABLE
UNRATED BONDS, ALSO KNOWN AS HIGH-YIELD BONDS. THEY ARE SUBJECT TO GREATER
CREDIT RISK THAN INVESTMENT GRADE BONDS. RISKS: CREDIT, MARKET, INTEREST RATE,
LIQUIDITY AND INFORMATION.
Q
5N
UNRATED DEBT SECURITIES. BONDS THAT HAVE NOT BEEN RATED BY A RECOGNIZED RATING
AGENCY; THE ADVISOR HAS DETERMINED THE CREDIT QUALITY BASED ON ITS OWN RESEARCH.
RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND INFORMATION.
Q
ILLIQUID SECURITIES. SECURITIES WHICH CANNOT BE READILY SOLD BECAUSE THERE IS NO
ACTIVE MARKET. RISKS: LIQUIDITY, MARKET AND TRANSACTION.
15N
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES. SECURITIES ARE BACKED BY UNSECURED DEBT, SUCH AS CREDIT
CARD DEBT. THESE SECURITIES ARE OFTEN GUARANTEED OR OVER-COLLATERALIZED TO
ENHANCE THEIR CREDIT QUALITY. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
MORTGAGE-BACKED SECURITIES. SECURITIES ARE BACKED BY POOLS OF MORTGAGES,
INCLUDING PASSTHROUGH CERTIFICATES, AND OTHER SENIOR CLASSES OF COLLATERALIZED
MORTGAGE OBLIGATIONS (CMOS). RISKS: CREDIT, EXTENSION, PREPAYMENT, LIQUIDITY AND
INTEREST RATE.
Q
PARTICIPATION INTERESTS. SECURITIES REPRESENTING AN INTEREST IN ANOTHER SECURITY
OR IN BANK LOANS. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
LEVERAGED DERIVATIVE INSTRUMENTS
CURRENCY CONTRACTS. CONTRACTS INVOLVING THE RIGHT OR OBLIGATION TO BUY OR SELL A
GIVEN AMOUNT OF FOREIGN CURRENCY AT A SPECIFIED PRICE AND FUTURE DATE. RISKS:
CURRENCY, LEVERAGE, CORRELATION, LIQUIDITY AND OPPORTUNITY.
5T
OPTIONS ON SECURITIES AND INDICES. CONTRACTS GIVING THE HOLDER THE RIGHT BUT NOT
THE OBLIGATION TO PURCHASE OR SELL A SECURITY (OR THE CASH VALUE, IN THE CASE OF
AN OPTION ON AN INDEX) AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. ANY OPTIONS
WRITTEN BY THE PORTFOLIO MUST BE COVERED. RISKS: INTEREST RATE, CURRENCY,
MARKET, LEVERAGE, CORRELATION, LIQUIDITY, CREDIT AND OPPORTUNITY.
5T1
<PAGE>
FUTURES CONTRACT. AGREEMENT TO BUY OR SELL A SPECIFIC AMOUNT OF A COMMODITY OR
FINANCIAL INSTRUMENT AT A PARTICULAR PRICE ON A SPECIFIC FUTURE DATE. RISKS:
INTEREST RATE, CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY AND
OPPORTUNITY.
Q
5T
1BASED ON NET PREMIUM PAYMENTS.
THE PORTFOLIO HAS ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS (FOR EXAMPLE,
REPURCHASE AGREEMENTS, REAL ESTATE INVESTMENT TRUSTS, BORROWING, PLEDGING, AND
REVERSE REPURCHASE AGREEMENTS, SECURITIES LENDING, WHEN-ISSUED SECURITIES AND
SHORT SALES.) THESE POLICIES AND RESTRICTIONS ARE DISCUSSED IN THE STATEMENT OF
ADDITIONAL INFORMATION ("SAI").
TYPES OF INVESTMENT RISK
CORRELATION RISK
THIS OCCURS WHEN A PORTFOLIO "HEDGES"- USES ONE INVESTMENT TO OFFSET THE
PORTFOLIO'S POSITION IN ANOTHER. IF THE TWO INVESTMENTS DO NOT BEHAVE IN
RELATION TO ONE ANOTHER THE WAY PORTFOLIO MANAGERS EXPECT THEM TO, THEN
UNEXPECTED OR UNDESIRED RESULTS MAY OCCUR. FOR EXAMPLE, A HEDGE MAY ELIMINATE OR
REDUCE GAINS AS WELL AS OFFSET LOSSES.
CREDIT RISK
THE RISK THAT THE ISSUER OF A SECURITY OR THE COUNTERPARTY TO AN INVESTMENT
CONTRACT MAY DEFAULT OR BECOME UNABLE TO PAY ITS OBLIGATIONS WHEN DUE.
CURRENCY RISK
CURRENCY RISK OCCURS WHEN A PORTFOLIO BUYS, SELLS OR HOLDS A SECURITY
DENOMINATED IN FOREIGN CURRENCY. FOREIGN CURRENCIES "FLOAT" IN VALUE AGAINST THE
U.S. DOLLAR. ADVERSE CHANGES IN FOREIGN CURRENCY VALUES CAN CAUSE INVESTMENT
LOSSES WHEN A PORTFOLIO'S INVESTMENTS ARE CONVERTED TO U.S. DOLLARS.
EXTENSION RISK
THE RISK THAT AN UNEXPECTED RISE IN INTEREST RATES WILL EXTEND THE LIFE OF A
MORTGAGE-BACKED SECURITY BEYOND THE EXPECTED PREPAYMENT TIME, TYPICALLY REDUCING
THE SECURITY'S VALUE.
INFORMATION RISK
THE RISK THAT INFORMATION ABOUT A SECURITY OR ISSUER OR THE MARKET MIGHT NOT BE
AVAILABLE, COMPLETE, ACCURATE OR COMPARABLE.
INTEREST RATE RISK
THE RISK THAT CHANGES IN INTEREST RATES WILL ADVERSELY AFFECT THE VALUE OF AN
INVESTOR'S SECURITIES. WHEN INTEREST RATES RISE, THE VALUE OF FIXED-INCOME
SECURITIES WILL GENERALLY FALL. CONVERSELY, A DROP IN INTEREST RATES WILL
GENERALLY CAUSE AN INCREASE IN THE VALUE OF FIXED-INCOME SECURITIES. LONGER-TERM
SECURITIES AND ZERO COUPON/"STRIPPED" COUPON SECURITIES ("STRIPS") ARE SUBJECT
TO GREATER INTEREST RATE RISK.
LEVERAGE RISK
THE RISK THAT OCCURS IN SOME SECURITIES OR TECHNIQUES WHICH TEND TO MAGNIFY THE
EFFECT OF SMALL CHANGES IN AN INDEX OR A MARKET. THIS CAN RESULT IN A LOSS THAT
EXCEEDS THE AMOUNT ACTUALLY INVESTED.
LIQUIDITY RISK
THE RISK THAT OCCURS WHEN INVESTMENTS CANNOT BE READILY SOLD. A PORTFOLIO MAY
HAVE TO ACCEPT A LESS-THAN-DESIRABLE PRICE TO COMPLETE THE SALE OF AN ILLIQUID
SECURITY OR MAY NOT BE ABLE TO SELL IT AT ALL.
MANAGEMENT RISK
THE RISK THAT A PORTFOLIO'S INVESTMENT MANAGEMENT PRACTICES MIGHT NOT WORK TO
ACHIEVE THEIR DESIRED RESULT.
MARKET RISK
THE RISK THAT THAT SECURITIES PRICES IN A MARKET, A SECTOR OR AN INDUSTRY WILL
FLUCTUATE, AND THAT SUCH MOVEMENTS MIGHT REDUCE AN INVESTMENT'S VALUE.
OPPORTUNITY RISK
THE RISK OF MISSING OUT ON AN INVESTMENT OPPORTUNITY BECAUSE THE ASSETS NEEDED
TO TAKE ADVANTAGE OF IT ARE COMMITTED TO LESS ADVANTAGEOUS INVESTMENTS OR
STRATEGIES.
POLITICAL RISK
THE RISK THAT MAY OCCUR WITH FOREIGN INVESTMENTS, AND MEANS THAT THE VALUE OF AN
INVESTMENT MAY BE ADVERSELY AFFECTED BY NATIONALIZATION, TAXATION, WAR,
GOVERNMENT INSTABILITY OR OTHER ECONOMIC OR POLITICAL ACTIONS OR FACTORS.
PREPAYMENT RISK
THE RISK THAT UNANTICIPATED PREPAYMENTS MAY OCCUR, REDUCING THE VALUE OF A
MORTGAGE-BACKED SECURITY. THE PORTFOLIO MUST THEN REINVEST THOSE ASSETS AT THE
CURRENT, MARKET RATE WHICH MAY BE LOWER.
TRANSACTION RISK
THE RISK THAT A PORTFOLIO MAY BE DELAYED OR UNABLE TO SETTLE A TRANSACTION OR
THAT COMMISSIONS AND SETTLEMENT EXPENSES MAY BE HIGHER THAN USUAL.
INVESTMENT SELECTION PROCESS
INVESTMENTS ARE SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL
OBJECTIVES OF FINANCIAL SOUNDNESS AND SOCIAL CRITERIA. ALTHOUGH THE PORTFOLIO'S
SOCIAL CRITERIA TEND TO LIMIT THE AVAILABILITY OF INVESTMENT OPPORTUNITIES MORE
THAN IS CUSTOMARY WITH OTHER INVESTMENT COMPANIES, CAMCO AND THE SUBADVISOR
BELIEVE THERE ARE SUFFICIENT INVESTMENT OPPORTUNITIES TO PERMIT FULL INVESTMENT
AMONG ISSUERS WHICH SATISFY THE PORTFOLIO'S INVESTMENT AND SOCIAL OBJECTIVES.
THE SELECTION OF AN INVESTMENT BY A PORTFOLIO DOES NOT CONSTITUTE ENDORSEMENT OR
VALIDATION BY THE PORTFOLIO, NOR DOES THE EXCLUSION OF AN INVESTMENT NECESSARILY
REFLECT FAILURE TO SATISFY THE PORTFOLIO'S SOCIAL CRITERIA. INVESTORS ARE
INVITED TO SEND A BRIEF DESCRIPTION OF COMPANIES THEY BELIEVE MIGHT BE SUITABLE
FOR INVESTMENT.
<PAGE>
SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
THE FOLLOWING CRITERIA MAY BE CHANGED BY THE PORTFOLIO'S BOARD OF DIRECTORS
WITHOUT SHAREHOLDER APPROVAL:
1. THE PORTFOLIO AVOIDS INVESTING IN COMPANIES THAT, IN THE ADVISOR'S
OPINION, HAVE SIGNIFICANT OR HISTORICAL PATTERNS OF VIOLATING ENVIRONMENTAL
REGULATIONS, OR OTHERWISE HAVE AN EGREGIOUS ENVIRONMENTAL RECORD. ADDITIONALLY,
THE PORTFOLIO WILL AVOID INVESTING IN NUCLEAR POWER PLANT OPERATORS AND OWNERS,
OR MANUFACTURERS OF KEY COMPONENTS IN THE NUCLEAR POWER PROCESS.
2. THE PORTFOLIO WILL NOT INVEST IN COMPANIES THAT ARE SIGNIFICANTLY ENGAGED
IN WEAPONS PRODUCTION. THIS INCLUDES WEAPONS SYSTEMS CONTRACTORS AND MAJOR
NUCLEAR WEAPONS SYSTEMS CONTRACTORS.
3. THE PORTFOLIO WILL NOT INVEST IN COMPANIES THAT, IN THE ADVISOR'S
OPINION, HAVE SIGNIFICANT OR HISTORICAL PATTERNS OF DISCRIMINATION AGAINST
EMPLOYEES ON THE BASIS OF RACE, GENDER, RELIGION, AGE, DISABILITY OR SEXUAL
ORIENTATION, OR THAT HAVE MAJOR LABOR-MANAGEMENT DISPUTES.
4. THE PORTFOLIO WILL NOT INVEST IN COMPANIES THAT ARE SIGNIFICANTLY
INVOLVED IN THE MANUFACTURE OF TOBACCO OR ALCOHOL PRODUCTS. THE PORTFOLIO WILL
NOT INVEST IN COMPANIES THAT MAKE PRODUCTS OR OFFER SERVICES THAT, UNDER PROPER
USE, IN THE ADVISOR'S OPINION, ARE CONSIDERED HARMFUL.
THE ADVISOR WILL SEEK TO REVIEW COMPANIES' OVERSEAS OPERATIONS CONSISTENT WITH
THE SOCIAL CRITERIA STATED ABOVE. WHILE THE PORTFOLIO MAY INVEST IN COMPANIES
THAT EXHIBIT POSITIVE SOCIAL CHARACTERISTICS, IT MAKES NO EXPLICIT CLAIMS TO
SEEK OUT COMPANIES WITH SUCH PRACTICES.
THE FUND AND ITS MANAGEMENT
THE SHARES OF THE FUND CURRENTLY ARE SOLD ONLY TO INSURANCE COMPANIES
(COLLECTIVELY, THE "INSURANCE COMPANIES") FOR ALLOCATION TO THEIR SEPARATE
ACCOUNTS (COLLECTIVELY, THE "VARIABLE ACCOUNTS") TO FUND THE BENEFITS UNDER
CERTAIN VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE POLICIES (COLLECTIVELY, THE
"POLICIES") ISSUED BY SUCH COMPANIES. ACCORDINGLY, THE INTEREST OF A POLICY
OWNER IN THE SHARES IS SUBJECT TO THE TERMS OF THE PARTICULAR ANNUITY OR LIFE
INSURANCE POLICY AND IS DESCRIBED IN THE ATTACHED PROSPECTUS FOR ONE OF THE
POLICIES, WHICH SHOULD BE REVIEWED CAREFULLY BY A PERSON CONSIDERING THE
PURCHASE OF A POLICY. THE RIGHTS OF THE INSURANCE COMPANIES AS SHAREHOLDERS
SHOULD BE DISTINGUISHED FROM THE RIGHTS OF A POLICY OWNER WHICH ARE DESCRIBED IN
THE POLICIES. POLICY OWNERS SHOULD CONSIDER THAT THE INVESTMENT RETURN
EXPERIENCE OF THE PORTFOLIO WILL AFFECT THE VALUE OF THE POLICY AND THE AMOUNT
OF ANNUITY PAYMENTS OR LIFE INSURANCE BENEFITS RECEIVED UNDER A POLICY. SEE THE
ATTACHED PROSPECTUS(ES) FOR THE POLICIES FOR A DESCRIPTION OF THE RELATIONSHIP
BETWEEN INCREASES OR DECREASES IN THE NET ASSET VALUE OF PORTFOLIO SHARES (AND
ANY DISTRIBUTIONS ON SUCH SHARES) AND THE BENEFITS PROVIDED UNDER A POLICY.
CALVERT ASSET MANAGEMENT COMPANY, INC. ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814) IS THE PORTFOLIO'S INVESTMENT ADVISOR. CAMCO
PROVIDES THE FUND WITH INVESTMENT SUPERVISION AND MANAGEMENT AND OFFICE SPACE;
FURNISHES EXECUTIVE AND OTHER PERSONNEL TO THE FUND, AND PAYS THE SALARIES AND
FEES OF ALL TRUSTEES/DIRECTORS WHO ARE AFFILIATED PERSONS OF THE ADVISOR. IT HAS
BEEN MANAGING MUTUAL FUNDS SINCE 1976. CALVERT IS THE INVESTMENT ADVISOR FOR
OVER 25 MUTUAL FUND PORTFOLIOS, INCLUDING THE FIRST AND LARGEST FAMILY OF
SOCIALLY SCREENED FUNDS. AS OF DECEMBER 31, 1999, CAMCO HAD $6.5 BILLION IN
ASSETS UNDER MANAGEMENT.
SUBADVISOR AND PORTFOLIO MANAGER
BROWN CAPITAL MANAGEMENT, INC. (1201 NORTH CALVERT STREET, BALTIMORE, MARYLAND
21202) HAS MANAGED THE PORTFOLIO SINCE 1996. IT USES A BOTTOM-UP APPROACH THAT
INCORPORATES GROWTH-ADJUSTED PRICE EARNINGS, CONCENTRATING ON MID-/LARGE-CAP
GROWTH STOCKS.
EDDIE C. BROWN, FOUNDER AND PRESIDENT OF BROWN CAPITAL MANAGEMENT, INC., HEADS
THE PORTFOLIO MANAGEMENT TEAM FOR CAPITAL ACCUMULATION AND BROWN CAPITAL'S
PORTION OF CSIF BALANCED. HE BRINGS OVER 24 YEARS OF MANAGEMENT EXPERIENCE TO
THE PORTFOLIO, AND HAS HELD POSITIONS WITH T. ROWE PRICE ASSOCIATES AND IRWING
MANAGEMENT COMPANY. MR. BROWN IS A FREQUENT PANELIST ON "WALL STREET WEEK WITH
LOUIS RUKEYSER" AND IS A MEMBER OF THE WALL STREET WEEK HALL OF FAME.
THE PORTFOLIO HAS OBTAINED AN EXEMPTIVE ORDER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO PERMIT THE FUND, PURSUANT TO APPROVAL BY THE BOARD OF DIRECTORS,
TO ENTER INTO AND MATERIALLY AMEND CONTRACTS WITH THE PORTFOLIO'S SUBADVISOR
WITHOUT SHAREHOLDER APPROVAL. SEE "INVESTMENT ADVISOR AND SUBADVISOR" IN THE SAI
FOR FURTHER DETAILS.
ADVISORY FEES
FOR FISCAL YEAR 1999, THE ADVISOR RECEIVED FROM THE PORTFOLIO AN ADVISORY FEE OF
0.67% OF THE AVERAGE DAILY NET ASSETS OF THE PORTFOLIO.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
THE FUND OFFERS ITS SHARES, WITHOUT SALES CHARGE, ONLY FOR PURCHASE BY THE
INSURANCE COMPANIES FOR ALLOCATION TO THEIR VARIABLE ACCOUNTS. SHARES ARE
PURCHASED BY THE VARIABLE ACCOUNTS AT THE NET ASSET VALUE OF THE PORTFOLIO NEXT
DETERMINED AFTER THE INSURANCE COMPANY RECEIVES THE PREMIUM PAYMENT. THE FUND
CONTINUOUSLY OFFERS ITS SHARES IN THE PORTFOLIO AT A PRICE EQUAL TO THE NET
ASSET VALUE PER SHARE. INITIAL AND SUBSEQUENT PAYMENTS ALLOCATED TO THE FUND ARE
SUBJECT TO THE LIMITS APPLICABLE IN THE POLICIES ISSUED BY THE INSURANCE
COMPANIES.
IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE DISADVANTAGEOUS FOR BOTH ANNUITY
VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE ACCOUNTS, OR FOR VARIABLE ACCOUNTS
OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE FUND, ALTHOUGH
CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE FUND FORESEE ANY SUCH
DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE POLICY
OWNERS OF ANY INSURANCE COMPANY. THE FUND'S BOARD
<PAGE>
OF DIRECTORS INTENDS TO MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL
CONFLICTS BETWEEN SUCH POLICY OWNERS AND TO DETERMINE WHAT ACTION, IF ANY,
SHOULD BE TAKEN IN RESPONSE THERETO.
THE INSURANCE COMPANIES REDEEM SHARES OF THE PORTFOLIO TO MAKE BENEFIT AND
SURRENDER PAYMENTS UNDER THE TERMS OF POLICIES. REDEMPTIONS ARE PROCESSED ON ANY
DAY ON WHICH THE FUND IS OPEN FOR BUSINESS (EACH DAY THE NEW YORK STOCK EXCHANGE
IS OPEN), AND ARE EFFECTED AT THE PORTFOLIO'S NET ASSET VALUE NEXT DETERMINED
AFTER THE APPROPRIATE INSURANCE COMPANY RECEIVES A SURRENDER REQUEST IN
ACCEPTABLE FORM.
PAYMENT FOR REDEEMED SHARES WILL BE MADE PROMPTLY, BUT IN NO EVENT LATER THAN
SEVEN DAYS. HOWEVER, THE RIGHT OF REDEMPTION MAY BE SUSPENDED OR THE DATE OF
PAYMENT POSTPONED IN ACCORDANCE WITH THE RULES UNDER THE 1940 ACT. THE AMOUNT
RECEIVED UPON REDEMPTION OF THE SHARES OF THE FUND MAY BE MORE OR LESS THAN THE
AMOUNT PAID FOR THE SHARES, DEPENDING UPON THE FLUCTUATIONS IN THE MARKET VALUE
OF THE ASSETS OWNED BY THE FUND. THE FUND REDEEMS ALL FULL AND FRACTIONAL SHARES
OF THE PORTFOLIO FOR CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER
SHARE.
THE NET ASSET VALUE OF THE SHARES OF THE PORTFOLIO IS DETERMINED ONCE DAILY AS
OF THE CLOSE OF BUSINESS OF THE NEW YORK STOCK EXCHANGE, ON DAYS WHEN THE
EXCHANGE IS OPEN FOR BUSINESS. THE NET ASSET VALUE IS DETERMINED BY ADDING THE
VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE PORTFOLIO, SUBTRACTING
LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF OUTSTANDING SHARES OF
THE PORTFOLIO.
SECURITIES HELD BY THE PORTFOLIO ARE VALUED AT THEIR MARKET VALUE IF MARKET
QUOTATIONS ARE READILY AVAILABLE. OTHERWISE, SUCH SECURITIES ARE VALUED AT FAIR
VALUE AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS, ALTHOUGH THE ACTUAL
CALCULATIONS MAY BE MADE BY PERSONS ACTING PURSUANT TO THE DIRECTION OF THE
BOARD. ALL MONEY MARKET INSTRUMENTS WITH A REMAINING MATURITY OF 60 DAYS OR LESS
ARE VALUED ON AN AMORTIZED COST BASIS.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
DIVIDENDS AND DISTRIBUTIONS
IT IS THE FUND'S INTENTION TO DISTRIBUTE SUBSTANTIALLY ALL OF THE NET INVESTMENT
INCOME, IF ANY, OF THE PORTFOLIO. FOR DIVIDEND PURPOSES, NET INVESTMENT INCOME
OF THE PORTFOLIO CONSISTS OF ALL PAYMENTS OF DIVIDENDS OR INTEREST RECEIVED BY
SUCH PORTFOLIO LESS ESTIMATED EXPENSES ALL NET REALIZED CAPITAL GAINS, IF ANY,
OF EACH PORTFOLIO ARE DECLARED AND DISTRIBUTED PERIODICALLY, NO LESS FREQUENTLY
THAN ANNUALLY. ALL DIVIDENDS AND DISTRIBUTIONS ARE REINVESTED IN ADDITIONAL
SHARES OF THE PORTFOLIO AT NET ASSET VALUE.
TAXES
AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER M OF THE
INTERNAL REVENUE CODE, AS AMENDED, THE FUND IS NOT SUBJECT TO FEDERAL INCOME
TAX, NOR TO THE FEDERAL EXCISE TAX IMPOSED BY THE TAX REFORM ACT OF 1986, TO THE
EXTENT THAT IT DISTRIBUTES ITS NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS.
SINCE THE ONLY SHAREHOLDERS OF THE FUND ARE THE INSURANCE COMPANIES, NO
DISCUSSION IS INCLUDED HEREIN AS TO THE FEDERAL INCOME TAX CONSEQUENCES AT THE
SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE FEDERAL TAX CONSEQUENCES TO
PURCHASERS OF THE ANNUITY OR LIFE INSURANCE POLICIES, SEE THE PROSPECTUSES FOR
THE POLICIES.
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PORTFOLIO'S FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) YEARS. THE PORTFOLIO'S
FISCAL YEAR END IN DECEMBER 31. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS
FOR A SINGLE SHARE, BY PORTFOLIO. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A
PORTFOLIO (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES
NOT REFLECT ANY APPLICABLE CHARGES OR EXPENSES BY THE INSURANCE COMPANIES. THIS
INFORMATION HAS BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP WHOSE REPORT, ALONG
WITH A PORTFOLIO'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE PORTFOLIO'S ANNUAL
REPORT, WHICH IS AVAILABLE UPON REQUEST.
MID CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
NET ASSET VALUE, BEGINNING $30.43 $26.63
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (.21) (.14)
NET REALIZED AND UNREALIZED
GAIN (LOSS) 2.32 8.00
TOTAL FROM INVESTMENT OPERATIONS 2.11 7.86
DISTRIBUTIONS FROM
NET INVESTMENT INCOME - -
NET REALIZED GAINS (2.51) (4.06)
TOTAL DISTRIBUTIONS (2.51) (4.06)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE (.40) 3.80
NET ASSET VALUE, ENDING $30.03 $30.43
TOTAL RETURN 6.97% 29.88%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.73%) (.60%)
TOTAL EXPENSES 1.11% 1.05%
EXPENSES BEFORE OFFSETS 1.11% 1.05%
NET EXPENSES 1.02% 1.00%
PORTFOLIO TURNOVER 101% 65%
NET ASSETS, ENDING (IN THOUSANDS) $43,976 $39,538
YEARS ENDED
DECEMBER 31,
1997
NET ASSET VALUE, BEGINNING $24.05
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (.04)
NET REALIZED AND UNREALIZED GAIN (LOSS) 5.70
TOTAL FROM INVESTMENT OPERATIONS 5.66
DISTRIBUTIONS FROM
NET INVESTMENT INCOME -
NET REALIZED GAINS (3.08)
TOTAL DISTRIBUTIONS (3.08)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE 2.58
NET ASSET VALUE, ENDING $26.63
TOTAL RETURN 23.53%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.17%)
TOTAL EXPENSES 1.04%
EXPENSES BEFORE OFFSETS 1.04%
NET EXPENSES .96%
PORTFOLIO TURNOVER 96%
NET ASSETS, ENDING (IN THOUSANDS) $26,117
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
NET ASSET VALUE, BEGINNING $22.42 $16.97
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (.12) (.15)
NET REALIZED AND UNREALIZED
GAIN (LOSS) 1.79 6.85
TOTAL FROM INVESTMENT OPERATIONS 1.67 6.70
DISTRIBUTIONS FROM
NET INVESTMENT INCOME - (.01)
NET REALIZED GAINS (.04) (1.24)
TOTAL DISTRIBUTIONS (.04) (1.25)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE 1.63 5.45
NET ASSET VALUE, ENDING $24.05 $22.42
TOTAL RETURN 7.44% 39.46%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.60%) (.84%)
TOTAL EXPENSES 1.33% 1.66%
EXPENSES BEFORE OFFSETS 1.33% 1.56%
NET EXPENSES 1.00% 1.25%
PORTFOLIO TURNOVER 124% 135%
NET ASSETS, ENDING (IN THOUSANDS) $19,904 $8,935
<PAGE>
SOCIAL INTERNATIONAL EQUITY PORTFOLIO
ABOUT THE PORTFOLIO
21 INVESTMENT OBJECTIVE, STRATEGY, PAST PERFORMANCE
22 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT SOCIAL INVESTING
24 INVESTMENT SELECTION PROCESS
24 SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ABOUT YOUR INVESTMENT
24 THE FUND AND ITS MANAGEMENT
24 ADVISORY FEES
25 PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
25 DIVIDENDS AND DISTRIBUTIONS
25 TAXES
26 FINANCIAL HIGHLIGHTS
CALVERT SOCIAL INTERNATIONAL EQUITY PORTFOLIO OF CALVERT VARIABLE SERIES, INC.
(THE "FUND") SHOULD NOT BE CONFUSED WITH THE CALVERT WORLD VALUES INTERNATIONAL
EQUITY FUND. PERFORMANCE OF THE TWO PORTFOLIOS WILL DIFFER.
<PAGE>
CVS SOCIAL INTERNATIONAL EQUITY
ADVISOR: CALVERT ASSET MANAGEMENT COMPANY, INC.
SUBADVISOR: MURRAY JOHNSTONE INTERNATIONAL, LTD.
OBJECTIVE
CVS SOCIAL INTERNATIONAL EQUITY SEEKS TO PROVIDE A HIGH TOTAL RETURN CONSISTENT
WITH REASONABLE RISK BY INVESTING PRIMARILY IN A GLOBALLY DIVERSIFIED PORTFOLIO
FOR EQUITY SECURITIES.
PRINCIPAL INVESTMENT STRATEGIES
CVS SOCIAL INTERNATIONAL EQUITY INVESTS PRIMARILY IN THE COMMON STOCKS OF MID-
TO LARGE-CAP COMPANIES USING A VALUE APPROACH. THE PORTFOLIO IDENTIFIES THOSE
COUNTRIES WITH MARKETS AND ECONOMIES THAT IT BELIEVES CURRENTLY PROVIDE THE MOST
FAVORABLE CLIMATE FOR INVESTING. THE SUBADVISOR SELECTS COUNTRIES BASED ON A "20
QUESTIONS" MODEL WHICH USES MACRO-AND MICRO-ECONOMIC INPUTS TO RANK THE
ATTRACTIVENESS OF MARKETS IN VARIOUS COUNTRIES. WITHIN EACH COUNTRY, THE
SUBADVISOR USES VALUATION TECHNIQUES THAT HAVE BEEN SHOWN TO BEST DETERMINE
VALUE WITHIN THAT MARKET. IN SOME COUNTRIES, THE VALUATION PROCESS MAY FAVOR THE
COMPARISON OF PRICE-TO-CASH-FLOW WHILE IN OTHER COUNTRIES, PRICE-TO-SALES OR
PRICE-TO-BOOK MAY BE MORE USEFUL IN DETERMINING WHICH STOCKS ARE UNDERVALUED.
THE PORTFOLIO INVESTS PRIMARILY IN MORE DEVELOPED ECONOMIES AND MARKETS. NO MORE
THAN 5% OF PORTFOLIO ASSETS ARE INVESTED IN THE U.S.
THE PORTFOLIO INVESTS WITH THE PHILOSOPHY THAT LONG-TERM REWARDS TO INVESTORS
WILL COME FROM THOSE ORGANIZATIONS WHOSE PRODUCTS, SERVICES, AND METHODS ENHANCE
THE HUMAN CONDITION AND THE TRADITIONAL AMERICAN VALUES OF INDIVIDUAL
INITIATIVE, EQUALITY OF OPPORTUNITY AND COOPERATIVE EFFORT. INVESTMENTS ARE
SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL OBJECTIVES OF
FINANCIAL SOUNDNESS AND SOCIAL CRITERIA. SEE "INVESTMENT SELECTION PROCESS."
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKETS GO DOWN (INCLUDING THOSE OUTSIDE THE U.S.).
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED.
- - INVESTMENT IN FOREIGN SECURITIES INVOLVES ADDITIONAL RISKS RELATING TO
POLITICAL, SOCIAL AND ECONOMIC DEVELOPMENTS ABROAD. OTHER RISKS FROM
THESE INVESTMENTS RESULT FROM THE DIFFERENCES BETWEEN THE REGULATIONS
TO WHICH U.S. AND FOREIGN ISSUERS AND MARKETS ARE SUBJECT, THE POTENTIAL
FOR FOREIGN MARKETS TO BE LESS LIQUID THAN U.S. MARKETS, AND THE
CURRENCY RISK ASSOCIATED WITH SECURITIES THAT TRADE IN CURRENCIES
OTHER THAN THE U.S. DOLLAR.
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
PAST PERFORMANCE
THE BAR CHART AND TABLE BELOW SHOW THE PORTFOLIO'S ANNUAL RETURNS AND ITS
LONG-TERM PERFORMANCE. THE CHART SHOWS HOW THE PERFORMANCE HAS VARIED FROM
YEAR TO YEAR AND PROVIDES AN INDICATION OF THE RISK OF INVESTING IN THE
PORTFOLIO. THE TABLE COMPARES THE PORTFOLIO'S PERFORMANCE OVER TIME TO THAT
OF THE MSCI EAFE INDEX GD. THIS IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF
COMMON STOCK PRICES. IT ALSO SHOWS THE PORTFOLIO'S RETURNS COMPARED TO THE
LIPPER VARIABLE ANNUITY INTERNATIONAL INDEX, A COMPOSITE INDEX OF THE ANNUAL
RETURN OF MUTUAL FUNDS THAT HAVE AN INVESTMENT GOAL SIMILAR TO THAT OF
THE PORTFOLIO. THE PORTFOLIO'S PAST PERFORMANCE DOES NOT NECESSARILY
INDICATE HOW THE PORTFOLIO WILL PERFORM IN THE FUTURE. THE RETURNS SHOWN DO
NOT REFLECT FEES AND CHARGES IMPOSED UNDER THE VARIABLE ANNUITY AND LIFE
INSURANCE CONTRACTS THROUGH WHICH AN INVESTMENT MAY BE MADE. IF THESE FEES
AND CHARGES WERE INCLUDED, THEY WOULD REDUCE THESE RETURNS.
CVS SOCIAL INTERNATIONAL EQUITY
YEAR-BY-YEAR TOTAL RETURN
[INSERT BAR CHART HERE]
BEST QUARTER (OF PERIODS SHOWN) Q4 '99 21.14%
WORST QUARTER (OF PERIODS SHOWN) Q3 '98 (13.95%)
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED DECEMBER 31, 1999)
1 YEAR 5 YEARS SINCE
INCEPTION*
CVS SOCIAL INTERNATIONAL
EQUITY 32.78% 18.06% 14.72%
MSCI EAFE INDEX GD 27.30% 13.15% 13.62%
LIPPER VA INTERNATIONAL
INDEX 36.66% 14.12% 12.08%
*FUND INCEPTION 6/30/92.
<PAGE>
PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF THE PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
AND ASSOCIATED RISKS IS UNDER THE RISK-RETURN SUMMARY. THE PORTFOLIO IS ALSO
PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND TO USE CERTAIN INVESTMENT
TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH THEM. ON THE FOLLOWING PAGES
ARE BRIEF DESCRIPTIONS OF THE INVESTMENTS AND TECHNIQUES, SUMMARIZED IN THE
RISK-RETURN SUMMARY ALONG WITH CERTAIN ADDITIONAL INVESTMENT TECHNIQUES AND
THEIR RISKS.
FOR EACH OF THE INVESTMENT PRACTICES LISTED, THE TABLE BELOW SHOWS THE
PORTFOLIO'S LIMITATIONS AS A PERCENTAGE OF ITS ASSETS AND THE PRINCIPAL TYPES OF
RISK INVOLVED. (SEE THE PAGES FOLLOWING THE TABLE FOR A DESCRIPTION OF THE TYPES
OF RISKS). NUMBERS IN THIS TABLE SHOW MAXIMUM ALLOWABLE AMOUNT ONLY; FOR ACTUAL
USAGE, CONSULT THE PORTFOLIO'S ANNUAL/SEMI-ANNUAL REPORTS.
KEY TO TABLE
J PORTFOLIO CURRENTLY USES
Q PERMITTED, BUT NOT TYPICALLY USED
(% OF ASSETS ALLOWABLE, IF RESTRICTED)
8 NOT PERMITTED
XN ALLOWED UP TO X% OF PORTFOLIO'S NET ASSETS
XT ALLOWED UP TO X% OF PORTFOLIO'S TOTAL ASSETS
NA NOT APPLICABLE TO THIS TYPE OF FUND
INVESTMENT PRACTICES
ACTIVE TRADING STRATEGY/TURNOVER INVOLVES SELLING A SECURITY SOON AFTER
PURCHASE. AN ACTIVE TRADING STRATEGY CAUSES A FUND TO HAVE HIGHER PORTFOLIO
TURNOVER COMPARED TO OTHER FUNDS AND HIGHER TRANSACTION COSTS, SUCH AS
COMMISSIONS AND CUSTODIAN AND SETTLEMENT FEES, AND MAY INCREASE A PORTFOLIO'S
TAX LIABILITY. RISKS: OPPORTUNITY, MARKET AND TRANSACTION.
Q
TEMPORARY DEFENSIVE POSITIONS.
DURING ADVERSE MARKET, ECONOMIC OR POLITICAL CONDITIONS, THE PORTFOLIO MAY
DEPART FROM ITS PRINCIPAL INVESTMENT STRATEGIES BY INCREASING ITS INVESTMENT IN
U.S. GOVERNMENT SECURITIES AND OTHER SHORT-TERM INTEREST-BEARING SECURITIES.
DURING TIMES OF ANY TEMPORARY DEFENSIVE POSITIONS, THE PORTFOLIO FUND MAY NOT BE
ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE
RISKS: OPPORTUNITY.
Q
CONVENTIONAL SECURITIES
FOREIGN SECURITIES. SECURITIES ISSUED BY COMPANIES LOCATED OUTSIDE THE U.S.
AND/OR TRADED PRIMARILY ON A FOREIGN EXCHANGE. RISKS: MARKET, CURRENCY,
TRANSACTION, LIQUIDITY, INFORMATION AND POLITICAL.
J
SMALL CAP STOCKS. INVESTING IN SMALL COMPANIES INVOLVES GREATER RISK THAN WITH
MORE ESTABLISHED COMPANIES. SMALL CAP STOCK PRICES ARE MORE VOLATILE AND THE
COMPANIES OFTEN HAVE LIMITED PRODUCT LINES, MARKETS, FINANCIAL RESOURCES, AND
MANAGEMENT EXPERIENCE. RISKS: MARKET, LIQUIDITY AND INFORMATION.
Q
INVESTMENT GRADE BONDS. BONDS RATED BBB/BAA OR HIGHER OR COMPARABLE UNRATED
BONDS. RISKS: INTEREST RATE, MARKET AND CREDIT.
Q
35N
BELOW-INVESTMENT GRADE BONDS. BONDS RATED BELOW BBB/BAA OR COMPARABLE
UNRATED BONDS, ALSO KNOWN AS HIGH-YIELD BONDS. THEY ARE SUBJECT TO GREATER
CREDIT RISK THAN INVESTMENT GRADE BONDS. RISKS: CREDIT, MARKET, INTEREST RATE,
LIQUIDITY AND INFORMATION.
5T
UNRATED DEBT SECURITIES. BONDS THAT HAVE NOT BEEN RATED BY A RECOGNIZED RATING
AGENCY; THE ADVISOR HAS DETERMINED THE CREDIT QUALITY BASED ON ITS OWN RESEARCH.
RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND INFORMATION.
Q
ILLIQUID SECURITIES. SECURITIES WHICH CANNOT BE READILY SOLD BECAUSE THERE IS NO
ACTIVE MARKET. RISKS: LIQUIDITY, MARKET AND TRANSACTION.
15N
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES. SECURITIES ARE BACKED BY UNSECURED DEBT, SUCH AS CREDIT
CARD DEBT. THESE SECURITIES ARE OFTEN GUARANTEED OR OVER-COLLATERALIZED TO
ENHANCE THEIR CREDIT QUALITY. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
MORTGAGE-BACKED SECURITIES. SECURITIES ARE BACKED BY POOLS OF MORTGAGES,
INCLUDING PASSTHROUGH CERTIFICATES, AND OTHER SENIOR CLASSES OF COLLATERALIZED
MORTGAGE OBLIGATIONS (CMOS). RISKS: CREDIT, EXTENSION, PREPAYMENT, LIQUIDITY AND
INTEREST RATE.
Q
PARTICIPATION INTERESTS. SECURITIES REPRESENTING AN INTEREST IN ANOTHER SECURITY
OR IN BANK LOANS. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
LEVERAGED DERIVATIVE INSTRUMENTS
CURRENCY CONTRACTS. CONTRACTS INVOLVING THE RIGHT OR OBLIGATION TO BUY OR SELL A
GIVEN AMOUNT OF FOREIGN CURRENCY AT A SPECIFIED PRICE AND FUTURE DATE. RISKS:
CURRENCY, LEVERAGE, CORRELATION, LIQUIDITY AND OPPORTUNITY.
5T
<PAGE>
OPTIONS ON SECURITIES AND INDICES. CONTRACTS GIVING THE HOLDER THE RIGHT BUT NOT
THE OBLIGATION TO PURCHASE OR SELL A SECURITY (OR THE CASH VALUE, IN THE CASE OF
AN OPTION ON AN INDEX) AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. ANY OPTIONS
WRITTEN BY THE PORTFOLIO MUST BE COVERED. RISKS: INTEREST RATE, CURRENCY,
MARKET, LEVERAGE, CORRELATION, LIQUIDITY, CREDIT AND OPPORTUNITY.
5T1
FUTURES CONTRACT. AGREEMENT TO BUY OR SELL A SPECIFIC AMOUNT OF A COMMODITY OR
FINANCIAL INSTRUMENT AT A PARTICULAR PRICE ON A SPECIFIC FUTURE DATE. RISKS:
INTEREST RATE, CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY AND
OPPORTUNITY.
1BASED ON NET PREMIUM PAYMENTS.
THE PORTFOLIO HAS ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS (FOR EXAMPLE,
REPURCHASE AGREEMENTS, REAL ESTATE INVESTMENT TRUSTS, BORROWING, PLEDGING, AND
REVERSE REPURCHASE AGREEMENTS, SECURITIES LENDING, WHEN-ISSUED SECURITIES AND
SHORT SALES.) THESE POLICIES AND RESTRICTIONS ARE DISCUSSED IN THE STATEMENT OF
ADDITIONAL INFORMATION ("SAI").
TYPES OF INVESTMENT RISK
CORRELATION RISK
THIS OCCURS WHEN A PORTFOLIO "HEDGES"- USES ONE INVESTMENT TO OFFSET THE
PORTFOLIO'S POSITION IN ANOTHER. IF THE TWO INVESTMENTS DO NOT BEHAVE IN
RELATION TO ONE ANOTHER THE WAY PORTFOLIO MANAGERS EXPECT THEM TO, THEN
UNEXPECTED OR UNDESIRED RESULTS MAY OCCUR. FOR EXAMPLE, A HEDGE MAY ELIMINATE OR
REDUCE GAINS AS WELL AS OFFSET LOSSES.
CREDIT RISK
THE RISK THAT THE ISSUER OF A SECURITY OR THE COUNTERPARTY TO AN INVESTMENT
CONTRACT MAY DEFAULT OR BECOME UNABLE TO PAY ITS OBLIGATIONS WHEN DUE.
CURRENCY RISK
CURRENCY RISK OCCURS WHEN A PORTFOLIO BUYS, SELLS OR HOLDS A SECURITY
DENOMINATED IN FOREIGN CURRENCY. FOREIGN CURRENCIES "FLOAT" IN VALUE AGAINST THE
U.S. DOLLAR. ADVERSE CHANGES IN FOREIGN CURRENCY VALUES CAN CAUSE INVESTMENT
LOSSES WHEN A PORTFOLIO'S INVESTMENTS ARE CONVERTED TO U.S. DOLLARS.
EXTENSION RISK
THE RISK THAT AN UNEXPECTED RISE IN INTEREST RATES WILL EXTEND THE LIFE OF A
MORTGAGE-BACKED SECURITY BEYOND THE EXPECTED PREPAYMENT TIME, TYPICALLY REDUCING
THE SECURITY'S VALUE.
INFORMATION RISK
THE RISK THAT INFORMATION ABOUT A SECURITY OR ISSUER OR THE MARKET MIGHT NOT BE
AVAILABLE, COMPLETE, ACCURATE OR COMPARABLE.
INTEREST RATE RISK
THE RISK THAT CHANGES IN INTEREST RATES WILL ADVERSELY AFFECT THE VALUE OF AN
INVESTOR'S SECURITIES. WHEN INTEREST RATES RISE, THE VALUE OF FIXED-INCOME
SECURITIES WILL GENERALLY FALL. CONVERSELY, A DROP IN INTEREST RATES WILL
GENERALLY CAUSE AN INCREASE IN THE VALUE OF FIXED-INCOME SECURITIES. LONGER-TERM
SECURITIES AND ZERO COUPON/"STRIPPED" COUPON SECURITIES ("STRIPS") ARE SUBJECT
TO GREATER INTEREST RATE RISK.
LEVERAGE RISK
THE RISK THAT OCCURS IN SOME SECURITIES OR TECHNIQUES WHICH TEND TO MAGNIFY THE
EFFECT OF SMALL CHANGES IN AN INDEX OR A MARKET. THIS CAN RESULT IN A LOSS THAT
EXCEEDS THE AMOUNT ACTUALLY INVESTED.
LIQUIDITY RISK
THE RISK THAT OCCURS WHEN INVESTMENTS CANNOT BE READILY SOLD. A PORTFOLIO MAY
HAVE TO ACCEPT A LESS-THAN-DESIRABLE PRICE TO COMPLETE THE SALE OF AN ILLIQUID
SECURITY OR MAY NOT BE ABLE TO SELL IT AT ALL.
MANAGEMENT RISK
THE RISK THAT A PORTFOLIO'S INVESTMENT MANAGEMENT PRACTICES MIGHT NOT WORK TO
ACHIEVE THEIR DESIRED RESULT.
MARKET RISK
THE RISK THAT SECURITIES PRICES IN A MARKET, A SECTOR OR AN INDUSTRY WILL
FLUCTUATE, AND THAT SUCH MOVEMENTS MIGHT REDUCE AN INVESTMENT'S VALUE.
OPPORTUNITY RISK
THE RISK OF MISSING OUT ON AN INVESTMENT OPPORTUNITY BECAUSE THE ASSETS NEEDED
TO TAKE ADVANTAGE OF IT ARE COMMITTED TO LESS ADVANTAGEOUS INVESTMENTS OR
STRATEGIES.
POLITICAL RISK
THE RISK THAT MAY OCCUR WITH FOREIGN INVESTMENTS, AND MEANS THAT THE VALUE OF AN
INVESTMENT MAY BE ADVERSELY AFFECTED BY NATIONALIZATION, TAXATION, WAR,
GOVERNMENT INSTABILITY OR OTHER ECONOMIC OR POLITICAL ACTIONS OR FACTORS.
PREPAYMENT RISK
THE RISK THAT UNANTICIPATED PREPAYMENTS MAY OCCUR, REDUCING THE VALUE OF A
MORTGAGE-BACKED SECURITY. THE PORTFOLIO MUST THEN REINVEST THOSE ASSETS AT THE
CURRENT, MARKET RATE WHICH MAY BE LOWER.
TRANSACTION RISK
THE RISK THAT A PORTFOLIO MAY BE DELAYED OR UNABLE TO SETTLE A TRANSACTION OR
THAT COMMISSIONS AND SETTLEMENT EXPENSES MAY BE HIGHER THAN USUAL.
<PAGE>
NVESTMENT SELECTION PROCESS
INVESTMENTS ARE SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL
OBJECTIVES OF FINANCIAL SOUNDNESS AND SOCIAL CRITERIA.
ALTHOUGH THE PORTFOLIO'S SOCIAL CRITERIA TEND TO LIMIT THE AVAILABILITY OF
INVESTMENT OPPORTUNITIES MORE THAN IS CUSTOMARY WITH OTHER INVESTMENT COMPANIES,
CAMCO AND THE SUBADVISOR BELIEVE THERE ARE SUFFICIENT INVESTMENT OPPORTUNITIES
TO PERMIT FULL INVESTMENT AMONG ISSUERS WHICH SATISFY THE PORTFOLIO'S INVESTMENT
AND SOCIAL OBJECTIVES.
THE SELECTION OF AN INVESTMENT BY A PORTFOLIO DOES NOT CONSTITUTE ENDORSEMENT OR
VALIDATION BY THE PORTFOLIO, NOR DOES THE EXCLUSION OF AN INVESTMENT NECESSARILY
REFLECT FAILURE TO SATISFY THE PORTFOLIO'S SOCIAL CRITERIA. INVESTORS ARE
INVITED TO SEND A BRIEF DESCRIPTION OF COMPANIES THEY BELIEVE MIGHT BE SUITABLE
FOR INVESTMENT.
SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
THE PORTFOLIO CAREFULLY REVIEWS A COMPANY'S POLICIES AND BEHAVIOR IN THE
FOLLOWING SOCIAL ISSUES: ENVIRONMENT, NUCLEAR ENERGY, WEAPONS SYSTEMS, HEALTH
CARE, HUMAN RIGHTS, AND ALCOHOL/TOBACCO. THE PORTFOLIO CURRENTLY OBSERVES THE
FOLLOWING OPERATING POLICIES WHICH MAY BE CHANGED BY THE PORTFOLIO'S BOARD OF
DIRECTORS WITHOUT SHAREHOLDER APPROVAL:
1. THE PORTFOLIO ACTIVELY SEEKS TO INVEST IN COMPANIES THAT ACHIEVE
EXCELLENCE IN BOTH FINANCIAL RETURN AND ENVIRONMENTAL SOUNDNESS, SELECTING
ISSUERS THAT TAKE POSITIVE STEPS TOWARD PRESERVING OUR ENVIRONMENT AND AVOIDING
COMPANIES WITH POOR ENVIRONMENTAL RECORDS.
2. THE PORTFOLIO WILL NOT INVEST IN ISSUERS PRIMARILY ENGAGED IN THE
MANUFACTURE OF WEAPONS SYSTEMS, THE PRODUCTION OF NUCLEAR ENERGY, OR THE
MANUFACTURE OF EQUIPMENT TO PRODUCE NUCLEAR ENERGY.
3. THE PORTFOLIO ACTIVELY SEEKS TO INVEST IN COMPANIES WHOSE PRODUCTS OR
SERVICES IMPROVE THE QUALITY OF OR ACCESS TO HEALTH CARE, INCLUDING PUBLIC
HEALTH AND PREVENTATIVE MEDICINE.
THE PORTFOLIO BELIEVES THAT THERE ARE LONG-TERM BENEFITS INHERENT IN AN
INVESTMENT PHILOSOPHY THAT DEMONSTRATES CONCERN FOR THE ENVIRONMENT, HUMAN
RIGHTS, ECONOMIC PRIORITIES, AND INTERNATIONAL RELATIONS. THOSE ENTERPRISES
WHICH EXHIBIT A SOCIAL AWARENESS MEASURED IN TERMS OF THE ABOVE ATTRIBUTES AND
CONSIDERATIONS SHOULD BE BETTER PREPARED TO MEET FUTURE SOCIETAL NEEDS FOR GOODS
AND SERVICES. BY RESPONDING TO SOCIAL CONCERNS, THESE ENTERPRISES SHOULD NOT
ONLY AVOID THE LIABILITY THAT MAY BE INCURRED WHEN A PRODUCT OR SERVICES IS
DETERMINED TO HAVE A NEGATIVE SOCIAL IMPACT OR HAS OUTLIVED ITS USEFULNESS, BUT
ALSO BE BETTER POSITIONED TO DEVELOP OPPORTUNITIES TO MAKE A PROFITABLE
CONTRIBUTION TO SOCIETY. THESE ENTERPRISES SHOULD BE READY TO RESPOND TO
EXTERNAL DEMANDS AND ENSURE THAT OVER THE LONGER TERM THEY WILL BE VIABLE TO
PROVIDE A POSITIVE RETURN TO BOTH INVESTORS AND SOCIETY AS A WHOLE.
THE FUND AND ITS MANAGEMENT
THE SHARES OF THE FUND CURRENTLY ARE SOLD ONLY TO INSURANCE COMPANIES
(COLLECTIVELY, THE "INSURANCE COMPANIES") FOR ALLOCATION TO THEIR SEPARATE
ACCOUNTS (COLLECTIVELY, THE "VARIABLE ACCOUNTS") TO FUND THE BENEFITS UNDER
CERTAIN VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE POLICIES (COLLECTIVELY, THE
"POLICIES") ISSUED BY SUCH COMPANIES. ACCORDINGLY, THE INTEREST OF A POLICY
OWNER IN THE SHARES IS SUBJECT TO THE TERMS OF THE PARTICULAR ANNUITY OR LIFE
INSURANCE POLICY AND IS DESCRIBED IN THE ATTACHED PROSPECTUS FOR ONE OF THE
POLICIES, WHICH SHOULD BE REVIEWED CAREFULLY BY A PERSON CONSIDERING THE
PURCHASE OF A POLICY. THE RIGHTS OF THE INSURANCE COMPANIES AS SHAREHOLDERS
SHOULD BE DISTINGUISHED FROM THE RIGHTS OF A POLICY OWNER WHICH ARE DESCRIBED IN
THE POLICIES. POLICY OWNERS SHOULD CONSIDER THAT THE INVESTMENT RETURN
EXPERIENCE OF THE PORTFOLIO WILL AFFECT THE VALUE OF THE POLICY AND THE AMOUNT
OF ANNUITY PAYMENTS OR LIFE INSURANCE BENEFITS RECEIVED UNDER A POLICY. SEE THE
ATTACHED PROSPECTUS(ES) FOR THE POLICIES FOR A DESCRIPTION OF THE RELATIONSHIP
BETWEEN INCREASES OR DECREASES IN THE NET ASSET VALUE OF PORTFOLIO SHARES (AND
ANY DISTRIBUTIONS ON SUCH SHARES) AND THE BENEFITS PROVIDED UNDER A POLICY.
CALVERT ASSET MANAGEMENT COMPANY, INC. ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814) IS THE PORTFOLIO'S INVESTMENT ADVISOR. CAMCO
PROVIDES THE FUND WITH INVESTMENT SUPERVISION AND MANAGEMENT AND OFFICE SPACE;
FURNISHES EXECUTIVE AND OTHER PERSONNEL TO THE FUND, AND PAYS THE SALARIES AND
FEES OF ALL TRUSTEES/DIRECTORS WHO ARE AFFILIATED PERSONS OF THE ADVISOR. IT HAS
BEEN MANAGING MUTUAL FUNDS SINCE 1976. CALVERT IS THE INVESTMENT ADVISOR FOR
OVER 25 MUTUAL FUND PORTFOLIOS, INCLUDING THE FIRST AND LARGEST FAMILY OF
SOCIALLY SCREENED FUNDS. AS OF DECEMBER 31, 1999, CAMCO HAD $6.5 BILLION IN
ASSETS UNDER MANAGEMENT.
SUBADVISOR AND PORTFOLIO MANAGER
MURRAY JOHNSTONE INTERNATIONAL, LTD. (875 NORTH MICHIGAN AVE., SUITE 3415
CHICAGO, ILLINOIS 60611) HAS MANAGED CVS SOCIAL INTERNATIONAL EQUITY SINCE ITS
INCEPTION.
ANDREW PRESTON HEADS THE PORTFOLIO MANAGEMENT TEAM FOR THE PORTFOLIO. HE JOINED
MURRAY JOHNSTONE INTERNATIONAL IN 1985, AND HAS HELD POSITIONS AS INVESTMENT
ANALYST IN THE UNITED KINGDOM AND U.S. DEPARTMENTS, AND FUND MANAGER IN THE
JAPANESE DEPARTMENT. HE WAS APPOINTED DIRECTOR OF THE COMPANY IN 1993. PRIOR TO
JOINING MURRAY JOHNSTONE, HE WAS A MEMBER OF THE AUSTRALIAN FOREIGN SERVICE AND
ATTENDED UNIVERSITY IN AUSTRALIA AND JAPAN.
THE PORTFOLIO HAS OBTAINED AN EXEMPTIVE ORDER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO PERMIT THE FUND, PURSUANT TO APPROVAL BY THE BOARD OF DIRECTORS,
TO ENTER INTO AND MATERIALLY AMEND CONTRACTS WITH THE PORTFOLIO'S SUBADVISOR
WITHOUT SHAREHOLDER APPROVAL. SEE "INVESTMENT ADVISOR AND SUBADVISOR" IN THE SAI
FOR FURTHER DETAILS.
ADVISORY FEES
FOR FISCAL YEAR 1999, THE ADVISOR RECEIVED FROM THE PORTFOLIO AN ADVISORY FEE OF
0.79% OF THE AVERAGE DAILY NET ASSETS OF THE PORTFOLIO.
<PAGE>
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
THE FUND OFFERS ITS SHARES, WITHOUT SALES CHARGE, ONLY FOR PURCHASE BY THE
INSURANCE COMPANIES FOR ALLOCATION TO THEIR VARIABLE ACCOUNTS. SHARES ARE
PURCHASED BY THE VARIABLE ACCOUNTS AT THE NET ASSET VALUE OF THE PORTFOLIO NEXT
DETERMINED AFTER THE INSURANCE COMPANY RECEIVES THE PREMIUM PAYMENT. THE FUND
CONTINUOUSLY OFFERS ITS SHARES IN THE PORTFOLIO AT A PRICE EQUAL TO THE NET
ASSET VALUE PER SHARE. INITIAL AND SUBSEQUENT PAYMENTS ALLOCATED TO THE FUND ARE
SUBJECT TO THE LIMITS APPLICABLE IN THE POLICIES ISSUED BY THE INSURANCE
COMPANIES.
IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE DISADVANTAGEOUS FOR BOTH ANNUITY
VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE ACCOUNTS, OR FOR VARIABLE ACCOUNTS
OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE FUND, ALTHOUGH
CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE FUND FORESEE ANY SUCH
DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE POLICY
OWNERS OF ANY INSURANCE COMPANY. THE FUND'S BOARD OF DIRECTORS INTENDS TO
MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS BETWEEN SUCH POLICY
OWNERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN IN RESPONSE
THERETO.
THE INSURANCE COMPANIES REDEEM SHARES OF THE PORTFOLIO TO MAKE BENEFIT AND
SURRENDER PAYMENTS UNDER THE TERMS OF POLICIES. REDEMPTIONS ARE PROCESSED ON ANY
DAY ON WHICH THE FUND IS OPEN FOR BUSINESS (EACH DAY THE NEW YORK STOCK EXCHANGE
IS OPEN), AND ARE EFFECTED AT THE PORTFOLIO'S NET ASSET VALUE NEXT DETERMINED
AFTER THE APPROPRIATE INSURANCE COMPANY RECEIVES A SURRENDER REQUEST IN
ACCEPTABLE FORM.
PAYMENT FOR REDEEMED SHARES WILL BE MADE PROMPTLY, BUT IN NO EVENT LATER THAN
SEVEN DAYS. HOWEVER, THE RIGHT OF REDEMPTION MAY BE SUSPENDED OR THE DATE OF
PAYMENT POSTPONED IN ACCORDANCE WITH THE RULES UNDER THE 1940 ACT. THE AMOUNT
RECEIVED UPON REDEMPTION OF THE SHARES OF THE FUND MAY BE MORE OR LESS THAN THE
AMOUNT PAID FOR THE SHARES, DEPENDING UPON THE FLUCTUATIONS IN THE MARKET VALUE
OF THE ASSETS OWNED BY THE FUND. THE FUND REDEEMS ALL FULL AND FRACTIONAL SHARES
OF THE PORTFOLIO FOR CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER
SHARE.
THE NET ASSET VALUE OF THE SHARES OF THE PORTFOLIO IS DETERMINED ONCE DAILY AS
OF THE CLOSE OF BUSINESS OF THE NEW YORK STOCK EXCHANGE, ON DAYS WHEN THE
EXCHANGE IS OPEN FOR BUSINESS. THE NET ASSET VALUE IS DETERMINED BY ADDING THE
VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE PORTFOLIO, SUBTRACTING
LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF OUTSTANDING SHARES OF
THE PORTFOLIO.
SECURITIES HELD BY THE PORTFOLIO ARE VALUED AT THEIR MARKET VALUE IF MARKET
QUOTATIONS ARE READILY AVAILABLE. OTHERWISE, SUCH SECURITIES ARE VALUED AT FAIR
VALUE AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS, ALTHOUGH THE ACTUAL
CALCULATIONS MAY BE MADE BY PERSONS ACTING PURSUANT TO THE DIRECTION OF THE
BOARD. ALL MONEY MARKET INSTRUMENTS WITH A REMAINING MATURITY OF 60 DAYS OR LESS
ARE VALUED ON AN AMORTIZED COST BASIS.
THE PORTFOLIO HOLDS SECURITIES THAT ARE PRIMARILY LISTED ON FOREIGN EXCHANGES
THAT TRADE ON DAYS WHEN THE NYSE IS CLOSED. THE PORTFOLIO DOES NOT PRICE SHARES
ON DAYS WHEN THE NYSE IS CLOSED, EVEN IF FOREIGN MARKETS MAY BE OPEN. AS A
RESULT, THE VALUE OF THE PORTFOLIO SHARES MAY CHANGE ON DAYS WHEN YOU WILL NOT
BE ABLE TO BUY OR SELL YOUR SHARES.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
DIVIDENDS AND DISTRIBUTIONS
IT IS THE FUND'S INTENTION TO DISTRIBUTE SUBSTANTIALLY ALL OF THE NET INVESTMENT
INCOME, IF ANY, OF THE PORTFOLIO. FOR DIVIDEND PURPOSES, NET INVESTMENT INCOME
OF THE PORTFOLIO CONSISTS OF ALL PAYMENTS OF DIVIDENDS OR INTEREST RECEIVED BY
SUCH PORTFOLIO LESS ESTIMATED EXPENSES (INCLUDING THE INVESTMENT ADVISORY FEE).
ALL NET REALIZED CAPITAL GAINS, IF ANY, OF EACH PORTFOLIO ARE DECLARED AND
DISTRIBUTED PERIODICALLY, NO LESS FREQUENTLY THAN ANNUALLY. ALL DIVIDENDS AND
DISTRIBUTIONS ARE REINVESTED IN ADDITIONAL SHARES OF THE PORTFOLIO AT NET ASSET
VALUE.
TAXES
AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER M OF THE
INTERNAL REVENUE CODE, AS AMENDED, THE FUND IS NOT SUBJECT TO FEDERAL INCOME
TAX, NOR TO THE FEDERAL EXCISE TAX IMPOSED BY THE TAX REFORM ACT OF 1986, TO THE
EXTENT THAT IT DISTRIBUTES ITS NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS.
SINCE THE ONLY SHAREHOLDERS OF THE FUND ARE THE INSURANCE COMPANIES, NO
DISCUSSION IS INCLUDED HEREIN AS TO THE FEDERAL INCOME TAX CONSEQUENCES AT THE
SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE FEDERAL TAX CONSEQUENCES TO
PURCHASERS OF THE ANNUITY OR LIFE INSURANCE POLICIES, SEE THE PROSPECTUSES FOR
THE POLICIES.
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PORTFOLIO'S FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) YEARS. THE PORTFOLIO'S
FISCAL YEAR END IS DECEMBER 31. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS
FOR A SINGLE SHARE, BY PORTFOLIO. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A
PORTFOLIO (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES
NOT REFLECT ANY APPLICABLE CHARGES OR EXPENSES BY THE INSURANCE COMPANIES. THIS
INFORMATION HAS BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP WHOSE REPORT, ALONG
WITH A PORTFOLIO'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE PORTFOLIO'S ANNUAL
REPORT, WHICH IS AVAILABLE UPON REQUEST.
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
NET ASSET VALUE, BEGINNING $20.81 $19.10
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .01 .10
NET REALIZED AND UNREALIZED
GAIN (LOSS) 6.80 3.35
TOTAL FROM INVESTMENT
OPERATIONS 6.81 3.45
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.01) (.07)
NET REALIZED GAINS (1.95) (1.67)
TOTAL DISTRIBUTIONS (1.96) (1.74)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE 4.85 1.71
NET ASSET VALUE, ENDING $25.66 $20.81
TOTAL RETURN 32.78% 18.09%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME .06% .49%
TOTAL EXPENSES 1.62% 1.80%
EXPENSES BEFORE OFFSETS 1.60% 1.65%
NET EXPENSES 1.50% 1.56%
PORTFOLIO TURNOVER 59% 92%
NET ASSETS, ENDING (IN THOUSANDS) $22,013 $17,109
YEARS ENDED
DECEMBER 31,
1997
NET ASSET VALUE, BEGINNING $18.74
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .19
NET REALIZED AND UNREALIZED
GAIN (LOSS) 2.28
TOTAL FROM INVESTMENT
OPERATIONS 2.47
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.20)
NET REALIZED GAINS (1.91)
TOTAL DISTRIBUTIONS (2.11)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE .36
NET ASSET VALUE, ENDING $19.10
TOTAL RETURN 13.23%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME .85%
TOTAL EXPENSES 1.73%
EXPENSES BEFORE OFFSETS 1.56%
NET EXPENSES 1.17%
PORTFOLIO TURNOVER 35%
NET ASSETS, ENDING (IN THOUSANDS) $14,450
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
NET ASSET VALUE, BEGINNING $17.15 $15.89
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .17 .27
NET REALIZED AND UNREALIZED
GAIN (LOSS) 2.40 1.69
TOTAL FROM INVESTMENT OPERATIONS 2.57 1.96
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.14) (.25)
NET REALIZED GAINS (.84) (.45)
TOTAL DISTRIBUTIONS (.98) (.70)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE 1.59 1.26
NET ASSET VALUE, ENDING $18.74 $17.15
TOTAL RETURN 14.99% 12.35%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 1.02% 1.48%
TOTAL EXPENSES 1.82% 1.90%
EXPENSES BEFORE OFFSETS 1.59% 1.51%
NET EXPENSES 1.18% 1.12%
PORTFOLIO TURNOVER 85% 90%
NET ASSETS, ENDING (IN THOUSANDS) $14,027 $9,831
<PAGE>
SOCIAL BALANCED PORTFOLIO
ABOUT THE PORTFOLIO
28 INVESTMENT OBJECTIVE, STRATEGY, PAST PERFORMANCE
29 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT SOCIAL INVESTING
31 INVESTMENT SELECTION PROCESS
31 SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ABOUT YOUR INVESTMENT
32 THE FUND AND ITS MANAGEMENT
32 ADVISORY FEES
32 PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
33 DIVIDENDS AND DISTRIBUTIONS
33 TAXES
34 FINANCIAL HIGHLIGHTS
CALVERT SOCIAL BALANCED PORTFOLIO OF CALVERT VARIABLE SERIES, INC. (THE "FUND")
SHOULD NOT BE CONFUSED WITH THE CALVERT SOCIAL INVESTMENT FUND BALANCED
PORTFOLIO. PERFORMANCE OF THE TWO PORTFOLIOS WILL DIFFER.
<PAGE>
CVS SOCIAL BALANCED
ADVISOR: CALVERT ASSET MANAGEMENT COMPANY, INC.
SUBADVISOR: NCM CAPITAL MANAGEMENT GROUP, INC.
OBJECTIVE
CVS SOCIAL BALANCED SEEKS TO ACHIEVE A COMPETITIVE TOTAL RETURN THROUGH AN
ACTIVELY MANAGED PORTFOLIO OF STOCKS, BONDS AND MONEY MARKET INSTRUMENTS WHICH
OFFER INCOME AND CAPITAL GROWTH OPPORTUNITY AND WHICH SATISFY THE INVESTMENT AND
SOCIAL CRITERIA. THIS OBJECTIVE MAY BE CHANGED BY THE PORTFOLIO'S BOARD OF
DIRECTORS WITHOUT SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
CVS SOCIAL BALANCED TYPICALLY INVESTS ABOUT 60% OF ITS ASSETS IN STOCKS AND 40%
IN BONDS OR OTHER FIXED-INCOME INVESTMENTS. STOCK INVESTMENTS ARE PRIMARILY
COMMON STOCK IN LARGE-CAP COMPANIES, WHILE THE FIXED-INCOME INVESTMENTS ARE
PRIMARILY A WIDE VARIETY OF INVESTMENT GRADE BONDS.
THE PORTFOLIO INVESTS IN A COMBINATION OF STOCKS, BONDS AND MONEY MARKET
INSTRUMENTS IN AN ATTEMPT TO PROVIDE A COMPLETE INVESTMENT PORTFOLIO IN A SINGLE
PRODUCT. THE ADVISOR REBALANCES THE PORTFOLIO QUARTERLY TO ADJUST FOR CHANGES IN
MARKET VALUE. THE PORTFOLIO IS A LARGE-CAP, GROWTH-ORIENTED U.S. DOMESTIC
PORTFOLIO, ALTHOUGH IT MAY HAVE OTHER INVESTMENTS, INCLUDING SOME FOREIGN
SECURITIES AND SOME MID-CAP STOCKS. FOR THE EQUITY PORTION, THE PORTFOLIO SEEKS
COMPANIES WITH BETTER THAN AVERAGE EXPECTED GROWTH RATES AT LOWER THAN
AVERAGE VALUATIONS. THE FIXED-INCOME PORTION REFLECTS AN ACTIVE TRADING
STRATEGY, SEEKING TOTAL RETURN.
EQUITY INVESTMENTS ARE SELECTED BY THE SUBADVISOR, WHILE THE ADVISOR MANAGES THE
FIXED-INCOME ASSETS AND DETERMINES THE OVERALL MIX FOR THE PORTFOLIO DEPENDING
UPON ITS VIEW OF MARKET CONDITIONS AND ECONOMIC OUTLOOK.
THE PORTFOLIO INVESTS WITH THE PHILOSOPHY THAT LONG-TERM REWARDS TO INVESTORS
WILL COME FROM THOSE ORGANIZATIONS WHOSE PRODUCTS, SERVICES, AND METHODS ENHANCE
THE HUMAN CONDITION AND THE TRADITIONAL AMERICAN VALUES OF INDIVIDUAL
INITIATIVE, EQUALITY OF OPPORTUNITY AND COOPERATIVE EFFORT. INVESTMENTS ARE
SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL OBJECTIVES OF
FINANCIAL SOUNDNESS AND SOCIAL CRITERIA. SEE "INVESTMENT SELECTION PROCESS."
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK OR BOND MARKET GOES DOWN.
- - THE INDIVIDUAL STOCKS AND BONDS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS
EXPECTED.
- - FOR THE FIXED-INCOME PORTION OF THE PORTFOLIO, THE ADVISOR'S FORECAST AS
TO INTEREST RATES IS NOT CORRECT.
- - INVESTMENT IN FOREIGN SECURITIES INVOLVES ADDITIONAL RISKS RELATING TO
POLITICAL, SOCIAL AND ECONOMIC DEVELOPMENTS ABROAD. OTHER RISKS FROM
THESE INVESTMENTS RESULT FROM THE DIFFERENCES BETWEEN THE REGULATIONS
TO WHICH U.S. AND FOREIGN ISSUERS AND MARKETS ARE SUBJECT, THE POTENTIAL
FOR FOREIGN MARKETS TO BE LESS LIQUID THAN U.S. MARKETS, AND THE
CURRENCY RISK ASSOCIATED WITH SECURITIES THAT TRADE IN CURRENCIES
OTHER THAN THE U.S. DOLLAR.
- - THE ADVISOR'S ALLOCATION AMONG DIFFERENT SECTORS OF THE STOCK AND BOND
MARKETS DO NOT PERFORM AS WELL AS EXPECTED.
- - THE PORTFOLIO IS NON-DIVERSIFIED. COMPARED TO OTHER FUNDS, THE PORTFOLIO
MAY INVEST MORE OF ITS ASSETS IN A SMALLER NUMBER OF COMPANIES. GAINS OR
LOSSES ON A SINGLE STOCK OR BOND MAY HAVE GREATER IMPACT ON THE
PORTFOLIO.
<PAGE>
PAST PERFORMANCE
THE BAR CHART AND TABLE BELOW SHOW THE PORTFOLIO'S ANNUAL RETURNS AND ITS
LONG-TERM PERFORMANCE. THE CHART SHOWS HOW THE PERFORMANCE HAS VARIED FROM YEAR
TO YEAR AND PROVIDES AN INDICATION OF THE RISK OF INVESTING IN THE PORTFOLIO.
THE TABLE COMPARES THE PORTFOLIO'S PERFORMANCE OVER TIME TO THAT OF THE S&P 500
INDEX MONTHLY REINVESTED AND THE LEHMAN AGGREGATE BOND INDEX, TR. THESE ARE
WIDELY RECOGNIZED, UNMANAGED INDEXES OF COMMON STOCK AND BOND PRICES. IT ALSO
SHOWS THE PORTFOLIO'S RETURNS COMPARED TO THE LIPPER VARIABLE ANNUITY BALANCED
INDEX, A COMPOSITE INDEX OF THE ANNUAL RETURN OF MUTUAL FUNDS THAT HAVE AN
INVESTMENT GOAL SIMILAR TO THAT OF THE PORTFOLIO. THE PORTFOLIO'S PAST
PERFORMANCE DOES NOT NECESSARILY INDICATE HOW THE PORTFOLIO WILL PERFORM IN THE
FUTURE. THE RETURNS SHOWN DO NOT REFLECT FEES AND CHARGES IMPOSED UNDER THE
VARIABLE ANNUITY AND LIFE INSURANCE CONTRACTS THROUGH WHICH AN INVESTMENT MAY
BE MADE. IF THESE FEES AND CHARGES WERE INCLUDED, THEY WOULD REDUCE THESE
RETURNS.
CVS SOCIAL BALANCED
YEAR-BY-YEAR TOTAL RETURN
[INSERT BAR CHART HERE]
BEST QUARTER (OF PERIODS SHOWN) Q2 '97 12.64%
WORST QUARTER (OF PERIODS SHOWN) Q3 '98 (5.82%)
AVERAGE ANNUAL TOTAL RETURNS (FOR THE PERIODS ENDED DECEMBER 31, 1999)
1 YEAR 5 YEARS 10 YEARS
CVS SOCIAL BALANCED 12.12% 18.02% 12.05%
S&P 500 INDEX MONTHLY
REINVESTED 21.03% 28.54% 18.19%
LEHMAN AGGREGATE BOND
INDEX, TR (0.82%) 7.73% 7.70%
LIPPER VA BALANCED INDEX 5.64% 14.31% N/A
PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF THE PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
AND ASSOCIATED RISKS IS UNDER THE RISK-RETURN SUMMARY. THE PORTFOLIO IS ALSO
PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND TO USE CERTAIN INVESTMENT
TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH THEM. ON THE FOLLOWING PAGES
ARE BRIEF DESCRIPTIONS OF THE INVESTMENTS AND TECHNIQUES, SUMMARIZED IN THE
RISK-RETURN SUMMARY ALONG WITH CERTAIN ADDITIONAL INVESTMENT TECHNIQUES AND
THEIR RISKS.
FOR EACH OF THE INVESTMENT PRACTICES LISTED, THE TABLE BELOW SHOWS THE
PORTFOLIO'S LIMITATIONS AS A PERCENTAGE OF ITS ASSETS AND THE PRINCIPAL TYPES OF
RISK INVOLVED. (SEE THE PAGES FOLLOWING THE TABLE FOR A DESCRIPTION OF THE TYPES
OF RISKS). NUMBERS IN THIS TABLE SHOW MAXIMUM ALLOWABLE AMOUNT ONLY; FOR ACTUAL
USAGE, CONSULT THE PORTFOLIO'S ANNUAL/SEMI-ANNUAL REPORTS.
KEY TO TABLE
J PORTFOLIO CURRENTLY USES
Q PERMITTED, BUT NOT TYPICALLY USED
(% OF ASSETS ALLOWABLE, IF RESTRICTED)
8 NOT PERMITTED
XN ALLOWED UP TO X% OF PORTFOLIO'S NET ASSETS
XT ALLOWED UP TO X% OF PORTFOLIO'S TOTAL ASSETS
NA NOT APPLICABLE TO THIS TYPE OF FUND
INVESTMENT PRACTICES
ACTIVE TRADING STRATEGY/TURNOVER INVOLVES SELLING A SECURITY SOON AFTER
PURCHASE. AN ACTIVE TRADING STRATEGY CAUSES A FUND TO HAVE HIGHER PORTFOLIO
TURNOVER COMPARED TO OTHER FUNDS AND HIGHER TRANSACTION COSTS, SUCH AS
COMMISSIONS AND CUSTODIAN AND SETTLEMENT FEES, AND MAY INCREASE A PORTFOLIO'S
TAX LIABILITY. RISKS: OPPORTUNITY, MARKET AND TRANSACTION.
J
TEMPORARY DEFENSIVE POSITIONS.
DURING ADVERSE MARKET, ECONOMIC OR POLITICAL CONDITIONS, THE PORTFOLIO MAY
DEPART FROM ITS PRINCIPAL INVESTMENT STRATEGIES BY INCREASING ITS INVESTMENT IN
U.S. GOVERNMENT SECURITIES AND OTHER SHORT-TERM INTEREST-BEARING SECURITIES.
DURING TIMES OF ANY TEMPORARY DEFENSIVE POSITIONS, THE PORTFOLIO FUND MAY NOT BE
ABLE TO ACHIEVE ITS INVESTMENT OBJECTIVE
RISKS: OPPORTUNITY.
Q
CONVENTIONAL SECURITIES
FOREIGN SECURITIES. SECURITIES ISSUED BY COMPANIES LOCATED OUTSIDE THE U.S.
AND/OR TRADED PRIMARILY ON A FOREIGN EXCHANGE. RISKS: MARKET, CURRENCY,
TRANSACTION, LIQUIDITY, INFORMATION AND POLITICAL.
10T
<PAGE>
SMALL CAP STOCKS. INVESTING IN SMALL COMPANIES INVOLVES GREATER RISK THAN WITH
MORE ESTABLISHED COMPANIES. SMALL CAP STOCK PRICES ARE MORE VOLATILE AND THE
COMPANIES OFTEN HAVE LIMITED PRODUCT LINES, MARKETS, FINANCIAL RESOURCES, AND
MANAGEMENT EXPERIENCE. RISKS: MARKET, LIQUIDITY AND INFORMATION.
Q
INVESTMENT GRADE BONDS. BONDS RATED BBB/BAA OR HIGHER OR COMPARABLE UNRATED
BONDS. RISKS: INTEREST RATE, MARKET AND CREDIT.
J
BELOW-INVESTMENT GRADE BONDS. BONDS RATED BELOW BBB/BAA OR COMPARABLE
UNRATED BONDS, ALSO KNOWN AS HIGH-YIELD BONDS. THEY ARE SUBJECT TO GREATER
CREDIT RISK THAN INVESTMENT GRADE BONDS. RISKS: CREDIT, MARKET, INTEREST RATE,
LIQUIDITY AND INFORMATION.
20T
UNRATED DEBT SECURITIES. BONDS THAT HAVE NOT BEEN RATED BY A RECOGNIZED RATING
AGENCY; THE ADVISOR HAS DETERMINED THE CREDIT QUALITY BASED ON ITS OWN RESEARCH.
RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND INFORMATION.
J
ILLIQUID SECURITIES. SECURITIES WHICH CANNOT BE READILY SOLD BECAUSE THERE IS NO
ACTIVE MARKET. RISKS: LIQUIDITY, MARKET AND TRANSACTION.
15T
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES. SECURITIES ARE BACKED BY UNSECURED DEBT, SUCH AS CREDIT
CARD DEBT. THESE SECURITIES ARE OFTEN GUARANTEED OR OVER-COLLATERALIZED TO
ENHANCE THEIR CREDIT QUALITY. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
J
MORTGAGE-BACKED SECURITIES. SECURITIES ARE BACKED BY POOLS OF MORTGAGES,
INCLUDING PASSTHROUGH CERTIFICATES, AND OTHER SENIOR CLASSES OF COLLATERALIZED
MORTGAGE OBLIGATIONS (CMOS). RISKS: CREDIT, EXTENSION, PREPAYMENT, LIQUIDITY AND
INTEREST RATE.
Q
PARTICIPATION INTERESTS. SECURITIES REPRESENTING AN INTEREST IN ANOTHER SECURITY
OR IN BANK LOANS. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
Q
LEVERAGED DERIVATIVE INSTRUMENTS
CURRENCY CONTRACTS. CONTRACTS INVOLVING THE RIGHT OR OBLIGATION TO BUY OR SELL A
GIVEN AMOUNT OF FOREIGN CURRENCY AT A SPECIFIED PRICE AND FUTURE DATE. RISKS:
CURRENCY, LEVERAGE, CORRELATION, LIQUIDITY AND OPPORTUNITY.
Q
OPTIONS ON SECURITIES AND INDICES. CONTRACTS GIVING THE HOLDER THE RIGHT BUT NOT
THE OBLIGATION TO PURCHASE OR SELL A SECURITY (OR THE CASH VALUE, IN THE CASE OF
AN OPTION ON AN INDEX) AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. ANY OPTIONS
WRITTEN BY THE PORTFOLIO MUST BE COVERED. RISKS: INTEREST RATE, CURRENCY,
MARKET, LEVERAGE, CORRELATION, LIQUIDITY, CREDIT AND OPPORTUNITY.
Q
5N1
FUTURES CONTRACT. AGREEMENT TO BUY OR SELL A SPECIFIC AMOUNT OF A COMMODITY OR
FINANCIAL INSTRUMENT AT A PARTICULAR PRICE ON A SPECIFIC FUTURE DATE. RISKS:
INTEREST RATE, CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY AND
OPPORTUNITY.
5N1
1BASED ON NET PREMIUM PAYMENTS.
THE PORTFOLIO HAS ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS (FOR EXAMPLE,
REPURCHASE AGREEMENTS, BORROWING, PLEDGING, AND REVERSE REPURCHASE AGREEMENTS,
SECURITIES LENDING AND WHEN-ISSUED SECURITIES.) THESE POLICIES AND RESTRICTIONS
ARE DISCUSSED IN THE SAI.
TYPES OF INVESTMENT RISK
CORRELATION RISK
THIS OCCURS WHEN A PORTFOLIO "HEDGES"- USES ONE INVESTMENT TO OFFSET THE
PORTFOLIO'S POSITION IN ANOTHER. IF THE TWO INVESTMENTS DO NOT BEHAVE IN
RELATION TO ONE ANOTHER THE WAY PORTFOLIO MANAGERS EXPECT THEM TO, THEN
UNEXPECTED OR UNDESIRED RESULTS MAY OCCUR. FOR EXAMPLE, A HEDGE MAY ELIMINATE OR
REDUCE GAINS AS WELL AS OFFSET LOSSES.
CREDIT RISK
THE RISK THAT THE ISSUER OF A SECURITY OR THE COUNTERPARTY TO AN INVESTMENT
CONTRACT MAY DEFAULT OR BECOME UNABLE TO PAY ITS OBLIGATIONS WHEN DUE.
CURRENCY RISK
CURRENCY RISK OCCURS WHEN A PORTFOLIO BUYS, SELLS OR HOLDS A SECURITY
DENOMINATED IN FOREIGN CURRENCY. FOREIGN CURRENCIES "FLOAT" IN VALUE AGAINST THE
US DOLLAR. ADVERSE CHANGES IN FOREIGN CURRENCY VALUES CAN CAUSE INVESTMENT
LOSSES WHEN A FUND'S INVESTMENTS ARE CONVERTED TO US DOLLARS.
EXTENSION RISK
THE RISK THAT AN UNEXPECTED RISE IN INTEREST RATES WILL EXTEND THE LIFE OF A
MORTGAGE-BACKED SECURITY BEYOND THE EXPECTED PREPAYMENT TIME, TYPICALLY REDUCING
THE SECURITY'S VALUE.
INFORMATION RISK
THE RISK THAT INFORMATION ABOUT A SECURITY OR ISSUER OR THE MARKET MIGHT NOT BE
AVAILABLE, COMPLETE, ACCURATE OR COMPARABLE.
INTEREST RATE RISK
THE RISK THAT CHANGES IN INTEREST RATES WILL ADVERSELY AFFECT THE VALUE OF AN
INVESTOR'S SECURITIES. WHEN INTEREST RATES RISE, THE
<PAGE>
VALUE OF FIXED-INCOME SECURITIES WILL GENERALLY FALL. CONVERSELY, A DROP IN
INTEREST RATES WILL GENERALLY CAUSE AN INCREASE IN THE VALUE OF FIXED-INCOME
SECURITIES. LONGER-TERM SECURITIES AND ZERO COUPON/"STRIPPED" COUPON SECURITIES
("STRIPS") ARE SUBJECT TO GREATER INTEREST RATE RISK.
LEVERAGE RISK
THE RISK THAT OCCURS IN SOME SECURITIES OR TECHNIQUES WHICH TEND TO MAGNIFY THE
EFFECT OF SMALL CHANGES IN AN INDEX OR A MARKET. THIS CAN RESULT IN A LOSS THAT
EXCEEDS THE AMOUNT ACTUALLY INVESTED.
LIQUIDITY RISK
THE RISK THAT OCCURS WHEN INVESTMENTS CANNOT BE READILY SOLD. A PORTFOLIO MAY
HAVE TO ACCEPT A LESS-THAN-DESIRABLE PRICE TO COMPLETE THE SALE OF AN ILLIQUID
SECURITY OR MAY NOT BE ABLE TO SELL IT AT ALL.
MANAGEMENT RISK
THE RISK THAT PORTFOLIO MANAGEMENT PRACTICES MIGHT NOT WORK TO ACHIEVE THEIR
DESIRED RESULT.
MARKET RISK
THE RISK THAT SECURITIES PRICES IN A MARKET, A SECTOR OR AN INDUSTRY WILL
FLUCTUATE, AND THAT SUCH MOVEMENTS MIGHT REDUCE AN INVESTMENT'S VALUE.
OPPORTUNITY RISK
THE RISK OF MISSING OUT ON AN INVESTMENT OPPORTUNITY BECAUSE THE ASSETS NEEDED
TO TAKE ADVANTAGE OF IT ARE COMMITTED TO LESS ADVANTAGEOUS INVESTMENTS OR
STRATEGIES.
POLITICAL RISK
THE RISK THAT MAY OCCUR WITH FOREIGN INVESTMENTS, AND MEANS THAT THE VALUE OF AN
INVESTMENT MAY BE ADVERSELY AFFECTED BY NATIONALIZATION, TAXATION, WAR,
GOVERNMENT INSTABILITY OR OTHER ECONOMIC OR POLITICAL ACTIONS OR FACTORS,
INCLUDING RISK OF EXPROPRIATION.
PREPAYMENT RISK
THE RISK THAT UNANTICIPATED PREPAYMENTS MAY OCCUR, REDUCING THE VALUE OF A
MORTGAGE-BACKED SECURITY. THE PORTFOLIO MUST THEN REINVEST THOSE ASSETS AT THE
CURRENT, MARKET RATE WHICH MAY BE LOWER.
TRANSACTION RISK
THE RISK THAT A PORTFOLIO MAY BE DELAYED OR UNABLE TO SETTLE A TRANSACTION OR
THAT COMMISSIONS AND SETTLEMENT EXPENSES MAY BE HIGHER THAN USUAL.
INVESTMENT SELECTION PROCESS
INVESTMENTS ARE SELECTED ON THE BASIS OF THEIR ABILITY TO CONTRIBUTE TO THE DUAL
OBJECTIVES OF FINANCIAL SOUNDNESS AND SOCIAL CRITERIA.
ALTHOUGH THE PORTFOLIO'S SOCIAL CRITERIA TEND TO LIMIT THE AVAILABILITY OF
INVESTMENT OPPORTUNITIES MORE THAN IS CUSTOMARY WITH OTHER INVESTMENT COMPANIES,
CAMCO AND THE SUBADVISOR BELIEVE THERE ARE SUFFICIENT INVESTMENT OPPORTUNITIES
TO PERMIT FULL INVESTMENT AMONG ISSUERS WHICH SATISFY THE PORTFOLIO'S INVESTMENT
AND SOCIAL OBJECTIVES.
THE SELECTION OF AN INVESTMENT BY A PORTFOLIO DOES NOT CONSTITUTE ENDORSEMENT OR
VALIDATION BY THE PORTFOLIO, NOR DOES THE EXCLUSION OF AN INVESTMENT NECESSARILY
REFLECT FAILURE TO SATISFY THE PORTFOLIO'S SOCIAL CRITERIA. INVESTORS ARE
INVITED TO SEND A BRIEF DESCRIPTION OF COMPANIES THEY BELIEVE MIGHT BE SUITABLE
FOR INVESTMENT.
SOCIALLY RESPONSIBLE INVESTMENT CRITERIA
ALL INVESTMENTS FOR THE PORTFOLIO ARE SELECTED WITH A CONCERN FOR THE SOCIAL
IMPACT OF EACH INVESTMENT. THE PORTFOLIO HAS DEVELOPED THE FOLLOWING CRITERIA
FOR THE SELECTION OF ORGANIZATIONS IN WHICH THE PORTFOLIO INVESTS. THE PORTFOLIO
SEEKS TO INVEST IN A PRODUCER OR SERVICE PROVIDER WHICH:
1. DELIVERS SAFE PRODUCTS AND SERVICES IN WAYS THAT SUSTAIN OUR NATURAL
ENVIRONMENT.
2. IS MANAGED WITH PARTICIPATION THROUGHOUT THE ORGANIZATION IN DEFINING AND
ACHIEVING OBJECTIVES.
3. NEGOTIATES FAIRLY WITH ITS WORKERS, PROVIDES AN ENVIRONMENT SUPPORTIVE OF
THEIR WELLNESS, DOES NOT DISCRIMINATE ON THE BASIS OF RACE, GENDER, RELIGION,
AGE, DISABILITY, ETHNIC ORIGIN OR SEXUAL ORIENTATION, DOES NOT CONSISTENTLY
VIOLATE REGULATIONS OF THE EQUAL EMPLOYMENT OPPORTUNITY COMMISSION, AND PROVIDES
OPPORTUNITIES FOR WOMEN, DISADVANTAGED MINORITIES AND OTHERS FROM WHOM EQUAL
OPPORTUNITIES HAVE OFTEN BEEN DENIED.
4. FOSTERS AWARENESS OF A COMMITMENT TO HUMAN GOALS, SUCH AS CREATIVITY,
PRODUCTIVITY, SELF-RESPECT, AND RESPONSIBILITY, WITHIN THE ORGANIZATION AND THE
WORLD, AND CONTINUALLY RECREATES A CONTEXT WITHIN WHICH THESE GOALS CAN BE
REALIZED.
THE PORTFOLIO WILL NOT INVEST IN AN ISSUER PRIMARILY ENGAGED IN THE PRODUCTION
OF NUCLEAR ENERGY OR IN THE MANUFACTURE OF EQUIPMENT TO PRODUCE NUCLEAR ENERGY,
BUSINESS ACTIVITIES IN SUPPORT OF REPRESSIVE REGIMES, OR THE MANUFACTURE OF
WEAPONS SYSTEMS.
EACH INVESTMENT IS SELECTED ON THE BASIS OF ITS ABILITIES TO CONTRIBUTE TO THE
DUAL OBJECTIVE OF THE PORTFOLIO. ALL POTENTIAL INVESTMENTS ARE FIRST SCREENED
FOR FINANCIAL SOUNDNESS AND THEN EVALUATED ACCORDING TO THE PORTFOLIO'S SOCIAL
CRITERIA. TO THE GREATEST EXTENT POSSIBLE, INVESTMENTS ARE MADE IN COMPANIES
EXHIBITING UNUSUAL, POSITIVE ACCOMPLISHMENT WITH RESPECT TO ONE OR MORE OF THE
CRITERIA. ALL COMPANIES MUST MEET THE PORTFOLIO'S MINIMUM STANDARDS FOR ALL THE
CRITERIA. IT SHOULD BE NOTED THAT THE PORTFOLIO'S SOCIAL CRITERIA TEND TO LIMIT
THE AVAILABILITY OF INVESTMENT OPPORTUNITIES MORE THAN IS CUSTOMARY WITH OTHER
INVESTMENT COMPANIES.
THE SELECTION OF AN ORGANIZATION FOR INVESTMENT BY THE PORTFOLIO DOES NOT
CONSTITUTE ENDORSEMENT OR VALIDATION BY THE FUND, NOR DOES THE EXCLUSION OF AN
ORGANIZATION NECESSARILY REFLECT FAILURE TO SATISFY THE PORTFOLIO'S SOCIAL
CRITERIA. POLICYHOLDERS DIRECTING INVESTMENT IN THE PORTFOLIO ARE INVITED TO
SEND BRIEF DESCRIPTIONS
<PAGE>
OF COMPANIES THEY BELIEVE MIGHT BE SUITABLE FOR INVESTMENT BY THE PORTFOLIO.
THE FUND AND ITS MANAGEMENT
THE SHARES OF THE FUND CURRENTLY ARE SOLD ONLY TO INSURANCE COMPANIES
(COLLECTIVELY, THE "INSURANCE COMPANIES") FOR ALLOCATION TO THEIR SEPARATE
ACCOUNTS (COLLECTIVELY, THE "VARIABLE ACCOUNTS") TO FUND THE BENEFITS UNDER
CERTAIN VARIABLE ANNUITY AND VARIABLE LIFE INSURANCE POLICIES (COLLECTIVELY, THE
"POLICIES") ISSUED BY SUCH COMPANIES. ACCORDINGLY, THE INTEREST OF A POLICY
OWNER IN THE SHARES IS SUBJECT TO THE TERMS OF THE PARTICULAR ANNUITY OR LIFE
INSURANCE POLICY AND IS DESCRIBED IN THE ATTACHED PROSPECTUS FOR ONE OF THE
POLICIES, WHICH SHOULD BE REVIEWED CAREFULLY BY A PERSON CONSIDERING THE
PURCHASE OF A POLICY. THE RIGHTS OF THE INSURANCE COMPANIES AS SHAREHOLDERS
SHOULD BE DISTINGUISHED FROM THE RIGHTS OF A POLICY OWNER WHICH ARE DESCRIBED IN
THE POLICIES. POLICY OWNERS SHOULD CONSIDER THAT THE INVESTMENT RETURN
EXPERIENCE OF THE PORTFOLIO WILL AFFECT THE VALUE OF THE POLICY AND THE AMOUNT
OF ANNUITY PAYMENTS OR LIFE INSURANCE BENEFITS RECEIVED UNDER A POLICY. SEE THE
ATTACHED PROSPECTUS(ES) FOR THE POLICIES FOR A DESCRIPTION OF THE RELATIONSHIP
BETWEEN INCREASES OR DECREASES IN THE NET ASSET VALUE OF PORTFOLIO SHARES (AND
ANY DISTRIBUTIONS ON SUCH SHARES) AND THE BENEFITS PROVIDED UNDER A POLICY.
CALVERT ASSET MANAGEMENT COMPANY, INC. ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814) IS THE PORTFOLIO'S INVESTMENT ADVISOR. CAMCO
PROVIDES THE FUND WITH INVESTMENT SUPERVISION AND MANAGEMENT AND OFFICE SPACE;
FURNISHES EXECUTIVE AND OTHER PERSONNEL TO THE FUND, AND PAYS THE SALARIES AND
FEES OF ALL TRUSTEES/DIRECTORS WHO ARE AFFILIATED PERSONS OF THE ADVISOR. IT HAS
BEEN MANAGING MUTUAL FUNDS SINCE 1976. CALVERT IS THE INVESTMENT ADVISOR FOR
OVER 25 MUTUAL FUND PORTFOLIOS, INCLUDING THE FIRST AND LARGEST FAMILY OF
SOCIALLY SCREENED FUNDS. AS OF DECEMBER 31, 1999, CAMCO HAD $6.5 BILLION IN
ASSETS UNDER MANAGEMENT.
CAMCO USES A TEAM APPROACH TO ITS MANAGEMENT OF THE PORTFOLIO. RENO J. MARTINI,
SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER, HEADS THIS TEAM AND OVERSEES
THE INVESTMENT STRATEGY AND MANAGEMENT OF ALL CALVERT FUNDS FOR CAMCO WHILE
GREGORY HABEEB MANAGES THE DAY-TO-DAY INVESTMENTS OF THE PORTFOLIO'S
FIXED-INCOME INVESTMENTS. MR. HABEEB HAS OVER 19 YEARS OF EXPERIENCE AS AN
ANALYST, TRADER, AND PORTFOLIO MANAGER.
SUBADVISOR AND PORTFOLIO MANAGER
NCM CAPITAL MANAGEMENT GROUP, INC. (103 WEST MAIN STREET, DURHAM, NORTH CAROLINA
27701) HAS MANAGED PART OF THE EQUITY INVESTMENTS OF CVS SOCIAL BALANCED SINCE
1995. NCM IS ONE OF THE LARGEST MINORITY-OWNED INVESTMENT MANAGEMENT FIRMS IN
THE COUNTRY AND PROVIDES PRODUCTS IN EQUITY FIXED INCOME AND BALANCED PORTFOLIO
MANAGEMENT. IT IS ALSO ONE OF THE INDUSTRY LEADERS IN THE EMPLOYMENT AND
TRAINING OF MINORITY AND WOMEN INVESTMENT PROFESSIONALS.
NCM'S PORTFOLIO MANAGEMENT TEAM CONSISTS OF SEVERAL MEMBERS, HEADED BY MACEO K.
SLOAN. MR. SLOAN HAS MORE THAN 10 YEARS OF EXPERIENCE IN THE INVESTMENT
INDUSTRY, AND IS A FREQUENT PANELIST ON WALL STREET WEEK WITH LOUIS RUKEYSER.
THE PORTFOLIO HAS OBTAINED AN EXEMPTIVE ORDER FROM THE SECURITIES AND EXCHANGE
COMMISSION TO PERMIT THE FUND, PURSUANT TO APPROVAL BY THE BOARD OF DIRECTORS,
TO ENTER INTO AND MATERIALLY AMEND CONTRACTS WITH THE PORTFOLIO'S SUBADVISOR
WITHOUT SHAREHOLDER APPROVAL. SEE "INVESTMENT ADVISOR AND SUBADVISOR" IN THE SAI
FOR FURTHER DETAILS.
ADVISORY FEES
FOR FISCAL YEAR 1999, THE ADVISOR RECEIVED FROM THE PORTFOLIO AN ADVISORY FEE OF
0.47% OF THE AVERAGE DAILY NET ASSETS OF THE PORTFOLIO.
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
THE FUND OFFERS ITS SHARES, WITHOUT SALES CHARGE, ONLY FOR PURCHASE BY THE
INSURANCE COMPANIES FOR ALLOCATION TO THEIR VARIABLE ACCOUNTS. SHARES ARE
PURCHASED BY THE VARIABLE ACCOUNTS AT THE NET ASSET VALUE OF THE PORTFOLIO NEXT
DETERMINED AFTER THE INSURANCE COMPANY RECEIVES THE PREMIUM PAYMENT. THE FUND
CONTINUOUSLY OFFERS ITS SHARES IN THE PORTFOLIO AT A PRICE EQUAL TO THE NET
ASSET VALUE PER SHARE. INITIAL AND SUBSEQUENT PAYMENTS ALLOCATED TO THE FUND ARE
SUBJECT TO THE LIMITS APPLICABLE IN THE POLICIES ISSUED BY THE INSURANCE
COMPANIES.
IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE DISADVANTAGEOUS FOR BOTH ANNUITY
VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE ACCOUNTS, OR FOR VARIABLE ACCOUNTS
OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE FUND, ALTHOUGH
CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE FUND FORESEE ANY SUCH
DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE POLICY
OWNERS OF ANY INSURANCE COMPANY. THE FUND'S BOARD OF DIRECTORS INTENDS TO
MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS BETWEEN SUCH POLICY
OWNERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN IN RESPONSE
THERETO.
THE INSURANCE COMPANIES REDEEM SHARES OF THE PORTFOLIO TO MAKE BENEFIT AND
SURRENDER PAYMENTS UNDER THE TERMS OF POLICIES. REDEMPTIONS ARE PROCESSED ON ANY
DAY ON WHICH THE FUND IS OPEN FOR BUSINESS (EACH DAY THE NEW YORK STOCK EXCHANGE
IS OPEN), AND ARE EFFECTED AT THE PORTFOLIO'S NET ASSET VALUE NEXT DETERMINED
AFTER THE APPROPRIATE INSURANCE COMPANY RECEIVES A SURRENDER REQUEST IN
ACCEPTABLE FORM.
PAYMENT FOR REDEEMED SHARES WILL BE MADE PROMPTLY, BUT IN NO EVENT LATER THAN
SEVEN DAYS. HOWEVER, THE RIGHT OF REDEMPTION MAY BE SUSPENDED OR THE DATE OF
PAYMENT POSTPONED IN ACCORDANCE WITH THE RULES UNDER THE 1940 ACT. THE AMOUNT
RECEIVED UPON REDEMPTION OF THE SHARES OF THE FUND MAY BE MORE OR LESS THAN THE
AMOUNT PAID FOR THE SHARES, DEPENDING UPON THE FLUCTUATIONS IN THE MARKET VALUE
OF THE ASSETS OWNED BY THE FUND. THE FUND REDEEMS ALL FULL AND FRACTIONAL SHARES
OF THE PORTFOLIO FOR CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER
SHARE.
THE NET ASSET VALUE OF THE SHARES OF THE PORTFOLIO IS DETERMINED ONCE DAILY AS
OF THE CLOSE OF BUSINESS OF THE NEW YORK STOCK EXCHANGE, ON DAYS WHEN THE
EXCHANGE IS OPEN FOR BUSINESS, OR FOR ANY OTHER DAY WHEN THERE IS A SUFFICIENT
DEGREE OF TRADING IN THE INVESTMENTS OF THE PORTFOLIO TO AFFECT MATERIALLY ITS
NET ASSET
<PAGE>
VALUE PER SHARE (EXCEPT ON DAYS WHEN NO ORDERS TO PURCHASE OR REDEEM SHARES OF
THE PORTFOLIO HAVE BEEN RECEIVED). THE NET ASSET VALUE IS DETERMINED BY ADDING
THE VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE PORTFOLIO, SUBTRACTING
LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF OUTSTANDING SHARES OF
THE PORTFOLIO.
SECURITIES HELD BY THE PORTFOLIO ARE VALUED AT THEIR MARKET VALUE IF MARKET
QUOTATIONS ARE READILY AVAILABLE. OTHERWISE, SUCH SECURITIES ARE VALUED AT FAIR
VALUE AS DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS, ALTHOUGH THE ACTUAL
CALCULATIONS MAY BE MADE BY PERSONS ACTING PURSUANT TO THE DIRECTION OF THE
BOARD. ALL MONEY MARKET INSTRUMENTS WITH A REMAINING MATURITY OF 60 DAYS OR LESS
ARE VALUED ON AN AMORTIZED COST BASIS.
THE PORTFOLIO HOLDS SECURITIES THAT ARE PRIMARILY LISTED ON FOREIGN EXCHANGES
THAT TRADE ON DAYS WHEN THE NYSE IS CLOSED. THE PORTFOLIO DOES NOT PRICE SHARES
ON DAYS WHEN THE NYSE IS CLOSED, EVEN IF FOREIGN MARKETS MAY BE OPEN. AS A
RESULT, THE VALUE OF THE PORTFOLIO SHARES MAY CHANGE ON DAYS WHEN YOU WILL NOT
BE ABLE TO BUY OR SELL YOUR SHARES.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
DIVIDENDS AND DISTRIBUTIONS
IT IS THE FUND'S INTENTION TO DISTRIBUTE SUBSTANTIALLY ALL OF THE NET INVESTMENT
INCOME, IF ANY, OF THE PORTFOLIO. FOR DIVIDEND PURPOSES, NET INVESTMENT INCOME
OF THE PORTFOLIO CONSISTS OF ALL PAYMENTS OF DIVIDENDS OR INTEREST RECEIVED BY
SUCH PORTFOLIO LESS ESTIMATED EXPENSES (INCLUDING THE INVESTMENT ADVISORY FEE).
ALL NET REALIZED CAPITAL GAINS, IF ANY, OF EACH PORTFOLIO ARE DECLARED AND
DISTRIBUTED PERIODICALLY, NO LESS FREQUENTLY THAN ANNUALLY. ALL DIVIDENDS AND
DISTRIBUTIONS ARE REINVESTED IN ADDITIONAL SHARES OF THE PORTFOLIO AT NET ASSET
VALUE.
TAXES
AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER M OF THE
INTERNAL REVENUE CODE, AS AMENDED, THE FUND IS NOT SUBJECT TO FEDERAL INCOME
TAX, NOR TO THE FEDERAL EXCISE TAX IMPOSED BY THE TAX REFORM ACT OF 1986, TO THE
EXTENT THAT IT DISTRIBUTES ITS NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS.
SINCE THE ONLY SHAREHOLDERS OF THE FUND ARE THE INSURANCE COMPANIES, NO
DISCUSSION IS INCLUDED HEREIN AS TO THE FEDERAL INCOME TAX CONSEQUENCES AT THE
SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE FEDERAL TAX CONSEQUENCES TO
PURCHASERS OF THE ANNUITY OR LIFE INSURANCE POLICIES, SEE THE PROSPECTUSES FOR
THE POLICIES.
<PAGE>
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PORTFOLIO'S FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) YEARS. THE PORTFOLIO'S
FISCAL YEAR END IS DECEMBER 31. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS
FOR A SINGLE SHARE, BY PORTFOLIO. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A
PORTFOLIO (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES
NOT REFLECT ANY APPLICABLE CHARGES OR EXPENSES BY THE INSURANCE COMPANIES. THIS
INFORMATION HAS BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP WHOSE REPORT, ALONG
WITH A PORTFOLIO'S FINANCIAL STATEMENTS, ARE INCLUDED IN THE PORTFOLIO'S ANNUAL
REPORT, WHICH IS AVAILABLE UPON REQUEST.
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
PERIODS ENDED
DECEMBER 31, DECEMBER 31,
1999 1998
NET ASSET VALUE, BEGINNING $2.138 $1.982
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .051 .052
NET REALIZED AND UNREALIZED
GAIN (LOSS) .208 .271
TOTAL FROM INVESTMENT
OPERATIONS .259 .323
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.052) (0.52)
NET REALIZED GAINS (.177) (.115)
TOTAL DISTRIBUTIONS (.229) (.167)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE .030 .156
NET ASSET VALUE, ENDING $2.168 $2.138
TOTAL RETURN 12.12% 16.33%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 2.35% 2.66%
TOTAL EXPENSES .89% .87%
EXPENSES BEFORE OFFSETS .89% .87%
NET EXPENSES .86% .85%
PORTFOLIO TURNOVER 619% 539%
NET ASSETS, ENDING (IN THOUSANDS) $349,313 $303,954
PERIODS ENDED
DECEMBER 31,
1997
NET ASSET VALUE, BEGINNING $1.774
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .047
NET REALIZED AND UNREALIZED GAIN (LOSS) .309
TOTAL FROM INVESTMENT OPERATIONS .356
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.047)
NET REALIZED GAINS (.101)
TOTAL DISTRIBUTIONS (.148)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE .208
NET ASSET VALUE, ENDING $1.982
TOTAL RETURN 20.08%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 2.66%
TOTAL EXPENSES .80%
EXPENSES BEFORE OFFSETS .80%
NET EXPENSES .77%
PORTFOLIO TURNOVER 905%
NET ASSETS, ENDING (IN THOUSANDS) $227,834
YEARS ENDED
DECEMBER 31, DECEMBER 31,
1996 1995
NET ASSET VALUE, BEGINNING $1.703 $1.440
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .040 .050
NET REALIZED AND UNREALIZED
GAIN (LOSS) .175 .380
TOTAL FROM INVESTMENT
OPERATIONS .215 .430
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.042) (.040)
NET REALIZED GAINS (.102) (.127)
TOTAL DISTRIBUTIONS (.144) (.167)
TOTAL INCREASE (DECREASE)
IN NET ASSET VALUE .071 .263
NET ASSET VALUE, ENDING $1.774 $1.703
TOTAL RETURN 12.62% 29.87%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 2.71% 3.08%
TOTAL EXPENSES .81% .83%
EXPENSES BEFORE OFFSETS .81% .83%
NET EXPENSES .78% .81%
PORTFOLIO TURNOVER 99% 163%
NET ASSETS, ENDING (IN THOUSANDS) $161,473 $110,237
<PAGE>
FOR INVESTORS WHO WANT MORE INFORMATION ABOUT THE PORTFOLIO, THE FOLLOWING
DOCUMENTS ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMI-ANNUAL REPORTS: ADDITIONAL INFORMATION ABOUT THE PORTFOLIO'S
INVESTMENTS IS AVAILABLE IN THE PORTFOLIO'S ANNUAL AND SEMI-ANNUAL REPORTS TO
SHAREHOLDERS. IN THE PORTFOLIO'S ANNUAL REPORT, YOU WILL FIND A DISCUSSION OF
THE MARKET CONDITIONS AND INVESTMENT STRATEGIES THAT SIGNIFICANTLY AFFECTED THE
PORTFOLIO'S PERFORMANCE DURING ITS LAST FISCAL YEAR.
STATEMENT OF ADDITIONAL INFORMATION (SAI): THE SAI FOR THE PORTFOLIO PROVIDES
MORE DETAILED INFORMATION ABOUT THE PORTFOLIO AND IS INCORPORATED INTO THIS
PROSPECTUS BY REFERENCE.
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE PORTFOLIO BY CONTACTING YOUR FINANCIAL
PROFESSIONAL, OR THE PORTFOLIO AT:
CALVERT GROUP, LTD.
4550 MONTGOMERY AVE., SUITE 1000N
BETHESDA, MD. 20814
TELEPHONE: 1-800-368-2745
CALVERT GROUP WEB-SITE:
WWW.CALVERT.COM
YOU CAN REVIEW THE PORTFOLIO'S REPORTS AND SAI AT THE PUBLIC REFERENCE ROOM OF
THE SECURITIES AND EXCHANGE COMMISSION. YOU CAN GET TEXT-ONLY COPIES:
FOR A FEE, BY WRITING TO OR CALLING THE PUBLIC REFERENCE ROOM OF THE COMMISSION,
WASHINGTON, D.C. 20549-0102, TELEPHONE: (202) 942-8090.
FREE FROM THE COMMISSION'S INTERNET WEBSITE AT HTTP://WWW.SEC.GOV.
INVESTMENT COMPANY ACT FILE NO.: 811-3591
CALVERT VARIABLE SERIES, INC.
AMERITAS PORTFOLIOS
PROSPECTUS
APRIL 30, 2000
ABOUT THE PORTFOLIOS
2 INVESTMENT OBJECTIVES AND STRATEGIES
11 PRINCIPAL INVESTMENT PRACTICES AND RISKS
ABOUT YOUR INVESTMENT
16 THE FUND AND ITS MANAGEMENT
17 PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
18 DIVIDENDS AND DISTRIBUTIONS
18 TAXES
18 FINANCIAL HIGHLIGHTS
PORTFOLIOS IN THIS PROSPECTUS
AMERITAS INCOME & GROWTH PORTFOLIO
AMERITAS GROWTH PORTFOLIO
AMERITAS SMALL CAPITALIZATION PORTFOLIO
AMERITAS MIDCAP GROWTH PORTFOLIO
AMERITAS EMERGING GROWTH PORTFOLIO
AMERITAS RESEARCH PORTFOLIO
AMERITAS GROWTH WITH INCOME PORTFOLIO
AMERITAS INDEX 500 PORTFOLIO
AMERITAS MONEY MARKET PORTFOLIO
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION (SEC) OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SEC OR
ANY STATE SECURITIES COMMISSION PASSED ON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
AMERITAS INCOME & GROWTH PORTFOLIO
OBJECTIVE
THE AMERITAS INCOME & GROWTH PORTFOLIO PRIMARILY SEEKS TO PROVIDE A HIGH
LEVEL OF DIVIDEND INCOME. ITS SECONDARY GOAL IS TO PROVIDE CAPITAL APPRECIATION.
THE OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT
SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
UNDER NORMAL CIRCUMSTANCES, THE PORTFOLIO INVESTS IN DIVIDEND PAYING EQUITY
SECURITIES, SUCH AS COMMON OR PREFERRED STOCKS, PREFERABLY THOSE WHICH THE
SUBADVISOR BELIEVES ALSO OFFER OPPORTUNITIES FOR CAPITAL APPRECIATION.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - THE POSSIBILITY THAT COMPANIES MAY CUT OR FAIL TO DECLARE DIVIDENDS DUE TO
MARKET DOWNTURNS OR OTHER REASONS
- - THE PRICES OF GROWTH COMPANY SECURITIES HELD BY THE SERIES MAY FALL TO A
GREATER EXTENT THAN THE OVERALL EQUITY MARKETS DUE TO CHANGING
ECONOMIC, POLITICAL OR MARKET CONDITIONS OR DISAPPOINTING GROWTH
COMPANY EARNINGS RESULTS
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
FRED ALGER MANAGEMENT, INC.
<PAGE>
AMERITAS GROWTH PORTFOLIO
OBJECTIVE
THE AMERITAS GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. THE
OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER
APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
THE PORTFOLIO FOCUSES ON GROWING COMPANIES THAT GENERALLY HAVE BROAD PRODUCT
LINES, MARKETS, FINANCIAL RESOURCES AND DEPTH OF MANAGEMENT. UNDER NORMAL
CIRCUMSTANCES, THE PORTFOLIO INVESTS PRIMARILY IN THE EQUITY SECURITIES, SUCH AS
COMMON OR PREFERRED STOCKS, OF LARGE COMPANIES LISTED ON U.S. EXCHANGES OR IN
THE U.S. OVER-THE-COUNTER MARKET. THE PORTFOLIO CONSIDERS A LARGE COMPANY TO
HAVE A MARKET CAPITALIZATION OF $1 BILLION OR GREATER.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - THE PRICES OF GROWTH COMPANY SECURITIES HELD BY THE PORTFOLIO MAY FALL TO
A GREATER EXTENT THAN THE OVERALL EQUITY MARKETS DUE TO CHANGING
ECONOMIC, POLITICAL OR MARKET CONDITIONS OR DISAPPOINTING GROWTH
COMPANY EARNINGS RESULTS
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
FRED ALGER MANAGEMENT, INC.
<PAGE>
AMERITAS SMALL CAPITALIZATION PORTFOLIO
OBJECTIVE
THE AMERITAS SMALL CAPITALIZATION PORTFOLIO SEEKS LONG-TERM CAPITAL
APPRECIATION. THE OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS
WITHOUT SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
THE PORTFOLIO FOCUSES ON SMALL, FAST-GROWING COMPANIES THAT OFFER INNOVATIVE
PRODUCTS, SERVICES OR TECHNOLOGIES TO A RAPIDLY EXPANDING MARKETPLACE. UNDER
NORMAL CIRCUMSTANCES, THE PORTFOLIO INVESTS PRIMARILY IN THE EQUITY SECURITIES,
SUCH AS COMMON OR PREFERRED STOCKS, OF SMALL CAPITALIZATION COMPANIES LISTED ON
U.S. EXCHANGES OR IN THE U.S. OVER-THE-COUNTER MARKET. THE PORTFOLIO CONSIDERS A
SMALL CAPITALIZATION COMPANY TO HAVE A MARKET CAPITALIZATION WITHIN THE RANGE OF
COMPANIES IN THE RUSSELL 2000 GROWTH INDEX OR THE S&P SMALLCAP 600 INDEX.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - THE PRICES OF SMALL-CAP STOCKS MAY RESPOND TO MARKET ACTIVITY DIFFERENTLY
THAN LARGER MORE ESTABLISHED COMPANIES SO THERE IS THE POSSIBILITY OF
GREATER RISK BY INVESTING IN SMALLER CAPITALIZED COMPANIES RATHER THAN
LARGER, MORE ESTABLISHED COMPANIES
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
FRED ALGER MANAGEMENT, INC.
<PAGE>
AMERITAS MIDCAP GROWTH PORTFOLIO
OBJECTIVE
THE AMERITAS MIDCAP GROWTH PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION.
THE OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT
SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
THE PORTFOLIO INVESTS IN MIDSIZE COMPANIES WITH PROMISING GROWTH POTENTIAL.
UNDER NORMAL CIRCUMSTANCES, THE PORTFOLIO INVESTS PRIMARILY IN THE EQUITY
SECURITIES, SUCH AS COMMON OR PREFERRED STOCKS, OF COMPANIES LISTED ON U.S.
EXCHANGES OR IN THE U.S. OVER-THE-COUNTER MARKET AND HAVING A MARKET
CAPITALIZATION WITHIN THE RANGE OF COMPANIES IN THE S&P MIDCAP 400 INDEX.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - THE POSSIBILITY OF GREATER RISK BY INVESTING IN MEDIUM-SIZED COMPANIES
RATHER THAN LARGER, MORE ESTABLISHED COMPANIES
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
FRED ALGER MANAGEMENT, INC.
<PAGE>
AMERITAS EMERGING GROWTH PORTFOLIO
OBJECTIVE
THE AMERITAS EMERGING GROWTH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL. THE
OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER
APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
THE PORTFOLIO INVESTS, UNDER NORMAL MARKET CONDITIONS, AT LEAST 65% OF ITS TOTAL
ASSETS IN COMMON STOCKS AND RELATED SECURITIES, SUCH AS PREFERRED STOCKS,
CONVERTIBLE SECURITIES AND DEPOSITARY RECEIPTS FOR THOSE SECURITIES, OF EMERGING
GROWTH COMPANIES.
EMERGING GROWTH COMPANIES ARE COMPANIES WHICH THE SUBADVISOR BELIEVES ARE EITHER
EARLY IN THEIR LIFE CYCLE BUT WHICH HAVE THE POTENTIAL TO BECOME MAJOR
ENTERPRISES, OR ARE MAJOR ENTERPRISES WHOSE RATES OF EARNINGS GROWTH ARE
EXPECTED TO ACCELERATE BECAUSE OF SPECIAL FACTORS, SUCH AS REJUVENATED
MANAGEMENT, NEW PRODUCTS, CHANGES IN CONSUMER DEMAND, OR BASIC CHANGES IN THE
ECONOMIC ENVIRONMENT. THE PORTFOLIO'S INVESTMENTS MAY INCLUDE SECURITIES TRADED
ON A SECURITIES EXCHANGE OR IN THE OVER-THE-COUNTER MARKETS.
THE PORTFOLIO MAY INVEST IN FOREIGN SECURITIES (INCLUDING EMERGING MARKET
SECURITIES), THROUGH WHICH IT MAY HAVE EXPOSURE TO FOREIGN CURRENCIES.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - BECAUSE THE PORTFOLIO INVESTS PRIMARILY IN EMERGING GROWTH COMPANIES, THE
PORTFOLIO'S PERFORMANCE IS PARTICULARLY SENSITIVE TO CHANGES IN THE
VALUE OF EMERGING GROWTH COMPANIES. INVESTMENTS IN EMERGING GROWTH
COMPANIES MAY BE SUBJECT TO MORE ABRUPT OR ERRATIC MARKET MOVEMENTS
AND MAY INVOLVE GREATER RISKS THAN INVESTMENTS IN OTHER COMPANIES.
EMERGING GROWTH COMPANIES ARE OFTEN DEPENDENT ON MANAGEMENT BY ONE
OR A FEW KEY INDIVIDUALS, HAVE SHARES THAT SUFFER ABOVE-AVERAGE PRICE
DECLINES AFTER DISAPPOINTING EARNINGS REPORTS AND HAVE LIMITED PRODUCT
LINES, MARKETS AND FINANCIAL RESOURCES. A DECLINE IN THE VALUE OF
THESE TYPES OF STOCKS MAY RESULT IN A DECLINE IN THE PORTFOLIO'S NET
ASSET VALUE AND YOUR INVESTMENT
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
<PAGE>
AMERITAS RESEARCH PORTFOLIO
OBJECTIVE
THE AMERITAS RESEARCH PORTFOLIO SEEKS LONG-TERM GROWTH OF CAPITAL AND FUTURE
INCOME. THE OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT
SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
UNDER NORMAL MARKET CONDITIONS, THE PORTFOLIO INVESTS AT LEAST 80% OF ITS TOTAL
ASSETS IN COMMON STOCKS AND RELATED SECURITIES, SUCH AS PREFERRED STOCKS,
CONVERTIBLE SECURITIES AND DEPOSITARY RECEIPTS. THE PORTFOLIO FOCUSES ON
COMPANIES THAT THE SUBADVISOR BELIEVES HAVE FAVORABLE PROSPECTS FOR LONG-TERM
GROWTH, ATTRACTIVE VALUATIONS BASED ON CURRENT AND EXPECTED EARNINGS OR CASH
FLOW, DOMINANT OR GROWING MARKET SHARE AND SUPERIOR MANAGEMENT. THE PORTFOLIO
MAY INVEST IN COMPANIES OF ANY SIZE. THE PORTFOLIO'S INVESTMENTS MAY INCLUDE
SECURITIES TRADED ON SECURITIES EXCHANGES OR IN THE OVER-THE-COUNTER MARKETS.
A COMMITTEE OF INVESTMENT RESEARCH ANALYSTS SELECTS HOLDINGS FOR THE PORTFOLIO.
THIS COMMITTEE INCLUDES INVESTMENT ANALYSTS EMPLOYED NOT ONLY BY THE SUBADVISOR,
BUT ALSO BY MFS' INVESTMENT ADVISORY AFFILIATES. THE COMMITTEE ALLOCATES THE
PORTFOLIO'S ASSETS AMONG VARIOUS INDUSTRIES. INDIVIDUAL ANALYSTS THEN SELECT
WHAT THEY VIEW AS SECURITIES BEST SUITED TO ACHIEVE THE PORTFOLIO'S INVESTMENT
OBJECTIVE WITHIN THEIR ASSIGNED INDUSTRY RESPONSIBILITY.
THE PORTFOLIO MAY INVEST IN FOREIGN SECURITIES (INCLUDING EMERGING MARKET
SECURITIES), THROUGH WHICH IT MAY HAVE EXPOSURE TO FOREIGN CURRENCIES.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - INVESTMENT IN FOREIGN SECURITIES INVOLVES ADDITIONAL RISKS RELATING TO
POLITICAL, SOCIAL AND ECONOMIC DEVELOPMENTS ABROAD. OTHER RISKS FROM
THESE INVESTMENTS RESULT FROM THE DIFFERENCES BETWEEN THE REGULATIONS
TO WHICH U.S. AND FOREIGN ISSUERS AND MARKETS ARE SUBJECT, THE
POTENTIAL FOR FOREIGN MARKETS TO BE LESS LIQUID THAN U.S. MARKETS, AND THE
CURRENCY RISK ASSOCIATED WITH SECURITIES THAT TRADE IN CURRENCIES OTHER
THAN THE U.S. DOLLAR
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
<PAGE>
AMERITAS GROWTH WITH INCOME PORTFOLIO
OBJECTIVE
THE AMERITAS GROWTH WITH INCOME PORTFOLIO SEEKS TO PROVIDE REASONABLE CURRENT
INCOME AND LONG-TERM GROWTH OF CAPITAL AND INCOME. THE OBJECTIVE MAY BE CHANGED
BY THE FUND'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
UNDER NORMAL MARKET CONDITIONS, THE PORTFOLIO INVESTS AT LEAST 65% OF ITS TOTAL
ASSETS IN COMMON STOCKS AND RELATED SECURITIES, SUCH AS PREFERRED STOCKS,
CONVERTIBLE SECURITIES AND DEPOSITARY RECEIPTS FOR THOSE SECURITIES. THESE
SECURITIES MAY BE LISTED ON A SECURITIES EXCHANGE OR TRADED IN THE
OVER-THE-COUNTER MARKETS. WHILE THE PORTFOLIO MAY INVEST IN COMPANIES OF ANY
SIZE, IT MAY GENERALLY FOCUS ON COMPANIES WITH LARGER MARKET CAPITALIZATIONS
THAT THE SUBADVISOR BELIEVES HAVE SUSTAINABLE GROWTH PROSPECTS AND ATTRACTIVE
VALUATIONS BASED ON CURRENT AND EXPECTED EARNINGS OR CASH FLOW. THE PORTFOLIO
WILL ALSO SEEK TO PROVIDE INCOME EQUAL TO APPROXIMATELY 90% OF THE DIVIDEND
YIELD ON THE STANDARD & POOR'S 500 COMPOSITE INDEX.
THE PORTFOLIO MAY INVEST IN FOREIGN SECURITIES AND MAY HAVE EXPOSURE TO FOREIGN
CURRENCIES THROUGH ITS INVESTMENT IN THESE SECURITIES.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO DO NOT PERFORM AS WELL AS EXPECTED
- - LARGE CAP COMPANIES TEND TO GO IN AND OUT OF FAVOR BASED ON MARKET AND
ECONOMIC CONDITIONS. LARGE CAP COMPANIES TEND TO BE LESS VOLATILE
THAN COMPANIES WITH SMALLER MARKET CAPITALIZATIONS, BUT THE VALUE
OF LARGE CAP COMPANY SECURITIES MAY NOT RISE AS MUCH AS THE VALUE
OF SMALLER CAP COMPANY SECURITIES
- - INVESTMENT IN FOREIGN SECURITIES INVOLVES ADDITIONAL RISKS RELATING TO
POLITICAL, SOCIAL AND ECONOMIC DEVELOPMENTS ABROAD. OTHER RISKS FROM
THESE INVESTMENTS RESULT FROM THE DIFFERENCES BETWEEN THE REGULATIONS
TO WHICH U.S. AND FOREIGN ISSUERS AND MARKETS ARE SUBJECT, THE
POTENTIAL FOR FOREIGN MARKETS TO BE LESS LIQUID THAN U.S. MARKETS AND THE
CURRENCY RISK ASSOCIATED WITH SECURITIES THAT TRADE IN CURRENCIES OTHER
THAN THE U.S. DOLLAR
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
MASSACHUSETTS FINANCIAL SERVICES COMPANY
<PAGE>
AMERITAS INDEX 500 PORTFOLIO
OBJECTIVE
THE AMERITAS INDEX 500 PORTFOLIO SEEKS INVESTMENT RESULTS THAT CORRESPOND TO THE
TOTAL RETURN OF COMMON STOCKS PUBLICLY TRADED IN THE U.S., AS REPRESENTED BY THE
S&P 500. THE OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS
WITHOUT SHAREHOLDER APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
UNDER NORMAL CONDITIONS, THE PORTFOLIO SEEKS TO TRACK THE S&P 500.
THE S&P 500 IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF COMMON STOCK PRICES.
THE PORTFOLIO INTENDS, UNDER NORMAL CONDITIONS, TO INVEST IN ALL 500 STOCKS IN
THE S&P 500 IN PROPORTION TO THE WEIGHTING IN THE INDEX. IF IT IS NOT ABLE
TO PURCHASE ALL 500 STOCKS, DUE TO MONETARY CONSTRAINTS, IT MAY PURCHASE A
REPRESENTATIVE SAMPLE.
PRINCIPAL RISKS
YOU COULD LOSE MONEY ON YOUR INVESTMENT IN THE PORTFOLIO, OR THE PORTFOLIO COULD
UNDERPERFORM FOR ANY OF THE FOLLOWING REASONS:
- - THE STOCK MARKET OR THE S&P 500 INDEX GOES DOWN
- - THE INDIVIDUAL STOCKS IN THE PORTFOLIO OR THE PORTFOLIO AS A WHOLE DOES
NOT PERFORM AS WELL AS EXPECTED
- - AN INDEX FUND HAS OPERATING EXPENSES; A MARKET INDEX DOES NOT. THE
PORTFOLIO - WHILE EXPECTED TO TRACK ITS TARGET INDEX AS CLOSELY AS
POSSIBLE - WILL NOT BE ABLE TO MATCH THE PERFORMANCE OF THE INDEX EXACTLY
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER
GOVERNMENT AGENCY.
THE S&P 500 INDEX IS A MARKET CAPITALIZATION-WEIGHTED INDEX COMPOSED OF 500
WIDELY HELD COMMON STOCKS. THE PORTFOLIO IS NOT SPONSORED, SOLD, PROMOTED OR
ENDORSED BY STANDARD AND POORS.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
STATE STREET GLOBAL ADVISORS
<PAGE>
AMERITAS MONEY MARKET PORTFOLIO
OBJECTIVE
THE AMERITAS MONEY MARKET PORTFOLIO SEEKS AS HIGH A LEVEL OF CURRENT INCOME AS
IS CONSISTENT WITH PRESERVATION OF CAPITAL AND LIQUIDITY. THE PORTFOLIO SEEKS TO
MAINTAIN A CONSTANT NET ASSET VALUE OF $1.00 PER SHARE FOR THE PORTFOLIO. THIS
OBJECTIVE MAY BE CHANGED BY THE FUND'S BOARD OF DIRECTORS WITHOUT SHAREHOLDER
APPROVAL.
PRINCIPAL INVESTMENT STRATEGIES
THE PORTFOLIO INVESTS IN U.S. DOLLAR-DENOMINATED MONEY MARKET SECURITIES OF
DOMESTIC AND FOREIGN ISSUERS, INCLUDING U.S. GOVERNMENT SECURITIES AND
REPURCHASE AGREEMENTS. ALL INVESTMENTS MUST COMPLY WITH THE SEC MONEY MARKET
FUND REQUIREMENTS. THE PORTFOLIO INVESTS MORE THAN 25% OF TOTAL ASSETS IN THE
FINANCIAL SERVICES INDUSTRY.
PRINCIPAL RISKS
- - THE PORTFOLIO'S YIELD WILL CHANGE IN RESPONSE TO MARKET INTEREST RATES. IN
GENERAL, AS MARKET RATES GO UP SO WILL THE PORTFOLIO'S YIELD, AND VICE
VERSA
- - ALTHOUGH THE PORTFOLIO TRIES TO KEEP THE VALUE OF ITS SHARES CONSTANT AT
$1.00 PER SHARE, EXTREME CHANGES IN MARKET RATES, AND OR SUDDEN CREDIT
DETERIORATION OF A HOLDING COULD CAUSE THE VALUE TO DECREASE.
- - THE PORTFOLIO LIMITS THE AMOUNT IT INVESTS IN ANY ONE ISSUER TO TRY TO
LESSEN ITS EXPOSURE.
- - INVESTMENT IN THE FINANCIAL SERVICES INDUSTRY INVOLVES ADDITIONAL RISK
RELATING TO CHANGES IN GOVERNMENT REGULATION OR ECONOMIC DOWNTURNS,
WHICH CAN HAVE A SIGNIFICANT NEGATIVE AFFECT ON ISSUERS IN THE
FINANCIAL SERVICES SECTOR
AN INVESTMENT IN THE PORTFOLIO IS NOT A BANK DEPOSIT AND IS NOT INSURED OR
GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT
AGENCY. ALTHOUGH THE PORTFOLIO SEEKS TO PRESERVE THE VALUE OF YOUR INVESTMENT AT
$1.00 PER SHARE, IT IS POSSIBLE TO LOSE MONEY BY INVESTING IN THE PORTFOLIO.
(NO PERFORMANCE RESULTS ARE SHOWN FOR THE PORTFOLIO SINCE IT WAS RECENTLY
ORGANIZED.)
ADVISOR:
AMERITAS INVESTMENT CORP.
SUBADVISOR:
CALVERT ASSET MANAGEMENT COMPANY, INC.
<PAGE>
PRINCIPAL INVESTMENT PRACTICES AND RISKS
THE MOST CONCISE DESCRIPTION OF EACH PORTFOLIO'S PRINCIPAL INVESTMENT STRATEGIES
AND ASSOCIATED RISKS IS UNDER THE EARLIER SUMMARIES FOR EACH PORTFOLIO. THE
PORTFOLIOS ARE ALSO PERMITTED TO INVEST IN CERTAIN OTHER INVESTMENTS AND TO USE
CERTAIN INVESTMENT TECHNIQUES THAT HAVE HIGHER RISKS ASSOCIATED WITH THEM. ON
THE FOLLOWING PAGES ARE BRIEF DESCRIPTIONS OF THE INVESTMENTS AND TECHNIQUES,
SUMMARIZED EARLIER, ALONG WITH CERTAIN ADDITIONAL INVESTMENT TECHNIQUES AND
THEIR RISKS.
FOR EACH OF THE INVESTMENT PRACTICES LISTED, THE TABLE BELOW SHOWS EACH
PORTFOLIO'S LIMITATIONS AS A PERCENTAGE OF ITS ASSETS AND THE PRINCIPAL TYPES OF
RISK INVOLVED. (SEE THE PAGES FOLLOWING THE TABLE FOR A DESCRIPTION OF THE TYPES
OF RISKS). NUMBERS IN THIS TABLE SHOW MAXIMUM ALLOWABLE AMOUNT ONLY; FOR ACTUAL
USAGE, CONSULT THE PORTFOLIO'S ANNUAL/SEMI-ANNUAL REPORTS.
KEY TO THE TABLE
J PORTFOLIO CURRENTLY USES
Q PERMITTED, BUT NOT TYPICALLY USED
(% OF ASSETS ALLOWABLE, IF RESTRICTED)
8 NOT PERMITTED
XN ALLOWED UP TO X% OF PORTFOLIO'S NET ASSETS
XT ALLOWED UP TO X% OF PORTFOLIO'S TOTAL ASSETS
N/A NOT APPLICABLE TO THIS TYPE OF PORTFOLIO
INVESTMENT PRACTICES
ACTIVE TRADING STRATEGY/TURNOVER. INVOLVES SELLING A SECURITY SOON AFTER
PURCHASE. AN ACTIVE TRADING STRATEGY CAUSES A FUND TO HAVE HIGHER PORTFOLIO
TURNOVER COMPARED TO OTHER FUNDS AND HIGHER TRANSACTION COSTS, SUCH AS
COMMISSIONS AND CUSTODIAN AND SETTLEMENT FEES, AND MAY INCREASE A PORTFOLIO'S
TAX LIABILITY. RISKS: OPPORTUNITY, MARKET AND TRANSACTION.
INCOME SMALL MIDCAP EMERGING GROWTH INDEX MONEY
& GROWTH GROWTH CAP GROWTH GROWTH RESEARCH WITH INCOME 5001 MARKET
J J J J J Q Q N/A N/A
TEMPORARY DEFENSIVE POSITIONS.
DURING ADVERSE MARKET, ECONOMIC OR POLITICAL CONDITIONS, THE PORTFOLIO MAY
DEPART FROM ITS PRINCIPAL INVESTMENT STRATEGIES BY INCREASING ITS INVESTMENT IN
U.S. GOVERNMENT SECURITIES AND OTHER SHORT-TERM INTEREST-BEARING SECURITIES.
DURING TIMES OF ANY TEMPORARY DEFENSIVE POSITIONS, A PORTFOLIO MAY NOT BE ABLE
TO ACHIEVE ITS INVESTMENT OBJECTIVE.
RISKS: OPPORTUNITY.
Q Q Q Q Q Q Q N/A N/A
<PAGE>
INVESTMENT PRACTICES (CONT'D)
CONVENTIONAL SECURITIES
FOREIGN SECURITIES. SECURITIES ISSUED BY COMPANIES LOCATED OUTSIDE THE U.S.
AND/OR TRADED PRIMARILY ON A FOREIGN EXCHANGE. RISKS: MARKET, CURRENCY,
TRANSACTION, LIQUIDITY, INFORMATION AND POLITICAL.
20T 20T 20T 20T 25N 20N 20N 20N Q
EMERGING MARKET. SECURITIES ISSUED BY COMPANIES LOCATED IN THOSE COUNTRIES WHOSE
ECONOMIES AND CAPITAL MARKETS ARE NOT AS DEVELOPED AS THOSE OF MORE
INDUSTRIALIZED NATIONS. RISKS: MARKET, CURRENCY, TRANSACTION, LIQUIDITY,
INFORMATION AND POLITICAL.
X X X X J Q Q N/A N/A
SMALL CAP STOCKS. INVESTING IN SMALL COMPANIES INVOLVES GREATER RISK THAN WITH
MORE ESTABLISHED COMPANIES. SMALL CAP STOCK PRICES ARE MORE VOLATILE AND THE
COMPANIES OFTEN HAVE LIMITED PRODUCT LINES, MARKETS, FINANCIAL RESOURCES, AND
MANAGEMENT EXPERIENCE. RISKS: MARKET, LIQUIDITY AND INFORMATION.
Q Q J Q J J Q N/A N/A
INVESTMENT GRADE BONDS. BONDS RATED BBB/BAA OR HIGHER OR COMPARABLE UNRATED
BONDS. RISKS: INTEREST RATE, MARKET AND CREDIT.
Q Q Q Q Q Q Q N/A N/A
BELOW-INVESTMENT GRADE BONDS. BONDS RATED BELOW BBB/BAA OR COMPARABLE UNRATED
BONDS ARE CONSIDERED JUNK BONDS. THEY ARE SUBJECT TO GREATER CREDIT RISK THAN
INVESTMENT GRADE BONDS.
RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND INFORMATION.
X X X X 5N 10N X N/A N/A
UNRATED DEBT SECURITIES. BONDS THAT HAVE NOT BEEN RATED BY A RECOGNIZED RATING
AGENCY; THE ADVISOR HAS DETERMINED THE CREDIT QUALITY BASED ON ITS OWN RESEARCH.
RISKS: CREDIT, MARKET, INTEREST RATE, LIQUIDITY AND INFORMATION.
X X X X Q Q Q N/A J2
<PAGE>
INVESTMENT PRACTICES (CONT'D)
CONVENTIONAL SECURITIES (CONT'D)
ILLIQUID SECURITIES. SECURITIES WHICH CANNOT BE READILY SOLD BECAUSE THERE IS NO
ACTIVE MARKET. RISKS: LIQUIDITY, MARKET AND TRANSACTION.
10T 10N 10N 10N 15N 15N 15N 15N 10N
UNLEVERAGED DERIVATIVE SECURITIES
ASSET-BACKED SECURITIES. SECURITIES ARE BACKED BY UNSECURED DEBT, SUCH AS CREDIT
CARD DEBT. THESE SECURITIES ARE OFTEN GUARANTEED OR OVER-COLLATERALIZED TO
ENHANCE THEIR CREDIT QUALITY. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
X X X X X X X N/A J2
MORTGAGE-BACKED SECURITIES. SECURITIES ARE BACKED BY POOLS OF MORTGAGES,
INCLUDING PASSTHROUGH CERTIFICATES, AND OTHER SENIOR CLASSES OF COLLATERALIZED
MORTGAGE OBLIGATIONS (CMOS). RISKS: CREDIT, EXTENSION, PREPAYMENT, LIQUIDITY AND
INTEREST RATE.
X X X X X X X N/A Q2
PARTICIPATION INTERESTS. SECURITIES REPRESENTING AN INTEREST IN ANOTHER SECURITY
OR IN BANK LOANS. RISKS: CREDIT, INTEREST RATE AND LIQUIDITY.
X X X X X X X N/A Q2
LEVERAGED DERIVATIVE INSTRUMENTS
CURRENCY CONTRACTS. CONTRACTS INVOLVING THE RIGHT OR OBLIGATION TO BUY OR SELL A
GIVEN AMOUNT OF FOREIGN CURRENCY AT A SPECIFIED PRICE AND FUTURE DATE. RISKS:
CURRENCY, LEVERAGE, CORRELATION, LIQUIDITY AND OPPORTUNITY.
X X X X Q Q Q N/A N/A
<PAGE>
INVESTMENT PRACTICES (CONT'D)
LEVERAGED DERIVATIVE INSTRUMENTS
(CONT'D)
OPTIONS ON SECURITIES AND INDICES. CONTRACTS GIVING THE HOLDER THE RIGHT BUT NOT
THE OBLIGATION TO PURCHASE OR SELL A SECURITY (OR THE CASH VALUE, IN THE CASE OF
AN OPTION ON AN INDEX) AT A SPECIFIED PRICE WITHIN A SPECIFIED TIME. IN THE CASE
OF SELLING (WRITING) OPTIONS, THE PORTFOLIOS WILL WRITE CALL OPTIONS ONLY IF
THEY ALREADY OWN THE SECURITY (IF IT IS "COVERED"). RISKS: INTEREST RATE,
CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY, CREDIT AND OPPORTUNITY.
X X X X Q X X 5T3 N/A
FUTURES CONTRACT. AGREEMENT TO BUY OR SELL A SPECIFIC AMOUNT OF A COMMODITY OR
FINANCIAL INSTRUMENT AT A PARTICULAR PRICE ON A SPECIFIC FUTURE DATE. RISKS:
INTEREST RATE, CURRENCY, MARKET, LEVERAGE, CORRELATION, LIQUIDITY AND
OPPORTUNITY.
X X X X Q X Q J N/A
STRUCTURED SECURITIES. INDEXED AND/OR LEVERAGED MORTGAGE-BACKED AND OTHER DEBT
SECURITIES, INCLUDING PRINCIPAL-ONLY AND INTEREST-ONLY SECURITIES, LEVERAGED
FLOATING RATE SECURITIES, AND OTHERS. THESE SECURITIES TEND TO BE HIGHLY
SENSITIVE TO INTEREST RATE MOVEMENTS AND THEIR PERFORMANCE MAY NOT CORRELATE TO
THESE MOVEMENTS IN A CONVENTIONAL FASHION. RISKS: CREDIT, INTEREST RATE,
EXTENSION, PREPAYMENT, MARKET, LEVERAGE, LIQUIDITY AND CORRELATION.
X X X X X Q X N/A N/A
1 ONLY TO THE EXTENT INCORPORATED WITHIN THE S&P 500
2 MUST BE MONEY-MARKET ELIGIBLE UNDER SEC RULE 2A-7
3 BASED ON NET PREMIUM PAYMENTS
THE PORTFOLIOS HAVE ADDITIONAL INVESTMENT POLICIES AND RESTRICTIONS (FOR
EXAMPLE, REPURCHASE AGREEMENTS, REAL ESTATE INVESTMENT TRUSTS, BORROWING,
PLEDGING, REVERSE REPURCHASE AGREEMENTS, SECURITIES LENDING, WHEN-ISSUED
SECURITIES AND SHORT SALES.) THESE POLICIES AND RESTRICTIONS ARE DISCUSSED IN
THE STATEMENT OF ADDITIONAL INFORMATION ("SAI").
<PAGE>
TYPES OF INVESTMENT RISK
CORRELATION RISK
THIS OCCURS WHEN A PORTFOLIO "HEDGES"- USES ONE INVESTMENT TO OFFSET THE
PORTFOLIO'S POSITION IN ANOTHER. IF THE TWO INVESTMENTS DO NOT BEHAVE IN
RELATION TO ONE ANOTHER THE WAY PORTFOLIO MANAGERS EXPECT THEM TO, THEN
UNEXPECTED OR UNDESIRED RESULTS MAY OCCUR. FOR EXAMPLE, A HEDGE MAY ELIMINATE OR
REDUCE GAINS AS WELL AS OFFSET LOSSES.
CREDIT RISK
THE RISK THAT THE ISSUER OF A SECURITY OR THE COUNTERPARTY TO AN INVESTMENT
CONTRACT MAY DEFAULT OR BECOME UNABLE TO PAY ITS OBLIGATIONS WHEN DUE.
CURRENCY RISK
CURRENCY RISK OCCURS WHEN A PORTFOLIO BUYS, SELLS OR HOLDS A SECURITY
DENOMINATED IN FOREIGN CURRENCY. FOREIGN CURRENCIES "FLOAT" IN VALUE AGAINST THE
U.S. DOLLAR. ADVERSE CHANGES IN FOREIGN CURRENCY VALUES CAN CAUSE INVESTMENT
LOSSES WHEN A PORTFOLIO'S INVESTMENTS ARE CONVERTED TO U.S. DOLLARS.
EXTENSION RISK
THE RISK THAT AN UNEXPECTED RISE IN INTEREST RATES WILL EXTEND THE LIFE OF A
MORTGAGE-BACKED SECURITY BEYOND THE EXPECTED PREPAYMENT TIME, TYPICALLY REDUCING
THE SECURITY'S VALUE.
INFORMATION RISK
THE RISK THAT INFORMATION ABOUT A SECURITY OR ISSUER OR THE MARKET MIGHT NOT BE
AVAILABLE, COMPLETE, ACCURATE OR COMPARABLE.
INTEREST RATE RISK
THE RISK THAT CHANGES IN INTEREST RATES WILL ADVERSELY AFFECT THE VALUE OF AN
INVESTOR'S SECURITIES. WHEN INTEREST RATES RISE, THE VALUE OF FIXED-INCOME
SECURITIES WILL GENERALLY FALL. CONVERSELY, A DROP IN INTEREST RATES WILL
GENERALLY CAUSE AN INCREASE IN THE VALUE OF FIXED-INCOME SECURITIES. LONGER-TERM
SECURITIES AND ZERO COUPON/"STRIPPED" COUPON SECURITIES ("STRIPS") ARE SUBJECT
TO GREATER INTEREST RATE RISK.
LEVERAGE RISK
THE RISK THAT OCCURS IN SOME SECURITIES OR TECHNIQUES WHICH TEND TO MAGNIFY THE
EFFECT OF SMALL CHANGES IN AN INDEX OR A MARKET. THIS CAN RESULT IN A
LOSS THAT EXCEEDS THE AMOUNT ACTUALLY INVESTED.
LIQUIDITY RISK
THE RISK THAT OCCURS WHEN INVESTMENTS CANNOT BE READILY SOLD. A PORTFOLIO MAY
HAVE TO ACCEPT A LESS-THAN-DESIRABLE PRICE TO COMPLETE THE SALE OF AN ILLIQUID
SECURITY OR MAY NOT BE ABLE TO SELL IT AT ALL.
MANAGEMENT RISK
THE RISK THAT A PORTFOLIO'S PORTFOLIO MANAGEMENT PRACTICES MIGHT NOT WORK TO
ACHIEVE THEIR DESIRED RESULT.
MARKET RISK
THE RISK THAT SECURITIES PRICES IN A MARKET, A SECTOR OR AN INDUSTRY WILL
FLUCTUATE, AND THAT SUCH MOVEMENTS MIGHT REDUCE AN INVESTMENT'S VALUE.
OPPORTUNITY RISK
THE RISK OF MISSING OUT ON AN INVESTMENT OPPORTUNITY BECAUSE THE ASSETS NEEDED
TO TAKE ADVANTAGE OF IT ARE COMMITTED TO LESS ADVANTAGEOUS INVESTMENTS OR
STRATEGIES.
<PAGE>
POLITICAL RISK
THE RISK THAT MAY OCCUR WITH FOREIGN INVESTMENTS, AND MEANS THAT THE VALUE OF AN
INVESTMENT MAY BE ADVERSELY AFFECTED BY NATIONALIZATION, TAXATION, WAR,
GOVERNMENT INSTABILITY OR OTHER ECONOMIC OR POLITICAL ACTIONS OR FACTORS.
PREPAYMENT RISK
THE RISK THAT UNANTICIPATED PREPAYMENTS MAY OCCUR, REDUCING THE VALUE OF A
MORTGAGE-BACKED SECURITY. THE PORTFOLIO MUST THEN REINVEST THOSE ASSETS AT THE
CURRENT, MARKET RATE WHICH MAY BE LOWER.
TRANSACTION RISK
THE RISK THAT A PORTFOLIO MAY BE DELAYED OR UNABLE TO SETTLE A TRANSACTION OR
THAT COMMISSIONS AND SETTLEMENT EXPENSES MAY BE HIGHER THAN USUAL.
THE FUND AND ITS MANAGEMENT
ABOUT AMERITAS INVESTMENT CORP.
AMERITAS INVESTMENT CORP. ("AIC") (5900 "O" STREET, 4TH FLOOR, LINCOLN, NEBRASKA
68510-1889) SERVES AS THE INVESTMENT ADVISOR OF THE PORTFOLIOS PURSUANT TO AN
INVESTMENT ADVISORY AGREEMENT WITH THE FUND. AIC IS REGISTERED AS AN INVESTMENT
ADVISOR UNDER THE INVESTMENT ADVISORS ACT OF 1940 AND ALSO IS REGISTERED AS A
BROKER DEALER UNDER THE SECURITIES EXCHANGE ACT OF 1934. AIC SERVES AS THE
UNDERWRITER OF VARIABLE PRODUCTS ISSUED BY ITS AFFILIATES, AMERITAS VARIABLE
LIFE INSURANCE COMPANY AND AMERITAS LIFE INSURANCE CORP.
AIC SERVES AS THE OVERALL INVESTMENT MANAGER OF THE AMERITAS PORTFOLIOS,
AUTHORIZED TO EXERCISE FULL INVESTMENT DISCRETION AND MAKE ALL DETERMINATIONS
WITH RESPECT TO THE INVESTMENT OF THE ASSETS OF THE RESPECTIVE PORTFOLIOS, BUT
HAS, AT ITS OWN COST AND EXPENSE, RETAINED SUBADVISORS TO PROVIDE DAY-TO-DAY
PORTFOLIO MANAGEMENT FOR EACH OF THE PORTFOLIOS.
SUBADVISORS AND PORTFOLIO MANAGERS
CALVERT ASSET MANAGEMENT COMPANY, INC. ("CAMCO") (4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MD 20814) SERVES AS THE INVESTMENT SUBADVISOR TO THE MONEY
MARKET PORTFOLIO. CAMCO HAS BEEN MANAGING MUTUAL FUNDS SINCE 1976 AND IS THE
INVESTMENT ADVISOR FOR OVER 25 MUTUAL FUND PORTFOLIOS, INCLUDING THE FIRST AND
LARGEST FAMILY OF SOCIALLY SCREENED FUNDS. AS OF DECEMBER 31, 1999, CAMCO HAD
$6.5 BILLION IN ASSETS UNDER MANAGEMENT.
CAMCO USES A TEAM APPROACH TO ITS MANAGEMENT OF THE MONEY MARKET PORTFOLIO. RENO
J. MARTINI, SENIOR VICE PRESIDENT AND CHIEF INVESTMENT OFFICER, HEADS THIS TEAM
AND OVERSEES THE MANAGEMENT OF THE PORTFOLIO. WITH THE EXCEPTION OF THE AMERITAS
PORTFOLIOS AND CALVERT NEW WORLD FUND, INC., CAMCO IS THE INVESTMENT ADVISER FOR
ALL OF THE CALVERT GROUP FUNDS. MR. MARTINI HAS OVER 15 YEARS OF EXPERIENCE IN
THE INVESTMENT INDUSTRY AND HAS BEEN THE HEAD OF CAMCO'S ASSET MANAGEMENT TEAM
SINCE 1985.
FRED ALGER MANAGEMENT, INC. ("ALGER") (1 WORLD TRADE CENTER, SUITE 9333, NEW
YORK, NY 10048) SERVES AS THE INVESTMENT SUBADVISOR TO THE INCOME & GROWTH,
GROWTH, SMALL CAPITALIZATION AND MIDCAP GROWTH PORTFOLIOS. ALGER HAS BEEN AN
INVESTMENT ADVISER SINCE 1964, AND MANAGES INVESTMENTS TOTALING $10.685 BILLION
IN MUTUAL FUND ASSETS AS WELL AS $6.755 BILLION IN OTHER ASSETS AS OF DECEMBER
31, 1999.
DAVID ALGER, SEILAI KHOO AND RON TARTARO ARE THE INDIVIDUALS RESPONSIBLE FOR THE
DAY-TO-DAY MANAGEMENT OF THE PORTFOLIO INVESTMENTS. MR. ALGER, A CO-MANAGER OF
THE PORTFOLIOS, HAS BEEN EMPLOYED BY ALGER AS EXECUTIVE VICE PRESIDENT AND
DIRECTOR OF RESEARCH SINCE 1971, AND AS PRESIDENT SINCE 1995. MS. KHOO, A
CO-MANAGER OF THE SMALL CAPITALIZATION PORTFOLIO, HAS BEEN EMPLOYED BY ALGER
SINCE 1989, AS A SENIOR RESEARCH ANALYST UNTIL 1995 AND AS A SENIOR VICE
PRESIDENT SINCE 1995. MR. TARTARO, A CO-MANAGER OF THE MIDCAP GROWTH, GROWTH,
AND INCOME & GROWTH PORTFOLIOS, HAS BEEN EMPLOYED BY ALGER SINCE 1990, AS A
SENIOR RESEARCH ANALYST UNTIL 1995 AND AS A SENIOR VICE PRESIDENT SINCE 1995.
<PAGE>
MASSACHUSETTS FINANCIAL SERVICES COMPANY ("MFS") (500 BOYLSTON STREET, BOSTON,
MA 02116) SERVES AS THE INVESTMENT SUBADVISOR TO THE EMERGING GROWTH, RESEARCH,
AND GROWTH WITH INCOME PORTFOLIOS. MFS IS AMERICA'S OLDEST MUTUAL FUND
ORGANIZATION. MFS AND ITS PREDECESSOR ORGANIZATIONS HAVE A HISTORY OF MONEY
MANAGEMENT DATING FROM 1924 AND THE FOUNDING OF THE FIRST MUTUAL FUND IN THE
UNITED STATES, THE MASSACHUSETTS INVESTORS TRUST. NET ASSETS UNDER THE
MANAGEMENT OF THE MFS ORGANIZATION WERE APPROXIMATELY $136.72 BILLION ON BEHALF
OF APPROXIMATELY 4.2 MILLION INVESTOR ACCOUNTS AS OF DECEMBER 31, 1999.
THE EMERGING GROWTH PORTFOLIO IS MANAGED BY TONI Y. SHIMURA, A SENIOR VICE
PRESIDENT OF MFS, WHO HAS BEEN EMPLOYED BY MFS AS A PORTFOLIO MANAGER SINCE
1987. JOHN W. BALLEN, PRESIDENT AND CHIEF INVESTMENT OFFICER OF MFS, PROVIDES
GENERAL OVERSIGHT OF THE SERIES' PORTFOLIO. THE RESEARCH PORTFOLIO IS CURRENTLY
MANAGED BY A COMMITTEE COMPRISED OF VARIOUS EQUITY RESEARCH ANALYSTS EMPLOYED BY
MFS AND MFS' INVESTMENT ADVISORY AFFILIATES. JOHN D. LAUPHEIMER, A SENIOR VICE
PRESIDENT OF MFS AND MITCHELL D. DYNAN, A SENIOR VICE PRESIDENT OF MFS, ARE THE
PORTFOLIO MANAGERS FOR THE GROWTH WITH INCOME PORTFOLIO. THEY HAVE BEEN EMPLOYED
AS PORTFOLIO MANAGERS BY MFS SINCE 1981 AND 1986, RESPECTIVELY.
STATE STREET GLOBAL ADVISORS ("SSGA") (225 FRANKLIN STREET, BOSTON, MA, 02110)
SERVES AS THE INVESTMENT SUBADVISOR TO THE INDEX 500 PORTFOLIO. SSGA WAS
ESTABLISHED IN 1978 AS AN INVESTMENT MANAGEMENT DIVISION OF THE STATE STREET
BANK AND TRUST COMPANY. SSGA IS A PIONEER IN THE DEVELOPMENT OF DOMESTIC AND
INTERNATIONAL INDEX FUNDS. AS OF DECEMBER 31, 1999, SSGA HAD $672.4 BILLION IN
ASSETS UNDER MANAGEMENT.
SSGA'S PORTFOLIO MANAGEMENT TEAM CONSISTS OF SEVERAL MEMBERS, HEADED BY PETER
LEAHY. HE JOINED SSGA IN 1991, AND HEADS THE GLOBAL STRUCTURED PRODUCTS GROUP.
HIS RESPONSIBILITIES INCLUDE MANAGEMENT OF INTERNATIONAL SMALL CAP INDEX FUNDS
AND RESEARCH AND DEVELOPMENT OF NEW PRODUCTS AND STRATEGIES.
ADVISORY FEES
THE FOLLOWING TABLE SHOWS THE AGGREGATE ANNUAL ADVISORY FEE PAID TO AIC FOR THE
MOST RECENT FISCAL YEAR BY EACH PORTFOLIO AS A PERCENTAGE OF THAT PORTFOLIO'S
AVERAGE DAILY NET ASSETS.
PORTFOLIO ADVISORY FEE
AMERITAS INCOME & GROWTH PORTFOLIO 0.625%
AMERITAS GROWTH PORTFOLIO 0.75%
AMERITAS SMALL CAPITALIZATION PORTFOLIO 0.85%
AMERITAS MIDCAP GROWTH PORTFOLIO 0.80%
AMERITAS EMERGING GROWTH PORTFOLIO 0.75%
AMERITAS RESEARCH PORTFOLIO 0.75%
AMERITAS GROWTH WITH INCOME PORTFOLIO 0.75%
AMERITAS INDEX 500 PORTFOLIO 0.24%
AMERITAS MONEY MARKET PORTFOLIO 0.20%
PURCHASE, EXCHANGE AND REDEMPTION OF SHARES
THE FUND OFFERS ITS SHARES, WITHOUT SALES CHARGE, ONLY FOR PURCHASE BY INSURANCE
COMPANIES FOR ALLOCATION TO THEIR VARIABLE ACCOUNTS. SHARES ARE PURCHASED BY THE
VARIABLE ACCOUNTS AT THE NET ASSET VALUE OF THE PORTFOLIO NEXT DETERMINED AFTER
THE INSURANCE COMPANY RECEIVES THE PREMIUM PAYMENT. THE FUND CONTINUOUSLY OFFERS
ITS SHARES IN THE PORTFOLIO AT A PRICE EQUAL TO THE NET ASSET VALUE PER SHARE.
INITIAL AND SUBSEQUENT PAYMENTS ALLOCATED TO THE FUND ARE SUBJECT TO THE LIMITS
APPLICABLE IN THE POLICIES ISSUED BY THE INSURANCE COMPANIES.
IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE DISADVANTAGEOUS FOR BOTH ANNUITY
VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE ACCOUNTS, OR FOR VARIABLE ACCOUNTS
OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE FUND, ALTHOUGH
CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE FUND FORESEE ANY SUCH
DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE INSURANCE POLICY
OWNERS OF ANY INSURANCE COMPANY. THE FUND'S BOARD OF DIRECTORS INTENDS TO
MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS BETWEEN SUCH POLICY
OWNERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN IN RESPONSE
THERETO.
THE INSURANCE COMPANIES REDEEM SHARES OF THE PORTFOLIO TO MAKE BENEFIT AND
SURRENDER PAYMENTS UNDER THE TERMS OF POLICIES.
<PAGE>
REDEMPTIONS ARE PROCESSED ON ANY DAY ON WHICH THE FUND IS OPEN FOR BUSINESS
(EACH DAY THE NEW YORK STOCK EXCHANGE IS OPEN), AND ARE EFFECTED AT THE
PORTFOLIO'S NET ASSET VALUE NEXT DETERMINED AFTER THE APPROPRIATE INSURANCE
COMPANY RECEIVES A SURRENDER REQUEST IN ACCEPTABLE FORM.
PAYMENT FOR REDEEMED SHARES WILL BE MADE PROMPTLY, BUT IN NO EVENT LATER THAN
SEVEN DAYS. HOWEVER, THE RIGHT OF REDEMPTION MAY BE SUSPENDED OR THE DATE OF
PAYMENT POSTPONED IN ACCORDANCE WITH THE RULES UNDER THE INVESTMENT COMPANY ACT
OF 1940. THE AMOUNT RECEIVED UPON REDEMPTION OF THE SHARES OF THE FUND MAY BE
MORE OR LESS THAN THE AMOUNT PAID FOR THE SHARES, DEPENDING UPON THE
FLUCTUATIONS IN THE MARKET VALUE OF THE ASSETS OWNED BY THE FUND. THE FUND
REDEEMS ALL FULL AND FRACTIONAL SHARES OF THE PORTFOLIO FOR CASH. THE REDEMPTION
PRICE IS THE NET ASSET VALUE PER SHARE.
THE NET ASSET VALUE OF THE SHARES OF THE PORTFOLIO IS DETERMINED ONCE DAILY AS
OF THE CLOSE OF BUSINESS OF THE NEW YORK STOCK EXCHANGE, ON DAYS WHEN THE
EXCHANGE IS OPEN FOR BUSINESS. THE NET ASSET VALUE IS DETERMINED BY ADDING THE
VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE PORTFOLIO, SUBTRACTING
LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF OUTSTANDING SHARES OF
THE PORTFOLIO.
EXCEPT FOR MONEY MARKET INSTRUMENTS MATURING IN 60 DAYS OR LESS, SECURITIES HELD
BY THE PORTFOLIO ARE VALUED AT THEIR MARKET VALUE IF MARKET QUOTATIONS ARE
READILY AVAILABLE. OTHERWISE, SUCH SECURITIES ARE VALUED AT FAIR VALUE AS
DETERMINED IN GOOD FAITH BY THE BOARD OF DIRECTORS, ALTHOUGH THE ACTUAL
CALCULATIONS MAY BE MADE BY PERSONS ACTING PURSUANT TO THE DIRECTION OF THE
BOARD. ALL MONEY MARKET INSTRUMENTS WITH A REMAINING MATURITY OF 60 DAYS OR LESS
ARE VALUED ON AN AMORTIZED COST BASIS.
EXCHANGE REQUESTS WILL NOT BE ACCEPTED ON ANY DAY WHEN CALVERT IS OPEN BUT THE
FUND'S CUSTODIAN BANK IS CLOSED (E.G., COLUMBUS DAY AND VETERAN'S DAY); THESE
EXCHANGE REQUESTS WILL BE PROCESSED THE NEXT DAY THE FUND'S CUSTODIAN BANK IS
OPEN.
THE FUND AND THE DISTRIBUTOR RESERVE THE RIGHT AT ANY TIME TO REJECT OR CANCEL
ANY PART OF ANY PURCHASE OR EXCHANGE ORDER; MODIFY ANY TERMS OR CONDITIONS OF
PURCHASE OF SHARES OF THE FUND; OR WITHDRAW ALL OR ANY PART OF THE OFFERING MADE
BY THIS PROSPECTUS. TO PROTECT THE INTERESTS OF INVESTORS, THE FUND AND THE
DISTRIBUTOR MAY REJECT ANY ORDER CONSIDERED MARKET-TIMING ACTIVITY.
THE FUND RESERVES THE RIGHT TO TERMINATE OR MODIFY THE EXCHANGE PRIVILEGE WITH
60 DAYS' WRITTEN NOTICE.
DIVIDENDS AND DISTRIBUTIONS
IT IS THE FUND'S INTENTION TO DISTRIBUTE SUBSTANTIALLY ALL OF THE NET INVESTMENT
INCOME, IF ANY, OF THE PORTFOLIOS. FOR DIVIDEND PURPOSES, NET INVESTMENT INCOME
OF THE PORTFOLIOS CONSISTS OF ALL PAYMENTS OF DIVIDENDS OR INTEREST RECEIVED BY
SUCH PORTFOLIO, LESS ESTIMATED EXPENSES. ALL NET REALIZED CAPITAL GAINS, IF ANY,
OF EACH PORTFOLIO ARE DECLARED AND DISTRIBUTED PERIODICALLY, NO LESS FREQUENTLY
THAN ANNUALLY. ALL DIVIDENDS AND DISTRIBUTIONS ARE REINVESTED IN ADDITIONAL
SHARES OF THE PORTFOLIO AT NET ASSET VALUE.
TAXES
AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER M OF THE
INTERNAL REVENUE CODE, AS AMENDED, THE FUND IS NOT SUBJECT TO FEDERAL INCOME
TAX, NOR TO THE FEDERAL EXCISE TAX IMPOSED BY THE TAX REFORM ACT OF 1986, TO THE
EXTENT THAT IT DISTRIBUTES ITS NET INVESTMENT INCOME AND REALIZED CAPITAL GAINS.
SINCE THE ONLY SHAREHOLDERS OF THE PORTFOLIOS ARE THE INSURANCE COMPANIES, NO
DISCUSSION IS INCLUDED HEREIN AS TO THE FEDERAL INCOME TAX CONSEQUENCES AT THE
SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE FEDERAL TAX CONSEQUENCES
TO PURCHASERS OF THE ANNUITY OR LIFE INSURANCE POLICIES, SEE THE PROSPECTUSES
FOR THE POLICIES.
FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLE IS INTENDED TO HELP YOU UNDERSTAND THE
PORTFOLIOS' FINANCIAL PERFORMANCE FOR THE PAST FIVE (5) YEARS (OR IF SHORTER,
THE PERIOD OF THE PORTFOLIO'S OPERATIONS). THE PORTFOLIOS' FISCAL YEAR END IS
DECEMBER 31. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A SINGLE SHARE,
BY PORTFOLIO. THE TOTAL RETURNS IN THE TABLE REPRESENT THE RATE THAT AN INVESTOR
WOULD HAVE EARNED (OR LOST) ON AN INVESTMENT IN A PORTFOLIO (ASSUMING
REINVESTMENT OF ALL DIVIDENDS AND DISTRIBUTIONS), AND DOES NOT REFLECT ANY
CHARGES OR EXPENSES DEDUCTED BY THE INSURANCE COMPANIES. THIS INFORMATION HAS
BEEN AUDITED BY PRICEWATERHOUSECOOPERS LLP WHOSE REPORT, ALONG WITH A
PORTFOLIOS' FINANCIAL STATEMENTS, ARE INCLUDED IN THE PORTFOLIOS' ANNUAL REPORT,
WHICH IS AVAILABLE UPON REQUEST.
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED
DECEMBER 31,
INCOME & GROWTH PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $13.83
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME -
NET REALIZED AND UNREALIZED GAIN (LOSS) 4.03
TOTAL FROM INVESTMENT OPERATIONS 4.03
DISTRIBUTIONS FROM
NET REALIZED GAINS (.51)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 3.52
NET ASSET VALUE, ENDING $17.35
TOTAL RETURN 29.14%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.09%) (A)
TOTAL EXPENSES .79% (A)
EXPENSES BEFORE OFFSETS .68% (A)
NET EXPENSES .68% (A)
PORTFOLIO TURNOVER 18%
NET ASSETS, ENDING (IN THOUSANDS) $80,385
PERIOD ENDED
DECEMBER 31,
GROWTH PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $56.04
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .01
NET REALIZED AND UNREALIZED GAIN (LOSS) 8.79
TOTAL FROM INVESTMENT OPERATIONS 8.80
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.01)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 8.79
NET ASSET VALUE, ENDING $64.83
TOTAL RETURN 15.70%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME .12% (A)
TOTAL EXPENSES .90% (A)
EXPENSES BEFORE OFFSETS .79% (A)
NET EXPENSES .79% (A)
PORTFOLIO TURNOVER 18%
NET ASSETS, ENDING (IN THOUSANDS) $197,953
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED
DECEMBER 31,
SMALL CAPITALIZATION PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $44.05
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (0.05)
NET REALIZED AND UNREALIZED GAIN (LOSS) 12.86
TOTAL FROM INVESTMENT OPERATIONS 12.81
DISTRIBUTIONS FROM
NET REALIZED GAINS (0.44)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 12.37
NET ASSET VALUE, ENDING $56.42
TOTAL RETURN 29.10%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.54%) (A)
TOTAL EXPENSES 1.00% (A)
EXPENSES BEFORE OFFSETS .90% (A)
NET EXPENSES .90% (A)
PORTFOLIO TURNOVER 21%
NET ASSETS, ENDING (IN THOUSANDS) $125,577
PERIOD ENDED
DECEMBER 31,
MIDCAP GROWTH PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $26.40
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) -
NET REALIZED AND UNREALIZED GAIN (LOSS) 5.82
TOTAL FROM INVESTMENT OPERATIONS 5.82
DISTRIBUTIONS FROM
NET REALIZED GAINS (0.72)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 5.10
NET ASSET VALUE, ENDING $31.50
TOTAL RETURN 22.09%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.06%) (A)
TOTAL EXPENSES 0.97% (A)
EXPENSES BEFORE OFFSETS 0.84% (A)
NET EXPENSES 0.84% (A)
PORTFOLIO TURNOVER 21%
NET ASSETS, ENDING (IN THOUSANDS) $75,643
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED
DECEMBER 31,
EMERGING GROWTH PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $25.82
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME (LOSS) (.02)
NET REALIZED AND UNREALIZED GAIN (LOSS) 12.06
TOTAL FROM INVESTMENT OPERATIONS 12.04
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 12.04
NET ASSET VALUE, ENDING $37.86
TOTAL RETURN 46.63%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.45%) (A)
TOTAL EXPENSES .98% (A)
EXPENSES BEFORE OFFSETS .86% (A)
NET EXPENSES .85% (A)
PORTFOLIO TURNOVER 18%
NET ASSETS, ENDING (IN THOUSANDS) $128,040
PERIOD ENDED
DECEMBER 31,
RESEARCH PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $20.24
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME -
NET REALIZED AND UNREALIZED GAIN (LOSS) 3.01
TOTAL FROM INVESTMENT OPERATIONS 3.01
DISTRIBUTIONS FROM
NET REALIZED GAINS (0.26)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 2.75
NET ASSET VALUE, ENDING $22.99
TOTAL RETURN 14.90%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME (.04%) (A)
TOTAL EXPENSES 1.42% (A)
EXPENSES BEFORE OFFSETS .89% (A)
NET EXPENSES .86% (A)
PORTFOLIO TURNOVER 16%
NET ASSETS, ENDING (IN THOUSANDS) $25,929
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED
DECEMBER 31,
GROWTH WITH INCOME PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $20.24
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .02
NET REALIZED AND UNREALIZED GAIN (LOSS) .92
TOTAL FROM INVESTMENT OPERATIONS .94
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.01)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE .93
NET ASSET VALUE, ENDING $21.17
TOTAL RETURN 4.65%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME .44% (A)
TOTAL EXPENSES 1.26% (A)
EXPENSES BEFORE OFFSETS .88% (A)
NET EXPENSES .88% (A)
PORTFOLIO TURNOVER 16%
NET ASSETS, ENDING (IN THOUSANDS) $34,742
PERIOD ENDED
DECEMBER 31,
INDEX 500 PORTFOLIO 1999^
NET ASSET VALUE, BEGINNING $155.01
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .31
NET REALIZED AND UNREALIZED GAIN (LOSS) 12.23
TOTAL FROM INVESTMENT OPERATIONS 12.54
DISTRIBUTIONS FROM
NET INVESTMENT INCOME (.25)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE 12.29
NET ASSET VALUE, ENDING $167.30
TOTAL RETURN 8.09%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 1.16% (A)
TOTAL EXPENSES .40% (A)
EXPENSES BEFORE OFFSETS .29% (A)
NET EXPENSES .28% (A)
PORTFOLIO TURNOVER 5%
NET ASSETS, ENDING (IN THOUSANDS) $206,872
<PAGE>
FINANCIAL HIGHLIGHTS
PERIOD ENDED
DECEMBER 31,
MONEY MARKET PORTFOLIO 1999^^
NET ASSET VALUE, BEGINNING $1.00
INCOME FROM INVESTMENT OPERATIONS
NET INVESTMENT INCOME .01
TOTAL FROM INVESTMENT OPERATIONS .01
DISTRIBUTIONS FROM
NET INVESTMENT INCOME ( .01)
TOTAL INCREASE (DECREASE) IN NET ASSET VALUE -
NET ASSET VALUE, ENDING $1.00
TOTAL RETURN .99%
RATIOS TO AVERAGE NET ASSETS:
NET INVESTMENT INCOME 5.67% (A)
TOTAL EXPENSES .33% (A)
EXPENSES BEFORE OFFSETS .26% (A)
NET EXPENSES .26% (A)
NET ASSETS, ENDING (IN THOUSANDS) $199,938
(A) ANNUALIZED
^ FROM NOVEMBER 1, 1999 INCEPTION.
^^ FROM OCTOBER 29, 1999 INCEPTION.
<PAGE>
FOR INVESTORS WHO WANT MORE INFORMATION ABOUT THE FUND, THE FOLLOWING DOCUMENTS
ARE AVAILABLE FREE UPON REQUEST:
ANNUAL/SEMI-ANNUAL REPORTS: ADDITIONAL INFORMATION ABOUT THE PORTFOLIOS'
INVESTMENTS IS AVAILABLE IN THE PORTFOLIOS' RESPECTIVE ANNUAL AND SEMI-ANNUAL
REPORTS TO SHAREHOLDERS. IN THE ANNUAL REPORT, YOU WILL FIND A DISCUSSION OF THE
MARKET CONDITIONS AND INVESTMENT STRATEGIES THAT SIGNIFICANTLY AFFECTED THE
RESPECTIVE PORTFOLIOS' PERFORMANCE DURING THE LAST FISCAL YEAR.
STATEMENT OF ADDITIONAL INFORMATION (SAI): THE SAI FOR THE FUND PROVIDES MORE
DETAILED INFORMATION ABOUT THE PORTFOLIOS AND IS INCORPORATED INTO THIS
PROSPECTUS BY REFERENCE.
YOU CAN GET FREE COPIES OF REPORTS AND THE SAI, REQUEST OTHER INFORMATION AND
DISCUSS YOUR QUESTIONS ABOUT THE AMERITAS PORTFOLIOS BY CONTACTING YOUR BROKER,
OR THE FUND AT:
AMERITAS INVESTMENT CORP.
5900 "O" STREET
LINCOLN, NEBRASKA 68510-1889
TELEPHONE: 1-800-335-9858
AMERITAS WEB-SITE ADDRESS: HTTP://WWW.AMERITAS.COM
YOU CAN REVIEW THE FUND'S REPORTS AND SAI AT THE PUBLIC REFERENCE ROOM OF THE
SECURITIES AND EXCHANGE COMMISSION. YOU CAN GET TEXT-ONLY COPIES:
FOR A FEE, BY WRITING TO OR CALLING THE PUBLIC REFERENCE ROOM OF THE COMMISSION,
WASHINGTON, D.C. 20549-6009, TELEPHONE: 1-800-SEC-0330.
FREE FROM THE COMMISSION'S INTERNET WEBSITE AT HTTP://WWW.SEC.GOV
INVESTMENT COMPANY ACT FILE NO.: 811-3591
CALVERT VARIABLE SERIES, INC.
SOCIAL MONEY MARKET PORTFOLIO
SOCIAL SMALL CAP GROWTH PORTFOLIO
SOCIAL MID CAP GROWTH PORTFOLIO
SOCIAL INTERNATIONAL EQUITY PORTFOLIO
SOCIAL BALANCED PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 2000
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS.
INVESTORS SHOULD READ THE STATEMENT OF ADDITIONAL INFORMATION IN CONJUNCTION
WITH THE FUND'S PROSPECTUS, DATED APRIL 30, 2000. THE FUND'S AUDITED FINANCIAL
STATEMENTS INCLUDED IN ITS MOST RECENT ANNUAL REPORT TO SHAREHOLDERS, ARE
EXPRESSLY INCORPORATED BY REFERENCE, AND MADE A PART OF THIS SAI. THE PROSPECTUS
AND THE MOST RECENT SHAREHOLDER REPORT MAY BE OBTAINED FREE OF CHARGE BY CALLING
(800) 368-2748 OR BY WRITING THE FUND AT 4550 MONTGOMERY AVENUE, BETHESDA,
MARYLAND 20814, OR BY VISITING OUR WEBSITE AT WWW.CALVERT.COM.
TABLE OF CONTENTS
-----------------
INVESTMENT POLICIES AND RISKS 2
- --------------------------------
INVESTMENT RESTRICTIONS 11
- ------------------------
INVESTMENT SELECTION PROCESS 12
PURCHASE AND REDEMPTION OF SHARES 13
NET ASSET VALUE 13
TAXES 14
CALCULATION OF YIELD AND TOTAL RETURN 15
DIRECTORS AND OFFICERS 16
INVESTMENT ADVISOR AND SUBADVISORS 19
ADMINISTRATIVE SERVICES AGENT 20
TRANSFER AND SHAREHOLDER SERVICING AGENT 20
INDEPENDENT ACCOUNTANTS AND CUSTODIANS 20
METHOD OF DISTRIBUTION 20
PORTFOLIO TRANSACTIONS 20
PERSONAL SECURITIES TRANSACTIONS 22
GENERAL INFORMATION 22
APPENDIX 23
<PAGE>
INVESTMENT POLICIES AND RISKS
-----------------------------
CALVERT VARIABLE SERIES, INC. ("THE FUND") OFFERS INVESTORS THE OPPORTUNITY
TO INVEST IN SEVERAL PROFESSIONALLY MANAGED SECURITIES PORTFOLIOS WHICH OFFER
THE OPPORTUNITY FOR GROWTH OF CAPITAL OR CURRENT INCOME THROUGH INVESTMENT IN
ENTERPRISES THAT MAKE A SIGNIFICANT CONTRIBUTION TO SOCIETY THROUGH THEIR
PRODUCTS AND SERVICES AND THROUGH THE WAY THEY DO BUSINESS. THE CALVERT SOCIAL
PORTFOLIOS OFFER INVESTORS A CHOICE OF FIVE SEPARATE PORTFOLIOS SELECTED WITH A
CONCERN FOR THE SOCIAL IMPACT OF EACH INVESTMENT: SOCIAL MONEY MARKET, SOCIAL
SMALL CAP GROWTH, SOCIAL MID CAP GROWTH, SOCIAL INTERNATIONAL EQUITY AND SOCIAL
BALANCED. REFERENCES TO THE "INVESTMENT ADVISOR" REFER TO THE ADVISOR
APPROPRIATE TO THE PORTFOLIO BEING DISCUSSED. (SEE "INVESTMENT ADVISORS")
FOREIGN SECURITIES
SOCIAL INTERNATIONAL EQUITY AND SOCIAL SMALL CAP GROWTH MAY INVEST ALL OF
THEIR ASSETS IN FOREIGN SECURITIES, ALTHOUGH SOCIAL SMALL CAP GROWTH DOES NOT
PRESENTLY INTEND TO INVEST IN FOREIGN SECURITIES. SOCIAL MONEY MARKET AND MID
CAP GROWTH MAY EACH INVEST UP TO 25%, AND SOCIAL BALANCED MAY INVEST UP TO 10%
OF ITS ASSETS IN THE SECURITIES OF FOREIGN ISSUERS. SOCIAL MONEY MARKET MAY
PURCHASE ONLY HIGH QUALITY, US DOLLAR-DENOMINATED INSTRUMENTS.
UNDER NORMAL CIRCUMSTANCES, SOCIAL INTERNATIONAL EQUITY WILL INVEST AT
LEAST 65% OF ITS ASSETS IN EQUITY SECURITIES AND AT LEAST 65% OF ITS ASSETS IN
THE SECURITIES OF ISSUERS IN NO LESS THAN THREE COUNTRIES, OTHER THAN THE U.S.
UNDER NORMAL CIRCUMSTANCES, BUSINESS ACTIVITIES IN A NUMBER OF DIFFERENT FOREIGN
COUNTRIES WILL BE REPRESENTED IN THE PORTFOLIO'S INVESTMENTS. THE PORTFOLIO MAY,
FROM TIME TO TIME, HAVE MORE THAN 25% OF ITS ASSETS INVESTED IN ANY MAJOR
INDUSTRIAL OR DEVELOPED COUNTRY WHICH IN THE VIEW OF THE SUBADVISOR POSES NO
UNIQUE INVESTMENT RISK. UNDER EXCEPTIONAL ECONOMIC OR MARKET CONDITIONS, SOCIAL
INTERNATIONAL EQUITY MAY INVEST SUBSTANTIALLY ALL OF ITS ASSETS IN ONLY ONE OR
TWO COUNTRIES, OR IN U.S. GOVERNMENT OBLIGATIONS OR SECURITIES OF COMPANIES
INCORPORATED IN AND HAVING THEIR PRINCIPAL ACTIVITIES IN THE U.S.
INVESTMENTS IN FOREIGN SECURITIES MAY PRESENT RISKS NOT TYPICALLY INVOLVED
IN DOMESTIC INVESTMENTS. THE FUND MAY PURCHASE FOREIGN SECURITIES DIRECTLY, ON
FOREIGN MARKETS, OR THOSE REPRESENTED BY AMERICAN DEPOSITARY RECEIPTS ("ADRS"),
OR OTHER RECEIPTS EVIDENCING OWNERSHIP OF FOREIGN SECURITIES, SUCH AS
INTERNATIONAL DEPOSITORY RECEIPTS AND GLOBAL DEPOSITARY RECEIPTS. ADRS ARE US
DOLLAR-DENOMINATED AND TRADED IN THE US ON EXCHANGES OR OVER THE COUNTER. BY
INVESTING IN ADRS RATHER THAN DIRECTLY IN FOREIGN ISSUERS' STOCK, THE FUND MAY
POSSIBLY AVOID SOME CURRENCY AND SOME LIQUIDITY RISKS. THE INFORMATION AVAILABLE
FOR ADRS IS SUBJECT TO THE MORE UNIFORM AND MORE EXACTING ACCOUNTING, AUDITING
AND FINANCIAL REPORTING STANDARDS OF THE DOMESTIC MARKET OR EXCHANGE ON WHICH
THEY ARE TRADED.
ADDITIONAL COSTS MAY BE INCURRED IN CONNECTION WITH INTERNATIONAL
INVESTMENT SINCE FOREIGN BROKERAGE COMMISSIONS AND THE CUSTODIAL COSTS
ASSOCIATED WITH MAINTAINING FOREIGN PORTFOLIO SECURITIES ARE GENERALLY HIGHER
THAN IN THE UNITED STATES. FEE EXPENSE MAY ALSO BE INCURRED ON CURRENCY
EXCHANGES WHEN THE FUND CHANGES INVESTMENTS FROM ONE COUNTRY TO ANOTHER OR
CONVERTS FOREIGN SECURITIES HOLDINGS INTO US DOLLARS.
UNITED STATES GOVERNMENT POLICIES HAVE AT TIMES, IN THE PAST, THROUGH
IMPOSITION OF INTEREST EQUALIZATION TAXES AND OTHER RESTRICTIONS, DISCOURAGED
CERTAIN INVESTMENTS ABROAD BY UNITED STATES INVESTORS.
INVESTING IN EMERGING MARKETS IN PARTICULAR, THOSE COUNTRIES WHOSE
ECONOMIES AND CAPITAL MARKETS ARE NOT AS DEVELOPED AS THOSE OF MORE
INDUSTRIALIZED NATIONS, CARRIES ITS OWN SPECIAL RISKS. AMONG OTHER RISKS, THE
ECONOMIES OF SUCH COUNTRIES MAY BE AFFECTED TO A GREATER EXTENT THAN IN OTHER
COUNTRIES BY PRICE FLUCTUATIONS OF A SINGLE COMMODITY, BY SEVERE CYCLICAL
CLIMACTIC CONDITIONS, LACK OF SIGNIFICANT HISTORY IN OPERATING UNDER A
MARKET-ORIENTED ECONOMY, OR BY POLITICAL INSTABILITY, INCLUDING RISK OF
EXPROPRIATION.
IN DETERMINING THE APPROPRIATE DISTRIBUTION OF INVESTMENTS AMONG VARIOUS
COUNTRIES AND GEOGRAPHIC REGIONS, THE SUBADVISOR ORDINARILY WILL CONSIDER THE
FOLLOWING FACTORS: PROSPECTS FOR RELATIVE ECONOMIC GROWTH AMONG FOREIGN
COUNTRIES; EXPECTED LEVELS OF INFLATION; RELATIVE PRICE LEVELS OF THE VARIOUS
CAPITAL MARKETS; GOVERNMENT POLICIES INFLUENCING BUSINESS CONDITIONS; THE
OUTLOOK FOR CURRENCY RELATIONSHIPS AND THE RANGE OF INDIVIDUAL INVESTMENT
OPPORTUNITIES AVAILABLE TO THE GLOBAL INVESTOR.
SINCE INVESTMENTS IN SECURITIES OF ISSUERS DOMICILED IN FOREIGN COUNTRIES
USUALLY INVOLVE CURRENCIES OF THE FOREIGN COUNTRIES, AND SINCE THE FUND MAY
TEMPORARILY HOLD FUNDS IN FOREIGN CURRENCIES DURING THE COMPLETION OF INVESTMENT
PROGRAMS, THE VALUE OF THE ASSETS OF THE FUND AS MEASURED IN UNITED STATES
DOLLARS MAY BE AFFECTED FAVORABLY OR UNFAVORABLY BY CHANGES IN FOREIGN CURRENCY
EXCHANGE RATES AND EXCHANGE CONTROL REGULATIONS. FOR EXAMPLE, IF THE VALUE OF
THE FOREIGN CURRENCY IN WHICH A SECURITY IS DENOMINATED INCREASES OR DECLINES IN
RELATION TO THE VALUE OF THE US DOLLAR, THE VALUE OF THE SECURITY IN US DOLLARS
WILL INCREASE OR DECLINE CORRESPONDINGLY. THE FUND WILL CONDUCT ITS FOREIGN
CURRENCY EXCHANGE TRANSACTIONS EITHER ON A SPOT (I.E., CASH) BASIS AT THE SPOT
RATE PREVAILING IN THE FOREIGN EXCHANGE MARKET, OR THROUGH ENTERING INTO FORWARD
CONTRACTS TO PURCHASE OR SELL FOREIGN CURRENCIES. A FORWARD FOREIGN CURRENCY
CONTRACT INVOLVES AN OBLIGATION TO PURCHASE OR SELL A SPECIFIC CURRENCY AT A
FUTURE DATE WHICH MAY BE ANY FIXED NUMBER OF DAYS FROM THE DATE OF THE CONTRACT
AGREED UPON BY THE PARTIES, AT A PRICE SET AT THE TIME OF THE CONTRACT. THESE
CONTRACTS ARE TRADED IN THE INTERBANK MARKET CONDUCTED DIRECTLY BETWEEN CURRENCY
TRADERS (USUALLY LARGE, COMMERCIAL BANKS) AND THEIR CUSTOMERS. A FORWARD FOREIGN
CURRENCY CONTRACT GENERALLY HAS NO DEPOSIT REQUIREMENT, AND NO COMMISSIONS ARE
CHARGED AT ANY STAGE FOR TRADES.
A PORTFOLIO MAY ENTER INTO FORWARD FOREIGN CURRENCY CONTRACTS FOR TWO
REASONS. FIRST, THE PORTFOLIO MAY DESIRE TO PRESERVE THE UNITED STATES DOLLAR
PRICE OF A SECURITY WHEN IT ENTERS INTO A CONTRACT FOR THE PURCHASE OR SALE OF A
SECURITY DENOMINATED IN A FOREIGN CURRENCY. A PORTFOLIOS MAY BE ABLE TO PROTECT
ITSELF AGAINST POSSIBLE LOSSES RESULTING FROM CHANGES IN THE RELATIONSHIP
BETWEEN THE UNITED STATES DOLLAR AND FOREIGN CURRENCIES DURING THE PERIOD
BETWEEN THE DATE THE SECURITY IS PURCHASED OR SOLD AND THE DATE ON WHICH PAYMENT
IS MADE OR RECEIVED BY ENTERING INTO A FORWARD CONTRACT FOR THE PURCHASE OR
SALE, FOR A FIXED AMOUNT OF DOLLARS, OF THE AMOUNT OF THE FOREIGN CURRENCY
INVOLVED IN THE UNDERLYING SECURITY TRANSACTIONS.
SECOND, WHEN THE ADVISOR OR SUBADVISOR BELIEVES THAT THE CURRENCY OF A
PARTICULAR FOREIGN COUNTRY MAY SUFFER A SUBSTANTIAL DECLINE AGAINST THE UNITED
STATES DOLLAR, A PORTFOLIO MAY ENTER INTO A FORWARD FOREIGN CURRENCY CONTRACT TO
SELL, FOR A FIXED AMOUNT OF DOLLARS, THE AMOUNT OF FOREIGN CURRENCY
APPROXIMATING THE VALUE OF SOME OR ALL OF THE PORTFOLIO SECURITIES DENOMINATED
IN SUCH FOREIGN CURRENCY. THE PRECISE MATCHING OF THE FORWARD FOREIGN CURRENCY
CONTRACT AMOUNTS AND THE VALUE OF THE PORTFOLIO SECURITIES INVOLVED WILL NOT
GENERALLY BE POSSIBLE SINCE THE FUTURE VALUE OF THE SECURITIES WILL CHANGE AS A
CONSEQUENCE OF MARKET MOVEMENTS BETWEEN THE DATE THE FORWARD CONTRACT IS ENTERED
INTO AND THE DATE IT MATURES. THE PROJECTION OF SHORT-TERM CURRENCY MARKET
MOVEMENT IS DIFFICULT, AND THE SUCCESSFUL EXECUTION OF THIS SHORT-TERM HEDGING
STRATEGY IS UNCERTAIN. ALTHOUGH FORWARD FOREIGN CURRENCY CONTRACTS TEND TO
MINIMIZE THE RISK OF LOSS DUE TO A DECLINE IN THE VALUE OF THE HEDGED CURRENCY,
AT THE SAME TIME THEY TEND TO LIMIT ANY POTENTIAL GAIN WHICH MIGHT RESULT SHOULD
THE VALUE OF SUCH CURRENCY INCREASE. THE PORTFOLIOS DO NOT INTEND TO ENTER INTO
SUCH FORWARD CONTRACTS UNDER THIS CIRCUMSTANCE ON A REGULAR OR CONTINUOUS BASIS.
EUROCURRENCY CONVERSION RISK
EUROPEAN COUNTRIES THAT ARE MEMBERS OF THE EUROPEAN MONETARY UNION HAVE
AGREED TO USE A COMMON CURRENCY UNIT, THE "EURO". CURRENTLY, EACH OF THESE
COUNTRIES HAS ITS OWN CURRENCY UNIT. ALTHOUGH THE ADVISOR DOES NOT ANTICIPATE
ANY PROBLEMS IN CONVERSION FROM THE OLD CURRENCIES TO THE EURO, THERE MAY BE
ISSUES INVOLVED IN SETTLEMENT, VALUATION, AND NUMEROUS OTHER AREAS THAT COULD
IMPACT THE FUND. CALVERT HAS BEEN REVIEWING ALL OF ITS COMPUTER SYSTEMS FOR
EUROCURRENCY CONVERSION COMPLIANCE. THERE CAN BE NO ASSURANCE THAT THERE WILL BE
NO NEGATIVE IMPACT ON THE FUND, HOWEVER, THE ADVISOR AND CUSTODIAN HAVE ADVISED
THE FUND THAT THEY HAVE BEEN ACTIVELY WORKING ON ANY NECESSARY CHANGES TO THEIR
COMPUTER SYSTEMS TO PREPARE FOR THE CONVERSION, AND EXPECT THAT THEIR SYSTEMS,
AND THOSE OF THEIR OUTSIDE SERVICE PROVIDERS, WILL BE ADAPTED IN TIME FOR THAT
EVENT.
FOREIGN MONEY MARKET INSTRUMENTS
SOCIAL MONEY MARKET MAY INVEST WITHOUT LIMITATION IN MONEY MARKET
INSTRUMENTS OF BANKS, WHETHER FOREIGN OR DOMESTIC, INCLUDING OBLIGATIONS OF US
BRANCHES OF FOREIGN BANKS ("YANKEE" INSTRUMENTS) AND OBLIGATIONS OF FOREIGN
BRANCHES OF US BANKS ("EURODOLLAR" INSTRUMENTS). ALL SUCH INSTRUMENTS MUST BE
HIGH-QUALITY, US DOLLAR-DENOMINATED OBLIGATIONS. IT IS AN OPERATING (I.E.,
NONFUNDAMENTAL) POLICY OF SOCIAL MONEY MARKET THAT IT MAY INVEST ONLY IN FOREIGN
MONEY MARKET INSTRUMENTS IF THEY ARE OF COMPARABLE QUALITY TO THE OBLIGATIONS OF
DOMESTIC BANKS. ALTHOUGH THESE INSTRUMENTS ARE NOT SUBJECT TO FOREIGN CURRENCY
RISK SINCE THEY ARE US DOLLAR-DENOMINATED, INVESTMENTS IN FOREIGN MONEY MARKET
INSTRUMENTS MAY INVOLVE RISKS THAT ARE DIFFERENT THAN INVESTMENTS IN SECURITIES
OF US ISSUERS. SEE "FOREIGN SECURITIES" ABOVE.
SMALL CAP ISSUERS
THE SECURITIES OF SMALL CAP ISSUERS MAY BE LESS ACTIVELY TRADED THAN THE
SECURITIES OF LARGER ISSUERS, MAY TRADE IN A MORE LIMITED VOLUME, AND MAY CHANGE
IN VALUE MORE ABRUPTLY THAN SECURITIES OF LARGER COMPANIES. INFORMATION
CONCERNING THESE SECURITIES MAY NOT BE READILY AVAILABLE SO THAT THE COMPANIES
MAY BE LESS ACTIVELY FOLLOWED BY STOCK ANALYSTS. SMALL-CAP ISSUERS DO NOT
USUALLY PARTICIPATE IN MARKET RALLIES TO THE SAME EXTENT AS MORE WIDELY-KNOWN
SECURITIES, AND THEY TEND TO HAVE A RELATIVELY HIGHER PERCENTAGE OF INSIDER
OWNERSHIP.
INVESTING IN SMALLER, NEW ISSUERS GENERALLY INVOLVES GREATER RISK THAN INVESTING
IN LARGER, ESTABLISHED ISSUERS. COMPANIES IN WHICH THE PORTFOLIO IS LIKELY TO
INVEST MAY HAVE LIMITED PRODUCT LINES, MARKETS OR FINANCIAL RESOURCES AND MAY
LACK MANAGEMENT DEPTH. THE SECURITIES IN SUCH COMPANIES MAY ALSO HAVE LIMITED
MARKETABILITY AND MAY BE SUBJECT TO MORE ABRUPT OR ERRATIC MARKET MOVEMENTS THAN
SECURITIES OF LARGER, MORE ESTABLISHED COMPANIES OR THE MARKET AVERAGES IN
GENERAL.
REAL ESTATE INVESTMENT TRUSTS
SOCIAL SMALL CAP GROWTH AND SOCIAL BALANCED MAY INVEST IN REAL ESTATE
INVESTMENT TRUSTS ("REITS"), INCLUDING EQUITY REITS, WHICH OWN REAL ESTATE
PROPERTIES, AND MORTGAGE REITS, WHICH MAKE CONSTRUCTION, DEVELOPMENT, AND
LONG-TERM MORTGAGE LOANS. THE VALUE OF AN EQUITY REIT MAY BE AFFECTED BY CHANGES
IN THE VALUE OF THE UNDERLYING PROPERTY, WHILE A MORTGAGE REIT MAY BE AFFECTED
BY THE QUALITY OF THE CREDIT EXTENDED. THE PERFORMANCE OF BOTH TYPES OF REITS
DEPENDS UPON CONDITIONS IN THE REAL ESTATE INDUSTRY, MANAGEMENT SKILLS, AND THE
AMOUNT OF CASH FLOW. THE RISKS ASSOCIATED WITH REITS INCLUDE DEFAULT BY
BORROWERS, SELF-LIQUIDATION, FAILURE TO QUALIFY AS A PASS-THROUGH ENTITY UNDER
THE FEDERAL TAX LAW, FAILURE TO QUALIFY AS AN EXEMPT ENTITY UNDER THE INVESTMENT
COMPANY ACT OF 1940 (THE "1940 ACT"), AND THE FACT THAT REITS ARE NOT
DIVERSIFIED.
PRIVATE PLACEMENTS AND ILLIQUID SECURITIES
DUE TO THE PARTICULAR SOCIAL OBJECTIVE OF THE PORTFOLIOS, OPPORTUNITIES MAY
EXIST TO PROMOTE ESPECIALLY PROMISING APPROACHES TO SOCIAL GOALS THROUGH
PRIVATELY-PLACED INVESTMENTS. THE PRIVATE PLACEMENT INVESTMENTS UNDERTAKEN BY
THE PORTFOLIOS, IF ANY, MAY BE SUBJECT TO A HIGH DEGREE OF RISK. SUCH
INVESTMENTS MAY INVOLVE RELATIVELY SMALL AND UNTRIED ENTERPRISES THAT HAVE BEEN
SELECTED IN THE FIRST INSTANCE BECAUSE OF SOME ATTRACTIVE SOCIAL OBJECTIVES OR
POLICIES. THE INVESTMENT ADVISORS SEEK TO STRUCTURE THE PORTFOLIOS' INVESTMENTS
TO PROVIDE THE GREATEST ASSURANCE OF ATTAINING THE INTENDED INVESTMENT RETURN.
MANY PRIVATE PLACEMENT INVESTMENTS HAVE NO READILY AVAILABLE MARKET AND MAY
THEREFORE BE CONSIDERED ILLIQUID. IT IS AN OPERATING POLICY OF THE PORTFOLIOS
NOT TO PURCHASE ILLIQUID SECURITIES IF MORE THAN A CERTAIN PERCENTAGE OF THE
VALUE OF ITS NET ASSETS WOULD BE INVESTED IN SUCH SECURITIES. SECURITIES
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT OF 1933 MAY
BE DETERMINED BY THE BOARD OF DIRECTORS TO BE LIQUID. THE BOARD MAY DELEGATE
SUCH DETERMINATIONS OF LIQUIDITY TO THE ADVISOR, PURSUANT TO GUIDELINES AND
OVERSIGHT BY THE BOARD. PORTFOLIO INVESTMENTS IN PRIVATE PLACEMENTS AND OTHER
SECURITIES FOR WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE ARE VALUED AT
FAIR MARKET VALUE AS DETERMINED BY THE ADVISOR UNDER THE DIRECTION AND CONTROL
OF THE BOARD.
TEMPORARY DEFENSIVE POSITIONS
FOR TEMPORARY DEFENSIVE PURPOSES - WHICH MAY INCLUDE A LACK OF ADEQUATE
PURCHASE CANDIDATES OR AN UNFAVORABLE MARKET ENVIRONMENT - THE PORTFOLIOS MAY
INVEST IN CASH OR CASH EQUIVALENTS. CASH EQUIVALENTS INCLUDE INSTRUMENTS SUCH
AS, BUT NOT LIMITED TO, US GOVERNMENT AND AGENCY OBLIGATIONS, CERTIFICATES OF
DEPOSIT, BANKER'S ACCEPTANCES, TIME DEPOSITS COMMERCIAL PAPER, SHORT-TERM
CORPORATE DEBT SECURITIES, AND REPURCHASE AGREEMENTS.
REPURCHASE AGREEMENTS
THE PORTFOLIOS MAY PURCHASE DEBT SECURITIES SUBJECT TO REPURCHASE
AGREEMENTS, WHICH ARE ARRANGEMENTS UNDER WHICH THE PORTFOLIO BUYS A SECURITY AND
THE SELLER SIMULTANEOUSLY AGREES TO REPURCHASE THE SECURITY AT A SPECIFIED TIME
AND PRICE. THE PORTFOLIOS ENGAGE IN REPURCHASE AGREEMENTS IN ORDER TO EARN A
HIGHER RATE OF RETURN THAN IT COULD EARN SIMPLY BY INVESTING IN THE OBLIGATION
WHICH IS THE SUBJECT OF THE REPURCHASE AGREEMENT. REPURCHASE AGREEMENTS ARE NOT,
HOWEVER, WITHOUT RISK. IN THE EVENT OF THE BANKRUPTCY OF A SELLER DURING THE
TERM OF A REPURCHASE AGREEMENT, A LEGAL QUESTION EXISTS AS TO WHETHER THE
PORTFOLIO WOULD BE DEEMED THE OWNER OF THE UNDERLYING SECURITY OR WOULD BE
DEEMED ONLY TO HAVE A SECURITY INTEREST IN AND LIEN UPON SUCH SECURITY. THE
PORTFOLIOS WILL ONLY ENGAGE IN REPURCHASE AGREEMENTS WITH RECOGNIZED SECURITIES
DEALERS AND BANKS DETERMINED TO PRESENT MINIMAL CREDIT RISK BY THE ADVISOR. IN
ADDITION, THE PORTFOLIOS WILL ONLY ENGAGE IN REPURCHASE AGREEMENTS REASONABLY
DESIGNED TO SECURE FULLY DURING THE TERM OF THE AGREEMENT THE SELLER'S
OBLIGATION TO REPURCHASE THE UNDERLYING SECURITY AND WILL MONITOR THE MARKET
VALUE OF THE UNDERLYING SECURITY DURING THE TERM OF THE AGREEMENT. IF THE VALUE
OF THE UNDERLYING SECURITY DECLINES AND IS NOT AT LEAST EQUAL TO THE REPURCHASE
PRICE DUE THE PORTFOLIO PURSUANT TO THE AGREEMENT, THE PORTFOLIO WILL REQUIRE
THE SELLER TO PLEDGE ADDITIONAL SECURITIES OR CASH TO SECURE THE SELLER'S
OBLIGATIONS PURSUANT TO THE AGREEMENT. IF THE SELLER DEFAULTS ON ITS OBLIGATION
TO REPURCHASE AND THE VALUE OF THE UNDERLYING SECURITY DECLINES, THE PORTFOLIO
MAY INCUR A LOSS AND MAY INCUR EXPENSES IN SELLING THE UNDERLYING SECURITY.
REPURCHASE AGREEMENTS ARE ALWAYS FOR PERIODS OF LESS THAN ONE YEAR. REPURCHASE
AGREEMENTS NOT TERMINABLE WITHIN SEVEN DAYS ARE CONSIDERED ILLIQUID.
REVERSE REPURCHASE AGREEMENTS
THE PORTFOLIOS MAY ALSO ENGAGE IN REVERSE REPURCHASE AGREEMENTS. UNDER A
REVERSE REPURCHASE AGREEMENT, A PORTFOLIO SELLS SECURITIES TO A BANK OR
SECURITIES DEALER AND AGREES TO REPURCHASE THOSE SECURITIES FROM SUCH PARTY AT
AN AGREED UPON DATE AND PRICE REFLECTING A MARKET RATE OF INTEREST. THE
PORTFOLIO INVESTS THE PROCEEDS FROM EACH REVERSE REPURCHASE AGREEMENT IN
OBLIGATIONS IN WHICH IT IS AUTHORIZED TO INVEST. THE PORTFOLIOS INTEND TO ENTER
INTO A REVERSE REPURCHASE AGREEMENT ONLY WHEN THE INTEREST INCOME PROVIDED FOR
IN THE OBLIGATION IN WHICH THE PORTFOLIO INVESTS THE PROCEEDS IS EXPECTED TO
EXCEED THE AMOUNT THE PORTFOLIO WILL PAY IN INTEREST TO THE OTHER PARTY TO THE
AGREEMENT PLUS ALL COSTS ASSOCIATED WITH THE TRANSACTIONS. THE PORTFOLIOS DO NOT
INTEND TO BORROW FOR LEVERAGE PURPOSES. THE PORTFOLIOS WILL ONLY BE PERMITTED TO
PLEDGE ASSETS TO THE EXTENT NECESSARY TO SECURE BORROWINGS AND REVERSE
REPURCHASE AGREEMENTS.
DURING THE TIME A REVERSE REPURCHASE AGREEMENT IS OUTSTANDING, THE
PORTFOLIO WILL MAINTAIN IN A SEGREGATED CUSTODIAL ACCOUNT AN AMOUNT OF CASH, US
GOVERNMENT SECURITIES OR OTHER LIQUID, HIGH-QUALITY DEBT SECURITIES EQUAL IN
VALUE TO THE REPURCHASE PRICE. THE PORTFOLIO WILL MARK TO MARKET THE VALUE OF
ASSETS HELD IN THE SEGREGATED ACCOUNT, AND WILL PLACE ADDITIONAL ASSETS IN THE
ACCOUNT WHENEVER THE TOTAL VALUE OF THE ACCOUNT FALLS BELOW THE AMOUNT REQUIRED
UNDER APPLICABLE REGULATIONS.
THE PORTFOLIOS' USE OF REVERSE REPURCHASE AGREEMENTS INVOLVES THE RISK THAT
THE OTHER PARTY TO THE AGREEMENTS COULD BECOME SUBJECT TO BANKRUPTCY OR
LIQUIDATION PROCEEDINGS DURING THE PERIOD THE AGREEMENTS ARE OUTSTANDING. IN
SUCH EVENT, THE PORTFOLIO MAY NOT BE ABLE TO REPURCHASE THE SECURITIES IT HAS
SOLD TO THAT OTHER PARTY. UNDER THOSE CIRCUMSTANCES, IF AT THE EXPIRATION OF THE
AGREEMENT SUCH SECURITIES ARE OF GREATER VALUE THAN THE PROCEEDS OBTAINED BY THE
PORTFOLIO UNDER THE AGREEMENTS, THE PORTFOLIO MAY HAVE BEEN BETTER OFF HAD IT
NOT ENTERED INTO THE AGREEMENT. HOWEVER, THE PORTFOLIO WILL ENTER INTO REVERSE
REPURCHASE AGREEMENTS ONLY WITH BANKS AND DEALERS WHICH THE ADVISOR BELIEVES
PRESENT MINIMAL CREDIT RISKS UNDER GUIDELINES ADOPTED BY THE FUND'S BOARD OF
DIRECTORS. IN ADDITION, THE PORTFOLIO BEARS THE RISK THAT THE MARKET VALUE OF
THE SECURITIES SOLD BY THE PORTFOLIO MAY DECLINE BELOW THE AGREED-UPON
REPURCHASE PRICE, IN WHICH CASE THE DEALER MAY REQUEST THE PORTFOLIO TO POST
ADDITIONAL COLLATERAL.
U.S. GOVERNMENT-BACKED OBLIGATIONS
SOCIAL BALANCED MAY, IN PURSUIT OF ITS INVESTMENT OBJECTIVE, INVEST IN
GINNIE MAES WHICH, ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, ARE
TYPICALLY INTERESTS IN POOLS OF MORTGAGE LOANS INSURED BY THE FEDERAL HOUSING
ADMINISTRATION OR GUARANTEED BY THE VETERANS ADMINISTRATION. A "POOL" OR GROUP
OF SUCH MORTGAGES IS ASSEMBLED AND, AFTER APPROVAL FROM GNMA, IS OFFERED TO
INVESTORS THROUGH VARIOUS SECURITIES DEALERS. GNMA IS A U.S. GOVERNMENT
CORPORATION WITHIN THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. GINNIE MAES
ARE BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES, WHICH MEANS THAT
THE U.S. GOVERNMENT GUARANTEES THAT INTEREST AND PRINCIPAL WILL BE PAID WHEN
DUE.
THE ADVISOR WILL ATTEMPT, THROUGH CAREFUL EVALUATION OF AVAILABLE GNMA
ISSUES AND PREVAILING MARKET CONDITIONS, TO INVEST IN GNMA CERTIFICATES WHICH
PROVIDE A HIGH INCOME RETURN BUT ARE NOT SUBJECT TO SUBSTANTIAL RISK OF LOSS OF
PRINCIPAL. ACCORDINGLY, THE ADVISOR MAY FOREGO THE OPPORTUNITY TO INVEST IN
CERTAIN ISSUES OF GNMA CERTIFICATES WHICH WOULD PROVIDE A HIGH CURRENT INCOME
YIELD IF THE ADVISOR DETERMINES THAT SUCH ISSUES WOULD BE SUBJECT TO A RISK OF
PREPAYMENT AND LOSS OF PRINCIPAL OVER THE LONG TERM THAT WOULD OUTWEIGH THE
SHORT-TERM INCREMENT IN YIELD. SOCIAL BALANCED IS NOT EXPECTED GENERALLY TO
INVEST MORE THAN A SMALL PORTION OF ITS ASSETS IN GNMA CERTIFICATES.
NON-INVESTMENT GRADE DEBT SECURITIES
SOCIAL BALANCED MAY INVEST IN LOWER QUALITY DEBT SECURITIES (GENERALLY
THOSE RATED BB OR LOWER BY S&P OR BA OR LOWER BY MOODY'S, KNOWN AS "JUNK
BONDS"). THE PORTFOLIO'S INVESTMENT POLICY PROVIDES THAT IT MAY NOT INVEST MORE
THAN 20% OF ITS ASSETS IN SECURITIES RATED BELOW B BY EITHER RATING SERVICE, OR
IN UNRATED SECURITIES DETERMINED BY THE ADVISOR TO BE COMPARABLE TO SECURITIES
RATED BELOW B BY EITHER RATING SERVICE. SOCIAL INTERNATIONAL EQUITY AND SOCIAL
MID CAP MAY EACH INVEST UP TO 5% OF ITS ASSETS IN LOWER QUALITY DEBT SECURITIES.
SOCIAL SMALL CAP GROWTH MAY INVEST UP TO 35% OF ITS ASSETS IN DEBT SECURITIES
WITHOUT REGARD TO INVESTMENT GRADE, BUT WILL NOT PURCHASE ANY DEBT SECURITIES
RATED BELOW C. NON-INVESTMENT GRADE DEBT SECURITIES ARE LOWER QUALITY DEBT
SECURITIES. THESE SECURITIES HAVE MODERATE TO POOR PROTECTION OF PRINCIPAL AND
INTEREST PAYMENTS AND HAVE SPECULATIVE CHARACTERISTICS. (SEE APPENDIX FOR A
DESCRIPTION OF THE RATINGS.) THESE SECURITIES INVOLVE GREATER RISK OF DEFAULT OR
PRICE DECLINES DUE TO CHANGES IN THE ISSUER'S CREDITWORTHINESS THAN
INVESTMENT-GRADE DEBT SECURITIES. BECAUSE THE MARKET FOR LOWER-RATED SECURITIES
MAY BE THINNER AND LESS ACTIVE THAN FOR HIGHER-RATED SECURITIES, THERE MAY BE
MARKET PRICE VOLATILITY FOR THESE SECURITIES AND LIMITED LIQUIDITY IN THE RESALE
MARKET. MARKET PRICES FOR THESE SECURITIES MAY DECLINE SIGNIFICANTLY IN PERIODS
OF GENERAL ECONOMIC DIFFICULTY OR RISING INTEREST RATES. UNRATED DEBT SECURITIES
MAY FALL INTO THE LOWER QUALITY CATEGORY.
THE QUALITY LIMITATION SET FORTH IN THE PORTFOLIOS' INVESTMENT POLICY IS
DETERMINED IMMEDIATELY AFTER A PORTFOLIO'S ACQUISITION OF A GIVEN SECURITY.
ACCORDINGLY, ANY LATER CHANGE IN RATINGS WILL NOT BE CONSIDERED WHEN DETERMINING
WHETHER AN INVESTMENT COMPLIES WITH THE PORTFOLIO'S INVESTMENT POLICY.
WHEN PURCHASING HIGH-YIELDING SECURITIES, RATED OR UNRATED, THE ADVISORS
PREPARE THEIR OWN CAREFUL CREDIT ANALYSIS TO ATTEMPT TO IDENTIFY THOSE ISSUERS
WHOSE FINANCIAL CONDITION IS ADEQUATE TO MEET FUTURE OBLIGATIONS OR IS EXPECTED
TO BE ADEQUATE IN THE FUTURE. THROUGH PORTFOLIO DIVERSIFICATION AND CREDIT
ANALYSIS, INVESTMENT RISK CAN BE REDUCED, ALTHOUGH THERE CAN BE NO ASSURANCE
THAT LOSSES WILL NOT OCCUR.
DERIVATIVES
EACH PORTFOLIO CAN USE VARIOUS TECHNIQUES TO INCREASE OR DECREASE ITS
EXPOSURE TO CHANGING SECURITY PRICES, INTEREST RATES, OR OTHER FACTORS THAT
AFFECT SECURITY VALUES. THESE TECHNIQUES MAY INVOLVE DERIVATIVE TRANSACTIONS
SUCH AS BUYING AND SELLING OPTIONS AND FUTURES CONTRACTS AND LEVERAGED NOTES,
ENTERING INTO SWAP AGREEMENTS, AND PURCHASING INDEXED SECURITIES. THE PORTFOLIOS
CAN USE THESE PRACTICES EITHER AS SUBSTITUTION OR AS PROTECTION AGAINST AN
ADVERSE MOVE IN THE PORTFOLIO TO ADJUST THE RISK AND RETURN CHARACTERISTICS OF
THE PORTFOLIO. IF THE ADVISOR AND/OR SUBADVISOR (AS APPLICABLE) JUDGES MARKET
CONDITIONS INCORRECTLY OR EMPLOYS A STRATEGY THAT DOES NOT CORRELATE WELL WITH A
PORTFOLIO'S INVESTMENTS, OR IF THE COUNTERPARTY TO THE TRANSACTION DOES NOT
PERFORM AS PROMISED, THESE TECHNIQUES COULD RESULT IN A LOSS. THESE TECHNIQUES
MAY INCREASE THE VOLATILITY OF A PORTFOLIO AND MAY INVOLVE A SMALL INVESTMENT OF
CASH RELATIVE TO THE MAGNITUDE OF THE RISK ASSUMED. DERIVATIVES ARE OFTEN
ILLIQUID.
OPTIONS AND FUTURES CONTRACTS
SOCIAL INTERNATIONAL EQUITY, SOCIAL SMALL CAP GROWTH, SOCIAL MID CAP GROWTH
AND SOCIAL BALANCED MAY, IN PURSUIT OF THEIR INVESTMENT OBJECTIVES, PURCHASE PUT
AND CALL OPTIONS AND ENGAGE IN THE WRITING OF COVERED CALL OPTIONS AND SECURED
PUT OPTIONS ON SECURITIES WHICH MEET THE PORTFOLIOS' SOCIAL CRITERIA, AND EMPLOY
A VARIETY OF OTHER INVESTMENT TECHNIQUES. SPECIFICALLY, THESE PORTFOLIOS MAY
ALSO ENGAGE IN THE PURCHASE AND SALE OF STOCK INDEX FUTURE CONTRACTS, FOREIGN
CURRENCY FUTURES CONTRACTS, INTEREST RATE FUTURES CONTRACTS, AND OPTIONS ON SUCH
FUTURES, AS DESCRIBED MORE FULLY BELOW.
THESE PORTFOLIOS WILL ENGAGE IN SUCH TRANSACTIONS ONLY TO HEDGE THE
EXISTING POSITIONS IN THE RESPECTIVE PORTFOLIOS. THEY WILL NOT ENGAGE IN SUCH
TRANSACTIONS FOR THE PURPOSES OF SPECULATION OR LEVERAGE. SUCH INVESTMENT
POLICIES AND TECHNIQUES MAY INVOLVE A GREATER DEGREE OF RISK THAN THOSE INHERENT
IN MORE CONSERVATIVE INVESTMENT APPROACHES.
THESE PORTFOLIOS WILL NOT ENGAGE IN SUCH OPTIONS OR FUTURES TRANSACTIONS
UNLESS THEY RECEIVE APPROPRIATE REGULATORY APPROVALS PERMITTING THEM TO ENGAGE
IN SUCH TRANSACTIONS. SOCIAL INTERNATIONAL EQUITY, SOCIAL SMALL CAP GROWTH AND
SOCIAL MID CAP GROWTH MAY NOT WRITE OPTIONS ON MORE THAN 50% OF THEIR TOTAL
ASSETS. THESE PORTFOLIOS MAY WRITE "COVERED OPTIONS" ON SECURITIES IN STANDARD
CONTRACTS TRADED ON NATIONAL SECURITIES EXCHANGES. THESE PORTFOLIOS WILL WRITE
SUCH OPTIONS IN ORDER TO RECEIVE THE PREMIUMS FROM OPTIONS THAT EXPIRE AND TO
SEEK NET GAINS FROM CLOSING PURCHASE TRANSACTIONS WITH RESPECT TO SUCH OPTIONS.
PUT AND CALL OPTIONS. THESE PORTFOLIOS MAY PURCHASE PUT AND CALL OPTIONS,
IN STANDARD CONTRACTS TRADED ON NATIONAL SECURITIES EXCHANGES, ON SECURITIES OF
ISSUERS WHICH MEET THE PORTFOLIOS' SOCIAL CRITERIA. THESE PORTFOLIOS WILL
PURCHASE SUCH OPTIONS ONLY TO HEDGE AGAINST CHANGES IN THE VALUE OF SECURITIES
THE PORTFOLIOS HOLD AND NOT FOR THE PURPOSES OF SPECULATION OR LEVERAGE. IN
BUYING A PUT, A PORTFOLIO HAS THE RIGHT TO SELL THE SECURITY AT THE EXERCISE
PRICE, THUS LIMITING ITS RISK OF LOSS THROUGH A DECLINE IN THE MARKET VALUE OF
THE SECURITY UNTIL THE PUT EXPIRES. THE AMOUNT OF ANY APPRECIATION IN THE VALUE
OF THE UNDERLYING SECURITY WILL BE PARTIALLY OFFSET BY THE AMOUNT OF THE PREMIUM
PAID FOR THE PUT OPTION AND ANY RELATED TRANSACTION COSTS. PRIOR TO ITS
EXPIRATION, A PUT OPTION MAY BE SOLD IN A CLOSING SALE TRANSACTION AND ANY
PROFIT OR LOSS FROM THE SALE WILL DEPEND ON WHETHER THE AMOUNT RECEIVED IS MORE
OR LESS THAN THE PREMIUM PAID FOR THE PUT OPTION PLUS THE RELATED TRANSACTION
COSTS.
THESE PORTFOLIOS MAY PURCHASE CALL OPTIONS ON SECURITIES THAT THEY MAY
INTEND TO PURCHASE AND THAT MEET THE PORTFOLIOS' SOCIAL CRITERIA. SUCH
TRANSACTIONS MAY BE ENTERED INTO IN ORDER TO LIMIT THE RISK OF A SUBSTANTIAL
INCREASE IN THE MARKET PRICE OF THE SECURITY WHICH THE PORTFOLIO INTENDS TO
PURCHASE. PRIOR TO ITS EXPIRATION, A CALL OPTION MAY BE SOLD IN A CLOSING SALE
TRANSACTION. ANY PROFIT OR LOSS FROM SUCH A SALE WILL DEPEND ON WHETHER THE
AMOUNT RECEIVED IS MORE OR LESS THAN THE PREMIUM PAID FOR THE CALL OPTION PLUS
THE RELATED TRANSACTION COSTS.
COVERED OPTIONS. THESE PORTFOLIOS MAY WRITE ONLY COVERED OPTIONS ON EQUITY
AND DEBT SECURITIES IN STANDARD CONTRACTS TRADED ON NATIONAL SECURITIES
EXCHANGES. FOR CALL OPTIONS, THIS MEANS THAT SO LONG AS A PORTFOLIO IS OBLIGATED
AS THE WRITER OF A CALL OPTION, THAT PORTFOLIO WILL OWN THE UNDERLYING SECURITY
SUBJECT TO THE OPTION AND, IN THE CASE OF PUT OPTIONS, THAT PORTFOLIO WILL,
THROUGH ITS CUSTODIAN, DEPOSIT AND MAINTAIN EITHER CASH OR SECURITIES WITH A
MARKET VALUE EQUAL TO OR GREATER THAN THE EXERCISE PRICE OF THE OPTION.
WHEN A PORTFOLIO WRITES A COVERED CALL OPTION, THE PORTFOLIO GIVES THE
PURCHASER THE RIGHT TO PURCHASE THE SECURITY AT THE CALL OPTION PRICE AT ANY
TIME DURING THE LIFE OF THE OPTION. AS THE WRITER OF THE OPTION, THE PORTFOLIO
RECEIVES A PREMIUM, LESS A COMMISSION, AND IN EXCHANGE FOREGOES THE OPPORTUNITY
TO PROFIT FROM ANY INCREASE IN THE MARKET VALUE OF THE SECURITY EXCEEDING THE
CALL OPTION PRICE. THE PREMIUM SERVES TO MITIGATE THE EFFECT OF ANY DEPRECIATION
IN THE MARKET VALUE OF THE SECURITY. WRITING COVERED CALL OPTIONS CAN INCREASE
THE INCOME OF THE PORTFOLIO AND THUS REDUCE DECLINES IN THE NET ASSET VALUE PER
SHARE OF THE PORTFOLIO IF SECURITIES COVERED BY SUCH OPTIONS DECLINE IN VALUE.
EXERCISE OF A CALL OPTION BY THE PURCHASER, HOWEVER, WILL CAUSE THE PORTFOLIO TO
FOREGO FUTURE APPRECIATION OF THE SECURITIES COVERED BY THE OPTION.
WHEN A PORTFOLIO WRITES A SECURED PUT OPTION, IT WILL GAIN A PROFIT IN THE
AMOUNT OF THE PREMIUM, LESS A COMMISSION, SO LONG AS THE PRICE OF THE UNDERLYING
SECURITY REMAINS ABOVE THE EXERCISE PRICE. HOWEVER, THE PORTFOLIO REMAINS
OBLIGATED TO PURCHASE THE UNDERLYING SECURITY FROM THE BUYER OF THE PUT OPTION
(USUALLY IN THE EVENT THE PRICE OF THE SECURITY FUNDS BELOW THE EXERCISE PRICE)
AT ANY TIME DURING THE OPTION PERIOD. IF THE PRICE OF THE UNDERLYING SECURITY
FALLS BELOW THE EXERCISE PRICE, THE PORTFOLIO MAY REALIZE A LOSS IN THE AMOUNT
OF THE DIFFERENCE BETWEEN THE EXERCISE PRICE AND THE SALE PRICE OF THE SECURITY,
LESS THE PREMIUM RECEIVED.
THESE PORTFOLIOS MAY PURCHASE SECURITIES THAT MAY BE COVERED BY CALL
OPTIONS SOLELY ON THE BASIS OF CONSIDERATIONS CONSISTENT WITH THE INVESTMENT
OBJECTIVES AND POLICIES OF THE PORTFOLIOS. THE PORTFOLIO TURNOVER RATE MAY
INCREASE THROUGH THE EXERCISE OF A CALL OPTION; THIS WILL GENERALLY OCCUR IF THE
MARKET VALUE OF A "COVERED" SECURITY INCREASES AND THE PORTFOLIO HAS NOT ENTERED
INTO A CLOSING PURCHASE TRANSACTION.
RISKS RELATED TO OPTIONS TRANSACTIONS. THE PORTFOLIOS CAN CLOSE OUT THEIR
RESPECTIVE POSITIONS IN EXCHANGE-TRADED OPTIONS ONLY ON AN EXCHANGE WHICH
PROVIDES A SECONDARY MARKET IN SUCH OPTIONS. ALTHOUGH THESE PORTFOLIOS INTEND TO
ACQUIRE AND WRITE ONLY SUCH EXCHANGE-TRADED OPTIONS FOR WHICH AN ACTIVE
SECONDARY MARKET APPEARS TO EXIST, THERE CAN BE NO ASSURANCE THAT SUCH A MARKET
WILL EXIST FOR ANY PARTICULAR OPTION CONTRACT AT ANY PARTICULAR TIME. THIS MIGHT
PREVENT THE PORTFOLIOS FROM CLOSING AN OPTIONS POSITION, WHICH COULD IMPAIR THE
PORTFOLIOS' ABILITY TO HEDGE EFFECTIVELY. THE INABILITY TO CLOSE OUT A CALL
POSITION MAY HAVE AN ADVERSE EFFECT ON LIQUIDITY BECAUSE THE PORTFOLIO MAY BE
REQUIRED TO HOLD THE SECURITIES UNDERLYING THE OPTION UNTIL THE OPTION EXPIRES
OR IS EXERCISED.
FUTURES TRANSACTIONS. THESE PORTFOLIOS MAY PURCHASE AND SELL FUTURES
CONTRACTS ("FUTURES CONTRACTS") BUT ONLY WHEN, IN THE JUDGMENT OF THE ADVISOR,
SUCH A POSITION ACTS AS A HEDGE AGAINST MARKET CHANGES WHICH WOULD ADVERSELY
AFFECT THE SECURITIES HELD BY THE PORTFOLIOS. THESE FUTURES CONTRACTS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MARKET INDEX FUTURES CONTRACTS AND FUTURES
CONTRACTS BASED ON US GOVERNMENT OBLIGATIONS.
A FUTURES CONTRACT IS AN AGREEMENT BETWEEN TWO PARTIES TO BUY AND SELL A
SECURITY ON A FUTURE DATE WHICH HAS THE EFFECT OF ESTABLISHING THE CURRENT PRICE
FOR THE SECURITY. ALTHOUGH FUTURES CONTRACTS BY THEIR TERMS REQUIRE ACTUAL
DELIVERY AND ACCEPTANCE OF SECURITIES, IN MOST CASES THE CONTRACTS ARE CLOSED
OUT BEFORE THE SETTLEMENT DATE WITHOUT THE MAKING OR TAKING OF DELIVERY OF
SECURITIES. UPON BUYING OR SELLING A FUTURES CONTRACT, THE PORTFOLIO DEPOSITS
INITIAL MARGIN WITH ITS CUSTODIAN, AND THEREAFTER DAILY PAYMENTS OF MAINTENANCE
MARGIN ARE MADE TO AND FROM THE EXECUTING BROKER. PAYMENTS OF MAINTENANCE MARGIN
REFLECT CHANGES IN THE VALUE OF THE FUTURES CONTRACT, WITH THE PORTFOLIO BEING
OBLIGATED TO MAKE SUCH PAYMENTS IF ITS FUTURES POSITION BECOMES LESS VALUABLE
AND ENTITLED TO RECEIVE SUCH PAYMENTS IF ITS POSITIONS BECOME MORE VALUABLE.
THESE PORTFOLIOS MAY ONLY INVEST IN FUTURES CONTRACTS TO HEDGE THEIR
RESPECTIVE EXISTING INVESTMENT POSITIONS AND NOT FOR INCOME ENHANCEMENT,
SPECULATION OR LEVERAGE PURPOSES. ALTHOUGH SOME OF THE SECURITIES UNDERLYING THE
FUTURES CONTRACT MAY NOT NECESSARILY MEET THE PORTFOLIOS' SOCIAL CRITERIA, ANY
SUCH HEDGE POSITION TAKEN BY THESE PORTFOLIOS WILL NOT CONSTITUTE A DIRECT
OWNERSHIP INTEREST IN THE UNDERLYING SECURITIES.
FUTURES CONTRACTS HAVE BEEN DESIGNED BY BOARDS OF TRADE WHICH HAVE BEEN
DESIGNATED "CONTRACTS MARKETS" BY THE COMMODITY FUTURES TRADING COMMISSION
("CFTC"). AS SERIES OF A REGISTERED INVESTMENT COMPANY, THE PORTFOLIOS ARE
ELIGIBLE FOR EXCLUSION FROM THE CFTC'S DEFINITION OF "COMMODITY POOL OPERATOR,"
MEANING THAT THE PORTFOLIOS MAY INVEST IN FUTURES CONTRACTS UNDER SPECIFIED
CONDITIONS WITHOUT REGISTERING WITH THE CFTC. AMONG THESE CONDITIONS ARE
REQUIREMENTS THAT EACH PORTFOLIO INVEST IN FUTURES ONLY FOR HEDGING PURPOSES.
FUTURES CONTRACTS TRADE ON CONTRACTS MARKETS IN A MANNER THAT IS SIMILAR TO THE
WAY A STOCK TRADES ON A STOCK EXCHANGE AND THE BOARDS OF TRADE, THROUGH THEIR
CLEARING CORPORATIONS, GUARANTEE PERFORMANCE OF THE CONTRACTS.
OPTIONS ON FUTURES CONTRACTS. THESE PORTFOLIOS MAY PURCHASE AND WRITE PUT
OR CALL OPTIONS AND SELL CALL OPTIONS ON FUTURES CONTRACTS IN WHICH A PORTFOLIO
COULD OTHERWISE INVEST AND WHICH ARE TRADED ON A US EXCHANGE OR BOARD OF TRADE.
THE PORTFOLIOS MAY ALSO ENTER INTO CLOSING TRANSACTIONS WITH RESPECT TO SUCH
OPTIONS TO TERMINATE AN EXISTING POSITION; THAT IS, TO SELL A PUT OPTION ALREADY
OWNED AND TO BUY A CALL OPTION TO CLOSE A POSITION WHERE THE PORTFOLIO HAS
ALREADY SOLD A CORRESPONDING CALL OPTION.
THE PORTFOLIOS MAY ONLY INVEST IN OPTIONS ON FUTURES CONTRACTS TO HEDGE
THEIR RESPECTIVE EXISTING INVESTMENT POSITIONS AND NOT FOR INCOME ENHANCEMENT,
SPECULATION OR LEVERAGE PURPOSES. ALTHOUGH SOME OF THE SECURITIES UNDERLYING THE
FUTURES CONTRACT UNDERLYING THE OPTION MAY NOT NECESSARILY MEET THE PORTFOLIOS'
SOCIAL CRITERIA, ANY SUCH HEDGE POSITION TAKEN BY THESE PORTFOLIOS WILL NOT
CONSTITUTE A DIRECT OWNERSHIP INTEREST IN THE UNDERLYING SECURITIES.
AN OPTION ON A FUTURES CONTRACT GIVES THE PURCHASER THE RIGHT, IN RETURN
FOR THE PREMIUM PAID, TO ASSUME A POSITION IN A FUTURES CONTRACT - A LONG
POSITION IF THE OPTION IS A CALL AND A SHORT POSITION IF THE OPTION IS A PUT -
AT A SPECIFIED EXERCISE PRICE AT ANY TIME DURING THE PERIOD OF THE OPTION. THE
PORTFOLIOS WILL PAY A PREMIUM FOR SUCH OPTIONS PURCHASED OR SOLD. IN CONNECTION
WITH SUCH OPTIONS BOUGHT OR SOLD, THE PORTFOLIOS WILL MAKE INITIAL MARGIN
DEPOSITS AND MAKE OR RECEIVE MAINTENANCE MARGIN PAYMENTS WHICH REFLECT CHANGES
IN THE MARKET VALUE OF SUCH OPTIONS. THIS ARRANGEMENT IS SIMILAR TO THE MARGIN
ARRANGEMENTS APPLICABLE TO FUTURES CONTRACTS DESCRIBED ABOVE.
PUT OPTIONS ON FUTURES CONTRACTS. THE PURCHASE OF PUT OPTIONS ON FUTURES
CONTRACTS IS ANALOGOUS TO THE SALE OF FUTURES CONTRACTS AND IS USED TO PROTECT
THE PORTFOLIO AGAINST THE RISK OF DECLINING PRICES. THESE PORTFOLIOS MAY
PURCHASE PUT OPTIONS AND SELL PUT OPTIONS ON FUTURES CONTRACTS THAT ARE ALREADY
OWNED BY THAT PORTFOLIO. THE PORTFOLIOS WILL ONLY ENGAGE IN THE PURCHASE OF PUT
OPTIONS AND THE SALE OF COVERED PUT OPTIONS ON MARKET INDEX FUTURES FOR HEDGING
PURPOSES.
CALL OPTIONS ON FUTURES CONTRACTS. THE SALE OF CALL OPTIONS ON FUTURES
CONTRACTS IS ANALOGOUS TO THE SALE OF FUTURES CONTRACTS AND IS USED TO PROTECT
THE PORTFOLIO AGAINST THE RISK OF DECLINING PRICES. THE PURCHASE OF CALL OPTIONS
ON FUTURES CONTRACTS IS ANALOGOUS TO THE PURCHASE OF A FUTURES CONTRACT. THESE
PORTFOLIOS MAY ONLY BUY CALL OPTIONS TO CLOSE AN EXISTING POSITION WHERE THE
PORTFOLIO HAS ALREADY SOLD A CORRESPONDING CALL OPTION, OR FOR A CASH HEDGE. THE
PORTFOLIOS WILL ONLY ENGAGE IN THE SALE OF CALL OPTIONS AND THE PURCHASE OF CALL
OPTIONS TO COVER FOR HEDGING PURPOSES.
WRITING CALL OPTIONS ON FUTURES CONTRACTS. THE WRITING OF CALL OPTIONS ON
FUTURES CONTRACTS CONSTITUTES A PARTIAL HEDGE AGAINST DECLINING PRICES OF THE
SECURITIES DELIVERABLE UPON EXERCISE OF THE FUTURES CONTRACT. IF THE FUTURES
CONTRACT PRICE AT EXPIRATION IS BELOW THE EXERCISE PRICE, THE PORTFOLIO WILL
RETAIN THE FULL AMOUNT OF THE OPTION PREMIUM WHICH PROVIDES A PARTIAL HEDGE
AGAINST ANY DECLINE THAT MAY HAVE OCCURRED IN THE PORTFOLIO'S SECURITIES
HOLDINGS.
RISKS OF OPTIONS AND FUTURES CONTRACTS. IF ONE OF THESE PORTFOLIOS HAS SOLD
FUTURES OR TAKES OPTIONS POSITIONS TO HEDGE ITS PORTFOLIO AGAINST DECLINE IN THE
MARKET AND THE MARKET LATER ADVANCES, THE PORTFOLIO MAY SUFFER A LOSS ON THE
FUTURES CONTRACTS OR OPTIONS WHICH IT WOULD NOT HAVE EXPERIENCED IF IT HAD NOT
HEDGED. CORRELATION IS ALSO IMPERFECT BETWEEN MOVEMENTS IN THE PRICES OF FUTURES
CONTRACTS AND MOVEMENTS IN PRICES OF THE SECURITIES WHICH ARE THE SUBJECT OF THE
HEDGE. THUS THE PRICE OF THE FUTURES CONTRACT OR OPTION MAY MOVE MORE THAN OR
LESS THAN THE PRICE OF THE SECURITIES BEING HEDGED. WHERE A PORTFOLIO HAS SOLD
FUTURES OR TAKEN OPTIONS POSITIONS TO HEDGE AGAINST DECLINE IN THE MARKET, THE
MARKET MAY ADVANCE AND THE VALUE OF THE SECURITIES HELD IN THE PORTFOLIO MAY
DECLINE. IF THIS WERE TO OCCUR, THE PORTFOLIO MIGHT LOSE MONEY ON THE FUTURES
CONTRACTS OR OPTIONS AND ALSO EXPERIENCE A DECLINE IN THE VALUE OF ITS PORTFOLIO
SECURITIES. HOWEVER, ALTHOUGH THIS MIGHT OCCUR FOR A BRIEF PERIOD OR TO A SLIGHT
DEGREE, THE VALUE OF A DIVERSIFIED PORTFOLIO WILL TEND TO MOVE IN THE DIRECTION
OF THE MARKET GENERALLY.
THE PORTFOLIOS CAN CLOSE OUT FUTURES POSITIONS ONLY ON AN EXCHANGE OR BOARD
OF TRADE WHICH PROVIDES A SECONDARY MARKET IN SUCH FUTURES. ALTHOUGH THE
PORTFOLIOS INTEND TO PURCHASE OR SELL ONLY SUCH FUTURES FOR WHICH AN ACTIVE
SECONDARY MARKET APPEARS TO EXIST, THERE CAN BE NO ASSURANCE THAT SUCH A MARKET
WILL EXIST FOR ANY PARTICULAR FUTURES CONTRACT AT ANY PARTICULAR TIME. THIS
MIGHT PREVENT THE PORTFOLIOS FROM CLOSING A FUTURES POSITION, WHICH COULD
REQUIRE A PORTFOLIO TO MAKE DAILY CASH PAYMENTS WITH RESPECT TO ITS POSITION IN
THE EVENT OF ADVERSE PRICE MOVEMENTS.
OPTIONS ON FUTURES TRANSACTIONS BEAR SEVERAL RISKS APART FROM THOSE
INHERENT IN OPTIONS TRANSACTIONS GENERALLY. THE PORTFOLIOS' ABILITY TO CLOSE OUT
THEIR OPTIONS POSITIONS IN FUTURES CONTRACTS WILL DEPEND UPON WHETHER AN ACTIVE
SECONDARY MARKET FOR SUCH OPTIONS DEVELOPS AND IS IN EXISTENCE AT THE TIME THE
PORTFOLIOS SEEK TO CLOSE THEIR POSITIONS. THERE CAN BE NO ASSURANCE THAT SUCH A
MARKET WILL DEVELOP OR EXIST. THEREFORE, THE PORTFOLIOS MIGHT BE REQUIRED TO
EXERCISE THE OPTIONS TO REALIZE ANY PROFIT.
FOREIGN CURRENCY TRANSACTIONS (NOT APPLICABLE TO SOCIAL MONEY MARKET)
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACT INVOLVES AN OBLIGATION TO PURCHASE OR SELL A SPECIFIC CURRENCY
AT A FUTURE DATE, WHICH MAY BE ANY FIXED NUMBER OF DAYS ("TERM") FROM THE DATE
OF THE CONTRACT AGREED UPON BY THE PARTIES, AT A PRICE SET AT THE TIME OF THE
CONTRACT. THESE CONTRACTS ARE TRADED DIRECTLY BETWEEN CURRENCY TRADERS (USUALLY
LARGE COMMERCIAL BANKS) AND THEIR CUSTOMERS.
THE PORTFOLIOS WILL NOT ENTER INTO SUCH FORWARD CONTRACTS OR MAINTAIN A NET
EXPOSURE IN SUCH CONTRACTS WHERE IT WOULD BE OBLIGATED TO DELIVER AN AMOUNT OF
FOREIGN CURRENCY IN EXCESS OF THE VALUE OF ITS PORTFOLIO SECURITIES AND OTHER
ASSETS DENOMINATED IN THAT CURRENCY. THE ADVISORS AND SUBADVISORS BELIEVES THAT
IT IS IMPORTANT TO HAVE THE FLEXIBILITY TO ENTER INTO SUCH FORWARD CONTRACT WHEN
IT DETERMINES THAT TO DO SO IS IN A PORTFOLIO'S BEST INTERESTS.
FOREIGN CURRENCY OPTIONS (NOT APPLICABLE TO SOCIAL MONEY MARKET OR SOCIAL
BALANCED). A FOREIGN CURRENCY OPTION PROVIDES THE OPTION BUYER WITH THE RIGHT TO
BUY OR SELL A STATED AMOUNT OF FOREIGN CURRENCY AT THE EXERCISE PRICE ON OR
BEFORE A SPECIFIED DATE. A CALL OPTION GIVES ITS OWNER THE RIGHT, BUT NOT THE
OBLIGATION, TO BUY THE CURRENCY, WHILE A PUT OPTION GIVES ITS OWNER THE RIGHT,
BUT NOT THE OBLIGATION, TO SELL THE CURRENCY. THE OPTION SELLER BUYER MAY CLOSE
ITS POSITION ANY TIME PRIOR TO EXPIRATION OF THE OPTION PERIOD. A CALL RISES IN
VALUE IF THE UNDERLYING CURRENCY APPRECIATES. CONVERSELY, A PUT RISES IN VALUE
IF THE UNDERLYING CURRENCY DEPRECIATES. PURCHASING A FOREIGN CURRENCY OPTION CAN
PROTECT A PORTFOLIO AGAINST ADVERSE MOVEMENT IN THE VALUE OF A FOREIGN CURRENCY.
FOREIGN CURRENCY FUTURES TRANSACTIONS. THE PORTFOLIO MAY USE FOREIGN
CURRENCY FUTURES CONTRACTS AND OPTIONS ON SUCH FUTURES CONTRACTS. THROUGH THE
PURCHASE OR SALE OF SUCH CONTRACTS, IT MAY BE ABLE TO ACHIEVE MANY OF THE SAME
OBJECTIVES ATTAINABLE THROUGH THE USE OF FOREIGN CURRENCY FORWARD CONTRACTS, BUT
MORE EFFECTIVELY AND POSSIBLY AT A LOWER COST.
UNLIKE FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS, FOREIGN CURRENCY
FUTURES CONTRACTS AND OPTIONS ON FOREIGN CURRENCY FUTURES CONTRACTS ARE
STANDARDIZED AS TO AMOUNT AND DELIVERY PERIOD AND ARE TRADED ON BOARDS OF TRADE
AND COMMODITIES EXCHANGES. IT IS ANTICIPATED THAT SUCH CONTRACTS MAY PROVIDE
GREATER LIQUIDITY AND LOWER COST THAN FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS.
LENDING PORTFOLIO SECURITIES
THE FUND MAY LEND ITS PORTFOLIO SECURITIES TO MEMBER FIRMS OF THE NEW YORK
STOCK EXCHANGE AND COMMERCIAL BANKS WITH ASSETS OF ONE BILLION DOLLARS OR MORE.
ANY SUCH LOANS MUST BE SECURED CONTINUOUSLY IN THE FORM OF CASH OR CASH
EQUIVALENTS SUCH AS US TREASURY BILLS. THE AMOUNT OF THE COLLATERAL MUST ON A
CURRENT BASIS EQUAL OR EXCEED THE MARKET VALUE OF THE LOANED SECURITIES, AND THE
FUND MUST BE ABLE TO TERMINATE SUCH LOANS UPON NOTICE AT ANY TIME. THE FUND WILL
EXERCISE ITS RIGHT TO TERMINATE A SECURITIES LOAN IN ORDER TO PRESERVE ITS RIGHT
TO VOTE UPON MATTERS OF IMPORTANCE AFFECTING HOLDERS OF THE SECURITIES.
THE ADVANTAGE OF SUCH LOANS IS THAT THE FUND CONTINUES TO RECEIVE THE
EQUIVALENT OF THE INTEREST EARNED OR DIVIDENDS PAID BY THE ISSUERS ON THE LOANED
SECURITIES WHILE AT THE SAME TIME EARNING INTEREST ON THE CASH OR EQUIVALENT
COLLATERAL WHICH MAY BE INVESTED IN ACCORDANCE WITH THE FUND'S INVESTMENT
OBJECTIVE, POLICIES AND RESTRICTIONS.
SECURITIES LOANS ARE USUALLY MADE TO BROKER-DEALERS AND OTHER FINANCIAL
INSTITUTIONS TO FACILITATE THEIR DELIVERY OF SUCH SECURITIES. AS WITH ANY
EXTENSION OF CREDIT, THERE MAY BE RISKS OF DELAY IN RECOVERY AND POSSIBLY LOSS
OF RIGHTS IN THE LOANED SECURITIES SHOULD THE BORROWER OF THE LOANED SECURITIES
FAIL FINANCIALLY. HOWEVER, THE FUND WILL MAKE LOANS OF ITS PORTFOLIO SECURITIES
ONLY TO THOSE FIRMS THE ADVISOR DEEMS CREDITWORTHY AND ONLY ON TERMS THE ADVISOR
BELIEVES SHOULD COMPENSATE FOR SUCH RISK. ON TERMINATION OF THE LOAN, THE
BORROWER IS OBLIGATED TO RETURN THE SECURITIES TO THE FUND. THE FUND WILL
RECOGNIZE ANY GAIN OR LOSS IN THE MARKET VALUE OF THE SECURITIES DURING THE LOAN
PERIOD. THE FUND MAY PAY REASONABLE CUSTODIAL FEES IN CONNECTION WITH THE LOAN.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
FROM TIME TO TIME, IN THE ORDINARY COURSE OF BUSINESS, EACH PORTFOLIO MAY
PURCHASE SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS -- THAT IS,
DELIVERY AND PAYMENT CAN TAKE PLACE A MONTH OR MORE AFTER THE DATE OF THE
TRANSACTIONS. THE SECURITIES PURCHASED IN THIS MANNER ARE SUBJECT TO MARKET
FLUCTUATION AND NO INTEREST ACCRUES TO THE PURCHASER DURING THIS PERIOD. AT THE
TIME A PORTFOLIO MAKES A COMMITMENT TO PURCHASE SECURITIES ON A WHEN-ISSUED OR
DELAYED DELIVERY BASIS, THE PRICE IS FIXED AND THE PORTFOLIO WILL RECORD THE
TRANSACTION AND THEREAFTER REFLECT THE VALUE, EACH DAY, OF THE SECURITY IN
DETERMINING THE NET ASSET VALUE OF THE PORTFOLIO. AT THE TIME OF DELIVERY OF THE
SECURITIES, THE VALUE MAY BE MORE OR LESS THAN THE PURCHASE PRICE.
THE PORTFOLIO WILL ENTER COMMITMENTS FOR WHEN-ISSUED OR DELAYED DELIVERY
SECURITIES ONLY WHEN IT INTENDS TO ACQUIRE THE SECURITIES. ACCORDINGLY, WHEN A
PORTFOLIO PURCHASES A WHEN-ISSUED SECURITY, IT WILL MAINTAIN AN AMOUNT OF CASH,
CASH EQUIVALENTS (FOR EXAMPLE, COMMERCIAL PAPER AND DAILY TENDER ADJUSTABLE
NOTES) OR SHORT-TERM HIGH-GRADE FIXED INCOME SECURITIES IN A SEGREGATED ACCOUNT
WITH THE PORTFOLIO'S CUSTODIAN, SO THAT THE AMOUNT SO SEGREGATED PLUS THE AMOUNT
OF INITIAL AND VARIATION MARGIN HELD IN THE ACCOUNT OF ITS BROKER EQUALS THE
MARKET VALUE OF THE WHEN-ISSUED PURCHASE, THEREBY ENSURING THE TRANSACTION IS
UNLEVERAGED.
INVESTMENT RESTRICTIONS
-----------------------
FUNDAMENTAL INVESTMENT RESTRICTIONS
THE PORTFOLIOS HAVE ADOPTED THE FOLLOWING FUNDAMENTAL INVESTMENT
RESTRICTIONS. THESE RESTRICTIONS CANNOT BE CHANGED WITHOUT THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF EACH PORTFOLIO:
(1) SOCIAL INTERNATIONAL EQUITY, SOCIAL SMALL CAP GROWTH AND SOCIAL MONEY MARKET
MAY NOT MAKE ANY INVESTMENT INCONSISTENT WITH THEIR CLASSIFICATION AS A
DIVERSIFIED INVESTMENT COMPANY UNDER THE 1940 ACT.
(2) EACH PORTFOLIO MAY NOT CONCENTRATE ITS INVESTMENTS IN THE SECURITIES OF
ISSUERS PRIMARILY ENGAGED IN ANY PARTICULAR INDUSTRY (OTHER THAN SECURITIES
ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT OR ITS AGENCIES OR INSTRUMENTALITIES
AND REPURCHASE AGREEMENTS SECURED THEREBY, OR, FOR SOCIAL MONEY MARKET, WITH
RESPECT TO INVESTMENTS IN MONEY MARKET INSTRUMENTS).
(3) EACH PORTFOLIO MAY NOT ISSUE SENIOR SECURITIES OR BORROW MONEY, EXCEPT FROM
BANKS FOR TEMPORARY OR EMERGENCY PURPOSES AND THEN ONLY IN AN AMOUNT UP TO 33
1/3% OF THE VALUE OF ITS TOTAL ASSETS OR AS PERMITTED BY LAW AND EXCEPT BY
ENGAGING IN REVERSE REPURCHASE AGREEMENTS, WHERE ALLOWED. IN ORDER TO SECURE ANY
PERMITTED BORROWINGS AND REVERSE REPURCHASE AGREEMENTS UNDER THIS SECTION, A
PORTFOLIO MAY PLEDGE, MORTGAGE OR HYPOTHECATE ITS ASSETS.
(4) EACH PORTFOLIO MAY NOT UNDERWRITE THE SECURITIES OF OTHER ISSUERS, EXCEPT AS
ALLOWED BY LAW OR TO THE EXTENT THAT THE PURCHASE OF OBLIGATIONS IN ACCORDANCE
WITH A PORTFOLIO'S INVESTMENT OBJECTIVE AND POLICIES, EITHER DIRECTLY FROM THE
ISSUER, OR FROM AN UNDERWRITER FOR AN ISSUER, MAY BE DEEMED AN UNDERWRITING.
(5) EACH PORTFOLIO MAY NOT INVEST DIRECTLY IN COMMODITIES OR REAL ESTATE,
ALTHOUGH IT MAY INVEST IN SECURITIES WHICH ARE SECURED BY REAL ESTATE OR REAL
ESTATE MORTGAGES AND SECURITIES OF ISSUERS WHICH INVEST OR DEAL IN COMMODITIES,
COMMODITY FUTURES, REAL ESTATE OR REAL ESTATE MORTGAGES AND PROVIDED THAT THE
SOCIAL MID CAP, INTERNATIONAL EQUITY, AND SMALL CAP GROWTH PORTFOLIOS MAY
PURCHASE OR SELL STOCK INDEX FUTURES, FOREIGN CURRENCY FUTURES, INTEREST RATE
FUTURES AND OPTIONS THEREON, EXCEPT THAT SOCIAL SMALL CAP GROWTH MAY INVEST IN
REAL ESTATE INVESTMENT TRUSTS.
(6) EACH PORTFOLIO MAY NOT MAKE LOANS, OTHER THAN THROUGH THE PURCHASE OF MONEY
MARKET INSTRUMENTS AND REPURCHASE AGREEMENTS OR BY THE PURCHASE OF BONDS,
DEBENTURES OR OTHER DEBT SECURITIES, OR AS PERMITTED BY LAW. THE PURCHASE OF ALL
OR A PORTION OF AN ISSUE OF PUBLICLY OR PRIVATELY DISTRIBUTED DEBT OBLIGATIONS
IN ACCORDANCE WITH A PORTFOLIO'S INVESTMENT OBJECTIVE, POLICIES AND
RESTRICTIONS, SHALL NOT CONSTITUTE THE MAKING OF A LOAN.
NONFUNDAMENTAL INVESTMENT RESTRICTIONS
THE BOARD OF DIRECTORS HAS ADOPTED THE FOLLOWING NONFUNDAMENTAL INVESTMENT
RESTRICTIONS. A NONFUNDAMENTAL INVESTMENT RESTRICTION CAN BE CHANGED BY THE
BOARD AT ANY TIME WITHOUT A SHAREHOLDER VOTE.
(1) EACH PORTFOLIO DOES NOT INTEND TO MAKE ANY PURCHASES OF SECURITIES IF
BORROWING EXCEEDS 5% OF A PORTFOLIO'S TOTAL ASSETS.
(2) EACH PORTFOLIO MAY NOT ACQUIRE PRIVATE PLACEMENT INVESTMENTS UNTIL THE VALUE
OF THE PORTFOLIO'S ASSETS EXCEEDS $20 MILLION.
(3) SOCIAL INTERNATIONAL EQUITY, SOCIAL SMALL CAP GROWTH AND SOCIAL MID CAP
GROWTH MAY NOT WRITE OPTIONS ON MORE THAN 50% OF THEIR TOTAL ASSETS.
(4) SOCIAL INTERNATIONAL EQUITY, SOCIAL SMALL CAP GROWTH, SOCIAL MID CAP GROWTH
AND SOCIAL BALANCED MAY NOT PURCHASE ILLIQUID SECURITIES IF MORE THAN 15% OF THE
VALUE OF NET ASSETS WOULD BE INVESTED IN SUCH SECURITIES.
(5) SOCIAL MONEY MARKET MAY NOT PURCHASE ILLIQUID SECURITIES IF MORE THAN 10% OF
THE VALUE OF NET ASSETS WOULD BE INVESTED IN SUCH SECURITIES.
(6) SOCIAL INTERNATIONAL EQUITY, SOCIAL MID CAP GROWTH AND SOCIAL BALANCED MAY
NOT MAKE SHORT SALES OF SECURITIES OR PURCHASE ANY SECURITIES ON MARGIN EXCEPT
THAT EACH PORTFOLIO MAY OBTAIN SUCH SHORT-TERM CREDITS AS MAY BE NECESSARY FOR
THE CLEARANCE OF PURCHASES AND SALES OF SECURITIES. THE DEPOSIT OR PAYMENT BY A
PORTFOLIO OF INITIAL OR MAINTENANCE MARGIN IN CONNECTION WITH FINANCIAL FUTURES
CONTRACTS OR RELATED OPTIONS TRANSACTIONS IS NOT CONSIDERED THE PURCHASE OF A
SECURITY ON MARGIN.
(7) SOCIAL MONEY MARKET MAY INVEST ONLY IN FOREIGN MONEY MARKET INSTRUMENTS IF
THEY ARE OF COMPARABLE QUALITY TO THE OBLIGATIONS OF DOMESTIC BANKS.
(8) SOCIAL BALANCED MAY NOT INVEST IN SECURITIES OF FOREIGN ISSUERS IF AT THE
TIME OF ACQUISITION MORE THAN 10% OF ITS TOTAL ASSETS TAKEN AT MARKET VALUE AT
THE TIME OF THE INVESTMENT, WOULD BE INVESTED IN SUCH SECURITIES.
(9) SOCIAL BALANCED MAY NOT WRITE, PURCHASE OR SELL PUTS, CALLS OR COMBINATIONS
THEREOF EXCEPT IN CONNECTION WITH WHEN-ISSUED SECURITIES.
(10) SOCIAL INTERNATIONAL EQUITY MAY NOT WRITE, PURCHASE OR SELL PUTS, CALLS OR
COMBINATIONS THEREOF EXCEPT THAT THE PORTFOLIO MAY (A) WRITE EXCHANGE-TRADED
COVERED CALL OPTIONS ON PORTFOLIO SECURITIES AND ENTER INTO CLOSING PURCHASE
TRANSACTIONS WITH RESPECT TO SUCH OPTIONS, AND THE PORTFOLIO MAY WRITE
EXCHANGE-TRADED COVERED CALL OPTIONS ON FOREIGN CURRENCIES AND SECURED PUT
OPTIONS ON SECURITIES AND FOREIGN CURRENCIES AND WRITE COVERED CALL AND SECURED
PUT OPTIONS ON SECURITIES AND FOREIGN CURRENCIES TRADED OVER THE COUNTER, AND
ENTER INTO CLOSING PURCHASE TRANSACTIONS WITH RESPECT TO SUCH OPTIONS, (B)
PURCHASE EXCHANGE-TRADED CALL OPTIONS AND PUT OPTIONS AND PURCHASE CALL AND PUT
OPTIONS TRADED OVER THE COUNTER, PROVIDED THAT THE PREMIUMS ON ALL OUTSTANDING
CALL AND PUT OPTIONS DO NOT EXCEED 5% OF ITS TOTAL ASSETS, AND ENTER INTO
CLOSING SALE TRANSACTION WITH RESPECT TO SUCH OPTIONS, AND (C) ENGAGE IN
FINANCIAL FUTURES CONTRACTS AND RELATED OPTIONS TRANSACTIONS, PROVIDED THAT THE
SUM OF THE INITIAL MARGIN DEPOSITS ON THE PORTFOLIO'S EXISTING FUTURES AND
RELATED OPTIONS POSITIONS AND THE PREMIUMS PAID FOR RELATED OPTIONS WOULD NOT
EXCEED 5% OF ITS TOTAL ASSETS.
(11) SOCIAL INTERNATIONAL EQUITY WILL LIMIT ITS INVESTMENT IN SECURITIES OF U.S.
ISSUERS TO 5% OF ITS NET ASSETS.
INVESTMENT SELECTION PROCESS
----------------------------
INVESTMENTS IN THE PORTFOLIOS ARE SELECTED ON THE BASIS OF THEIR ABILITY TO
CONTRIBUTE TO THE DUAL OBJECTIVE OF THE PORTFOLIOS. THE PORTFOLIOS HAVE
DEVELOPED A NUMBER OF TECHNIQUES FOR EVALUATING THE PERFORMANCE OF ISSUERS IN
EACH OF THESE AREAS. THE PRIMARY SOURCES OF INFORMATION ARE REPORTS PUBLISHED BY
THE ISSUERS THEMSELVES, THE REPORTS OF PUBLIC AGENCIES, AND THE REPORTS OF
GROUPS WHICH MONITOR PERFORMANCE IN PARTICULAR AREAS. THESE SOURCES OF
INFORMATION ARE SOMETIMES AUGMENTED WITH DIRECT INTERVIEWS OR WRITTEN
QUESTIONNAIRES ADDRESSED TO THE ISSUERS. IT SHOULD BE RECOGNIZED, HOWEVER, THAT
THERE ARE FEW GENERALLY ACCEPTED MEASURES BY WHICH ACHIEVEMENT IN THESE AREAS
CAN BE READILY DISTINGUISHED; THEREFORE, THE DEVELOPMENT OF SUITABLE MEASUREMENT
TECHNIQUES IS LARGELY WITHIN THE DISCRETION AND JUDGMENT OF THE ADVISORS AND
SUBADVISORS OF THE PORTFOLIO.
IT SHOULD BE NOTED THAT THE PORTFOLIOS' SOCIAL CRITERIA TEND TO LIMIT THE
AVAILABILITY OF INVESTMENT OPPORTUNITIES MORE THAN IS CUSTOMARY WITH OTHER
INVESTMENT COMPANIES. THE ADVISOR AND SUBADVISORS, HOWEVER, BELIEVE THAT THERE
ARE SUFFICIENT INVESTMENT OPPORTUNITIES TO PERMIT FULL INVESTMENT AMONG ISSUERS
THAT SATISFY THE PORTFOLIOS' SOCIAL INVESTMENT OBJECTIVE.
TO THE GREATEST EXTENT POSSIBLE, THE SAME SOCIAL CRITERIA IS APPLIED TO THE
PURCHASE OF NON-EQUITY SECURITIES AS TO EQUITY INVESTMENTS. BANK CERTIFICATES OF
DEPOSIT, COMMERCIAL PAPER, REPURCHASE AGREEMENTS, AND CORPORATE BONDS ARE JUDGED
IN THE SAME WAY AS A PROSPECTIVE PURCHASE OF THE BANK'S OR ISSUING COMPANY'S
COMMON STOCK. THE PORTFOLIOS MAY INVEST, HOWEVER, IN CERTIFICATES OF DEPOSIT OF
BANKS AND SAVINGS AND LOAN ASSOCIATIONS IN WHICH THE PORTFOLIOS WOULD NOT
OTHERWISE INVEST BECAUSE SUCH INSTITUTIONS HAVE ASSETS OF $1 BILLION OR LESS,
BUT GENERALLY ONLY TO THE EXTENT ALL SUCH INVESTMENTS ARE FULLY INSURED AS TO
PRINCIPAL BY THE FEDERAL DEPOSIT INSURANCE CORPORATION.
OBLIGATIONS ISSUED BY THE US TREASURY, SUCH AS US TREASURY BILLS, NOTES AND
BONDS, ARE SUPPORTED BY THE FULL FAITH AND CREDIT OF THE US GOVERNMENT. CERTAIN
OBLIGATIONS ISSUED OR GUARANTEED BY A US GOVERNMENT AGENCY OR INSTRUMENTALITY
ARE SUPPORTED BY THE FULL FAITH AND CREDIT OF THE US GOVERNMENT. THESE INCLUDE
OBLIGATIONS ISSUED BY THE EXPORT-IMPORT BANK, FARMERS HOME ADMINISTRATION,
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, POSTAL SERVICE, MERCHANT MARINE, AND
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY. THE PORTFOLIOS MAY ALSO INVEST
IN OTHER US GOVERNMENT AGENCY OR INSTRUMENTALITY OBLIGATIONS WHICH ARE SUPPORTED
ONLY BY THE CREDIT OF THE AGENCY OR INSTRUMENTALITY AND MAY BE FURTHER SUPPORTED
BY THE RIGHT OF THE ISSUER TO BORROW FROM THE US TREASURY. SUCH OBLIGATIONS
INCLUDE SECURITIES ISSUED BY THE BANK FOR COOPERATIVES, FEDERAL INTERMEDIATE
CREDIT BANK, FEDERAL LAND BANK, FEDERAL HOME LOAN BANK, FEDERAL HOME LOAN
MORTGAGE CORPORATION, AND FEDERAL NATIONAL MORTGAGE ASSOCIATION.
PURCHASE AND REDEMPTION OF SHARES
---------------------------------
THE PORTFOLIOS CONTINUOUSLY OFFER THEIR SHARES AT PRICES EQUAL TO THE
RESPECTIVE NET ASSET VALUES OF THE PORTFOLIOS DETERMINED IN THE MANNER SET FORTH
BELOW UNDER "NET ASSET VALUE." THE PORTFOLIOS OFFER THEIR SHARES, WITHOUT SALES
CHARGE, ONLY FOR PURCHASE BY VARIOUS INSURANCE COMPANIES FOR ALLOCATION TO THEIR
VARIABLE ACCOUNTS. IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE
DISADVANTAGEOUS FOR BOTH ANNUITY VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE
ACCOUNTS OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE
PORTFOLIOS, ALTHOUGH CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE PORTFOLIO
FORESEE ANY SUCH DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE POLICY HOLDERS OF ANY INSURANCE COMPANY. THE PORTFOLIOS' BOARD OF
DIRECTORS INTENDS TO MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS
BETWEEN SUCH POLICYHOLDERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN
IN RESPONSE TO ANY CONFLICTS.
THE PORTFOLIOS ARE REQUIRED TO REDEEM ALL FULL AND FRACTIONAL SHARES FOR
CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER SHARE, WHICH MAY BE MORE
OR LESS THAN THE ORIGINAL COST, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE
PORTFOLIO. PAYMENT FOR SHARES REDEEMED WILL GENERALLY BE MADE WITHIN SEVEN DAYS
AFTER RECEIPT OF A PROPER NOTICE OF REDEMPTION. THE RIGHT OF REDEMPTION MAY BE
SUSPENDED OR THE DATE OF PAYMENT POSTPONED FOR ANY PERIOD DURING WHICH THE NEW
YORK STOCK EXCHANGE IS CLOSED (OTHER THAN CUSTOMARY WEEKEND AND HOLIDAY
CLOSINGS), WHEN TRADING ON THE NEW YORK STOCK EXCHANGE IS RESTRICTED, OR AN
EMERGENCY EXISTS, AS DETERMINED BY THE COMMISSION, OR IF THE COMMISSION HAS
ORDERED SUCH A SUSPENSION FOR THE PROTECTION OF SHAREHOLDERS.
NET ASSET VALUE
---------------
THE NET ASSET VALUE OF THE SHARES OF EACH PORTFOLIO OF THE FUND IS
DETERMINED BY ADDING THE VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE
PORTFOLIO, SUBTRACTING LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF
SHARES OF THE PORTFOLIO OUTSTANDING. EXPENSES ARE ACCRUED DAILY, INCLUDING THE
INVESTMENT ADVISORY FEE. SOCIAL MONEY MARKET ATTEMPTS TO MAINTAIN A CONSTANT NET
ASSET VALUE OF $1.00 PER SHARE; THE NET ASSET VALUES OF SOCIAL BALANCED, SOCIAL
INTERNATIONAL EQUITY, SOCIAL SMALL CAP GROWTH AND SOCIAL MID CAP GROWTH
FLUCTUATE BASED ON THE RESPECTIVE MARKET VALUE OF THE PORTFOLIO'S INVESTMENTS.
THE NET ASSET VALUE PER SHARE OF EACH OF THE PORTFOLIOS IS DETERMINED EVERY
BUSINESS DAY AS OF THE CLOSE OF THE REGULAR SESSION OF THE NEW YORK STOCK
EXCHANGE (GENERALLY 4:00 P.M. EASTERN TIME), AND AT SUCH OTHER TIMES AS MAY BE
NECESSARY OR APPROPRIATE. THE PORTFOLIOS DO NOT DETERMINE NET ASSET VALUE ON
CERTAIN NATIONAL HOLIDAYS OR OTHER DAYS ON WHICH THE NEW YORK STOCK EXCHANGE IS
CLOSED: NEW YEAR'S DAY, PRESIDENTS' DAY, DR. MARTIN LUTHER KING, JR. DAY, GOOD
FRIDAY, MEMORIAL DAY, INDEPENDENCE DAY, LABOR DAY, THANKSGIVING DAY, AND
CHRISTMAS DAY. EACH PORTFOLIO'S NET ASSET VALUE PER SHARE IS DETERMINED BY
DIVIDING THAT PORTFOLIO'S TOTAL NET ASSETS (THE VALUE OF ITS ASSETS NET OF
LIABILITIES, INCLUDING ACCRUED EXPENSES AND FEES) BY THE NUMBER OF SHARES
OUTSTANDING.
THE ASSETS OF SOCIAL SMALL CAP GROWTH, SOCIAL MID CAP GROWTH, SOCIAL
INTERNATIONAL EQUITY AND SOCIAL BALANCED ARE VALUED AS FOLLOWS: (A) SECURITIES
FOR WHICH MARKET QUOTATIONS ARE READILY AVAILABLE ARE VALUED AT THE MOST RECENT
CLOSING PRICE, MEAN BETWEEN BID AND ASKED PRICE, OR YIELD EQUIVALENT AS OBTAINED
FROM ONE OR MORE MARKET MAKERS FOR SUCH SECURITIES; (B) SECURITIES MATURING
WITHIN 60 DAYS MAY BE VALUED AT COST, PLUS OR MINUS ANY AMORTIZED DISCOUNT OR
PREMIUM, UNLESS THE BOARD OF DIRECTORS DETERMINES SUCH METHOD NOT TO BE
APPROPRIATE UNDER THE CIRCUMSTANCES; AND (C) ALL OTHER SECURITIES AND ASSETS FOR
WHICH MARKET QUOTATIONS ARE NOT READILY AVAILABLE WILL BE FAIRLY VALUED BY THE
ADVISOR IN GOOD FAITH UNDER THE SUPERVISION OF THE BOARD OF DIRECTORS.
SECURITIES PRIMARILY TRADED ON FOREIGN SECURITIES EXCHANGES ARE GENERALLY VALUED
AT THE PRECEDING CLOSING VALUES ON THEIR RESPECTIVE EXCHANGES WHERE PRIMARILY
TRADED. EQUITY OPTIONS ARE VALUED AT THE LAST SALE PRICE UNLESS THE BID PRICE IS
HIGHER OR THE ASKED PRICE IS LOWER, IN WHICH EVENT SUCH BID OR ASKED PRICE IS
USED. EXCHANGE TRADED FIXED INCOME OPTIONS ARE VALUED AT THE LAST SALE PRICE
UNLESS THERE IS NO SALE PRICE, IN WHICH EVENT CURRENT PRICES PROVIDED BY MARKET
MAKERS ARE USED. OVER-THE-COUNTER FIXED INCOME OPTIONS ARE VALUED BASED UPON
CURRENT PRICES PROVIDED BY MARKET MAKERS. FINANCIAL FUTURES ARE VALUED AT THE
SETTLEMENT PRICE ESTABLISHED EACH DAY BY THE BOARD OF TRADE OR EXCHANGE ON WHICH
THEY ARE TRADED. BECAUSE OF THE NEED TO OBTAIN PRICES AS OF THE CLOSE OF TRADING
ON VARIOUS EXCHANGES THROUGHOUT THE WORLD, THE CALCULATION OF THE PORTFOLIO'S
NET ASSET VALUE DOES NOT TAKE PLACE FOR CONTEMPORANEOUSLY WITH THE DETERMINATION
OF THE PRICES OF US PORTFOLIO SECURITIES. FOR PURPOSES OF DETERMINING THE NET
ASSET VALUE ALL ASSETS AND LIABILITIES INITIALLY EXPRESSED IN FOREIGN CURRENCY
VALUES WILL BE CONVERTED INTO UNITED STATES DOLLAR VALUES AT THE MEAN BETWEEN
THE BID AND OFFERED QUOTATIONS OF SUCH CURRENCIES AGAINST UNITED STATES DOLLARS
AT LAST QUOTED BY ANY RECOGNIZED DEALER. IF AN EVENT WERE TO OCCUR AFTER THE
VALUE OF AN INVESTMENT WAS SO ESTABLISHED BUT BEFORE THE NET ASSET VALUE PER
SHARE WAS DETERMINED WHICH WAS LIKELY TO MATERIALLY CHANGE THE NET ASSET VALUE,
THEN THE INSTRUMENT WOULD BE VALUED USING FAIR VALUE CONSIDERATION BY THE
DIRECTORS OR THEIR DELEGATES.
SOCIAL MONEY MARKET'S ASSETS, INCLUDING SECURITIES SUBJECT TO REPURCHASE
AGREEMENTS, ARE NORMALLY VALUED AT THEIR AMORTIZED COST WHICH DOES NOT TAKE INTO
ACCOUNT UNREALIZED CAPITAL GAINS OR LOSSES. THIS INVOLVES VALUING AN INSTRUMENT
AT ITS COST AND THEREAFTER ASSUMING A CONSTANT AMORTIZATION TO MATURITY OF ANY
DISCOUNT OR PREMIUM, REGARDLESS OF THE IMPACT OF FLUCTUATING INTEREST RATES ON
THE MARKET VALUE OF THE INSTRUMENT. WHILE THIS METHOD PROVIDES CERTAINTY IN
VALUATION, IT MAY RESULT IN PERIODS DURING WHICH VALUE, AS DETERMINED BY
AMORTIZED COST, IS HIGHER OR LOWER THAN THE PRICE THAT WOULD BE RECEIVED UPON
SALE OF THE INSTRUMENT.
TAXES
-----
IN 1999 THE PORTFOLIOS QUALIFIED, AND IN 2000 THE PORTFOLIOS INTEND TO
QUALIFY, AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER
M OF THE INTERNAL REVENUE CODE (THE "CODE"). IF FOR ANY REASON THE FUND SHOULD
FAIL TO QUALIFY, IT WOULD BE TAXED AS A CORPORATION AT THE FUND LEVEL, RATHER
THAN PASSING THROUGH ITS INCOME AND GAINS TO SHAREHOLDERS.
DISTRIBUTIONS OF REALIZED NET CAPITAL GAINS, IF ANY, ARE NORMALLY PAID ONCE
A YEAR; HOWEVER, THE PORTFOLIOS DO NOT INTEND TO MAKE ANY SUCH DISTRIBUTIONS
UNLESS AVAILABLE CAPITAL LOSS CARRYOVERS, IF ANY, HAVE BEEN USED OR HAVE THE
EXPIRED. THE CAPITAL LOSS CARRYFORWARD AS OF DECEMBER 31, 1999, FOR SOCIAL MONEY
MARKET WAS $6, SOCIAL SMALL CAP GROWTH WAS $392,468, SOCIAL MID CAP GROWTH WAS
$0, SOCIAL INTERNATIONAL EQUITY WAS $0, AND SOCIAL BALANCED WAS $0.
SINCE THE SHAREHOLDERS OF THE PORTFOLIOS ARE INSURANCE COMPANIES, THIS
STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONTAIN A DISCUSSION OF THE FEDERAL
INCOME TAX CONSEQUENCES AT THE SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE
FEDERAL TAX CONSEQUENCES TO PURCHASERS OF ANNUITY OR LIFE INSURANCE POLICIES,
SEE THE PROSPECTUS FOR THE POLICIES.
CALCULATION OF YIELD AND TOTAL RETURN
-------------------------------------
YIELD (SOCIAL MONEY MARKET):
FROM TIME TO TIME SOCIAL MONEY MARKET ADVERTISES ITS "YIELD" AND "EFFECTIVE
YIELD." BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT INTENDED
TO INDICATE FUTURE PERFORMANCE. THE "YIELD" OF SOCIAL MONEY MARKET REFERS TO THE
ACTUAL INCOME GENERATED BY AN INVESTMENT IN THE PORTFOLIO OVER A PARTICULAR BASE
PERIOD OF TIME. IF THE BASE PERIOD IS LESS THAN ONE YEAR, THE YIELD IS THEN
"ANNUALIZED." THAT IS, THE NET CHANGE, EXCLUSIVE OF CAPITAL CHANGES, IN THE
VALUE OF A SHARE DURING THE BASE PERIOD IS DIVIDED BY THE NET ASSET VALUE PER
SHARE AT THE BEGINNING OF THE PERIOD, AND THE RESULT IS MULTIPLIED BY 365 AND
DIVIDED BY THE NUMBER OF DAYS IN THE BASE PERIOD. CAPITAL CHANGES EXCLUDED FROM
THE CALCULATION OF YIELD ARE: (1) REALIZED GAINS AND LOSSES FROM THE SALE OF
SECURITIES, AND (2) UNREALIZED APPRECIATION AND DEPRECIATION. SOCIAL MONEY
MARKET'S "EFFECTIVE YIELD" FOR A SEVEN-DAY PERIOD IS ITS ANNUALIZED COMPOUNDED
YIELD DURING THE PERIOD, CALCULATED ACCORDING TO THE FOLLOWING FORMULA:
EFFECTIVE YIELD = [(BASE PERIOD RETURN) + 1]365/7 - 1
THE "EFFECTIVE YIELD" IS CALCULATED LIKE YIELD, BUT ASSUMES REINVESTMENT OF
EARNED INCOME. THE EFFECTIVE YIELD WILL BE SLIGHTLY HIGHER THAN THE YIELD
BECAUSE OF THE COMPOUNDING EFFECT OF THIS ASSUMED REINVESTMENT. FOR THE
SEVEN-DAY PERIOD ENDED DECEMBER 31, 1999, SOCIAL MONEY MARKET'S YIELD WAS 5.34%
AND ITS EFFECTIVE YIELD WAS 5.48%.
THE YIELD OF THE MONEY MARKET PORTFOLIO WILL FLUCTUATE IN RESPONSE TO
CHANGES IN INTEREST RATES AND GENERAL ECONOMIC CONDITIONS, PORTFOLIO QUALITY,
PORTFOLIO MATURITY, AND OPERATING EXPENSES. YIELD IS NOT FIXED OR INSURED AND
THEREFORE IS NOT COMPARABLE TO A SAVINGS OR OTHER SIMILAR TYPE OF ACCOUNT. YIELD
DURING ANY PARTICULAR TIME PERIOD SHOULD NOT BE CONSIDERED AN INDICATION OF
FUTURE YIELD. IT IS, HOWEVER, USEFUL IN EVALUATING A PORTFOLIO'S PERFORMANCE IN
MEETING ITS INVESTMENT OBJECTIVE.
TOTAL RETURN AND OTHER QUOTATIONS (ALL PORTFOLIOS EXCEPT SOCIAL MONEY MARKET):
SOCIAL SMALL CAP GROWTH, SOCIAL MID CAP GROWTH, SOCIAL INTERNATIONAL EQUITY
AND SOCIAL BALANCED MAY EACH ADVERTISE "TOTAL RETURN." TOTAL RETURN IS COMPUTED
BY TAKING THE TOTAL NUMBER OF SHARES PURCHASED BY A HYPOTHETICAL $1,000
INVESTMENT, ADDING ALL ADDITIONAL SHARES PURCHASED WITHIN THE PERIOD WITH
REINVESTED DIVIDENDS AND DISTRIBUTIONS, CALCULATING THE VALUE OF THOSE SHARES AT
THE END OF THE PERIOD, AND DIVIDING THE RESULT BY THE INITIAL $1,000 INVESTMENT.
FOR PERIODS OF MORE THAN ONE YEAR, THE CUMULATIVE TOTAL RETURN IS THEN ADJUSTED
FOR THE NUMBER OF YEARS, TAKING COMPOUNDING INTO ACCOUNT, TO CALCULATE AVERAGE
ANNUAL TOTAL RETURN DURING THAT PERIOD.
TOTAL RETURN IS COMPUTED ACCORDING TO THE FOLLOWING FORMULA:
P(1 + T)N = ERV
WHERE P = A HYPOTHETICAL INITIAL PAYMENT OF $10,000; T = TOTAL RETURN; N =
NUMBER OF YEARS; AND ERV = THE ENDING REDEEMABLE VALUE OF A HYPOTHETICAL $10,000
PAYMENT MADE AT THE BEGINNING OF THE PERIOD. TOTAL RETURN IS HISTORICAL IN
NATURE AND IS NOT INTENDED TO INDICATE FUTURE PERFORMANCE. TOTAL RETURN FOR THE
PORTFOLIOS FOR THE PERIODS INDICATED ARE AS FOLLOWS:
PERIODS ENDED
DECEMBER 31, 1999 SEC AVERAGE ANNUAL RETURN
SOCIAL SMALL CAP GROWTH
ONE YEAR 19.38%
FROM INCEPTION
(MARCH 15, 1995) 8.60%
SOCIAL MID CAP GROWTH
ONE YEAR 6.97%
FIVE YEARS 20.80%
FROM INCEPTION
(JULY 16, 1991) 14.06%
SOCIAL INTERNATIONAL EQUITY
ONE YEAR 32.78%
FIVE YEARS 18.06%
FROM INCEPTION
(JUNE 30, 1992) 14.72%
SOCIAL BALANCED
ONE YEAR 12.12%
FIVE YEARS 18.02%
TEN YEARS 12.05%
FROM INCEPTION 11.65%
(SEPTEMBER 2, 1986)
TOTAL RETURN, LIKE YIELD AND NET ASSET VALUE PER SHARE, FLUCTUATES IN
RESPONSE TO CHANGES IN MARKET CONDITIONS. NEITHER TOTAL RETURN NOR YIELD FOR ANY
PARTICULAR TIME PERIOD SHOULD BE CONSIDERED AN INDICATION OF FUTURE RETURN.
DIRECTORS AND OFFICERS
----------------------
THE FUND'S BOARD OF DIRECTORS SUPERVISES THE FUND'S ACTIVITIES AND REVIEWS
ITS CONTRACTS WITH COMPANIES THAT PROVIDE IT WITH SERVICES. THE DIRECTORS AND
OFFICERS OF THE FUND AND THEIR PRINCIPAL OCCUPATIONS ARE SET FORTH BELOW.
*WILLIAM J. ATHERTON, PRESIDENT AND DIRECTOR. MR. ATHERTON IS PRESIDENT AND
DIRECTOR OF AMERITAS VARIABLE LIFE INSURANCE COMPANY, A SUBSIDIARY OF AMERITAS
LIFE AND AMERITAS ACACIA MUTUAL HOLDING COMPANY, WHICH MANUFACTURES AND
DISTRIBUTES VARIABLE AND FIXED LIFE AND ANNUITY POLICIES. HE WAS FORMERLY
PRESIDENT AND DIRECTOR OF NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY OF
BOSTON, MA. HE SERVES ON THE BOARD OF DIRECTORS OF AMAL CORPORATION. ADDRESS:
2441 BRETIGUE DRIVE, LINCOLN, NEBRASKA 68512. BOB: 01/15/39.
FRANK H. BLATZ, JR., ESQ., DIRECTOR. MR. BLATZ IS A PARTNER IN THE LAW FIRM
OF SNEVILY, ELY, WILLIAMS, GURRIERI & BLATZ. HE WAS FORMERLY A PARTNER WITH
ABRAMS, BLATZ, GRAN, HENDRICKS & REINA, P.A. HE IS ALSO A DIRECTOR/TRUSTEE OF
THE CALVERT FUND, CALVERT CASH RESERVES, FIRST VARIABLE RATE FUND, CALVERT
TAX-FREE RESERVES, AND CALVERT MUNICIPAL FUND, INC. ADDRESS: DOB: 10/29/35.
ALICE GRESHAM BULLOCK, DIRECTOR. MS. BULLOCK IS A DEAN AND PROFESSOR AT
HOWARD UNIVERSITY SCHOOL OF LAW. SHE WAS FORMERLY DEPUTY DIRECTOR OF THE
ASSOCIATION OF AMERICAN LAW SCHOOLS. MS. BULLOCK IS A MEMBER OF THE BOARD OF
VISITORS OF J. REUBEN CLARK LAW SCHOOL, BRIGHAM YOUNG UNIVERSITY AND THE BOARD
OF DIRECTORS OF COUNCIL ON LEGAL EDUCATION OPPORTUNITY. ADDRESS: 6127 UTAH
AVENUE, WASHINGTON, D.C. 20015. DOB: 05/17/50.
CHARLES E. DIEHL, DIRECTOR. MR. DIEHL IS VICE PRESIDENT AND TREASURER
EMERITUS OF THE GEORGE WASHINGTON UNIVERSITY, AND HAS RETIRED FROM UNIVERSITY
SUPPORT SERVICES, INC. OF HERNDON, VIRGINIA. HE IS ALSO A DIRECTOR OF ACACIA
MUTUAL LIFE INSURANCE COMPANY. ADDRESS: 1658 QUAIL HOLLOW COURT, MCLEAN,
VIRGINIA 22101. DOB: 10/13/22.
*THOMAS C. GODLASKY, DIRECTOR MR. GODLASKY IS EXECUTIVE VICE PRESIDENT AND
CHIEF INVESTMENT OFFICER OF AMERUS LIFE HOLDINGS, INC. HE WAS FORMERLY A MANAGER
OF FIXED INCOME PRODUCTS AT PROVIDIAN CORP. HE ALSO SERVES ON THE BOARD OF
DIRECTORS OF AMERUS HOME EQUITY, AMVESTORS CORP. DELTA LIFE & ANNUITY, AMERITAS
VARIABLE LIFE INSURANCE COMPANY, AMERITAS INVESTMENT COMPANY AND AMERUS GROUP
FOUNDATION. HE IS ALSO A CHARTERED FINANCIAL ANALYST. ADDRESS: 1516 S. 42ND
STREET, WEST DES MOINES, IOWA 50265. DOB: 10/30/55.
*BARBARA J. KRUMSIEK, PRESIDENT AND DIRECTOR. MS. KRUMSIEK SERVES AS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN OF CALVERT GROUP, LTD. AND
AS AN OFFICER AND DIRECTOR OF EACH OF ITS AFFILIATED COMPANIES. SHE IS A
DIRECTOR OF CALVERT-SLOAN ADVISERS, L.L.C., AND A TRUSTEE/DIRECTOR OF EACH OF
THE INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO JOINING CALVERT
GROUP, MS. KRUMSIEK SERVED AS SENIOR VICE PRESIDENT OF ALLIANCE CAPITAL LP'S
MUTUAL FUND DIVISION. DOB: 08/09/52.
M. CHARITO KRUVANT, DIRECTOR. MS. KRUVANT IS PRESIDENT OF CREATIVE
ASSOCIATES INTERNATIONAL, INC., A FIRM THAT SPECIALIZES IN HUMAN RESOURCES
DEVELOPMENT, INFORMATION MANAGEMENT, PUBLIC AFFAIRS AND PRIVATE ENTERPRISE
DEVELOPMENT. SHE IS ALSO A DIRECTOR OF ACACIA FEDERAL SAVINGS BANK. DOB:
ADDRESS: 5301 WISCONSIN AVENUE, N.W. WASHINGTON, D.C. 20015. DOB:12/08/45.
CYNTHIA H. MILLIGAN, DIRECTOR. MS. MILLIGAN IS DEAN, COLLEGE OF BUSINESS
ADMINISTRATION, UNIVERSITY OF NEBRASKA, LINCOLN. FORMERLY, SHE WAS THE PRESIDENT
AND CHIEF EXECUTIVE OFFICER FOR CMA, A CONSULTING FIRM FOR FINANCIAL
INSTITUTIONS. SHE SERVES ON THE BOARD OF DIRECTORS OF WELLS FARGO AND GALLUP,
INC. SHE ALSO SERVES ON THE BOARD OF TRUSTEES OF W.K. KELLOGG FOUNDATION.
ADDRESS: 2633 SOUTH 24TH STREET, LINCOLN, NEBRASKA 68502. DOB: 4/11/46. DOB:
ARTHUR J. PUGH, DIRECTOR. MR. PUGH SERVES AS A DIRECTOR OF ACACIA FEDERAL
SAVINGS BANK. ADDRESS: 4823 PRESTWICK DRIVE, FAIRFAX, VIRGINIA 22030. DOB:
09/24/37.
SOUTH TRIMBLE, III, DIRECTOR. MR. TRIMBLE IS SPECIAL COUNSEL TO AND
FORMERLY WAS A PARTNER IN THE LAW FIRM OF REASONER & FOX. ADDRESS: 888 17TH
STREET, N.W., SUITE 800, WASHINGTON, DC 20006. DOB: 06/25/25
RONALD M. WOLFSHEIMER, CPA, TREASURER. MR. WOLFSHEIMER IS SENIOR VICE
PRESIDENT AND CHIEF FINANCIAL OFFICER OF CALVERT GROUP, LTD. AND ITS
SUBSIDIARIES AND AN OFFICER OF EACH OF THE OTHER INVESTMENT COMPANIES IN THE
CALVERT GROUP OF FUNDS. MR. WOLFSHEIMER IS VICE PRESIDENT AND TREASURER OF
CALVERT-SLOAN ADVISERS, L.L.C., AND A DIRECTOR OF CALVERT DISTRIBUTORS, INC.
DOB: 07/24/47.
WILLIAM M. TARTIKOFF, ESQ., VICE PRESIDENT AND SECRETARY. MR. TARTIKOFF IS
GENERAL COUNSEL, SECRETARY, AND SENIOR VICE PRESIDENT OF CALVERT GROUP, LTD.,
AND ITS SUBSIDIARIES, AND IS AN OFFICER OF EACH OF THE OTHER INVESTMENT
COMPANIES IN THE CALVERT GROUP OF FUNDS. MR. TARTIKOFF IS VICE PRESIDENT AND
SECRETARY OF CALVERT-SLOAN ADVISERS, L.L.C., A DIRECTOR OF CALVERT DISTRIBUTORS,
INC., AND IS AN OFFICER OF ACACIA NATIONAL LIFE INSURANCE COMPANY. DOB:
08/12/47.
RENO J. MARTINI, SENIOR VICE PRESIDENT. MR. MARTINI IS A DIRECTOR AND
SENIOR VICE PRESIDENT OF CALVERT GROUP, LTD., AND SENIOR VICE PRESIDENT AND
CHIEF INVESTMENT OFFICER OF CALVERT ASSET MANAGEMENT COMPANY, INC. MR. MARTINI
IS ALSO A DIRECTOR AND PRESIDENT OF CALVERT-SLOAN ADVISERS, L.L.C., AND A
DIRECTOR AND OFFICER OF CALVERT NEW WORLD FUND, INC. DOB: 1/13/50.
DANIEL K. HAYES, VICE PRESIDENT. MR. HAYES IS VICE PRESIDENT OF CALVERT
ASSET MANAGEMENT COMPANY, INC., AND IS AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS, EXCEPT FOR CALVERT NEW WORLD
FUND, INC. DOB: 09/09/50.
ROBERT J. O'MEARA, VICE PRESIDENT, MR. O'MEARA IS ASSISTANT VICE PRESIDENT,
INVESTMENT FUNDS ADMINISTRATOR AND BUDGET ADMINISTRATOR OF AMERITAS VARIABLE
LIFE INSURANCE COMPANY. DOB: 12/12/62.
SUSAN WALKER BENDER, ESQ., ASSISTANT SECRETARY. MS. BENDER IS ASSOCIATE
GENERAL COUNSEL OF CALVERT GROUP, AND AN OFFICER OF EACH OF ITS SUBSIDIARIES AND
CALVERT-SLOAN ADVISERS, L.L.C. SHE IS ALSO AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. DOB: 1/29/59.
IVY WAFFORD DUKE, ESQ., ASSISTANT SECRETARY. MS. DUKE IS ASSOCIATE GENERAL
COUNSEL OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS SUBSIDIARIES AND
CALVERT-SLOAN ADVISERS, L.L.C. SHE IS ALSO AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING AT CALVERT
GROUP, MS. DUKE WAS AN ASSOCIATE IN THE INVESTMENT MANAGEMENT GROUP OF THE
BUSINESS AND FINANCE DEPARTMENT AT DRINKER BIDDLE AND REATH. DOB: 9/7/68.
VICTOR FRYE, ESQ., ASSISTANT SECRETARY AND COMPLIANCE OFFICER. MR. FRYE IS
COUNSEL AND COMPLIANCE OFFICER OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS
SUBSIDIARIES AND CALVERT-SLOAN ADVISERS, L.L.C. HE IS ALSO AN OFFICER OF EACH OF
THE OTHER INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING
AT CALVERT GROUP, MR. FRYE WAS COUNSEL AND MANAGER OF THE COMPLIANCE DEPARTMENT
AT THE ADVISORS GROUP. DOB: 10/15/58.
JENNIFER STREAKS, ESQ., ASSISTANT SECRETARY. MS. STREAKS IS ASSISTANT
GENERAL COUNSEL OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS SUBSIDIARIES AND
CALVERT-SLOAN ADVISERS, L.L.C. SHE IS ALSO AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING AT CALVERT
GROUP, MS. STREAKS WAS A REGULATORY ANALYST IN THE MARKET REGULATION DEPARTMENT
OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS. DOB: 08/02/71.
MICHAEL V. YUHAS JR., CPA, CONTROLLER OF FUNDS. MR. YUHAS IS THE DIRECTOR
OF FUND ADMINISTRATION OF CALVERT GROUP, LTD., AND AN OFFICER OF EACH OF THE
OTHER INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. DOB: 08/04/61.
THE ADDRESS OF DIRECTORS AND OFFICERS, UNLESS OTHERWISE NOTED, IS 4550
MONTGOMERY AVENUE, SUITE 1000N, BETHESDA, MARYLAND 20814. DIRECTORS AND OFFICERS
OF THE FUND AS A GROUP OWN LESS THAN 1% OF THE FUND'S OUTSTANDING SHARES.
DIRECTORS MARKED WITH AN *, ABOVE, ARE "INTERESTED PERSONS" OF THE FUND, UNDER
THE 1940 ACT.
EACH DIRECTOR OF THE FUND WHO IS NOT AFFILIATED WITH THE ADVISOR RECEIVES A
MEETING FEE OF $1,500 FOR EACH BOARD MEETING ATTENDED; SUCH FEES ARE ALLOCATED
AMONG THE SERIES BASED UPON THEIR RELATIVE NET ASSETS. DIRECTORS NOT ON ANY
OTHER CALVERT GROUP FUND BOARDS RECEIVE AN ANNUAL FEE OF $15,000.
DIRECTORS OF THE FUND NOT AFFILIATED WITH THE FUND'S ADVISOR
("NONINTERESTED PERSONS") MAY ELECT TO DEFER RECEIPT OF ALL OR A PERCENTAGE OF
THEIR ANNUAL FEES AND INVEST THEM IN ANY FUND IN THE CALVERT FAMILY OF FUNDS
THROUGH THE DIRECTORS/TRUSTEES DEFERRED COMPENSATION PLAN (SHOWN AS "PENSION OR
RETIREMENT BENEFITS ACCRUED AS PART OF FUND EXPENSES," BELOW). DEFERRAL OF THE
FEES IS DESIGNED TO MAINTAIN THE PARTIES IN THE SAME POSITION AS IF THE FEES
WERE PAID ON A CURRENT BASIS. MANAGEMENT BELIEVES THIS WILL HAVE A NEGLIGIBLE
EFFECT ON THE FUND'S ASSETS, LIABILITIES, NET ASSETS, AND NET INCOME PER SHARE.
DIRECTOR COMPENSATION TABLE
FISCAL YEAR 1999
(UNAUDITED NUMBERS)
Aggregate Pension or Total Compensation
Compensation Retirement Benefits from
from Registrant Accrued as Registrant and Fund
for Service part of Complex paid to
as Trustee/Directors Registrant Trustee/Directors**
Expenses*
NAME OF DIRECTOR
FRANK H. BLATZ, JR. $10,501 $10,501 $48,250
ALICE GRESHAM BULLOCK $18,000 $0 $18,000
CHARLES E. DIEHL $10,501 $0 $48,250
M. CHARITO KRUVANT $9,749 $5,849 $45,250
CYNTHIA H. MILLIGAN $5,250 $0 $5,250
ARTHUR J. PUGH $10,500 $10,500 $48,250
SOUTH TRIMBLE, III $19,500 $19,500 $19,500
*MESSRS. BLATZ, DIEHL, TRIMBLE AND PUGH AND MS. KRUVANT HAVE CHOSEN TO DEFER A
PORTION OF THEIR COMPENSATION. AS OF DECEMBER 31, 1999, TOTAL DEFERRED
COMPENSATION, INCLUDING DIVIDENDS AND CAPITAL APPRECIATION, WAS: BLATZ,
$784,000; DIEHL, $760,650; TRIMBLE, $103,000; PUGH, $134,450 AND KRUVANT,
$58,700.
**THE FUND COMPLEX CONSISTS OF NINE (9) REGISTERED INVESTMENT COMPANIES.
INVESTMENT ADVISOR AND SUBADVISORS
----------------------------------
THE FUND'S INVESTMENT ADVISOR IS CALVERT ASSET MANAGEMENT COMPANY, INC.,
4550 MONTGOMERY AVENUE, 1000N, BETHESDA, MARYLAND 20814, A SUBSIDIARY OF CALVERT
GROUP LTD., WHICH IS A SUBSIDIARY OF ACACIA MUTUAL LIFE INSURANCE COMPANY OF
WASHINGTON, D.C. ("ACACIA"). ACACIA IS A SUBSIDIARY OF AMERITAS ACACIA MUTUAL
HOLDING COMPANY.
FOR THE FUND'S FISCAL YEARS ENDED DECEMBER 31, 1997, 1998, AND 1999, SOCIAL
BALANCED PAID CAMCO INVESTMENT ADVISORY FEES OF $1,339,136, $1,826,036, AND
$1,515,657 RESPECTIVELY. FOR 1997, 1998, AND 1999, SOCIAL MONEY MARKET PAID
INVESTMENT ADVISORY FEES OF $30,309, $48,868, AND $50,712 RESPECTIVELY. FOR
1997, 1998 AND 1999, SOCIAL INTERNATIONAL EQUITY PAID INVESTMENT ADVISORY FEES
OF $148,107, $161,550, AND $142,875 RESPECTIVELY, AND RECEIVED EXPENSE
REIMBURSEMENTS FROM CAMCO OF $25,189, $23,845, AND $3,707, RESPECTIVELY. FOR
1997, 1998 AND 1999, SOCIAL MID CAP GROWTH PAID INVESTMENT ADVISORY FEES OF
$179,053, $250,773, AND $275,694, RESPECTIVELY. FOR 1997, 1998 AND 1999, SOCIAL
SMALL CAP GROWTH PAID INVESTMENT ADVISORY FEES OF $48,611, $35,088, AND $27,062,
RESPECTIVELY, AND RECEIVED EXPENSE REIMBURSEMENTS FROM CAMCO OF $6,208, $0, AND
$0, RESPECTIVELY.
SUBADVISORS
CAMCO HAS RETAINED AWAD ASSET MANAGEMENT, INC. AS SUBADVISOR FOR SOCIAL
SMALL CAP GROWTH IS CONTROLLED BY RAYMOND JAMES. IT RECEIVES A SUBADVISORY FEE,
PAID BY THE ADVISOR, OF 0.40% OF NET ASSETS.
CAMCO HAS RETAINED BROWN CAPITAL MANAGEMENT, INC. AS SUBADVISOR FOR SOCIAL
MID CAP GROWTH. BROWN CAPITAL MANAGEMENT, INC. IS CONTROLLED BY EDDIE C. BROWN.
IT RECEIVES A SUBADVISORY FEE, PAID BY THE ADVISOR, OF 0.25% OF NET ASSETS.
CAMCO HAS RETAINED MURRAY JOHNSTONE INTERNATIONAL, LTD. AS SUBADVISOR FOR
SOCIAL INTERNATIONAL EQUITY. MURRAY JOHNSTONE INTERNATIONAL, LTD. IS CONTROLLED
BY UNITED ASSET MANAGEMENT COMPANY. IT RECEIVES A SUBADVISORY FEE, PAID BY THE
ADVISOR, OF 0.45% OF NET ASSETS.
CAMCO HAS RETAINED NCM CAPITAL MANAGEMENT GROUP, INC. AS SUBADVISOR FOR
SOCIAL BALANCED. NCM CAPITAL MANAGEMENT GROUP, INC. IS A SUBSIDIARY OF THE NORTH
CAROLINA MUTUAL LIFE INSURANCE COMPANY. IT RECEIVES A SUBADVISORY FEE, PAID BY
THE ADVISOR, OF 0.25% OF NET ASSETS.
THE FUND HAS RECEIVED AN EXEMPTIVE ORDER TO PERMIT THE FUND AND THE ADVISOR
TO ENTER INTO AND MATERIALLY AMEND AN INVESTMENT SUBADVISORY AGREEMENT WITHOUT
SHAREHOLDER APPROVAL. AUTHORIZATION FOR THE ADVISOR TO ACT ON THE ORDER WITH
RESPECT TO THE OTHER PORTFOLIOS IS CURRENTLY PENDING SHAREHOLDER APPROVAL. IF
APPROVED, THEN WITHIN 90 DAYS OF THE HIRING OF ANY SUBADVISOR OR THE
IMPLEMENTATION OF ANY PROPOSED MATERIAL CHANGE IN AN INVESTMENT SUBADVISORY
AGREEMENT, THE PORTFOLIO WILL FURNISH ITS SHAREHOLDERS INFORMATION ABOUT THE NEW
SUBADVISOR OR INVESTMENT SUBADVISORY AGREEMENT THAT WOULD BE INCLUDED IN A PROXY
STATEMENT. SUCH INFORMATION WILL INCLUDE ANY CHANGE IN SUCH DISCLOSURE CAUSED BY
THE ADDITION OF A NEW SUBADVISOR OR ANY PROPOSED MATERIAL CHANGE IN THE
INVESTMENT SUBADVISORY AGREEMENT OF THE PORTFOLIO. THE PORTFOLIO WILL MEET THIS
CONDITION BY PROVIDING SHAREHOLDERS, WITHIN 90 DAYS OF THE HIRING OF THE
SUBADVISOR OR IMPLEMENTATION OF ANY MATERIAL CHANGE TO THE TERMS OF AN
INVESTMENT SUBADVISORY AGREEMENT, WITH AN INFORMATION STATEMENT TO THIS EFFECT.
ADMINISTRATIVE SERVICES AGENT
-----------------------------
CALVERT ADMINISTRATIVE SERVICES COMPANY ("CASC"), AN AFFILIATE OF THE
ADVISOR, HAS BEEN RETAINED BY THE FUND TO PROVIDE CERTAIN ADMINISTRATIVE
SERVICES NECESSARY TO THE CONDUCT OF ITS AFFAIRS, INCLUDING THE PREPARATION OF
REGULATORY FILINGS AND SHAREHOLDER REPORTS. FOR PROVIDING SUCH SERVICES, CASC
RECEIVES AN ANNUAL ADMINISTRATIVE SERVICE FEE PAYABLE MONTHLY (AS A PERCENTAGE
OF NET ASSETS) AS FOLLOWS:
SOCIAL MONEY MARKET 0.20%
SOCIAL SMALL CAP GROWTH 0.25%
SOCIAL MID CAP GROWTH 0.25%
SOCIAL INTERNATIONAL EQUITY 0.35%
SOCIAL BALANCED 0.275%
FOR 1997, 1998 AND 1999, SOCIAL SMALL CAP GROWTH PAID $6,554, AND $3,899
AND $6,835, RESPECTIVELY; SOCIAL MID CAP GROWTH PAID $22,493, $31,572, AND
$93,247, RESPECTIVELY FOR 1997, 1998, AND 1999, SOCIAL INTERNATIONAL EQUITY PAID
$40,000 FOR EACH OF 1997 AND 1998 AND FOR 1999, IT PAID $48,020 TO CASC IN
ADMINISTRATIVE FEES; AND SOCIAL MONEY MARKET AND SOCIAL BALANCED PAID $20,957
AND $749,534, RESPECTIVELY, FOR 1999.
TRANSFER AND SHAREHOLDER SERVICING AGENT
----------------------------------------
NATIONAL FINANCIAL DATA SERVICES, INC. ("NFDS"), 1004 BALTIMORE, 6TH FLOOR,
KANSAS CITY, MISSOURI 64105, A SUBSIDIARY OF STATE STREET BANK & TRUST, HAS BEEN
RETAINED BY THE FUND TO ACT AS TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.
THESE RESPONSIBILITIES INCLUDE: RESPONDING TO CERTAIN SHAREHOLDER INQUIRIES AND
INSTRUCTIONS, CREDITING AND DEBITING SHAREHOLDER ACCOUNTS FOR PURCHASES AND
REDEMPTIONS OF FUND SHARES AND CONFIRMING SUCH TRANSACTIONS, AND DAILY UPDATING
OF SHAREHOLDER ACCOUNTS TO REFLECT DECLARATION AND PAYMENT OF DIVIDENDS.
CALVERT SHAREHOLDER SERVICES, INC. ("CSSI"), 4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814, A SUBSIDIARY OF CALVERT GROUP, LTD. AND ACACIA
MUTUAL, HAS BEEN RETAINED BY THE FUND TO ACT AS SHAREHOLDER SERVICING AGENT.
SHAREHOLDER SERVICING RESPONSIBILITIES INCLUDE RESPONDING TO SHAREHOLDER
INQUIRIES AND INSTRUCTIONS CONCERNING THEIR ACCOUNTS, ENTERING ANY TELEPHONED
PURCHASES OR REDEMPTIONS INTO THE NFDS SYSTEM, MAINTENANCE OF BROKER-DEALER
DATA, AND PREPARING AND DISTRIBUTING STATEMENTS TO SHAREHOLDERS REGARDING THEIR
ACCOUNTS.
FOR THESE SERVICES, CSSI AND NFDS RECEIVE A FEE BASED ON AVERAGE NET
ASSETS.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
--------------------------------------
PRICEWATERHOUSECOOPERS LLP, 250 WEST PRATT STREET, BALTIMORE, MARYLAND
21201, HAS BEEN SELECTED BY THE BOARD OF DIRECTORS TO SERVE AS INDEPENDENT
ACCOUNTANTS FOR FISCAL YEAR 2000. STATE STREET BANK AND TRUST COMPANY, N.A., 225
FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110, SERVES AS CUSTODIAN OF THE FUND'S
INVESTMENTS. ALLFIRST FINANCIAL, INC., 25 SOUTH CHARLES STREET, BALTIMORE,
MARYLAND 21203 ALSO SERVES AS CUSTODIAN OF CERTAIN OF THE FUND'S CASH ASSETS.
THE CUSTODIANS HAVE NO PART IN DECIDING THE FUND'S INVESTMENT POLICIES OR THE
CHOICE OF SECURITIES THAT ARE TO BE PURCHASED OR SOLD FOR THE FUND'S PORTFOLIOS.
METHOD OF DISTRIBUTION
----------------------
CALVERT DISTRIBUTORS, INC. ("CDI"), 4550 MONTGOMERY AVENUE, SUITE 1000N,
BETHESDA, MARYLAND 20814, IS THE PRINCIPAL UNDERWRITER AND DISTRIBUTOR FOR THE
FUND. CDI IS AN AFFILIATE OF THE FUND'S ADVISOR. UNDER THE TERMS OF ITS
UNDERWRITING AGREEMENT WITH THE FUNDS, CDI MARKETS AND DISTRIBUTES THE FUND'S
SHARES AND IS RESPONSIBLE FOR PREPARING ADVERTISING AND SALES LITERATURE, AND
PRINTING AND MAILING PROSPECTUSES TO PROSPECTIVE INVESTORS. CDI IS ENTITLED TO
COMPENSATION FOR SERVICES PERFORMED AND EXPENSES ASSUMED. PAYMENTS TO CDI MAY BE
AUTHORIZED BY THE FUND'S BOARD OF DIRECTORS FROM TIME TO TIME IN ACCORDANCE WITH
APPLICABLE LAW. NO PAYMENTS WERE AUTHORIZED IN 1999. CDI IS RESPONSIBLE FOR
PAYING (I) ALL COMMISSIONS OR OTHER FEES TO ITS ASSOCIATED PERSONS WHICH ARE DUE
FOR THE SALE OF THE POLICIES, AND (II) ANY COMPENSATION TO OTHER BROKER-DEALERS
AND THEIR ASSOCIATED PERSONS DUE UNDER THE TERMS OF ANY SALES AGREEMENT BETWEEN
CDI AND THE BROKER-DEALERS. THE ADVISOR AND CDI, AT THEIR OWN EXPENSE, MAY INCUR
COSTS OR PAY EXPENSES ASSOCIATED WITH THE DISTRIBUTION OF THE FUND'S SHARES.
PORTFOLIO TRANSACTIONS
----------------------
PORTFOLIO TRANSACTIONS ARE UNDERTAKEN ON THE BASIS OF THEIR DESIRABILITY
FROM AN INVESTMENT STANDPOINT. THE FUND'S ADVISOR AND SUBADVISORS MAKE
INVESTMENT DECISIONS AND THE CHOICE OF BROKERS AND DEALERS UNDER THE DIRECTION
AND SUPERVISION OF THE FUND'S BOARD OF DIRECTORS.
BROKER-DEALERS WHO EXECUTE PORTFOLIO TRANSACTIONS ON BEHALF OF THE FUND ARE
SELECTED ON THE BASIS OF THEIR EXECUTION CAPABILITY AND TRADING EXPERTISE
CONSIDERING, AMONG OTHER FACTORS, THE OVERALL REASONABLENESS OF THE BROKERAGE
COMMISSIONS, CURRENT MARKET CONDITIONS, SIZE AND TIMING OF THE ORDER, DIFFICULTY
OF EXECUTION, PER SHARE PRICE, MARKET FAMILIARITY, RELIABILITY, INTEGRITY, AND
FINANCIAL CONDITION, SUBJECT TO THE ADVISOR/SUBADVISOR OBLIGATION TO SEEK BEST
EXECUTION. THE ADVISOR OR SUBADVISOR(S) MAY ALSO CONSIDER SALES OF FUND SHARES
AS A FACTOR IN THE SELECTION OF BROKERS.
FOR THE LAST THREE FISCAL YEARS, TOTAL BROKERAGE COMMISSIONS PAID ARE AS
FOLLOWS:
1997 1998 1999
SOCIAL SMALL CAP GROWTH $12,275 $9,209 $5,720
SOCIAL MID CAP GROWTH $26,905 $37,585 $89,509
SOCIAL INTERNATIONAL EQUITY $83,107 $69,583 $48,607
SOCIAL BALANCED $156,483 $242,112 $271,226
FOR THE LAST THREE FISCAL YEARS, SOCIAL SMALL CAP GROWTH PAID BROKERAGE
COMMISSIONS TO RAYMOND JAMES, AN AFFILIATED PERSON AND THE CONTROLLING PARENT
COMPANY OF THE FUND'S SUBADVISOR AS FOLLOWS:
1997 1998 1999
SOCIAL SMALL CAP GROWTH N/A $4,095 $1,318
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, AGGREGATE BROKERAGE
COMMISSIONS PAID TO RAYMOND JAMES REPRESENTED 23% OF SOCIAL SMALL CAP GROWTH'S
TOTAL COMMISSIONS AND 6% OF THE TOTAL DOLLAR AMOUNT OF COMMISSION TRANSACTIONS.
WHILE THE FUND'S ADVISOR AND SUBADVISOR(S) SELECT BROKERS PRIMARILY ON THE
BASIS OF BEST EXECUTION, IN SOME CASES THEY MAY DIRECT TRANSACTIONS TO BROKERS
BASED ON THE QUALITY AND AMOUNT OF THE RESEARCH AND RESEARCH-RELATED SERVICES
WHICH THE BROKERS PROVIDE TO THEM. THESE RESEARCH SERVICES INCLUDE ADVICE,
EITHER DIRECTLY OR THROUGH PUBLICATIONS OR WRITINGS, AS TO THE VALUE OF
SECURITIES, THE ADVISABILITY OF INVESTING IN, PURCHASING OR SELLING SECURITIES,
AND THE AVAILABILITY OF SECURITIES OR PURCHASERS OR SELLERS OF SECURITIES;
FURNISHING OF ANALYSES AND REPORTS CONCERNING ISSUERS, SECURITIES OR INDUSTRIES;
PROVIDING INFORMATION ON ECONOMIC FACTORS AND TRENDS; ASSISTING IN DETERMINING
PORTFOLIO STRATEGY; PROVIDING COMPUTER SOFTWARE USED IN SECURITY ANALYSES;
PROVIDING PORTFOLIO PERFORMANCE EVALUATION AND TECHNICAL MARKET ANALYSES; AND
PROVIDING OTHER SERVICES RELEVANT TO THE INVESTMENT DECISION MAKING PROCESS.
OTHER SUCH SERVICES ARE DESIGNED PRIMARILY TO ASSIST THE ADVISOR IN MONITORING
THE INVESTMENT ACTIVITIES OF THE SUBADVISOR(S) OF THE FUND. SUCH SERVICES
INCLUDE PORTFOLIO ATTRIBUTION SYSTEMS, RETURN-BASED STYLE ANALYSIS, AND
TRADE-EXECUTION ANALYSIS. THE ADVISOR MAY ALSO DIRECT SELLING CONCESSIONS AND/OR
DISCOUNTS IN FIXED-PRICE OFFERINGS FOR RESEARCH SERVICES.
IF, IN THE JUDGMENT OF THE ADVISOR OR SUBADVISOR(S), THE FUND OR OTHER
ACCOUNTS MANAGED BY THEM WILL BE BENEFITED BY SUPPLEMENTAL RESEARCH SERVICES,
THEY ARE AUTHORIZED TO PAY BROKERAGE COMMISSIONS TO A BROKER FURNISHING SUCH
SERVICES WHICH ARE IN EXCESS OF COMMISSIONS WHICH ANOTHER BROKER MAY HAVE
CHARGED FOR EFFECTING THE SAME TRANSACTION. IT IS THE POLICY OF THE ADVISOR THAT
SUCH RESEARCH SERVICES WILL BE USED FOR THE BENEFIT OF THE FUND AS WELL AS OTHER
CALVERT GROUP FUNDS AND MANAGED ACCOUNTS.
FOR THE FISCAL YEAR DECEMBER 31, 1999, THE ADVISOR DIRECTED BROKERAGE FOR
RESEARCH SERVICES IN THE FOLLOWING AMOUNTS:
RELATED
AMOUNT OF TRANSACTIONS COMMISSIONS
SOCIAL SMALL CAP GROWTH 20,700 SHARES $1,035
SOCIAL MID CAP GROWTH 232,620 SHARES $1,631
SOCIAL INTERNATIONAL EQUITY 0 $0
SOCIAL BALANCED 1,506,180 SHARES $74,439
THE PORTFOLIO TURNOVER RATES FOR THE LAST TWO FISCAL YEARS ARE AS FOLLOWS:
1998 1999
SOCIAL SMALL CAP GROWTH 72% 79%
SOCIAL MID CAP GROWTH 65% 101%
SOCIAL INTERNATIONAL EQUITY 92% 59%
SOCIAL BALANCED* 539% 619%
* SOCIAL BALANCED'S FIXED-INCOME INVESTMENT STRATEGIES CAUSED IT TO HAVE A
RELATIVELY HIGH PORTFOLIO TURNOVER COMPARED TO OTHER PORTFOLIOS.
NO PORTFOLIO TURNOVER RATE CAN BE CALCULATED FOR SOCIAL MONEY MARKET DUE TO
THE SHORT MATURITIES OF THE INSTRUMENTS PURCHASED. PORTFOLIO TURNOVER SHOULD NOT
AFFECT THE INCOME OR NET ASSET VALUE OF SOCIAL MONEY MARKET BECAUSE BROKERAGE
COMMISSIONS ARE NOT NORMALLY CHARGED ON THE PURCHASE OR SALE OF MONEY MARKET
INSTRUMENTS.
PERSONAL SECURITIES TRANSACTIONS
--------------------------------
THE FUND, ITS ADVISOR, AND PRINCIPAL UNDERWRITER HAVE ADOPTED A CODE OF
ETHICS PURSUANT TO RULE 17J-1 OF THE INVESTMENT COMPANY ACT OF 1940. THE CODE OF
ETHICS IS DESIGNED TO PROTECT THE PUBLIC FROM ABUSIVE TRADING PRACTICES AND TO
MAINTAIN ETHICAL STANDARDS FOR ACCESS PERSONS AS DEFINED IN THE RULE WHEN
DEALING WITH THE PUBLIC. THE CODE OF ETHICS PERMITS THE FUND'S INVESTMENT
PERSONNEL TO INVEST IN SECURITIES THAT MAY BE PURCHASED OR HELD BY THE FUND. THE
CODE OF ETHICS CONTAINS CERTAIN CONDITIONS SUCH AS PRE-CLEARANCE AND
RESTRICTIONS ON USE OF MATERIAL INFORMATION.
GENERAL INFORMATION
-------------------
THE FUND IS AN OPEN-END, MANAGEMENT INVESTMENT COMPANY, INCORPORATED IN
MARYLAND ON SEPTEMBER 27, 1982. SOCIAL MONEY MARKET, SOCIAL SMALL CAP GROWTH AND
SOCIAL INTERNATIONAL EQUITY ARE DIVERSIFIED. SOCIAL MID CAP GROWTH AND SOCIAL
BALANCED ARE NON-DIVERSIFIED. THE FUND WAS FORMERLY KNOWN AS "ACACIA CAPITAL
CORPORATION" AND THE PORTFOLIOS, SOCIAL MONEY MARKET, SOCIAL SMALL CAP GROWTH,
SOCIAL MID CAP GROWTH, SOCIAL INTERNATIONAL EQUITY AND SOCIAL BALANCED, WERE
FORMERLY KNOWN AS CALVERT RESPONSIBLY INVESTED MONEY MARKET, STRATEGIC GROWTH,
CAPITAL ACCUMULATION, GLOBAL EQUITY AND BALANCED, RESPECTIVELY.
THE FUND ISSUES SEPARATE STOCK FOR EACH PORTFOLIO. SHARES OF EACH OF THE
PORTFOLIOS HAVE EQUAL RIGHTS WITH REGARD TO VOTING, REDEMPTIONS, DIVIDENDS,
DISTRIBUTIONS, AND LIQUIDATIONS. NO PORTFOLIO HAS PREFERENCE OVER ANOTHER
PORTFOLIO. THE INSURANCE COMPANIES AND THE FUND'S SHAREHOLDERS WILL VOTE FUND
SHARES ALLOCATED TO REGISTERED SEPARATE ACCOUNTS IN ACCORDANCE WITH INSTRUCTIONS
RECEIVED FROM POLICYHOLDERS. UNDER CERTAIN CIRCUMSTANCES, WHICH ARE DESCRIBED IN
THE ACCOMPANYING PROSPECTUS OF THE VARIABLE LIFE OR ANNUITY POLICY, THE VOTING
INSTRUCTIONS RECEIVED FROM VARIABLE LIFE OR ANNUITY POLICYHOLDERS MAY BE
DISREGARDED.
ALL SHARES OF COMMON STOCK HAVE EQUAL VOTING RIGHTS (REGARDLESS OF THE NET
ASSET VALUE PER SHARE) EXCEPT THAT ONLY SHARES OF THE RESPECTIVE PORTFOLIO ARE
ENTITLED TO VOTE ON MATTERS CONCERNING ONLY THAT PORTFOLIO. PURSUANT TO THE 1940
ACT AND THE RULES AND REGULATIONS THEREUNDER, CERTAIN MATTERS APPROVED BY A VOTE
OF ALL SHAREHOLDERS OF THE FUND MAY NOT BE BINDING ON A PORTFOLIO WHOSE
SHAREHOLDERS HAVE NOT APPROVED THAT MATTER. EACH ISSUED AND OUTSTANDING SHARE IS
ENTITLED TO ONE VOTE AND TO PARTICIPATE EQUALLY IN DIVIDENDS AND DISTRIBUTIONS
DECLARED BY THE RESPECTIVE PORTFOLIO AND, UPON LIQUIDATION OR DISSOLUTION, IN
NET ASSETS OF SUCH PORTFOLIO REMAINING AFTER SATISFACTION OF OUTSTANDING
LIABILITIES. THE SHARES OF EACH PORTFOLIO, WHEN ISSUED, WILL BE FULLY PAID AND
NON-ASSESSABLE AND HAVE NO PREEMPTIVE OR CONVERSION RIGHTS. HOLDERS OF SHARES OF
ANY PORTFOLIO ARE ENTITLED TO REDEEM THEIR SHARES AS SET FORTH ABOVE UNDER
"PURCHASE AND REDEMPTION OF SHARES." THE SHARES DO NOT HAVE CUMULATIVE VOTING
RIGHTS AND THE HOLDERS OF MORE THAN 50% OF THE SHARES OF THE FUND VOTING FOR THE
ELECTION OF DIRECTORS CAN ELECT ALL OF THE DIRECTORS OF THE FUND IF THEY CHOOSE
TO DO SO AND IN SUCH EVENT THE HOLDERS OF THE REMAINING SHARES WOULD NOT BE ABLE
TO ELECT ANY DIRECTORS.
THE FUND'S BOARD OF DIRECTORS HAS ADOPTED A "PROPORTIONATE VOTING" POLICY,
MEANING THAT INSURANCE COMPANIES WILL VOTE ALL OF THE FUND'S SHARES, INCLUDING
SHARES THE INSURANCE COMPANIES HOLD, IN RETURN FOR PROVIDING THE FUND WITH ITS
CAPITAL AND IN PAYMENT OF CHARGES MADE AGAINST THE VARIABLE ANNUITY OR VARIABLE
LIFE SEPARATE ACCOUNTS, IN PROPORTION TO THE VOTES RECEIVED FROM CONTRACTHOLDERS
OR POLICYOWNERS.
THE FUND IS NOT REQUIRED TO HOLD ANNUAL POLICYHOLDER MEETINGS, BUT SPECIAL
MEETINGS MAY BE CALLED FOR CERTAIN PURPOSES SUCH AS ELECTING DIRECTORS, CHANGING
FUNDAMENTAL POLICIES, OR APPROVING A MANAGEMENT CONTRACT. AS A POLICYHOLDER, YOU
RECEIVE ONE VOTE FOR EACH SHARE YOU OWN.
APPENDIX
--------
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE INC.'S/STANDARD & POOR'S MUNICIPAL BOND RATINGS:
AAA/AAA: BEST QUALITY. THESE BONDS CARRY THE SMALLEST DEGREE OF INVESTMENT
RISK AND ARE GENERALLY REFERRED TO AS "GILT EDGE." INTEREST PAYMENTS ARE
PROTECTED BY A LARGE OR BY AN EXCEPTIONALLY STABLE MARGIN AND PRINCIPAL IS
SECURE. THIS RATING INDICATES AN EXTREMELY STRONG CAPACITY TO PAY PRINCIPAL AND
INTEREST.
AA/AA: BONDS RATED AA ALSO QUALIFY AS HIGH-QUALITY DEBT OBLIGATIONS.
CAPACITY TO PAY PRINCIPAL AND INTEREST IS VERY STRONG, AND IN THE MAJORITY OF
INSTANCES THEY DIFFER FROM AAA ISSUES ONLY IN SMALL DEGREE. THEY ARE RATED LOWER
THAN THE BEST BONDS BECAUSE MARGINS OF PROTECTION MAY NOT BE AS LARGE AS IN AAA
SECURITIES, FLUCTUATION OF PROTECTIVE ELEMENTS MAY BE OF GREATER AMPLITUDE, OR
THERE MAY BE OTHER ELEMENTS PRESENT WHICH MAKE LONG-TERM RISKS APPEAR SOMEWHAT
LARGER THAN IN AAA SECURITIES.
A/A: UPPER-MEDIUM GRADE OBLIGATIONS. FACTORS GIVING SECURITY TO PRINCIPAL
AND INTEREST ARE CONSIDERED ADEQUATE, BUT ELEMENTS MAY BE PRESENT WHICH MAKE THE
BOND SOMEWHAT MORE SUSCEPTIBLE TO THE ADVERSE EFFECTS OF CIRCUMSTANCES AND
ECONOMIC CONDITIONS.
BAA/BBB: MEDIUM GRADE OBLIGATIONS; ADEQUATE CAPACITY TO PAY PRINCIPAL AND
INTEREST. WHEREAS THEY NORMALLY EXHIBIT ADEQUATE PROTECTION PARAMETERS, ADVERSE
ECONOMIC CONDITIONS OR CHANGING CIRCUMSTANCES ARE MORE LIKELY TO LEAD TO A
WEAKENED CAPACITY TO PAY PRINCIPAL AND INTEREST FOR BONDS IN THIS CATEGORY THAN
FOR BONDS IN THE A CATEGORY.
BA/BB, B/B, CAA/CCC, CA/CC: DEBT RATED IN THESE CATEGORIES IS REGARDED AS
PREDOMINANTLY SPECULATIVE WITH RESPECT TO CAPACITY TO PAY INTEREST AND REPAY
PRINCIPAL. THERE MAY BE SOME LARGE UNCERTAINTIES AND MAJOR RISK EXPOSURE TO
ADVERSE CONDITIONS. THE HIGHER THE DEGREE OF SPECULATION, THE LOWER THE RATING.
C/C: THIS RATING IS ONLY FOR NO-INTEREST INCOME BONDS.
D: DEBT IN DEFAULT; PAYMENT OF INTEREST AND/OR PRINCIPAL IS IN ARREARS.
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICES, INC.
A PRIME RATING IS THE HIGHEST COMMERCIAL PAPER RATING ASSIGNED BY MOODY'S
INVESTORS SERVICE, INC. ISSUERS RATED PRIME ARE FURTHER REFERRED TO BY USE OF
NUMBERS 1, 2, AND 3 TO DENOTE RELATIVE STRENGTH WITHIN THIS HIGHEST
CLASSIFICATION. AMONG THE FACTORS CONSIDERED BY MOODY'S IN ASSIGNING RATINGS FOR
AN ISSUER ARE THE FOLLOWING: (1) MANAGEMENT; (2) ECONOMIC EVALUATION OF THE
INHERENT UNCERTAIN AREAS; (3) COMPETITION AND CUSTOMER ACCEPTANCE OF PRODUCTS;
(4) LIQUIDITY; (5) AMOUNT AND QUALITY OF LONG-TERM DEBT; (6) TEN YEAR EARNINGS
TRENDS; (7) FINANCIAL STRENGTH OF A PARENT COMPANY AND THE RELATIONSHIPS WHICH
EXIST WITH THE ISSUER; AND (8) RECOGNITION BY MANAGEMENT OF OBLIGATIONS WHICH
MAY BE PRESENT OR MAY ARISE AS A RESULT OF PUBLIC INTEREST QUESTIONS AND
PREPARATIONS TO MEET SUCH OBLIGATIONS.
STANDARD & POOR'S CORPORATION
COMMERCIAL PAPER RATED A BY STANDARD & POOR'S CORPORATION HAS THE FOLLOWING
CHARACTERISTICS: LIQUIDITY RATIOS ARE BETTER THAN THE INDUSTRY AVERAGE. LONG
TERM SENIOR DEBT RATING IS "A" OR BETTER. IN SOME CASES BBB CREDITS MAY BE
ACCEPTABLE. THE ISSUER HAS ACCESS TO AT LEAST TWO ADDITIONAL CHANNELS OF
BORROWING. BASIC EARNINGS AND CASH FLOW HAVE AN UPWARD TREND WITH ALLOWANCE MADE
FOR UNUSUAL CIRCUMSTANCES. TYPICALLY, THE ISSUER'S INDUSTRY IS WELL ESTABLISHED,
THE ISSUER HAS A STRONG POSITION WITHIN ITS INDUSTRY AND THE RELIABILITY AND
QUALITY OF MANAGEMENT IS UNQUESTIONED. ISSUERS RATED A ARE FURTHER REFERRED TO
BY USE OF NUMBERS 1, 2, AND 3 TO DENOTE RELATIVE STRENGTH WITHIN THIS
CLASSIFICATION.
CALVERT VARIABLE SERIES, INC.
AMERITAS INCOME & GROWTH PORTFOLIO
AMERITAS GROWTH PORTFOLIO
AMERITAS SMALL CAPITALIZATION PORTFOLIO
AMERITAS MIDCAP GROWTH PORTFOLIO
AMERITAS EMERGING GROWTH PORTFOLIO
AMERITAS RESEARCH PORTFOLIO
AMERITAS GROWTH WITH INCOME PORTFOLIO
AMERITAS INDEX 500 PORTFOLIO
AMERITAS MONEY MARKET PORTFOLIO
STATEMENT OF ADDITIONAL INFORMATION
APRIL 30, 2000
THIS STATEMENT OF ADDITIONAL INFORMATION ("SAI") IS NOT A PROSPECTUS.
INVESTORS SHOULD READ THE STATEMENT OF ADDITIONAL INFORMATION IN CONJUNCTION
WITH THE FUND'S PROSPECTUS, DATED APRIL 30, 2000. THE FUND'S AUDITED FINANCIAL
STATEMENTS INCLUDED IN ITS MOST RECENT ANNUAL REPORT TO SHAREHOLDERS, ARE
EXPRESSLY INCORPORATED BY REFERENCE, AND MADE A PART OF THIS SAI. THE PROSPECTUS
AND THE MOST RECENT SHAREHOLDER REPORT MAY BE OBTAINED FREE OF CHARGE BY CALLING
1-800-335-9858 OR BY WRITING THE FUND AT 5900 "O" STREET, LINCOLN, NEBRASKA
68510-1889.
TABLE OF CONTENTS
-----------------
INVESTMENT POLICIES AND RISKS 1
- --------------------------------
INVESTMENT RESTRICTIONS 9
- ------------------------
PURCHASE AND REDEMPTION OF SHARES 14
NET ASSET VALUE 15
TAXES 15
CALCULATION OF YIELD AND TOTAL RETURN 16
DIRECTORS AND OFFICERS 17
INVESTMENT ADVISOR AND SUBADVISORS 20
ADMINISTRATIVE SERVICES AGENT 21
TRANSFER AND SHAREHOLDER SERVICING AGENT 21
INDEPENDENT ACCOUNTANTS AND CUSTODIANS 22
METHOD OF DISTRIBUTION 22
PORTFOLIO TRANSACTIONS 22
PERSONAL SECURITIES TRANSACTIONS 23
GENERAL INFORMATION 24
APPENDIX 24
<PAGE>
INVESTMENT POLICIES AND RISKS
-----------------------------
THE AMERITAS PORTFOLIOS OF CALVERT VARIABLE SERIES, INC. ("THE FUND") OFFER
INVESTORS THE OPPORTUNITY TO INVEST IN SEVERAL PROFESSIONALLY MANAGED SECURITIES
PORTFOLIOS WHICH OFFER THE OPPORTUNITY FOR GROWTH OF CAPITAL OR CURRENT INCOME.
THE AMERITAS PORTFOLIOS OFFER INVESTORS A CHOICE OF NINE SEPARATE PORTFOLIOS:
INCOME & GROWTH, GROWTH, SMALL CAPITALIZATION, MIDCAP GROWTH, EMERGING GROWTH,
RESEARCH, GROWTH WITH INCOME, INDEX 500 AND MONEY MARKET PORTFOLIOS.
FOREIGN SECURITIES (NOT APPLICABLE TO THE INDEX 500 AND MONEY MARKET PORTFOLIOS)
THE PORTFOLIOS MAY INVEST A PORTION OF THEIR ASSETS IN FOREIGN SECURITIES.
THE EMERGING GROWTH PORTFOLIO MAY INVEST UP TO 25%, AND THE OTHER PORTFOLIOS MAY
EACH INVEST UP TO 20% OF THEIR RESPECTIVE ASSETS IN THE SECURITIES OF FOREIGN
ISSUERS. THE MONEY MARKET PORTFOLIO MAY PURCHASE ONLY HIGH QUALITY, U.S.
DOLLAR-DENOMINATED INSTRUMENTS.
INVESTMENTS IN FOREIGN SECURITIES MAY PRESENT RISKS NOT TYPICALLY INVOLVED
IN DOMESTIC INVESTMENTS. THE FUND MAY PURCHASE FOREIGN SECURITIES DIRECTLY, ON
FOREIGN MARKETS, OR THOSE REPRESENTED BY AMERICAN DEPOSITARY RECEIPTS ("ADRS"),
OR OTHER RECEIPTS EVIDENCING OWNERSHIP OF FOREIGN SECURITIES, SUCH AS
INTERNATIONAL DEPOSITORY RECEIPTS AND GLOBAL DEPOSITARY RECEIPTS. ADRS ARE U.S.
DOLLAR-DENOMINATED AND TRADED IN THE U.S. ON EXCHANGES OR OVER THE COUNTER. BY
INVESTING IN ADRS RATHER THAN DIRECTLY IN FOREIGN ISSUERS' STOCK, THE FUND MAY
POSSIBLY AVOID SOME CURRENCY AND SOME LIQUIDITY RISKS. THE INFORMATION AVAILABLE
FOR ADRS IS SUBJECT TO THE MORE UNIFORM AND MORE EXACTING ACCOUNTING, AUDITING
AND FINANCIAL REPORTING STANDARDS OF THE DOMESTIC MARKET OR EXCHANGE ON WHICH
THEY ARE TRADED.
ADDITIONAL COSTS MAY BE INCURRED IN CONNECTION WITH INTERNATIONAL
INVESTMENT SINCE FOREIGN BROKERAGE COMMISSIONS AND THE CUSTODIAL COSTS
ASSOCIATED WITH MAINTAINING FOREIGN PORTFOLIO SECURITIES ARE GENERALLY HIGHER
THAN IN THE UNITED STATES. FEE EXPENSE MAY ALSO BE INCURRED ON CURRENCY
EXCHANGES WHEN THE FUND CHANGES INVESTMENTS FROM ONE COUNTRY TO ANOTHER OR
CONVERTS FOREIGN SECURITIES HOLDINGS INTO U.S. DOLLARS.
UNITED STATES GOVERNMENT POLICIES HAVE AT TIMES, IN THE PAST, THROUGH
IMPOSITION OF INTEREST EQUALIZATION TAXES AND OTHER RESTRICTIONS, DISCOURAGED
CERTAIN INVESTMENTS ABROAD BY UNITED STATES INVESTORS.
INVESTING IN EMERGING MARKETS IN PARTICULAR, THOSE COUNTRIES WHOSE
ECONOMIES AND CAPITAL MARKETS ARE NOT AS DEVELOPED AS THOSE OF MORE
INDUSTRIALIZED NATIONS, CARRIES ITS OWN SPECIAL RISKS. AMONG OTHER RISKS, THE
ECONOMIES OF SUCH COUNTRIES MAY BE AFFECTED TO A GREATER EXTENT THAN IN OTHER
COUNTRIES BY PRICE FLUCTUATIONS OF A SINGLE COMMODITY, BY SEVERE CYCLICAL
CLIMACTIC CONDITIONS, LACK OF SIGNIFICANT HISTORY IN OPERATING UNDER A
MARKET-ORIENTED ECONOMY, OR BY POLITICAL INSTABILITY, INCLUDING RISK OF
EXPROPRIATION.
IN DETERMINING THE APPROPRIATE DISTRIBUTION OF INVESTMENTS AMONG VARIOUS
COUNTRIES AND GEOGRAPHIC REGIONS, THE SUBADVISOR ORDINARILY WILL CONSIDER THE
FOLLOWING FACTORS: PROSPECTS FOR RELATIVE ECONOMIC GROWTH AMONG FOREIGN
COUNTRIES; EXPECTED LEVELS OF INFLATION; RELATIVE PRICE LEVELS OF THE VARIOUS
CAPITAL MARKETS; GOVERNMENT POLICIES INFLUENCING BUSINESS CONDITIONS; THE
OUTLOOK FOR CURRENCY RELATIONSHIPS AND THE RANGE OF INDIVIDUAL INVESTMENT
OPPORTUNITIES AVAILABLE TO THE GLOBAL INVESTOR.
SINCE INVESTMENTS IN SECURITIES OF ISSUERS DOMICILED IN FOREIGN COUNTRIES
USUALLY INVOLVE CURRENCIES OF THE FOREIGN COUNTRIES, AND SINCE THE FUND MAY
TEMPORARILY HOLD FUNDS IN FOREIGN CURRENCIES DURING THE COMPLETION OF INVESTMENT
PROGRAMS, THE VALUE OF THE ASSETS OF THE FUND AS MEASURED IN UNITED STATES
DOLLARS MAY BE AFFECTED FAVORABLY OR UNFAVORABLY BY CHANGES IN FOREIGN CURRENCY
EXCHANGE RATES AND EXCHANGE CONTROL REGULATIONS. FOR EXAMPLE, IF THE VALUE OF
THE FOREIGN CURRENCY IN WHICH A SECURITY IS DENOMINATED INCREASES OR DECLINES IN
RELATION TO THE VALUE OF THE U.S. DOLLAR, THE VALUE OF THE SECURITY IN U.S.
DOLLARS WILL INCREASE OR DECLINE CORRESPONDINGLY. THE FUND WILL CONDUCT ITS
FOREIGN CURRENCY EXCHANGE TRANSACTIONS EITHER ON A SPOT (I.E., CASH) BASIS AT
THE SPOT RATE PREVAILING IN THE FOREIGN EXCHANGE MARKET, OR THROUGH ENTERING
INTO FORWARD CONTRACTS TO PURCHASE OR SELL FOREIGN CURRENCIES. A FORWARD FOREIGN
CURRENCY CONTRACT INVOLVES AN OBLIGATION TO PURCHASE OR SELL A SPECIFIC CURRENCY
AT A FUTURE DATE WHICH MAY BE ANY FIXED NUMBER OF DAYS FROM THE DATE OF THE
CONTRACT AGREED UPON BY THE PARTIES, AT A PRICE SET AT THE TIME OF THE CONTRACT.
THESE CONTRACTS ARE TRADED IN THE INTERBANK MARKET CONDUCTED DIRECTLY BETWEEN
CURRENCY TRADERS (USUALLY LARGE, COMMERCIAL BANKS) AND THEIR CUSTOMERS. A
FORWARD FOREIGN CURRENCY CONTRACT GENERALLY HAS NO DEPOSIT REQUIREMENT, AND NO
COMMISSIONS ARE CHARGED AT ANY STAGE FOR TRADES.
A PORTFOLIO MAY ENTER INTO FORWARD FOREIGN CURRENCY CONTRACTS FOR TWO
REASONS. FIRST, THE PORTFOLIO MAY DESIRE TO PRESERVE THE UNITED STATES DOLLAR
PRICE OF A SECURITY WHEN IT ENTERS INTO A CONTRACT FOR THE PURCHASE OR SALE OF A
SECURITY DENOMINATED IN A FOREIGN CURRENCY. A PORTFOLIO MAY BE ABLE TO PROTECT
ITSELF AGAINST POSSIBLE LOSSES RESULTING FROM CHANGES IN THE RELATIONSHIP
BETWEEN THE UNITED STATES DOLLAR AND FOREIGN CURRENCIES DURING THE PERIOD
BETWEEN THE DATE THE SECURITY IS PURCHASED OR SOLD AND THE DATE ON WHICH PAYMENT
IS MADE OR RECEIVED BY ENTERING INTO A FORWARD CONTRACT FOR THE PURCHASE OR
SALE, FOR A FIXED AMOUNT OF DOLLARS, OF THE AMOUNT OF THE FOREIGN CURRENCY
INVOLVED IN THE UNDERLYING SECURITY TRANSACTIONS.
SECOND, WHEN THE ADVISOR OR SUBADVISOR BELIEVES THAT THE CURRENCY OF A
PARTICULAR FOREIGN COUNTRY MAY SUFFER A SUBSTANTIAL DECLINE AGAINST THE UNITED
STATES DOLLAR, A PORTFOLIO MAY ENTER INTO A FORWARD FOREIGN CURRENCY CONTRACT TO
SELL, FOR A FIXED AMOUNT OF DOLLARS, THE AMOUNT OF FOREIGN CURRENCY
APPROXIMATING THE VALUE OF SOME OR ALL OF THE PORTFOLIO SECURITIES DENOMINATED
IN SUCH FOREIGN CURRENCY. THE PRECISE MATCHING OF THE FORWARD FOREIGN CURRENCY
CONTRACT AMOUNTS AND THE VALUE OF THE PORTFOLIO SECURITIES INVOLVED WILL NOT
GENERALLY BE POSSIBLE SINCE THE FUTURE VALUE OF THE SECURITIES WILL CHANGE AS A
CONSEQUENCE OF MARKET MOVEMENTS BETWEEN THE DATE THE FORWARD CONTRACT IS ENTERED
INTO AND THE DATE IT MATURES. THE PROJECTION OF SHORT-TERM CURRENCY MARKET
MOVEMENT IS DIFFICULT, AND THE SUCCESSFUL EXECUTION OF THIS SHORT-TERM HEDGING
STRATEGY IS UNCERTAIN. ALTHOUGH FORWARD FOREIGN CURRENCY CONTRACTS TEND TO
MINIMIZE THE RISK OF LOSS DUE TO A DECLINE IN THE VALUE OF THE HEDGED CURRENCY,
AT THE SAME TIME THEY TEND TO LIMIT ANY POTENTIAL GAIN WHICH MIGHT RESULT SHOULD
THE VALUE OF SUCH CURRENCY INCREASE. THE PORTFOLIOS DO NOT INTEND TO ENTER INTO
SUCH FORWARD CONTRACTS UNDER THIS CIRCUMSTANCE ON A REGULAR OR CONTINUOUS BASIS.
EUROCURRENCY CONVERSION RISK
EUROPEAN COUNTRIES THAT ARE MEMBERS OF THE EUROPEAN MONETARY UNION HAVE
AGREED TO USE A COMMON CURRENCY UNIT, THE "EURO". CURRENTLY, EACH OF THESE
COUNTRIES HAS ITS OWN CURRENCY UNIT. ALTHOUGH THE ADVISOR DOES NOT ANTICIPATE
ANY PROBLEMS IN CONVERSION FROM THE OLD CURRENCIES TO THE EURO, THERE MAY BE
ISSUES INVOLVED IN SETTLEMENT, VALUATION, AND NUMEROUS OTHER AREAS THAT COULD
IMPACT THE FUND. THE ADVISOR AND SUBADVISORS HAVE BEEN REVIEWING ALL OF THEIR
COMPUTER SYSTEMS FOR EUROCURRENCY CONVERSION COMPLIANCE. THERE CAN BE NO
ASSURANCE THAT THERE WILL BE NO NEGATIVE IMPACT ON THE FUND, HOWEVER, THE
ADVISOR, SUBADVISORS AND CUSTODIAN HAVE ADVISED THE FUND THAT THEY HAVE BEEN
ACTIVELY WORKING ON ANY NECESSARY CHANGES TO THEIR COMPUTER SYSTEMS TO PREPARE
FOR THE CONVERSION, AND EXPECT THAT THEIR SYSTEMS, AND THOSE OF THEIR OUTSIDE
SERVICE PROVIDERS, WILL BE ADAPTED IN TIME FOR THAT EVENT.
FOREIGN MONEY MARKET INSTRUMENTS
THE MONEY MARKET PORTFOLIO MAY INVEST WITHOUT LIMITATION IN MONEY MARKET
INSTRUMENTS OF BANKS, WHETHER FOREIGN OR DOMESTIC, INCLUDING OBLIGATIONS OF U.S.
BRANCHES OF FOREIGN BANKS ("YANKEE" INSTRUMENTS) AND OBLIGATIONS OF FOREIGN
BRANCHES OF U.S. BANKS ("EURODOLLAR" INSTRUMENTS). ALL SUCH INSTRUMENTS MUST BE
HIGH-QUALITY, U.S. DOLLAR-DENOMINATED OBLIGATIONS. IT IS AN OPERATING (I.E.,
NONFUNDAMENTAL) POLICY OF THE MONEY MARKET PORTFOLIO THAT IT MAY INVEST ONLY IN
FOREIGN MONEY MARKET INSTRUMENTS IF THEY ARE OF COMPARABLE QUALITY TO THE
OBLIGATIONS OF DOMESTIC BANKS. ALTHOUGH THESE INSTRUMENTS ARE NOT SUBJECT TO
FOREIGN CURRENCY RISK SINCE THEY ARE U.S. DOLLAR-DENOMINATED, INVESTMENTS IN
FOREIGN MONEY MARKET INSTRUMENTS MAY INVOLVE RISKS THAT ARE DIFFERENT THAN
INVESTMENTS IN SECURITIES OF U.S. ISSUERS. SEE "FOREIGN SECURITIES" ABOVE.
SMALL CAP ISSUERS
THE SECURITIES OF SMALL CAP ISSUERS MAY BE LESS ACTIVELY TRADED THAN THE
SECURITIES OF LARGER ISSUERS, MAY TRADE IN A MORE LIMITED VOLUME, AND MAY CHANGE
IN VALUE MORE ABRUPTLY THAN SECURITIES OF LARGER COMPANIES. INFORMATION
CONCERNING THESE SECURITIES MAY NOT BE READILY AVAILABLE SO THAT THE COMPANIES
MAY BE LESS ACTIVELY FOLLOWED BY STOCK ANALYSTS. SMALL-CAP ISSUERS DO NOT
USUALLY PARTICIPATE IN MARKET RALLIES TO THE SAME EXTENT AS MORE WIDELY-KNOWN
SECURITIES, AND THEY TEND TO HAVE A RELATIVELY HIGHER PERCENTAGE OF INSIDER
OWNERSHIP.
INVESTING IN SMALLER, NEW ISSUERS GENERALLY INVOLVES GREATER RISK THAN INVESTING
IN LARGER, ESTABLISHED ISSUERS. COMPANIES IN WHICH THE PORTFOLIO IS LIKELY TO
INVEST MAY HAVE LIMITED PRODUCT LINES, MARKETS OR FINANCIAL RESOURCES AND MAY
LACK MANAGEMENT DEPTH. THE SECURITIES IN SUCH COMPANIES MAY ALSO HAVE LIMITED
MARKETABILITY AND MAY BE SUBJECT TO MORE ABRUPT OR ERRATIC MARKET MOVEMENTS THAN
SECURITIES OF LARGER, MORE ESTABLISHED COMPANIES OR THE MARKET AVERAGES IN
GENERAL.
TEMPORARY DEFENSIVE POSITIONS
FOR TEMPORARY DEFENSIVE PURPOSES - WHICH MAY INCLUDE A LACK OF ADEQUATE
PURCHASE CANDIDATES OR AN UNFAVORABLE MARKET ENVIRONMENT - THE FUND MAY INVEST
IN CASH OR CASH EQUIVALENTS. CASH EQUIVALENTS INCLUDE INSTRUMENTS SUCH AS, BUT
NOT LIMITED TO, U.S. GOVERNMENT AND AGENCY OBLIGATIONS, CERTIFICATES OF DEPOSIT,
BANKER'S ACCEPTANCES, TIME DEPOSITS COMMERCIAL PAPER, SHORT-TERM CORPORATE DEBT
SECURITIES, AND REPURCHASE AGREEMENTS.
REPURCHASE AGREEMENTS
REPURCHASE AGREEMENTS ARE ARRANGEMENTS UNDER WHICH A PORTFOLIO BUYS A
SECURITY AND THE SELLER SIMULTANEOUSLY AGREES TO REPURCHASE THE SECURITY AT A
SPECIFIED TIME AND PRICE. A PORTFOLIO MAY ENGAGE IN REPURCHASE AGREEMENTS IN
ORDER TO EARN A HIGHER RATE OF RETURN THAN IT COULD EARN SIMPLY BY INVESTING IN
THE OBLIGATION WHICH IS THE SUBJECT OF THE REPURCHASE AGREEMENT. REPURCHASE
AGREEMENTS ARE NOT, HOWEVER, WITHOUT RISK. IN THE EVENT OF THE BANKRUPTCY OF A
SELLER DURING THE TERM OF A REPURCHASE AGREEMENT, A LEGAL QUESTION EXISTS AS TO
WHETHER THE PORTFOLIO WOULD BE DEEMED THE OWNER OF THE UNDERLYING SECURITY OR
WOULD BE DEEMED ONLY TO HAVE A SECURITY INTEREST IN AND LIEN UPON SUCH SECURITY.
A PORTFOLIO WILL ONLY ENGAGE IN REPURCHASE AGREEMENTS WITH RECOGNIZED SECURITIES
DEALERS AND BANKS DETERMINED TO PRESENT MINIMAL CREDIT RISK BY THE ADVISOR. IN
ADDITION, A PORTFOLIO WILL ONLY ENGAGE IN REPURCHASE AGREEMENTS REASONABLY
DESIGNED TO SECURE FULLY DURING THE TERM OF THE AGREEMENT THE SELLER'S
OBLIGATION TO REPURCHASE THE UNDERLYING SECURITY AND WILL MONITOR THE MARKET
VALUE OF THE UNDERLYING SECURITY DURING THE TERM OF THE AGREEMENT. IF THE VALUE
OF THE UNDERLYING SECURITY DECLINES AND IS NOT AT LEAST EQUAL TO THE REPURCHASE
PRICE DUE THE PORTFOLIO PURSUANT TO THE AGREEMENT, THE PORTFOLIO WILL REQUIRE
THE SELLER TO PLEDGE ADDITIONAL SECURITIES OR CASH TO SECURE THE SELLER'S
OBLIGATIONS PURSUANT TO THE AGREEMENT. IF THE SELLER DEFAULTS ON ITS OBLIGATION
TO REPURCHASE AND THE VALUE OF THE UNDERLYING SECURITY DECLINES, THE PORTFOLIO
MAY INCUR A LOSS AND MAY INCUR EXPENSES IN SELLING THE UNDERLYING SECURITY.
REPURCHASE AGREEMENTS ARE ALWAYS FOR PERIODS OF LESS THAN ONE YEAR. REPURCHASE
AGREEMENTS NOT TERMINABLE WITHIN SEVEN DAYS ARE CONSIDERED ILLIQUID.
REVERSE REPURCHASE AGREEMENTS
UNDER A REVERSE REPURCHASE AGREEMENT, A PORTFOLIO SELLS SECURITIES TO A
BANK OR SECURITIES DEALER AND AGREES TO REPURCHASE THOSE SECURITIES FROM SUCH
PARTY AT AN AGREED UPON DATE AND PRICE REFLECTING A MARKET RATE OF INTEREST. THE
PORTFOLIO INVESTS THE PROCEEDS FROM EACH REVERSE REPURCHASE AGREEMENT IN
OBLIGATIONS IN WHICH IT IS AUTHORIZED TO INVEST. THE PORTFOLIOS INTEND TO ENTER
INTO A REVERSE REPURCHASE AGREEMENT ONLY WHEN THE INTEREST INCOME PROVIDED FOR
IN THE OBLIGATION IN WHICH THE PORTFOLIO INVESTS THE PROCEEDS IS EXPECTED TO
EXCEED THE AMOUNT THE PORTFOLIO WILL PAY IN INTEREST TO THE OTHER PARTY TO THE
AGREEMENT PLUS ALL COSTS ASSOCIATED WITH THE TRANSACTIONS. THE PORTFOLIOS DO NOT
INTEND TO BORROW FOR LEVERAGE PURPOSES. A PORTFOLIO WILL ONLY BE PERMITTED TO
PLEDGE ASSETS TO THE EXTENT NECESSARY TO SECURE BORROWINGS AND REVERSE
REPURCHASE AGREEMENTS.
DURING THE TIME A REVERSE REPURCHASE AGREEMENT IS OUTSTANDING, THE
PORTFOLIO WILL MAINTAIN IN A SEGREGATED CUSTODIAL ACCOUNT AN AMOUNT OF CASH,
U.S. GOVERNMENT SECURITIES OR OTHER LIQUID, HIGH-QUALITY DEBT SECURITIES EQUAL
IN VALUE TO THE REPURCHASE PRICE. THE PORTFOLIO WILL MARK TO MARKET THE VALUE OF
ASSETS HELD IN THE SEGREGATED ACCOUNT, AND WILL PLACE ADDITIONAL ASSETS IN THE
ACCOUNT WHENEVER THE TOTAL VALUE OF THE ACCOUNT FALLS BELOW THE AMOUNT REQUIRED
UNDER APPLICABLE REGULATIONS.
THE USE OF REVERSE REPURCHASE AGREEMENTS INVOLVES THE RISK THAT THE OTHER
PARTY TO THE AGREEMENTS COULD BECOME SUBJECT TO BANKRUPTCY OR LIQUIDATION
PROCEEDINGS DURING THE PERIOD THE AGREEMENTS ARE OUTSTANDING. IN SUCH EVENT, THE
PORTFOLIO MAY NOT BE ABLE TO REPURCHASE THE SECURITIES IT HAS SOLD TO THAT OTHER
PARTY. UNDER THOSE CIRCUMSTANCES, IF AT THE EXPIRATION OF THE AGREEMENT SUCH
SECURITIES ARE OF GREATER VALUE THAN THE PROCEEDS OBTAINED BY THE PORTFOLIO
UNDER THE AGREEMENTS, THE PORTFOLIO MAY HAVE BEEN BETTER OFF HAD IT NOT ENTERED
INTO THE AGREEMENT. HOWEVER, THE PORTFOLIO WILL ENTER INTO REVERSE REPURCHASE
AGREEMENTS ONLY WITH BANKS AND DEALERS WHICH THE ADVISOR BELIEVES PRESENT
MINIMAL CREDIT RISKS UNDER GUIDELINES ADOPTED BY THE FUND'S BOARD OF DIRECTORS.
IN ADDITION, THE PORTFOLIO BEARS THE RISK THAT THE MARKET VALUE OF THE
SECURITIES SOLD BY THE PORTFOLIO MAY DECLINE BELOW THE AGREED-UPON REPURCHASE
PRICE, IN WHICH CASE THE DEALER MAY REQUEST THE PORTFOLIO TO POST ADDITIONAL
COLLATERAL.
U.S. GOVERNMENT-BACKED OBLIGATIONS
GINNIE MAES, ISSUED BY THE GOVERNMENT NATIONAL MORTGAGE ASSOCIATION, ARE
TYPICALLY INTERESTS IN POOLS OF MORTGAGE LOANS INSURED BY THE FEDERAL HOUSING
ADMINISTRATION OR GUARANTEED BY THE VETERANS ADMINISTRATION. A "POOL" OR GROUP
OF SUCH MORTGAGES IS ASSEMBLED AND, AFTER APPROVAL FROM GNMA, IS OFFERED TO
INVESTORS THROUGH VARIOUS SECURITIES DEALERS. GNMA IS A U.S. GOVERNMENT
CORPORATION WITHIN THE DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT. GINNIE MAES
ARE BACKED BY THE FULL FAITH AND CREDIT OF THE UNITED STATES, WHICH MEANS THAT
THE U.S. GOVERNMENT GUARANTEES THAT INTEREST AND PRINCIPAL WILL BE PAID WHEN
DUE.
THE ADVISOR WILL ATTEMPT, THROUGH CAREFUL EVALUATION OF AVAILABLE GNMA
ISSUES AND PREVAILING MARKET CONDITIONS, TO INVEST IN GNMA CERTIFICATES WHICH
PROVIDE A HIGH INCOME RETURN BUT ARE NOT SUBJECT TO SUBSTANTIAL RISK OF LOSS OF
PRINCIPAL. ACCORDINGLY, THE ADVISOR MAY FOREGO THE OPPORTUNITY TO INVEST IN
CERTAIN ISSUES OF GNMA CERTIFICATES WHICH WOULD PROVIDE A HIGH CURRENT INCOME
YIELD IF THE ADVISOR DETERMINES THAT SUCH ISSUES WOULD BE SUBJECT TO A RISK OF
PREPAYMENT AND LOSS OF PRINCIPAL OVER THE LONG TERM THAT WOULD OUTWEIGH THE
SHORT-TERM INCREMENT IN YIELD.
NON-INVESTMENT GRADE DEBT SECURITIES
THE EMERGING GROWTH AND RESEARCH PORTFOLIOS MAY INVEST IN LOWER QUALITY
DEBT SECURITIES (GENERALLY THOSE RATED BB OR LOWER BY S&P OR BA OR LOWER BY
MOODY'S, KNOWN AS "JUNK BONDS"). THE EMERGING GROWTH'S INVESTMENT POLICY
PROVIDES THAT IT MAY NOT INVEST MORE THAN 5%, AND NO MORE THAN 10% FOR THE
RESEARCH PORTFOLIO, OF THEIR RESPECTIVE NET ASSETS IN SECURITIES RATED BELOW B
BY EITHER RATING SERVICE, OR IN UNRATED SECURITIES DETERMINED BY THE ADVISOR TO
BE COMPARABLE TO SECURITIES RATED BELOW B BY EITHER RATING SERVICE. THERE IS NO
MINIMUM RATING STANDARD REQUIRED BY EITHER PORTFOLIO, WHICH INCLUDES
NON-INVESTMENT GRADE DEBT SECURITIES. LOWER QUALITY DEBT SECURITIES, THESE
SECURITIES HAVE MODERATE TO POOR PROTECTION OF PRINCIPAL AND INTEREST PAYMENTS
AND HAVE SPECULATIVE CHARACTERISTICS. (SEE APPENDIX FOR A DESCRIPTION OF THE
RATINGS.) THESE SECURITIES INVOLVE GREATER RISK OF DEFAULT OR PRICE DECLINES DUE
TO CHANGES IN THE ISSUER'S CREDITWORTHINESS THAN INVESTMENT-GRADE DEBT
SECURITIES. BECAUSE THE MARKET FOR LOWER-RATED SECURITIES MAY BE THINNER AND
LESS ACTIVE THAN FOR HIGHER-RATED SECURITIES, THERE MAY BE MARKET PRICE
VOLATILITY FOR THESE SECURITIES AND LIMITED LIQUIDITY IN THE RESALE MARKET.
MARKET PRICES FOR THESE SECURITIES MAY DECLINE SIGNIFICANTLY IN PERIODS OF
GENERAL ECONOMIC DIFFICULTY OR RISING INTEREST RATES. UNRATED DEBT SECURITIES
MAY FALL INTO THE LOWER QUALITY CATEGORY.
THE QUALITY LIMITATION SET FORTH IN THE PORTFOLIOS' INVESTMENT POLICY IS
DETERMINED IMMEDIATELY AFTER A PORTFOLIO'S ACQUISITION OF A GIVEN SECURITY.
ACCORDINGLY, ANY LATER CHANGE IN RATINGS WILL NOT BE CONSIDERED WHEN DETERMINING
WHETHER AN INVESTMENT COMPLIES WITH THE PORTFOLIO'S INVESTMENT POLICY.
WHEN PURCHASING HIGH-YIELDING SECURITIES, RATED OR UNRATED, THE ADVISOR
PREPARES ITS OWN CAREFUL CREDIT ANALYSIS TO ATTEMPT TO IDENTIFY THOSE ISSUERS
WHOSE FINANCIAL CONDITION IS ADEQUATE TO MEET FUTURE OBLIGATIONS OR IS EXPECTED
TO BE ADEQUATE IN THE FUTURE. THROUGH PORTFOLIO DIVERSIFICATION AND CREDIT
ANALYSIS, INVESTMENT RISK CAN BE REDUCED, ALTHOUGH THERE CAN BE NO ASSURANCE
THAT LOSSES WILL NOT OCCUR.
DERIVATIVES
A PORTFOLIO CAN USE VARIOUS TECHNIQUES TO INCREASE OR DECREASE ITS EXPOSURE
TO CHANGING SECURITY PRICES, INTEREST RATES, OR OTHER FACTORS THAT AFFECT
SECURITY VALUES. THESE TECHNIQUES MAY INVOLVE DERIVATIVE TRANSACTIONS SUCH AS
BUYING AND SELLING OPTIONS AND FUTURES CONTRACTS AND LEVERAGED NOTES, ENTERING
INTO SWAP AGREEMENTS, AND PURCHASING INDEXED SECURITIES. THE PORTFOLIOS CAN USE
THESE PRACTICES EITHER AS SUBSTITUTION OR AS PROTECTION AGAINST AN ADVERSE MOVE
IN THE PORTFOLIO TO ADJUST THE RISK AND RETURN CHARACTERISTICS OF THE PORTFOLIO.
IF THE ADVISOR AND/OR SUBADVISOR JUDGES MARKET CONDITIONS INCORRECTLY OR EMPLOYS
A STRATEGY THAT DOES NOT CORRELATE WELL WITH A PORTFOLIO'S INVESTMENTS, OR IF
THE COUNTERPARTY TO THE TRANSACTION DOES NOT PERFORM AS PROMISED, THESE
TECHNIQUES COULD RESULT IN A LOSS. THESE TECHNIQUES MAY INCREASE THE VOLATILITY
OF A PORTFOLIO AND MAY INVOLVE A SMALL INVESTMENT OF CASH RELATIVE TO THE
MAGNITUDE OF THE RISK ASSUMED. DERIVATIVES ARE OFTEN ILLIQUID.
OPTIONS AND FUTURES CONTRACTS
THE EMERGING GROWTH, GROWTH WITH INCOME AND INDEX 500 PORTFOLIOS MAY, IN
PURSUIT OF THEIR INVESTMENT OBJECTIVES, PURCHASE PUT AND CALL OPTIONS AND ENGAGE
IN THE WRITING OF COVERED CALL OPTIONS AND SECURED PUT OPTIONS ON SECURITIES,
AND EMPLOY A VARIETY OF OTHER INVESTMENT TECHNIQUES. SPECIFICALLY, THESE
PORTFOLIOS MAY ALSO ENGAGE IN THE PURCHASE AND SALE OF STOCK INDEX FUTURE
CONTRACTS, FOREIGN CURRENCY FUTURES CONTRACTS, INTEREST RATE FUTURES CONTRACTS,
AND OPTIONS ON SUCH FUTURES, AS DESCRIBED MORE FULLY BELOW.
THESE PORTFOLIOS WILL ENGAGE IN SUCH TRANSACTIONS ONLY TO HEDGE THE
EXISTING POSITIONS IN THE RESPECTIVE PORTFOLIOS. THEY WILL NOT ENGAGE IN SUCH
TRANSACTIONS FOR THE PURPOSES OF SPECULATION OR LEVERAGE. SUCH INVESTMENT
POLICIES AND TECHNIQUES MAY INVOLVE A GREATER DEGREE OF RISK THAN THOSE INHERENT
IN MORE CONSERVATIVE INVESTMENT APPROACHES.
THESE PORTFOLIOS WILL NOT ENGAGE IN SUCH OPTIONS OR FUTURES TRANSACTIONS
UNLESS THEY RECEIVE APPROPRIATE REGULATORY APPROVALS PERMITTING THEM TO ENGAGE
IN SUCH TRANSACTIONS. THESE PORTFOLIOS MAY WRITE "COVERED OPTIONS" ON SECURITIES
IN STANDARD CONTRACTS TRADED ON NATIONAL SECURITIES EXCHANGES. THESE PORTFOLIOS
WILL WRITE SUCH OPTIONS IN ORDER TO RECEIVE THE PREMIUMS FROM OPTIONS THAT
EXPIRE AND TO SEEK NET GAINS FROM CLOSING PURCHASE TRANSACTIONS WITH RESPECT TO
SUCH OPTIONS.
PUT AND CALL OPTIONS. THESE PORTFOLIOS MAY PURCHASE PUT AND CALL OPTIONS,
IN STANDARD CONTRACTS TRADED ON NATIONAL SECURITIES EXCHANGES, ON SECURITIES OF
ISSUERS WHICH MEET THE PORTFOLIOS' CRITERIA. THESE PORTFOLIOS WILL PURCHASE SUCH
OPTIONS ONLY TO HEDGE AGAINST CHANGES IN THE VALUE OF SECURITIES THE PORTFOLIOS
HOLD AND NOT FOR THE PURPOSES OF SPECULATION OR LEVERAGE. IN BUYING A PUT, A
PORTFOLIO HAS THE RIGHT TO SELL THE SECURITY AT THE EXERCISE PRICE, THUS
LIMITING ITS RISK OF LOSS THROUGH A DECLINE IN THE MARKET VALUE OF THE SECURITY
UNTIL THE PUT EXPIRES. THE AMOUNT OF ANY APPRECIATION IN THE VALUE OF THE
UNDERLYING SECURITY WILL BE PARTIALLY OFFSET BY THE AMOUNT OF THE PREMIUM PAID
FOR THE PUT OPTION AND ANY RELATED TRANSACTION COSTS. PRIOR TO ITS EXPIRATION, A
PUT OPTION MAY BE SOLD IN A CLOSING SALE TRANSACTION AND ANY PROFIT OR LOSS FROM
THE SALE WILL DEPEND ON WHETHER THE AMOUNT RECEIVED IS MORE OR LESS THAN THE
PREMIUM PAID FOR THE PUT OPTION PLUS THE RELATED TRANSACTION COSTS.
THESE PORTFOLIOS MAY PURCHASE CALL OPTIONS ON SECURITIES THAT THEY MAY
INTEND TO PURCHASE AND THAT MEET THE PORTFOLIOS' CRITERIA. SUCH TRANSACTIONS MAY
BE ENTERED INTO IN ORDER TO LIMIT THE RISK OF A SUBSTANTIAL INCREASE IN THE
MARKET PRICE OF THE SECURITY WHICH THE PORTFOLIO INTENDS TO PURCHASE. PRIOR TO
ITS EXPIRATION, A CALL OPTION MAY BE SOLD IN A CLOSING SALE TRANSACTION. ANY
PROFIT OR LOSS FROM SUCH A SALE WILL DEPEND ON WHETHER THE AMOUNT RECEIVED IS
MORE OR LESS THAN THE PREMIUM PAID FOR THE CALL OPTION PLUS THE RELATED
TRANSACTION COSTS.
COVERED OPTIONS. THESE PORTFOLIOS MAY WRITE ONLY COVERED OPTIONS ON EQUITY
AND DEBT SECURITIES IN STANDARD CONTRACTS TRADED ON NATIONAL SECURITIES
EXCHANGES. FOR CALL OPTIONS, THIS MEANS THAT SO LONG AS A PORTFOLIO IS OBLIGATED
AS THE WRITER OF A CALL OPTION, THAT PORTFOLIO WILL OWN THE UNDERLYING SECURITY
SUBJECT TO THE OPTION AND, IN THE CASE OF PUT OPTIONS, THAT PORTFOLIO WILL,
THROUGH ITS CUSTODIAN, DEPOSIT AND MAINTAIN EITHER CASH OR SECURITIES WITH A
MARKET VALUE EQUAL TO OR GREATER THAN THE EXERCISE PRICE OF THE OPTION.
WHEN A PORTFOLIO WRITES A COVERED CALL OPTION, THE PORTFOLIO GIVES THE
PURCHASER THE RIGHT TO PURCHASE THE SECURITY AT THE CALL OPTION PRICE AT ANY
TIME DURING THE LIFE OF THE OPTION. AS THE WRITER OF THE OPTION, THE PORTFOLIO
RECEIVES A PREMIUM, LESS A COMMISSION, AND IN EXCHANGE FOREGOES THE OPPORTUNITY
TO PROFIT FROM ANY INCREASE IN THE MARKET VALUE OF THE SECURITY EXCEEDING THE
CALL OPTION PRICE. THE PREMIUM SERVES TO MITIGATE THE EFFECT OF ANY DEPRECIATION
IN THE MARKET VALUE OF THE SECURITY. WRITING COVERED CALL OPTIONS CAN INCREASE
THE INCOME OF THE PORTFOLIO AND THUS REDUCE DECLINES IN THE NET ASSET VALUE PER
SHARE OF THE PORTFOLIO IF SECURITIES COVERED BY SUCH OPTIONS DECLINE IN VALUE.
EXERCISE OF A CALL OPTION BY THE PURCHASER, HOWEVER, WILL CAUSE THE PORTFOLIO TO
FOREGO FUTURE APPRECIATION OF THE SECURITIES COVERED BY THE OPTION.
WHEN A PORTFOLIO WRITES A SECURED PUT OPTION, IT WILL GAIN A PROFIT IN THE
AMOUNT OF THE PREMIUM, LESS A COMMISSION, SO LONG AS THE PRICE OF THE UNDERLYING
SECURITY REMAINS ABOVE THE EXERCISE PRICE. HOWEVER, THE PORTFOLIO REMAINS
OBLIGATED TO PURCHASE THE UNDERLYING SECURITY FROM THE BUYER OF THE PUT OPTION
(USUALLY IN THE EVENT THE PRICE OF THE SECURITY FUNDS BELOW THE EXERCISE PRICE)
AT ANY TIME DURING THE OPTION PERIOD. IF THE PRICE OF THE UNDERLYING SECURITY
FALLS BELOW THE EXERCISE PRICE, THE PORTFOLIO MAY REALIZE A LOSS IN THE AMOUNT
OF THE DIFFERENCE BETWEEN THE EXERCISE PRICE AND THE SALE PRICE OF THE SECURITY,
LESS THE PREMIUM RECEIVED.
THESE PORTFOLIOS MAY PURCHASE SECURITIES THAT MAY BE COVERED BY CALL
OPTIONS SOLELY ON THE BASIS OF CONSIDERATIONS CONSISTENT WITH THE INVESTMENT
OBJECTIVES AND POLICIES OF THE PORTFOLIOS. THE PORTFOLIO TURNOVER RATE MAY
INCREASE THROUGH THE EXERCISE OF A CALL OPTION; THIS WILL GENERALLY OCCUR IF THE
MARKET VALUE OF A "COVERED" SECURITY INCREASES AND THE PORTFOLIO HAS NOT ENTERED
INTO A CLOSING PURCHASE TRANSACTION.
RISKS RELATED TO OPTIONS TRANSACTIONS. THE PORTFOLIOS CAN CLOSE OUT THEIR
RESPECTIVE POSITIONS IN EXCHANGE-TRADED OPTIONS ONLY ON AN EXCHANGE WHICH
PROVIDES A SECONDARY MARKET IN SUCH OPTIONS. ALTHOUGH THESE PORTFOLIOS INTEND TO
ACQUIRE AND WRITE ONLY SUCH EXCHANGE-TRADED OPTIONS FOR WHICH AN ACTIVE
SECONDARY MARKET APPEARS TO EXIST, THERE CAN BE NO ASSURANCE THAT SUCH A MARKET
WILL EXIST FOR ANY PARTICULAR OPTION CONTRACT AT ANY PARTICULAR TIME. THIS MIGHT
PREVENT THE PORTFOLIOS FROM CLOSING AN OPTIONS POSITION, WHICH COULD IMPAIR THE
PORTFOLIOS' ABILITY TO HEDGE EFFECTIVELY. THE INABILITY TO CLOSE OUT A CALL
POSITION MAY HAVE AN ADVERSE EFFECT ON LIQUIDITY BECAUSE THE PORTFOLIO MAY BE
REQUIRED TO HOLD THE SECURITIES UNDERLYING THE OPTION UNTIL THE OPTION EXPIRES
OR IS EXERCISED.
FUTURES TRANSACTIONS. THESE PORTFOLIOS MAY PURCHASE AND SELL FUTURES
CONTRACTS ("FUTURES CONTRACTS") BUT ONLY WHEN, IN THE JUDGMENT OF THE ADVISOR,
SUCH A POSITION ACTS AS A HEDGE AGAINST MARKET CHANGES WHICH WOULD ADVERSELY
AFFECT THE SECURITIES HELD BY THE PORTFOLIOS. THESE FUTURES CONTRACTS MAY
INCLUDE, BUT ARE NOT LIMITED TO, MARKET INDEX FUTURES CONTRACTS AND FUTURES
CONTRACTS BASED ON U.S. GOVERNMENT OBLIGATIONS.
A FUTURES CONTRACT IS AN AGREEMENT BETWEEN TWO PARTIES TO BUY AND SELL A
SECURITY ON A FUTURE DATE WHICH HAS THE EFFECT OF ESTABLISHING THE CURRENT PRICE
FOR THE SECURITY. ALTHOUGH FUTURES CONTRACTS BY THEIR TERMS REQUIRE ACTUAL
DELIVERY AND ACCEPTANCE OF SECURITIES, IN MOST CASES THE CONTRACTS ARE CLOSED
OUT BEFORE THE SETTLEMENT DATE WITHOUT THE MAKING OR TAKING OF DELIVERY OF
SECURITIES. UPON BUYING OR SELLING A FUTURES CONTRACT, THE PORTFOLIO DEPOSITS
INITIAL MARGIN WITH ITS CUSTODIAN, AND THEREAFTER DAILY PAYMENTS OF MAINTENANCE
MARGIN ARE MADE TO AND FROM THE EXECUTING BROKER. PAYMENTS OF MAINTENANCE MARGIN
REFLECT CHANGES IN THE VALUE OF THE FUTURES CONTRACT, WITH THE PORTFOLIO BEING
OBLIGATED TO MAKE SUCH PAYMENTS IF ITS FUTURES POSITION BECOMES LESS VALUABLE
AND ENTITLED TO RECEIVE SUCH PAYMENTS IF ITS POSITIONS BECOME MORE VALUABLE.
THESE PORTFOLIOS MAY ONLY INVEST IN FUTURES CONTRACTS TO HEDGE THEIR
RESPECTIVE EXISTING INVESTMENT POSITIONS AND NOT FOR INCOME ENHANCEMENT,
SPECULATION OR LEVERAGE PURPOSES. ALTHOUGH SOME OF THE SECURITIES UNDERLYING THE
FUTURES CONTRACT MAY NOT NECESSARILY MEET THE PORTFOLIOS' CRITERIA, ANY SUCH
HEDGE POSITION TAKEN BY THESE PORTFOLIOS WILL NOT CONSTITUTE A DIRECT OWNERSHIP
INTEREST IN THE UNDERLYING SECURITIES.
FUTURES CONTRACTS HAVE BEEN DESIGNED BY BOARDS OF TRADE WHICH HAVE BEEN
DESIGNATED "CONTRACTS MARKETS" BY THE COMMODITY FUTURES TRADING COMMISSION
("CFTC"). AS SERIES OF A REGISTERED INVESTMENT COMPANY, THE PORTFOLIOS ARE
ELIGIBLE FOR EXCLUSION FROM THE CFTC'S DEFINITION OF "COMMODITY POOL OPERATOR,"
MEANING THAT THE PORTFOLIOS MAY INVEST IN FUTURES CONTRACTS UNDER SPECIFIED
CONDITIONS WITHOUT REGISTERING WITH THE CFTC. AMONG THESE CONDITIONS ARE
REQUIREMENTS THAT EACH PORTFOLIO INVEST IN FUTURES ONLY FOR HEDGING PURPOSES.
FUTURES CONTRACTS TRADE ON CONTRACTS MARKETS IN A MANNER THAT IS SIMILAR TO THE
WAY A STOCK TRADES ON A STOCK EXCHANGE AND THE BOARDS OF TRADE, THROUGH THEIR
CLEARING CORPORATIONS, GUARANTEE PERFORMANCE OF THE CONTRACTS.
OPTIONS ON FUTURES CONTRACTS. THESE PORTFOLIOS MAY PURCHASE AND WRITE PUT
OR CALL OPTIONS AND SELL CALL OPTIONS ON FUTURES CONTRACTS IN WHICH A PORTFOLIO
COULD OTHERWISE INVEST AND WHICH ARE TRADED ON A U.S. EXCHANGE OR BOARD OF
TRADE. THE PORTFOLIOS MAY ALSO ENTER INTO CLOSING TRANSACTIONS WITH RESPECT TO
SUCH OPTIONS TO TERMINATE AN EXISTING POSITION; THAT IS, TO SELL A PUT OPTION
ALREADY OWNED AND TO BUY A CALL OPTION TO CLOSE A POSITION WHERE THE PORTFOLIO
HAS ALREADY SOLD A CORRESPONDING CALL OPTION.
THE PORTFOLIOS MAY ONLY INVEST IN OPTIONS ON FUTURES CONTRACTS TO HEDGE
THEIR RESPECTIVE EXISTING INVESTMENT POSITIONS AND NOT FOR INCOME ENHANCEMENT,
SPECULATION OR LEVERAGE PURPOSES. ALTHOUGH SOME OF THE SECURITIES UNDERLYING THE
FUTURES CONTRACT UNDERLYING THE OPTION MAY NOT NECESSARILY MEET THE PORTFOLIOS'
CRITERIA, ANY SUCH HEDGE POSITION TAKEN BY THESE PORTFOLIOS WILL NOT CONSTITUTE
A DIRECT OWNERSHIP INTEREST IN THE UNDERLYING SECURITIES.
AN OPTION ON A FUTURES CONTRACT GIVES THE PURCHASER THE RIGHT, IN RETURN
FOR THE PREMIUM PAID, TO ASSUME A POSITION IN A FUTURES CONTRACT - A LONG
POSITION IF THE OPTION IS A CALL AND A SHORT POSITION IF THE OPTION IS A PUT -
AT A SPECIFIED EXERCISE PRICE AT ANY TIME DURING THE PERIOD OF THE OPTION. THE
PORTFOLIOS WILL PAY A PREMIUM FOR SUCH OPTIONS PURCHASED OR SOLD. IN CONNECTION
WITH SUCH OPTIONS BOUGHT OR SOLD, THE PORTFOLIOS WILL MAKE INITIAL MARGIN
DEPOSITS AND MAKE OR RECEIVE MAINTENANCE MARGIN PAYMENTS WHICH REFLECT CHANGES
IN THE MARKET VALUE OF SUCH OPTIONS. THIS ARRANGEMENT IS SIMILAR TO THE MARGIN
ARRANGEMENTS APPLICABLE TO FUTURES CONTRACTS DESCRIBED ABOVE.
PUT OPTIONS ON FUTURES CONTRACTS. THE PURCHASE OF PUT OPTIONS ON FUTURES
CONTRACTS IS ANALOGOUS TO THE SALE OF FUTURES CONTRACTS AND IS USED TO PROTECT
THE PORTFOLIO AGAINST THE RISK OF DECLINING PRICES. THESE PORTFOLIOS MAY
PURCHASE PUT OPTIONS AND SELL PUT OPTIONS ON FUTURES CONTRACTS THAT ARE ALREADY
OWNED BY THAT PORTFOLIO. THE PORTFOLIOS WILL ONLY ENGAGE IN THE PURCHASE OF PUT
OPTIONS AND THE SALE OF COVERED PUT OPTIONS ON MARKET INDEX FUTURES FOR HEDGING
PURPOSES.
CALL OPTIONS ON FUTURES CONTRACTS. THE SALE OF CALL OPTIONS ON FUTURES
CONTRACTS IS ANALOGOUS TO THE SALE OF FUTURES CONTRACTS AND IS USED TO PROTECT
THE PORTFOLIO AGAINST THE RISK OF DECLINING PRICES. THE PURCHASE OF CALL OPTIONS
ON FUTURES CONTRACTS IS ANALOGOUS TO THE PURCHASE OF A FUTURES CONTRACT. THESE
PORTFOLIOS MAY ONLY BUY CALL OPTIONS TO CLOSE AN EXISTING POSITION WHERE THE
PORTFOLIO HAS ALREADY SOLD A CORRESPONDING CALL OPTION, OR FOR A CASH HEDGE. THE
PORTFOLIOS WILL ONLY ENGAGE IN THE SALE OF CALL OPTIONS AND THE PURCHASE OF CALL
OPTIONS TO COVER FOR HEDGING PURPOSES.
WRITING CALL OPTIONS ON FUTURES CONTRACTS. THE WRITING OF CALL OPTIONS ON
FUTURES CONTRACTS CONSTITUTES A PARTIAL HEDGE AGAINST DECLINING PRICES OF THE
SECURITIES DELIVERABLE UPON EXERCISE OF THE FUTURES CONTRACT. IF THE FUTURES
CONTRACT PRICE AT EXPIRATION IS BELOW THE EXERCISE PRICE, THE PORTFOLIO WILL
RETAIN THE FULL AMOUNT OF THE OPTION PREMIUM WHICH PROVIDES A PARTIAL HEDGE
AGAINST ANY DECLINE THAT MAY HAVE OCCURRED IN THE PORTFOLIO'S SECURITIES
HOLDINGS.
RISKS OF OPTIONS AND FUTURES CONTRACTS. IF ONE OF THESE PORTFOLIOS HAS SOLD
FUTURES OR TAKES OPTIONS POSITIONS TO HEDGE ITS PORTFOLIO AGAINST DECLINE IN THE
MARKET AND THE MARKET LATER ADVANCES, THE PORTFOLIO MAY SUFFER A LOSS ON THE
FUTURES CONTRACTS OR OPTIONS WHICH IT WOULD NOT HAVE EXPERIENCED IF IT HAD NOT
HEDGED. CORRELATION IS ALSO IMPERFECT BETWEEN MOVEMENTS IN THE PRICES OF FUTURES
CONTRACTS AND MOVEMENTS IN PRICES OF THE SECURITIES WHICH ARE THE SUBJECT OF THE
HEDGE. THUS THE PRICE OF THE FUTURES CONTRACT OR OPTION MAY MOVE MORE THAN OR
LESS THAN THE PRICE OF THE SECURITIES BEING HEDGED. WHERE A PORTFOLIO HAS SOLD
FUTURES OR TAKEN OPTIONS POSITIONS TO HEDGE AGAINST DECLINE IN THE MARKET, THE
MARKET MAY ADVANCE AND THE VALUE OF THE SECURITIES HELD IN THE PORTFOLIO MAY
DECLINE. IF THIS WERE TO OCCUR, THE PORTFOLIO MIGHT LOSE MONEY ON THE FUTURES
CONTRACTS OR OPTIONS AND ALSO EXPERIENCE A DECLINE IN THE VALUE OF ITS PORTFOLIO
SECURITIES. HOWEVER, ALTHOUGH THIS MIGHT OCCUR FOR A BRIEF PERIOD OR TO A SLIGHT
DEGREE, THE VALUE OF A DIVERSIFIED PORTFOLIO WILL TEND TO MOVE IN THE DIRECTION
OF THE MARKET GENERALLY.
THE PORTFOLIOS CAN CLOSE OUT FUTURES POSITIONS ONLY ON AN EXCHANGE OR BOARD
OF TRADE WHICH PROVIDES A SECONDARY MARKET IN SUCH FUTURES. ALTHOUGH THE
PORTFOLIOS INTEND TO PURCHASE OR SELL ONLY SUCH FUTURES FOR WHICH AN ACTIVE
SECONDARY MARKET APPEARS TO EXIST, THERE CAN BE NO ASSURANCE THAT SUCH A MARKET
WILL EXIST FOR ANY PARTICULAR FUTURES CONTRACT AT ANY PARTICULAR TIME. THIS
MIGHT PREVENT THE PORTFOLIOS FROM CLOSING A FUTURES POSITION, WHICH COULD
REQUIRE A PORTFOLIO TO MAKE DAILY CASH PAYMENTS WITH RESPECT TO ITS POSITION IN
THE EVENT OF ADVERSE PRICE MOVEMENTS.
OPTIONS ON FUTURES TRANSACTIONS BEAR SEVERAL RISKS APART FROM THOSE
INHERENT IN OPTIONS TRANSACTIONS GENERALLY. THE PORTFOLIOS' ABILITY TO CLOSE OUT
THEIR OPTIONS POSITIONS IN FUTURES CONTRACTS WILL DEPEND UPON WHETHER AN ACTIVE
SECONDARY MARKET FOR SUCH OPTIONS DEVELOPS AND IS IN EXISTENCE AT THE TIME THE
PORTFOLIOS SEEK TO CLOSE THEIR POSITIONS. THERE CAN BE NO ASSURANCE THAT SUCH A
MARKET WILL DEVELOP OR EXIST. THEREFORE, THE PORTFOLIOS MIGHT BE REQUIRED TO
EXERCISE THE OPTIONS TO REALIZE ANY PROFIT.
FOREIGN CURRENCY TRANSACTIONS
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. A FORWARD FOREIGN CURRENCY
EXCHANGE CONTRACT INVOLVES AN OBLIGATION TO PURCHASE OR SELL A SPECIFIC CURRENCY
AT A FUTURE DATE, WHICH MAY BE ANY FIXED NUMBER OF DAYS ("TERM") FROM THE DATE
OF THE CONTRACT AGREED UPON BY THE PARTIES, AT A PRICE SET AT THE TIME OF THE
CONTRACT. THESE CONTRACTS ARE TRADED DIRECTLY BETWEEN CURRENCY TRADERS (USUALLY
LARGE COMMERCIAL BANKS) AND THEIR CUSTOMERS.
A PORTFOLIO WILL NOT ENTER INTO SUCH FORWARD CONTRACTS OR MAINTAIN A NET
EXPOSURE IN SUCH CONTRACTS WHERE IT WOULD BE OBLIGATED TO DELIVER AN AMOUNT OF
FOREIGN CURRENCY IN EXCESS OF THE VALUE OF ITS PORTFOLIO SECURITIES AND OTHER
ASSETS DENOMINATED IN THAT CURRENCY. THE ADVISOR BELIEVES THAT IT IS IMPORTANT
TO HAVE THE FLEXIBILITY TO ENTER INTO SUCH FORWARD CONTRACT WHEN IT DETERMINES
THAT TO DO SO IS IN A PORTFOLIO'S BEST INTERESTS.
FOREIGN CURRENCY OPTIONS. A FOREIGN CURRENCY OPTION PROVIDES THE OPTION
BUYER WITH THE RIGHT TO BUY OR SELL A STATED AMOUNT OF FOREIGN CURRENCY AT THE
EXERCISE PRICE ON OR BEFORE A SPECIFIED DATE. A CALL OPTION GIVES ITS OWNER THE
RIGHT, BUT NOT THE OBLIGATION, TO BUY THE CURRENCY, WHILE A PUT OPTION GIVES ITS
OWNER THE RIGHT, BUT NOT THE OBLIGATION, TO SELL THE CURRENCY. THE OPTION SELLER
BUYER MAY CLOSE ITS POSITION ANY TIME PRIOR TO EXPIRATION OF THE OPTION PERIOD.
A CALL RISES IN VALUE IF THE UNDERLYING CURRENCY APPRECIATES. CONVERSELY, A PUT
RISES IN VALUE IF THE UNDERLYING CURRENCY DEPRECIATES. PURCHASING A FOREIGN
CURRENCY OPTION CAN PROTECT A PORTFOLIO AGAINST ADVERSE MOVEMENT IN THE VALUE OF
A FOREIGN CURRENCY.
FOREIGN CURRENCY FUTURES TRANSACTIONS. A PORTFOLIO MAY USE FOREIGN CURRENCY
FUTURES CONTRACTS AND OPTIONS ON SUCH FUTURES CONTRACTS. THROUGH THE PURCHASE OR
SALE OF SUCH CONTRACTS, IT MAY BE ABLE TO ACHIEVE MANY OF THE SAME OBJECTIVES
ATTAINABLE THROUGH THE USE OF FOREIGN CURRENCY FORWARD CONTRACTS, BUT MORE
EFFECTIVELY AND POSSIBLY AT A LOWER COST.
UNLIKE FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS, FOREIGN CURRENCY
FUTURES CONTRACTS AND OPTIONS ON FOREIGN CURRENCY FUTURES CONTRACTS ARE
STANDARDIZED AS TO AMOUNT AND DELIVERY PERIOD AND ARE TRADED ON BOARDS OF TRADE
AND COMMODITIES EXCHANGES. IT IS ANTICIPATED THAT SUCH CONTRACTS MAY PROVIDE
GREATER LIQUIDITY AND LOWER COST THAN FORWARD FOREIGN CURRENCY EXCHANGE
CONTRACTS.
LENDING PORTFOLIO SECURITIES
THE FUND MAY LEND ITS PORTFOLIO SECURITIES TO MEMBER FIRMS OF THE NEW YORK
STOCK EXCHANGE AND COMMERCIAL BANKS WITH ASSETS OF ONE BILLION DOLLARS OR MORE.
ANY SUCH LOANS MUST BE SECURED CONTINUOUSLY IN THE FORM OF CASH OR CASH
EQUIVALENTS SUCH AS U.S. TREASURY BILLS. THE AMOUNT OF THE COLLATERAL MUST ON A
CURRENT BASIS EQUAL OR EXCEED THE MARKET VALUE OF THE LOANED SECURITIES, AND THE
FUND MUST BE ABLE TO TERMINATE SUCH LOANS UPON NOTICE AT ANY TIME. THE FUND WILL
EXERCISE ITS RIGHT TO TERMINATE A SECURITIES LOAN IN ORDER TO PRESERVE ITS RIGHT
TO VOTE UPON MATTERS OF IMPORTANCE AFFECTING HOLDERS OF THE SECURITIES.
THE ADVANTAGE OF SUCH LOANS IS THAT THE FUND CONTINUES TO RECEIVE THE
EQUIVALENT OF THE INTEREST EARNED OR DIVIDENDS PAID BY THE ISSUERS ON THE LOANED
SECURITIES WHILE AT THE SAME TIME EARNING INTEREST ON THE CASH OR EQUIVALENT
COLLATERAL WHICH MAY BE INVESTED IN ACCORDANCE WITH THE FUND'S INVESTMENT
OBJECTIVE, POLICIES AND RESTRICTIONS.
SECURITIES LOANS ARE USUALLY MADE TO BROKER-DEALERS AND OTHER FINANCIAL
INSTITUTIONS TO FACILITATE THEIR DELIVERY OF SUCH SECURITIES. AS WITH ANY
EXTENSION OF CREDIT, THERE MAY BE RISKS OF DELAY IN RECOVERY AND POSSIBLY LOSS
OF RIGHTS IN THE LOANED SECURITIES SHOULD THE BORROWER OF THE LOANED SECURITIES
FAIL FINANCIALLY. HOWEVER, THE FUND WILL MAKE LOANS OF ITS PORTFOLIO SECURITIES
ONLY TO THOSE FIRMS THE ADVISOR DEEMS CREDITWORTHY AND ONLY ON TERMS THE ADVISOR
BELIEVES SHOULD COMPENSATE FOR SUCH RISK. ON TERMINATION OF THE LOAN, THE
BORROWER IS OBLIGATED TO RETURN THE SECURITIES TO THE FUND. THE FUND WILL
RECOGNIZE ANY GAIN OR LOSS IN THE MARKET VALUE OF THE SECURITIES DURING THE LOAN
PERIOD. THE FUND MAY PAY REASONABLE CUSTODIAL FEES IN CONNECTION WITH THE LOAN.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
FROM TIME TO TIME, IN THE ORDINARY COURSE OF BUSINESS, EACH PORTFOLIO MAY
PURCHASE SECURITIES ON A WHEN-ISSUED OR DELAYED DELIVERY BASIS -- THAT IS,
DELIVERY AND PAYMENT CAN TAKE PLACE A MONTH OR MORE AFTER THE DATE OF THE
TRANSACTIONS. THE SECURITIES PURCHASED IN THIS MANNER ARE SUBJECT TO MARKET
FLUCTUATION AND NO INTEREST ACCRUES TO THE PURCHASER DURING THIS PERIOD. AT THE
TIME A PORTFOLIO MAKES A COMMITMENT TO PURCHASE SECURITIES ON A WHEN-ISSUED OR
DELAYED DELIVERY BASIS, THE PRICE IS FIXED AND THE PORTFOLIO WILL RECORD THE
TRANSACTION AND THEREAFTER REFLECT THE VALUE, EACH DAY, OF THE SECURITY IN
DETERMINING THE NET ASSET VALUE OF THE PORTFOLIO. AT THE TIME OF DELIVERY OF THE
SECURITIES, THE VALUE MAY BE MORE OR LESS THAN THE PURCHASE PRICE.
THE PORTFOLIO WILL ENTER COMMITMENTS FOR WHEN-ISSUED OR DELAYED DELIVERY
SECURITIES ONLY WHEN IT INTENDS TO ACQUIRE THE SECURITIES. ACCORDINGLY, WHEN A
PORTFOLIO PURCHASES A WHEN-ISSUED SECURITY, IT WILL MAINTAIN AN AMOUNT OF CASH,
CASH EQUIVALENTS (FOR EXAMPLE, COMMERCIAL PAPER AND DAILY TENDER ADJUSTABLE
NOTES) OR SHORT-TERM HIGH-GRADE FIXED INCOME SECURITIES IN A SEGREGATED ACCOUNT
WITH THE PORTFOLIO'S CUSTODIAN, SO THAT THE AMOUNT SO SEGREGATED PLUS THE AMOUNT
OF INITIAL AND VARIATION MARGIN HELD IN THE ACCOUNT OF ITS BROKER EQUALS THE
MARKET VALUE OF THE WHEN-ISSUED PURCHASE, THEREBY ENSURING THE TRANSACTION IS
UNLEVERAGED.
INVESTMENT RESTRICTIONS
-----------------------
INCOME & GROWTH, GROWTH, SMALL CAPITALIZATION AND MIDCAP GROWTH PORTFOLIOS
THE PORTFOLIOS HAVE ADOPTED THE FOLLOWING FUNDAMENTAL INVESTMENT
RESTRICTIONS. THESE RESTRICTIONS CANNOT BE CHANGED WITHOUT THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF EACH OF THE PORTFOLIOS. THE
PORTFOLIOS MAY NOT:
1. PURCHASE THE SECURITIES OF ANY ISSUER, OTHER THAN U.S. GOVERNMENT
SECURITIES, IF AS A RESULT MORE THAN 5% OF THE VALUE OF A PORTFOLIO'S TOTAL
ASSETS WOULD BE INVESTED IN THE SECURITIES OF THE ISSUER, EXCEPT THAT UP TO 25%
OF THE VALUE OF THE PORTFOLIO'S TOTAL ASSETS MAY BE INVESTED WITHOUT REGARD TO
THIS LIMITATION.
2. PURCHASE MORE THAN 10% OF THE VOTING SECURITIES OF ANY ONE ISSUER OR MORE
THAN 10% OF THE SECURITIES OF ANY CLASS OF ANY ONE ISSUER. THIS LIMITATION SHALL
NOT APPLY TO INVESTMENTS IN U.S. GOVERNMENT SECURITIES.
3. SELL SECURITIES SHORT OR PURCHASE SECURITIES ON MARGIN, EXCEPT THAT THE
PORTFOLIO MAY OBTAIN ANY SHORT-TERM CREDIT NECESSARY FOR THE CLEARANCE OF
PURCHASES AND SALES OF SECURITIES. THESE RESTRICTIONS SHALL NOT APPLY TO
TRANSACTIONS INVOLVING SELLING SECURITIES "SHORT AGAINST THE BOX."
4. BORROW MONEY, EXCEPT THAT THE PORTFOLIO MAY BORROW FOR TEMPORARY OR
EMERGENCY (BUT NOT LEVERAGING) PURPOSES, INCLUDING THE MEETING OF REDEMPTION
REQUESTS THAT MIGHT OTHERWISE REQUIRE THE UNTIMELY DISPOSITION OF SECURITIES, IN
AN AMOUNT NOT EXCEEDING 10% OF THE VALUE OF THE PORTFOLIO'S TOTAL ASSETS
(INCLUDING THE AMOUNT BORROWED) VALUED AT THE LESSER OF COST OR MARKET, LESS
LIABILITIES (NOT INCLUDING THE AMOUNT BORROWED) AT THE TIME THE BORROWING IS
MADE. WHENEVER BORROWINGS EXCEED 5% OF THE VALUE OF THE PORTFOLIO'S TOTAL
ASSETS, THE PORTFOLIO WILL NOT MAKE ANY ADDITIONAL INVESTMENTS. IMMEDIATELY
AFTER ANY BORROWING, INCLUDING REVERSE REPURCHASE AGREEMENTS AND MORTGAGE-BACKED
ROLLS, THE PORTFOLIO WILL MAINTAIN ASSET COVERAGE OF NOT LESS THAN 300% WITH
RESPECT TO ALL BORROWINGS.
5. PLEDGE, HYPOTHECATE, MORTGAGE OR OTHERWISE ENCUMBER MORE THAN 10% OF THE
VALUE OF THE PORTFOLIO'S TOTAL ASSETS. THESE RESTRICTIONS SHALL NOT APPLY TO
TRANSACTIONS INVOLVING REVERSE REPURCHASE AGREEMENTS OR THE PURCHASE OF
SECURITIES SUBJECT TO FIRM COMMITMENT AGREEMENTS OR ON A WHEN-ISSUED BASIS.
6. UNDERWRITE THE SECURITIES OF OTHER ISSUERS, EXCEPT INSOFAR AS THE
PORTFOLIO MAY BE DEEMED TO BE AN UNDERWRITER UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, BY VIRTUE OF DISPOSING OF PORTFOLIO SECURITIES.
7. MAKE LOANS TO OTHERS, EXCEPT THROUGH PURCHASING QUALIFIED DEBT
OBLIGATIONS, LENDING PORTFOLIO SECURITIES OR ENTERING INTO REPURCHASE
AGREEMENTS.
8. INVEST IN SECURITIES OF OTHER INVESTMENT COMPANIES, EXCEPT AS THEY MAY BE
ACQUIRED AS PART OF A MERGER, CONSOLIDATION, REORGANIZATION, ACQUISITION OF
ASSETS OR OFFER OF EXCHANGE.
9. PURCHASE ANY SECURITIES THAT WOULD CAUSE MORE THAN 25% OF THE VALUE OF
THE PORTFOLIO'S TOTAL ASSETS TO BE INVESTED IN THE SECURITIES OF ISSUERS
CONDUCTING THEIR PRINCIPAL BUSINESS ACTIVITIES IN THE SAME INDUSTRY; PROVIDED
THAT THERE SHALL BE NO LIMIT ON THE PURCHASE OF U.S. GOVERNMENT SECURITIES.
10. INVEST IN COMMODITIES.
11. INVEST MORE THAN 10% OF ITS NET ASSETS IN SECURITIES WHICH ARE ILLIQUID
BY VIRTUE OF LEGAL OR CONTRACTUAL RESTRICTIONS ON RESALE OR THE ABSENCE OF A
READILY AVAILABLE MARKET. HOWEVER, SECURITIES WITH LEGAL AND CONTRACTUAL
RESTRICTIONS ON RESALE MAY BE PURCHASED IF THEY ARE DETERMINED TO BE LIQUID, AND
SUCH PURCHASES WOULD NOT BE SUBJECT TO THE LIMIT STATED ABOVE.
12. ISSUE SENIOR SECURITIES.
THE BOARD OF DIRECTORS HAS ADOPTED THE FOLLOWING NONFUNDAMENTAL INVESTMENT
RESTRICTIONS. A NONFUNDAMENTAL INVESTMENT RESTRICTION CAN BE CHANGED BY THE
BOARD AT ANY TIME WITHOUT A SHAREHOLDER VOTE. THE PORTFOLIOS MAY NOT:
1. PURCHASE OR SELL REAL ESTATE, EXCEPT THAT THE PORTFOLIO MAY PURCHASE AND
SELL SECURITIES SECURED BY REAL ESTATE, MORTGAGES OR INTERESTS THEREIN AND
SECURITIES THAT ARE ISSUED BY COMPANIES THAT INVEST OR DEAL IN REAL ESTATE.
2. WRITE OR SELL PUTS, CALLS, STRADDLES, SPREADS OR COMBINATIONS THEREOF.
3. INVEST IN OIL, GAS OR OTHER MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS,
EXCEPT THAT THE PORTFOLIO MAY INVEST IN THE SECURITIES OF COMPANIES THAT INVEST
IN OR SPONSOR THOSE PROGRAMS.
4. PURCHASE ANY SECURITY IF AS A RESULT THE PORTFOLIO WOULD THEN HAVE MORE
THAN 5% OF ITS TOTAL ASSETS INVESTED IN SECURITIES OF ISSUERS (INCLUDING
PREDECESSORS) THAT HAVE BEEN IN CONTINUAL OPERATION FOR LESS THAN THREE YEARS.
THIS LIMITATION SHALL NOT APPLY TO INVESTMENTS IN U.S. GOVERNMENT SECURITIES.
5. MAKE INVESTMENTS FOR THE PURPOSE OF EXERCISING CONTROL OR MANAGEMENT.
6. INVEST IN WARRANTS, EXCEPT THAT THE PORTFOLIO MAY INVEST IN WARRANTS IF,
AS A RESULT, THE INVESTMENTS (VALUED AT THE LOWER OF COST OR MARKET) WOULD NOT
EXCEED 5% OF THE VALUE OF THE PORTFOLIO'S NET ASSETS, OF WHICH NOT MORE THAN 2%
OF THE PORTFOLIO'S NET ASSETS MAY BE INVESTED IN WARRANTS NOT LISTED ON A
RECOGNIZED DOMESTIC STOCK EXCHANGE. WARRANTS ACQUIRED BY THE PORTFOLIO AS PART
OF A UNIT OR ATTACHED TO SECURITIES AT THE TIME OF ACQUISITION ARE NOT SUBJECT
TO THIS LIMITATION.
7. PURCHASE OR RETAIN THE SECURITIES OF ANY ISSUER IF, TO THE KNOWLEDGE OF
THE FUND, ANY OF THE OFFICERS, DIRECTORS OR TRUSTEES OF THE FUND, ADVISOR OR
SUBADVISOR INDIVIDUALLY OWNS MORE THAN .5% OF THE OUTSTANDING SECURITIES OF THE
ISSUER AND TOGETHER THEY OWN BENEFICIALLY MORE THAN 5% OF THE SECURITIES.
EXCEPT IN THE CASE OF THE 300% LIMITATION SET FORTH IN FUNDAMENTAL
INVESTMENT RESTRICTION NO. 4, AND AS MAY BE OTHERWISE STATED, THE PERCENTAGE
LIMITATIONS CONTAINED IN THE FOREGOING RESTRICTIONS AND IN THE FUND'S OTHER
INVESTMENT POLICIES APPLY AT THE TIME OF THE PURCHASE OF THE SECURITIES AND A
LATER INCREASE OR DECREASE IN PERCENTAGE RESULTING FROM A CHANGE IN THE VALUES
OF THE SECURITIES OR IN THE AMOUNT OF THE PORTFOLIO'S ASSETS WILL NOT CONSTITUTE
A VIOLATION OF THE RESTRICTION.
EMERGING GROWTH, RESEARCH AND GROWTH WITH INCOME PORTFOLIOS
THE PORTFOLIOS HAVE ADOPTED THE FOLLOWING FUNDAMENTAL INVESTMENT
RESTRICTIONS. THESE RESTRICTIONS CANNOT BE CHANGED WITHOUT THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF EACH OF THE PORTFOLIOS. THE
PORTFOLIOS MAY NOT:
1. BORROW AMOUNTS IN EXCESS OF 33 1/3% OF ITS ASSETS INCLUDING AMOUNTS
BORROWED AND THEN ONLY AS A TEMPORARY MEASURE FOR EXTRAORDINARY OR EMERGENCY
PURPOSES.
2. UNDERWRITE SECURITIES ISSUED BY OTHER PERSONS EXCEPT INSOFAR AS THE
PORTFOLIOS MAY TECHNICALLY BE DEEMED AN UNDERWRITER UNDER THE SECURITIES ACT OF
1933, AS AMENDED IN SELLING A PORTFOLIO SECURITY.
3. PURCHASE OR SELL REAL ESTATE (INCLUDING LIMITED PARTNERSHIP INTERESTS BUT
EXCLUDING SECURITIES SECURED BY REAL ESTATE OR INTERESTS THEREIN AND SECURITIES
OF COMPANIES, SUCH AS REAL ESTATE INVESTMENT TRUSTS, WHICH DEAL IN REAL ESTATE
OR INTERESTS THEREIN), INTERESTS IN OIL, GAS OR MINERAL LEASES, COMMODITIES OR
COMMODITY CONTRACTS (EXCLUDING CURRENCIES AND ANY TYPE OF OPTION, FUTURES
CONTRACTS AND FORWARD CONTRACTS) IN THE ORDINARY COURSE OF ITS BUSINESS. THE
PORTFOLIOS RESERVE THE FREEDOM OF ACTION TO HOLD AND TO SELL REAL ESTATE,
MINERAL LEASES, COMMODITIES OR COMMODITY CONTRACTS (INCLUDING CURRENCIES AND ANY
TYPE OF OPTION, FUTURES CONTRACTS AND FORWARD CONTRACTS) ACQUIRED AS A RESULT OF
THE OWNERSHIP OF SECURITIES.
4. ISSUE ANY SENIOR SECURITIES EXCEPT AS PERMITTED BY THE INVESTMENT COMPANY
ACT OF 1940. FOR PURPOSES OF THIS RESTRICTION, COLLATERAL ARRANGEMENTS WITH
RESPECT TO ANY TYPE OF SWAP, OPTION, FORWARD CONTRACTS AND FUTURES CONTRACTS AND
COLLATERAL ARRANGEMENTS WITH RESPECT TO INITIAL AND VARIATION MARGIN ARE NOT
DEEMED TO BE THE ISSUANCE OF A SENIOR SECURITY.
5. MAKE LOANS TO OTHER PERSONS. FOR THESE PURPOSES, THE PURCHASE OF
COMMERCIAL PAPER, THE PURCHASE OF A PORTION OR ALL OF AN ISSUE OF DEBT
SECURITIES, THE LENDING OF PORTFOLIO SECURITIES, OR THE INVESTMENT OF THE
PORTFOLIOS' ASSETS IN REPURCHASE AGREEMENTS, SHALL NOT BE CONSIDERED THE MAKING
OF A LOAN.
6. PURCHASE ANY SECURITIES OF AN ISSUER OF A PARTICULAR INDUSTRY, IF AS A
RESULT, MORE THAN 25% OF ITS GROSS ASSETS WOULD BE INVESTED IN SECURITIES OF
ISSUERS WHOSE PRINCIPAL BUSINESS ACTIVITIES ARE IN THE SAME INDUSTRY, EXCEPT
THERE IS NO LIMITATION WITH RESPECT TO OBLIGATIONS ISSUED OR GUARANTEED BY THE
U.S. GOVERNMENT OR ITS AGENCIES AND INSTRUMENTALITIES AND REPURCHASE AGREEMENTS
COLLATERALIZED BY SUCH OBLIGATIONS.
THE BOARD OF DIRECTORS HAS ADOPTED THE FOLLOWING NONFUNDAMENTAL INVESTMENT
RESTRICTIONS. A NONFUNDAMENTAL INVESTMENT RESTRICTION CAN BE CHANGED BY THE
BOARD AT ANY TIME WITHOUT A SHAREHOLDER VOTE. THE PORTFOLIOS MAY NOT:
1. INVEST IN ILLIQUID INVESTMENTS, INCLUDING SECURITIES SUBJECT TO LEGAL OR
CONTRACTUAL RESTRICTIONS ON RESALE OR FOR WHICH THERE IS NO READILY AVAILABLE
MARKET (I.E., TRADING IN THE SECURITY IS SUSPENDED, OR, IN THE CASE OF UNLISTED
SECURITIES, WHERE NO MARKET EXISTS) IF MORE THAN 15% OF THE PORTFOLIOS' ASSETS
(TAKEN AT MARKET VALUE) WOULD BE INVESTED IN SUCH SECURITIES. REPURCHASE
AGREEMENTS MATURING IN MORE THAN SEVEN DAYS WILL BE DEEMED TO BE ILLIQUID FOR
PURPOSES OF THE PORTFOLIOS' LIMITATION ON INVESTMENT IN ILLIQUID SECURITIES.
SECURITIES THAT ARE NOT REGISTERED UNDER THE SECURITIES ACT OF 1933 AND SOLD IN
RELIANCE ON RULE 144A THEREUNDER, BUT ARE DETERMINED TO BE LIQUID BY THE FUND'S
BOARD OF DIRECTORS (OR ITS DELEGEE), WILL NOT SUBJECT TO THIS 15% LIMITATION.
2. PLEDGE, MORTGAGE OR HYPOTHECATE IN EXCESS OF 33 1/3% OF ITS GROSS ASSETS.
FOR PURPOSES OF THIS RESTRICTION, COLLATERAL ARRANGEMENTS WITH RESPECT TO ANY
TYPE OF SWAP, OPTION, FUTURES CONTRACTS AND FORWARD CONTRACTS AND PAYMENTS OF
INITIAL AND VARIATION MARGIN IN CONNECTION THEREWITH, ARE NOT CONSIDERED A
PLEDGE OF ASSETS. INVEST FOR THE PURPOSE OF EXERCISING CONTROL OR MANAGEMENT.
3. HOLD OBLIGATIONS ISSUED OR GUARANTEED BY ANY ONE U.S. GOVERNMENTAL AGENCY
OR INSTRUMENTALITY, AT THE END OF ANY CALENDAR QUARTER (OR WITHIN 30 DAYS
THEREAFTER), TO THE EXTENT SUCH HOLDINGS WOULD CAUSE THE PORTFOLIOS TO FAIL TO
COMPLY WITH THE DIVERSIFICATION REQUIREMENTS IMPOSED BY SECTION 817(H) OF THE
INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"), AND THE TREASURY
REGULATIONS ISSUED THEREUNDER ON SEGREGATED ASSET ACCOUNTS THAT FUND VARIABLE
CONTRACTS.
4. INVEST 25% OR MORE OF THE MARKET VALUE OF ITS TOTAL ASSETS IN SECURITIES
OF ISSUERS IN ANY ONE INDUSTRY (PROVIDED THAT THIS RESTRICTION DOES NOT LIMIT
THE EXCEPTIONS SET FORTH IN FUNDAMENTAL INVESTMENT RESTRICTION NO. 6).
EXCEPT FOR FUNDAMENTAL INVESTMENT RESTRICTION NO. 1 AND NONFUNDAMENTAL
INVESTMENT RESTRICTION NO. 1, THESE INVESTMENT RESTRICTIONS AND POLICIES ARE
ADHERED TO AT THE TIME OF PURCHASE OR UTILIZATION OF ASSETS; A SUBSEQUENT CHANGE
IN CIRCUMSTANCES WILL NOT BE CONSIDERED TO RESULT IN A VIOLATION OF ANY OF THE
RESTRICTIONS.
INDEX 500 PORTFOLIO
THE PORTFOLIO HAS ADOPTED THE FOLLOWING FUNDAMENTAL INVESTMENT
RESTRICTIONS. THESE RESTRICTIONS CANNOT BE CHANGED WITHOUT THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF THE PORTFOLIO. THE PORTFOLIO
MAY NOT:
1. WITH RESPECT TO 75% OF THE PORTFOLIO'S TOTAL ASSETS, PURCHASE THE
SECURITIES OF ANY ISSUER (OTHER THAN SECURITIES ISSUED OR GUARANTEED BY THE U.S.
GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES, OR SECURITIES OF OTHER
INVESTMENT COMPANIES) IF, AS A RESULT, (A) MORE THAN 5% OF THE PORTFOLIO'S TOTAL
ASSETS WOULD BE INVESTED IN THE SECURITIES OF THAT ISSUER, OR (B) THE PORTFOLIO
WOULD HOLD MORE THAN 10% OF THE OUTSTANDING VOTING SECURITIES OF THAT ISSUER.
2. ISSUE SENIOR SECURITIES, EXCEPT IN CONNECTION WITH THE INSURANCE PROGRAM
ESTABLISHED BY THE PORTFOLIO PURSUANT TO AN EXEMPTIVE ORDER ISSUED BY THE
SECURITIES AND EXCHANGE COMMISSION OR AS OTHERWISE PERMITTED UNDER THE
INVESTMENT COMPANY ACT OF 1940.
3. BORROW MONEY, EXCEPT THAT THE PORTFOLIO MAY BORROW MONEY FOR TEMPORARY OR
EMERGENCY PURPOSES (NOT FOR LEVERAGING OR INVESTMENT) IN AN AMOUNT NOT EXCEEDING
33 1/3% OF ITS TOTAL ASSETS (INCLUDING THE AMOUNT BORROWED) LESS LIABILITIES
(OTHER THAN BORROWINGS). ANY BORROWINGS THAT COME TO EXCEED THIS AMOUNT WILL BE
REDUCED WITHIN THREE DAYS (NOT INCLUDING SUNDAYS AND HOLIDAYS) TO THE EXTENT
NECESSARY TO COMPLY WITH THE 33 1/3% LIMITATION.
4. UNDERWRITE SECURITIES ISSUED BY OTHERS, EXCEPT TO THE EXTENT THAT THE
PORTFOLIO MAY BE CONSIDERED AN UNDERWRITER WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 IN THE DISPOSITION OF RESTRICTED SECURITIES.
5. PURCHASE THE SECURITIES OF ANY ISSUER (OTHER THAN SECURITIES ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES)
IF, AS A RESULT, MORE THAN 25% OF ITS TOTAL ASSETS WOULD BE INVESTED IN THE
SECURITIES OF COMPANIES WHOSE PRINCIPAL BUSINESS ACTIVITIES ARE IN THE SAME
INDUSTRY.
6. PURCHASE OR SELL REAL ESTATE UNLESS ACQUIRED AS A RESULT OF OWNERSHIP OF
SECURITIES OR OTHER INSTRUMENTS (BUT THIS SHALL NOT PREVENT THE PORTFOLIO FROM
INVESTING IN SECURITIES OR OTHER INSTRUMENTS BACKED BY REAL ESTATE OR SECURITIES
OF COMPANIES ENGAGED IN THE REAL ESTATE BUSINESS).
7. PURCHASE OR SELL PHYSICAL COMMODITIES UNLESS ACQUIRED AS A RESULT OF
OWNERSHIP OF SECURITIES OR OTHER INSTRUMENTS (BUT THIS SHALL NOT PREVENT THE
PORTFOLIO FROM PURCHASING OR SELLING OPTIONS AND FUTURES CONTRACTS OR FROM
INVESTING IN SECURITIES OR OTHER INSTRUMENTS BACKED BY PHYSICAL COMMODITIES).
8. LEND ANY SECURITY OR MAKE ANY OTHER LOAN IF, AS A RESULT, MORE THAN 33
1/3% OF ITS TOTAL ASSETS WOULD BE LENT TO OTHER PARTIES, BUT THIS LIMITATION
DOES NOT APPLY TO PURCHASES OF DEBT SECURITIES OR TO REPURCHASE AGREEMENTS.
THE BOARD OF DIRECTORS HAS ADOPTED THE FOLLOWING NONFUNDAMENTAL INVESTMENT
RESTRICTIONS. A NONFUNDAMENTAL INVESTMENT RESTRICTION CAN BE CHANGED BY THE
BOARD AT ANY TIME WITHOUT A SHAREHOLDER VOTE.
1. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO SELL SECURITIES SHORT, UNLESS
IT OWNS OR HAS THE RIGHT TO OBTAIN SECURITIES EQUIVALENT IN KIND AND AMOUNT TO
THE SECURITIES SOLD SHORT, AND PROVIDED THAT TRANSACTIONS IN FUTURES CONTRACTS
AND OPTIONS ARE NOT DEEMED TO CONSTITUTE SELLING SECURITIES SHORT.
2. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE SECURITIES ON MARGIN,
EXCEPT THAT THE PORTFOLIO MAY OBTAIN SUCH SHORT-TERM CREDITS AS ARE NECESSARY
FOR THE CLEARANCE OF TRANSACTIONS, AND PROVIDED THAT MARGIN PAYMENTS IN
CONNECTION WITH FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS SHALL NOT
CONSTITUTE PURCHASING SECURITIES ON MARGIN.
3. THE PORTFOLIO MAY BORROW MONEY ONLY (A) FROM A BANK OR FROM A REGISTERED
INVESTMENT COMPANY OR PORTFOLIO FOR WHICH THE ADVISOR, SUBADVISOR OR AN
AFFILIATE SERVES AS INVESTMENT ADVISER OR (B) BY ENGAGING IN REVERSE REPURCHASE
AGREEMENTS WITH ANY PARTY (REVERSE REPURCHASE AGREEMENTS ARE TREATED AS
BORROWINGS FOR PURPOSES OF FUNDAMENTAL INVESTMENT RESTRICTION NO. 3). THE
PORTFOLIO WILL NOT BORROW FROM OTHER FUNDS ADVISED BY ADVISOR, SUBADVISOR OR ITS
AFFILIATES IF TOTAL OUTSTANDING BORROWINGS IMMEDIATELY AFTER SUCH BORROWING
WOULD EXCEED 15% OF THE PORTFOLIO'S TOTAL ASSETS.
4. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE ANY SECURITY IF, AS A
RESULT, MORE THAN 10% OF ITS NET ASSETS WOULD BE INVESTED IN SECURITIES THAT ARE
DEEMED TO BE ILLIQUID BECAUSE THEY ARE SUBJECT TO LEGAL OR CONTRACTUAL
RESTRICTIONS ON RESALE OR BECAUSE THEY CANNOT BE SOLD OR DISPOSED OF IN THE
ORDINARY COURSE OF BUSINESS AT APPROXIMATELY THE PRICES AT WHICH THEY ARE
VALUED.
5. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO LEND ASSETS OTHER THAN
SECURITIES TO OTHER PARTIES, EXCEPT BY: (A) LENDING UP TO 5% OF ITS NET ASSETS
TO A REGISTERED INVESTMENT COMPANY OR PORTFOLIO FOR WHICH THE ADVISOR,
SUBADVISOR OR AN AFFILIATE SERVES AS INVESTMENT ADVISER OR (B) ACQUIRING LOANS,
LOAN PARTICIPATIONS, OR OTHER FORMS OF DIRECT DEBT INSTRUMENTS AND, IN
CONNECTION THEREWITH, ASSUMING ANY ASSOCIATED UNFUNDED COMMITMENTS OF THE
SELLERS. (THIS LIMITATION DOES NOT APPLY TO PURCHASES OF DEBT SECURITIES OR TO
REPURCHASE AGREEMENTS.)
6. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO INVEST IN OIL, GAS, OR OTHER
MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS OR LEASES; EXCEPT TO THE EXTENT
INCORPORATED WITHIN THE S&P 500.
WITH RESPECT TO NONFUNDAMENTAL INVESTMENT RESTRICTION NO. 4, IF THROUGH A
CHANGE IN VALUES, NET ASSETS, OR OTHER CIRCUMSTANCES, A FUND WERE IN A POSITION
WHERE MORE THAN 10% OF ITS NET ASSETS WAS INVESTED IN ILLIQUID SECURITIES, IT
WOULD CONSIDER APPROPRIATE STEPS TO PROTECT LIQUIDITY.
WITH RESPECT TO THE PORTFOLIO'S LIMITATIONS ON FUTURES AND OPTIONS
TRANSACTIONS, SEE THE SECTION ENTITLED "OPTIONS AND FUTURES CONTRACTS".
MONEY MARKET PORTFOLIO
THE PORTFOLIO HAS ADOPTED THE FOLLOWING FUNDAMENTAL INVESTMENT
RESTRICTIONS. THESE RESTRICTIONS CANNOT BE CHANGED WITHOUT THE APPROVAL OF THE
HOLDERS OF A MAJORITY OF THE OUTSTANDING SHARES OF THE PORTFOLIO. THE PORTFOLIO
MAY NOT:
1. PURCHASE THE SECURITIES OF ANY ISSUER IF, AS A RESULT, THE PORTFOLIO
WOULD NOT COMPLY WITH ANY APPLICABLE DIVERSIFICATION REQUIREMENTS FOR A MONEY
MARKET FUND UNDER THE INVESTMENT COMPANY ACT OF 1940 AND THE RULES THEREUNDER,
AS SUCH MAY BE AMENDED FROM TIME TO TIME.
2. ISSUE SENIOR SECURITIES.
3. BORROW MONEY, EXCEPT THAT THE PORTFOLIO MAY (I) BORROW MONEY FOR
TEMPORARY OR EMERGENCY PURPOSES (NOT FOR LEVERAGING OR INVESTMENT) AND (II)
ENGAGE IN REVERSE REPURCHASE AGREEMENTS FOR ANY PURPOSE; PROVIDED THAT (I) AND
(II) IN COMBINATION DO NOT EXCEED 33 1/3% OF THE PORTFOLIO'S TOTAL ASSETS
(INCLUDING THE AMOUNT BORROWED) LESS LIABILITIES (OTHER THAN BORROWINGS). ANY
BORROWINGS THAT COME TO EXCEED THIS AMOUNT WILL BE REDUCED WITHIN THREE DAYS
(NOT INCLUDING SUNDAYS AND HOLIDAYS) TO THE EXTENT NECESSARY TO COMPLY WITH THE
33 1/3% LIMITATION.
4. UNDERWRITE SECURITIES ISSUED BY OTHERS, EXCEPT TO THE EXTENT THAT THE
PORTFOLIO MAY BE CONSIDERED AN UNDERWRITER WITHIN THE MEANING OF THE SECURITIES
ACT OF 1933 IN THE DISPOSITION OF RESTRICTED SECURITIES.
5. PURCHASE THE SECURITIES OF ANY ISSUER (OTHER THAN SECURITIES ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT OR ANY OF ITS AGENCIES OR INSTRUMENTALITIES)
IF, AS A RESULT, MORE THAN 25% OF THE PORTFOLIO'S TOTAL ASSETS WOULD BE INVESTED
IN THE SECURITIES OF COMPANIES WHOSE PRINCIPAL BUSINESS ACTIVITIES ARE IN THE
SAME INDUSTRY, EXCEPT THAT THE PORTFOLIO WILL INVEST MORE THAN 25% OF ITS TOTAL
ASSETS IN THE FINANCIAL SERVICES INDUSTRY.
6. PURCHASE OR SELL REAL ESTATE UNLESS ACQUIRED AS A RESULT OF OWNERSHIP OF
SECURITIES OR OTHER INSTRUMENTS (BUT THIS SHALL NOT PREVENT THE PORTFOLIO FROM
INVESTING IN SECURITIES OR OTHER INSTRUMENTS BACKED BY REAL ESTATE OR SECURITIES
OF COMPANIES ENGAGED IN THE REAL ESTATE BUSINESS).
7. PURCHASE OR SELL PHYSICAL COMMODITIES UNLESS ACQUIRED AS A RESULT OF
OWNERSHIP OF SECURITIES OR OTHER INSTRUMENTS.
8. LEND ANY SECURITY OR MAKE ANY OTHER LOAN IF, AS A RESULT, MORE THAN 33
1/3% OF ITS TOTAL ASSETS WOULD BE LENT TO OTHER PARTIES, BUT THIS LIMITATION
DOES NOT APPLY TO PURCHASES OF DEBT SECURITIES OR TO REPURCHASE AGREEMENTS.
9. INVEST IN COMPANIES FOR THE PURPOSE OF EXERCISING CONTROL OR MANAGEMENT.
THE BOARD OF DIRECTORS HAS ADOPTED THE FOLLOWING NONFUNDAMENTAL INVESTMENT
RESTRICTIONS. A NONFUNDAMENTAL INVESTMENT RESTRICTION CAN BE CHANGED BY THE
BOARD AT ANY TIME WITHOUT A SHAREHOLDER VOTE.
1. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE A SECURITY (OTHER
THAN SECURITIES ISSUED OR GUARANTEED BY THE U.S. GOVERNMENT OR ANY OF ITS
AGENCIES OR INSTRUMENTALITIES OR SECURITIES OF OTHER MONEY MARKET FUNDS) IF, AS
A RESULT, MORE THAN 5% OF ITS TOTAL ASSETS WOULD BE INVESTED IN SECURITIES OF A
SINGLE ISSUER; PROVIDED THAT THE PORTFOLIO MAY INVEST UP TO 25% OF ITS TOTAL
ASSETS IN THE FIRST TIER SECURITIES OF A SINGLE ISSUER FOR UP TO THREE BUSINESS
DAYS.
2. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO SELL SECURITIES SHORT, UNLESS
IT OWNS OR HAS THE RIGHT TO OBTAIN SECURITIES EQUIVALENT IN KIND AND AMOUNT TO
THE SECURITIES SOLD SHORT, AND PROVIDED THAT TRANSACTIONS IN FUTURES CONTRACTS
AND OPTIONS ARE NOT DEEMED TO CONSTITUTE SELLING SECURITIES SHORT.
3. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE SECURITIES ON MARGIN,
EXCEPT THAT THE PORTFOLIO MAY OBTAIN SUCH SHORT-TERM CREDITS AS ARE NECESSARY
FOR THE CLEARANCE OF TRANSACTIONS, AND PROVIDED THAT MARGIN PAYMENTS IN
CONNECTION WITH FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS SHALL NOT
CONSTITUTE PURCHASING SECURITIES ON MARGIN.
4. THE PORTFOLIO MAY BORROW MONEY ONLY (A) FROM A BANK OR FROM A REGISTERED
INVESTMENT COMPANY OR PORTFOLIO FOR WHICH THE ADVISOR, SUBADVISOR OR AN
AFFILIATE SERVES AS INVESTMENT ADVISER OR (B) BY ENGAGING IN REVERSE REPURCHASE
AGREEMENTS WITH ANY PARTY. THE PORTFOLIO WILL NOT BORROW FROM OTHER FUNDS
ADVISED BY THE ADVISOR, SUBADVISOR OR ITS AFFILIATES IF TOTAL OUTSTANDING
BORROWINGS IMMEDIATELY AFTER SUCH BORROWING WOULD EXCEED 33 1/3% OF THE
PORTFOLIO'S TOTAL ASSETS.
5. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE ANY SECURITY IF, AS A
RESULT, MORE THAN 10% OF ITS NET ASSETS WOULD BE INVESTED INSECURITIES THAT ARE
DEEMED TO BE ILLIQUID BECAUSE THEY ARE SUBJECT TO LEGAL OR CONTRACTUAL
RESTRICTIONS ON RESALE OR BECAUSE THEY CANNOT BE SOLD OR DISPOSED OF IN THE
ORDINARY COURSE OF BUSINESS AT APPROXIMATELY THE PRICES AT WHICH THEY ARE
VALUED.
6. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO PURCHASE OR SELL FUTURES
CONTRACTS OR CALL OPTIONS. THIS LIMITATION DOES NOT APPLY TO OPTIONS ATTACHED
TO, OR ACQUIRED OR TRADED TOGETHER WITH, THEIR UNDERLYING SECURITIES, AND DOES
NOT APPLY TO SECURITIES THAT INCORPORATE FEATURES SIMILAR TO OPTIONS OR FUTURES
CONTRACTS.
7. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO LEND ASSETS OTHER THAN
SECURITIES TO OTHER PARTIES, EXCEPT BY LENDING MONEY (UP TO 10% OF THE
PORTFOLIO'S NET ASSETS) TO A REGISTERED INVESTMENT COMPANY OR PORTFOLIO FOR
WHICH ADVISOR, SUBADVISOR OR AN AFFILIATE SERVES AS INVESTMENT ADVISER. (THIS
LIMITATION DOES NOT APPLY TO PURCHASES OF DEBT SECURITIES OR TO REPURCHASE
AGREEMENTS.)
8. THE PORTFOLIO DOES NOT CURRENTLY INTEND TO INVEST IN OIL, GAS, OR OTHER
MINERAL EXPLORATION OR DEVELOPMENT PROGRAMS OR LEASES.
WITH RESPECT TO NONFUNDAMENTAL INVESTMENT RESTRICTION NO. 1, CERTAIN
SECURITIES SUBJECT TO GUARANTEES (INCLUDING INSURANCE, LETTERS OF CREDIT AND
DEMAND FEATURES) ARE NOT CONSIDERED SECURITIES OF THEIR ISSUER, BUT ARE SUBJECT
TO SEPARATE DIVERSIFICATION REQUIREMENTS, IN ACCORDANCE WITH INDUSTRY STANDARD
REQUIREMENTS FOR MONEY MARKET FUNDS.
WITH RESPECT TO NONFUNDAMENTAL INVESTMENT RESTRICTION NO. 5, IF THROUGH A CHANGE
IN VALUES, NET ASSETS, OR OTHER CIRCUMSTANCES, THE PORTFOLIO WERE IN A POSITION
WHERE MORE THAN 10% OF ITS NET ASSETS WAS INVESTED IN ILLIQUID SECURITIES, IT
WOULD CONSIDER APPROPRIATE STEPS TO PROTECT LIQUIDITY.
PURCHASE AND REDEMPTION OF SHARES
---------------------------------
THE PORTFOLIOS CONTINUOUSLY OFFER THEIR SHARES AT PRICES EQUAL TO THE
RESPECTIVE NET ASSET VALUES OF THE PORTFOLIOS DETERMINED IN THE MANNER SET FORTH
BELOW UNDER "NET ASSET VALUE." THE PORTFOLIOS OFFER THEIR SHARES, WITHOUT SALES
CHARGE, ONLY FOR PURCHASE BY VARIOUS INSURANCE COMPANIES FOR ALLOCATION TO THEIR
VARIABLE ACCOUNTS. IT IS CONCEIVABLE THAT IN THE FUTURE IT MAY BE
DISADVANTAGEOUS FOR BOTH ANNUITY VARIABLE ACCOUNTS AND LIFE INSURANCE VARIABLE
ACCOUNTS OF DIFFERENT INSURANCE COMPANIES, TO INVEST SIMULTANEOUSLY IN THE
PORTFOLIOS, ALTHOUGH CURRENTLY NEITHER THE INSURANCE COMPANIES NOR THE PORTFOLIO
FORESEE ANY SUCH DISADVANTAGES TO EITHER VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE POLICY HOLDERS OF ANY INSURANCE COMPANY. THE PORTFOLIOS' BOARD OF
DIRECTORS INTENDS TO MONITOR EVENTS IN ORDER TO IDENTIFY ANY MATERIAL CONFLICTS
BETWEEN SUCH POLICYHOLDERS AND TO DETERMINE WHAT ACTION, IF ANY, SHOULD BE TAKEN
IN RESPONSE TO ANY CONFLICTS.
THE PORTFOLIOS ARE REQUIRED TO REDEEM ALL FULL AND FRACTIONAL SHARES FOR
CASH. THE REDEMPTION PRICE IS THE NET ASSET VALUE PER SHARE, WHICH MAY BE MORE
OR LESS THAN THE ORIGINAL COST, DEPENDING ON THE INVESTMENT EXPERIENCE OF THE
PORTFOLIO. PAYMENT FOR SHARES REDEEMED WILL GENERALLY BE MADE WITHIN SEVEN DAYS
AFTER RECEIPT OF A PROPER NOTICE OF REDEMPTION. THE RIGHT OF REDEMPTION MAY BE
SUSPENDED OR THE DATE OF PAYMENT POSTPONED FOR ANY PERIOD DURING WHICH THE NEW
YORK STOCK EXCHANGE IS CLOSED (OTHER THAN CUSTOMARY WEEKEND AND HOLIDAY
CLOSINGS), WHEN TRADING ON THE NEW YORK STOCK EXCHANGE IS RESTRICTED, OR AN
EMERGENCY EXISTS, AS DETERMINED BY THE COMMISSION, OR IF THE COMMISSION HAS
ORDERED SUCH A SUSPENSION FOR THE PROTECTION OF SHAREHOLDERS.
NET ASSET VALUE
---------------
THE NET ASSET VALUE OF THE SHARES OF EACH PORTFOLIO OF THE FUND IS
DETERMINED BY ADDING THE VALUES OF ALL SECURITIES AND OTHER ASSETS OF THE
PORTFOLIO, SUBTRACTING LIABILITIES AND EXPENSES, AND DIVIDING BY THE NUMBER OF
SHARES OF THE PORTFOLIO OUTSTANDING. EXPENSES ARE ACCRUED DAILY, INCLUDING THE
INVESTMENT ADVISORY FEE. THE MONEY MARKET PORTFOLIO ATTEMPTS TO MAINTAIN A
CONSTANT NET ASSET VALUE OF $1.00 PER SHARE. THE NET ASSET VALUES OF THE INCOME
& GROWTH, GROWTH, SMALL CAPITALIZATION, MIDCAP GROWTH, EMERGING GROWTH,
RESEARCH, GROWTH WITH INCOME AND INDEX 500 PORTFOLIOS FLUCTUATE BASED ON THE
RESPECTIVE MARKET VALUE OF A PORTFOLIO'S INVESTMENTS. THE NET ASSET VALUE PER
SHARE OF EACH OF THE PORTFOLIOS IS DETERMINED EVERY BUSINESS DAY AS OF THE CLOSE
OF THE REGULAR SESSION OF THE NEW YORK STOCK EXCHANGE (GENERALLY 4:00 P.M.
EASTERN TIME), AND AT SUCH OTHER TIMES AS MAY BE NECESSARY OR APPROPRIATE. THE
PORTFOLIOS DO NOT DETERMINE NET ASSET VALUE ON CERTAIN NATIONAL HOLIDAYS OR
OTHER DAYS ON WHICH THE NEW YORK STOCK EXCHANGE IS CLOSED: NEW YEAR'S DAY,
PRESIDENTS' DAY, DR. MARTIN LUTHER KING, JR. DAY, GOOD FRIDAY, MEMORIAL DAY,
INDEPENDENCE DAY, LABOR DAY, THANKSGIVING DAY, AND CHRISTMAS DAY. EACH
PORTFOLIO'S NET ASSET VALUE PER SHARE IS DETERMINED BY DIVIDING THAT PORTFOLIO'S
TOTAL NET ASSETS (THE VALUE OF ITS ASSETS NET OF LIABILITIES, INCLUDING ACCRUED
EXPENSES AND FEES) BY THE NUMBER OF SHARES OUTSTANDING.
THE ASSETS OF THE INCOME & GROWTH, GROWTH, SMALL CAPITALIZATION, MIDCAP
GROWTH, EMERGING GROWTH, RESEARCH, GROWTH WITH INCOME AND INDEX 500 PORTFOLIOS
ARE VALUED AS FOLLOWS: (A) SECURITIES FOR WHICH MARKET QUOTATIONS ARE READILY
AVAILABLE ARE VALUED AT THE MOST RECENT CLOSING PRICE, MEAN BETWEEN BID AND
ASKED PRICE, OR YIELD EQUIVALENT AS OBTAINED FROM ONE OR MORE MARKET MAKERS FOR
SUCH SECURITIES; (B) SECURITIES MATURING WITHIN 60 DAYS MAY BE VALUED AT COST,
PLUS OR MINUS ANY AMORTIZED DISCOUNT OR PREMIUM, UNLESS THE BOARD OF DIRECTORS
DETERMINES SUCH METHOD NOT TO BE APPROPRIATE UNDER THE CIRCUMSTANCES; AND (C)
ALL OTHER SECURITIES AND ASSETS FOR WHICH MARKET QUOTATIONS ARE NOT READILY
AVAILABLE WILL BE FAIRLY VALUED BY THE ADVISOR IN GOOD FAITH UNDER THE
SUPERVISION OF THE BOARD OF DIRECTORS. SECURITIES PRIMARILY TRADED ON FOREIGN
SECURITIES EXCHANGES ARE GENERALLY VALUED AT THE PRECEDING CLOSING VALUES ON
THEIR RESPECTIVE EXCHANGES WHERE PRIMARILY TRADED. EQUITY OPTIONS ARE VALUED AT
THE LAST SALE PRICE UNLESS THE BID PRICE IS HIGHER OR THE ASKED PRICE IS LOWER,
IN WHICH EVENT SUCH BID OR ASKED PRICE IS USED. EXCHANGE TRADED FIXED INCOME
OPTIONS ARE VALUED AT THE LAST SALE PRICE UNLESS THERE IS NO SALE PRICE, IN
WHICH EVENT CURRENT PRICES PROVIDED BY MARKET MAKERS ARE USED. OVER-THE-COUNTER
FIXED INCOME OPTIONS ARE VALUED BASED UPON CURRENT PRICES PROVIDED BY MARKET
MAKERS. FINANCIAL FUTURES ARE VALUED AT THE SETTLEMENT PRICE ESTABLISHED EACH
DAY BY THE BOARD OF TRADE OR EXCHANGE ON WHICH THEY ARE TRADED. BECAUSE OF THE
NEED TO OBTAIN PRICES AS OF THE CLOSE OF TRADING ON VARIOUS EXCHANGES THROUGHOUT
THE WORLD, THE CALCULATION OF THE PORTFOLIO'S NET ASSET VALUE DOES NOT TAKE
PLACE FOR CONTEMPORANEOUSLY WITH THE DETERMINATION OF THE PRICES OF U.S.
PORTFOLIO SECURITIES. FOR PURPOSES OF DETERMINING THE NET ASSET VALUE ALL ASSETS
AND LIABILITIES INITIALLY EXPRESSED IN FOREIGN CURRENCY VALUES WILL BE CONVERTED
INTO UNITED STATES DOLLAR VALUES AT THE MEAN BETWEEN THE BID AND OFFERED
QUOTATIONS OF SUCH CURRENCIES AGAINST UNITED STATES DOLLARS AT LAST QUOTED BY
ANY RECOGNIZED DEALER. IF AN EVENT WERE TO OCCUR AFTER THE VALUE OF AN
INVESTMENT WAS SO ESTABLISHED BUT BEFORE THE NET ASSET VALUE PER SHARE WAS
DETERMINED WHICH WAS LIKELY TO MATERIALLY CHANGE THE NET ASSET VALUE, THEN THE
INSTRUMENT WOULD BE VALUED USING FAIR VALUE CONSIDERATION BY THE DIRECTORS OR
THEIR DELEGATES.
THE MONEY MARKET PORTFOLIO'S ASSETS, INCLUDING SECURITIES SUBJECT TO
REPURCHASE AGREEMENTS, ARE NORMALLY VALUED AT THEIR AMORTIZED COST WHICH DOES
NOT TAKE INTO ACCOUNT UNREALIZED CAPITAL GAINS OR LOSSES. THIS INVOLVES VALUING
AN INSTRUMENT AT ITS COST AND THEREAFTER ASSUMING A CONSTANT AMORTIZATION TO
MATURITY OF ANY DISCOUNT OR PREMIUM, REGARDLESS OF THE IMPACT OF FLUCTUATING
INTEREST RATES ON THE MARKET VALUE OF THE INSTRUMENT. WHILE THIS METHOD PROVIDES
CERTAINTY IN VALUATION, IT MAY RESULT IN PERIODS DURING WHICH VALUE, AS
DETERMINED BY AMORTIZED COST, IS HIGHER OR LOWER THAN THE PRICE THAT WOULD BE
RECEIVED UPON SALE OF THE INSTRUMENT.
TAXES
-----
IN 1999 THE PORTFOLIOS QUALIFIED, AND IN 2000, THE PORTFOLIOS INTEND TO
QUALIFY, AS A "REGULATED INVESTMENT COMPANY" UNDER THE PROVISIONS OF SUBCHAPTER
M OF THE INTERNAL REVENUE CODE (THE "CODE"). IF FOR ANY REASON THE FUND SHOULD
FAIL TO QUALIFY, IT WOULD BE TAXED AS A CORPORATION AT THE FUND LEVEL, RATHER
THAN PASSING THROUGH ITS INCOME AND GAINS TO SHAREHOLDERS.
DISTRIBUTIONS OF REALIZED NET CAPITAL GAINS, IF ANY, ARE NORMALLY PAID ONCE A
YEAR; HOWEVER, THE PORTFOLIOS DO NOT INTEND TO MAKE ANY SUCH DISTRIBUTIONS
UNLESS AVAILABLE CAPITAL LOSS CARRYOVERS, IF ANY, HAVE BEEN USED OR HAVE
EXPIRED. CAPITAL LOSS CARRYFORWARDS AS OF DECEMBER 31, 1999, FOR INCOME & GROWTH
WAS $0, GROWTH WAS $228,348 SMALL CAPITALIZATION WAS $0, MIDCAP GROWTH WAS $0,
EMERGING GROWTH WAS $0, RESEARCH WAS $0, GROWTH WITH INCOME WAS $0, INDEX 500
WAS $0, AND MONEY MARKET WAS $0.
SINCE THE SHAREHOLDERS OF THE PORTFOLIOS ARE INSURANCE COMPANIES, THIS
STATEMENT OF ADDITIONAL INFORMATION DOES NOT CONTAIN A DISCUSSION OF THE FEDERAL
INCOME TAX CONSEQUENCES AT THE SHAREHOLDER LEVEL. FOR INFORMATION CONCERNING THE
FEDERAL TAX CONSEQUENCES TO PURCHASERS OF ANNUITY OR LIFE INSURANCE POLICIES,
SEE THE PROSPECTUS FOR THE POLICIES.
CALCULATION OF YIELD AND TOTAL RETURN
-------------------------------------
YIELD (MONEY MARKET):
FROM TIME TO TIME THE MONEY MARKET PORTFOLIO ADVERTISES ITS "YIELD" AND
"EFFECTIVE YIELD." BOTH YIELD FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. THE "YIELD" OF THE MONEY MARKET
PORTFOLIO REFERS TO THE ACTUAL INCOME GENERATED BY AN INVESTMENT IN THE
PORTFOLIO OVER A PARTICULAR BASE PERIOD OF TIME. IF THE BASE PERIOD IS LESS THAN
ONE YEAR, THE YIELD IS THEN "ANNUALIZED." THAT IS, THE NET CHANGE, EXCLUSIVE OF
CAPITAL CHANGES, IN THE VALUE OF A SHARE DURING THE BASE PERIOD IS DIVIDED BY
THE NET ASSET VALUE PER SHARE AT THE BEGINNING OF THE PERIOD, AND THE RESULT IS
MULTIPLIED BY 365 AND DIVIDED BY THE NUMBER OF DAYS IN THE BASE PERIOD. CAPITAL
CHANGES EXCLUDED FROM THE CALCULATION OF YIELD ARE: (1) REALIZED GAINS AND
LOSSES FROM THE SALE OF SECURITIES, AND (2) UNREALIZED APPRECIATION AND
DEPRECIATION. THE MONEY MARKET PORTFOLIO'S "EFFECTIVE YIELD" FOR A SEVEN-DAY
PERIOD IS ITS ANNUALIZED COMPOUNDED YIELD DURING THE PERIOD, CALCULATED
ACCORDING TO THE FOLLOWING FORMULA:
EFFECTIVE YIELD = [(BASE PERIOD RETURN) + 1]365/7 - 1
THE "EFFECTIVE YIELD" IS CALCULATED LIKE YIELD, BUT ASSUMES REINVESTMENT OF
EARNED INCOME. THE EFFECTIVE YIELD WILL BE SLIGHTLY HIGHER THAN THE YIELD
BECAUSE OF THE COMPOUNDING EFFECT OF THIS ASSUMED REINVESTMENT. THE "EFFECTIVE
YIELD" IS CALCULATED LIKE YIELD, BUT ASSUMES REINVESTMENT OF EARNED INCOME. THE
EFFECTIVE YIELD WILL BE SLIGHTLY HIGHER THAN THE YIELD BECAUSE OF THE
COMPOUNDING EFFECT OF THIS ASSUMED REINVESTMENT. FOR THE SEVEN-DAY PERIOD ENDED
DECEMBER 31, 1999, MONEY MARKET'S YIELD WAS 6.13% AND ITS EFFECTIVE YIELD WAS
6.32%.
THE YIELD OF THE MONEY MARKET PORTFOLIO WILL FLUCTUATE IN RESPONSE TO
CHANGES IN INTEREST RATES AND GENERAL ECONOMIC CONDITIONS, PORTFOLIO QUALITY,
PORTFOLIO MATURITY, AND OPERATING EXPENSES. YIELD IS NOT FIXED OR INSURED AND
THEREFORE IS NOT COMPARABLE TO A SAVINGS OR OTHER SIMILAR TYPE OF ACCOUNT. YIELD
DURING ANY PARTICULAR TIME PERIOD SHOULD NOT BE CONSIDERED AN INDICATION OF
FUTURE YIELD. IT IS, HOWEVER, USEFUL IN EVALUATING A PORTFOLIO'S PERFORMANCE IN
MEETING ITS INVESTMENT OBJECTIVE.
TOTAL RETURN AND OTHER QUOTATIONS (ALL PORTFOLIOS EXCEPT MONEY MARKET):
THE PORTFOLIOS MAY EACH ADVERTISE "TOTAL RETURN." TOTAL RETURN IS COMPUTED
BY TAKING THE TOTAL NUMBER OF SHARES PURCHASED BY A HYPOTHETICAL $1,000
INVESTMENT, ADDING ALL ADDITIONAL SHARES PURCHASED WITHIN THE PERIOD WITH
REINVESTED DIVIDENDS AND DISTRIBUTIONS, CALCULATING THE VALUE OF THOSE SHARES AT
THE END OF THE PERIOD, AND DIVIDING THE RESULT BY THE INITIAL $1,000 INVESTMENT.
FOR PERIODS OF MORE THAN ONE YEAR, THE CUMULATIVE TOTAL RETURN IS THEN ADJUSTED
FOR THE NUMBER OF YEARS, TAKING COMPOUNDING INTO ACCOUNT, TO CALCULATE AVERAGE
ANNUAL TOTAL RETURN DURING THAT PERIOD.
TOTAL RETURN IS COMPUTED ACCORDING TO THE FOLLOWING FORMULA:
P(1 + T)N = ERV
WHERE P = A HYPOTHETICAL INITIAL PAYMENT OF $1,000; T = TOTAL RETURN; N = NUMBER
OF YEARS; AND ERV = THE ENDING REDEEMABLE VALUE OF A HYPOTHETICAL $1,000 PAYMENT
MADE AT THE BEGINNING OF THE PERIOD. TOTAL RETURN IS HISTORICAL IN NATURE AND IS
NOT INTENDED TO INDICATE FUTURE PERFORMANCE. TOTAL RETURN FOR THE PORTFOLIOS FOR
THE PERIODS INDICATED ARE AS FOLLOWS:
PERIOD ENDED
DECEMBER 31, 1999 SEC ANNUAL RETURN
INCOME & GROWTH
FROM INCEPTION* 29.14%
GROWTH
FROM INCEPTION* 15.70%
SMALL CAPITALIZATION
FROM INCEPTION* 29.10%
MIDCAP GROWTH
FROM INCEPTION* 22.09%
EMERGING GROWTH
FROM INCEPTION* 46.63%
RESEARCH
FROM INCEPTION* 14.90%
GROWTH WITH INCOME
FROM INCEPTION* 4.65%
INDEX 500
FROM INCEPTION* 8.09%
* INCEPTION FOR THESE EIGHT PORTFOLIOS WAS NOVEMBER 1, 1999.
TOTAL RETURN, LIKE YIELD AND NET ASSET VALUE PER SHARE, FLUCTUATES IN
RESPONSE TO CHANGES IN MARKET CONDITIONS. NEITHER TOTAL RETURN NOR YIELD FOR ANY
PARTICULAR TIME PERIOD SHOULD BE CONSIDERED AN INDICATION OF FUTURE RETURN.
DIRECTORS AND OFFICERS
----------------------
THE FUND'S BOARD OF DIRECTORS SUPERVISES THE FUND'S ACTIVITIES AND REVIEWS
ITS CONTRACTS WITH COMPANIES THAT PROVIDE IT WITH SERVICES. THE DIRECTORS AND
OFFICERS OF THE FUND AND THEIR PRINCIPAL OCCUPATIONS ARE SET FORTH BELOW.
DIRECTORS AND OFFICERS WHO ARE ACTIVE EMPLOYEES OF THE INVESTMENT ADVISOR OR ITS
AFFILIATES WILL NOT RECEIVE ANY ADDITIONAL COMPENSATION FOR THEIR SERVICES TO
THE FUND.
*WILLIAM J. ATHERTON, PRESIDENT AND DIRECTOR. MR. ATHERTON IS PRESIDENT AND
DIRECTOR OF AMERITAS VARIABLE LIFE INSURANCE COMPANY, A SUBSIDIARY OF AMERITAS
LIFE AND AMERITAS ACACIA MUTUAL HOLDING COMPANY, WHICH MANUFACTURES AND
DISTRIBUTES VARIABLE AND FIXED LIFE AND ANNUITY POLICIES. HE WAS FORMERLY
PRESIDENT AND DIRECTOR OF NORTH AMERICAN SECURITY LIFE INSURANCE COMPANY OF
BOSTON, MA. HE SERVES ON THE BOARD OF DIRECTORS OF AMAL CORPORATION. ADDRESS:
2441 BRETIGUE DRIVE, LINCOLN, NEBRASKA 68512. BOB: 01/15/39.
FRANK H. BLATZ, JR., ESQ., DIRECTOR. MR. BLATZ IS A PARTNER IN THE LAW FIRM
OF SNEVILY, ELY, WILLIAMS, GURRIERI & BLATZ. HE WAS FORMERLY A PARTNER WITH
ABRAMS, BLATZ, GRAN, HENDRICKS & REINA, P.A. HE IS ALSO A DIRECTOR/TRUSTEE OF
THE CALVERT FUND, CALVERT CASH RESERVES, FIRST VARIABLE RATE FUND, CALVERT
TAX-FREE RESERVES, AND CALVERT MUNICIPAL FUND, INC. ADDRESS: 308 EAST BROAD
STREET, WESTFIELD, NEW JERSEY 07091. DOB: 10/29/35.
ALICE GRESHAM BULLOCK, DIRECTOR. MS. BULLOCK IS A DEAN AND PROFESSOR AT
HOWARD UNIVERSITY SCHOOL OF LAW. SHE WAS FORMERLY DEPUTY DIRECTOR OF THE
ASSOCIATION OF AMERICAN LAW SCHOOLS. MS. BULLOCK IS A MEMBER OF THE BOARD OF
VISITORS OF J. REUBEN CLARK LAW SCHOOL, BRIGHAM YOUNG UNIVERSITY AND THE BOARD
OF DIRECTORS OF COUNCIL ON LEGAL EDUCATION OPPORTUNITY. ADDRESS: 6127 UTAH
AVENUE, WASHINGTON, D.C. 20015. DOB: 05/17/50.
CHARLES E. DIEHL, DIRECTOR. MR. DIEHL IS VICE PRESIDENT AND TREASURER
EMERITUS OF THE GEORGE WASHINGTON UNIVERSITY, AND HAS RETIRED FROM UNIVERSITY
SUPPORT SERVICES, INC. OF HERNDON, VIRGINIA. HE IS ALSO A DIRECTOR OF ACACIA
MUTUAL LIFE INSURANCE COMPANY. ADDRESS: 1658 QUAIL HOLLOW COURT, MCLEAN,
VIRGINIA 22101. DOB: 10/13/22.
*THOMAS C. GODLASKY, DIRECTOR MR. GODLASKY IS EXECUTIVE VICE PRESIDENT AND
CHIEF INVESTMENT OFFICER OF AMERUS LIFE HOLDINGS, INC. HE WAS FORMERLY A MANAGER
OF FIXED INCOME PRODUCTS AT PROVIDIAN CORP. HE ALSO SERVES ON THE BOARD OF
DIRECTORS OF AMERUS HOME EQUITY, AMVESTORS CORP. DELTA LIFE & ANNUITY, AMERITAS
VARIABLE LIFE INSURANCE COMPANY, AMERITAS INVESTMENT COMPANY AND AMERUS GROUP
FOUNDATION. HE IS ALSO A CHARTERED FINANCIAL ANALYST. ADDRESS: 1516 S. 42ND
STREET, WEST DES MOINES, IOWA 50265. DOB: 10/30/55.
*BARBARA J. KRUMSIEK, PRESIDENT AND DIRECTOR. MS. KRUMSIEK SERVES AS
PRESIDENT, CHIEF EXECUTIVE OFFICER AND VICE CHAIRMAN OF CALVERT GROUP, LTD. AND
AS AN OFFICER AND DIRECTOR OF EACH OF ITS AFFILIATED COMPANIES. SHE IS A
DIRECTOR OF CALVERT-SLOAN ADVISERS, L.L.C., AND A TRUSTEE/DIRECTOR OF EACH OF
THE INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO JOINING CALVERT
GROUP, MS. KRUMSIEK SERVED AS SENIOR VICE PRESIDENT OF ALLIANCE CAPITAL LP'S
MUTUAL FUND DIVISION. DOB: 08/09/52.
M. CHARITO KRUVANT, DIRECTOR. MS. KRUVANT IS PRESIDENT OF CREATIVE
ASSOCIATES INTERNATIONAL, INC., A FIRM THAT SPECIALIZES IN HUMAN RESOURCES
DEVELOPMENT, INFORMATION MANAGEMENT, PUBLIC AFFAIRS AND PRIVATE ENTERPRISE
DEVELOPMENT. SHE IS ALSO A DIRECTOR OF ACACIA FEDERAL SAVINGS BANK. DOB:
12/08/45. ADDRESS: 5301 WISCONSIN AVENUE, N.W. WASHINGTON, D.C. 20015.
CYNTHIA H. MILLIGAN, DIRECTOR. MS. MILLIGAN IS DEAN, COLLEGE OF BUSINESS
ADMINISTRATION, UNIVERSITY OF NEBRASKA, LINCOLN. FORMERLY, SHE WAS THE PRESIDENT
AND CHIEF EXECUTIVE OFFICER FOR CMA, A CONSULTING FIRM FOR FINANCIAL
INSTITUTIONS. SHE SERVES ON THE BOARD OF DIRECTORS OF WELLS FARGO AND GALLUP,
INC. SHE ALSO SERVES ON THE BOARD OF TRUSTEES OF W.K. KELLOGG FOUNDATION.
ADDRESS: 2633 SOUTH 24TH STREET, LINCOLN, NEBRASKA 68502. DOB: 4/11/46.
ARTHUR J. PUGH, TRUSTEE. MR. PUGH SERVES AS A DIRECTOR OF ACACIA FEDERAL
SAVINGS BANK. ADDRESS: 4823 PRESTWICK DRIVE, FAIRFAX, VIRGINIA 22030. DOB:
09/24/37.
SOUTH TRIMBLE, III, DIRECTOR. MR. TRIMBLE IS SPECIAL COUNSEL TO AND
FORMERLY WAS A PARTNER IN THE LAW FIRM OF REASONER & FOX. ADDRESS: 888 17TH
STREET, N.W., SUITE 800, WASHINGTON, DC 20006. DOB: 06/25/25
RONALD M. WOLFSHEIMER, CPA, TREASURER. MR. WOLFSHEIMER IS SENIOR VICE
PRESIDENT AND CHIEF FINANCIAL OFFICER OF CALVERT GROUP, LTD. AND ITS
SUBSIDIARIES AND AN OFFICER OF EACH OF THE OTHER INVESTMENT COMPANIES IN THE
CALVERT GROUP OF FUNDS. MR. WOLFSHEIMER IS VICE PRESIDENT AND TREASURER OF
CALVERT-SLOAN ADVISERS, L.L.C., AND A DIRECTOR OF CALVERT DISTRIBUTORS, INC.
DOB: 07/24/47.
WILLIAM M. TARTIKOFF, ESQ., VICE PRESIDENT AND SECRETARY. MR. TARTIKOFF IS
GENERAL COUNSEL, SECRETARY, AND SENIOR VICE PRESIDENT OF CALVERT GROUP, LTD.,
AND ITS SUBSIDIARIES, AND IS AN OFFICER OF EACH OF THE OTHER INVESTMENT
COMPANIES IN THE CALVERT GROUP OF FUNDS. MR. TARTIKOFF IS VICE PRESIDENT AND
SECRETARY OF CALVERT-SLOAN ADVISERS, L.L.C., A DIRECTOR OF CALVERT DISTRIBUTORS,
INC., AND IS AN OFFICER OF ACACIA NATIONAL LIFE INSURANCE COMPANY. DOB:
08/12/47.
RENO J. MARTINI, SENIOR VICE PRESIDENT. MR. MARTINI IS A DIRECTOR AND
SENIOR VICE PRESIDENT OF CALVERT GROUP, LTD., AND SENIOR VICE PRESIDENT AND
CHIEF INVESTMENT OFFICER OF CALVERT ASSET MANAGEMENT COMPANY, INC. MR. MARTINI
IS ALSO A DIRECTOR AND PRESIDENT OF CALVERT-SLOAN ADVISERS, L.L.C., AND A
DIRECTOR AND OFFICER OF CALVERT NEW WORLD FUND, INC. DOB: 1/13/50.
DANIEL K. HAYES, VICE PRESIDENT. MR. HAYES IS VICE PRESIDENT OF CALVERT
ASSET MANAGEMENT COMPANY, INC., AND IS AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS, EXCEPT FOR CALVERT NEW WORLD
FUND, INC. DOB: 09/09/50.
ROBERT J. O'MEARA, VICE PRESIDENT, MR. O'MEARA IS ASSISTANT VICE PRESIDENT,
INVESTMENT FUNDS ADMINISTRATOR AND BUDGET ADMINISTRATOR OF AMERITAS VARIABLE
LIFE INSURANCE COMPANY. DOB: 12/12/62.
SUSAN WALKER BENDER, ESQ., ASSISTANT SECRETARY. MS. BENDER IS ASSOCIATE
GENERAL COUNSEL OF CALVERT GROUP, AND AN OFFICER OF EACH OF ITS SUBSIDIARIES AND
CALVERT-SLOAN ADVISERS, L.L.C. SHE IS ALSO AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. DOB: 1/29/59.
IVY WAFFORD DUKE, ESQ., ASSISTANT SECRETARY. MS. DUKE IS ASSOCIATE GENERAL
COUNSEL OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS SUBSIDIARIES AND
CALVERT-SLOAN ADVISERS, L.L.C. SHE IS ALSO AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING AT CALVERT
GROUP, MS. DUKE WAS AN ASSOCIATE IN THE INVESTMENT MANAGEMENT GROUP OF THE
BUSINESS AND FINANCE DEPARTMENT AT DRINKER BIDDLE AND REATH. DOB: 9/7/68.
VICTOR FRYE, ESQ., ASSISTANT SECRETARY AND COMPLIANCE OFFICER. MR. FRYE IS
COUNSEL AND COMPLIANCE OFFICER OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS
SUBSIDIARIES AND CALVERT-SLOAN ADVISERS, L.L.C. HE IS ALSO AN OFFICER OF EACH OF
THE OTHER INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING
AT CALVERT GROUP, MR. FRYE WAS COUNSEL AND MANAGER OF THE COMPLIANCE DEPARTMENT
AT THE ADVISORS GROUP. DOB: 10/15/58.
JENNIFER STREAKS, ESQ., ASSISTANT SECRETARY. MS. STREAKS IS ASSISTANT
GENERAL COUNSEL OF CALVERT GROUP AND AN OFFICER OF EACH OF ITS SUBSIDIARIES AND
CALVERT-SLOAN ADVISERS, L.L.C. SHE IS ALSO AN OFFICER OF EACH OF THE OTHER
INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. PRIOR TO WORKING AT CALVERT
GROUP, MS. STREAKS WAS A REGULATORY ANALYST IN THE MARKET REGULATION DEPARTMENT
OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS. DOB: 08/02/71.
MICHAEL V. YUHAS, JR., CPA, CONTROLLER OF FUNDS. MR. YUHAS IS THE DIRECTOR
OF FUND ADMINISTRATION OF CALVERT GROUP, LTD., AND AN OFFICER OF EACH OF THE
OTHER INVESTMENT COMPANIES IN THE CALVERT GROUP OF FUNDS. DOB: 08/04/61.
THE ADDRESS OF DIRECTORS AND OFFICERS, UNLESS OTHERWISE NOTED, IS 4550
MONTGOMERY AVENUE, SUITE 1000N, BETHESDA, MARYLAND 20814. DIRECTORS AND OFFICERS
OF THE FUND AS A GROUP OWN LESS THAN 1% OF THE FUND'S OUTSTANDING SHARES.
DIRECTORS MARKED WITH AN *, ABOVE, ARE "INTERESTED PERSONS" OF THE FUND, UNDER
THE INVESTMENT COMPANY ACT OF 1940.
DURING FISCAL 1999, DIRECTORS OF THE FUND NOT AFFILIATED WITH THE FUND'S
ADVISOR WERE PAID $1,012 BY INCOME & GROWTH, $2,869 BY GROWTH, $1,581 BY SMALL
CAPITALIZATION, $1,042 BY MIDCAP GROWTH, $1,439 BY EMERGING GROWTH, $380 BY
RESEARCH, $621 BY GROWTH WITH INCOME, $2,942 BY INDEX 500, AND $2,544 BY MONEY
MARKET. EACH DIRECTOR OF THE FUND WHO IS NOT AFFILIATED WITH THE ADVISOR
RECEIVES A MEETING FEE OF $1,500 FOR EACH BOARD MEETING ATTENDED; SUCH FEES ARE
ALLOCATED AMONG THE SERIES BASED UPON THEIR RELATIVE NET ASSETS. DIRECTORS NOT
ON ANY OTHER CALVERT GROUP FUND BOARDS RECEIVE AN ANNUAL FEE OF $15,000.
DIRECTORS OF THE FUND NOT AFFILIATED WITH THE FUND'S ADVISOR
("NONINTERESTED PERSONS") MAY ELECT TO DEFER RECEIPT OF ALL OR A PERCENTAGE OF
THEIR ANNUAL FEES AND INVEST THEM IN ANY FUND IN THE CALVERT GROUP FAMILY OF
FUNDS THROUGH THE DIRECTORS/TRUSTEES DEFERRED COMPENSATION PLAN (SHOWN AS
"PENSION OR RETIREMENT BENEFITS ACCRUED AS PART OF FUND EXPENSES," BELOW).
DEFERRAL OF THE FEES IS DESIGNED TO MAINTAIN THE PARTIES IN THE SAME POSITION AS
IF THE FEES WERE PAID ON A CURRENT BASIS. MANAGEMENT BELIEVES THIS WILL HAVE A
NEGLIGIBLE EFFECT ON THE FUND'S ASSETS, LIABILITIES, NET ASSETS, AND NET INCOME
PER SHARE.
DIRECTOR COMPENSATION TABLE
FISCAL YEAR 1999
(UNAUDITED NUMBERS)
Aggregate Pension or Total Compensation
Compensation Retirement Benefits from
from Registrant Accrued as Registrant and Fund
for Service part of Complex paid to
as Trustee/Directors Registrant Trustee/Directors**
Expenses*
NAME OF DIRECTOR
FRANK H. BLATZ, JR. $10,501 $10,501 $48,250
ALICE GRESHAM BULLOCK $18,000 $0 $18,000
CHARLES E. DIEHL $10,501 $0 $48,250
M. CHARITO KRUVANT $9,749 $5,849 $45,250
CYNTHIA H. MILLIGAN $5,250 $0 $5,250
ARTHUR J. PUGH $10,500 $10,500 $48,250
SOUTH TRIMBLE, III $19,500 $19,500 $19,500
*MESSRS. BLATZ, DIEHL, TRIMBLE AND PUGH AND MS. KRUVANT HAVE CHOSEN TO DEFER A
PORTION OF THEIR COMPENSATION. AS OF DECEMBER 31, 1999, TOTAL DEFERRED
COMPENSATION, INCLUDING DIVIDENDS AND CAPITAL APPRECIATION, WAS: BLATZ,
$784,000; DIEHL, $760,650; TRIMBLE, $103,000; PUGH, $134,450 AND KRUVANT,
$58,700.
**THE FUND COMPLEX CONSISTS OF NINE (9) REGISTERED INVESTMENT COMPANIES.
INVESTMENT ADVISOR AND SUBADVISORS
----------------------------------
THE FUND'S INVESTMENT ADVISOR IS AMERITAS INVESTMENT CORP. ("AIC"), 5900
"O" STREET, 4TH FLOOR, LINCOLN, NEBRASKA 68510-1889. AIC IS REGISTERED AS AN
INVESTMENT ADVISOR UNDER THE INVESTMENT ADVISORS ACT OF 1940 AND ALSO IS
REGISTERED AS A BROKER DEALER UNDER THE SECURITIES EXCHANGE ACT OF 1934. AIC
SERVES AS THE UNDERWRITER OF VARIABLE PRODUCTS ISSUED BY ITS AFFILIATES,
AMERITAS VARIABLE LIFE INSURANCE COMPANY AND AMERITAS LIFE INSURANCE CORP.
THE ADVISOR RECEIVES MONTHLY FEES BASED ON THE FOLLOWING ANNUAL RATES OF
THE PORTFOLIO'S AVERAGE DAILY NET ASSETS:
INCOME & GROWTH 0.625%
GROWTH 0.75%
SMALL CAPITALIZATION 0.85%
MIDCAP GROWTH 0.80%
EMERGING GROWTH 0.75%
RESEARCH 0.75%
GROWTH WITH INCOME 0.75%
INDEX 500 0.24%
MONEY MARKET 0.20%
FOR A PERIOD OF ONE YEAR FOLLOWING NOVEMBER 1, 1999 (OCTOBER 29, 1999 FOR
MONEY MARKET), THE ADVISOR IS REQUIRED TO WAIVE ITS FEE AND/OR REIMBURSE THE
EXPENSES OF EACH PORTFOLIO TO THE EXTENT THAT AGGREGATE EXPENSES EXCEED THE
FOLLOWING EXPENSE RATIOS:
INCOME & GROWTH 0.68%
GROWTH 0.79%
SMALL CAPITALIZATION 0.90%
MIDCAP GROWTH 0.84%
EMERGING GROWTH 0.85%
RESEARCH 0.86%
GROWTH WITH INCOME 0.88%
INDEX 500 0.28%
MONEY MARKET 0.26%
FOLLOWING THIS ONE YEAR PERIOD, EXPENSES WILL NOT BE PERMITTED TO EXCEED AN
EXPENSE RATIO WHICH IS .10% GREATER THAN THE CURRENT EXPENSE RATIOS, UNLESS AN
AMENDMENT TO THE INVESTMENT ADVISORY CONTRACT IS APPROVED MODIFYING OR
ELIMINATING THE EXPENSE GUARANTEE.
FOR THE FUND'S FISCAL YEAR ENDED DECEMBER 31, 1999, INCOME & GROWTH PAID
AIC INVESTMENT ADVISORY FEES OF $75,862 AND RECEIVED EXPENSE REIMBURSEMENTS FROM
AIC OF $13,526, GROWTH PAID $238,838 AND RECEIVED EXPENSE REIMBURSEMENTS FROM
AIC OF $35,281, SMALL CAPITALIZATION PAID $157,905 AND RECEIVED EXPENSE
REIMBURSEMENTS FROM AIC OF $19,219, MIDCAP GROWTH PAID $93,241 AND RECEIVED
EXPENSE REIMBURSEMENTS FROM AIC OF $15,191, EMERGING GROWTH PAID $130,638 AND
RECEIVED EXPENSE REIMBURSEMENTS FROM AIC OF $21,431, RESEARCH PAID $31,003 AND
RECEIVED EXPENSE REIMBURSEMENTS FROM AIC OF $21,930, GROWTH WITH INCOME PAID
$42,591 AND RECEIVED EXPENSE REIMBURSEMENTS FROM AIC OF $21,396, INDEX 500 PAID
$79,768 AND RECEIVED EXPENSE REIMBURSEMENTS FROM AIC OF $38,459, AND MONEY
MARKET PAID $57,951 AND RECEIVED EXPENSE REIMBURSEMENTS FROM AIC OF $19,277.
SUBADVISORS
AIC HAS RETAINED FRED ALGER MANAGEMENT, INC. AS SUBADVISOR FOR INCOME &
GROWTH, GROWTH, SMALL CAPITALIZATION AND MIDCAP GROWTH PORTFOLIOS. FRED ALGER
MANAGEMENT, INC. IS OWNED BY ALGER INC. WHICH IN TURN IS OWNED BY ALGER
ASSOCIATES, INC., A FINANCIAL SERVICES HOLDING COMPANY. FRED M. ALGER, III AND
DAVID D. ALGER ARE THE MAJORITY SHAREHOLDERS OF ALGER ASSOCIATES, INC. AND MAY
BE DEEMED TO CONTROL THAT COMPANY AND ITS SUBSIDIARIES. IT RECEIVES A
SUBADVISORY FEE, PAID BY THE ADVISOR, OF 0.355%, 0.48%, 0.58% AND 0.53%,
RESPECTIVELY, OF EACH PORTFOLIO'S AVERAGE DAILY NET ASSETS.
AIC HAS RETAINED MASSACHUSETTS FINANCIAL SERVICES COMPANY AS SUBADVISOR FOR
THE EMERGING GROWTH, RESEARCH, AND GROWTH WITH INCOME PORTFOLIOS. MASSACHUSETTS
FINANCIAL SERVICES COMPANY IS A SUBSIDIARY OF SUN LIFE OF CANADA (U.S.)
FINANCIAL SERVICES HOLDINGS, INC., WHICH IN TURN IS AN INDIRECT WHOLLY OWNED
SUBSIDIARY OF SUN LIFE OF CANADA (AN INSURANCE COMPANY). IT RECEIVES A
SUBADVISORY FEE, PAID BY THE ADVISOR, OF 0.50% OF EACH PORTFOLIO'S AVERAGE DAILY
NET ASSETS.
AIC HAS RETAINED STATE STREET GLOBAL ADVISORS AS SUBADVISOR FOR THE INDEX
500 PORTFOLIO. STATE STREET GLOBAL ADVISORS IS A DIVISION OF STATE STREET BANK
AND TRUST. IT RECEIVES A SUBADVISORY FEE, PAID BY THE ADVISOR, OF 0.05 % OF THE
PORTFOLIO'S AVERAGE DAILY NET ASSETS.
AIC HAS RETAINED CALVERT ASSET MANAGEMENT COMPANY, INC. AS SUBADVISOR FOR
THE MONEY MARKET PORTFOLIO. CALVERT ASSET MANAGEMENT COMPANY, INC. IS A
SUBSIDIARY OF CALVERT GROUP, LTD., WHICH IS A SUBSIDIARY OF ACACIA MUTUAL LIFE
INSURANCE COMPANY OF WASHINGTON, D.C. ("ACACIA "). ACACIA, IN TURN, IS A
SUBSIDIARY OF AMERITAS ACACIA MUTUAL HOLDING COMPANY. IT RECEIVES A SUBADVISORY
FEE, PAID BY THE ADVISOR, OF 0.15% OF THE PORTFOLIO'S AVERAGE DAILY NET ASSETS.
ADMINISTRATIVE SERVICES AGENT
-----------------------------
CALVERT ADMINISTRATIVE SERVICES COMPANY ("CASC"), A SUBSIDIARY OF CALVERT
GROUP, LTD., HAS BEEN RETAINED BY THE FUND TO PROVIDE CERTAIN ADMINISTRATIVE
SERVICES NECESSARY TO THE CONDUCT OF ITS AFFAIRS, INCLUDING THE PREPARATION OF
REGULATORY FILINGS AND SHAREHOLDER REPORTS. FOR PROVIDING SUCH SERVICES, CASC
RECEIVES AN ANNUAL ADMINISTRATIVE SERVICE FEE PAYABLE MONTHLY OF 0.05% OF EACH
PORTFOLIO'S NET ASSETS OR A MINIMUM OF $50,000 PER PORTFOLIO.
FOR FISCAL YEAR 1999, INCOME & GROWTH PAID $8,356, GROWTH PAID, $15,922,
SMALL CAPITALIZATION PAID $9,289, MIDCAP GROWTH PAID $8,356, EMERGING GROWTH
PAID 8,710, RESEARCH PAID $8,356, GROWTH WITH INCOME PAID $8,356, INDEX 500 PAID
$16,618, AND MONEY MARKET PAID $14,488.
TRANSFER AND SHAREHOLDER SERVICING AGENT
----------------------------------------
NATIONAL FINANCIAL DATA SERVICES, INC. ("NFDS"), 1004 BALTIMORE, 6TH FLOOR,
KANSAS CITY, MISSOURI 64105, A SUBSIDIARY OF STATE STREET BANK & TRUST, HAS BEEN
RETAINED BY THE FUND TO ACT AS TRANSFER AGENT AND DIVIDEND DISBURSING AGENT.
THESE RESPONSIBILITIES INCLUDE: RESPONDING TO CERTAIN SHAREHOLDER INQUIRIES AND
INSTRUCTIONS, CREDITING AND DEBITING SHAREHOLDER ACCOUNTS FOR PURCHASES AND
REDEMPTIONS OF FUND SHARES AND CONFIRMING SUCH TRANSACTIONS, AND DAILY UPDATING
OF SHAREHOLDER ACCOUNTS TO REFLECT DECLARATION AND PAYMENT OF DIVIDENDS.
CALVERT SHAREHOLDER SERVICES, INC. ("CSSI"), 4550 MONTGOMERY AVENUE, SUITE
1000N, BETHESDA, MARYLAND 20814, A SUBSIDIARY OF CALVERT GROUP, LTD. AND ACACIA
MUTUAL, HAS BEEN RETAINED BY THE FUND TO ACT AS SHAREHOLDER SERVICING AGENT.
SHAREHOLDER SERVICING RESPONSIBILITIES INCLUDE RESPONDING TO SHAREHOLDER
INQUIRIES AND INSTRUCTIONS CONCERNING THEIR ACCOUNTS, ENTERING ANY TELEPHONED
PURCHASES OR REDEMPTIONS INTO THE NFDS SYSTEM, MAINTENANCE OF BROKER-DEALER
DATA, AND PREPARING AND DISTRIBUTING STATEMENTS TO SHAREHOLDERS REGARDING THEIR
ACCOUNTS.
FOR THESE SERVICES, CSSI AND NFDS MAY RECEIVE A FEE BASED ON THE NUMBER OF
SHAREHOLDER ACCOUNTS IN EACH PORTFOLIO.
INDEPENDENT ACCOUNTANTS AND CUSTODIANS
--------------------------------------
PRICEWATERHOUSECOOPERS LLP, 250 WEST PRATT STREET, BALTIMORE, MARYLAND
21201, HAS BEEN SELECTED BY THE BOARD OF DIRECTORS TO SERVE AS INDEPENDENT
ACCOUNTANTS FOR FISCAL YEAR 2000. STATE STREET BANK AND TRUST COMPANY, N.A., 225
FRANKLIN STREET, BOSTON, MASSACHUSETTS 02110, SERVES AS CUSTODIAN OF THE FUND'S
INVESTMENTS. ALLFIRST FINANCIAL, INC., 25 SOUTH CHARLES STREET, BALTIMORE,
MARYLAND 21203 ALSO SERVES AS CUSTODIAN OF CERTAIN OF THE FUND'S CASH ASSETS.
THE CUSTODIANS HAVE NO PART IN DECIDING THE FUND'S INVESTMENT POLICIES OR THE
CHOICE OF SECURITIES THAT ARE TO BE PURCHASED OR SOLD FOR THE FUND'S PORTFOLIOS.
METHOD OF DISTRIBUTION
----------------------
AMERITAS INVESTMENT CORP. ALSO SERVES AS THE PRINCIPAL UNDERWRITER AND
DISTRIBUTOR FOR THE FUND. UNDER THE TERMS OF ITS UNDERWRITING AGREEMENT WITH THE
FUND, AIC MARKETS AND DISTRIBUTES THE FUND'S SHARES AND IS RESPONSIBLE FOR
PREPARING ADVERTISING AND SALES LITERATURE, AND PRINTING AND MAILING
PROSPECTUSES TO PROSPECTIVE INVESTORS. AIC IS ENTITLED TO COMPENSATION FOR
SERVICES PERFORMED AND EXPENSES ASSUMED. PAYMENTS TO AIC MAY BE AUTHORIZED BY
THE FUND'S BOARD OF DIRECTORS FROM TIME TO TIME IN ACCORDANCE WITH APPLICABLE
LAW. NO PAYMENTS WERE AUTHORIZED IN 1999. AIC IS RESPONSIBLE FOR PAYING (I) ALL
COMMISSIONS OR OTHER FEES TO ITS ASSOCIATED PERSONS WHICH ARE DUE FOR THE SALE
OF THE POLICIES, AND (II) ANY COMPENSATION TO OTHER BROKER-DEALERS AND THEIR
ASSOCIATED PERSONS DUE UNDER THE TERMS OF ANY SALES AGREEMENT BETWEEN AIC AND
THE BROKER-DEALERS. AS THE ADVISOR AND DISTRIBUTOR, AIC, AT ITS OWN EXPENSE, MAY
INCUR COSTS OR PAY EXPENSES ASSOCIATED WITH THE DISTRIBUTION OF THE FUND'S
SHARES.
PORTFOLIO TRANSACTIONS
----------------------
PORTFOLIO TRANSACTIONS ARE UNDERTAKEN ON THE BASIS OF THEIR DESIRABILITY
FROM AN INVESTMENT STANDPOINT. THE FUND'S ADVISOR AND SUBADVISORS MAKE
INVESTMENT DECISIONS AND THE CHOICE OF BROKERS AND DEALERS UNDER THE DIRECTION
AND SUPERVISION OF THE FUND'S BOARD OF DIRECTORS.
BROKER-DEALERS WHO EXECUTE PORTFOLIO TRANSACTIONS ON BEHALF OF THE FUND ARE
SELECTED ON THE BASIS OF THEIR EXECUTION CAPABILITY AND TRADING EXPERTISE
CONSIDERING, AMONG OTHER FACTORS, THE OVERALL REASONABLENESS OF THE BROKERAGE
COMMISSIONS, CURRENT MARKET CONDITIONS, SIZE AND TIMING OF THE ORDER, DIFFICULTY
OF EXECUTION, PER SHARE PRICE, MARKET FAMILIARITY, RELIABILITY, INTEGRITY, AND
FINANCIAL CONDITION, SUBJECT TO THE ADVISOR/SUBADVISOR OBLIGATION TO SEEK BEST
EXECUTION. THE ADVISOR OR SUBADVISOR(S) MAY ALSO CONSIDER SALES OF FUND SHARES
AS A FACTOR IN THE SELECTION OF BROKERS.
FOR FISCAL YEAR 1999, TOTAL BROKERAGE COMMISSIONS PAID ARE AS FOLLOWS:
INCOME & GROWTH $22,190
GROWTH $53,290
SMALL CAPITALIZATION $28,139
MIDCAP GROWTH $14,991
EMERGING GROWTH $25,004
RESEARCH $6,760
GROWTH WITH INCOME $9,414
INDEX 500 $3,074
MONEY MARKET $0
FOR FISCAL 1999, INCOME & GROWTH, GROWTH, SMALL CAPITALIZATION AND MIDCAP
GROWTH PAID BROKERAGE COMMISSIONS TO FRED ALGER & COMPANY, INCORPORATED, THE
PARENT COMPANY OF FRED ALGER MANAGEMENT, INC. AS FOLLOWS:
INCOME & GROWTH $22,190
GROWTH $53,290
SMALL CAPITALIZATION $26,164
MIDCAP GROWTH $14,391
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, AGGREGATE BROKERAGE
COMMISSIONS PAID TO FRED ALGER & COMPANY, INCORPORATED REPRESENTED 100% OF
INCOME & GROWTH'S TOTAL COMMISSIONS AND 56% OF THE TOTAL DOLLAR AMOUNT OF
COMMISSION TRANSACTIONS; 100% OF GROWTH'S TOTAL COMMISSIONS AND 67% OF THE TOTAL
DOLLAR AMOUNT OF COMMISSION TRANSACTIONS; 93% OF SMALL CAPITALIZATION'S TOTAL
COMMISSIONS AND 24% OF THE TOTAL DOLLAR AMOUNT OF COMMISSION TRANSACTIONS; AND
96% OF MIDCAP GROWTH'S TOTAL COMMISSIONS AND 24% OF THE TOTAL DOLLAR AMOUNT OF
COMMISSION TRANSACTIONS.
WHILE THE FUND'S ADVISOR AND SUBADVISOR(S) SELECT BROKERS PRIMARILY ON THE
BASIS OF BEST EXECUTION, IN SOME CASES THEY MAY DIRECT TRANSACTIONS TO BROKERS
BASED ON THE QUALITY AND AMOUNT OF THE RESEARCH AND RESEARCH-RELATED SERVICES
WHICH THE BROKERS PROVIDE TO THEM. THESE RESEARCH SERVICES INCLUDE ADVICE,
EITHER DIRECTLY OR THROUGH PUBLICATIONS OR WRITINGS, AS TO THE VALUE OF
SECURITIES, THE ADVISABILITY OF INVESTING IN, PURCHASING OR SELLING SECURITIES,
AND THE AVAILABILITY OF SECURITIES OR PURCHASERS OR SELLERS OF SECURITIES;
FURNISHING OF ANALYSES AND REPORTS CONCERNING ISSUERS, SECURITIES OR INDUSTRIES;
PROVIDING INFORMATION ON ECONOMIC FACTORS AND TRENDS; ASSISTING IN DETERMINING
PORTFOLIO STRATEGY; PROVIDING COMPUTER SOFTWARE USED IN SECURITY ANALYSES;
PROVIDING PORTFOLIO PERFORMANCE EVALUATION AND TECHNICAL MARKET ANALYSES; AND
PROVIDING OTHER SERVICES RELEVANT TO THE INVESTMENT DECISION MAKING PROCESS.
OTHER SUCH SERVICES ARE DESIGNED PRIMARILY TO ASSIST THE ADVISOR IN MONITORING
THE INVESTMENT ACTIVITIES OF THE SUBADVISOR(S) OF THE FUND. SUCH SERVICES
INCLUDE PORTFOLIO ATTRIBUTION SYSTEMS, RETURN-BASED STYLE ANALYSIS, AND
TRADE-EXECUTION ANALYSIS. THE ADVISOR MAY ALSO DIRECT SELLING CONCESSIONS AND/OR
DISCOUNTS IN FIXED-PRICE OFFERINGS FOR RESEARCH SERVICES.
IF, IN THE JUDGMENT OF THE ADVISOR OR SUBADVISOR(S), THE FUND OR OTHER
ACCOUNTS MANAGED BY THEM WILL BE BENEFITED BY SUPPLEMENTAL RESEARCH SERVICES,
THEY ARE AUTHORIZED TO PAY BROKERAGE COMMISSIONS TO A BROKER FURNISHING SUCH
SERVICES WHICH ARE IN EXCESS OF COMMISSIONS WHICH ANOTHER BROKER MAY HAVE
CHARGED FOR EFFECTING THE SAME TRANSACTION. IT IS THE POLICY OF THE ADVISOR THAT
SUCH RESEARCH SERVICES WILL BE USED FOR THE BENEFIT OF THE FUND AS WELL AS OTHER
CALVERT GROUP FUNDS AND MANAGED ACCOUNTS.
THE ADVISOR DID NOT DIRECT ANY BROKERAGE FOR RESEARCH SERVICES FOR FISCAL
YEAR 1999.
THE PORTFOLIO TURNOVER RATES FOR FISCAL YEAR 1999 IS AS FOLLOWS:
INCOME & GROWTH 18%
GROWTH 18%
SMALL CAPITALIZATION 21%
MIDCAP GROWTH 21%
EMERGING GROWTH 18%
RESEARCH 16%
GROWTH WITH INCOME 16%
INDEX 500 5%
NO PORTFOLIO TURNOVER RATE CAN BE CALCULATED FOR MONEY MARKET DUE TO THE
SHORT MATURITIES OF THE INSTRUMENTS PURCHASED. PORTFOLIO TURNOVER SHOULD NOT
AFFECT THE INCOME OR NET ASSET VALUE OF MONEY MARKET BECAUSE BROKERAGE
COMMISSIONS ARE NOT NORMALLY CHARGED ON THE PURCHASE OR SALE OF MONEY MARKET
INSTRUMENTS.
PERSONAL SECURITIES TRANSACTIONS
--------------------------------
THE FUND, ITS ADVISOR, AND PRINCIPAL UNDERWRITER HAVE ADOPTED A CODE OF
ETHICS PURSUANT TO RULE 17J-1 OF THE INVESTMENT COMPANY ACT OF 1940. THE CODE OF
ETHICS IS DESIGNED TO PROTECT THE PUBLIC FROM ABUSIVE TRADING PRACTICES AND TO
MAINTAIN ETHICAL STANDARDS FOR ACCESS PERSONS AS DEFINED IN THE RULE WHEN
DEALING WITH THE PUBLIC. THE CODE OF ETHICS PERMITS THE FUND'S INVESTMENT
PERSONNEL TO INVEST IN SECURITIES THAT MAY BE PURCHASED OR HELD BY THE FUND. THE
CODE OF ETHICS CONTAINS CERTAIN CONDITIONS SUCH AS PRE-CLEARANCE AND
RESTRICTIONS ON USE OF MATERIAL INFORMATION.
GENERAL INFORMATION
-------------------
THE FUND IS AN OPEN-END, MANAGEMENT INVESTMENT COMPANY, INCORPORATED IN
MARYLAND ON SEPTEMBER 27, 1982. THE INCOME & GROWTH, GROWTH, SMALL
CAPITALIZATION, MIDCAP GROWTH, EMERGING GROWTH PORTFOLIOS ARE DIVERSIFIED. THE
RESEARCH, GROWTH WITH INCOME, INDEX 500 AND MONEY MARKET PORTFOLIOS ARE
NON-DIVERSIFIED. THE FUND ISSUES SEPARATE STOCK FOR EACH PORTFOLIO. SHARES OF
EACH OF THE PORTFOLIOS HAVE EQUAL RIGHTS WITH REGARD TO VOTING, REDEMPTIONS,
DIVIDENDS, DISTRIBUTIONS, AND LIQUIDATIONS. NO PORTFOLIO HAS PREFERENCE OVER
ANOTHER PORTFOLIO. THE INSURANCE COMPANIES AND THE FUND'S SHAREHOLDERS WILL VOTE
FUND SHARES ALLOCATED TO REGISTERED SEPARATE ACCOUNTS IN ACCORDANCE WITH
INSTRUCTIONS RECEIVED FROM POLICYHOLDERS. UNDER CERTAIN CIRCUMSTANCES, WHICH ARE
DESCRIBED IN THE ACCOMPANYING PROSPECTUS OF THE VARIABLE LIFE OR ANNUITY POLICY,
THE VOTING INSTRUCTIONS RECEIVED FROM VARIABLE LIFE OR ANNUITY POLICYHOLDERS MAY
BE DISREGARDED.
ALL SHARES OF COMMON STOCK HAVE EQUAL VOTING RIGHTS (REGARDLESS OF THE NET
ASSET VALUE PER SHARE) EXCEPT THAT ONLY SHARES OF THE RESPECTIVE PORTFOLIO ARE
ENTITLED TO VOTE ON MATTERS CONCERNING ONLY THAT PORTFOLIO. PURSUANT TO THE
INVESTMENT COMPANY ACT OF 1940 AND THE RULES AND REGULATIONS THEREUNDER, CERTAIN
MATTERS APPROVED BY A VOTE OF ALL SHAREHOLDERS OF THE FUND MAY NOT BE BINDING ON
A PORTFOLIO WHOSE SHAREHOLDERS HAVE NOT APPROVED THAT MATTER. EACH ISSUED AND
OUTSTANDING SHARE IS ENTITLED TO ONE VOTE AND TO PARTICIPATE EQUALLY IN
DIVIDENDS AND DISTRIBUTIONS DECLARED BY THE RESPECTIVE PORTFOLIO AND, UPON
LIQUIDATION OR DISSOLUTION, IN NET ASSETS OF SUCH PORTFOLIO REMAINING AFTER
SATISFACTION OF OUTSTANDING LIABILITIES. THE SHARES OF EACH PORTFOLIO, WHEN
ISSUED, WILL BE FULLY PAID AND NON-ASSESSABLE AND HAVE NO PREEMPTIVE OR
CONVERSION RIGHTS. HOLDERS OF SHARES OF ANY PORTFOLIO ARE ENTITLED TO REDEEM
THEIR SHARES AS SET FORTH ABOVE UNDER "PURCHASE AND REDEMPTION OF SHARES." THE
SHARES DO NOT HAVE CUMULATIVE VOTING RIGHTS AND THE HOLDERS OF MORE THAN 50% OF
THE SHARES OF THE FUND VOTING FOR THE ELECTION OF DIRECTORS CAN ELECT ALL OF THE
DIRECTORS OF THE FUND IF THEY CHOOSE TO DO SO AND IN SUCH EVENT THE HOLDERS OF
THE REMAINING SHARES WOULD NOT BE ABLE TO ELECT ANY DIRECTORS.
THE FUND'S BOARD OF DIRECTORS HAS ADOPTED A "PROPORTIONATE VOTING" POLICY,
MEANING THAT INSURANCE COMPANIES WILL VOTE ALL OF THE FUND'S SHARES, INCLUDING
SHARES THE INSURANCE COMPANIES HOLD, IN RETURN FOR PROVIDING THE FUND WITH ITS
CAPITAL AND IN PAYMENT OF CHARGES MADE AGAINST THE VARIABLE ANNUITY OR VARIABLE
LIFE SEPARATE ACCOUNTS, IN PROPORTION TO THE VOTES RECEIVED FROM CONTRACTHOLDERS
OR POLICYOWNERS.
THE FUND IS NOT REQUIRED TO HOLD ANNUAL POLICYHOLDER MEETINGS, BUT SPECIAL
MEETINGS MAY BE CALLED FOR CERTAIN PURPOSES SUCH AS ELECTING DIRECTORS, CHANGING
FUNDAMENTAL POLICIES, OR APPROVING A MANAGEMENT CONTRACT. AS A POLICYHOLDER, YOU
RECEIVE ONE VOTE FOR EACH SHARE YOU OWN.
APPENDIX
--------
CORPORATE BOND RATINGS
MOODY'S INVESTORS SERVICE INC.'S/STANDARD & POOR'S MUNICIPAL BOND RATINGS:
AAA/AAA: BEST QUALITY. THESE BONDS CARRY THE SMALLEST DEGREE OF INVESTMENT
RISK AND ARE GENERALLY REFERRED TO AS "GILT EDGE." INTEREST PAYMENTS ARE
PROTECTED BY A LARGE OR BY AN EXCEPTIONALLY STABLE MARGIN AND PRINCIPAL IS
SECURE. THIS RATING INDICATES AN EXTREMELY STRONG CAPACITY TO PAY PRINCIPAL AND
INTEREST.
AA/AA: BONDS RATED AA ALSO QUALIFY AS HIGH-QUALITY DEBT OBLIGATIONS.
CAPACITY TO PAY PRINCIPAL AND INTEREST IS VERY STRONG, AND IN THE MAJORITY OF
INSTANCES THEY DIFFER FROM AAA ISSUES ONLY IN SMALL DEGREE. THEY ARE RATED LOWER
THAN THE BEST BONDS BECAUSE MARGINS OF PROTECTION MAY NOT BE AS LARGE AS IN AAA
SECURITIES, FLUCTUATION OF PROTECTIVE ELEMENTS MAY BE OF GREATER AMPLITUDE, OR
THERE MAY BE OTHER ELEMENTS PRESENT WHICH MAKE LONG-TERM RISKS APPEAR SOMEWHAT
LARGER THAN IN AAA SECURITIES.
A/A: UPPER-MEDIUM GRADE OBLIGATIONS. FACTORS GIVING SECURITY TO PRINCIPAL
AND INTEREST ARE CONSIDERED ADEQUATE, BUT ELEMENTS MAY BE PRESENT WHICH MAKE THE
BOND SOMEWHAT MORE SUSCEPTIBLE TO THE ADVERSE EFFECTS OF CIRCUMSTANCES AND
ECONOMIC CONDITIONS.
BAA/BBB: MEDIUM GRADE OBLIGATIONS; ADEQUATE CAPACITY TO PAY PRINCIPAL AND
INTEREST. WHEREAS THEY NORMALLY EXHIBIT ADEQUATE PROTECTION PARAMETERS, ADVERSE
ECONOMIC CONDITIONS OR CHANGING CIRCUMSTANCES ARE MORE LIKELY TO LEAD TO A
WEAKENED CAPACITY TO PAY PRINCIPAL AND INTEREST FOR BONDS IN THIS CATEGORY THAN
FOR BONDS IN THE A CATEGORY.
BA/BB, B/B, CAA/CCC, CA/CC: DEBT RATED IN THESE CATEGORIES IS REGARDED AS
PREDOMINANTLY SPECULATIVE WITH RESPECT TO CAPACITY TO PAY INTEREST AND REPAY
PRINCIPAL. THERE MAY BE SOME LARGE UNCERTAINTIES AND MAJOR RISK EXPOSURE TO
ADVERSE CONDITIONS. THE HIGHER THE DEGREE OF SPECULATION, THE LOWER THE RATING.
C/C: THIS RATING IS ONLY FOR NO-INTEREST INCOME BONDS.
D: DEBT IN DEFAULT; PAYMENT OF INTEREST AND/OR PRINCIPAL IS IN ARREARS.
COMMERCIAL PAPER RATINGS
MOODY'S INVESTORS SERVICES, INC.
A PRIME RATING IS THE HIGHEST COMMERCIAL PAPER RATING ASSIGNED BY MOODY'S
INVESTORS SERVICE, INC. ISSUERS RATED PRIME ARE FURTHER REFERRED TO BY USE OF
NUMBERS 1, 2, AND 3 TO DENOTE RELATIVE STRENGTH WITHIN THIS HIGHEST
CLASSIFICATION. AMONG THE FACTORS CONSIDERED BY MOODY'S IN ASSIGNING RATINGS FOR
AN ISSUER ARE THE FOLLOWING: (1) MANAGEMENT; (2) ECONOMIC EVALUATION OF THE
INHERENT UNCERTAIN AREAS; (3) COMPETITION AND CUSTOMER ACCEPTANCE OF PRODUCTS;
(4) LIQUIDITY; (5) AMOUNT AND QUALITY OF LONG-TERM DEBT; (6) TEN YEAR EARNINGS
TRENDS; (7) FINANCIAL STRENGTH OF A PARENT COMPANY AND THE RELATIONSHIPS WHICH
EXIST WITH THE ISSUER; AND (8) RECOGNITION BY MANAGEMENT OF OBLIGATIONS WHICH
MAY BE PRESENT OR MAY ARISE AS A RESULT OF PUBLIC INTEREST QUESTIONS AND
PREPARATIONS TO MEET SUCH OBLIGATIONS.
STANDARD & POOR'S CORPORATION
COMMERCIAL PAPER RATED A BY STANDARD & POOR'S CORPORATION HAS THE FOLLOWING
CHARACTERISTICS: LIQUIDITY RATIOS ARE BETTER THAN THE INDUSTRY AVERAGE. LONG
TERM SENIOR DEBT RATING IS "A" OR BETTER. IN SOME CASES BBB CREDITS MAY BE
ACCEPTABLE. THE ISSUER HAS ACCESS TO AT LEAST TWO ADDITIONAL CHANNELS OF
BORROWING. BASIC EARNINGS AND CASH FLOW HAVE AN UPWARD TREND WITH ALLOWANCE MADE
FOR UNUSUAL CIRCUMSTANCES. TYPICALLY, THE ISSUER'S INDUSTRY IS WELL ESTABLISHED,
THE ISSUER HAS A STRONG POSITION WITHIN ITS INDUSTRY AND THE RELIABILITY AND
QUALITY OF MANAGEMENT IS UNQUESTIONED. ISSUERS RATED A ARE FURTHER REFERRED TO
BY USE OF NUMBERS 1, 2, AND 3 TO DENOTE RELATIVE STRENGTH WITHIN THIS
CLASSIFICATION.
PART C. OTHER INFORMATION
ITEM 23. EXHIBITS
99B.1A. RESTATED ARTICLES OF INCORPORATION OF ACACIA CAPITAL CORPORATION,
INCORPORATED BY REFERENCE TO POST-EFFECTIVE AMENDMENT NO. 31,
DATED 4/25/96, ACCESSION NUMBER 0000708950-96-000005.
B. ARTICLES SUPPLEMENTARY OF ACACIA CAPITAL CORPORATION, INCORPORATED
BY REFERENCE TO POST-EFFECTIVE AMENDMENT NO. 31, DATED 4/25/96,
ACCESSION NUMBER 0000708950-96-000005.
C. ARTICLES SUPPLEMENTARY OF ACACIA CAPITAL CORPORATION INCORPORATED
BY REFERENCE TO POST-EFFECTIVE AMENDMENT NO. 32, DATED 4/22/97,
ACCESSION NUMBER 0000708950-97-000006.
D. ARTICLES OF AMENDMENT OF ACACIA CAPITAL CORPORATION TO CHANGE
NAME TO CALVERT VARIABLE SERIES, INC., AND TO CHANGE THE NAME OF
EACH SERIES, INCORPORATED BY REFERENCE TO POST-EFFECTIVE AMENDMENT
NO. 33, DATED 2/12/98, ACCESSION NUMBER 0000708950-98-000002.
99B.2 AMENDED BY-LAWS OF CALVERT VARIABLE SERIES, INC., INCORPORATED BY
REFERENCE TO POST-EFFECTIVE AMENDMENT NO. 37, DATED 4/30/99,
ACCESSION NUMBER 0000708950-99-000009.
99.B5. INVESTMENT ADVISORY AGREEMENT, INCORPORATED BY REFERENCE TO
POST-EFFECTIVE AMENDMENT NO. 37, DATED 4/30/99, ACCESSION
NUMBER 0000708950-99-000009.
99.B5.A SUB-INVESTMENT ADVISORY AGREEMENTS, INCORPORATED BY REFERENCE TO
POST-EFFECTIVE AGREEMENT NO. 31, DATED 4/25/96, ACCESSION
NUMBER 0000708950-96-000005.
99.B6 UNDERWRITING AGREEMENT, INCORPORATED BY REFERENCE TO POST-EFFECTIVE
AMENDMENT NO. 34, DATED 4/30/98, ACCESSION NUMBER
0000708950-98-000006.
99.B8. CUSTODY AGREEMENT, INCORPORATED BY REFERENCE TO POST-EFFECTIVE
AMENDMENT NO. 37, DATED 4/30/99, ACCESSION
NUMBER 0000708950-99-000009.
99.B9 DEFERRED COMPENSATION AGREEMENT, INCORPORATED BY REFERENCE
TO POST-EFFECTIVE AGREEMENT NO. 31, DATED 4/25/96, ACCESSION
NUMBER 0000708950-96-000005.
99.B9A TRANSFER AGENCY CONTRACT AND SHAREHOLDER SERVICING CONTRACT,
INCORPORATED BY REFERENCE TO POST-EFFECTIVE AMENDMENT NO. 34,
DATED 4/30/98, ACCESSION NUMBER 0000708950-98-000006.
99.B9.B. ADMINISTRATIVE SERVICES AGREEMENT FILED HEREWITH.
99.B10 OPINION AND CONSENT OF COUNSEL FILED HEREWITH.
99.B11. CONSENT OF INDEPENDENT ACCOUNTANTS TO USE OF REPORT FILED HEREWITH.
99.B15 PLAN OF DISTRIBUTION INCORPORATED BY REFERENCE TO REGISTRANT'S
POST-EFFECTIVE AMENDMENT NO. 28, JULY 19, 1995, FOR CLASS A
AND POST-EFFECTIVE AMENDMENT NO. 34, MARCH 31, 1998 FOR
CLASS B AND C SHARE FILED HEREWITH.
99.B17.A MULTIPLE-CLASS PLAN PURSUANT TO INVESTMENT COMPANY ACT OF 1940 RULE
18F-3, AS AMENDED ON SEPTEMBER 12, 1999, FILED HEREWITH.
99.B17.B POWER OF ATTORNEY FORMS SIGNED BY EACH DIRECTOR/TRUSTEE, INCORPORATED
BY REFERENCE TO REGISTRANT'S POST-EFFECTIVE AMENDMENT NO. 39, DATED
JANUARY 28, 1999, ACCESSION NUMBER 000070103999000001
99.B18 CODE OF ETHICS FILED HEREWITH.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
NOT APPLICABLE.
ITEM 25. INDEMNIFICATION
REGISTRANT'S DECLARATION OF TRUST, WHICH DECLARATION IS EXHIBIT 1 OF
THIS REGISTRATION STATEMENT, PROVIDES, IN SUMMARY, THAT OFFICERS, TRUSTEES,
EMPLOYEES, AND AGENTS SHALL BE INDEMNIFIED BY REGISTRANT AGAINST LIABILITIES
AND EXPENSES INCURRED BY SUCH PERSONS IN CONNECTION WITH ACTIONS, SUITS, OR
PROCEEDINGS ARISING OUT OF THEIR OFFICES OR DUTIES OF EMPLOYMENT, EXCEPT THAT
NO INDEMNIFICATION CAN BE MADE TO SUCH A PERSON IF HE HAS BEEN ADJUDGED LIABLE
OF WILLFUL MISFEASANCE, BAD FAITH, GROSS NEGLIGENCE, OR RECKLESS DISREGARD OF
HIS DUTIES. IN THE ABSENCE OF SUCH AN ADJUDICATION, THE DETERMINATION OF
ELIGIBILITY FOR INDEMNIFICATION SHALL BE MADE BY INDEPENDENT COUNSEL IN A
WRITTEN OPINION OR BY THE VOTE OF A MAJORITY OF A QUORUM OF TRUSTEES WHO ARE
NEITHER "INTERESTED PERSONS" OF REGISTRANT, AS THAT TERM IS DEFINED IN SECTION
2(A)(19) OF THE INVESTMENT COMPANY ACT OF 1940, NOR PARTIES TO THE PROCEEDING.
REGISTRANT'S DECLARATION OF TRUST ALSO PROVIDES THAT REGISTRANT MAY
PURCHASE AND MAINTAIN LIABILITY INSURANCE ON BEHALF OF ANY OFFICER, TRUSTEE,
EMPLOYEE OR AGENT AGAINST ANY LIABILITIES ARISING FROM SUCH STATUS. IN THIS
REGARD, REGISTRANT MAINTAINS A DIRECTORS & OFFICERS (PARTNERS) LIABILITY
INSURANCE POLICY WITH CHUBB GROUP OF INSURANCE COMPANIES, 15 MOUNTAIN VIEW
ROAD, WARREN, NEW JERSEY 07061, PROVIDING REGISTRANT WITH $5 MILLION IN
DIRECTORS AND OFFICERS LIABILITY COVERAGE, PLUS $5 MILLION IN EXCESS DIRECTORS
AND OFFICERS LIABILITY COVERAGE FOR THE INDEPENDENT TRUSTEES/DIRECTORS ONLY.
REGISTRANT ALSO MAINTAINS AN $9 MILLION INVESTMENT COMPANY BLANKET BOND ISSUED
BY ICI MUTUAL INSURANCE COMPANY, P.O. BOX 730, BURLINGTON, VERMONT, 05402.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
NAME OF COMPANY, PRINCIPAL
NAME BUSINESS AND ADDRESS CAPACITY
BARBARA J. KRUMSIEK CALVERT VARIABLE SERIES, INC. OFFICER
CALVERT MUNICIPAL FUND, INC. AND
CALVERT WORLD VALUES FUND, INC. DIRECTOR
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
FIRST VARIABLE RATE FUND FOR OFFICER
GOVERNMENT INCOME AND
CALVERT TAX-FREE RESERVES TRUSTEE
CALVERT SOCIAL INVESTMENT FUND
CALVERT CASH RESERVES
THE CALVERT FUND
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
----------------
CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
----------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. OFFICER
SERVICE COMPANY AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CALVERT DISTRIBUTORS, INC. OFFICER
BROKER-DEALER AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CALVERT-SLOAN ADVISERS, LLC DIRECTOR
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT NEW WORLD FUND, INC. DIRECTOR
INVESTMENT COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
--------------
ALLIANCE CAPITAL MGMT. L.P. SR. VICE PRESIDENT
MUTUAL FUND DIVISION DIRECTOR
1345 AVENUE OF THE AMERICAS
NEW YORK, NY 10105
--------------
RONALD M. WOLFSHEIMER FIRST VARIABLE RATE FUND OFFICER
FOR GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT CASH RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT VARIABLE SERIES, INC.
CALVERT MUNICIPAL FUND, INC.
CALVERT WORLD VALUES FUND, INC.
CALVERT NEW WORLD FUND, INC.
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
--------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. OFFICER
SERVICE COMPANY AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CALVERT DISTRIBUTORS, INC. OFFICER
BROKER-DEALER AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CALVERT-SLOAN ADVISERS, LLC OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
DAVID R. ROCHAT FIRST VARIABLE RATE FUND OFFICER
FOR GOVERNMENT INCOME AND
CALVERT TAX-FREE RESERVES TRUSTEE
CALVERT CASH RESERVES
THE CALVERT FUND
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT MUNICIPAL FUND, INC. OFFICER
INVESTMENT COMPANY AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR AND
4550 MONTGOMERY AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
CHELSEA SECURITIES, INC. OFFICER
SECURITIES FIRM AND
POST OFFICE BOX 93 DIRECTOR
CHELSEA, VERMONT 05038
---------------
GRADY, BERWALD & CO. OFFICER
HOLDING COMPANY AND
43A SOUTH FINLEY AVENUE DIRECTOR
BASKING RIDGE, NJ 07920
---------------
RENO J. MARTINI CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
FIRST VARIABLE RATE FUND OFFICER
FOR GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT CASH RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT VARIABLE SERIES, INC.
CALVERT MUNICIPAL FUND, INC.
CALVERT WORLD VALUES FUND, INC.
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT NEW WORLD FUND, INC. DIRECTOR
INVESTMENT COMPANY AND
4550 MONTGOMERY AVENUE OFFICER
BETHESDA, MARYLAND 20814
---------------
CALVERT-SLOAN ADVISERS, LLC DIRECTOR
INVESTMENT ADVISOR AND
4550 MONTGOMERY AVENUE OFFICER
BETHESDA, MARYLAND 20814
---------------
CHARLES T. NASON AMERITAS ACACIA MUTUAL HOLDING COMPANY OFFICER
ACACIA LIFE INSURANCE AND DIRECTOR
INSURANCE COMPANIES
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
ACACIA FINANCIAL CORPORATION OFFICER
HOLDING COMPANY AND
7315 WISCONSIN AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
---------------
ACACIA FEDERAL SAVINGS BANK DIRECTOR
SAVINGS BANK
7600-B LEESBURG PIKE
FALLS CHURCH, VIRGINIA 22043
---------------
ENTERPRISE RESOURCES, INC. DIRECTOR
BUSINESS SUPPORT SERVICES
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
ACACIA REALTY SQUARE, L.L.C. DIRECTOR
REALTY INVESTMENTS
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
GARDNER MONTGOMERY COMPANY DIRECTOR
TAX RETURN PREPARATION SERVICES
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT GROUP, LTD. DIRECTOR
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. DIRECTOR
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO., INC. DIRECTOR
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT SHAREHOLDER SERVICES, INC. DIRECTOR
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT SOCIAL INVESTMENT FUND TRUSTEE
INVESTMENT COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
-----------------
THE ADVISORS GROUP, LTD. DIRECTOR
BROKER-DEALER AND
INVESTMENT ADVISOR
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
ROBERT-JOHN H. AMERITAS ACACIA MUTUAL HOLDING COMPANY OFFICER
ACACIA LIFE INSURANCE
ACACIA NATIONAL LIFE INSURANCE OFFICER
INSURANCE COMPANY AND
7315 WISCONSIN AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
----------------
ACACIA LIFE INSURANCE OFFICER
INSURANCE COMPANY
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
----------------
ACACIA FINANCIAL CORPORATION OFFICER
HOLDING COMPANY AND
7315 WISCONSIN AVENUE DIRECTOR
BETHESDA, MARYLAND 20814
----------------
ACACIA FEDERAL SAVINGS BANK OFFICER
SAVINGS BANK
7600-B LEESBURG PIKE
FALLS CHURCH, VIRGINIA 22043
---------------
ENTERPRISE RESOURCES, INC. DIRECTOR
BUSINESS SUPPORT SERVICES
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
ACACIA REALTY SQUARE, L.L.C. DIRECTOR
REALTY INVESTMENTS
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
THE ADVISORS GROUP, LTD. DIRECTOR
BROKER-DEALER AND
INVESTMENT ADVISOR
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
GARDNER MONTGOMERY COMPANY DIRECTOR
TAX RETURN PREPARATION SERVICES
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT GROUP, LTD. DIRECTOR
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. DIRECTOR
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT, CO., INC. DIRECTOR
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT SHAREHOLDER SERVICES, INC. DIRECTOR
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
WILLIAM M. TARTIKOFF ACACIA NATIONAL LIFE INSURANCE OFFICER
INSURANCE COMPANY
7315 WISCONSIN AVENUE
BETHESDA, MARYLAND 20814
----------------
FIRST VARIABLE RATE FUND FOR OFFICER
GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT CASH RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT VARIABLE SERIES, INC.
CALVERT MUNICIPAL FUND, INC.
CALVERT WORLD VALUES FUND, INC.
CALVERT NEW WORLD FUND, INC.
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE OFFICER
SERVICES COMPANY
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO. INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT DISTRIBUTORS, INC. DIRECTOR
BROKER-DEALER AND
4550 MONTGOMERY AVENUE OFFICER
BETHESDA, MARYLAND 20814
----------------
CALVERT-SLOAN ADVISERS, LLC OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
SUSAN WALKER BENDER CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. OFFICER
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT DISTRIBUTORS, INC. OFFICER
BROKER-DEALER
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT-SLOAN ADVISERS, LLC OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
FIRST VARIABLE RATE FUND FOR OFFICER
GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT CASH RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT VARIABLE SERIES, INC.
CALVERT MUNICIPAL FUND, INC.
CALVERT WORLD VALUES FUND, INC.
CALVERT NEW WORLD FUND, INC.
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
IVY WAFFORD DUKE CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. OFFICER
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT DISTRIBUTORS, INC. OFFICER
BROKER-DEALER
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT-SLOAN ADVISERS, LLC OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
FIRST VARIABLE RATE FUND FOR OFFICER
GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT CASH RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT VARIABLE SERIES, INC.
CALVERT MUNICIPAL FUND, INC.
CALVERT WORLD VALUES FUND, INC.
CALVERT NEW WORLD FUND, INC.
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
JENNIFER STREAKS CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. OFFICER
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT DISTRIBUTORS, INC. OFFICER
BROKER-DEALER
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
VICTOR FRYE CALVERT GROUP, LTD. OFFICER
HOLDING COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ADMINISTRATIVE SERVICES CO. OFFICER
SERVICE COMPANY
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
---------------
CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT SHAREHOLDER SERVICES, INC. OFFICER
TRANSFER AGENT
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
CALVERT DISTRIBUTORS, INC. OFFICER
BROKER-DEALER
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
----------------
THE ADVISORS GROUP, LTD. COUNSEL
BROKER-DEALER AND AND
INVESTMENT ADVISOR COMPLIANCE
7315 WISCONSIN AVENUE MANAGER
BETHESDA, MARYLAND 20814
---------------
DANIEL K. HAYES CALVERT ASSET MANAGEMENT CO., INC. OFFICER
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
------------------
FIRST VARIABLE RATE FUND FOR OFFICER
GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT CASH RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT VARIABLE SERIES, INC.
CALVERT MUNICIPAL FUND, INC.
CALVERT WORLD VALUES FUND, INC.
INVESTMENT COMPANIES
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
------------------
JOHN NICHOLS CALVERT ASSET MANAGEMENT OFFICER
COMPANY, INC.
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
------------------
DAVID LEACH CALVERT ASSET MANAGEMENT OFFICER
COMPANY, INC.
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
------------------
MATTHEW D. GELFAND CALVERT ASSET MANAGEMENT OFFICER
COMPANY, INC.
INVESTMENT ADVISOR
4550 MONTGOMERY AVENUE
BETHESDA, MARYLAND 20814
------------------
STRATEGIC INVESTMENT MANAGEMENT OFFICER
INVESTMENT ADVISOR
1001 19TH STREET NORTH
ARLINGTON, VIRGINIA 20009
------------------
ITEM 27. PRINCIPAL UNDERWRITERS
(A) REGISTRANT'S PRINCIPAL UNDERWRITER UNDERWRITES SHARES OF
FIRST VARIABLE RATE FUND FOR GOVERNMENT INCOME, CALVERT TAX-FREE RESERVES,
CALVERT SOCIAL INVESTMENT FUND, CALVERT CASH RESERVES, THE CALVERT FUND,
CALVERT MUNICIPAL FUND, INC., CALVERT WORLD VALUES FUND, INC., CALVERT NEW
WORLD FUND, INC., AND CALVERT VARIABLE SERIES, INC. (FORMERLY NAMED ACACIA
CAPITAL CORPORATION).
(B) POSITIONS OF UNDERWRITER'S OFFICERS AND DIRECTORS
NAME AND PRINCIPAL POSITION(S) WITH POSITION(S) WITH
BUSINESS ADDRESS UNDERWRITER REGISTRANT
BARBARA J. KRUMSIEK DIRECTOR AND PRESIDENT PRESIDENT AND TRUSTEE
RONALD M. WOLFSHEIMER DIRECTOR, SENIOR VICE TREASURER
PRESIDENT AND CHIEF FINANCIAL OFFICER
WILLIAM M. TARTIKOFF DIRECTOR, SENIOR VICE VICE PRESIDENT AND
PRESIDENT AND SECRETARY SECRETARY
CRAIG CLOYED SENIOR VICE PRESIDENT NONE
KAREN BECKER VICE PRESIDENT, OPERATIONS NONE
MATTHEW GELFAND VICE PRESIDENT NONE
GEOFFREY ASHTON REGIONAL VICE PRESIDENT NONE
MARTIN BROWN REGIONAL VICE PRESIDENT NONE
BILL HAIRGROVE REGIONAL VICE PRESIDENT NONE
ANTHONY EAMES REGIONAL VICE PRESIDENT NONE
STEVE HIMBER REGIONAL VICE PRESIDENT NONE
TANYA WILLIAMS REGIONAL VICE PRESIDENT NONE
BEN OGBOGU REGIONAL VICE PRESIDENT NONE
TOM STANTON REGIONAL VICE PRESIDENT NONE
CHRISTINE TESKE REGIONAL VICE PRESIDENT NONE
JENNIFER STREAKS ASSISTANT SECRETARY NONE
SUSAN WALKER BENDER ASSISTANT SECRETARY ASSISTANT SECRETARY
IVY WAFFORD DUKE ASSISTANT SECRETARY ASSISTANT SECRETARY
VICTOR FRYE ASSISTANT SECRETARY NONE
AND COMPLIANCE OFFICER
(C) INAPPLICABLE.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
RONALD M. WOLFSHEIMER, TREASURER
AND
WILLIAM M. TARTIKOFF, ASSISTANT SECRETARY
4550 MONTGOMERY AVENUE, SUITE 1000N
BETHESDA, MARYLAND 20814
ITEM 29. MANAGEMENT SERVICES
NOT APPLICABLE
ITEM 30. UNDERTAKINGS
NOT APPLICABLEE
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933 AND THE
INVESTMENT COMPANY ACT OF 1940, THE REGISTRANT CERTIFIES THAT IT MEETS ALL
OF THE REQUIREMENTS FOR EFFECTIVENESS OF THIS REGISTRATION STATEMENT UNDER
RULE 485(B) UNDER THE SECURITIES ACT AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, DULY AUTHORIZED, IN
THE CITY OF BETHESDA, AND STATE OF MARYLAND, ON THE ___TH DAY OF APRIL, 2000.
CALVERT VARIABLE SERIES, INC.
(FORMERLY NAMED ACACIA CAPITAL CORPORATION)
BY:
_______________**__________________
BARBARA J. KRUMSIEK
PRESIDENT AND DIRECTOR
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING
PERSONS IN THE CAPACITIES AND ON THE DATE INDICATED.
SIGNATURE TITLE DATE
__________**____________ PRESIDENT AND 4/23/00
BARBARA J. KRUMSIEK TRUSTEE (PRINCIPAL EXECUTIVE OFFICER)
__________**____________ PRINCIPAL ACCOUNTING 4/23/00
RONALD M. WOLFSHEIMER OFFICER
__________**____________ DIRECTOR 4/23/00
CHARLES E. DIEHL
__________**____________ DIRECTOR 4/23/00
ARTHUR J. PUGH
__________**____________ DIRECTOR 4/23/00
SOUTH TRIMBLE, III
__________**____________ DIRECTOR 4/23/00
FRANK H. BLATZ, JR.
**BY IVY WAFFORD DUKE AS ATTORNEY-IN-FACT, PURSUANT TO POWER OF ATTORNEY
ON FILE.
Administrative Services Agreement
March 1, 1999
Page 3 of 5
ADMINISTRATIVE SERVICES AGREEMENT
CALVERT VARIABLE SERIES, INC.
ADMINISTRATIVE SERVICES AGREEMENT, MADE THIS 1ST DAY OF MARCH, 1999, BY AND
BETWEEN CALVERT ADMINISTRATIVE SERVICES COMPANY, A DELAWARE CORPORATION
("CASC"), AND CALVERT VARIABLE SERIES, INC., A MARYLAND CORPORATION (THE
"FUND"), EACH HAVING ITS PRINCIPAL PLACE OF BUSINESS AT 4550 MONTGOMERY AVENUE,
BETHESDA, MARYLAND, 20814.
THE PARTIES TO THIS AGREEMENT, INTENDING TO BE LEGALLY BOUND, AGREE WITH
EACH OTHER AS FOLLOWS:
1. PROVISION OF SERVICES. CASC HEREBY UNDERTAKES TO PROVIDE THE FUND
WITH CERTAIN ADMINISTRATIVE SERVICES THAT MAY BE REQUIRED IN THE CONDUCT OF
BUSINESS. SUCH SERVICES INCLUDE, BUT ARE NOT LIMITED TO, MAINTAINING THE FUND'S
ORGANIZATIONAL EXISTENCE, PREPARING THE FUND'S PROSPECTUS(ES), PREPARING
NOTICES, PROXY MATERIALS, REPORTS TO REGULATORY BODIES AND REPORTS TO
SHAREHOLDERS OF THE FUND, AND SUCH OTHER INCIDENTAL ADMINISTRATIVE SERVICES AS
ARE NECESSARY TO THE CONDUCT OF THE FUND'S AFFAIRS. CASC SHALL OVERSEE THE
DETERMINATION OF THE DAILY NET ASSET VALUE OF SHARES, THE AMOUNT OF DAILY
DIVIDENDS OF NET INVESTMENT INCOME PER SHARE, AND THE MAINTENANCE OF THE
PORTFOLIO AND GENERAL ACCOUNTING RECORDS OF THE FUND THROUGH ITS CHOSEN
ACCOUNTING AGENT. THE FUND HEREBY ENGAGES CASC TO PROVIDE IT WITH SUCH SERVICES,
OR TO CAUSE SUCH SERVICES TO BE PROVIDED TO THE FUND BY THIRD PARTIES.
2. SCOPE OF AUTHORITY. CASC IS AT ALL TIMES, IN THE PERFORMANCE OF ITS
FUNCTIONS UNDER THIS AGREEMENT, SUBJECT TO ANY DIRECTION AND CONTROL OF THE
DIRECTORS OF THE FUND AND OF ITS OFFICERS, AND TO THE TERMS OF ITS ARTICLES OF
INCORPORATION AND BYLAWS, EXCEPT THAT IT HAS NO OBLIGATION TO PROVIDE TO THE
FUND ANY SERVICES THAT ARE CLEARLY OUTSIDE THE SCOPE OF THOSE CONTEMPLATED IN
THIS AGREEMENT. IN THE PERFORMANCE OF ITS DUTIES UNDER THIS AGREEMENT, CASC IS
AUTHORIZED TO TAKE ANY ACTION IT DEEMS ADVISABLE. CASC MAY CONTRACT WITH OTHER
PERSONS TO PROVIDE TO THE FUND ANY OF THE SERVICES CONTEMPLATED UNDER THE
AGREEMENT UNDER SUCH TERMS AS CASC DEEMS REASONABLE, AND CASC HAS THE AUTHORITY
TO DIRECT THE ACTIVITIES OF THOSE OTHER PERSONS IN THE MANNER CASC DEEMS
APPROPRIATE.
3. OTHER ACTIVITIES OF CASC. CASC AND ANY OF ITS AFFILIATES MAY RENDER
TO OTHER PERSONS SERVICES SIMILAR TO THOSE IT PROVIDES TO THE FUND UNDER THIS
AGREEMENT. CASC OR ANY INTERESTED PERSON OF CASC MAY INVEST IN THE FUND AS A
SHAREHOLDER, BECOME AN OFFICER OR DIRECTOR OF THE FUND IF PROPERLY ELECTED, OR
ENTER INTO ANY OTHER RELATIONSHIP WITH THE FUND APPROVED BY THE DIRECTORS, IF
NECESSARY, AND IN ACCORDANCE WITH LAW.
4. RECORDKEEPING AND OTHER INFORMATION. CASC WILL, COMMENCING NO LATER
THAN THE EFFECTIVE DATE OF THIS AGREEMENT, OR THE COMMENCEMENT DATE OF ANY
SUBSEQUENTLY-CONSTITUTED SERIES OR CLASSES, CREATE AND MAINTAIN ALL NECESSARY
ADMINISTRATIVE RECORDS OF THE RELEVANT SERIES OR CLASS IN ACCORDANCE WITH ALL
APPLICABLE LAWS, RULES AND REGULATIONS, INCLUDING, BUT NOT LIMITED TO, RECORDS
REQUIRED BY SECTION 31(A) OF THE INVESTMENT COMPANY ACT OF 1940 (THE "1940 ACT")
AND THE RULES UNDER THAT SECTION. ALL RECORDS ARE THE PROPERTY OF THE FUND AND
ARE AVAILABLE FOR INSPECTION AND USE BY THE FUND.
5. AUDIT, INSPECTION AND VISITATION. CASC WILL MAKE AVAILABLE DURING
REGULAR BUSINESS HOURS ALL RECORDS AND OTHER DATA CREATED AND MAINTAINED
PURSUANT TO THIS AGREEMENT FOR REASONABLE AUDIT AND INSPECTION BY THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION ("SEC"), THE FUND OR ANY PERSON
RETAINED BY THE FUND IF THAT PERSON'S FUNCTION NECESSITATES ACCESS TO SUCH
RECORDS AND DATA.
6. COMPENSATION TO CASC. THE FUND WILL COMPENSATE CASC ON A MONTHLY
BASIS FOR THE SERVICES PERFORMED UNDER THIS AGREEMENT. THE RATE OF COMPENSATION,
BASED ON AVERAGE NET ASSETS, IS SHOWN IN SCHEDULE A. CASC WILL NOT BE
RESPONSIBLE FOR ANY COSTS OR EXPENSES OF THE FUND OTHER THAN THOSE SPECIFICALLY
ASSUMED IN PARAGRAPH 1. EXPENSES INCURRED BY CASC AND NOT INCLUDED IN THE
SERVICE FEE WILL BE REIMBURSED TO CASC BY THE FUND, AS APPROPRIATE. SUCH
EXPENSES MAY INCLUDE EXPENSES INCIDENTAL TO MEETINGS OF SHAREHOLDERS, TAXES AND
CORPORATE FEES LEVIED AGAINST THE FUND OR ITS SERIES, EXPENSES OF PRINTING STOCK
CERTIFICATES REPRESENTING SHARES OF THE SERIES, EXPENSES OF PRINTING, MAILING
NOTICES, PROXY MATERIAL, REPORTS TO REGULATORY BODIES AND REPORTS TO
SHAREHOLDERS OF THE FUND, EXPENSES OF TYPESETTING PROSPECTUSES AND PRINTING AND
MAILING PROSPECTUSES TO SHAREHOLDERS, AND DATA PROCESSING EXPENSES INCIDENTAL TO
MAINTENANCE OF BOOKS AND RECORDS. SUCH CHARGES ARE PAYABLE IN FULL UPON RECEIPT
OF A BILLING INVOICE. IN LIEU OF REIMBURSING CASC FOR EXPENSES INCURRED AND NOT
INCLUDED IN THE SERVICE FEE, THE FUND MAY, IN ITS DISCRETION, DIRECTLY PAY ANY
EXPENSES.
7. USE OF NAMES. THE FUND MAY NOT USE THE NAME OF CASC IN ANY
PROSPECTUS, SALES LITERATURE OR OTHER MATERIAL RELATING TO THE FUND OR ITS
SERIES OR CLASSES IN ANY MANNER WITHOUT PRIOR APPROVAL BY CASC, SUCH APPROVAL
NOT TO BE UNREASONABLY WITHHELD; PROVIDED, HOWEVER, THAT CASC HEREBY APPROVES
ALL USES OF ITS NAME THAT MERELY REFER IN ACCURATE TERMS TO ITS APPOINTMENT OR
THAT ARE REQUIRED BY THE SEC OR A STATE SECURITIES COMMISSION. CASC MAY NOT USE
THE NAME OF THE FUND OR ITS SERIES OR CLASSES IN ANY MATERIAL RELATING TO CASC
IN ANY MANNER WITHOUT PRIOR APPROVAL BY THE FUND, SUCH APPROVAL NOT TO BE
UNREASONABLY WITHHELD; PROVIDED, HOWEVER, THAT THE FUND HEREBY APPROVES ALL USES
OF ITS NAME OR THE NAMES OF ITS SERIES OR CLASSES THAT MERELY REFER IN ACCURATE
TERMS TO THE APPOINTMENT OF CASC OR THAT ARE REQUIRED BY THE SEC.
8. SECURITY. CASC REPRESENTS AND WARRANTS THAT, TO THE BEST OF ITS
KNOWLEDGE, THE VARIOUS PROCEDURES AND SYSTEMS THAT CASC PROPOSES TO IMPLEMENT
WITH REGARD TO SAFEGUARDING INFORMATION FROM LOSS OR DAMAGE ATTRIBUTABLE TO
FIRE, THEFT OR ANY OTHER CAUSE (INCLUDING PROVISIONS FOR TWENTY-FOUR HOUR
RESTRICTED ACCESS) WITH RESPECT TO THE FUND'S BOOKS AND RECORDS ADMINISTERED
PURSUANT TO THIS AGREEMENT AND CASC'S RECORDS, DATA, EQUIPMENT, FACILITIES AND
OTHER PROPERTY USED IN THE PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT
ARE ADEQUATE AND THAT CASC WILL IMPLEMENT THESE PROCEDURES AND SYSTEM IN A
MANNER CALCULATED TO ENSURE THE PERFORMANCE OF CASC'S OBLIGATIONS UNDER THIS
AGREEMENT.
9. LIMITATION OF LIABILITY. THE FUND WILL INDEMNIFY AND HOLD CASC
HARMLESS AGAINST ANY LOSSES, CLAIMS, DAMAGES, LIABILITIES OR EXPENSES (INCLUDING
REASONABLE COUNSEL FEES AND EXPENSES) RESULTING FROM ANY CLAIM, DEMAND, ACTION
OR SUIT BROUGHT BY ANY PERSON (INCLUDING A SHAREHOLDER NAMING THE FUND OR ANY OF
ITS SERIES OR CLASSES AS A PARTY) OTHER THAN THE FUND NOT RESULTING FROM CASC'S
NEGLIGENCE, OR CAUSED BY ERRORS OF JUDGMENT OR MISTAKES OF LAW COMMITTED BY CASC
IN A GOOD FAITH EFFORT TO CARRY OUT ITS DUTIES UNDER THIS AGREEMENT.
IN NO EVENT WILL CASC BE LIABLE FOR INDIRECT, SPECIAL, OR CONSEQUENTIAL
DAMAGES (EVEN IF CASC HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES)
ARISING FROM THE OBLIGATIONS ASSUMED HEREUNDER AND THE SERVICES PROVIDED FOR BY
THIS AGREEMENT, INCLUDING BUT NOT LIMITED TO LOST PROFITS, LOSS OF USE OF
ACCOUNTING SYSTEMS, COST OF CAPITAL, COST OF SUBSTITUTE FACILITIES, PROGRAMS OR
SERVICES, DOWNTIME COSTS, OR CLAIMS OF THE FUND'S SHAREHOLDERS FOR SUCH DAMAGE.
10. LIMITATION OF FUND'S LIABILITY. CASC ACKNOWLEDGES THAT IT HAS
RECEIVED NOTICE OF AND ACCEPTS THE LIMITATION ON THE FUND'S LIABILITY. CASC
AGREES THAT THE FUND'S OBLIGATIONS IN ANY CASE EXTEND ONLY TO ITS SERIES AND
CLASSES AND THEIR ASSETS, AND THAT CASC WILL NOT SEEK SATISFACTION OF ANY
OBLIGATION FROM THE SHAREHOLDERS OR ANY DIRECTOR, OFFICER, EMPLOYEE OR AGENT OF
THE FUND.
11. FORCE MAJEURE. CASC WILL NOT BE LIABLE FOR DELAYS OR ERRORS CAUSED
BY CIRCUMSTANCES BEYOND CASC'S CONTROL, INCLUDING BUT NOT LIMITED TO ACTS OF
CIVIL OR MILITARY AUTHORITY, NATIONAL EMERGENCIES, WORK STOPPAGES, FIRE, FLOOD
CATASTROPHE, ACTS OF GOD, INSURRECTION, WAR, RIOT, OR FAILURE OF COMMUNICATION
OR POWER SUPPLY. IN THE EVENT OF EQUIPMENT BREAKDOWNS BEYOND ITS CONTROL, CASC
WILL TAKE REASONABLE STEPS TO MINIMIZE SERVICE INTERRUPTIONS BUT WILL HAVE NO
LIABILITY IN THE EVENT INTERRUPTIONS OCCUR.
12. AMENDMENTS. CASC AND THE FUND WILL CONSULT EACH OTHER REGARDING
CASC'S PERFORMANCE OF ITS OBLIGATIONS UNDER THIS AGREEMENT. ANY CHANGE IN THE
FUND'S REGISTRATION STATEMENTS UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
THE 1940 ACT OR IN THE FORMS RELATING TO ANY PLAN, PROGRAM OR SERVICE OFFERED BY
THE CURRENT PROSPECTUSES OF ANY SERIES THAT WOULD REQUIRE A CHANGE IN CASC'S
OBLIGATIONS UNDER THIS AGREEMENT WILL BE SUBJECT TO CASC'S APPROVAL, WHICH WILL
NOT BE UNREASONABLY WITHHELD.
13. DURATION, TERMINATION, ETC. NEITHER THIS AGREEMENT NOR ANY OF ITS
PROVISIONS MAY BE CHANGED, WAIVED, DISCHARGED, OR TERMINATED ORALLY, BUT ONLY BY
WRITTEN INSTRUMENT WHICH WILL MAKE SPECIFIC REFERENCE TO THIS AGREEMENT AND
WHICH WILL BE SIGNED BY THE PARTY AGAINST WHICH ENFORCEMENT OF SUCH CHANGE,
WAIVER, DISCHARGE OR TERMINATION IS SOUGHT. THIS AGREEMENT WILL CONTINUE IN
EFFECT UNTIL DECEMBER 31, 1999, AND FOR ONE-YEAR TERMS THEREAFTER OR AS THE
PARTIES MAY MUTUALLY AGREE. THIS AGREEMENT MAY BE TERMINATED FOR CAUSE EITHER BY
THE FUND OR CASC, BUT ONLY AFTER A REASONABLE OPPORTUNITY TO CURE HAS BEEN
PROVIDED TO THE PARTY ACCUSED OF NOT PERFORMING ACCORDING TO THE TERMS OF THIS
AGREEMENT. WHAT CONSTITUTES A REASONABLE AMOUNT OF TIME TO CURE ANY DEFICIENCY
WILL BE DETERMINED BY THE PARTIES IN THE CONTEXT OF ACTION THAT NEEDS TO BE
TAKEN IN ORDER TO CURE THE DEFICIENCY, BUT IN NO EVENT WILL THE PARTY HAVE LESS
THAN 90 DAYS TO ATTEMPT TO CURE THE DEFICIENCY. IN THE EVENT THAT THE CAUSE
REMAINS UNREMEDIED, THE PARTIES HAVE THE OPTION TO TERMINATE THE CONTRACT PRIOR
TO ITS EXPIRATION DATE. ANY SUCH TERMINATION WILL NOT AFFECT THE RIGHTS AND
OBLIGATIONS OF THE PARTIES UNDER PARAGRAPHS 9 AND 10 OF THIS AGREEMENT. IN THE
EVENT THE FUND DESIGNATES A SUCCESSOR TO ANY OF CASC'S OBLIGATIONS UNDER THIS
AGREEMENT, CASC WILL, AT THE EXPENSE AND DIRECTION OF THE FUND, TRANSFER TO SUCH
SUCCESSOR ALL RELEVANT BOOKS, RECORDS AND OTHER DATA ESTABLISHED OR MAINTAINED
BY CASC.
14. MISCELLANEOUS. EACH PARTY AGREES TO PERFORM SUCH FURTHER ACTS AND
EXECUTE SUCH FURTHER DOCUMENTS AS ARE NECESSARY TO EFFECTUATE THE PURPOSES OF
THIS AGREEMENT. THIS AGREEMENT WILL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH
AND GOVERNED BY THE LAWS OF MARYLAND. THE CAPTIONS IN THIS AGREEMENT ARE
INCLUDED FOR CONVENIENCE ONLY AND DO NOT DEFINE OR DELIMIT ANY OF THE PROVISIONS
HEREOF OR OTHERWISE AFFECT THEIR CONSTRUCTION OR EFFECT.
IN WITNESS WHEREOF, THE PARTIES HAVE DULY EXECUTED THIS AGREEMENT AS OF THE
DATE INDICATED ABOVE.
CALVERT ADMINISTRATIVE SERVICES COMPANY
BY
TITLE
CALVERT VARIABLE SERIES, INC.
BY
TITLE
<PAGE>
ADMINISTRATIVE SERVICES AGREEMENT
SCHEDULE A
LISTED BELOW ARE THE SERIES OF CALVERT VARIABLE SERIES, INC. THAT ARE
ENTITLED TO RECEIVE ADMINISTRATIVE SERVICES FROM CALVERT ADMINISTRATIVE SERVICES
COMPANY ("CASC") UNDER THE ADMINISTRATIVE SERVICES AGREEMENT DATED MARCH 1,
1999, AND WHICH WILL PAY ANNUAL FEES TO CASC PURSUANT TO THE AGREEMENT.
CVS SOCIAL MONEY MARKET 0.20%
CVS SOCIAL BALANCED 0.275%
CVS SOCIAL MID CAP GROWTH 0.25%
CVS SOCIAL SMALL CAP GROWTH 0.25%
CVS SOCIAL INTERNATIONAL EQUITY FUND 0.35%
FOR ITS SERVICES UNDER THIS ADMINISTRATIVE SERVICES AGREEMENT, CASC IS
ENTITLED TO RECEIVE THE FEE INDICATED ABOVE BASED ON AVERAGE NET ASSETS. THE
LIABILITY TO PAY FOR SERVICES UNDER THE AGREEMENT ARISES AT THE TIME A SERIES
COMMENCES OPERATIONS, ABSENT WAIVERS.
EXHIBIT 10
APRIL 27, 2000
SECURITIES AND EXCHANGE COMMISSION
JUDICIARY PLAZA
450 FIFTH STREET, N.W.
WASHINGTON, D.C. 20549
RE: EXHIBIT 10, FORM N-1A
CALVERT VARIABLE SERIES, INC.
FILE NUMBERS 811-3591, 2-80154
LADIES AND GENTLEMEN:
AS COUNSEL TO CALVERT VARIABLE SERIES,
INC., FORMERLY NAMED ACACIA CAPITAL CORPORATION, IT
IS MY OPINION, BASED UPON AN EXAMINATION OF THE
ARTICLES OF INCORPORATION, AMENDMENTS, RESTATEMENTS
AND BY-LAWS AND SUCH OTHER ORIGINAL OR PHOTOSTATIC
COPIES OF FUND RECORDS, CERTIFICATES OF PUBLIC
OFFICIALS, DOCUMENTS, PAPERS, STATUTES, AND AUTHORITIES
AS I DEEMED NECESSARY TO FORM THE BASIS OF THIS
OPINION, THAT THE SECURITIES BEING REGISTERED BY THIS
POST-EFFECTIVE AMENDMENT NO. 39 WILL, WHEN SOLD, BE
LEGALLY ISSUED, FULLY PAID AND NON-ASSESSABLE.
CONSENT IS HEREBY GIVEN TO FILE THIS
OPINION OF COUNSEL WITH THE SECURITIES AND EXCHANGE
COMMISSION AS AN EXHIBIT TO THE FUND'S POST-EFFECTIVE
AMENDMENT NO. 39 TO ITS REGISTRATION STATEMENT.
SINCERELY,
/S/IVY WAFFORD DUKE
IVY WAFFORD DUKE
ASSOCIATE GENERAL COUNSEL
CONSENT OF INDEPENDENT ACCOUNTANTS
WE CONSENT TO THE INCORPORATION BY REFERENCE IN POST EFFECTIVE
AMENDMENT NO. 39 TO THE REGISTRATION STATEMENT OF CALVERT VARIABLE SERIES, INC.
(COMPRISED OF THE SOCIAL MONEY MARKET, SOCIAL SMALL CAP, SOCIAL MID CAP GROWTH,
SOCIAL INTERNATIONAL EQUITY PORTFOLIO AND SOCIAL BALANCED PORTFOLIO) ON FORM
N-LA (FILE NUMBER 2-80154 AND 811-3591) OF OUR REPORTS DATED FEBRUARY 4, 2000,
ON OUR AUDITS OF THE FINANCIAL STATEMENTS AND FINANCIAL HIGHLIGHTS OF THE
PORTFOLIOS, WHICH REPORTS ARE INCLUDED IN THE ANNUAL REPORT TO SHAREHOLDERS FOR
THE YEAR ENDED DECEMBER 31, 1999, WHICH IS INCORPORATED BY REFERENCE IN THE
REGISTRATION STATEMENT. WE ALSO CONSENT TO THE REFERENCE OF OUR FIRM UNDER
THE CAPTION "FINANCIAL HIGHLIGHTS" IN THE PROSPECTUS AND "INDEPENDENT
ACCOUNTANTS" IN THE STATEMENT OF ADDITIONAL INFORMATION.
PRICEWATERHOUSECOOPERS LLP
BALTIMORE, MARYLAND
APRIL 27, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
WE CONSENT TO THE INCORPORATION BY REFERENCE IN POST EFFECTIVE
AMENDMENT NO. 39 TO THE REGISTRATION STATEMENT OF CALVERT VARIABLE SERIES, INC.
(COMPRISED OF THE INCOME & GROWTH, GROWTH, SMALL CAPITALIZATION, MIDCAP GROWTH,
EMERGING GROWTH, RESEARCH, GROWTH WITH INCOME, INDEX 500, AND MONEY MARKET
PORTFOLIOS) ON FORM N-LA (FILE NUMBER 2-80154 AND 811-3591) OF OUR REPORTS
DATED FEBRUARY 11, 2000, ON OUR AUDITS OF THE FINANCIAL STATEMENTS AND
FINANCIAL HIGHLIGHTS OF THE PORTFOLIOS, WHICH REPORTS IS INCLUDED IN THE ANNUAL
REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1999, WHICH IS
INCORPORATED BY REFERENCE IN THE REGISTRATION STATEMENT. WE ALSO CONSENT TO
THE REFERENCE OF OUR FIRM UNDER THE CAPTION "FINANCIAL HIGHLIGHTS" IN THE
PROSPECTUS AND "INDEPENDENT ACCOUNTANTS" IN THE STATEMENT OF ADDITIONAL
INFORMATION.
PRICEWATERHOUSECOOPERS LLP
BALTIMORE, MARYLAND
APRIL 27, 2000
18f-3 Multiple Class Plan
As Restated December 1998
Page 3 of 11
THE CALVERT GROUP OF FUNDS
RULE 18F-3 MULTIPLE CLASS PLAN
UNDER THE INVESTMENT COMPANY ACT OF 1940
AS RESTATED DECEMBER 1998
RULE 18F-3 UNDER THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED (THE "1940
ACT"), REQUIRES THAT AN INVESTMENT COMPANY DESIRING TO OFFER MULTIPLE CLASSES OF
SHARES PURSUANT TO THE RULE ADOPT A PLAN SETTING FORTH THE DIFFERENCES AMONG THE
CLASSES WITH RESPECT TO SHAREHOLDER SERVICES, DISTRIBUTION ARRANGEMENTS, EXPENSE
ALLOCATIONS AND ANY RELATED CONVERSION FEATURES OR EXCHANGE PRIVILEGES. ANY
MATERIAL AMENDMENT TO THE PLAN MUST BE APPROVED BY THE INVESTMENT COMPANY'S
BOARD OF TRUSTEES/DIRECTORS, INCLUDING A MAJORITY OF THE DISINTERESTED BOARD
MEMBERS, WHO MUST FIND THAT THE PLAN IS IN THE BEST INTERESTS OF EACH CLASS
INDIVIDUALLY AND THE INVESTMENT COMPANY AS A WHOLE.
THIS RULE 18F-3 MULTIPLE CLASS PLAN ("PLAN") SHALL APPLY TO THOSE FUNDS IN
THE CALVERT GROUP OF FUNDS LISTED IN EXHIBIT I (EACH A "FUND" AND COLLECTIVELY,
"FUNDS") AND TO ANY FUTURE FUND FOR WHICH THIS PLAN HAS BEEN APPROVED IN
ACCORDANCE WITH THE ABOVE PARAGRAPH.
THE PROVISIONS OF THIS PLAN ARE SEVERABLE FOR EACH FUND OR SERIES THEREOF
("SERIES") OR CLASS, AND WHENEVER ACTION IS TO BE TAKEN WITH RESPECT TO THIS
PLAN, THAT ACTION MUST BE TAKEN SEPARATELY FOR EACH FUND, SERIES OR CLASS
AFFECTED BY THE MATTER.
1. CLASS DESIGNATION. A FUND MAY OFFER SHARES DESIGNATED CLASS A, CLASS B,
CLASS C , CLASS I, AND FOR CERTAIN MONEY MARKET PORTFOLIOS, CLASS O AND CLASS T.
2. DIFFERENCES IN AVAILABILITY. CLASS A, CLASS B, CLASS C, AND CLASS O
SHARES SHALL EACH BE AVAILABLE THROUGH THE SAME DISTRIBUTION CHANNELS, EXCEPT
THAT (A) CLASS B SHARES MAY NOT BE AVAILABLE THROUGH SOME DEALERS AND ARE NOT
AVAILABLE FOR PURCHASES OF $500,000 OR MORE, (B) CLASS B SHARES OF CALVERT FIRST
GOVERNMENT MONEY MARKET FUND ARE AVAILABLE ONLY THROUGH EXCHANGE FROM CLASS B OR
CLASS C SHARES OF ANOTHER CALVERT FUND, AND (C) CLASS C SHARES MAY NOT BE
AVAILABLE THROUGH SOME DEALERS AND ARE NOT AVAILABLE FOR PURCHASES OF $1 MILLION
OR MORE. CLASS I SHARES ARE GENERALLY AVAILABLE ONLY DIRECTLY FROM CALVERT GROUP
AND NOT THROUGH DEALERS, AND EACH CLASS I SHAREHOLDER MUST MAINTAIN A $1 MILLION
MINIMUM ACCOUNT BALANCE. CLASS T SHARES ARE ONLY AVAILABLE THROUGH CERTAIN
DEALERS.
3. DIFFERENCES IN SERVICES. THE SERVICES OFFERED TO SHAREHOLDERS OF EACH
CLASS SHALL BE SUBSTANTIALLY THE SAME, EXCEPT THAT THE RIGHTS OF ACCUMULATION,
LETTERS OF INTENT AND REINVESTMENT PRIVILEGES SHALL BE AVAILABLE ONLY TO HOLDERS
OF CLASS A SHARES. CLASS I PURCHASES AND REDEMPTIONS MAY ONLY BE MADE BY BANK
WIRE. CLASS T SHARES HAVE LIMITED SERVICES BY CALVERT, RATHER THE SERVICES TO
SHAREHOLDERS ARE PROVIDED BY THE DEALER OFFERING THE CLASS T SHARES.
4. DIFFERENCES IN DISTRIBUTION ARRANGEMENTS. CLASS A SHARES SHALL BE OFFERED
WITH A FRONT-END SALES CHARGE, AS SUCH TERM IS DEFINED IN RULE 2830 OF THE
CONDUCT RULES OF THE NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. THE AMOUNT
OF THE SALES CHARGE ON CLASS A SHARES IS SET FORTH AT EXHIBIT II. SALES OF CLASS
A SHARES OF $1 MILLION OR MORE SOLD AT NAV SHALL BE SUBJECT TO A 1.00%
CONTINGENT DEFERRED SALES CHARGE ("CDSC") IF THE SHARES ARE REDEEMED WITHIN ONE
YEAR OF PURCHASE. CLASS A SHARES SHALL BE SUBJECT TO A DISTRIBUTION PLAN
ADOPTED PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. THE AMOUNT OF THE
DISTRIBUTION PLAN EXPENSES FOR CLASS A SHARES, AS SET FORTH AT EXHIBIT II, ARE
USED TO PAY THE FUND'S PRINCIPAL UNDERWRITER FOR DISTRIBUTING AND OR PROVIDING
SERVICES TO THE FUND'S CLASS A SHARES. THIS AMOUNT INCLUDES A SERVICE FEE AT THE
ANNUAL RATE OF .25 OF 1% OF THE VALUE OF THE AVERAGE DAILY NET ASSETS OF CLASS
A.
CLASS B SHARES SHALL BE OFFERED WITH A CDSC AND NO FRONT-END SALES CHARGE.
THE AMOUNT OF THE CDSC ON CLASS B SHARES IS SET FORTH AT EXHIBIT II. CLASS B
SHARES SHALL BE SUBJECT TO A DISTRIBUTION PLAN ADOPTED PURSUANT TO RULE 12B-1
UNDER THE 1940 ACT. THE AMOUNT OF THE DISTRIBUTION PLAN EXPENSES FOR CLASS B
SHARES, AS SET FORTH AT EXHIBIT II, ARE USED TO PAY EACH FUND'S PRINCIPAL
UNDERWRITER FOR DISTRIBUTING AND OR PROVIDING SERVICES TO THE FUND'S CLASS B
SHARES. THIS AMOUNT INCLUDES A SERVICE FEE AT THE ANNUAL RATE OF .25 OF 1% OF
THE VALUE OF THE AVERAGE DAILY NET ASSETS OF CLASS B.
CLASS C SHARES SHALL NOT BE SUBJECT TO A FRONT-END SALES CHARGE, BUT SHALL
BE SUBJECT TO A 1.00% CDSC IF THE SHARES ARE REDEEMED WITHIN ONE YEAR OF
PURCHASE. CLASS C SHARES SHALL BE SUBJECT TO A DISTRIBUTION PLAN ADOPTED
PURSUANT TO RULE 12B-1 UNDER THE 1940 ACT. THE AMOUNT OF THE DISTRIBUTION PLAN
EXPENSES FOR CLASS C SHARES ARE SET FORTH AT EXHIBIT II. THE CLASS C
DISTRIBUTION PLAN PAYS EACH APPLICABLE FUND'S PRINCIPAL UNDERWRITER FOR
DISTRIBUTING AND OR PROVIDING SERVICES TO SUCH FUND'S CLASS C SHARES. THIS
AMOUNT INCLUDES A SERVICE FEE AT THE ANNUAL RATE OF .25 OF 1% OF THE VALUE OF
THE AVERAGE DAILY NET ASSETS OF CLASS C.
CLASS I AND CLASS O SHARES SHALL BE SUBJECT TO NEITHER A FRONT-END SALES
CHARGE, NOR A CDSC, NOR ARE THEY SUBJECT TO A DISTRIBUTION PLAN ADOPTED PURSUANT
TO RULE 12B-1 UNDER THE 1940 ACT.
CLASS T SHARES SHALL BE SUBJECT TO NEITHER A FRONT-END SALES CHARGE, NOR A CDSC,
BUT THEY ARE SUBJECT TO A DISTRIBUTION PLAN ADOPTED PURSUANT TO RULE 12B-1 UNDER
THE 1940 ACT.
5. EXPENSE ALLOCATION. THE FOLLOWING EXPENSES SHALL BE ALLOCATED, TO THE
EXTENT PRACTICABLE, ON A CLASS-BY-CLASS BASIS: (A) DISTRIBUTION PLAN FEES; (B)
TRANSFER AGENT AND SHAREHOLDER SERVICING FEES; (C) ADMINISTRATIVE SERVICE FEES;
AND (E) CERTAIN STATE REGISTRATION FEES.
6. CONVERSION FEATURES. CLASS B SHARES SHALL BE SUBJECT TO AN AUTOMATIC
CONVERSION FEATURE INTO CLASS A SHARES AFTER THEY HAVE BEEN HELD FOR THAT NUMBER
OF YEARS SET FORTH IN EXHIBIT II. CLASS A, CLASS C ,CLASS I, CLASS O, AND CLASS
T ARE NOT SUBJECT TO AUTOMATIC CONVERSION.
7. EXCHANGE PRIVILEGES. CLASS A SHARES SHALL BE EXCHANGEABLE ONLY FOR: (A)
CLASS A SHARES OF OTHER FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP; (B)
SHARES OF FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP WHICH DO NOT HAVE
SEPARATE SHARE CLASSES; AND (C) SHARES OF CERTAIN OTHER FUNDS SPECIFIED FROM
TIME TO TIME.
CLASS B SHARES SHALL BE EXCHANGEABLE ONLY FOR: (A) CLASS B SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP; (B) CLASS A SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP, IF THE FRONT-END LOAD ON THE
CLASS A SHARES IS PAID AT THE TIME OF THE EXCHANGE; AND (C) SHARES OF CERTAIN
OTHER FUNDS SPECIFIED FROM TIME TO TIME.
CLASS C SHARES SHALL BE EXCHANGEABLE ONLY FOR: (A) CLASS C SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP AND CLASS B SHARES OF CALVERT
FIRST GOVERNMENT MONEY MARKET FUND; (B) CLASS A SHARES OF OTHER FUNDS MANAGED OR
ADMINISTERED BY THE CALVERT GROUP, IF THE FRONT-END LOAD ON THE CLASS A SHARES
IS PAID AT THE TIME OF THE EXCHANGE; AND (C) SHARES OF CERTAIN OTHER FUNDS
SPECIFIED FROM TIME TO TIME.
CLASS I SHARES SHALL BE EXCHANGEABLE ONLY FOR: (A) CLASS I SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP; (B) CLASS A SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP, IF THE FRONT-END LOAD ON THE
CLASS A SHARES IS PAID AT THE TIME OF THE EXCHANGE; AND (C) SHARES OF CERTAIN
OTHER FUNDS SPECIFIED FROM TIME TO TIME.
CLASS T SHARES SHALL BE EXCHANGEABLE ONLY FOR: (A) CLASS T SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP; (B) CLASS A SHARES OF OTHER
FUNDS MANAGED OR ADMINISTERED BY THE CALVERT GROUP, IF THE FRONT-END LOAD ON THE
CLASS A SHARES IS PAID AT THE TIME OF THE EXCHANGE; AND (C) SHARES OF CERTAIN
OTHER FUNDS SPECIFIED FROM TIME TO TIME.
<PAGE>
EXHIBIT I
THE CALVERT FUND
CALVERT TAX-FREE RESERVES
CALVERT MUNICIPAL FUND, INC.
CALVERT SOCIAL INVESTMENT FUND
CALVERT WORLD VALUES FUND, INC.
CALVERT NEW WORLD FUND, INC.
FIRST VARIABLE RATE FUND
<PAGE>
EXHIBIT II
CALVERT SOCIAL INVESTMENT FUND (CSIF)
MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C
FRONT-END 12B-1 FEE 12B-1FEE
SALES CHARGE
CSIF BALANCED 4.75% 0.35% 1.00%
CSIF EQUITY 4.75% 0.35% 1.00%
CSIF MANAGED INDEX 4.75% 0.25% 1.00%
CSIF BOND 3.75% 0.35% 1.00%
BALANCED,
CLASS B EQUITY, AND MAXIMUM
CONTINGENT DEFERRED SALES CHARGE MANAGED INDEX BOND 12B-1 FEE
SHARES HELD LESS THAN ONE YEAR AFTER
PURCHASE 5% 4% 1.00%
MORE THAN ONE YEAR BUT LESS THAN TWO 4% 3%
MORE THAN TWO YEARS BUT LESS THAN THREE 4% 2%
MORE THAN THREE YEARS BUT LESS THAN FOUR 3% 1%
MORE THAN FOUR YEARS BUT LESS THAN FIVE 2%
MORE THAN FIVE YEARS BUT LESS THAN SIX 1%
CONVERTS TO CLASS A AFTER 8 YRS. 6 YRS.
<PAGE>
EXHIBIT II
CALVERT TAX-FREE RESERVES (CTFR)
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C CLASS T
FRONT-END 12B-1 FEE 12B-1FEE 12B-1 FEE
SALES CHARGE
CTFR MONEY MARKET N/A N/A N/A 0.25%
CTFR LONG-TERM 3.75% 0.35% 1.00%
CTFR VERMONT 3.75% N/A 1.00%
LONG-TERM MAXIMUM
CLASS B AND CLASS B
CONTINGENT DEFERRED SALES CHARGE VERMONT 12B-1 FEE
SHARES HELD LESS THAN ONE YEAR AFTER PURCHASE 4% 1.00%
MORE THAN ONE YEAR BUT LESS THAN TWO 3%
MORE THAN TWO YEARS BUT LESS THAN THREE 2%
MORE THAN THREE YEARS BUT LESS THAN FOUR 1%
CONVERTS TO CLASS A AFTER 6 YRS.
<PAGE>
EXHIBIT II
CALVERT MUNICIPAL FUND, INC. (CMF)
MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C
FRONT-END 12B-1 FEE 12B-1FEE
SALES CHARGE
NATIONAL INTERMEDIATE 2.75% 0.25% N/A
CALIFORNIA INTERMEDIATE 2.75% 0.25% N/A
MARYLAND INTERMEDIATE 2.75% 0.25% N/A
VIRGINIA INTERMEDIATE 2.75% 0.25% N/A
MAXIMUM
CLASS B CLASS B
CONTINGENT DEFERRED SALES CHARGE CMF 12B-1 FEE
SHARES HELD LESS THAN ONE YEAR AFTER PURCHASE 3% 1.00%
MORE THAN ONE YEAR BUT LESS THAN TWO 2%
MORE THAN TWO YEARS BUT LESS THAN THREE 2%
MORE THAN THREE YEARS BUT LESS THAN FOUR 1%
CONVERTS TO CLASS A AFTER 4 YRS.
<PAGE>
EXHIBIT II
THE CALVERT FUND
MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C
FRONT-END 12B-1 FEE 12B-1 FEE
SALES CHARGE
NEW VISION SMALL CAP 4.75% 0.25% 1.00%
CALVERT INCOME FUND 3.75% 0.50% 1.00%
MAXIMUM
CLASS B CLASS B
CONTINGENT DEFERRED SALES CHARGE NEW VISION INCOME 12B-1 FEE
SHARES HELD LESS THAN ONE YEAR AFTER
PURCHASE 5% 4% 1.00%
MORE THAN ONE YEAR BUT LESS THAN TWO 4% 3%
MORE THAN TWO YEARS BUT LESS THAN THREE 4% 2%
MORE THAN THREE YEARS BUT LESS THAN FOUR 3% 1%
MORE THAN FOUR YEARS BUT LESS THAN FIVE 2%
MORE THAN FIVE YEARS BUT LESS THAN SIX 1%
CONVERTS TO CLASS A AFTER 8 YRS. 6 YRS.
<PAGE>
EXHIBIT II
CALVERT WORLD VALUES FUND, INC. (CWVF)
MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C
FRONT-END 12B-1 FEE 12B-1FEE
SALES CHARGE
INTERNATIONAL EQUITY 4.75% 0.35% 1.00%
CAPITAL ACCUMULATION 4.75% 0.35% 1.00%
MAXIMUM
CLASS B CLASS B
CONTINGENT DEFERRED SALES CHARGE CWVF 12B-1 FEE
SHARES HELD LESS THAN ONE YEAR AFTER PURCHASE 5% 1.00%
MORE THAN ONE YEAR BUT LESS THAN TWO 4%
MORE THAN TWO YEARS BUT LESS THAN THREE 4%
MORE THAN THREE YEARS BUT LESS THAN FOUR 3%
MORE THAN FOUR YEARS BUT LESS THAN FIVE 2%
MORE THAN FIVE YEARS BUT LESS THAN SIX 1%
CONVERTS TO CLASS A AFTER 8 YRS.
<PAGE>
EXHIBIT II
CALVERT NEW WORLD FUND, INC. (CNWF)
MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C
FRONT-END 12B-1 FEE 12B-1 FEE
SALES CHARGE
CALVERT NEW AFRICA 4.75% 0.25% 1.00%
MAXIMUM
CLASS B CLASS B
CONTINGENT DEFERRED SALES CHARGE CNWF 12B-1 FEE
SHARES HELD LESS THAN ONE YEAR AFTER PURCHASE 5% 1.00%
MORE THAN ONE YEAR BUT LESS THAN TWO 4%
MORE THAN TWO YEARS BUT LESS THAN THREE 4%
MORE THAN THREE YEARS BUT LESS THAN FOUR 3%
MORE THAN FOUR YEARS BUT LESS THAN FIVE 2%
MORE THAN FIVE YEARS BUT LESS THAN SIX 1%
CONVERTS TO CLASS A AFTER 8 YRS.
<PAGE>
EXHIBIT II
FIRST VARIABLE RATE FUND (FVRF)
MAXIMUM MAXIMUM MAXIMUM MAXIMUM
CLASS A CLASS A CLASS C CLASS T
FRONT-END 12B-1 FEE 12B-1 FEE 12B-1 FEE
SALES CHARGE
FIRST GOVERNMENT
MONEY MARKET N/A N/A 1.00% 0.25%
MAXIMUM
CLASS B CLASS B
CONTINGENT DEFERRED SALES CHARGE 12B-1 FEE
CDSC OF ORIGINAL CLASS B FUND PURCHASED 1.00%
IS APPLIED UPON REDEMPTION FROM CLASS B
OF CALVERT FIRST GOVERNMENT MONEY MARKET FUND.
CONVERSION PERIOD OF ORIGINAL CLASS B FUND PURCHASED IS APPLIED.
E:\PROCEDURES\FALL FINAL 1999 CODE of ETHICS REVISIONS.doc
REVISED DECEMBER 1999
CODE OF ETHICS AND INSIDER TRADING POLICY AND PROCEDURES
CALVERT ASSET MANAGEMENT COMPANY, INC.
CALVERT-SLOAN, ADVISERS, L.L.C.
CALVERT DISTRIBUTORS, INC.
FIRST VARIABLE RATE FUND FOR GOVERNMENT INCOME
CALVERT TAX-FREE RESERVES
CALVERT SOCIAL INVESTMENT FUND
THE CALVERT FUND
CALVERT MUNICIPAL FUND INC.
CALVERT WORLD VALUES FUND, INC.
CALVERT VARIABLE SERIES, INC.
CALVERT CASH RESERVES
CALVERT NEW WORLD FUND, INC.
THE CODE OF ETHICS AND INSIDER TRADING POLICIES AND PROCEDURES ARE DESIGNED TO
PROTECT THE PUBLIC FROM ABUSIVE TRADING PRACTICES AND TO MAINTAIN ETHICAL
STANDARDS FOR ACCESS PERSONS WHEN DEALING WITH THE PUBLIC. ACTIVE LEADERSHIP
AND INTEGRITY OF MANAGEMENT DICTATES THESE PRINCIPLES BE DILIGENTLY IMPLEMENTED
AND MONITORED. THE CODE OF ETHICS IMPOSES THE FOLLOWING GENERAL OBLIGATIONS:
- - INFORMATION CONCERNING THE PURCHASE AND SALE OF SECURITIES LEARNED IN
CONNECTION WITH AN ACCESS PERSON'S SERVICE, IS PROPERTY OF THE FUND, ADVISER OR
EMPLOYER AND MAY NOT BE USED FOR PERSONAL BENEFIT.
- - FIDUCIARY DUTIES MANDATE SUITABLE INVESTMENT OPPORTUNITIES BE PRESENTED
FIRST TO THE FUND, ADVISER, OR EMPLOYER AND SHOULD NOT BE EXERCISED EVEN AFTER
FULL DISCLOSURE FOR PERSONAL BENEFIT.
- - MATERIAL INSIDE INFORMATION MUST BE KEPT CONFIDENTIAL AND RESTRICTS
TRADING OF SECURITIES.
- - FRONT RUNNING, MARKET MANIPULATION AND DECEPTIVE TRADING PRACTICES ARE
ABUSIVE TECHNIQUES PROHIBITED BY THESE PROCEDURES AND MAY RESULT, IN FINES,
TERMINATION OR LEGAL ACTIONS BY THIRD PARTIES.
- - ACCESS PERSONS MAY NOT PURCHASE IPOS DUE TO THE HIGH POTENTIAL FOR ABUSIVE
TRADING PRACTICES.
- - ACCESS PERSONS MUST NOT TRADE IN SECURITIES WITH KNOWLEDGE THAT THE FUND,
ADVISER, SUB-ADVISER OR EMPLOYER IS CONSIDERING TO MAKE A SIMILAR PURCHASE OR
SALE OF THE SAME SECURITIES.
- - ACCESS PERSONS SHALL NOT ENGAGE IN TRANSACTIONS THAT CREATE A CONFLICT OF
INTEREST INCLUDING BUT NOT LIMITED TO INAPPROPRIATELY MAKING DECISIONS ON BEHALF
OF A FUND REGARDING SECURITIES OR PRIVATE PLACEMENTS PERSONALLY OWNED BY THE
ACCESS PERSON.
CODE OF ETHICS GUIDELINES
THE LEGAL DEFINITION OF A SECURITY IS VERY BROAD AND INCORPORATES THE PURCHASE
AND SALE OF PUBLIC, PRIVATE, REGISTERED AND EXEMPT FROM REGISTRATION SECURITIES,
AS WELL AS DERIVATIVES. TO EASE THE BURDEN OF FOLLOWING THESE GUIDELINES, THE
CODE OF ETHICS REPORTING AND DISCLOSURE OBLIGATIONS AS WELL AS PRECLEARANCE
POLICIES DO NOT APPLY TO THE FOLLOWING:
1) THE SALE AND PURCHASE OF OPEN-END MUTUAL FUNDS INCLUDING MONEY MARKET
FUNDS.
2) THE SALE AND PURCHASE OF U.S. GOVERNMENT, U.S. GOVERNMENT AGENCY
SECURITIES AND MUNICIPAL SECURITIES IN TRADE AMOUNTS OF LESS THAN $20,000.
3) ACQUISITIONS THROUGH STOCK DIVIDEND PLANS, SPIN-OFFS OR OTHER
DISTRIBUTIONS APPLIED TO ALL HOLDERS OF THE SAME CLASS OF SECURITIES.
4) ACQUISITIONS THROUGH THE EXERCISE OF RIGHTS ISSUED PRO RATA TO ALL
HOLDERS.
5) ACQUISITIONS THROUGH GIFTS OR BEQUESTS.
6) TRADES IN ANY S & P 500 COMPANY OF 500 SHARES OR LESS.
7) TRADES IN REITS AND VARIABLE INSURANCE PRODUCTS.
A. DISCLOSURE OF HOLDINGS & DUPLICATE STATEMENTS AND CONFIRMATIONS FOR THE
PURCHASE AND SALE OF SECURITIES OR OPTIONS ON SECURITIES BY ACCESS PERSONS.
TO ASSURE THAT ABUSIVE OR UNETHICAL TRADING PRACTICES ARE NOT CONDUCTED BY
ACCESS PERSONS, ACCESS PERSONS ARE REQUIRED TO DISCLOSE PERSONAL SECURITIES
HOLDINGS INCLUDING PRIVATE PLACEMENT HOLDINGS AND SEND DUPLICATE BROKERAGE AND
CONFIRMATION STATEMENTS TO THE ATTENTION OF THE COMPLIANCE OFFICER AT CALVERT
GROUP, LTD., 4550 MONTGOMERY AVENUE, BETHESDA, MD 20814. PERSONAL SECURITIES
HOLDINGS MUST BE DISCLOSED AT THE POINT OF HIRE AND UPON ANNUAL ACKNOWLEDGEMENT
OF THESE PROCEDURES. DUPLICATE STATEMENTS AND CONFIRMATIONS ARE REQUIRED FOR
ANY ACCESS PERSON'S ACCOUNT OR AN ACCOUNT OVER WHICH THE ACCESS PERSON HAS
EITHER CUSTODY, CONTROL OR BENEFICIAL OWNERSHIP. ACCOUNT STATEMENTS FOR
IMMEDIATE FAMILY MEMBERS ARE ALSO REQUIRED."BENEFICIAL OWNERSHIP" SHALL HAVE THE
SAME MEANING AS IN RULE 16A-1(A)(2) UNDER THE SECURITIES EXCHANGE ACT OF 1934.
GENERALLY, A PERSON HAS A BENEFICIAL OWNERSHIP IN A SECURITY IF HE OR SHE,
DIRECTLY OR INDIRECTLY, THROUGH ANY CONTRACT, ARRANGEMENT, UNDERSTANDING,
RELATIONSHIP OR OTHERWISE, HAS OR SHARES A DIRECT OR INDIRECT PECUNIARY INTEREST
IN THE SECURITY, [HAS OR SHARES VOTING POWER (THE POWER TO VOTE OR DIRECT THE
VOTING OF THE SECURITY) OR INVESTMENT POWER (THE POWER TO DISPOSE OF OR DIRECT
THE DISPOSITION OF THE SECURITY).] BENEFICIAL OWNERSHIP" INCLUDES ACCOUNTS OF
A SPOUSE, MINOR CHILDREN AND RELATIVES RESIDENT IN THE ACCESS PERSON'S HOME, AS
WELL AS ACCOUNTS OF ANOTHER PERSON IF BY REASON OF ANY CONTRACT, UNDERSTANDING,
RELATIONSHIP, AGREEMENT OR OTHER ARRANGEMENT THE ACCESS PERSON OBTAINS THEREFROM
BENEFITS SUBSTANTIALLY EQUIVALENT TO THOSE OF OWNERSHIP, E.G., AS TRUSTEE,
SETTLOR, BENEFICIARY, POWER OF ATTORNEY.
ALL INFORMATION PROVIDED TO THE COMPLIANCE OFFICER WILL BE CONFIDENTIAL.
STATEMENTS AND CONFIRMATIONS WILL BE REVIEWED BY THE COMPLIANCE OFFICER OR HIS
OR HER DESIGNEE(S) FOR ANY PATTERN OF TRANSACTIONS INVOLVING PARALLEL
TRANSACTIONS (PORTFOLIO AND INDIVIDUAL BOTH BUYING OR BOTH SELLING THE SAME
SECURITY) GENERALLY WITHIN A 15 DAY PERIOD BEFORE OR AFTER THE TRANSACTION DATE.
AMONG THE FACTORS THAT WILL BE CONSIDERED IN THE ANALYSIS OF WHETHER ANY
PROVISION OF THE CODE HAS BEEN VIOLATED WILL BE THE NUMBER AND DOLLAR VALUE OF
THE TRANSACTIONS, THE TRADING VOLUME OF THE SECURITIES IN QUESTION, THE LENGTH
OF TIME THE SECURITY IS HELD BY THE INDIVIDUAL AND THE INDIVIDUAL'S INVOLVEMENT
IN THE INVESTMENT PROCESS. WHILE THE FOCUS OF THIS PROCEDURE OF THE CODE IS ON
"PATTERNS", IT IS IMPORTANT TO NOTE THAT A VIOLATION COULD RESULT FROM A SINGLE
TRANSACTION IF THE CIRCUMSTANCES WARRANT A FINDING THAT THE UNDERLYING
PRINCIPLES OF FAIR DEALING HAVE BEEN VIOLATED. THE COMPLIANCE OFFICER OR HIS OR
HER DESIGNEE(S), WILL SIMILARLY REVIEW THE PERSONAL SECURITIES HOLDINGS REPORTS
PROVIDED TO THE COMPLIANCE OFFICER.
B. PRECLEARANCE POLICY
BECAUSE OF THE SENSITIVE NATURE OF SECURITIES TRADING, THE COMPLIANCE OFFICER
WILL NOTIFY CERTAIN ACCESS PERSONS AND INVESTMENT PERSONNEL ABOUT THE NEED TO
FOLLOW A PRECLEARANCE POLICY. ATTACHMENT A WILL BE USED BY DESIGNATED ACCESS
PERSONS SEEKING PRECLEARANCE FOR SECURITIES TRADES INCLUDING PRECLEARANCE BY
INVESTMENT PERSONNEL FOR PRIVATE PLACEMENT TRANSACTIONS. THOSE INDIVIDUALS
SUBJECT TO THE PRECLEARANCE POLICY WILL NOT BE EXEMPT FROM THE GENERAL
PROHIBITIONS LISTED IN THE CODE OR THE POLICIES AND PROCEDURES DESIGNED TO
PREVENT INSIDER TRADING. THE COMPLIANCE OFFICER WILL REVIEW WITH THE
DIRECTORS/TRUSTEES PERIODICALLY A LIST OF PERSONS WHO ARE SUBJECT TO THE
PRECLEARANCE POLICY AND THE CRITERIA USED TO SELECT SUCH INDIVIDUALS.
THE PRECLEARANCE AUTHORIZATION SHALL BE VALID FOR A PERIOD OF THREE BUSINESS
DAYS UNLESS A FURTHER EXTENSION OF TIME IS INDICATED BY THE COMPLIANCE OFFICER.
<PAGE>
C. NOTIFICATION OF REPORTING OBLIGATION - ANNUAL CERTIFICATION TO BOARD
MEMBERS OF THE LEGAL DEPARTMENT WILL BE RESPONSIBLE FOR NOTIFYING ALL ACCESS
PERSONS ABOUT THE DUTY TO FORWARD TRADE CONFIRMATIONS TO THE COMPLIANCE OFFICER.
ONCE INFORMED OF THE DUTY TO FORWARD TRADE CONFIRMATIONS, AN ACCESS PERSON HAS A
CONTINUING OBLIGATION TO PROVIDE SUCH CONFIRMS, IN A TIMELY MANNER, UNTIL SUCH
TIME AS NOTIFIED OTHERWISE. INFORMATION COMPILED IN COMPLIANCE OFFICER REPORTS
IS AVAILABLE FOR INSPECTION BY THE SEC OR OTHER REGULATORY AUTHORITIES AT ANY
TIME DURING THE FIVE-YEAR PERIOD FOLLOWING THE END OF THE FISCAL YEAR IN WHICH
EACH REPORT IS MADE.
ANNUALLY, THE LEGAL DEPARTMENT WILL PREPARE A WRITTEN " ISSUES AND CERTIFICATION
REPORT" FOR THE BOARD THAT:
- - DESCRIBES ANY ISSUES THAT HAVE ARISEN UNDER THIS CODE OF ETHICS OR ITS
PROCEDURES SINCE THE LAST REPORT, INCLUDING INFORMATION ABOUT MATERIAL CODE OF
ETHICS OR PROCEDURE VIOLATIONS AND SANCTIONS IMPOSED IN RESPONSE TO THOSE
VIOLATIONS; AND
- - CERTIFIES TO THE BOARD THAT THE ADOPTED CODE OF ETHICS AND ITS PROCEDURES
PROVIDE REASONABLY NECESSARY MEASURES TO PREVENT INVESTMENT PERSONNEL FROM
VIOLATING THE CODE AND APPLICABLE PROCEDURES.
THE CODE OF ETHICS AND ANY MATERIAL CHANGES TO ITS PROVISIONS AND/OR PROCEDURES
MUST BE APPROVED BY A MAJORITY OF THE BOARD, INCLUDING A MAJORITY OF THE
INDEPENDENT DIRECTORS.
D. RESTRICTIONS AS TO GIFTS, ENTERTAINMENT, FAVORS AND DIRECTORSHIPS
1. GIFTS, ENTERTAINMENT AND FAVORS. ACCESS PERSONS MUST NOT MAKE BUSINESS
DECISIONS THAT ARE INFLUENCED OR APPEAR TO BE INFLUENCED BY GIVING OR ACCEPTING
GIFTS, ENTERTAINMENT OR FAVORS. ACCESS PERSONS ARE PROHIBITED FROM RECEIVING ANY
GIFT OR OTHER THING OF MORE THAN DE MINIMIS VALUE FROM ANY PERSON OR ENTITY THAT
DOES BUSINESS WITH OR ON BEHALF OF CALVERT ASSET MANAGEMENT COMPANY,
CALVERT-SLOAN ADVISERS, OR CALVERT DISTRIBUTORS INC. INVITATIONS TO AN
OCCASIONAL MEAL, SPORTING EVENT OR OTHER SIMILAR ACTIVITY WILL NOT BE DEEMED TO
VIOLATE THIS RESTRICTION UNLESS THE OCCURRENCE OF SUCH EVENTS IS SO FREQUENT OR
LAVISH AS TO SUGGEST AN IMPROPRIETY. THE PRESIDENT/CEO OF CALVERT GROUP MUST
APPROVE THE ACCEPTANCE OF ANY GIFT, ENTERTAINMENT OR FAVOR WITH A PER GIFT VALUE
OF MORE THAN $100.00.
2. DIRECTORSHIPS.
(A) GENERAL RULE:
NO ACCESS PERSON, OTHER THAN A DISINTERESTED FUND DIRECTOR/TRUSTEE, MAY SERVE ON
THE BOARD OF DIRECTORS OF A PUBLICLY-HELD OR PRIVATE FOR-PROFIT COMPANY ABSENT
PRIOR WRITTEN APPROVAL FROM THE CALVERT GROUP, LTD. BOARD OF DIRECTORS AND/OR
THE APPLICABLE FUND'S BOARD OF DIRECTORS/TRUSTEES. DISINTERESTED
DIRECTORS/TRUSTEES MUST PROVIDE ANNUAL DISCLOSURE ABOUT DIRECTORSHIPS AND OTHER
POTENTIAL CONFLICTS OF INTEREST.
(B) APPLICATIONS FOR APPROVAL:
APPLICATIONS FOR APPROVAL TO SERVE AS A DIRECTOR OF A PUBLICLY TRADED OR PRIVATE
FOR-PROFIT COMPANY SHALL BE DIRECTED, IN WRITING, TO THE OFFICE OF THE GENERAL
COUNSEL FOR PROMPT FORWARDING TO THE CALVERT GROUP, LTD. BOARD OF DIRECTORS AND
THE RESPECTIVE FUND'S BOARD OF DIRECTORS/TRUSTEES. AUTHORIZATION MAY BE GRANTED
WHERE IT IS DETERMINED THAT SUCH BOARD SERVICE WOULD BE CONSISTENT WITH THE
INTERESTS OF THE FUNDS AND THEIR SHAREHOLDERS.
(C) SUBSEQUENT INVESTMENT MANAGEMENT ACTIVITIES:
WHENEVER AN ACCESS PERSON IS GRANTED APPROVAL TO SERVE AS A DIRECTOR OF A
PUBLICLY-TRADED OR PRIVATE FOR-PROFIT COMPANY, HE OR SHE SHALL PERSONALLY
REFRAIN FROM PARTICIPATING IN ANY DELIBERATION, RECOMMENDATIONS, OR
CONSIDERATIONS OF WHETHER OR NOT TO RECOMMEND THAT ANY SECURITIES OF THAT
COMPANY BE PURCHASED, SOLD OR RETAINED IN THE INVESTMENT PORTFOLIO OF ANY
CALVERT GROUP FUND OR CALVERT ASSET MANAGEMENT COMPANY MANAGED ACCOUNT.
E. ENFORCEMENT AND SANCTIONS
EACH VIOLATION OF THIS CODE SHALL BE REPORTED TO THE BOARD OF
DIRECTORS/TRUSTEES OF THE APPLICABLE FUND OR ENTITY AT OR BEFORE THE NEXT
REGULAR MEETING OF THE BOARD. UPON DISCOVERING OR OTHERWISE BEING INFORMED OF A
VIOLATION OF THIS CODE, THE BOARD OF DIRECTORS/TRUSTEES MAY TAKE ANY ACTION IT
DEEMS APPROPRIATE INCLUDING, INTER ALIA, A LETTER OF CENSURE, TERMINATION WITH
RESPECT TO PORTFOLIO MANAGEMENT DUTIES REGARDING THE FUND, OR RECOMMENDING TO
THE OPERATING COMPANIES, SUSPENSION OR REMOVAL FROM OFFICE, IMPOSITION OF A FINE
OR TERMINATION OF EMPLOYMENT OF THE VIOLATOR.
F. RECORDKEEPING
EACH ENTITY SHALL MAINTAIN SUCH LISTS, RECORDS, AND REPORTS AS ARE REQUIRED
BY LAW.
<PAGE>
G. INSIDER TRADING POLICY AND PROCEDURES
1. SCOPE OF POLICY STATEMENT
THIS POLICY STATEMENT IS DRAFTED BROADLY; IT WILL BE APPLIED AND
INTERPRETED IN A SIMILAR MANNER. THIS POLICY STATEMENT APPLIES TO SECURITIES
TRADING AND INFORMATION HANDLING BY ALL ACCESS PERSONS.
THE LAW OF INSIDER TRADING IS UNSETTLED; AN INDIVIDUAL LEGITIMATELY MAY BE
UNCERTAIN ABOUT THE APPLICATION OF THE POLICY STATEMENT IN A PARTICULAR
CIRCUMSTANCE. OFTEN, A SINGLE QUESTION CAN FORESTALL DISCIPLINARY ACTION OR
COMPLEX LEGAL PROBLEMS. YOU SHOULD DIRECT ANY QUESTIONS RELATING TO THE POLICY
STATEMENT TO AN ATTORNEY IN THE CALVERT GROUP LEGAL DEPARTMENT. YOU MUST ALSO
NOTIFY AN ATTORNEY IN THE LEGAL DEPARTMENT IF YOU HAVE ANY REASON TO BELIEVE
THAT A VIOLATION OF THE POLICY STATEMENT HAS OCCURRED OR IS ABOUT TO OCCUR.
2. POLICY STATEMENT ON INSIDER TRADING
CALVERT FORBIDS ANY OFFICER, DIRECTOR\TRUSTEE OR EMPLOYEE FROM TRADING,
EITHER PERSONALLY OR ON BEHALF OF OTHERS, INCLUDING MUTUAL FUNDS MANAGED BY
CALVERT, ON MATERIAL NONPUBLIC INFORMATION OR COMMUNICATING MATERIAL NONPUBLIC
INFORMATION TO OTHERS IN VIOLATION OF THE LAW. THIS CONDUCT IS FREQUENTLY
REFERRED TO AS "INSIDER TRADING." CALVERT'S POLICY APPLIES TO EACH FUND, ITS
INVESTMENT ADVISOR, ITS PRINCIPAL UNDERWRITER, AND EVERY OFFICER, DIRECTOR AND
EMPLOYEE THEREOF, AND EXTENDS TO ACTIVITIES WITHIN AND OUTSIDE THEIR DUTIES AT
CALVERT. EVERY OFFICER, DIRECTOR, TRUSTEE AND EMPLOYEE MUST READ AND RETAIN THIS
POLICY STATEMENT. ANY QUESTIONS REGARDING CALVERT'S POLICY AND PROCEDURES SHOULD
BE REFERRED TO AN ATTORNEY IN THE CALVERT LEGAL DEPARTMENT. AN OFFICER,
DIRECTOR, TRUSTEE OR EMPLOYEE MUST NOTIFY AN ATTORNEY IN THE LEGAL DEPARTMENT
IMMEDIATELY IF THEY HAVE ANY REASON TO BELIEVE THAT A VIOLATION OF THE POLICY
STATEMENT HAS OCCURRED OR IS ABOUT TO OCCUR.
THE TERM "INSIDER TRADING" IS NOT DEFINED IN THE FEDERAL SECURITIES LAWS,
BUT GENERALLY IS USED TO REFER TO THE USE OF MATERIAL NONPUBLIC INFORMATION TO
TRADE IN SECURITIES (WHETHER OR NOT ONE IS AN "INSIDER") OR TO COMMUNICATIONS OF
MATERIAL NONPUBLIC INFORMATION TO OTHERS.
WHILE THE LAW CONCERNING INSIDER TRADING IS NOT STATIC, IT IS GENERALLY
UNDERSTOOD THAT THE LAW PROHIBITS:
A) TRADING BY AN INSIDER, WHILE IN POSSESSION OF MATERIAL
NONPUBLIC INFORMATION; OR
B) TRADING BY A NON-INSIDER, WHILE IN POSSESSION OF MATERIAL NONPUBLIC
INFORMATION, WHERE THE INFORMATION EITHER WAS DISCLOSED TO THE NON-INSIDER IN
VIOLATION OF AN INSIDER'S DUTY TO KEEP IT CONFIDENTIAL OR WAS MISAPPROPRIATED;
OR
C) COMMUNICATING MATERIAL NONPUBLIC INFORMATION TO OTHERS.
I. WHO IS AN INSIDER?
THE CONCEPT OF "INSIDER" IS BROAD. IT INCLUDES OFFICERS, DIRECTORS,
TRUSTEES AND EMPLOYEES OF A COMPANY. IN ADDITION, A PERSON CAN BE A "TEMPORARY
INSIDER" IF HE OR SHE ENTERS INTO A SPECIAL CONFIDENTIAL RELATIONSHIP IN THE
CONDUCT OF A COMPANY'S AFFAIRS AND AS A RESULT IS GIVEN ACCESS TO INFORMATION
SOLELY FOR THE COMPANY'S PURPOSES. A TEMPORARY INSIDER CAN INCLUDE, AMONG
OTHERS, A COMPANY'S ATTORNEYS, ACCOUNTANTS, CONSULTANTS, BANK LENDING OFFICERS,
AND THE EMPLOYEES OF SUCH ORGANIZATIONS. IN ADDITION, CALVERT MAY BECOME A
TEMPORARY INSIDER OF A COMPANY IT ADVISES OR FOR WHICH IT PERFORMS OTHER
SERVICES. ACCORDING TO THE SUPREME COURT, THE COMPANY MUST EXPECT THE OUTSIDER
TO KEEP THE DISCLOSED NONPUBLIC INFORMATION CONFIDENTIAL AND THE RELATIONSHIP
MUST AT LEAST IMPLY SUCH A DUTY BEFORE THE OUTSIDER WILL BE CONSIDERED AN
INSIDER.
II. WHAT IS MATERIAL INFORMATION?
TRADING ON INSIDE INFORMATION IS NOT A BASIS FOR LIABILITY UNLESS THE
INFORMATION IS MATERIAL. "MATERIAL INFORMATION" GENERALLY IS DEFINED AS
INFORMATION FOR WHICH THERE IS A SUBSTANTIAL LIKELIHOOD THAT A REASONABLE
INVESTOR WOULD CONSIDER IT IMPORTANT IN MAKING HIS OR HER INVESTMENT DECISIONS,
OR INFORMATION THAT IS REASONABLY CERTAIN TO HAVE A SUBSTANTIAL EFFECT ON THE
PRICE OF A COMPANY'S SECURITIES. INFORMATION THAT OFFICERS, DIRECTORS AND
EMPLOYEES SHOULD CONSIDER MATERIAL INCLUDES, BUT IS NOT LIMITED TO: DIVIDEND
CHANGES, EARNINGS ESTIMATES, CHANGES IN PREVIOUSLY RELEASED EARNINGS ESTIMATES,
SIGNIFICANT MERGER OR ACQUISITION PROPOSALS OR AGREEMENTS, MAJOR LITIGATION,
LIQUIDATION PROBLEMS, AND EXTRAORDINARY MANAGEMENT DEVELOPMENTS.
MATERIAL INFORMATION ALSO MAY RELATE TO THE MARKET FOR A COMPANY'S SECURITIES.
INFORMATION ABOUT A SIGNIFICANT ORDER TO PURCHASE OR SELL SECURITIES MAY, IN
SOME CONTEXTS, BE DEEMED MATERIAL. SIMILARLY, PREPUBLICATION INFORMATION
REGARDING REPORTS IN THE FINANCIAL PRESS ALSO MAY BE DEEMED MATERIAL. FOR
EXAMPLE, THE SUPREME COURT UPHELD THE CRIMINAL CONVICTIONS OF INSIDER TRADING
DEFENDANTS WHO CAPITALIZED ON PREPUBLICATION INFORMATION ABOUT THE WALL STREET
JOURNAL'S HEARD ON THE STREET COLUMN.
IT IS CONCEIVABLE THAT SIMILAR ADVANCE REPORTS OF SECURITIES TO BE BOUGHT OR
SOLD BY A LARGE, INFLUENTIAL INSTITUTIONAL INVESTOR, SUCH AS A FUND, MAY BE
DEEMED MATERIAL TO AN INVESTMENT IN THOSE PORTFOLIO SECURITIES. ADVANCE
KNOWLEDGE OF IMPORTANT PROPOSED GOVERNMENT REGULATION, FOR EXAMPLE, COULD ALSO
BE DEEMED MATERIAL INFORMATION REGARDING COMPANIES IN THE REGULATED INDUSTRY.
III. WHAT IS NONPUBLIC INFORMATION?
INFORMATION IS NONPUBLIC UNTIL IT HAS BEEN DISSEMINATED BROADLY TO INVESTORS IN
THE MARKET PLACE. TANGIBLE EVIDENCE OF SUCH DISSEMINATION IS THE BEST INDICATION
THAT THE INFORMATION IS PUBLIC. FOR EXAMPLE, INFORMATION IS PUBLIC AFTER IT HAS
BECOME AVAILABLE TO THE GENERAL PUBLIC THROUGH A PUBLIC FILING WITH THE SEC OR
SOME OTHER GOVERNMENTAL AGENCY, THE DOW JONES "TAPE" OR THE WALL STREET JOURNAL
OR SOME OTHER PUBLICATION OF GENERAL CIRCULATION, AND AFTER SUFFICIENT TIME HAS
PASSED SO THAT THE INFORMATION HAS BEEN DISSEMINATED WIDELY
IV. PENALTIES FOR INSIDER TRADING
PENALTIES FOR TRADING ON OR COMMUNICATING MATERIAL NONPUBLIC
INFORMATION ARE SEVERE, BOTH FOR INDIVIDUALS INVOLVED IN SUCH UNLAWFUL CONDUCT
AND THEIR EMPLOYERS. A PERSON CAN BE SUBJECT TO SOME OR ALL OF THE PENALTIES
BELOW EVEN IF HE OR SHE DOES NOT PERSONALLY BENEFIT FROM THE VIOLATION.
PENALTIES INCLUDE:
- - CIVIL INJUNCTIONS
- - TREBLE DAMAGES
- - DISGORGEMENT OF PROFITS
- - JAIL SENTENCES
- - FINES FOR THE PERSON WHO COMMITTED THE VIOLATION OF UP TO THREE TIMES THE
PROFIT GAINED OR LOSS AVOIDED, WHETHER OR NOT THE PERSON ACTUALLY BENEFITED, AND
- - FINES FOR THE EMPLOYER OR OTHER CONTROLLING PERSON OF UP TO THE GREATER OF
$1,000,000 OR THREE TIMES THE AMOUNT OF THE PROFIT GAINED OR LOSS AVOIDED.
IN ADDITION, ANY VIOLATION OF THIS POLICY STATEMENT CAN BE EXPECTED TO
RESULT IN SERIOUS SANCTIONS BY CALVERT, UP TO AND INCLUDING DISMISSAL OF THE
PERSONS INVOLVED.
<PAGE>
3. IDENTIFYING INSIDE INFORMATION
BEFORE A CALVERT EMPLOYEE EXECUTES ANY TRADE FOR HIM/HERSELF OR ON
BEHALF OF OTHERS, INCLUDING INVESTMENT COMPANIES MANAGED BY CALVERT, IN THE
SECURITIES OF A COMPANY ABOUT WHICH THE EMPLOYEE MAY HAVE POTENTIAL INSIDE
INFORMATION, THE FOLLOWING QUESTIONS SHOULD BE CONSIDERED:
A) IS THE INFORMATION MATERIAL? IS THIS INFORMATION THAT AN INVESTOR
WOULD CONSIDER IMPORTANT IN MAKING HIS OR HER INVESTMENT DECISIONS? IS THIS
INFORMATION THAT WOULD SUBSTANTIALLY AFFECT THE MARKET PRICE OF THE SECURITIES
IF GENERALLY DISCLOSED?
B) IS THE INFORMATION NONPUBLIC? HOW WAS THE INFORMATION OBTAINED? TO
WHOM HAS THIS INFORMATION BEEN PROVIDED? HAS THE INFORMATION BEEN DISSEMINATED
BROADLY TO INVESTORS IN THE MARKETPLACE BY BEING PUBLISHED IN REUTERS, THE WALL
STREET JOURNAL OR OTHER PUBLICATIONS OF GENERAL CIRCULATION? IS IT ON FILE WITH
THE SECURITIES AND EXCHANGE COMMISSION?
IF, AFTER CONSIDERATION OF THE ABOVE, IT IS FOUND THAT THE INFORMATION IS
MATERIAL AND NONPUBLIC, OR IF THERE ARE QUESTIONS AS TO WHETHER THE INFORMATION
IS MATERIAL AND NONPUBLIC, THE FOLLOWING STEPS SHOULD BE TAKEN:
A) REPORT THE MATTER IMMEDIATELY TO THE COMPLIANCE OFFICER OR AN
ATTORNEY IN THE LEGAL DEPARTMENT.
B) THE SECURITIES SHOULD NOT BE PURCHASED OR SOLD BY THE OFFICER,
DIRECTOR, TRUSTEE OR EMPLOYEE FOR HIM/HERSELF OR ON BEHALF OF OTHERS, INCLUDING
INVESTMENT COMPANIES MANAGED BY CALVERT.
C) THE INFORMATION SHOULD NOT BE COMMUNICATED INSIDE OR OUTSIDE
CALVERT, OTHER THAN TO THE LEGAL DEPARTMENT.
D) AFTER THE ISSUE HAS BEEN REVIEWED, THE LEGAL DEPARTMENT WILL
INSTRUCT THE OFFICER, DIRECTOR, OR EMPLOYEE AS TO WHETHER TO CONTINUE THE
PROHIBITIONS AGAINST TRADING AND COMMUNICATION, OR ALLOWING THE TRADE AND
COMMUNICATION OF THE INFORMATION.
4. CONTACTS WITH PUBLIC COMPANIES.
FOR CALVERT, CONTACTS WITH PUBLIC COMPANIES REPRESENT AN IMPORTANT PART OF
OUR RESEARCH EFFORTS. CALVERT MAY MAKE INVESTMENT DECISIONS ON THE BASIS OF THE
FIRM'S CONCLUSIONS FORMED THROUGH SUCH CONTACTS AND ANALYSIS OF
PUBLICLY-AVAILABLE INFORMATION. DIFFICULT LEGAL ISSUES ARISE, HOWEVER, WHEN, IN
THE COURSE OF THESE CONTACTS, A CALVERT EMPLOYEE OR OTHER PERSON SUBJECT TO THIS
POLICY STATEMENT BECOMES AWARE OF MATERIAL, NONPUBLIC INFORMATION. THIS COULD
HAPPEN, FOR EXAMPLE, IF A COMPANY'S CHIEF FINANCIAL OFFICER PREMATURELY
DISCLOSES QUARTERLY RESULTS TO AN ANALYST OR AN INVESTOR RELATION REPRESENTATIVE
MAKES A SELECTIVE DISCLOSURE OF ADVERSE NEWS TO A HANDFUL OF INVESTORS. IN SUCH
SITUATION, CALVERT MUST MAKE A JUDGMENT AS TO ITS FURTHER CONDUCT. FOR THE
PROTECTION OF THE COMPANY AND ITS EMPLOYEES, THE LEGAL DEPARTMENT SHOULD BE
CONTACTED IF AN EMPLOYEE BELIEVES THAT HE/SHE HAS RECEIVED MATERIAL, NONPUBLIC
INFORMATION.
5. TENDER OFFERS
TENDER OFFERS REPRESENT A PARTICULAR CONCERN IN THE LAW OF INSIDER TRADING
FOR TWO REASONS. FIRST, TENDER OFFER ACTIVITY OFTEN PRODUCES EXTRAORDINARY
GYRATIONS IN THE PRICE OF THE TARGET COMPANY'S SECURITIES. TRADING DURING THIS
TIME PERIOD IS MORE LIKELY TO ATTRACT REGULATORY ATTENTION (AND PRODUCES A
DISPROPORTIONATE PERCENTAGE OF INSIDER TRADING CASES). SECOND, THE SEC HAS
ADOPTED A RULE WHICH EXPRESSLY FORBIDS TRADING AND "TIPPING" WHILE IN POSSESSION
OF MATERIAL, NONPUBLIC INFORMATION REGARDING A TENDER OFFER RECEIVED FROM THE
TENDER OFFEROR, THE TARGET COMPANY OR ANYONE ACTING ON BEHALF OF EITHER. CALVERT
EMPLOYEES AND OTHERS SUBJECT TO THIS POLICY STATEMENT SHOULD EXERCISE PARTICULAR
CAUTION ANY TIME THEY BECOME AWARE OF NONPUBLIC INFORMATION RELATING TO A TENDER
OFFER.
6. EDUCATION
ANOTHER ASPECT OF CALVERT'S COMPLIANCE PROCEDURES WILL BE TO KEEP CALVERT
PERSONNEL AND OTHER ACCESS PERSONS INFORMED. THIS MEMORANDUM SERVES AS A BASIC
PRIMER ON WHAT CONSTITUTES INSIDE INFORMATION AND PERIODIC MEMORANDA WILL BE
DISTRIBUTED, PARTICULARLY WHEN A SIGNIFICANT CASE DEALING WITH THE SUBJECT HAS
BEEN DECIDED.
ALL NEW EMPLOYEES WILL BE GIVEN A COPY OF THIS STATEMENT AND WILL BE
REQUIRED TO READ IT AND AGREE TO ITS CONDITIONS. ALL EMPLOYEES WILL BE REQUIRED
TO CONFIRM THEIR UNDERSTANDING AND ACKNOWLEDGMENT OF THE STATEMENT ON AN ANNUAL
BASIS.
<PAGE>
ATTACHMENT A
[GRAPHIC OMITED]
MEMO
TO: LEGAL DEPARTMENT; COMPLIANCE
FROM:
RE: PRIOR APPROVAL OF ACCESS PERSON TRADING IN SECURITIES
THE FOLLOWING PROPOSED SECURITY(IES) TRANSACTION(S) WAS (WERE) REVIEWED BY THE
FUND, OR DESIGNATED EMPLOYEE OF THE ADVISOR (CHIEF INVESTMENT OFFICER OR
DIRECTOR OF RESEARCH) PURSUANT TO CALVERT GROUP'S CODE OF ETHICS:
NAME OF ADVISORY PERSON:
SECURITY (IES) TO BE PURCHASED OR SOLD:
BASIS OF APPROVAL OR DENIAL:
FUND OR ADVISOR DESIGNEE SIGNATURE
SIGNATURE PAGE
CODE OF ETHICS AND INSIDER TRADING POLICY AND PROCEDURES
ACKNOWLEDGEMENT FORM
I HAVE READ AND UNDERSTAND CALVERT GROUP'S CODE OF ETHICS AND INSIDER TRADING
POLICY AND PROCEDURES AND WILL COMPLY IN ALL RESPECTS WITH SUCH PROCEDURES.
SIGNATURE DATE
PRINT NAME
<PAGE>
ATTACHMENT B
ACCESS PERSONS SUBJECT TO PRECLEARANCE FOR SECURITIES TRANSACTIONS INCLUDING
PRIVATE PLACEMENTS
MICHAEL ABRAMO
FATIMA BATALVI
SUSAN BENDER
YING-WEI CHEN
TOM DAILEY
IVY DUKE
PATRICK FAUL
VICTOR FRYE
DAVID GIBSON
CEASAR GONZALES
DONNA GOMEZ
GREG HABEEB
DAN HAYES
HUI PING HO
MOHAMMED JAVAID
ANU KHONDOKAR
TRACY KNIGHT
BARBARA KRUMSIEK
EMMETT LONG
RENO MARTINI
GARY MILLER
JOHN NICHOLS
MATT NOTTINGHAM
KENDRA PLEMMONS
CARMEN REID
CHRIS SANTOS
BILL TARTIKOFF
LAURIE WEBSTER
RON WOLFSHEIMER
MIKE YUHAS
INVESTMENT PERSONNEL SUBJECT SOLEY TO PRIVATE PLACEMENT PRECLEARANCE
MEMBERS OF THE SPECIAL EQUITIES COMMITTEE OF THE BOARD OF DIRECTORS/TRUSTEES
The term "entity" will be used for any organization adopting these procedures.
For those organizations which are investment companies as defined under the
Investment Company Act of 1940, the term "Fund" may also be used if applicable.
Access person means any director/trustee, officer, general partner, or employee
of any entity adopting these procedures who participates in the selection of
securities (other than high social impact securities or special equity
securities) or who has access to information regarding impending purchases or
sales [See rule 17 j-1(e)]. The General Counsel or Compliance Officer may
designate any person, including an independent contractor or consultant, as an
access person, who, as such, shall provide signed acknowledgement of the receipt
of these procedures and their applicability. A current list of access persons
and investment personnel subject to preclearance or other requirements shall be
maintained by the Compliance Officer.
For this purpose, "securities" include options on securities and securities that
are convertible into or exchangeable for securities held or to be acquired by a
fund. A security is being considered for purchase once a recommendation has
been documented, communicated and under serious evaluation by the purchaser or
seller. Evidence of consideration may include such things as approved
recommendations in current research reports, pending or active order tickets,
and a watch list of securities under current evaluation.
Disinterested Directors and/or Trustees as defined by the Investment Company Act
of 1940, are excluded from the duplicate statement and confirmation requirement
unless the General Counsel or Compliance Officer imposes a different standard
due to an entity's active trading strategy and/or the information available to
the Disinterested Directors and/or Trustees.
All account information is subject to regulatory review. The trade confirmations
of persons other than disinterested directors or trustees may be disclosed to
other senior officers of the Fund or to legal counsel as deemed necessary for
compliance purposes and to otherwise administer the Code of Ethics.
