Calvert First Government Money Market Fund
Semi-Annual Report
June 30, 1998
<PAGE>
Contents
President's Letter
1
Portfolio
Manager Remarks
2
Statement of
Net Assets
4
Statement of
Operations
6
Statements of
Changes in Net Assets
7
Notes to
Financial Statements
8
Financial Highlights
10
Dear Investor:
The previous quarter serves as a reminder that U.S. stock and bond markets can
be severely impacted by global forces and points out some of the challenges
portfolio managers will face in the months ahead.
The Asian financial crisis remains the number one issue. Devaluation of
foreign currencies makes U.S. goods more expensive for buyers overseas and
cheapens the cost of imports to the U.S. This radical shift in pricing power
and advantage caused investors to reduce their expectations for future U.S.
corporate profits growth and helped keep stock prices from rising further.
Asia's struggles also touched off a general flight-to-quality, with investors
bailing out of stocks and riskier bonds, especially emerging market issues,
and running for the safety of U.S. Treasury securities. The yield on the
benchmark 30-year Treasury bond fell to an all-time low.
Russia's economic woes also came to the fore. Propping up the ruble is likely
to be a financial drain on world lenders and could spell more trouble for
emerging market countries.
There are bright spots. In Europe, corporations continued to post good returns
and most markets advanced during the last quarter. Looking ahead, progress
toward a single currency, the euro, for 11 participating countries should
encourage further gains, as it will reduce corporations' currency risk and
make it easier to sell goods and services to customers in other euro-based
countries.
Our equity and fixed-income managers continue to cast a wide net in monitoring
these and other key economic and financial hot spots around the world without
lessening their focus on the changing U.S. economy.
We appreciate your choosing to invest with Calvert Group.
Sincerely,
/s/
Barbara J. Krumsiek
President and CEO
July 27, 1998
<PAGE>
[picture]
Beth Bunnell Hunter is a member of the CAMCO portfolio management team.
Calvert First Government Money Market Fund seeks to earn the highest possible
yield consistent with safety, liquidity, and preservation of capital.
Fund
Information
asset allocation
taxable money market
NASDAQ symbol
FVRXX
CUSIP number
131557-10-8
Calvert First Government Money Market Fund
How would you characterize the investment climate during the last six months?
Most areas of the economy, including the housing sector and labor markets,
continued to expand. A few areas indicated a slowing from their earlier torrid
pace. Manufacturing activity as measured by a widening trade deficit and
inventory build-up, slowed in response to a decline in exports to Asia and was
further affected by the GM strike, still unresolved as of today.
Short-term interest rates traded in a narrow range near the federal funds
target rate of 5.50%. The federal funds rate is the rate banks charge each
other for overnight loans. The Federal Reserve maintained its neutral monetary
policy, taking no steps to either raise or lower interest rates. The Fed has
not intervened to adjust rates since March of 1997.
As a money manager, what developments were you tracking most closely?
Certainly, the impact of the Asian financial crisis on inflation, Fed policy
and the strength of the U.S. economy.
As long as inflation remains tame, the Federal Reserve will likely remain on
the sidelines, expecting that fallout from the Asian financial crisis will
create a sufficient drag on the domestic economy. If we don't see a
continuation of reports indicating a slowdown or if the economy strengthens,
the Fed may be forced to play catch-up and move quickly to pre-empt inflation.
The effects of the Asian crisis on the domestic economy will determine the
Fed's next move and set the trend for interest rates over the coming months.
How has the strength of the economy affected your management approach?
Ironically, the robust economy has created a challenging environment. Thanks
in part to strong stock market performance over the past few years, the U.S.
Treasury has received tax payments exceeding expectations and consequently has
been able to pay down U.S. government debt on a rolling basis. The Treasury
paydown has meant there have been increasingly fewer Treasury securities
available for purchase. Level demand in the face of decreasing supply has
pushed yields lower.
This combined with the Fed's current neutral monetary policy has meant that
many short-term money market eligible securities are trading at yields below
the current federal funds target rate of 5.50%.
What strategies did you use to enhance the Fund's yield?
The current yield curve is flat, indicating that longer term securities do not
carry much more yield than short-term securities. We do not feel it is prudent
to greatly extend our average days to maturity, only to capture very little
additional yield. Instead, we have sought out non-traditional money market
eligible securities as a way to boost yield without exposing the fund to
excess credit or duration risk. For example, we added securities guaranteed by
the U.S. Government through the Overseas Private Investment Corporation.
How has the Fund performed relative to its peers?
The Fund returned 2.48% for the year to date, slightly ahead of the 2.45%
return for the Lipper US Government Money Market Funds Average.
What is your outlook for the coming six months?
We expect many of the trends that have affected the market over the preceding
six months will continue to impact the market in the months ahead. Over the
course of the next quarter a clearer consensus on the direction of the economy
is likely to emerge and the bond market will begin to price in expectations of
the Federal Reserve's next move. In addition, the Treasury has announced that
it will be increasing the total dollar amount of certain shorter maturity
Treasury bills being auctioned in the future, and this may help to ease the
shortage of money market eligible Treasury securities. It remains to be seen
whether this will significantly offset the effect of the pay down. Over the
near term we still anticipate that this trend is likely to affect money market
rates relative to the federal funds rate.
July 20, 1998
Please remember, this discussion reflects the views and opinions of Calvert
Asset Management Company at June 30, 1998, the end of the reporting period.
Our strategy and the Fund's portfolio composition may differ due to
ever-changing market and economic conditions. While historical performance is
no guarantee of future results, it may give you a better and more thorough
understanding of our investment decisions and management philosophy.
Portfolio statistics
weighted
average maturity
6.30.98 35 days
12.31.97 52 days
credit quality distribution
as of 6.30.98
The Fund invests solely in debt obligations issued or guaranteed by the United
States, its agencies or instrumentalities, assignments of interest in such
obligations, and commitments to purchase such obligations ("US
Government-backed obligations"). The Fund may invest in US Government-backed
obligations subject to repurchase agreements with the recognized securities
dealers and banks.
comparative month-end yields
Calvert IBC's
First Government Government
Money Market Money Market
Class O Averages
6.30.98 4.92% 4.84%
5.31.98 4.86% 4.82%
4.30.98 4.98% 4.84%
3.31.98 5.00% 4.86%
2.28.98 5.03% 4.86%
1.31.98 4.97% 4.90%
12.31.97 5.02% 4.91%
Class O average annual total return
as of 6.30.98
1 year 5.08%
5 year 4.50%
10 year 5.27%
inception 7.48%
(12.07.76)
Total returns assume reinvestment of dividends. Performance information
represents the value of an investment in Class O shares. The value of an
investment in Class B or C shares would be different. Past performance is no
guarantee of future results. Sources: IBC's Money Fund Report, IBC Financial
Data Inc. and Lipper Analytical Services, Inc.
<PAGE>
Statement of Net Assets
June 30, 1998
U.S. Government Agency Obligations - 46.9%
Principal
Amount Value
Federal Home Loan Bank, 5.69%, 9/24/98 $5,000,000 $5,000,800
Federal Home Loan Mortgage
Corporation, Discount Notes
5.42%, 7/6/98 5,000,000 4,996,236
5.44%, 7/8/98 6,000,000 5,993,653
5.43%, 7/21/98 4,788,000 4,773,556
5.40%, 8/4/98 4,500,000 4,477,050
5.48%, 8/7/98 11,000,000 10,938,046
5.407%, 9/29/98 10,000,000 9,864,825
5.41%, 9/29/98 5,000,000 4,932,375
5.38%, 10/2/98 6,000,000 5,916,610
5.36%, 11/5/98 5,000,000 4,905,456
Federal National Mortgage Association,
6.41%, 7/17/98 3,000,000 3,001,011
5.337%, 8/12/98 7,000,000 6,997,951
5.53%, 3/11/99 5,000,000 4,998,917
Federal National Mortgage Association, Discount Notes:
5.41%, 8/19/98 4,000,000 3,970,546
5.34%, 9/21/98 6,000,000 5,927,020
5.37%, 9/23/98 6,000,000 5,924,820
5.35%, 9/24/98 5,000,000 4,936,840
5.30%, 1/19/99 5,000,000 4,851,306
Student Loan Marketing Association,
5.775%, 9/9/98 1,000,000 1,000,196
5.79%, 9/16/98 5,000,000 5,000,499
5.531%, 10/15/98 5,000,000 5,000,000
Total U.S. Government Agency
Obligations (Cost $113,407,713) 113,407,713
Depository Receipts for U.S.
Government Guaranteed Loans - 7.4% +
Colson Services Corporation Loan Sets:*
7.09375%, 12/22/97-4/26/09 691,322 693,086
6.84375%, 4/21/98-5/18/02 20,581 20,519
7.34375%, 10/1/98-7/26/10 490,561 490,662
8.75%, 8/10/99 32,413 33,202
8.34375%, 3/12/00 992 996
7.375%, 9/9/06 203,768 203,900
7.25%, 8/1/10-1/22/11 800,810 801,326
7.25%, 3/15/11-8/10/12 8,600,101 8,617,336
7.50%, 3/23/12 1,375,447 1,390,593
8.25%, 4/1/12 27,071 27,678
7.375%, 5/29/12 1,917,594 1,920,596
7.25%, 10/30/01-9/2/12 3,636,810 3,643,436
8.59375%, 1/17/10 87,823 92,032
Total Depository Receipts for U.S.
Government Guaranteed Loans
(Cost $17,935,362) 17,935,362
<PAGE>
Variable rate Loans Guaranteed by
Agencies of the U.S. Government - 21.7%+
Principal
Amount Value
Audley Investments Opic COPs,
5.74%, 11/29/04
$12,000,000 $12,000,000
Loan pools:
8.59375%, 3./30/99 35,786 35,786
7.00%, 8/15/12 1,570,482 1,553,228
6.25%, 3/1/07 934,745 919,788
Sakhalin Energy Co. Opic COPs,
5.50%, 4/2/07 14,000,000 14,000,000
Rural Electric Coop Grantor
Trust Certificates VRDN,
5.70%, 12/25/17 24,000,000 24,000,000
Total Variable Rate Loans
Guaranteed by
Agencies of the U.S. Government
(Cost $52,508,802) 52,508,802
Repurchase Agreements, for Delivery at
Cost, Collateralized by
Securities Issued or
Guaranteed by the U.S. Government - 23.3%
Donaldson, Lufkin & Jenrette
Securities, Inc.:
5.85%, dated 6/30/98, due 7/1/98
($1,124,775 FNMA Discount, 7/10/98)
($5,540,767 FNMA, 6.28%, 5/27/05) 6,500,000 6,500,000
Paine Webber, Inc.: 5.67%,
dated 6/29/98,
due 7/1/98 ($25,659,115 FHLMC
Pool #FGC00555, 7.50%, 10/1/27) 25,000,000 25,000,000
Paine Webber, Inc.: 5.68%,
dated 6/29/98,
due 7/6/98 ($18,362,301 GNMA I
Pool #GN461632, 7.50%, 1/15/28)
($7,586,692.39 GNMA I
Pool #GN473504,
7.00%, 4/15/28) 25,000,000 25,000,000
Total Repurchase Agreements
(Cost $56,500,000) 56,500,000
TOTAL INVESTMENTS
(Cost $240,351,877) - 99.3% 240,351,877
Other assets in excess of liabilities, net - 0.7% 1,693,800
Net Assets - 100.0% $242,045,677
Net Assets Consist of:
Paid-in capital applicable the following
shares of beneficial interest, unlimited number
of no par shares authorized
Class O: 242,453,670 shares outstanding $242,222,347
Class B: 52,648 shares outstanding 52,648
Class C: 28,181 shares outstanding 28,181
Undistributed net investment income (loss) 21,057
Accumulated net realized gain (loss) on investments (278,554)
Net Assets $242,045,677
Net Asset Value Per Share
Class O (based on net assets of $241,964,861) $1.00
Class B (based on net assets of $52,638) $1.00
Class C (based on net assets of $28,178) $1.00
+ Represents rates in effect at June 30, 1998, after regularly
scheduled adjustments on such date. Interest rates adjust monthly and
quarterly, generally at the beginning of the month or calendar quarter, or
semiannually based on prime plus contracted adjustments. As of June 30, 1998,
the prime interest rate was 8.50%.
* Colson Services Corporation is the custodian, collection, and
transfer agent for certain of the Fund's U.S. Government guaranteed variable
rate loans. Each depository receipt pertains to a set, grouped by interest
rate, of these loans.
See notes to financial statements.
<PAGE>
Statement of Operations Six Months Ended June 30, 1998
Net Investment Income
Investment Income
Interest income $6,971,731
Expenses
Investment advisory fee 605,017
Transfer agency fees and expenses 251,756
Distribution plan expenses:
Class B 14
Class C 13
Trustees' fees and expenses 13,870
Custodian fees 19,064
Registration fees 22,474
Reports to shareholders 51,253
Professional fees 13,742
Miscellaneous 7,074
Reimbursement from Advisor
Class O -
Class B (2,272)
Class C (958)
Total expenses 981,047
Fees paid indirectly (26,252)
Net expenses 954,795
Net Investment Income 6,016,936
Realized Gain (Loss) on Investments
Net realized gain (loss) (18,372)
Increase (Decrease) in Net Assets
Resulting from Operations $5,998,564
See notes to financial statements.
<PAGE>
Statements of Changes in Net Assets
Six Months Ended Year Ended
June 30, December 31,
Increase (Decrease) in Net Assets 1998 1997
Operations
Net investment income $6,016,936 $11,781,093
Net realized gain (loss) (18,372) 11,055
Increase (Decrease)
in Net Assets
Resulting from Operations 5,998,564 11,792,148
Distributions to shareholders from
Net investment income:
Class O shares (6,013,735) (11,790,757)
Class B shares (30) -
Class C shares (47) -
Total distributions (6,013,812) -
Capital share transactions
Shares sold:
Class O shares 215,811,277 390,048,098
Class B shares 52,633 -
Class C shares 30,134 -
Reinvestment of distributions:
Class O shares 5,846,759 11,513,525
Class B shares 15 -
Class C shares 47 -
Shares redeemed:
Class O shares (211,702,716) (408,957,845)
Class B shares - -
Class C shares (2,000) -
Total capital share transactions 10,036,147 (7,396,222)
Total Increase (Decrease)
in Net Assets 10,020,899 (7,394,831)
Net Assets
Beginning of period 232,024,778 239,419,609
End of period (including undistributed
net investment income
of $21,057 and $17,933, respectively) $242,045,677 $232,024,778
Capital Share Activity
Shares sold:
Class O shares 215,811,277 390,048,098
Class B shares 52,633 -
Class C shares 30,134 -
Reinvestment of distributions:
Class O shares 5,846,759 11,513,525
Class B shares 15 -
Class C shares 47 -
Shares redeemed:
Class O shares (211,702,716) (408,957,845)
Class B shares - -
Class C shares (2,000) -
Total capital share activity 10,036,147 (7,396,222)
see notes to financial statements.
<PAGE>
Notes to Financial Statements
Note A - Significant Accounting Policies
General: The Calvert First Government Money Market Fund (the "Fund"), the only
series of First Variable Rate Fund for Government Income, is registered under
the Investment Company Act of 1940 as a diversified, open-end management
investment company. The Fund offers three classes of shares of beneficial
interest. Class O shares are sold to the public, with no front-end sales
charge at the time of purchase and no back-end load when they are redeemed.
Effective April 1, 1998 the Fund began to offer Class B shares. Class B shares
may be purchased only by exchange from Class B shares of another Calvert Group
Fund. Class B shares are sold without a front-end sales charge at the time of
purchase, but may be subject to a deferred sales charge upon redemption.
Effective June 1, 1998 the Fund began to offer Class C shares. Class C shares
may be purchased only by exchange from Class C shares of another Calvert Group
Fund. Class C shared are sold without a front-end sales charge at the time of
purchase. They are subject to a deferred sales charge if they are redeemed
within one year after purchase of the Class C shares in the original fund.
Class B and C shares have higher expenses than Class O shares, including
Distribution Plan expenses. Class O shares are not subject to a Distribution
Plan.
Security Valuation: Securities are valued at amortized cost which approximates
market.
Repurchase Agreements: The Fund may enter into repurchase agreements with
recognized financial institutions or registered broker/dealers and, in all
instances, holds underlying securities with a value exceeding the total
repurchase price, including accrued interest. Although risk is mitigated by
the collateral, the Fund could experience a delay in recovering its value and
a possible loss of income or value if the counterparty fails to perform in
accordance with the terms of the agreement.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Interest income, accretion of discount and amortization
of premium are recorded on an accrual basis.
Distributions to Shareholders: Distributions to shareholders are recorded by
the Fund on ex-dividend date. Dividends from net investment income are accrued
daily and paid monthly. Distributions from net realized capital gains, if any,
are paid at least annually. Distributions are determined in accordance with
income tax regulations which may differ from generally accepted accounting
principles; accordingly, periodic reclassifications are made within the Fund's
capital accounts to reflect income and gains available for distribution under
income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
Expense Offset Arrangements: The Fund has an arrangement with its custodian
bank whereby the custodian's and transfer agent's fees may be paid indirectly
by credits earned on the Fund's cash on deposit with the bank. Such a deposit
arrangement is an alternative to overnight investments.
<PAGE>
Federal Income Taxes: No provision for federal income or excise tax is
required since the Fund intends to continue to qualify as a regulated
investment company under the Internal Revenue Code and to distribute
substantially all of its earnings.
Note B - Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory
services and pays the salaries and fees of officers and affiliated Trustees of
the Fund. For its services, the Advisor receives a monthly fee based on the
following annual rates of average daily net assets: .50% on the first $500
million, .45% on the next $400 million, .40% on the next $400 million, .35% on
the next $700 million and .30% on the excess of $2 billion. Under the terms of
the agreement, $115,168 was payable at period end.
The Advisor reimburses the Fund for its aggregate operating expenses
(excluding brokerage fees, taxes, interest, Distribution Plan expenses and
extraordinary items) that are in excess of 1.0% of the average daily net
assets of the Fund.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor
and principal underwriter for the Fund. Distribution Plans, adopted by Class B
and C shares, allow the Fund to pay the distributor for expenses and services
associated with distribution of shares. The expenses paid may not exceed 1.0%
annually of average daily net assets of Class B and Class C. Under the terms
of the agreement, $25 was payable at period end.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, is the
shareholder servicing agent for the Fund. Under terms of the agreement,
$21,137 was payable at period end. National Financial Data Services, Inc., is
the transfer and dividend disbursing agent.
Each Trustee who is not affiliated with the Advisor received an annual fee of
$20,500 plus up to $1,500 for each Board and Committee meeting attended.
Trustee's fees are allocated to each of the funds served.
Note C - Investment Activity
The cost of investments owned at June 30, 1998 was substantially the same for
federal income tax and financial reporting purposes. Net capital loss
carryforwards, for federal income tax purposes, of $260,182 at December 31,
1997 may be utilized to offset current and future capital gains until
expiration through 2001.
Note D - Line of Credit
A financing agreement is in place with all Calvert Group Funds and State
Street Bank and Trust Company ("the Bank"). Under the agreement, the Bank is
providing an unsecured line of credit facility, in the aggregate amount of $50
million ($25 million committed and $25 million uncommitted), to be accessed by
the Funds for temporary or emergency purposes only. Borrowings under this
facility bear interest at the overnight Federal Funds Rate plus .50% per
annum. A commitment fee of .10% per annum will be incurred on the unused
portion of the committed facility which will be allocated to all participating
funds. This fee is paid quarterly in arrears. The Fund had no loans
outstanding pursuant to this line of credit at June 30, 1998.
<PAGE>
Financial Highlights
Periods Ended
June 30 Dec. 31, Dec. 31,
Class O Shares 1998 1997 1996
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .025 .049 .047
Distributions from
Net investment income (.025) (.049) (.047)
Net asset value, ending $1.00 $1.00 $1.00
Total return 2.48% 5.00% 4.79%
Ratios to average net assets:
Net investment income 4.97%(a) 4.88% 4.69%
Total expenses + .81%(a) .82% .86%
Net expenses .79%(a) .80% .85%
Net assets, ending (in thousands) $241,965 232,025 $239,420
Number of shares outstanding,
ending (in thousands) 242,454 232,514 239,910
Years Ended Dec. 31, Dec. 31, Dec. 31,
Class O Shares 1995 1994 1993
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .051 .036 .027
Distributions from
Net investment income (.051) (.036) (.027)
Net asset value, ending $1.00 $1.00 $1.00
Total return 5.22% 3.66% 2.70%
Ratios to average net assets:
Net investment income 5.04% 3.56% 2.66%
Total expenses + .89% - -
Net expenses .88% .81% .81%
Net assets, ending (in thousands)
$241,150 $230,183 $263,260
Number of shares outstanding,
ending (in thousands) 241,685 230,618 263,930
<PAGE>
Financial Highlights
Periods Ended
Class B Shares Class C Shares
June 30, June 30,
1998^ 1998^^
Net asset value, beginning $1.00 $1.00
Income from investment operations
Net investment income .009 .003
Distributions from
Net investment income (.009) (.003)
Net asset value, ending $1.00 $1.00
Total return .93% .29%
Ratios to average net assets:
Net investment income 1.38%(a) 3.50%(a)
Total expenses + 2.07%(a) 2.07%(a)
Net expenses 2.00%(a) 1.98%(a)
Expenses reimbursed 165.45%(a) 72.93%(a)
Net assets, ending (in thousands) $53 $28
Number of shares outstanding,
ending (in thousands) 53 28
(a) Annualized
^ From March 31, 1998 inception
^^ From June 1, 1998 inception
<PAGE>
Calvert First
Government
Money
Market
Fund
This report is intended to provide fund information to shareholders. It is not
authorized for distribution to prospective investors unless preceded or
accompanied by a prospectus.
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4550 Montgomery Avenue
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Registered, Certified or Overnight Mail
Calvert Group
c/o NFDS, 6th Floor
1004 Baltimore
Kansas City, MO 64105-1807
Web Site
http://www.calvertgroup.com
Principal Underwriter
Calvert Distributors, Inc.
4550 Montgomery Avenue
Suite 1000 North
Bethesda, Maryland 20814
Calvert Group's Family of Funds
Tax-Exempt Money Market Funds
CTFR Money Market Portfolio
CTFR California Money Market Portfolio
Taxable Money Market Funds
First Government Money Market Fund
CSIF Money Market Portfolio
Balanced Fund
CSIF Managed Growth Portfolio
Municipal Funds
CTFR Limited-Term Portfolio
CTFR Long-Term Portfolio
CTFR Vermont Municipal Portfolio
National Muni. Intermediate Portfolio
California Muni. Intermediate Portfolio
Maryland Muni. Intermediate Portfolio
Virginia Muni. Intermediate Portfolio
Taxable Bond Funds
CSIF Bond Portfolio
Income Fund
Equity Funds
CSIF Managed Index Portfolio
CSIF Equity Portfolio
Capital Accumulation Fund
CWV International Equity Fund
New Vision Small Cap Fund
New Africa Fund
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