A Special Notice to all
Calvert Group Shareholders
We're pleased to announce that on April 21, 1997, Barbara Krumsiek joined
Calvert Group as president and chief executive officer. Ms. Krumsiek
comes to Calvert Group from Alliance Capital Management, where she served
as senior vice president and managing director of their mutual funds
division. She has 20 years experience in mutual fund management and
marketing.
Ms. Krumsiek replaces former Calvert Group president, Clifton S. Sorrell,
who stepped down earlier this year after nearly 10 years in the top post.
We look forward to Ms. Krumsiek leading the company into the next century
and bringing Calvert Group mutual funds to a growing number of new
investors. We welcome her to the Calvert Group family.
<PAGE>
CALVERT TAX-FREE RESERVES
CALIFORNIA MONEY MARKET PORTFOLIO
Dear Investor:
The yield on the Calvert Tax-Free Reserves California Money
Market Portfolio was well ahead of the average yield for the 54
California tax-free money market funds tracked by Lipper Analytical
Services, Inc.
Review of the Economy and Markets
[Line graph appears on side of text here]
Municipal Rates
1 year AA General Obligation - 4%
7 year AA General Obligation - 5%
20 year AA General Obligation - 5 1/2 %
The economy expanded at a robust pace for the first quarter then
appeared to moderate in the second quarter. A number of other indicators,
including an increase in housing starts and rising wages, also pointed to
a strengthening economy.
In an attempt to defuse inflationary pressures, the Federal
Reserve adopted a slightly more restrictive monetary policy. The Fed
nudged its target for key short-term rates higher in March, but left
rates unchanged during the second quarter.
In general, tax-free money market and bond yields moved higher
during the first part of the year then backed down toward the close of
this reporting period as investors revised their forecast for the next
Fed move-first thinking the Fed would take steps to raise rates then
expecting no change.
Portfolio Strategy
[Chart appears on side of text here]
ANNUALIZED TOTAL RETURN
6 Months Ended 12/31/96 6/30/97
California Money
Market Portfolio 3.12% 3.25%
Lipper California
Money Market
Funds Average 2.91% 2.97%
Source: Lipper Analytical Services, Inc.
[end of chart]
Expecting generally rising rates, we kept the Portfolio's
maturity near the short end of its target range so that we would have the
opportunity to reinvest the proceeds of maturing securities in higher
yielding issues.
Outlook
In light of the economy's perceived strength and the possibility
of a more stimulative fiscal policy, we expect the Federal Reserve will
take further steps to raise rates during 1997. The resulting rise in
rates would be good news for money market investors, but likely would not
be as well received by the stock and bond markets.
Issuance of municipal bonds has been very tight and met with
steady demand, which puts downward pressure on coupon rates. In spite of
these positive technical conditions, municipals should continue to offer
an advantage over after-tax yields on comparable maturity U.S. government
issues, as they have since the flat tax scare of 1995.
Thank you for your investment in the Calvert Tax-Free Reserves
California Money Market Portfolio.
Sincerely,
David Rochat Barbara Krumsiek
Senior Vice President President
July 21, 1997
<PAGE>
[chart appears in center of page here]
PORTFOLIO STATISTICS
RATINGS BREAKDOWN
(pie chart contains) First Tier - 94%
Second Tier - 6%
(end of pie chart)
All securities in Calvert Group money market funds are eligible securities
under rule 2a-7 of the Investment Company Act of 1940. First Tier Securities
are eligible securities rated in the highest rating category for short-term
debt obligations by at least two of the Nationally recognized Satistical Ratings
Organizations: Second Tier Securities are eligible securities not in the First
Tier.
AVERAGE ANNUAL TOTAL RETURNS
For Periods ended 6/30/97
One Year 3.19%
Five Year 2.96%
Since Inception (10/89) 3.70%
PERFORMANCE COMPARISON
Change in value of a hypothetical $10,000 investment.
(line graph contains) 10/16/89 - $10,000
6/97 - $13,234
(end of line graph)
Total returns assume reinvestment of dividends. Past performance is no
guarantee of future results.
[End of chart]
<PAGE>
STATEMENT OF NET ASSETS
Principal
Amount Value
California Municipal Obligations - 99.2%
$4,225,000 Auburn Unified School District Certificates of
Participation VRDN, 4.25%, 12/1/19, LOC:
Union Bank of California $4,225,000
6,300,000 California Buena Park Community Development
Authority VRDN, 5.355%, 12/28/99,
GA: Mass Mutual Life Insurance 6,300,000
2,410,000 California Housing Finance Agency Revenue VRDN,
4.18%, 8/1/10, TOA: Citibank, INSUR: MBIA 2,410,000
4,825,000 California State Custodial Receipts 1992 Series
A VRDN, 4.40%, 10/1/07, TOA: FNB Chicago,
INSUR: MBIA 4,825,000
10,000,000 California Schools Cash Reserve Program
Authority Series A Notes, 4.75%,
7/2/98, INSUR: AMBAC 10,087,600
14,000,000 California Valleys Housing Finance Authority
Revenue Bonds, 4.875%, 7/1/25, LOC:
Sumitomo Bank, Ltd. 14,000,000
1,188,000 Fresno Multi-Family Housing VRDN, 5.30%,
5/1/15, LOC: Tokai Bank Ltd. 1,188,000
3,025,000 Glendora Industrial Development Authority VRDN,
4.665%, 12/1/16, LOC: Union Bank of California 3,025,000
12,050,000 Hemet Multi-Family Housing Authority VRDN,
4.10%, 7/1/06, C/LOC: Mercury S&L 12,050,000
15,000,000 Huntington Beach CA Tax and Revenue
Anticipation Notes, 4.50%, 10/1/97 15,030,386
7,000,000 Los Angeles Community Redevelopment Agency
Revenue VRDN, 4.20%, 12/1/05, LOC:
Industrial Bank of Japan, Ltd. 7,000,000
13,500,000 Los Angeles Convention & Exhibition Center
Revenue VRDN, 4.20%, 8/15/18, BPA:
Merrill Lynch, INSUR: MBIA 13,500,000
Los Angeles Multi-Family Housing Revenue VRDN:
13,581,000 4.20%, 5/1/07, LOC: Industrial Bank
of Japan, Ltd. 13,581,000
1,500,000 4.10%, 12/1/15, LOC: Sumitomo Bank Ltd. 1,500,000
8,600,000 4.50%, 8/1/19, LOC: Fuji Bank Ltd. 8,600,000
8,500,000 Los Angeles Tax & Revenue Anticipation Notes,
4.50%, 6/30/98 8,553,040
6,000,000 Los Angeles Transportation Community Sales Tax
Revenue Bonds, 4.35%, 8/20/03, LOC: Credit Suisse,
INSUR: MBIA 6,000,000
4,000,000 Los Angeles Unified School Districts Tax &
Revenue Anticipation Notes, 4.50%, 9/30/97 4,009,347
4,965,000 Midway School District Certificates of
Participation, 4.25%, 2/1/23,
LOC: Union Bank of California 4,965,000
6,540,000 Oceanside Multi-Family Housing VRDN, 4.40%,
8/1/17, SURBD: Continental Casualty Co. 6,540,000
Orange County Apartment Development Revenue VRDN:
4,200,000 4.35%, 11/1/05, LOC: Wells Fargo Bank, NA 4,200,000
6,000,000 4.35%, 11/1/05, LOC: Wells Fargo Bank, NA 6,000,000
3,050,000 4.40%, 3/1/07, LOC: Tokai Bank Ltd. 3,050,000
4,800,000 4.20%, 10/1/07, LOC: Bank of Tokyo-Mitsubishi, Ltd. 4,800,000
8,400,000 4.30%, 11/1/08, LOC: Banque Paribas 8,400,000
10,750,000 Orange County Housing Authority Revenue VRDN,
4.10%, 12/1/07, LOC: Bank of Tokyo-Mitsubishi, Ltd. 10,750,000
<PAGE>
Principal
Amount Value
$5,000,000 Orange County Multi-Family Housing Authority
VRDN, 4.50%, 5/1/22, LOC: Banque Paribas $5,000,000
Palmdale School District Project Lease VRDN:
5,449,999 4.60%, 12/13/10, LOC: National Westminster Bank 5,449,999
1,737,143 4.60%, 12/13/10, LOC: National Westminster Bank 1,737,143
1,700,000 Paramount Multi-Family Housing Authority VRDN,
4.73%, 10/1/18, LOC: Heller Financial 1,700,000
Pitney Bowes Credit Corporation LeaseTOPS Trust
Certificates:
13,893,360 4.40%, 4/1/98, BPA: Pitney Bowes
Credit Corporation 13,893,360
1,500,000 4.40%, 2/11/11, BPA: Pitney Bowes
Credit Corporation, LOC: Landesbank Hessen 1,500,000
7,000,000 Puerto Rico Commonwealth Tax & Revenue
Anticipation Notes, 4.00%, 7/30/97 17,007,549
12,000,000 Puerto Rico Electric Power Authority General
Obligation Bonds, 4.10%, 7/1/22, BPA:
Societe Generale, INSUR: MBIA 12,000,000
1,000,000 Riverside Multi-Family Housing VRDN, 4.80%,
6/1/09, LOC: Tokai Bank Ltd. 1,000,000
5,000,000 Riverside Tax and Revenue Anticipation Notes,
4.50%, 6/30/98 5,026,350
San Bernardino Multi-Family Housing Revenue VRDN:
5,000,000 6.05%, 5/1/15, IA: Escrowed/Treasury Bills 5,000,000
2,000,000 4.25, 6/1/05, LOC: Household Federal Savings 2,000,000
San Francisco Redevelopment Multi-Family Housing VRDN:
5,000,000 4.65%, 10/1/00, LOC: Mitsubishi Trust & Banking 5,000,000
5,400,000 4.225%, 12/1/05, LOC: Industrial Bank
of Japan 5,400,000
800,000 4.225%, 12/1/05, LOC: Industrial Bank of Japan 800,000
1,790,000 San Marcos Industrial Development Authority
VRDN, 4.78%, 12/1/20, LOC: Union Bank of California 1,790,000
1,800,000 San Marcos Redevelopment VRDN, 4.165%, 12/1/10,
LOC: Bank of America 1,800,000
6,900,000 Santa Paula Public Financing Authority Revenue
VRDN, 4.20%, 2/1/26, LOC: Multi-Bank 6,900,000
2,800,000 Simi Valley Multi-Family Housing Revenue
Authority VRDN, 4.15%, 6/1/10, LOC: Sumitomo Trust
& Banking, Confirming LOC: Sumitomo Bank, Ltd. 2,800,000
2,680,000 Stockton County Nursing Home VRDN, 4.665%,
12/1/16, LOC: Union Bank of California 2,680,000
1,265,000 Stockton Heritage Convalescent Center Project
VRDN, 5.95%, 12/1/05, LOC: Tokai Bank Ltd. 1,265,000
8,000,000 Union City Housing Mortgage Revenue VRDN,
4.65%, 10/1/11, LOC: Mitsubishi Trust & Banking 8,000,000
5,000,000 Union City Multi-Family Housing Authority
Revenue VRDN, 4.20%, 10/1/07, LOC: Sumitomo Trust
& Banking, Confirming LOC: Sumitomo Bank, Ltd. 5,000,000
5,000,000 Victor Valley Community College Revenue VRDN,
4.25%, 11/1/24, GA: Anchor National Life 5,000,000
6,300,000 Victor Valley Community College Certificates of
Participation VRDN, 4.25%, 8/01/26, LOC: Banque
National de Paris 6,300,000
3,830,000 Victorville Multi-Family Housing Revenue VRDN,
4.75%, 12/1/15, C/LOC: Redlands S&L 3,830,000
<PAGE>
Principal
Amount Value
$2,600,000 West Sacramento Financing Authority Special Tax
Revenue VRDN, 4.10%, 8/1/21, LOC: Wells Fargo Bank, NA $2,600,000
Total Municipal Obligations (Cost $315,068,774) 315,068,774
US Government Agencies and Instrumentalities - 5.9%
18,700,000 Federal Home Loan Bank, 5.20%, 7/1/97 18,700,000
Total US Government Agencies and Instrumentalities
(Cost $18,700,000) 18,700,000
TOTAL INVESTMENTS (Cost $333,768,774) - 105.1% 333,768,774
Other assets and liabilities, net (5.1%) (16,225,140)
Net Assets - 100% $317,543,634
Net Assets Consist of:
Paid-in capital applicable to 317,686,139 shares of
beneficial interest,
unlimited number of no par shares authorized $317,686,180
Undistributed net investment income 2,255
Accumulated realized gain/(loss) on investments (144,801)
Net Assets $317,543,634
Net Asset Value per Share $1.00
Explanation of Guarantee:
BPA: Bond-Purchase Agreement
GA: Guaranty Agreement
IA: Investment Agreement
INSUR: Insurance
LOC: Letter of Credit
C/LOC: Collateralized LOC
SURBD: Surety Bond
TOA: Tender Option Agreement
Abbreviations:
VRDN: Variable Rate Demand Note
See notes to financial statments.
<PAGE>
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
Net Investment Income
Investment Income
Interest income $6,413,530
Expenses
Investment advisory fee 827,734
Transfer agency fees and expenses 203,584
Trustees' fees and expenses 26,753
Administrative fees 13,034
Custodian fees 11,906
Registration fees 1,355
Reports to shareholders 78,037
Professional fees 6,236
Miscellaneous 17,617
Reimbursement from Advisor (82,774)
Total expenses 1,103,482
Fees paid indirectly (11,906)
Net expenses 1,091,576
Net Investment Income 5,321,954
Realized Gain (Loss) on Investments
Net realized gain (loss) (1,068)
Increase (Decrease) in Net Assets
Resulting from Operations $5,320,886
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<S> <C> <C>
Six Months Year Ended
Ended December 31,
Increase (Decrease) in Net Assets June 30, 1997 1996
Operations
Net investment income $5,321,954 $10,613,397
Net realized gain (loss) on
securities (1,068) (351)
Increase (Decrease) in Net Assets
Resulting from Operations 5,320,886 10,613,046
Distributions to shareholders from
Net investment income (5,346,642) (10,536,345)
Capital share transactions
Shares sold 187,465,354 459,651,341
Reinvestment of distributions 5,223,856 10,313,443
Shares redeemed (221,127,392) (424,384,914)
Total capital share transactions (28,438,182) 45,579,870
Total Increase (Decrease) in Net
Assets (28,463,938) 45,656,571
Net Assets
Beginning of period 346,007,572 300,351,001
End of period (including
undistributed net investment income
(loss) of $2,255 and $26,943,
respectively) $317,543,634 $346,007,572
Share Activity
Shares sold 187,465,354 459,651,341
Reinvestment of distributions 5,223,856 10,313,443
Shares redeemed (221,127,392) (424,384,914)
Net share activity (28,438,182) 45,579,870
</TABLE>
See notes to financial statements.
<PAGE>
Notes To Financial Statements
Note A-Significant Accounting Policies
General: The California Money Market Portfolio (the "Portfolio"), a
series of Calvert Tax-Free Reserves (the "Fund"), is registered under the
Investment Company Act of 1940 as a diversified, open-end management
investment company. The operations of each series are accounted for
separately. The Portfolio offers shares of beneficial interest to the
public with no sales charges.
Security Valuation: Securities are valued at amortized cost which
approximates market.
Security Transactions and Investment Income: Security transactions are
accounted for on trade date. Realized gains and losses are recorded on an
identified cost basis. Interest income, accretion of discount and
amortization of premium are recorded on an accrual basis.
Distributions to Shareholders: Distributions to shareholders are
recorded by the Portfolio on ex-dividend date. Dividends from net
investment income are earned daily and paid monthly. Distributions from
net realized capital gains, if any, are paid at least annually.
Distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles,
accordingly, periodic reclassifications are made within the Portfolio's
capital accounts to reflect income and gains available for distribution
under income tax regulations.
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amount of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of income and
expenses during the reporting period. Actual results could differ from
those estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's fees are paid indirectly by
credits earned on the Portfolios' cash on deposit with the bank. Such
deposit arrangement is an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since the Portfolio intends to continue to qualify as a
regulated investment company under the Internal Revenue Code and to
distribute substantially all of its earnings.
Note B-Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by
Acacia Mutual Life Insurance Company. The Advisor provides investment
advisory services and pays the salaries and fees of officers and
affiliated 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 $500 million
and .40% on the excess of $1 billion.
Calvert Administrative Services Company, an affiliate of the Advisor,
provides administrative services to the Fund for an annual fee, payable
monthly, of $200,000 which is allocated to all of the Portfolios of the
Fund based on their relative net assets.
Calvert Distributors, Inc., an affiliate of the Advisor, is the
distributor and principal underwriter for the Portfolio.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
transfer, dividend disbursing and shareholder servicing agent for the
Fund.
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, 1997 was substantially the same
for federal income tax and financial reporting purposes. Net realized
capital loss carryforwards, for federal income tax purposes, of $143,733
at December 31, 1996 may be utilized to offset current and future capital
gains until expiration through 2004.
As a cash management practice, the Portfolio may sell or purchase
short-term variable rate demand notes from other Portfolios managed by
the Advisor. All transactions are executed at independently derived
prices.
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<S> <C> <C> <C>
Periods Ended
June 30, December 31,
1997 1996 1995
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .016 .031 .037
Distributions from
Net investment income (.016) (.031) (.037)
Net asset value, ending $1.00 $1.00 $1.00
Total return 1.61% 3.17% 3.78%*
Ratios to average net assets:
Net investment income 3.21%(a) 3.14% 3.69%
Total expenses+ .67%(a) .69% .76%
Net expenses .66%(a) .68% .75%
Expenses reimbursed .05%(a) .03% -
Net assets, ending (in thousands) $317,544 $346,008 $300,351
Number of shares outstanding,
ending (in thousands) 317,686 346,124 300,544
Years Ended
December 31,
1994 1993 1992
Net asset value, beginning $1.00 $1.00 $1.00
Income from investment operations
Net investment income .026 .022 .030
Distributions from
Net investment income (.026) (.022) (.030)
Net asset value, ending $1.00 $1.00 $1.00
Total return 2.62%* 2.26% 3.08%
Ratios to average net assets:
Net investment income 2.55% 2.22% 3.01%
Total expenses+ - - -
Net expenses .69% .69% .68%
Net assets, ending (in thousands) $260,719 $296,984 $323,928
Number of shares outstanding,
ending (in thousands) 260,716 296,984 323,928
(a) Annualized
* Total return numbers do not reflect Tender Option
Agreement (See 12/31/95 annual report).
+ Effective December 31, 1995, this ratio reflects total
expenses before reduction for fees paid indirectly; such
reductions are included in the ratio of net expenses.
</TABLE>
