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.
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CALVERT TAX-FREE RESERVES
VERMONT MUNICIPAL PORTFOLIO
Dear Investor:
The Calvert Tax-Free Reserves Vermont Municipal Portfolio
generated a positive total return for the six-months ended June 30, 1997.
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%
(end of line graph).
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, 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 additional steps to raise rates then expecting no change.
Most measures of the stock market's performance advanced, with the
Standard & Poor's 500 Stock Index returning 20.6% for the six months.
Portfolio Strategy
[chart appears on side of text here]
INVESTMENT PERFORMANCE
Periods Ended 6/30/97 6 Months 12 Months
Vermont Municipal
Portfolio 2.16% 6.85%
Lipper Other States
Muni Fund Avg. 3.02% 7.66%
Investment performance does not reflect the deduction of
any front-end sales charge.
[end of chart]
In anticipation of higher rates, we maintained a cautious
position throughout the period and kept the Portfolio's weighted average
maturity near the short end of its target range. This strategy worked to
our advantage as yields moved higher through April. However, when yields
backed down late in the quarter, the Portfolio did not gain as much in
price as those of our more aggressive peers. Prices of longer-term
securities appreciate more in response to a decline in rates than do
those of shorter-term securities.
Outlook
Despite today's tight labor market and rising wages, inflation
has continued to decline. Many economists and analysts attribute this to
an increase in business productivity, brought about by broader-based use
of information technology and the growth of the Internet. In our view,
businesses will soon have to pass their higher labor costs along to
consumers in the form of modestly higher prices. At that point, we expect
the Federal Reserve will take additional steps to keep inflation in check
and interest rates will trend a bit higher. Accordingly, we will continue
to manage the Portfolio defensively.
Despite a possible rise in rates, we expect that munis will
continue to offer an advantage over after-tax yields on comparable
maturity Government issues, as they have since the flat tax scare of
1995. Municipal bond issuance has been very tight and met with steady
demand, which puts downward pressure on coupon rates and helps to keep
prices of previously issued securities firm. Looking ahead, we expect
these positive technical conditions will remain in force.
Thank you for your investment Calvert Tax-Free Reserves Vermont
Municipal Portfolio.
Sincerely,
David Rochat Barbara Krumsiek
Senior Vice President President
July 21, 1997
[Ratings Breakdown pie chart appears here]
RATINGS BREAKDOWN
BBB/Baa NR AAA/Aaa Cash Equivalents AA/Aa A/a
10% 7% 48% 2% 28% 5%
NR: Obligation is not rated by a commercial credit rating service, such as
Moody's Investors Services, Inc., or Standard & Poor's Corporation; obligation
has been determined to be of appropriate quality for the Portfolio by Calvert
Asset Management Company, Inc., The Investment Advisor.
[end of pie chart]
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[Portfolio Statistics chart appears in center of page here]
PORTFOLIO STATISTICS
WEIGHTED AVERAGE MATURITY
12/31/96 6/30/97
15 YEARS 13 YEARS
SEC YIELD
Thirty Days Ended 6/30/97
SEC Yield 4.32%
AVERAGE ANNUAL TOTAL RETURNS
For periods ended 6/30/97
Class A Shares
One Year 2.83%
Since Inception (4/91) 6.37%
PERFORMANCE COMPARISON
Comparison of change in value of a hypothetical $10,000 investment.
[line graph appears here]
4/1/91 6/97
CTFR Vermont $9,000 $14,711
Lehman Municipal Bd $9,500 $16,347
[end of line graph]
Total returns assume reinvestment of dividends and reflect the deduction of the
Fund's maximum sales charge of 3.75%. No sales charge has been applied to the
net index used for comparison. Past performance is no guarantee of future
results.
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STATEMENT OF NET ASSETS
JUNE 30, 1997
Principal
Amount Value
Vermont Municipal Obligations - 98.4%
$2,000,000 Burlington Electric Revenue Bonds, 6.25%,7/1/14,
MBIA Insured $2,141,620
700,000 Burlington VT General Obligation Bond, 6.50%, 5/1/02 727,741
2,000,000 Chittenden Solid Waste District General Obligation Bond,
6.60%, 1/1/12, Asset Guaranty Insured 2,178,740
Rutland County Solid Waste General Obligation Bonds:
110,000 5.80%, 11/1/99 113,278
110,000 5.95%, 11/1/00 114,622
110,000 6.10%, 11/1/01 115,970
110,000 6.25%, 11/2/01 117,422
110,000 6.35%, 11/1/03 118,527
110,000 6.45%, 11/1/04 119,615
105,000 6.50%, 11/1/05 114,947
100,000 6.55%, 11/1/06 110,187
100,000 6.60%, 11/1/07 110,907
100,000 6.70%, 11/1/08 111,535
100,000 6.75%, 11/1/09 111,747
100,000 6.80%, 11/1/10 111,740
100,000 6.80%, 11/1/11 111,689
100,000 6.85%, 11/1/12 112,038
900,000 Vermont Education and Health - Buildings Agency,
4.30%,6/1/05, LOC: FNB Boston 900,000
1,800,000 Vermont Education and Health - Central Vermont
Hospital, 7.00%, 10/1/22, (Prerefunded) 2,039,490
2,000,000 Vermont Education and Health - Central Vermont
Hospital, 5.00%, 1/15/15, AMBAC Insured 1,891,780
1,000,000 Vermont Education and Health - Lyndon Institute
Project, 6.60%, 12/1/14 1,034,720
3,000,000 Vermont Education and Health - Middlebury
College, 5.50%, 11/1/16 2,992,680
2,000,000 Vermont Education and Health - Northwestern
Medical Center, 6.25%, 9/1/18 2,008,140
580,000 Vermont Education and Health - Norwich University,
5.75%, 9/1/05 593,990
1,500,000 Vermont Education and Health - Norwich
University, 6.00%, 9/1/13 1,505,610
1,000,000 Vermont Education and Health - Southwest
Medical Center, 5.625%, 10/1/25, FSA Insured 986,670
750,000 Vermont Education and Health - Vermont Medical Center
Bonds, 6.00%, 9/1/22, FGIC Insured 766,920
1,200,000 Vermont Housing Finance Authority Single Family
Series 2 Housing Bonds, 7.20%, 11/1/11 1,247,892
1,400,000 Vermont IDA Revenue Bonds VRDN, 5.775%,
12/1/01, LOC: Vermont National Bank 1,400,000
Vermont Municipal Bond Bank Revenue Bonds:
1,000,000 Series 1, 5.375%, 12/1/13 987,610
4,000,000 Series 2, 5.50%, 12/1/22, AMBAC Insured 3,924,640
<PAGE>
Principal
Amount Value
Vermont State General Obligation Bonds:
$1,500,000 Series A, 5.70%, 1/15/00 $1,552,935
1,740,000 6.50%, 2/1/01 1,864,097
2,500,000 Series A, 6.30%, 1/15/06 2,767,575
500,000 6.50%, 2/1/07, (Prerefunded) 544,235
1,000,000 6.40%, 2/1/08 1,096,830
400,000 Series C, Zero Coupon, 8/1/08 227,392
300,000 Series C, Zero Coupon, 8/1/09 160,176
1,000,000 Series A, 4.90%, 2/1/10 963,020
1,950,000 6.45%, 2/1/12 2,142,816
2,440,000 Vermont State Lease Certificates of
Participation, 6.50%, 7/1/11, MBIA Insured 2,624,244
Vermont Student Assistance Corporation Education Loan
Revenue Bonds,
2,000,000 Series A, 6.50%, 6/15/00, AMBAC Insured 2,094,860
2,240,000 Series A-3, 6.50%, 12/15/05, FSA Insured 2,400,518
1,000,000 Series B, 6.70%, 12/15/12, FSA Insured 1,058,610
200,000 Windham County Solid Waste General Obligation Bonds,
6.40%, 12/1/97 199,976
Total Municipal Obligations (Cost $46,209,053) 48,619,751
Contracts
Options Purchased - 0.0%
40 September 104 Put Options on U.S. Treasury Bond
Futures, Expiration 8/23/97 1,875
Total Options (Cost $48,524) 1,875
TOTAL INVESTMENTS (Cost $46,257,577) - 98.4% 48,621,626
Other assets and liabilities, net - 1.6% 772,892
Net Assets - 100% $49,394,518
Net Assets Consist of:
Paid-in capital applicable to 3,063,439 Class A shares of
beneficial interest,
unlimited number of no par shares authorized: $46,877,801
Undistributed net investment income 205,390
Accumulated net realized gain (loss) on investments (52,722)
Net unrealized appreciation (depreciation) on investments 2,364,049
Net assets $49,394,518
Net Asset Value per Share $16.12
Abbreviations:
AMBAC - AMBAC Indemnity Corporation
FGIC - Financial Guaranty Insurance Company
FSA - Financial Security Assurance
MBIA - MBIA Insurance Corporation
See notes to financial statements
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STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1997
Net Investment Income
Investment Income
Interest income $1,442,575
Expenses
Investment advisory fee 146,035
Transfer agency fees and expenses 10,862
Trustees' fees and expenses 3,952
Administrative fees 1,917
Custodian fees 7,180
Registration fees 2,285
Reports to shareholders 12,000
Professional fees 913
Miscellaneous 3,364
Total expenses 188,508
Fees paid indirectly (7,180)
Net expenses 181,328
Net Investment Income 1,261,247
Realized and Unrealized Gain (Loss)
on Investments
Net realized gain (loss) on:
Securities (101,134)
Change in unrealized appreciation or depreciation (83,419)
Net Realized and Unrealized Gain (Loss)
on Investments (184,553)
Increase (Decrease) in Net Assets
Resulting From Operations $1,076,694
See notes to financial statements.
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
Six Months
Ended Year Ended
June 30, 1997 Dec. 31, 1996
Increase (Decrease) in Net Assets
Operations
Net investment income $1,261,247 $2,987,933
Net realized gain (loss) (101,134) 641,470
Change in unrealized appreciation
or depreciation (83,419) (1,491,128)
Increase (Decrease) in Net Assets
Resulting From Operations 1,076,694 2,138,275
Distributions to shareholders from
Net investment income:
Class A shares (1,255,866) (2,916,946)
Class C shares - (12,173)
Net realized gain:
Class A shares (433,259) (230,374)
Class C shares - -
Total distributions (1,689,125) (3,159,493)
Capital share transactions
Shares sold:
Class A shares 3,456,694 5,207,872
Class C shares - 253,726
Reinvestment of distributions:
Class A shares 891,512 1,422,158
Class C shares - 11,686
Shares redeemed:
Class A shares (4,115,340) (16,048,921)
Class C shares - (648,927)
Total capital share transactions 232,866 (9,802,406)
Total Increase (Decrease) in Net Assets (379,565) (10,823,624)
Net Assets
Beginning of period 49,774,083 60,597,707
End of period (including undistributed net
investment income of $205,390 and $200,009,
respectively) $49,394,518 $49,774,083
Capital Share Activity
Shares sold:
Class A shares 215,300 319,474
Class C shares - 15,797
Reinvestment of distributions:
Class A shares 55,530 87,429
Class C shares - 729
Shares redeemed:
Class A shares (255,753) (979,940)
Class C shares - (40,553)
Total capital share activity 15,077 (597,064)
See notes to financial statements.
<PAGE>
Notes To Financial Statements
Note A-Significant Accounting Policies
General: The Vermont Municipal Portfolio (the "Portfolio"), a series of
Calvert Tax-Free Reserves (the "Fund"), is registered under the
Investment Company Act of 1940 as a nondiversified, open-end management
investment company. The operations of each series are accounted for
separately. Shares of the Portfolio are sold with a maximum front-end
sales charge of 3.75%. On October 29, 1996, all outstanding Class C
shares in the Portfolio were converted into an equivalent value of Class
A shares. This transaction was a non-taxable exchange and no sales charge
was applied to the Class A shares issued.
Security Valuation: Municipal securities are valued utilizing the
average of bid prices or at bid prices based on a matrix system (which
considers such factors as security prices, yields, maturities and
ratings) furnished by dealers through an independent pricing service.
Securities listed or traded on a national securities exchange are valued
at the last reported sale price. Other securities and assets for which
market quotations are not available or deemed inappropriate are valued in
good faith under the direction of the Board of Trustees.
Options: The Portfolio may write or purchase option securities. The
option premium is the basis for recognition of unrealized or realized
gain or loss on the option. The cost of securities acquired or the
proceeds from securities sold through the exercise of the option is
adjusted by the amount of the premium.
Futures Contracts: The Portfolio may enter into futures contracts
agreeing to buy or sell a financial instrument for a set price at a
future date. The Portfolio maintains securities with a value equal to its
obligation under each contract. Initial margin deposits of either cash
or securities are made upon entering into futures contracts; thereafter,
variation margin payments are made or received daily reflecting the
change in market value. Unrealized or realized gains and losses are
recognized based on the change in market value. Risks of futures
contracts arise from the possible illiquidity of the futures markets and
the movement in the value of the investment or in interest rates.
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 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 Portfolio's 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 Portfolio. For its services, the Advisor
receives a monthly fee based on an annual rate of .60% of the Portfolio's
average daily net assets.
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. The Distributor
received $10,708 as its portion of commissions charged on sales of the
Portfolio.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as
transfer, dividend disbursing and shareholder servicing agent for the
Portfolio.
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
During the period, purchases and sales of investments, other than
short-term, were $0 and $2,327,888, respectively.
The cost of investments owned at June 30, 1997 was substantially the same
for federal income tax and financial reporting purposes. Net unrealized
appreciation aggregated
$2,364,049, of which $2,442,177 related to appreciated securities and
$78,128 related to depreciated securities.
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.
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FINANCIAL HIGHLIGHTS
PERIODS ENDED
Class A Shares June 30, December 31,
1997 1996 1995
Net asset value, beginning $16.33 $16.62 $15.34
Income from investment operations
Net investment income .41 .88 .87
Net realized and unrealized gain
(loss) (.07) (.25) 1.35
Total from investment operations .34 .63 2.22
Distributions from
Net investment income (.41) (.85) (.85)
Net realized gains (.14) (.07) (.09)
Total distributions (.55) (.92) (.94)
Total increase (decrease) in net
asset value (.21) (.29) 1.28
Net asset value, ending $16.12 $16.33 $16.62
Total return* 2.16% 3.98% 14.86%
Ratios to average net assets:
Net investment income 5.18%(a) 5.27% 5.35%
Total expenses~ .77%(a) .77% .76%
Net expenses .75%(a) .73% .75%
Portfolio turnover - 24% 12%
Net assets, ending (in thousands) $49,395 $49,774 $60,203
Number of shares outstanding,
ending (in thousands) 3,063 3,048 3,621
YEARS ENDED
Class A Shares December 31,
1994 1993 1992
Net asset value, beginning $16.66 $15.83 $15.58
Income from investment operations
Net investment income .87 .86 .84
Net realized and unrealized gain
(loss) (1.35) .82 .31
Total from investment operations (.48) 1.68 1.15
Distributions from
Net investment income (.84) (.85) (.84)
Net realized gains - - (.06)
Total distributions (.84) (.85) (.90)
Total increase (decrease) in net
asset value (1.32) .83 .25
Net asset value, ending $15.34 $16.66 $15.83
Total return* (2.88%) 10.84% 4.99%
Ratios to average net assets:
Net investment income 5.47% 5.25% 5.41%
Total expenses~ - - -
Net expenses .73% .72% .62%
Expenses reimbursed - -
Portfolio turnover 11% 5% 11%
Net assets, ending (in thousands) $64,215 $67,634 $53,179
Number of shares outstanding,
ending (in thousands) 4,185 4,060 3,359
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FINANCIAL HIGHLIGHTS
October 29, December 31,
1996 1995 1994
Class C Shares
Net asset value, beginning $16.42 $15.26 $16.40
Income from investment operations
Net investment income .45 .58 .51
Net realized and unrealized gain
(loss) (.39) 1.35 (1.06)
Total from investment operations .06 1.93 (.55)
Distributions from
Net investment income (.44) (.68) (.59)
Net realized gains - (.09) -
Total distributions (.44) (.77) (.59)
Total increase (decrease) in net asset
value (.38) 1.16 (1.14)
Net asset value, ending $16.04 $16.42 $15.26
Total return* .41% 12.88% (2.94%)
Ratios to average net assets:
Net investment income 3.26%(a) 3.61% 3.87%(a)
Total expenses~ 2.78%(a) 2.47% -
Net expenses 2.74%(a) 2.46% 2.41%(a)
Expenses reimbursed - - 1.85%(a)
Portfolio turnover 19% 12% 11%
Net assets, ending (in thousands) $432 $394 $223
Number of shares outstanding,
ending (in thousands) 27 24 15
* Total return does not reflect deduction of Class A front-end
sales charge
(a) Annualized
+ Effective December 31, 1995, this ratio reflects
total expenses before reduction for fees paid indirectly; such
reductions are included in the ratio of net expenses.
(#) From March 1, 1994, inception.
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