Calvert
Tax-Free Reserves Vermont
Municipal Portfolio
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
11
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
(picture)
Calvert Tax-Free Reserves Vermont Municipal Portfolio seeks to
earn the highest level of interest income exempt from Vermont
and federal income taxes as is consistent with prudent investment
management, preservation of capital, and the quality characteristics
of the portfolio.
Emmett Long is a member of the CAMCO portfolio management team.
How would you characterize the investment environment over the past six months?
The Asian contagion has played havoc on the municipal markets. In January, the
continued "flight to quality" resulted in new lows in the long Treasury market
posting a 5.67% yield.
Throughout the fourth quarter and into January municipal bonds benefited from
the run
up in bond prices. There was even talk of a Fed easing. By mid-February
markets had removed Asia from the front pages and the tone turned decidedly
bearish.
The key economic releases were full of conflicting information, the
soothsayers were having a ball and the yields were now behind 6.00%. This
increased volatility took its toll on the municipal market, spreads began to
widen and municipals underperformed the treasuries well into the second
quarter of the year. As we entered May, municipal spreads were the widest they
have been since 1995. These spreads enticed crossover buyers into the
municipal market which led to the best performing month of the year.
How did the investing environment affect your strategy?
We extended the Portfolio's duration in the latter half of last year. The
timing of the move captured a significant upward move in the market. Although
we were handcuffed by the lack of issuance of Vermont municipals, we reaped
nice rewards from our holdings in territorial debt, including issues in Puerto
Rico, Guam and the Virgin Islands (which is exempt from Vermont taxes).
The Portfolio's 2.18% six-month return was 14 basis points behind the return
of the Lipper Other States Municipal Debt Funds Average. This average includes
Vermont plus other state-specific funds. In the universe of Vermont only
municipal funds, Vermont Municipal Portfolio was the top performer.
What's your near-term outlook for the bond market?
We believe the municipal market will test new lows in the later stages of this
year, and the Vermont Portfolio's bullish stance should allow us to
outperform. However, we are continually challenged by the lack of available
securities.
We will continue to supplement Vermont issues with debt securities issued by
U.S. territories.
July 21, 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 investmentdecisions and management philosophy.
Fund
Information
asset allocation
Vermont long-term
tax-exempt bonds
NASDAQsymbol
CGVTX
CUSIP number
131620-70-0
Comparative Investment Performance
CTFR Lipper Other States Lehman
Vermont Municipal Municipal Debt Municipal Bond
Portfolio Funds Average Index TR
6 month 2.18% 2.32% 2.69%
1 year 6.92% 7.80% 8.66%
3 year 6.66% 7.08% 7.85%
5 year 5.63% 5.69% 6.46%
Investment performance does not reflect the deduction of any front-end sales
charge.
TRrepresents total return. Source: Lipper Analytical Services, Inc.
Portfolio
statistics
monthly
dividend yield
6.30.98 4.30%
12.31.97 4.78%
30 day SECyield
6.30.98 4.24%
12.31.97 4.32%
weighted
average maturity
6.30.98 15 years
12.31.97 15 years
effective duration
6.30.98 7.18 years
12.31.97 6.30 years
credit quality
distribution
as of 6.30.98
Pie chart that shows credit quality distribution
AAA 47%
AA 31%
A- 11%
BBB 5%
Cash &
Equivalents 6%
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT
Total returns assume reinvestment of dividends and reflect the deduction of
Fund's maximum front-end sales charge of 3.75%. No sales charge has been
applied to the indices used for comparison. Past performance is no guarantee
of future returns.
Line graph here shows performance from 4/91 - 6/98
CTFR Vermont Municipal Portfolio $15,728
Lehman Municipal Bond Fund index TR $17,245
Lipper Other States Municipal Debt Funds Average $15,528
average annual
total return
as of 6.30.98
1 year 2.89%
5 year 4.82%
inception 6.44%
(4.01.91)
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STATEMENT OF NET ASSETS
June 30, 1998
Principal
Municipal Obligations - 97.9% Amount Value
Vermont - 82.6%
Burlington Electric Revenue Bonds,
Series A, 6.375%, 7/1/10,
MBIA Insured $3,125,000 $3,635,406
Burlington GO Bonds, 6.50%, 5/1/02 700,000 715,736
Chittenden Solid Waste District GO
Bonds, 6.60%, 1/1/12,
Asset Guaranty Insured 2,000,000 2,192,760
Vermont Education and Health -
Buildings Agency Revenue VRDN,
3.45%, 6/1/05, LOC: FNB Boston 1,105,000 1,105,000
Vermont Education and Health -
Central Vermont Hospital,
7.00%, 10/1/22, (Prerefunded) 1,800,000 2,028,186
Vermont Education and Health -
Central Vermont Hospital,
5.00%, 11/15/15, AMBAC Insured 2,000,000 1,974,740
Vermont Education and Health -
Lyndon Institute Project,
6.60%, 12/1/14 1,000,000 1,108,130
Vermont Education and Health -
Middlebury College,
5.50%, 11/1/16 3,000,000 3,105,000
Vermont Education and Health -
Northwestern Medical Center,
6.25%, 9/1/18 2,000,000 2,100,100
Vermont Education and Health -
Norwich University,
5.75%, 9/1/05 580,000 618,674
5.50%, 7/1/18 1,955,000 1,952,634
Vermont Education and Health -
Southwest Medical Center,
5.625%, 10/1/25, FSA Insured 1,000,000 1,041,250
Vermont Housing Finance Authority
Single Family Series 2
Housing Bonds, 7.20%, 11/1/11 1,200,000 1,269,624
Vermont IDA Revenue Bonds VRDN,
5.775%, 12/1/01,
LOC: Vermont National Bank 1,350,000 1,350,000
Vermont Municipal Bond Bank Revenue
Bonds, Series 2,
5.50%, 12/1/22, AMBAC Insured 1,000,000 1,035,630
Vermont State Colleges Revenue Bonds,
5.125%, 7/1/18 1,000,000 991,970
Vermont State GO Bonds:
6.50%, 2/1/01 1,740,000 1,846,975
Series A, 6.30%, 1/15/06 2,500,000 2,810,525
5.00%, 1/15/11 3,000,000 3,068,670
6.50%, 2/1/07, (Prerefunded) 500,000 539,555
6.40%, 2/1/08 1,000,000 1,094,040
Series C, Zero Coupon, 8/1/08 400,000 255,096
Series C, Zero Coupon, 8/1/09 300,000 181,593
6.45%, 2/1/12 1,950,000 2,136,596
Vermont Student Assistance Corporation
Education Loan
Revenue Bonds, Series A-3, 6.50%,
12/15/05, FSA Insured 2,240,000 2,428,518
Rutland County Solid Waste GO Bonds:
5.80%, 11/1/99 110,000 112,780
5.95%, 11/1/00 110,000 114,532
6.10%, 11/1/01 110,000 116,611
6.25%, 11/1/02 110,000 118,621
6.35%, 11/1/03 110,000 120,292
6.45%, 11/1/04 110,000 121,908
<PAGE>
Principal
Municipal Obligations (Cont'd) Amount Value
Rutland County Solid Waste GO
Bonds (cont'd):
6.50%, 11/1/05 $105,000 $117,573
6.55%, 11/1/06 100,000 113,309
6.60%, 11/1/07 100,000 114,380
6.70%, 11/1/08 100,000 116,218
6.75%, 11/1/09 100,000 117,175
6.80%, 11/1/10 100,000 117,956
6.80%, 11/1/11 100,000 118,630
6.85%, 11/1/12 100,000 118,786
Other - 15.3%
Guam Government Limited Obligation
Revenue Bonds,
5.00%, 11/1/17, AMBAC Insured 2,500,000 2,490,625
Puerto Rico Commonwealth Highway
Transportation Authority
Revenue Bonds, 4.75%, 7/1/38 2,000,000 1,881,040
Puerto Rico Commonwealth Infrastructure
Financing Authority
Revenue Bonds, Series A,
5.00%, 7/1/21,
AMBAC Insured 1,500,000 1,479,825
Puerto Rico Public Buildings Authority
Revenue Bonds,
5.00%, 7/1/27, AMBAC Insured 2,000,000 1,960,980
Total Municipal Obligations (Cost $47,570,895) 50,037,649
TOTAL INVESTMENTS
(Cost $47,570,895) - 97.9% 50,037,649
Other assets in excess of liabilities, net - 2.1% 1,074,988
Net Assets - 100% $51,112,637
Net Assets Consist of:
Paid-in capital applicable to 3,126,475 Class
A shares of beneficial
interest, unlimited number of no par
shares authorized: $47,892,675
Undistributed net investment income 188,201
Accumulated net realized gain (loss) on investments 565,007
Net unrealized appreciation (depreciation) on investments 2,466,754
Net Assets $51,112,637
Net Asset Value Per Share $16.35
Abbreviations: Explanation of Guarantees:
AMBAC: AMBAC Indemnity Corporation LOC: Letter of Credit
FGIC: Financial Guaranty Insurance Company
FSA: Financial Security Assurance
GO: General Obligation
MBIA: MBIA Insurance Corporation
See notes to financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Six Months Ended June 30, 1998
Net Investment Income
Investment Income
Interest income $1,391,796
Expenses
Investment advisory fee 148,933
Transfer agency fees and expenses 14,781
Trustees' fees and expenses 2,929
Administrative fees 2,124
Custodian fees 7,476
Registration fees 2,045
Reports to shareholders 7,120
Professional fees 1,027
Miscellaneous 2,494
Total expenses 188,929
Fees paid indirectly (7,399)
Net expenses 181,530
Net Investment Income 1,210,266
Realized and Unrealized Gain (Loss) on Investments
Net realized gain (loss) 554,605
Change in unrealized appreciation or depreciation (661,709)
Net Realized and Unrealized Gain
(Loss) on Investments (107,104)
Increase (Decrease) in Net Assets
Resulting From Operations $1,103,162
<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 $1,210,266 $2,519,418
Net realized gain (loss) 554,605 108,335
Change in unrealized appreciation
or depreciation (661,709) 680,995
Increase (Decrease) in Net Assets
Resulting From Operations 1,103,392 3,308,748
Distributions to shareholders from
Net investment income (1,203,204) (2,498,801)
Net realized gain (185,832) (433,259)
Total distributions (1,389,036) 2,932,060
Capital share transactions
Shares sold 3,676,594 6,041,427
Reinvestment of distributions 738,812 1,536,702
Shares redeemed (3,210,747) (7,535,048)
Total capital share transactions 1,204,659 43,081
Total Increase (Decrease) in Net Assets 918,785 419,769
Net Assets
Beginning of period 50,193,852 49,774,083
End of period (including undistributed
net investment income
of $188,201 and $181,139, respectively) $51,112,637 $50,193,852
Capital Share Activity
Shares sold 224,935 374,036
Reinvestment of distributions 45,195 95,114
Shares redeemed (195,773) (465,394)
Total capital share activity 74,357 3,756
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%.
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 (including options)
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. Risks from writing or purchasing option securities arise from
possible illiquidity of the options market and the movement in the value of
the investment or in interest rates. The risk associated with purchasing
options is limited to the premium originally paid.
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.
<PAGE>
Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the
reporting period. Actual results could differ from those estimates.
Expense Offset Arrangements: The Portfolio has an arrangement with its
custodian bank whereby the custodian's and transfer agent's fees may be paid
indirectly by credits earned on the Portfolio's cash on deposit with the bank.
Such a deposit arrangement is an alternative to overnight investments.
Federal Income Taxes: No provision for federal income or excise tax is
required since
the Portfolio intends to continue to qualify as a regulated investment company
under the Internal Revenue Code and to distribute substantially all of its
earnings.
Note B - Related Party Transactions
Calvert Asset Management Company, Inc. (the "Advisor") is wholly-owned by
Calvert Group, Ltd. ("Calvert"), which is indirectly wholly-owned by Acacia
Mutual Life Insurance Company. The Advisor provides investment advisory
services and pays the salaries and fees of officers and affiliated 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. Under the
terms of the agreement, $26,837 was payable at period end.
Calvert Administrative Services Company, an affiliate of the Advisor, provides
administrative services to the Fund for an annual fee. The Fund (exclusive of
Money Market portfolios, Class O and Institutional Class) pays monthly an
annual fee of $80,000, which is allocated between the Portfolios based on
their relative net assets. Under the terms of the agreement, $355 was payable
at period end.
Calvert Distributors, Inc., an affiliate of the Advisor, is the distributor
and principal underwriter for the Portfolio. The Distributor received $12,270
as its portion of commissions charged on sales of the Portfolio.
Calvert Shareholder Services, Inc., an affiliate of the Advisor, is the
shareholder servicing agent for the Portfolio. Under the terms of the
agreement, $423 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
During the period, purchases and sales of investments, other than short-term,
were
$10,483,043 and $11,247,435, respectively.
The cost of investments owned at June 30, 1998 was substantially the same for
federal income tax and financial reporting purposes. Net unrealized
appreciation aggregated $2,466,754, of which $2,484,508 related to appreciated
securities and $17,754 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.
<PAGE>
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, December 31, December 31,
Class A Shares 1998 1997 1996
Net asset value, beginning $16.45 $16.33 $16.62
Income from investment operations
Net investment income .39 .82 .88
Net realized and unrealized
gain (loss) (.04) .26 (.25)
Total from investment operations .35 1.08 .63
Distributions from
Net investment income (.39) (.82) (.85)
Net realized gains (.06) (.14) (.07)
Total distributions (.45) (.96) (.92)
Total increase (decrease) in net
asset value (.10) .12 (.29)
Net asset value, ending $16.35 $16.45 $16.33
Total return * 2.18% 6.90% 3.98%
Ratios to average net assets:
Net investment income 4.88%(a) 5.11% 5.27%
Total expenses + .76%(a) .76% .77%
Net expenses .73%(a) .73% .73%
Portfolio turnover 22% 14% 24%
Net assets, ending (in thousands) $51,113 $50,194 $49,774
Number of shares outstanding,
ending (in thousands) 3,126 3,052 3,048
Years Ended
December 31, December 31, December 31,
Class A Shares 1995 1994 1993
Net asset value, beginning $15.34 $16.66 $15.83
Income from investment operations
Net investment income .87 .87 .86
Net realized and unrealized
gain (loss) 1.35 (1.35) .82
Total from investment operations 2.22 (.48) 1.68
Distributions from
Net investment income (.85) (.84) (.85)
Net realized gains (.09) - -
Total distributions (.94) (.84) (.85)
Total increase (decrease) in net
asset value 1.28 (1.32) .83
Net asset value, ending $16.62 $15.34 $16.66
Total return * 14.86% (2.88%) 10.84%
Ratios to average net assets:
Net investment income 5.35% 5.47% 5.25%
Total expenses + .76% - -
Net expenses .75% .73% .72%
Portfolio turnover 12% 11% 5%
Net assets, ending (in thousands) $60,203 $64,215 $67,634
Number of shares outstanding,
ending (in thousands) 3,621 4,185 4,060
(a) Annualized
* Total return does not reflect deduction of Class A front-end sales charge.
+ 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.
<PAGE>
this page is reserved for any comments and questions.
<PAGE>
CALVERT TAX-FREE RESERVES VERMONT MUNICIPAL
PORTFOLIO
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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