NOTES TO FINANCIAL STATEMENTS Note A--Significant Accounting Policies General: The Calvert Tax-Free Reserves (the "Fund") is registered under the Investment Company Act of 1940 as a diversified, open-end management investment company. The Fund is comprised of six separate portfolios, three of which are reported herein; Money Market, Limited-Term and Long-Term. The operations of each series are accounted for separately. Each Portfolio offers shares of beneficial interest. Money Market Class O and Class MMP shares are sold without a sales charge. Limited-Term and Long-Term offer both Class A and Class C shares. Class A shares are sold with a maximum front-end sales charge of 2.00% for Limited-Term and 3.75% for Long-Term. Class C shares, which have no transaction-based sales charge, have a higher annual expense rate than Class A. Each class has different: (a) dividend rates due to differences in Distribution Plan expenses and other class specific expenses, (b) exchange privileges and (c) class specific voting rights. On April 26, 1996, the net assets of Calvert Tax-Free Reserves New Jersey Money Market Portfolio, ("New Jersey"), approximately $25.6 million, were merged into Money Market Portfolio. The merger was a tax-free exchange, whereby Class O shares were issued to the former New Jersey shareholders. 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. All securities for Money Market are valued at amortized cost which approximates market. 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: Long-Term 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: Long-Term 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. 32 - CALVERT TAX-FREE RESERVES SEMI-ANNUAL REPORT (UNAUDITED) 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 for Money Market; dividends from net investment income are declared and paid monthly for Limited-Term and Long-Term. 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. Expense Offset Arrangements: The Fund has an arrangement with its custodian bank whereby the custodian's fees are paid indirectly by credits earned on the Fund'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 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 monthly fees based on the following annual rates of 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 Fund. Distribution Plans, adopted by Class MMP of Money Market, Class A of Long-Term and Class C of both Limited-Term and Long- Term, allow the Portfolios to pay the distributor for expenses and services associated with distribution of shares. The expenses paid may not exceed an annual rate of average daily net assets of: .35% on Class MMP and Class A, and .55% and 1% on Class C of Limited-Term and Long-Term, respectively. The Distributor received $0 and $4,656 as its portion of commissions charged on sales of the Limited-Term and Long-Term Class A shares, respectively. Calvert Shareholder Services, Inc., an affiliate of the Advisor, acts as transfer, dividend disbursing and shareholder servicing agent for the Fund. SEMI-ANNUAL REPORT (UNAUDITED) CALVERT TAX-FREE RESERVES - 33 First $500 Next $500 Over Million Million $1 Billion ==================================================================== Money Market............... .50% .45% .40% Limited-Term............... .60% .50% .40% Long-Term.................. .60% .50% .40% Each Trustee who is not affiliated with the Advisor receives an annual fee of $20,250 plus up to $1,200 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 securities, were: Money Market held only short-term investments. The cost of investments owned at June 30, 1996 was substantially the same for federal income tax and financial reporting purposes for each Portfolio. The following table presents the components of net unrealized appreciation (depreciation) as of June 30, 1996 and the net realized capital loss carryforward as of December 31, 1995 with expiration dates: Capital losses may be utilized to offset current and future capital gains until expiration. As a cash management practice, Portfolios may sell or purchase short-term variable rate demand notes from other Portfolios managed by the Advisor. The transactions are effected at par with no gain or loss to the Portfolio, in accordance with policies of the Fund. Additionally, the Portfolios effected transactions with other Portfolios, which resulted in net gains (losses) on sales of securities of $470 and ($865) in Money Market and Long-Term, respectively, and cost of purchases of $21,687,880 in Limited-Term; all were executed at independently derived prices. NOTE D--SUBSEQUENT EVENT Effective on or about October 28, 1996, all outstanding Class C shares in both the Limited-Term and Long- Term Portfolios will be converted automatically into an equivalent value of Class A shares. This transaction is a non-taxable exchange and no sales charge will be applied to the Class A shares issued. 34 - CALVERT TAX-FREE RESERVES SEMI-ANNUAL REPORT (UNAUDITED) Limited-Term Long-Term ========================================================= Purchases.................. $ 93,046,420 $ 8,846,693 Sales...................... 101,864,861 11,509,234 Money Market Limited-Term Long-Term ========================================================================= Unrealized appreciation....... -- $1,851,890 $2,101,094 Unrealized depreciation....... -- (172,279) (124,199) ---------- ---------- Net........................ -- 1,679,611 1,976,895 ========== ========== Capital loss carry forward.... $99,863 $ 492,172 -- Expiration dates.............. 2003 2002 -- FINANCIAL HIGHLIGHTS MONEY MARKET PORTFOLIO CLASS O SHARES PERIODS ENDED ---------------------------------------------------- June 30, December 31, 1996 1995 1994 1993 ========================================================================================= Net asset value, beginning.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== Income from investment operations - --------------------------------- Net investment income.............. .017 .040 .028 .024 ---------- ---------- ---------- ---------- Distributions from - ------------------ Net investment income.............. (.017) (.040) (.028) (.024) ---------- ---------- ---------- ---------- Net asset value, ending............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ========== ========== Total return*....................... 1.68% 4.02% 2.81% 2.41% ========== ========== ========== ========== Ratios to average net assets: Net investment income.............. 3.36%(a) 3.93% 2.75% 2.37% ========== ========== ========== ========== Total expenses +................... .68%(a) .62% ---- ---- ========== ========== ========== ========== Net expenses....................... .67%(a) .61% .62% .60% ========== ========== ========== ========== Net assets, ending (in thousands)... $1,722,892 $1,740,839 $1,344,595 $1,500,614 ========== ========== ========== ========== Number of shares outstanding, ending (in thousands).............. 1,722,931 1,740,948 1,344,668 1,500,557 ========== ========== ========== ========== CLASS O SHARES CLASS MMP SHARES PERIODS ENDED PERIODS ENDED ----------------------- --------------------- December 31, June 30, December 31, 1992 1991 1996 1995/\ ==================================================================================== ................................. Net asset value, beginning.......... $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ======= ======= Income from investment operations - --------------------------------- Net investment income.............. .031 .048 .013 .008 ---------- ---------- ------- ------- Distributions from - ------------------ Net investment income.............. (.031) (.048) (.013) (.008) ---------- ---------- ------- ------- Net asset value, ending............. $ 1.00 $ 1.00 $ 1.00 $ 1.00 ========== ========== ======= ======= Total return*....................... 3.18% 4.96% 1.35% .79% ========== ========== ======= ======= Ratios to average net assets: Net investment income.............. 3.10% 4.79% 2.70%(a) 3.19%(a) ========== ========== ======= ======= Total expenses +................... ---- ---- 1.33%(a) 1.35%(a) ========== ========== ======= ======= Net expenses....................... .59% .61% 1.33%(a) 1.34%(a) ========== ========== ======= ======= Net assets, ending (in thousands)... $1,552,106 $1,382,330 $37,168 $41,736 ========== ========== ======= ======= Number of shares outstanding, ending (in thousands).............. 1,552,061 1,382,288 37,161 41,732 ========== ========== ======= ======= SEMI-ANNUAL REPORT (UNAUDITED) CALVERT TAX-FREE RESERVES -35 FINANCIAL HIGHLIGHTS LIMITED-TERM PORTFOLIO (CLASS A SHARES) PERIODS ENDED ------------------------------------- JUNE 30, DECEMBER 31, 1996 1995 1994 - ----------------------------------------------------------------------------------------------------- Net asset value, beginning.................. $10.72 $10.59 $10.72 ========== ========= ======== Income from investment operations Net investment income..................... .23 .45 .39 Net realized and unrealized gain (loss)... (.03) .13 (.13) --------- --------- -------- Total from investment operations.......... .20 .58 .26 --------- --------- -------- Distributions from Net investment income.................... (.23) (.45) (.39) -------- --------- -------- Total increase (decrease) in net asset value (.03) .13 (.13) -------- --------- -------- Net asset value, ending..................... $10.69 $10.72 $10.59 ======== ========= ======== Total return*............................... 1.85% 5.55% 2.42% ======== ========= ======== Ratios to average net assets: Net investment income..................... 4.23%(a) 4.21% 3.60% ======== ========= ======== Total expenses +.......................... .73%(a) .71% ---- ======== ========= ======== Net expenses.............................. .71%(a) .70% .66% ======== ========= ======== Portfolio turnover.......................... 26% 33% 27% ======== ========= ======== Net assets, ending (in thousands)........... $476,886 $457,707 $544,822 ======== ========= ======== Number of shares outstanding, ending (in thousands).................... 44,614 42,690 51,424 ======== ========= ======== YEARS ENDED ------------------------------------------ DECEMBER 31, 1993 1992 1991 - ----------------------------------------------------------------------------------------------------- Net asset value, beginning................... $10.68 $10.65 $10.61 ======== ======== ======== Income from investment operations Net investment income...................... .38 .49 .64 Net realized and unrealized gain (loss).... .04 .03 .03 -------- -------- -------- Total from investment operations........... .42 .52 .67 -------- -------- -------- Distributions from Net investment income...................... (.38) (.49) (.63) -------- -------- -------- Total increase (decrease) in net asset value. .04 .03 .04 -------- -------- -------- Net asset value, ending...................... $10.72 $10.68 $10.65 ======== ======== ======== Total return*................................ 4.02% 4.99% 6.46% ======== ======== ======== Ratios to average net assets: Net investment income...................... 3.59% 4.58% 5.99% ======== ======== ======== Total expenses +........................... ---- ---- ---- ======== ======== ======== Net expenses............................... .67% .71% .73% ======== ======== ======== Portfolio turnover........................... 14% 5% 1% ======== ======== ======== Net assets, ending (in thousands)............ $663,305 $567,419 $294,308 ======== ======== ======== Number of shares outstanding, ending (in thousands)...................... 61,861 53,140 27,644 ======== ======== ========= 36 - CALVERT TAX-FREE RESERVES SEMI-ANNUAL REPORT (UNAUDITED) FINANCIAL HIGHLIGHTS LIMITED-TERM PORTFOLIO (CLASS C SHARES) SEMI-ANNUAL REPORT (UNAUDITED) CALVERT TAX-FREE RESERVES-37 PERIODS ENDED -------------------------------- JUNE 30, DECEMBER 31, 1996 1995 1994# - -------------------------------------------------------------------------------- Net asset value, beginning.................... $ 10.68 $ 10.56 $ 10.70 ======= ======= ======= Income from investment operations - --------------------------------- Net investment income........................ .18 .38 .27 Net realized and unrealized gain (loss)...... (.02) .13 (.12) ------- ------- ------- Total from investment operations............. .16 .51 .15 ------- ------- ------- Distributions from - ------------------ Net investment income........................ (.19) (.39) (.29) ------- ------- ------- Total increase (decrease) in net asset value.. (.03) .12 (.14) ------- ------- ------- Net asset value, ending....................... $ 10.65 $ 10.68 $ 10.56 ======= ======= ======= Total return* ................................ 1.51% 4.86% 1.43% ======= ======= ======= Ratios to average net assets: Net investment income........................ 3.50%(a) 3.57% 3.05%(a) ======= ======= ======= Total expenses +............................. 1.46%(a) 1.35% ---- ======= ======= ======= Net expenses................................. 1.45%(a) 1.34% 1.38%(a) ======= ======= ======= Portfolio turnover............................ 26% 33% 27% ======= ======= ======= Net assets, ending (in thousands)............. $28,368 $30,057 $31,081 ======= ======= ======= Number of shares outstanding, ending (in thousands)........................ 2,664 2,814 2,942 ======= ======= ======= FINANCIAL HIGHLIGHTS LONG-TERM PORTFOLIO (CLASS A SHARES) PERIODS ENDED -------------------------------- JUNE 30, DECEMBER 31, 1996 1995 1994 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING.................... $ 17.31 $ 15.83 $ 17.15 ======= ======= ======= Income from investment operations - --------------------------------- Net investment income....................... .47 .95 .93 Net realized and unrealized gain (loss)..... (.76) 1.53 (1.33) ------- ------- ------- Total from investment operations............ (.29) 2.48 (.40) ------- ------- ------- Distributions from - ------------------ Net investment income....................... (.46) (.91) (.92) Net realized gains.......................... -- (.09) -- ------- ------- ------- Total distributions....................... (.46) (1.00) (.92) ------- ------- ------- Total increase (decrease) in net asset value.. (.75) 1.48 (1.32) ------- ------- ------- NET ASSET VALUE, ENDING....................... $ 16.56 $ 17.31 $ 15.83 ======= ======= ======= Total return *................................ (1.68%) 16.05% (2.30%) ======= ======= ======= Ratios to average net assets: Net investment income....................... 5.52%(a) 5.71% 5.73% ======= ======= ======= Total expenses +............................ .91%(a) .87% -- ======= ======= ======= Net expenses................................ .88%(a) .85% .81% ======= ======= ======= Portfolio turnover............................ 17% 58% 98% ======= ======= ======= NET ASSETS, ENDING (IN THOUSANDS)............. $50,687 $57,359 $47,267 ======= ======= ======= Number of shares outstanding, ending (in thousands)....................... 3,061 3,314 2,985 ======= ======= ======= YEARS ENDED -------------------------------- DECEMBER 31, 1993 1992 1991 - -------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING.................... $ 16.32 $ 16.11 $ 15.35 ======= ======= ======= Income from investment operations - --------------------------------- Net investment income....................... .94 .98 .97 Net realized and unrealized gain (loss)..... .83 .20 .78 ------- ------- ------- Total from investments...................... 1.77 1.18 1.75 ------- ------- ------- Distributions from - ------------------ Net investment income....................... (.94) (.97) (.99) Net realized gains.......................... -- -- -- ------- ------- ------- Total distributions....................... (.94) (.97) (.99) ------- ------- ------- Total increase (decrease) in net asset value.. .83 .21 .76 ------- ------- ------- NET ASSET VALUE, ENDING....................... $ 17.15 $ 16.32 $ 16.11 ======= ======= ======= 38 - CALVERT TAX-FREE RESERVES SEMI-ANNUAL REPORT (UNAUDITED) Total return *................................ 11.12% 7.60% 11.77% ======= ======= ======= Ratio to average net assets: Net investment income....................... 5.59% 6.06% 6.39% ======= ======= ======= Total expenses +............................ -- -- -- ======= ======= ======= Net expenses................................ .78% .82% .78% ======= ======= ======= Portfolio turnover............................ 97% 196% 276% ======= ======= ======= NET ASSETS, ENDING (IN THOUSANDS)............. $55,204 $45,665 $43,774 ======= ======= ======= Number of shares outstanding, ending (in thousands)....................... 3,219 2,799 2,718 ======= ======= ======= FINANCIAL HIGHLIGHTS LONG-TERM PORTFOLIO (CLASS C SHARES) * Total return is not annualized for periods of less than one year and 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 October 2, 1995, inception. # From March 1, 1994, inception. SEMI-ANNUAL REPORT (UNAUDITED) CALVERT TAX-FREE RESERVES - 39 Periods Ended ---------------------------- June 30, December 31, 1996 1995 1994# ============================================================================ Net asset value, beginning.................... $17.13 $15.72 $16.86 Income from investment operations ====== ====== ====== - --------------------------------- Net investment income........................ .33 .78 .58 Net realized and unrealized gain (loss)...... (.75) 1.46 (1.04) ------ ------ ------ Total from investment operations............. (.42) 2.24 (.46) ------ ------ ------ Distributions from - ------------------ Net investment income........................ (.33) (.74) (.68) Net realized gains........................... -- (.09) -- ------ ------ ------ Total distributions......................... (.33) .83 (.68) ------ ------ ------ Total increase (decrease) in net asset value (.75) 1.41 (1.14) ------ ------ ------ Net asset value, ending....................... $16.38 $17.13 $15.72 ====== ====== ====== Total return *................................ (2.46%) 14.51% (2.24%) ====== ====== ====== Ratios to average net assets: Net investment income........................ 3.95%(a) 4.34% 3.57%(a) ====== ====== ====== Total expenses +............................. 2.50%(a) 2.19% -- ====== ====== ====== Net expenses................................. 2.47%(a) 2.17% 2.55%(a) ====== ====== ====== Expenses reimbursed.......................... -- -- 3.06%(a) ====== ====== ====== Portfolio turnover............................ 17% 58% 98% ====== ====== ====== Net assets, ending (in thousands)............. $1,716 $1,678 $ 871 ====== ====== ====== Number of shares outstanding, ending (in thousands)............................... 105 98 55 ====== ====== ====== THIS PAGE INTENTIONALLY LEFT BLANK 40 - CALVERT TAX-FREE RESERVES SEMI-ANNUAL REPORT (UNAUDITED) Calvert Information Network 24 hours, 7 days a week 800-368-2745 Service for Existing Account: ..................... Shareholders: 800-368-2745 Brokers: 800-368-2746 TDD for Hearing Impaired: ..................... 800-541-1524 Branch Office: ..................... 4550 Montgomery Avenue Suite 1000N Bethesda, Maryland 20814 Registered, Certified or Overnight Mail: .................... Calvert Group c/o NFDS, 6th Floor 1004 Baltimore Kansas City, MO 64105 Web Site: ..................... Address: http://www.calvertgroup.com Principal Underwriter: ..................... Calvert Distributors, Inc. 4550 Montgomery Avenue Suite 1000N Bethesda, Maryland 20814 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. To Open an Account: ..................... 800-368-2748 Yields and Prices: ..................... INVESTING with VISION [LOGO--CALVERT GROUP] A member of The Acecia Group 4550 Montgomery Avenue, Suite 1000N Bethesda, Maryland 20814 CALVERT TAX-FREE RESERVES CALIFORNIA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 1996 [LOGO] CALVERT TAX-FREE RESERVES CALIFORNIA MONEY MARKET PORTFOLIO Dear Investor: Interest rates moved a bit higher during the first six months of 1996. The nation's economy continued to expand slowly, with Gross Domestic Product increasing by an annualized 2.5%, but investors feared that stronger growth and possibly higher inflation were on the horizon. suffered more in response to the rise in rates and, on average, reported flat to negative year-to-date returns. Fund Performance and Strategy Review Yields on municipal money market securities trended a bit higher early in 1996, but fell back in April and May to close the period about where they began. Municipal money market yields were not able to keep pace with those of taxable because of the 0.0% 0.5% 1.0% 1.5% 2.0% SEMI-ANNUAL REPORT (UNAUDITED) CTFR-CA MONEY MARKET PORTFOLIO-1 The rise in rates did not stall the stock market's MUNICIPAL RATES advance. The Standard & Poor's 500 Stock Index, a [GRAPH APPEARS HERE] grouping of mostly large- 6% company stocks, turned in a six-month gain of 10.10%. 5% In general, money 4% market yields were slightly below their levels of six 3% months ago. Intermediate- 6/95 8/95 10/95 12/95 2/96 4/96 6/96 and longer-term fixed- income investments money market securities because money managers COMPOUND DIVIDEND YIELD looking to reduce the interest rate sensitivity [GRAPH APPEARS HERE] of their municipal portfolios increased their 1.82% holdings of these very short-term securities. 1.61% The stronger demand kept a lid on yields. In the 1.60% taxable fixed-income market, this level of activity 1.42% would be insignificant greater supply of money market securities. But the supply of municipal money market securities is much thinner, therefore demand factors have more of an impact on yields. The California Money Market Portfolio's yield on June 30, 1996 was slightly below its level at the close of 1995 due to continued low interest rates, but it remained above the yield on an average of similar funds. The Portfolio's maintained a weighted average maturity of 15 days on June 30, 1996, which was little changed from its level at the beginning of this reporting period. Outlook We anticipate continued modest economic growth. Gross Domestic Product will likely continue to expand at an annualized rate of 2.5% or a bit higher for the remainder of the year. This could be slightly above the Federal Reserve's target growth rate, but not so much so that we would expect rates to move dramatically higher. Radical suggestions for tax reform had been hurting the municipal market and these now appear to have been put on the sidelines. And, since the close of this reporting period, investors in stocks have encountered significantly greater volatility. A riskier stock market could enhance the appeal of bond and money market securities. In our view the municipal market is now fairly valued, and our outlook for the balance of 1996 is positive. Investors in the California Money Market Portfolio are not likely to be rewarded with soaring yields, however the Portfolio remains an ideal choice for those looking to generate tax-free income and maintain a stable principal value. Sincerely, 2 - CTRF-CA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) /s/ David Rochat - ---------------- David Rochat Senior Vice President July 31, 1996 RATINGS BREAKDOWN [CHART APPEARS HERE] First Tier Second Tier 92% 8% 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 Statistical Ratings Organizations. Second Tier Securities are eligible securities not in the First Tier. SEMI-ANNUAL REPORT (UNAUDITED) CTFR--CA MONEY MARKET PORTFOLIO-3 Portfolio Statistics Maturity Schedule Hypothetical Performance Change in value of a hypothetical $10,000 investment. Total returns assume reinvestment of dividends. Past performance is no guarantee of future results. 4 - CTFR--CA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) 12/31/95 6/30/96 - -------------------------------------------------------------------------------- 1-60 Days 94% 96% 61-120 Days 5% -- 121-180 Days 1% 1% 181-360 Days -- 3% Weighted Average 14 days 15 days Average Annual Total Returns for periods ended 6/30/96 One Year 3.45% Five Year 3.12% Since Inception (10/89) 3.79% [GRAPH APPEARS HERE] 10/16/89 $10,000 6/96 $12,826 STATEMENT OF NET ASSETS JUNE 30, 1996 SEMI-ANNUAL REPORT (UNAUDITED) CTFR-CA MONEY MARKET PORTFOLIO - 5 PRINCIPAL AMOUNT VALUE =============================================================================================== CALIFORNIA MUNICIPAL OBLIGATIONS - 98.5% $ 3,550,000 Alameda-Contra Costa Revenue Anticipation Notes, 3.75%, 1/30/97, LOC: Sumitomo Bank, Ltd. ......................................... $ 3,559,964 2,000,000 Auburn Unified School District Certificates of Participation VRDN, 3.25%, 12/1/19, LOC: Union Bank of California .................... 2,000,000 3,700,000 Barstow Multi-Family Housing Revenue VRDN, 3.75%, 4/1/18, C/LOC: Mercury S&L ............................................... 3,700,000 6,800,000 California Buena Park Community Development Authority VRDN, 5.1975%, 12/28/99, GA: Mass Mutual Life Insurance ................ 6,800,000 2,410,000 California Housing Finance Agency Revenue VRDN, 3.40%, 8/1/10, INSUR: MBIA ...................................................... 2,410,000 750,000 California Pollution Control Financing Authority Revenue VDRN, 3.80%, 3/1/08, LOC: Banque National de Paris ..................... 750,000 4,825,000 California State Custodial Receipts 1992 Series A VRDN, 3.60%, 10/1/07, INSUR: MBIA ............................................. 4,825,000 14,000,000 California Valleys Housing Finance Authority Revenue Bonds, 4.05%, 7/1/25, LOC: Sumitomo Bank, Ltd. ................................. 14,000,000 1,100,000 Chula Vista Industrial Development Authority VRDN, 3.55%, 12/1/21, LOC: Union Bank of California .................................... 1,100,000 4,650,000 City of Palmdale Community Redevelopment Agency VRDN, 5.3625%, 12/1/05, LOC: National Bank of Canada ............................ 4,650,000 2,875,000 Commerce California Joint Powers Financing Authority VRDN, 3.30%, 11/1/14, LOC: Bank of America .................................... 2,875,000 1,700,000 Fairfield Industrial Development Authority VRDN, 3.30%, 4/1/12, LOC: Wells Fargo Bank, NA ........................................ 1,700,000 1,200,000 Fresno Multi-Family Housing VRDN, 4.50%, 5/1/15, LOC: Tokai Bank Ltd. ............................................. 1,200,000 3,075,000 Glendora Industrial Development Authority VRDN, 4.46%, 12/1/16, LOC: Union Bank of California .................................... 3,075,000 Hemet Multi-Family Housing Authority VRDN: 4,800,000 3.80%, 8/15/04, C/LOC: Redland S&L ............................... 4,800,000 8,050,000 3.60%, 7/1/06, C/LOC: Mercury S&L ................................ 8,050,000 6,100,000 Irvine Public Facilities Revenue VRDN, 3.10%, 11/1/10, LOC: National Westminster Bank ................................... 6,100,000 Los Angeles Community Redevelopment Agency Revenue VRDN: 7,000,000 3.25%, 12/1/05, LOC: Industrial Bank of Japan, Ltd. .............. 7,000,000 5,900,000 3.20%, 4/1/09, LOC: Tokai Bank Ltd. .............................. 5,900,000 6,500,000 Los Angles Convention & Exhibition Center Revenue VRDN, 3.45%, 8/15/18, INSUR: MBIA ............................................. 6,500,000 3,100,000 Los Angeles County Housing Authority Revenue VRDN, 3.40%, 11/1/09, LOC: Industrial Bank of Japan, Ltd. ..................... 3,100,000 2,000,000 Los Angeles County Tax & Revenue Anticipation Notes, 4.50%, 7/1/96, LOC: Bank of America ............................................. 2,000,000 Los Angeles Multi-Family Housing Revenue VRDN: 5,000,000 3.40%, 12/1/16, C/LOC: Mercury S&L ............................... 5,000,000 8,600,000 3.75%, 8/1/19, LOC: Fuji Bank Ltd. ............................... 8,600,000 5,525,000 Midpeninsula Regional VRDN, 4.15%, 2/1/08, LOC: Fuji Bank Ltd. .... 5,525,000 6-CTFR--CA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) PRINCIPAL AMOUNT VALUE =============================================================================================== Oceanside Multi-Family Housing VRDN: $ 4,600,000 3.675%, 12/1/07, C/LOC: Western Federal S&L ...................... $ 4,600,000 6,540,000 3.50%, 8/1/17, SURBD: Continental Casualty........................ 6,540,964 Orange County Apartment Development Revenue VRDN: 9,200,000 3.40%, 11/1/05, LOC: First Interstate Bancorp .................... 9,200,000 7,000,000 3.40%, 11/1/05, LOC: First Interstate Bancorp .................... 7,000,000 5,400,000 3.00%, 4/1/06, LOC: Bank of Tokyo-Mitsubishi, Ltd. ............... 5,400,000 450,000 3.65%, 3/1/07, LOC: Tokai Bank Ltd. .............................. 450,000 3,500,000 3.35%, 10/1/07, LOC: Bank of Tokyo-Mitsubishi, Ltd. .............. 3,500,000 600,000 3.00%, 11/1/08, LOC: Bank of Tokyo-Mitsubishi, Ltd. .............. 600,000 7,400,000 3.45%, 11/1/08, LOC: Banque Paribas .............................. 7,400,000 2,500,000 4.25%, 11/1/08, LOC: Tokai Bank Ltd. ............................. 2,500,000 5,800,000 4.35%, 11/1/09, LOC: Tokai Bank Ltd. ............................. 5,800,000 5,530,000 3,80%, 12/1/16, LOC: Bank of Tokyo-Mitsubishi, Ltd. .............. 5,530,000 500,000 Orange County Certificates of Participation, Florence Crittendon Services VRDN, 3.30%, 3/1/16, LOC: Swiss Bank Corp. .............. 500,000 9,000,000 Orange County Housing Authority Revenue VRDN, 3.40%, 12/1/07, LOC: Bank of Tokyo-Mitsubishi, Ltd. .............................. 9,000,000 Palmdale School District Project Lease VRDN: 5,444,086 3.60%, 12/13/10, LOC: National Westminster Bank .................. 5,444,086 1,807,143 3.60%, 12/13/10, LOC: National Westminster Bank .................. 1,807,143 11,000,000 Pitney Bowes Credit Corporation Lease TOPS Trust Certificates, 3.70%, 4/1/98, BPA: Pitney Bowes Credit Corporation .............. 11,000,000 Riverside Multi-Family Housing VRDN: 5,890,000 3.425%, 12/1/05, LOC: Household Federal Savings .................. 5,890,000 1,000,000 4.25%, 6/1/09, LOC: Tokai Bank Ltd. .............................. 1,000,000 6,635,000 3.50%, 12/1/16, LOC: Tokai Bank Ltd. ............................. 6,635,000 4,050,000 Salinas Multi-Family Housing VRDN, 3.925%, 12/1/16, C/LOC: Mercury S&L ............................................... 4,050,000 5,000,000 San Bernardino Multi-Family Housing Revenue VRDN, 5.58%, 5/1/15 ... 5,000,000 San Bernardino Public Safety Authority Revenue Bonds: 2,100,000 3.90%, 11/1/96 ................................................... 2,100,000 2,400,000 4.10%, 5/1/97 .................................................... 2,400,000 San Diego Multi-Family Housing VRDN: 4,000,000 3.55%, 6/1/07, C/LOC: Mercury S&L ................................ 4,000,000 1,100,000 6,00%, 12/1/08, LOC: Daiwa Bank, Ltd. ............................ 1,100,000 4,000,000 2.90%, 2/1/09, LOC: Citibank ..................................... 4,000,000 5,000,000 3.50%, 8/1/15, LOC: Bank of Tokyo-Mitsubishi, Ltd. ............... 5,000,000 2,700,000 San Diego Sewer Revenue VRDN, 3.50%, 5/15/20, INSUR: AMBAC ........ 2,700,000 San Francisco Multi-Family Housing VRDN: 5,000,000 4.05%, 10/1/00, LOC: Mitsubishi Trust & Banking .................. 5,000,000 8,000,000 3.40%, 12/1/05, LOC: Industrial Bank of Japan, Ltd. .............. 8,000,000 3,500,000 San Marcos Industrial Development Authority VRDN, 3.83%, 12/1/20, LOC: Bank of California .......................................... 3,500,000 1,900,000 San Marcos Redevelopment VRDN, 4.21%, 12/1/10, LOC: Bank of America ............................................. 1,900,000 4,033,000 Santa Ana Industrial Development VRDN, 3.40%, 10/1/15, LOC: Tokai Bank Ltd. ............................................. 4,033,000 1,500,000 Santa Ana Multi-Family Housing VRDN, 3.50%, 12/1/07, C/LOC: Mercury S&L ............................................... 1,500,000 Explanation of Guarantees: BPA: Bond-Purchase Agreement GA: Guaranty Agreement INSUR: Insurance LOC: Letter of Credit C/LOC: Collaterized LOC PRINCIPAL AMOUNT VALUE ============================================================================== $ 3,000,000 Santa Ana Unified School District Certificates of Participation VRDN, 3.10%, 7/1/15, LOC: Banque National de Paris................................. $ 3,000,000 7,000,000 Santa Paula Public Financing Authority Revenue VRDN, 3.75%, 2/1/26, LOC: Sumitomo Trust & Banking........................................... 7,000,000 3,000,000 Southeast Resource Recovery Facility Authority Lease Revenue Bonds, 3.45%, 12/1/18, LOC: Industrial Bank of Japan, Ltd................................ 3,000,000 2,500,000 Stockton County Multi-Family Housing VRDN, 3.10%, 9/1/18, LOC: Bank of America...................... 2,500,000 2,740,000 Stockton County Nursing Home VRDN, 4.46%, 12/1/16, LOC: Union Bank of California..................... 2,740,000 1,360,000 Stockton Heritage Convalescent Center Project VRDN, 5.775% 12/1/05, LOC: Tokai Bank Ltd............... 1,360,000 8,000,000 Union City Housing Mortgage Revenue VRDN, 4.05%, 10/1/11, LOC: Mitsubishi Trust & Banking.......... 8,000,000 5,000,000 Union City Multi-Family Housing Authority Revenue VRDN, 3.20%, 10/1/07, LOC: Sumitomo Trust & Banking........................................... 5,000,000 16,000,000 Victor Valley Community College Revenue VRDN, 3.45%, 11/1/24, GA: Anchor National Life.......... 16,000,000 6,300,000 Victor Valley Community College Certificates of Participation VRDN, 3.15%, 8/01/26, LOC: Banque National de Paris................................. 6,300,000 3,830,000 Victorville Multi-Family Housing Revenue VRDN, 3.90%, 12/1/15, C/LOC: Redlands S&L............... 3,830,000 2,600,000 West Sacramento Financing Authority Special Tax Revenue VRDN, 3.50%, 8/01/21, LOC: Wells Fargo Bank, NA.................................... 2,600,000 ------------ TOTAL INVESTMENTS (Cost $330,629,193) - 98.5%............................................... 330,629,193 Other assets and liabilities, net - 1.5%............ 4,882,983 ------------ NET ASSETS - 100%................................... $335,512,176 ============ NET ASSETS CONSIST OF: ============================================================================== Paid in capital applicable to 335,690,365 shares of beneficial interest, unlimited number of no par shares authorized.......... $335,690,406 Undistributed net investment income.............................. (34,497) Accumulated realized gain/(loss) on investments.................. (143,733) ------------ NET ASSETS......................................... $335,512,176 ============ NET ASSET VALUE PER SHARE.......................... $ 1.00 ============ SURBD: Surety Bond Abbreviations: VRDN: Variable Rate Demand Note See notes to financial statements. SEMI-ANNUAL REPORT (UNAUDITED) CTFR-CA MONEY MARKET PORTFOLIO - 7 STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 See notes to financial statements. 8 - CTFR--CA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) NET INVESTMENT INCOME - ------------------------------------------------------------------------------- Investment Income Interest income................................................... $6,465,805 ---------- Expenses Investment advisory fee........................................... 826,690 Transfer agency fees and expenses................................. 247,827 Trustees' fees and expenses....................................... 13,480 Administrative fees............................................... 11,834 Custodian fees.................................................... 12,499 Registration fees................................................. 6,855 Reports to shareholders........................................... 74,184 Professional fees................................................. 13,295 Miscellaneous..................................................... 23,339 Reimbursement from Advisor........................................ (31,438) ---------- Total expenses.................................................. 1,198,565 Fees paid indirectly............................................ (12,499) ---------- Net expenses.................................................. 1,186,066 ---------- NET INVESTMENT INCOME....................................... 5,279,739 ---------- REALIZED GAIN (LOSS) ON INVESTMENTS - ------------------------------------------------------------------------------- Net realized gain (loss)............................................ (351) ---------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS..................................... $5,279,388 ========== STATEMENTS OF CHANGES IN NET ASSETS See notes to financial statements. SEMI-ANNUAL REPORT (UNAUDITED) CTFR--CA MONEY MARKET PORTFOLIO-9 Six Months Year Ended Ended December 31 INCREASE (DECREASE) IN NET ASSETS June 30, 1996 1995 - ------------------------------------------------------------------------------------------------------- Operations Net investment income................................................ $ 5,279,739 $ 10,530,69 Net realized gain (loss) on securities............................... (351) (143,38 Net realized gain (loss) on Tender Option Agreement - Note B......... -- (600,00 Change in unrealized appreciation or depreciation.................... -- 600,00 ------------ ----------- INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS........................................ 5,279,388 10,387,31 ------------ ----------- Distributions to shareholders from Net investment income................................................ (5,264,127) (10,583,76 ------------ ----------- Capital share transactions Shares sold.......................................................... 247,120,658 377,023,68 Reinvestment of distributions........................................ 5,083,764 10,452,68 Shares redeemed...................................................... (217,058,508) (347,647,51 ------------ ----------- Total capital share transactions.................................. 35,145,914 39,828,86 ------------ ----------- TOTAL INCREASE (DECREASE) IN NET ASSETS................................ 35,161,175 39,632,41 NET ASSETS - ------------------------------------------------------------------------------------------------------- Beginning of period.................................................... 300,351,001 260,718,58 ------------ ----------- End of period (including undistributed net investment income (loss) of ($34,497) and ($50,109), respectively)............................ $335,512,176 $300,351,00 ============ =========== SHARE ACTIVITY - ------------------------------------------------------------------------------------------------------- Shares sold............................................................ 247,120,658 377,023,68 Reinvestment of distributions.......................................... 5,083,764 10,452,68 Shares redeemed........................................................ (217,058,508) (347,647,51 ------------ ----------- Net share activity................................................... 35,145,914 39,828,86 ============ =========== 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. 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. On December 15, 1994, the Portfolio entered into a Tender Option Agreement with the Advisor valued at $600,000 to secure payment of an "at risk" investment. On June 30, 1995 the investment paid the Portfolio in full and the Option expired unused. The expiration loss was applied against the Advisor's capital contribution of the Option. 10 - CTRF--CA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) 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 receives an annual fee of $20,250 plus up to $1,200 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, 1996 was substantially the same for federal income tax and financial reporting purposes. Net realized capital loss carryforwards, for federal income tax purposes, of $143,382 at December 31, 1995 may be utilized to offset current and future capital gains until expiration through 2003. As a cash management practice, the Portfolio may sell or purchase short-term variable rate demand notes from other Portfolios managed by the Advisor. The transactions are effected at par with no gain or loss to the Portfolio, in accordance with its policies. SEMI-ANNUAL REPORT (UNAUDITED) CTFR--CA MONEY MARKET PORTFOLIO - 11 FINANCIAL HIGHLIGHTS PERIODS ENDED -------------------------------------- JUNE 30, DECEMBER 31, 1996 1995 1994 - ------------------------------------------------------------------------------ Net asset value, beginning............ $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Income from investment operations - --------------------------------- Net investment income............... .016 .037 .026 -------- -------- -------- Distributions from - ------------------ Net investment income............... (.016) (.037) (.026) -------- -------- -------- Net asset value, ending............... $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Total return/\........................ 1.60% 3.78%* 2.62%* ======== ======== ======== Ratios to average net assets: Net investment income............... 3.19%(a) 3.69% 2.55% ======== ======== ======== Total expenses+..................... .72%(a) .76% -- ======== ======== ======== Net expenses........................ .72%(a) .75% .69% ======== ======== ======== Expenses reimbursed................. .02%(a) -- -- ======== ======== ======== Net assets, ending (in thousands)..... $335,512 $300,351 $260,719 ======== ======== ======== Number of shares outstanding, ending (in thousands)...................... 335,690 300,544 260,716 ======== ======== ======== YEARS ENDED --------------------------------------- DECEMBER 31, 1993 1992 1991 - ------------------------------------------------------------------------------- Net asset value, beginning............ $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Income from investment operations - --------------------------------- Net investment income............... .022 .030 .045 -------- -------- -------- Distributions from - ------------------ Net investment income............... (.022) (.030) (.045) -------- -------- -------- Net asset value, ending............... $ 1.00 $ 1.00 $ 1.00 ======== ======== ======== Total return/\........................ 2.26% 3.08% 4.64% ======== ======== ======== Ratios to average net assets: Net investment income............... 2.22% 3.01% 4.51% ======== ======== ======== Total expenses+..................... -- -- -- ======== ======== ======== Net expenses........................ .69% .68% .60% ======== ======== ======== Net assets, ending (in thousands)..... $296,984 $323,928 $287,984 ======== ======== ======== Number of shares outstanding, ending (in thousands)...................... 296,984 323,928 287,984 ======== ======== ======== (a) Annualized /\ Total return is not annualized for periods of less than one year. * Total return numbers do not reflect Tender Option Agreement (see Note B). + 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. 12-CTFR--CA MONEY MARKET PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) To Open an Account: .................. 800-368-2748 Yields and Prices: .................. Calvert Information Network 24 hours, 7 days a week 800-368-2745 Service for Existing Account: .................. Shareholders: 800-368-2745 Brokers: 800-368-2746 TDD for Hearing Impaired: .................. 800-541-1524 Branch Office: .................. 4550 Montgomery Avenue Suite 1000N Bethesda, Maryland 20814 Registered, Certified or Overnight Mail: .................. Calvert Group c/o NFDS, 6th Floor 1004 Baltimore Kansas City, MO 64105 Web Site: .................. Address: http://www.calvertgroup.com Principal Underwriter: .................. Calvert Distributors, Inc. 4550 Montgomery Avenue Suite 1000N Bethesda, Maryland 20814 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. INVESTING with VISION [LOGO--CALVERT GROUP] BULK RATE A member of The Acacia Group U.S. POSTAGE PAID 4550 Montgomery Avenue, Suite 1000N Permit No. 7470 Bethesda, Maryland 20814 Baltimore, MD CALVERT TAX-FREE RESERVES VERMONT MUNICIPAL PORTFOLIO SEMI-ANNUAL REPORT JUNE 30, 1996 INVESTING with VISION(TM) [LOGO OF CALVERT GROUP] CALVERT TAX-FREE RESERVES VERMONT MUNICIPAL PORTFOLIO Dear Investor: Interest rates moved a bit higher during the first six months of 1996. The nation's economy continued to expand slowly, with Gross Domestic Product increasing by an annualized 2.5%, but investors feared that stronger growth and possibly higher inflation were on the horizon. The rise in rates did not stall the stock market's advance. The Standard & Poor's 500 Stock Index, a grouping of mostly large-company stocks, turned in a six-month gain of 10.10%. [GRAPH APPEARS HERE] In general, short-term fixed-income investments were able to eke out slightly positive returns for the six-months ended June 30, as higher yields more than offset declining prices. Intermediate- and longer-term fixed-income investments suffered more in response to the rise in rates and, on average, reported flat to negative year-to-date returns. Municipal bonds outperformed Treasuries as the likelihood of radical tax reform faded. The prospect of an overhaul of the Tax Code had been depressing the municipal market but, with Bob Dole in place as the Republican candidate, it became less likely that this would be a plank in either Party's campaign. Tight supply of new issues and strong demand also helped to buoy municipal bond prices relative to taxable securities. FUND PERFORMANCE AND STRATEGY REVIEW After a protracted period of declining yields and rising prices, the municipal bond market changed course early in this reporting period. Bond prices started to slip in February as investors demanded higher yields to compensate for their expectations of stronger economic growth and belief that the Federal Reserve would shift to a tighter monetary policy. The Vermont Municipal Portfolio's 12-month return was positive and in line with municipal securities' historical average annual returns. The Portfolio's six-month return was slightly negative as the modestly higher level of interest income was not enough to offset the decline in bond prices. For both the six- and 12-month periods, the Vermont Municipal Portfolio's return was above its peer group average. SEMI-ANNUAL REPORT (UNAUDITED) CTFR VERMONT MUNICIPAL PORTFOLIO - 1 The Portfolio had an average maturity of 13 years at the close of this reporting period, which was only slightly lower than its level at the beginning of the year. The Portfolio's allocation of assets by credit quality was essentially unchanged. Almost 65% of assets continue to be invested in securities with AAA or AA ratings, the two highest credit categories, according to Moody's Investors Service. INVESTMENT PERFORMANCE OUTLOOK We anticipate continued modest economic growth. Gross Domestic Product will likely continue to expand at an annualized rate of 2.5% or a bit higher for the remainder of the year. This could be slightly above the Federal Reserve's target growth rate, but not so much so that we would expect rates to move dramatically higher. As we mentioned earlier, radical suggestions for tax reform had been hurting the municipal market and these now appear to have been put on the sidelines. And, since the close of this reporting period, investors in stocks have encountered significantly greater volatility. A riskier stock market could enhance the appeal of fixed-income securities. In our view the municipal market is now fairly valued, and our outlook for the balance of 1996 is positive. We appreciate your investment in the Calvert Vermont Municipal Portfolio. Sincerely, 2-CTFR VERMONT MUNICIPAL PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) Periods Ended 6/30/96 6 Months 12 Months ------------------------------------------------ Vermont Municipal Portfolio -.58% 6.21% Lipper Other States Muni Fund Avg. -.99% 5.88% Investment performance is for Class A shares and does not reflect the deduction of any front-end sales charge. /s/ David Rochat David Rochat Senior Vice President July 31, 1996 Important Notice To Investors in Class C Shares On or about October 28, 1996, all outstanding Class C accounts in the Calvert Vermont Municipal Portfolio will be converted into an equal dollar amount of Class A shares. The shares will be converted at net asset value with no sales charge. This exchange will have a positive impact on your return, since Class A shares have a lower expense ratio than Class C shares. You do not need to take any action. The conversion will take place automatically. The conversion will be a non- taxable event, meaning you should not incur any taxes as a result. No new Class C accounts may be opened after August 23, 1996. Owners of Class C accounts opened on or before that date may continue to purchase Class C shares for existing Class C accounts until the date of conversion. Ratings Breakdown 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. SEMI-ANNUAL REPORT (UNAUDITED) CTFR VERMONT MUNICIPAL PORTFOLIO - 3 [GRAPH APPEARS HERE] AAA/Aaa AA/Aa A/a BBB/Baa NR 40% 24% 16% 12% 8% PERFORMANCE COMPARISON Comparison of change in value of a hypothetical $10,000 investment. [CHART APPEARS HERE] Total returns assume reinvestment of dividends and, for Class A shares, reflect the deduction of the fund's maximum sales charge of 3.75%. No sales charge has been applied to the index used for comparison. The value of an investment in Class A shares is plotted in the line graph. The value of an investment in Class C shares would be different. Past performance is no guarantee of future returns. 4 - CTFR VERMONT MUNICIPAL PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) PORTFOLIO STATISTICS WEIGHTED AVERAGE MATURITY 12/31/95 6/30/96 --------------------- 14 years 13 years SEC YIELDS Class A Class C Thirty Days Ended 6/30/96 6/30/96 - ------------------------------------------------------------------------------- 4.93% 3.15% Yields assume reinvestment of dividends. AVERAGE ANNUAL TOTAL RETURNS for periods ended 6/30/96 Class A Shares One Year 2.20% Since Inception (4/91) 6.30% Class C Shares One Year 4.07% Since Inception (3/94) 2.96% STATEMENT OF NET ASSETS JUNE 30, 1996 SEMI-ANUAL REPORT (UNAUDITED) CTFR VERMONT MUNICIPAL PORTFOLIO - 5 Principal Amount Value - ------------------------------------------------------------------------------------------------------ Vermont Municipal Obligations - 97.6% $2,000,000 Burlington Electric Revenue Bonds, 6.25%, 7/1/14, MBIA Insured...... $2,050,560 Burlington Public Improvement General Obligation Bonds: 265,000 6.40%, 5/1/01..................................................... 276,331 700,000 6.50%, 5/1/02..................................................... 729,883 100,000 6.50%, 5/1/04..................................................... 103,759 220,000 6.50%, 5/1/06..................................................... 227,095 2,000,000 Chittenden Unlimited Tax General Obligation Bonds, 6.60%, 1/1/12 Asset Guaranty Insured..................................... 2,084,440 Rutland County Solid Waste General Obligation Bonds: 110,000 5.80%, 11/1/99.................................................... 113,420 110,000 5.95%, 11/1/00.................................................... 114,329 110,000 6.10%, 11/1/01.................................................... 115,339 110,000 6.25%, 11/1/02.................................................... 116,405 110,000 6.35%, 11/1/03.................................................... 117,077 110,000 6.45%, 11/1/04.................................................... 117,818 105,000 6.50%, 11/1/05.................................................... 112,740 100,000 6.55%, 11/1/06.................................................... 107,535 100,000 6.60%, 11/1/07.................................................... 107,606 100,000 6.70%, 11/1/08.................................................... 108,028 100,000 6.75%, 11/1/09.................................................... 107,956 100,000 6.80%, 11/1/10.................................................... 108,315 100,000 6.80%, 11/1/11.................................................... 108,149 100,000 6.85%, 11/1/12.................................................... 108,437 1,800,000 Vermont Education and Health - Central Vermont Hospital, 7.00%, 10/1/22.................................................... 2,018,700 2,000,000 Vermont Education and Health - Central Vermont Hospital, 5.00%, 11/15/15, AMBAC Insured.................................... 1,783,040 1,000,000 Vermont Education and Healthy - Lyndon Institute Project, 6.60%, 12/1/14.................................................... 972,970 2,095,000 Vermont Education and Health - Middlebury College, 6.00%, 11/1/13.................................................... 2,109,686 2,000,000 Vermont Education and Health - Northwestern Medical Center, 6.25%, 9/1/18..................................................... 1,887,800 580,000 Vermont Education and Health - Norwich University, 5.75%, 9/1/05..................................................... 594,065 1,500,000 Vermont Education and Health - Norwich University, 6.00%, 9/1/13..................................................... 1,459,155 1,000,000 Vermont Education and Health - Southwestern Vermont Medical Center, 5.625%, 5/1/25, FSA Insured............................... 949,800 1,085,000 Vermont Education and Health - St. Johnsbury Academy, 7.30%, 4/15/18.................................................... 1,159,659 Vermont Education and Health - St. Michael's College: 50,000 7.40%, 6/1/99..................................................... 53,283 125,000 7.80%, 6/1/02..................................................... 133,066 2,000,000 7.05%, 10/1/16.................................................... 2,182,740 6-CTFR VERMONT MUNICIPAL PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) Principal Amount Value - ------------------------------------------------------------------------------- $750,000 Vermont Education and Health - Vermont Medical Center Bonds, 6.00%, 9/1/22, FGIC Insured..................... $749,925 65,000 Vermont Housing Finance Authority Home Mortgage Purchase Series A Bonds, 7.25%, 12/1/00......................... 67,518 175,000 Vermont Housing Finance Authority Single Family Series 1 Housing Bonds, 8.15%, 5/1/25........................... 184,226 1,200,000 Vermont Housing Finance Authority Single Family Series 2 Housing Bonds, 7.20%, 11/1/11.......................... 1,235,532 1,250,000 Vermont Industrial Development Authority Revenue Bonds, 5.775%, 12/1/01, Letter of Credit: Vermont National Bank................................................... 1,250,000 Vermont Municipal Bond Bank Revenue Bonds: 130,000 Series 1, 7.35%, 12/1/97............................... 135,803 420,000 Series 1, 6.60%, 12/1/98............................... 441,508 130,000 Series 1, 7.35%, 12/1/98............................... 138,363 1,000,000 Series 1, 5.375%, 12/1/13.............................. 965,420 1,500,000 Series 1, 6.875%, 12/1/22.............................. 1,665,675 200,000 Series 2, 6.50%, 12/1/98............................... 209,786 500,000 Series 2, 7.10%, 12/1/99 (Prerefunded 12/1/98 @ 102).. 541,395 500,000 Series 2, 6.60%, 12/1/00............................... 539,230 750,000 Series B, 7.25%, 12/1/98............................... 774,188 190,000 Vermont Public Power Supply Authority Bonds, 6.50%, 7/1/99, AMBAC Insured.................................. 195,884 1,000,000 Vermont State College Revenue Bonds, 8.00%, 7/1/18, (Prerefunded 7/1/99 @ 102)............................. 1,114,640 1,360,000 Vermont State College Revenue Bonds, 5.125%, 7/1/18, MBIA Insured................................................ 1,245,107 Vermont State General Obligation Bonds: 1,500,000 5.70%, 1/15/00......................................... 1,554,390 1,740,000 6.50%, 2/1/01.......................................... 1,868,656 2,500,000 6.30%, 1/15/06......................................... 2,707,550 500,000 6.50%, 2/1/07, (Prerefunded 2/1/01 @ 102).............. 544,185 1,000,000 6.40%, 2/1/08.......................................... 1,090,880 400,000 Zero Coupon, 8/1/08................................... 202,492 300,000 Zero Coupon, 8/1/09.................................... 141,741 1,000,000 4.90%, 2/1/10.......................................... 924,980 1,000,000 6.45%, 2/1/11.......................................... 1,093,300 1,950,000 6.45%, 2/1/12.......................................... 2,131,935 2,440,000 Vermont State Lease Certificates of Participation, 6.50%, 7/1/11, MBIA Insured............................ 2,561,512 2,000,000 Vermont Student Assistance Corporation Education Loan Series A Revenue Bonds, 6.50%, 6/15/00, AMBAC Insured.. 2,092,740 2,240,000 Vermont Student Assistance Corporation Education Loan Series A-3 Revenue Bonds, 6.50%, 12/15/05, FSA Insured. 2,381,344 1,000,000 Vermont Student Assistance Corporation Education Loan Series B Revenue Bonds, 6.70%, 12/15/12, FSA Insured... 1,036,490 400,000 Windham County Solid Waste General Obligation Bonds, 6.40%, 12/1/97......................................... 399,768 ----------- TOTAL INVESTMENTS (Cost $52,305,599) - 97.6%.............54,525,349 Other assets and liabilities, net - 2.4%................. 1,328,861 ----------- Net Assets - 100%.......................................$55,854,210 =========== Abbreviations: AMBAC - AMBAC Indemnity Corporation FGIC - Financial Guaranty Insurance Company FSA - Financial Security Assurance MBIA - MBIA Insurance Corporation See notes to financial statements. SEMI-ANNUAL REPORT (UNAUDITED) CTFR VERMONT MUNICIPAL PORTFOLIO - 7 Net Assets Consist of: Value - ------------------------------------------------------------------ Paid-in capital applicable to the following shares of beneficial interest, unlimited number of no par shares authorized: Class A: 3,442,015 shares outstanding............ $53,123,592 Class C: 27,245 shares outstanding............... 429,420 Undistributed net investment income................. 208,717 Accumulated net realized gain (loss) on investments. (127,269) Net unrealized appreciation (depreciation) on investments........................................ 2,219,750 ----------- Net assets........................................ $55,854,210 =========== Net Asset Value per Share - ------------------------------------------------------------------ Class A (based on net assets of $55,421,339)......... $16.10 =========== Class C (based on net assets of $432,871)............ $15.89 =========== STATEMENT OF OPERATIONS SIX MONTHS ENDED JUNE 30, 1996 See notes to financial statement. 8 - CTFR VERMONT MUNICIPAL PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) Net Investment Income - -------------------------------------------------------------------------------- Investment Income Interest income.............................................. $ 1,742,811 ----------- Expenses Investment advisory fee...................................... 173,473 Transfer agency fees and expenses............................ 13,187 Distribution plan expenses of Class C........................ 2,237 Trustees' fees and expenses.................................. 2,493 Administrative fees.......................................... 2,069 Custodian fees............................................... 10,120 Registration fees............................................ 4,112 Reports to shareholders...................................... 12,240 Professional fees............................................ 2,911 Miscellaneous................................................ 9,464 ----------- Total expenses............................................ 232,306 Fees paid indirectly...................................... (10,120) ----------- Net expenses........................................... 222,186 ----------- Net Investment Income............................... 1,520,625 ----------- Realized and Unrealized Gain (Loss) on Investments - -------------------------------------------------------------------------------- Net realized gain (loss) on: Securities................................................... (20,247) Futures...................................................... (161,144) ----------- (181,391) Change in unrealized appreciation or depreciation............... (1,718,846) ----------- Net Realized and Unrealized Gain (Loss) on Investments...................................... (1,900,237) ----------- Increase (Decrease) in Net Assets Resulting From Operations........................... (379,612) =========== STATEMENT OF CHANGES IN NET ASSETS See notes to financial statements. SEMI-ANNUAL REPORT (UNAUDITED) CTFR VERMONT MUNICIPAL PORTFOLIO - 9 Six Months Ended Year Ended INCREASE (DECREASE) IN NET ASSETS June 30, 1996 Dec. 31, 1995 - ---------------------------------------------------------------------------------------------- Operations Net investment income............................................ $ 1,520,625 $ 3,335,609 Net realized gain (loss)......................................... (181,391) 829,370 Change in unrealized appreciation or depreciation................ (1,718,846) 4,506,456 ----------- ------------ INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS....................................... (379,612) 8,671,435 ----------- ------------ Distributions to shareholders from Net investment income: Class A shares................................................. (1,489,144) (3,270,290) Class C shares................................................. (7,669) (18,419) Net realized gain: Class A shares................................................. - (336,995) Class C shares................................................. - (2,227) ----------- ------------ Total distributions.............................................. (1,496,813) (3,627,931) ----------- ------------ Capital share transactions Shares sold: Class A shares................................................. 2,437,671 4,860,473 Class C shares................................................. 251,341 430,193 Reinvestment of distributions: Class A shares................................................. 648,393 2,192,127 Class C shares................................................. 7,581 19,158 Shares redeemed: Class A shares................................................. (6,006,687) (16,079,754) Class C shares................................................. (205,371) (306,328) ----------- ------------ Total capital share transactions................................. (2,867,072) (8,884,131) ----------- ------------ TOTAL INCREASE (DECREASE) IN NET ASSETS........................... (4,743,497) (3,840,627) NET ASSETS - ---------------------------------------------------------------------------------------------- Beginning of period.............................................. 60,597,707 64,438,334 ----------- ------------ End of period (including undistributed net investment income of $208,717 and $184,905, respectively)............................ $55,854,210 $ 60,597,707 =========== ============ 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. The Portfolio offers Class A and Class C shares of beneficial interest. Class A shares are sold with a maximum front-end sales charge of 3.75%. Class C shares, which have no transaction-based sales charge, have a higher annual expense rate than Class A. Each class has different: (a) dividend rates, due to differences in Distribution Plan expenses and other class specific expenses, (b) exchange privileges and (c) class specific voting rights. 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. 10 - CTFR VERMONT MUNICIPAL PORTFOLIO SEMI-ANNUAL REPORT (UNAUDITED) 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. A Distribution Plan, adopted by Class C shareholders, allows the Portfolio 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 C. The Distributor received $13,941 as its portion of commissions charged on sales of the Portfolio's Class A shares. 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 receives an annual fee of $20,250 plus up to $1,200 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 $5,565,639 and $9,975,634, respectively. The cost of investments owned at June 30, 1996 was substantially the same for federal income tax and financial reporting purposes. Net unrealized appreciation aggregated $2,219,750, of which $2,466,649 related to appreciated securities and $246,899 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. The transactions are effected at par with no gain or loss to the Portfolio, in accordance with policies of the Fund. SEMI-ANNUAL REPORT (UNAUDITED) CTFR VERMONT MUNICIPAL PORTFOLIO - 11