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Tax-Exempt California Money Market Fund
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DEAR SHAREHOLDERS:
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We are pleased to provide you with the Tax-Exempt California Money Market
Fund annual report for the year ended September 30, 1996.
Your Fund's management greatly appreciates your decision to invest in Tax-Exempt
California Money Market Fund. During the past year, the Fund registered solid
performance and achieved its objective of providing maximum current income that
is exempt from Federal and State of California income taxes while maintaining
stability of principal.
ECONOMIC REVIEW AND OUTLOOK
Currently, overall economic activity is reported to be generally favorable and
expanding moderately. We anticipate no material changes in the pace of economic
growth or inflationary pressures for the foreseeable future.
Nevertheless, the economy should continue to show above trend growth, and the
Federal Reserve should become increasingly concerned about the prospects for
inflation and eventually raise interest rates.
Money market funds such as Tax-Exempt California Money Market Fund should offer
the opportunity for attractive yields and should continue to be an excellent
place to invest your money.
Your Fund's management thanks you for the vote of confidence you have shown
through your investment, and continues its dedication to performance. We look
forward to serving your investment needs for years to come.
Sincerely,
Frank Rachwalski
Frank Rachwalski
Vice President and Portfolio Manager
October 11, 1996
Frank Rachwalski is Senior Vice President of Zurich Kemper Investments, Inc. and
Vice President and Portfolio Manager of Tax-Exempt California Money Market Fund.
Mr. Rachwalski holds a B.B.A. and a M.B.A. degree from Loyola University.
PORTFOLIO RESULTS
For the year ended September 30, 1996, the Tax-Exempt California Money Market
Fund had a net annualized yield of 2.88% and a tax-equivalent yield of 5.04%.
NOTES
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
The Fund's net annualized yield for the year ended September 30, 1996, is the
annualized sum of the daily dividend rates for the period. Yields are historical
and may not represent future yields, which will fluctuate.
The tax-equivalent yield is based upon the Fund's yield and a combined Federal
and State of California marginal income tax rate of 42.9%. Income may be subject
to local taxes and for some investors, the alternative minimum tax.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report as stated above. The manager's views
are subject to change at any time, based on market and other conditions.
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Tax-Exempt California Money Market Fund
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PORTFOLIO OF INVESTMENTS
September 30, 1996
(Value in thousands)
<TABLE>
<CAPTION>
Value
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<S> <C>
(A)VARIABLE RATE DEMAND SECURITIES
State of California
Pollution Control Financing Authority
Occidental Geothermal Inc. Project
3.55% $ 2,500
Pacific Gas and Electric Company
3.85% 2,700
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Auburn
Union School District
3.90% 3,625
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Costa Mesa
Performing Arts Center
3.65% 4,650
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Fremont
Multifamily Housing Revenue
3.70% 3,000
Public Financing Authority
3.90% 4,700
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Irvine
Assessment District
3.60% 2,000
East Investment Company Revenue
3.65% 1,750
Public Facilities and Infrastructure Authority
3.60% 3,500
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Kern County
Community College District
4.45% 4,500
Public Facilities Project
3.65% 3,400
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Los Angeles
Housing Authority
3.90% 3,400
Pension Obligation Bonds
3.70% 5,200
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Monterey County
Peninsula Water Management District
3.70% 4,500
Regional Waste Management Authority
3.90% 2,000
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Orange County
Multifamily Housing Revenue
3.80% 3,000
Sanitation District
3.90% 1,300
Water District
3.75% 3,100
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<CAPTION>
Value
<S> <C>
Palm Springs
Community Redevelopment Agency
3.75% $ 4,530
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Riverside County
Industrial Development Authority
3.65% 1,300
Tax and Revenue Anticipation Notes
3.70% 3,000
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Roseville
Finance Authority
3.70% 1,900
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Sacramento County
Multifamily Housing Revenue
Briarwood Apartments
3.90% 3,700
Stone Creek Apartments
3.95% 4,900
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San Bernardino
County Center
3.80% 2,100
Multifamily Housing Revenue
4.15% 1,500
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San Diego
Housing Authority
3.85% 2,600
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San Jose
Multifamily Housing Revenue
3.55% 3,000
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Santa Ana
School District
3.80% 3,000
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Santa Clara County
Transit District
3.90% 2,500
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Southeast Resource
Recovery Facilities Authority
3.95% 1,000
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Ventura County
Triunfo Sanitation District
3.90% 2,400
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TOTAL VARIABLE RATE DEMAND
SECURITIES--81.0%
(average maturity: 5 days) 96,255
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</TABLE>
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Tax-Exempt California Money Market Fund
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<TABLE>
<CAPTION>
OTHER SECURITIES Value
<S> <C>
State of California
Pollution Control Financing Authority
3.55%-3.60%, 11/13/96-12/10/96 $ 7,000
Public Capital Improvements Financing Authority
3.80%, 12/15/96 4,500
Revenue Anticipation Notes
3.97%, 6/30/97 3,011
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Riverside County
Transportation Commission
3.70%, 10/17/96 3,000
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San Diego County
Teeter Obligation Notes
3.65%, 11/7/96 3,000
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<CAPTION>
Value
<S> <C>
Puerto Rico
Industrial Development Authority
3.40%, 11/7/96 $ 2,000
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TOTAL OTHER SECURITIES--18.9%
(average maturity: 79 days) 22,511
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TOTAL INVESTMENTS--99.9%
(average maturity: 19 days) 118,766
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CASH AND OTHER ASSETS,
LESS LIABILITIES--.1% 118
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NET ASSETS--100% $118,884
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</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate securities described in Note (a). For each security, cost (for
financial reporting and federal income tax purposes) and carrying value are the
same. Likewise, carrying value approximates principal amount.
(a) Variable rate demand securities are payable within five business days and
are backed by credit support agreements from banks or insurance
institutions. The rates shown are the current rates at September 30, 1996.
See accompanying Notes to Financial Statements.
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Tax-Exempt California Money Market Fund
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REPORT OF INDEPENDENT AUDITORS
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THE BOARD OF TRUSTEES AND SHAREHOLDERS
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Exempt California Money Market Fund as of
September 30, 1996, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods since 1992.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1996 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tax-Exempt California Money Market Fund at September 30, 1996, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the fiscal periods since 1992, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1996
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5
Tax-Exempt California Money Market Fund
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STATEMENT OF ASSETS AND LIABILITIES
September 30, 1996
(in thousands)
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<TABLE>
<S> <C>
ASSETS
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Investments, at amortized cost $118,766
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Cash 34
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Receivable for:
Interest 392
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Fund shares sold 3
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Securities sold 80
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Total assets 119,275
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LIABILITIES AND NET ASSETS
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Payable for:
Dividends 141
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Fund shares redeemed 97
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Management fee 22
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Distribution services fee 33
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Custodian and transfer agent fees
and related expenses 15
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Other 83
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Total liabilities 391
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Net assets applicable to
shares outstanding $118,884
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THE PRICING OF SHARES
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Shares outstanding 118,884
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Net asset value and
redemption price per share $1.00
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</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year ended September 30, 1996
(in thousands)
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<TABLE>
<S> <C>
INTEREST INCOME $3,813
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EXPENSES:
Management fee 232
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Distribution services fee 349
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Custodian and transfer agent
fees and related expenses 103
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Professional fees 41
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Reports to shareholders 19
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Registration costs 3
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Trustees' fees and other 19
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Total expenses 766
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Net investment income $3,047
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1996 and 1995
(in thousands)
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<TABLE>
<CAPTION>
1996 1995
--------- --------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,047 3,115
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Dividends to shareholders from
net investment income (3,047) (3,115)
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CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 370,566 382,622
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Shares issued in reinvestment
of dividends 3,038 3,065
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373,604 385,687
Shares redeemed (360,012) (381,543)
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Net increase from capital share
transactions and total increase in
net assets 13,592 4,144
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NET ASSETS:
Beginning of year 105,292 101,148
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End of year $ 118,884 105,292
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</TABLE>
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Tax-Exempt California Money Market Fund
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NOTES TO FINANCIAL STATEMENTS
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1. DESCRIPTION OF THE FUND
Tax-Exempt California Money Market Fund is an open-end management investment
company organized as a business trust under the laws of Massachusetts.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at amortized cost, which approximates market value. In
the event that a deviation of 1/2 of 1% or more exists between the Fund's $1.00
per share net asset value, calculated at amortized cost, and the net asset value
calculated by reference to market-based values, or if there is any other
deviation that the Board of Trustees believes would result in a material
dilution to shareholders or purchasers, the Board of Trustees will promptly
consider what action should be initiated.
INVESTMENT TRANSACTIONS AND INTEREST INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
includes amortization of premium on investments.
FUND SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS
Fund shares are sold and redeemed on a continuous basis at net asset value. On
each day that the New York Stock Exchange is open for trading, the Fund
determines its net asset value per share at 11:00 a.m. and 3:00 p.m. Chicago
time by dividing the total value of the Fund's investments and other assets,
less liabilities, by the number of Fund shares outstanding. The Fund declares a
daily dividend, equal to its net investment income for that day, payable
monthly. Net investment income consists of all interest income, plus (minus) all
realized gains (losses) on portfolio securities, minus all expenses of the Fund.
FEDERAL INCOME TAXES
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Fund has a management agreement with Zurich Kemper Investments, Inc. (ZKI)
and pays a management fee at an annual rate of .22% of the first $500 million of
average daily net assets declining to .15% of average daily net assets in excess
of $3 billion. During the year ended September 30, 1996, the Fund incurred a
management fee of $232,000.
DISTRIBUTION AGREEMENT
The Fund also has an administration, shareholder services and distribution
agreement with Kemper Distributors Inc. (KDI). For distribution services, the
Fund pays KDI an annual fee of .33% of average daily net assets of the Fund. KDI
has related service agreements with various firms to provide cash management and
other services for Fund shareholders. Under these agreements, KDI pays such
firms at an annual rate ranging from .15% to .33% of the average daily net
assets of those accounts that they maintain and service. During the year ended
September 30, 1996, the Fund incurred a distribution services fee of $349,000,
of which KDI, pursuant to the related service agreements, remitted $346,000 to
various firms.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's transfer agent, Kemper Service
Company (KSvC) is the shareholder service agent of the Fund. Under the
agreement, KSvC received shareholder services
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Tax-Exempt California Money Market Fund
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fees of $57,000 for the year ended September 30, 1996.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of ZKI.
During the year ended September 30, 1996, the Fund made no payments to its
officers and incurred trustees' fees of $16,000 to independent trustees.
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
Year ended September 30,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
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Net investment income and dividends declared .03 .03 .02 .02 .02
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Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
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TOTAL RETURN 2.93% 3.23 1.97 1.88 2.64
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RATIOS TO AVERAGE NET ASSETS
Expenses .72% .75 .71 .69 .69
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Net investment income 2.88% 3.16 1.94 1.87 2.62
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SUPPLEMENTAL DATA
Net assets at end of year (in thousands) $118,884 105,292 101,148 122,560 128,822
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</TABLE>
FEDERAL TAX STATUS OF 1996 DIVIDENDS
All of the dividends constitute tax-exempt interest which is not taxable for
federal or State of California income tax purposes.
<PAGE> 8
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
ANNUAL REPORT
September 30, 1996
This report is not to be distributed unless preceded or
accompanied by a prospectus.
Principal Underwriter
Kemper Distributors, Inc.
222 South Riverside Plaza, Chicago, IL 60606
http://www.Kemper.com
1023540 10/96 (RECYCLE LOGO) printed on recycled paper
