Shares of Scudder California Tax Free Money Fund are not insured or guaranteed
by the U.S. government. Scudder California Tax Free Money Fund seeks to maintain
a constant net asset value of $1.00 per share, but there can be no assurance
that the stable net asset value will be maintained.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
Scudder California
Tax Free Money Fund
- ----------------------
Scudder California
Tax Free Fund
Semiannual Report
September 30, 1995
* For investors seeking double-tax-free income exempt from both California and
regular federal income taxes.
* Pure no-load(TM) funds with no commissions to buy, sell, or exchange shares.
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- --------------------------------------------------------------------------------
CONTENTS
2 In Brief
3 Letter from the Funds' President
4 Scudder California Tax Free Fund Performance Update
5 Scudder California Tax Free Fund Portfolio Summary
6 Scudder California Tax Free Money Fund
Portfolio Management Discussion
8 Scudder California Tax Free Fund Portfolio Management Discussion
13 Scudder California Tax Free Money Fund Investment Portfolio
17 Scudder California Tax Free Money Fund Financial Statements
20 Scudder California Tax Free Money Fund Financial Highlights
21 Scudder California Tax Free Fund Investment Portfolio
29 Scudder California Tax Free Fund Financial Statements
32 Scudder California Tax Free Fund Financial Highlights
33 Notes to Financial Statements
38 Investment Products and Services
39 How to Contact Scudder
IN BRIEF
Scudder California Tax Free Money Fund
* Scudder California Tax Free Money Fund offered a 7-day effective yield of
3.54% on September 30, 1995, equivalent to a 6.58% taxable yield for
investors in the top federal and state income tax brackets.
(BAR CHART TITLE) Seven-Day Effective Yields on September 30, 1995
(BAR CHART DATA)
Scudder California Tax Free Money Fund 3.54%
Taxable yield needed to equal the Fund's yield 6.58%
Scudder California Tax Free Fund
* Scudder California Tax Free Fund provided a 4.81% 30-day net annualized SEC
yield on September 30, 1995.
* For shareholders subject to the 46.24% maximum combined federal and state
income tax rate, the Fund's yield was equal to a taxable yield of 8.95%.
(BAR CHART TITLE) 30-Day Yields on September 30, 1995
(BAR CHART DATA)
Scudder California Tax Free Fund 4.81%
Taxable yield needed to equal the Fund's yield 8.95%
* Scudder California Tax Free Fund earned the number one ranking among
California tax-free funds for the five-year period ended September 30,
1995. Page 8 contains additional information about the Fund's ranking.
- ----
2
<PAGE>
LETTER FROM THE FUNDS' PRESIDENT
- --------------------------------------------------------------------------------
Dear Shareholders,
In our annual report dated March 31 we wondered whether we had seen the
highs in interest rates after their persistent rise in 1994. The answer turned
out to be "yes," for the most part. As the U.S. economy slowed and inflation
remained quiescent during the first quarter of 1995 and beyond, the Federal
Reserve permitted short-term interest rates to ease downward, cutting the
federal funds rate by 0.25% in July.
Throughout 1995, investors have been anticipating an economic slowdown, but
for now economic indicators are turning up, corporate profits remain healthy,
and consumers have responded to lower short-term rates by borrowing and spending
more. We believe consumers will fuel this reacceleration of U.S. economic
activity until their increasingly high debt burdens force them to tighten their
budgetary belts. The current economic expansion cycle is extremely mature, and
we expect a slowdown sometime in the second half of 1996.
What does this mean for tax-exempt fund investors? It's possible that
the pickup in economic activity could lead to some increases in interest rates
over the short term. But the economy is extremely interest-rate sensitive and
should respond quickly to any rate changes. When the economy begins to slow
down, rates should move down, too. Most importantly, the relationship between
supply and demand for municipal bonds should work in favor of tax-exempt
investors as the supply of bonds continues to shrink, placing upward pressure on
prices.
As always, your portfolio managers will continue to focus their efforts
on fundamental research and security selection as a means of generating high
current income and attractive total returns. Please call a Scudder Investor
Relations representative if you have questions about your Fund. Page 39 provides
more information on how to contact Scudder. Thank you for choosing Scudder
California Tax Free Funds to help meet your investment needs.
Sincerely,
/s/ David S. Lee
David S. Lee
President,
Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
----
3
<PAGE>
Scudder California Tax Free Fund
Performance Update as of September 30, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder California Tax Free Fund
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,057 10.57% 10.57%
5 Year $15,409 54.09% 9.03%
10 Year $23,729 137.29% 9.03%
Lehman Brothers Municipal Bond Index
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/95 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $11,118 11.18% 11.18%
5 Year $15,289 52.89% 8.86%
10 Year $25,121 151.21% 9.64%
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended September 30
Scudder California Tax Free Fund
Year Amount
- ----------------------
85 $10,000
86 $12,054
87 $11,857
88 $13,374
89 $14,700
90 $15,399
91 $17,545
92 $19,513
93 $22,619
94 $21,461
95 $23,729
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
85 $10,000
86 $12,465
87 $12,530
88 $14,156
89 $15,385
90 $16,431
91 $18,598
92 $20,542
93 $23,160
94 $22,594
95 $25,121
The unmanaged Lehman Brothers Municipal Bond Index is a market
value-weighted measure of municipal bonds issued across the United
States. Index issues have a credit rating of at least Baa and a
maturity of at least two years. Index returns assume reinvestment
of dividends and, unlike Fund returns, do not reflect any fees or
expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly periods ended September 30
- ---------------------------------
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1986 1987 1988 1989 1990 1991 1992 1993 1994 1995
--------------------------------------------------------------------------------
Net Asset Value... $10.76 $ 9.65 $10.16 $10.43 $10.11 $10.62 $10.83 $11.29 $ 9.78 $10.28
Income Dividends.. $ .72 $ .70 $ .68 $ .67 $ .63 $ .63 $ .60 $ .56 $ .52 $ .50
Capital Gains
and Other
Distributions..... $ .30 $ .26 $ -- $ .05 $ .17 $ .22 $ .34 $ .60 $ .44 $ --
Fund Total
Return (%)........ 20.54 -1.64 12.79 9.91 4.76 13.93 11.22 15.92 -5.12 10.57
Index Total
Return (%)........ 24.65 .52 12.98 8.68 6.80 13.19 10.45 12.74 -2.44 11.18
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results.
Investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than when purchased.
- ----
4
<PAGE>
Portfolio Summary as of September 30, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Lease Rentals 30%
Hospital/Health 20% Scudder California Tax Free
Sales & Special Tax 15% Fund is broadly diversified,
Housing Finance with investments in over 150
Authority 12% different issues.
Water/Sewer Revenue 5%
Pollution Control 4%
Electric Utility Revenue 4%
School District/Lease 4%
Toll Revenue 3%
Miscellaneous Municipal 3%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 58%
AA 5% The Fund continues to emphasize
A 24% high quality, with 58% of its
BBB 9% portfolio in AAA-rated tax-exempt
Not Rated 4% bonds.
----
100%
====
Weighted average quality: AA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 5% Bonds with maturities between
1 - 5 years 12% five and 20 years, 58% of the
5 - 10 years 23% Fund's portfolio as of September
10 - 20 years 35% 30, currently offer good value
Greater than 20 years 25% and attractive yields.
----
100%
====
Weighted average effective maturity: 14 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
For more complete details about the Fund's Investment Portfolio,
see page 21.
----
5
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
Scudder California Tax Free Money Fund's semiannual period ended
September 30, 1995, was characterized by slightly lower interest rates and more
stability overall for the California tax-exempt money markets. The period stood
in contrast to the Fund's 1994 fiscal year, when the Federal Reserve boosted
short-term interest rates substantially to fend off inflation. Besides the
easing of rates, the most important market influence during the period was
California's heavy short-term municipal financing calendar, which is largely
restricted to July through September. The abundance of supply during this period
tended to depress prices and raise yields of new issues, creating attractive
values.
Because of the relatively strong supply of issues, and because we
believed that the Federal Reserve's next move would be to lower interest rates,
we felt that this was an ideal time to extend the Fund's maturity. As of
September 30, 1995, the Fund's average maturity stood at 73 days, compared with
39 days six months earlier. Our longer maturity has helped us keep the Fund's
yield almost identical to its yield six months before, despite the trend toward
lower rates: Scudder California Tax Free Money Fund's 7-day effective yield was
3.54% on September 30, compared with 3.58% on March 31. For investors in the
highest combined state and federal income tax bracket, this yield equaled a
6.58% compounded taxable yield, well above the 5.25% average for taxable money
funds, according to IBC/Donoghue, Inc., an independent firm that tracks money
fund performance. The Fund provided a total return of 1.70% for the six months
ended September 30, 1995, assuming reinvestment of all income distributions,
which totaled $0.017 during the period.
The Orange County financial crisis is slowly moving toward
resolution, and it appears that the county will emerge from bankruptcy in the
near future. Though some investors have ruled out purchases of Orange County
bonds or pooled securities throughout California, we believe our comprehensive
research may identify opportunities among these issuers that are worth
- ----
6
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
considering. At the same time, we will remain cautious, keeping the Fund's price
stability a top priority. Looking ahead, we continue to believe that rates will
head lower. Our continuing objective for Scudder California Tax Free Money Fund
is to maintain a stable $1.00 share price through a portfolio of high-quality,
short-term municipal securities while actively managing the Fund's average
maturity to provide a competitive double-tax-free yield.
If you have questions about the Fund or your investments, please
call a Scudder Investor Relations representative at 1-800-225-2470. Page 39
provides more information on how to contact Scudder. Thank you for choosing
Scudder California Tax Free Money Fund to help meet your investment needs.
Sincerely,
Your Portfolio Management Team
/s/Rebecca Wilson /s/K. Sue Cote
Rebecca Wilson K. Sue Cote
----
7
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Dear Shareholders,
On September 30, 1995, Scudder California Tax Free Fund provided a
30-day net annualized SEC yield of 4.81%. For shareholders subject to the 39.60%
maximum federal income tax rate and the 11.00% maximum California state income
tax rate, the Fund's yield is equivalent to a taxable yield of 8.95%. During the
six-month period ended September 30, 1995, shareholders received $0.25 per share
of income exempt from both federal and California state income taxes.
In a municipal market characterized by wide price fluctuations,
the Fund's share price increased $0.21 to $10.28 per share over the six-month
period. The Fund provided a total return of 4.63% through a combination of
interest income and share price appreciation. The Fund's return compares
favorably with an average total return of 4.20% for the 103 California municipal
funds tracked by Lipper Analytical Services for the same period.
Scudder California Tax Free Fund also has exceeded the average
performance of California tax-exempt funds over one-, three-, four-, five- and
ten-year periods. The Fund continues to hold the number one ranking for total
return among California tax-free funds for the five years ended September 30,
1995.
The chart below illustrates how the Fund ranked for various periods.
Scudder California Tax Free Fund's Average Annual Total Return
versus the Lipper Average of All California Tax-Free Funds
(For periods ended September 30, 1995)
--------------------------------------------------------------------
Scudder
California Lipper Number of
Tax Free average Funds
Period Fund return annual return Rank tracked
--------------------------------------------------------------------
Six months 4.63% 4.20% 20 103
--------------------------------------------------------------------
One year 10.57 9.58 19 92
--------------------------------------------------------------------
Two years 2.43 2.50 39 71
--------------------------------------------------------------------
Three years 6.74 6.12 9 57
--------------------------------------------------------------------
Four years 7.84 6.99 3 50
--------------------------------------------------------------------
Five years 9.03 8.15 1 46
--------------------------------------------------------------------
Ten years 9.03 8.60 6 20
--------------------------------------------------------------------
Past performance is no guarantee of future results.
- ----
8
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Congress, the Budget, and Higher Demand for Bonds
The change in the political majorities in Congress last November
brought renewed optimism that the federal budget deficit could finally be dealt
with. Both the Clinton administration and Congress have agreed in principle to
balance the federal budget -- their disagreement lies in the timing and in a
host of specifics. Nevertheless, this broad basis of agreement has encouraged
the financial markets to believe that the size and quantity of debt instruments
being issued by the federal government will tend to diminish over the next
couple of years. The move toward balancing the budget also reduces inflationary
expectations. Both factors have created a more positive environment for bond
investors over the past year.
Two Distinct Periods
During the six-month period ended September 30, we maintained
Scudder California Tax Free Fund's average effective maturity at
higher-than-average levels and kept the Fund's cash position low to help the
Fund regain ground lost in 1994's poor bond market. So far, this strategy has
worked to the Fund's advantage.
The municipal bond market experienced two distinct periods of
performance during the past six months. The first period, from April to June,
was marked by steadily rising bond prices and declining yields. A weaker U.S.
economy, due partly to the extremely weak dollar and the Mexican peso crisis of
the first quarter of 1995, created the conditions for the bond market rally.
U.S. Gross Domestic Product (GDP) fell to its lowest level since the fourth
quarter of 1993 during this period. As a result of the lackluster economy, the
Federal Reserve stopped raising interest rates, which had been ratcheting higher
since February 1994.
During the second part of the semiannual period, which ran from
June until the end of September, the U.S. economy reaccelerated modestly while
bond prices remained largely unchanged. This period was also marked by
considerable discussion in Congress of various "flat tax" proposals, resulting
in a weakening of demand for municipal bonds. In our opinion, any tax proposal
that becomes law will most likely continue to tax interest income at
substantially high rates, ensuring that municipal bonds continue to be
worthwhile investments for investors in high tax brackets.
----
9
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
The Fund's Four-Point Strategy
The Fund's investment strategy continues to focus on four basic
elements: (1) purchasing bonds with effective maturities of less than 20 years,
(2) purchasing noncallable bonds at yields close to those of callable bonds with
comparable maturities, (3) purchasing high-yielding callable bonds, and (4)
diversifying investments based on careful credit selection.
Bonds with effective maturities of at least five but less than 20
years represented almost 58% of the portfolio on September 30, 1995, compared
with approximately 48% on March 31, 1995. Bonds in this maturity range currently
offer good value and provide attractive yields with less price volatility than
longer-term bonds. These bonds are also generally less sensitive to changes in
interest rates because of their shorter maturities.
While shorter-maturity bonds and noncallable bonds offer a
relative degree of price stability, they also typically yield less than
longer-maturity, callable debt instruments. In order to enhance the portfolio's
overall yield, we selectively purchased higher-coupon bonds that can be called
by their issuers in a relatively short time. Typically, these bonds provide
yields three quarters to one percentage point higher than noncallable bonds
maturing on similar call dates, a yield advantage we believe more than
compensates for their callability.
Scudder California Tax Free Fund continues to emphasize careful
credit selection and portfolio diversification, investing in a variety of issues
including general obligation, water district, hospital, single family,
multi-family, school district, lease, and tax allocation bonds as of September
30, 1995. The Fund's average credit quality at the end of September was AA.
Los Angeles and Orange Counties
As most California residents know only too well by now, Orange
County declared bankruptcy in December 1993 after incurring substantial losses
in its large investment pool. Scudder California Tax Free Fund was not adversely
affected by the bankruptcy because the Fund did not own any obligations of the
county at the time. Since then, the California legislature has drawn up a
"bailout" package that Governor Wilson has signed into law. Based on the
provisions of the package, we anticipate that Orange County will be able to
emerge from bankruptcy some time during 1996. We intend to selectively purchase
Orange County debt securities that we deem attractive.
- ----
10
<PAGE>
PORTFOLIO MANAGEMENT DISCUSSION
- --------------------------------------------------------------------------------
Los Angeles County has recently experienced significant fiscal
difficulties and budget shortfalls. As a result, both Standard & Poor's and
Moody's credit agencies have lowered the County's credit rating to A1/A-. None
of the Fund's holdings was adversely affected by these downgrades. As with
Orange County, we will continue to consider selected Los Angeles County bonds
for purchase, based on our research and the relative value of each issue.
California's Economy
California's economy has been recovering steadily from its 1994
slowdown; the state gained 300,000 jobs over the past two years. However,
800,000 jobs were lost during the recession of the early 1990s, and we do not
expect the state to fully regain them until the end of the decade. California's
unemployment rate was 7.2% in September 1995, a marked improvement over its 1993
rate of 9.2% but still substantially higher than the 5.6% national average.
Further impeding the state's economic recovery is California's declining wealth:
Per capita income declined from 118% of the national average to 103% from 1980
to 1994. Much of this decline stems from changes in the state's unemployment
base as California's economy shifts from manufacturing to service-related
industries.
Despite continued fiscal stress at the local level, the state's
budgetary problems are abating. California's budget assumptions are conservative
given the improving economy, with a 3.5% General Fund revenue increase projected
for 1996 and a rise in expenditures of 4%. Short-term borrowing levels are
expected to be the smallest in years, and it appears the state will eliminate
its accumulated deficit and post a small surplus at the end of the 1996 fiscal
year. Still, California's financial problems could re-emerge if difficult fiscal
decisions are delayed.
Our Near-Term Outlook
Led by consumers, the U.S. economy picked up steam in the third
quarter of 1995, growing at a 4.2% rate. Auto sales, consumer spending, and
employment have all improved. However, we are concerned about consumers' staying
power, since borrowing appears to be the major source of funds for this spending
increase. We believe the U.S. economy will slow sometime in late 1996 as
consumers spend less and as businesses make anticipated cuts in capital
expenditures. Meanwhile, inflation remains in check (for the 12 months ended
August 31, 1995, consumer prices rose only 2.6%). We are hopeful that this
combination of
----
11
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
economic slowdown and low inflation, which historically has been beneficial for
the bond markets, will set the stage for an attractive longer-term environment.
In the short term, as investors recognize the high after-tax value
of municipals, we expect tax-free bonds to make some gains. As we pursue Scudder
California Tax Free Fund's objectives, we intend to continue to emphasize
noncallable bonds with effective maturities between five and 15 years. As
always, we will pay close attention to credit quality as we position the Fund to
seek high double-tax-free income and a competitive total return.
Sincerely,
Your Portfolio Management Team
/s/Jeremy L. Ragus /s/Donald C. Carleton
Jeremy L. Ragus Donald C. Carleton
- ----
12
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
INVESTMENT PORTFOLIO as of September 30, 1995 (Unaudited)
- ----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------
100.0% MUNICIPAL INVESTMENTS
------------------------------------------------------------------------------------------------------
CALIFORNIA Anaheim, CA, Electric Utility, Revenue Anticipation
Note, Tax Exempt Commercial Paper:
3.7%, 10/20/95 .................................. 750,000 A1+ 750,000
3.7%, 12/12/95 .................................. 1,000,000 A1+ 1,000,000
Butte Office of Education, CA, Tax and Revenue
Anticipation Notes, 5%, 10/27/95 ................. 1,000,000 SP1+ 1,000,546
California Health Facilities Finance Authority:
Catholic Healthcare West, Series C, Variable Rate
Demand Note, 4.15%, 7/1/20 (c)* ................. 1,000,000 A1+ 1,000,000
Pooled Loan Program, Series 1985 B, Weekly
Demand Note, 4.1%, 10/1/10 (c)* ................. 100,000 AAA 100,000
Sutter Health, Series B, Daily Demand Bond,
4.7%, 3/1/20* ................................... 300,000 A1+ 300,000
California Pollution Control Financing Authority,
Pacific Gas & Electric Company, Series 1988 C,
Tax Exempt Commercial Paper, 3.35%, 10/11/95 ..... 1,000,000 A1+ 1,000,000
California Pollution Control Revenue, Minnesota,
Mining & Manufacturing, Weekly Demand Bond,
4.1%, 11/1/96* ................................... 400,000 MIG1 400,000
California Pollution Control Revenue, Shell Oil
Company Project, Series A, Daily Demand Bond,
4.3%, 10/1/08* ................................... 200,000 A1+ 200,000
California Revenue Anticipation Warrants,
Series C, 5.75%, 4/25/96 ......................... 3,000,000 MIG1 3,019,277
Chino, CA, Unified School District, Certificate of
Participation, Refunding Capital Construction
Project, Variable Rate Demand Bond,
4.15%, 9/1/08* ................................... 2,600,000 MIG1 2,600,000
City of Industry, Los Angeles County, CA, Industrial
Development Revenue, Helene Curtis, Inc.,
Weekly Demand Bond, 4.35%, 10/1/06* .............. 1,900,000 A1+ 1,900,000
Contra Costa, CA, Transportation Authority, Sales
Tax Revenue , Series A, Weekly Demand Bond,
3.9%, 3/1/09 (c)* ................................ 1,000,000 MIG1 1,000,000
Delmar Racetrack Authority, CA, Tax Exempt
Commercial Paper:
3.7%, 10/26/95 .................................. 1,000,000 A1+ 1,000,000
3.65%, 11/16/95 ................................. 1,000,000 A1+ 1,000,000
East Bay, CA, Municipal Utility District, Tax Exempt
Commercial Paper, 3.6%, 12/12/95 ................. 500,000 A1+ 500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
El Cerrito, CA, Tax & Revenue Anticipation Note,
4.5%, 7/5/96 ...................................... 1,000,000 MIG1 1,003,650
Escondido, CA, Multi-Family Housing Revenue,
Series 1985 A, Morning View Terrace Project,
Variable Rate Demand Note, 3.75%, 2/15/07* ........ 600,000 MIG1 600,000
Fontana, CA, Unified School District, Tax and
Revenue Anticipation Note, 4.5%, 7/5/96 ........... 1,500,000 SP1+ 1,504,376
Glendale, CA, Reliance Development Co. Inc.,
Public Parking Project, Series 1984 A,
Variable Rate Demand Bond, 4.05%, 12/1/14* ........ 700,000 A1+ 700,000
Huntington Beach, CA, River Meadows Apartments,
Variable Rate Demand Bond, 4.625%, 10/1/05* ....... 1,500,000 SS&C 1,500,000
Irvine, CA, Improvement Bond, Assessment
District 89-10, Daily Demand Bond, 4.7%, 9/2/15* .. 2,690,000 A1+ 2,690,000
Kern County, CA, Certificate of Participation,
Public Facilities Project, Variable Rate
Demand Bond:
Series A, 4.15%, 8/1/06* ......................... 1,400,000 MIG1 1,400,000
Series D, 4.15%, 8/1/06* ......................... 1,700,000 MIG1 1,700,000
Lancaster, CA, Redevelopment Agency, Multi-Family
Housing Revenue, Westwood Park Apartments,
Variable Rate Demand Notes, 3.75%, 12/1/07* ....... 600,000 MIG1 600,000
Los Angeles County, CA, Tax and Revenue
Anticipation Notes, 4.5%, 7/1/96 .................. 1,000,000 MIG1 1,005,017
Los Angeles Wastewater System Revenue,
Tax Exempt Commercial Paper, 3.6%, 12/12/95 ....... 1,000,000 P1 1,000,000
Los Angeles, CA, Multi-Family Housing Revenue,
Series K, Variable Rate Demand Bond,
3.8%, 7/1/10* ..................................... 3,300,000 A1+ 3,300,000
Los Rios Community College District, Sacramento
County, CA, Tax and Revenue Anticipation Notes,
4.75%, 9/19/96 .................................... 2,000,000 MIG1 2,013,560
Ontario, CA, Multi-Family Residential Mortgage
Revenue, Park Centre Partners, Variable Rate
Demand Bond, 3.75%, 8/1/07* ....................... 2,000,000 MIG1 2,000,000
Ontario, CA, Redevelopment Agency,
Multi-Family Housing Revenue:
Daisy XX Associates, Ltd. Project, Variable Rate
Demand Note, 3.75%, 11/1/04* .................... 100,000 MIG1 100,000
Weekly Demand Bond, 3.75%, 4/1/98* ............... 1,000,000 A1+ 1,000,000
Orange County, CA, Water District, Tax Exempt
Commercial Paper:
4%, 10/18/95 ..................................... 1,000,000 A1+ 1,000,000
3.85%, 10/20/95 .................................. 1,000,000 A1+ 1,000,000
4%, 10/25/95 ..................................... 1,000,000 A1+ 1,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Rincon Del Diablio, CA, Municipal Water District,
Quarterly Optional Tender Bond, 4.35%, 2/1/15* .... 2,625,000 MIG1 2,625,000
Riverside County, CA, School Financing Authority,
School Districts Financing, Revenue
Anticipation Notes, 4.75%, 7/18/96 ................ 1,000,000 SP1+ 1,003,808
Sacramento, CA, Municipal Utility District, Series I,
Tax Exempt Commercial Paper, 3.6%, 12/13/95 ....... 1,500,000 A1+ 1,500,000
San Bernardino County, CA, Multi-Family
Housing Revenue, Variable Rate Demand Bonds:
Western Properties 1, 3.85%, 2/1/05* ............. 900,000 MIG1 900,000
Woodview Apartments Project, 3.75%, 4/1/07* ...... 1,100,000 MIG1 1,100,000
San Diego, CA, Multi-Family Housing Revenue,
Lusk Mira Mesa Project, Issue E, Variable Rate
Demand Bond, 3.75%, 4/1/07* ....................... 1,900,000 MIG1 1,900,000
San Jose, CA, Multi-Family Housing Revenue,
Kimberly Woods Project, Variable Rate
Demand Bond, 3.75%, 11/1/08* ...................... 500,000 MIG1 500,000
San Marcos, CA, Multi-Family Housing Revenue,
Household Bank Project, Series 1985,
Weekly Demand Note, 5.025%, 6/1/05* ............... 2,700,000 SS&C 2,700,000
Santa Clara, CA, Electric Revenue:
Series B, Junior Lien, Variable Rate
Demand Bond, 4.15%, 7/1/10* ...................... 1,100,000 MIG1 1,100,000
Series C, Junior Lien, Variable Rate
Demand Bond, 4.15%, 7/1/10* ...................... 1,300,000 MIG1 1,300,000
Santa Clara County, CA, Housing Authority,
Fox Chase I Project, Weekly Demand Bond,
4.35%, 11/1/08 (c)* ............................... 1,000,000 MIG1 1,000,000
Santa Cruz County, CA, Tax & Revenue Anticipation
Notes, 4.5%, 7/11/96 .............................. 1,000,000 SP1+ 1,003,296
Solano County, CA, Tax and Revenue
Anticipation Note, 5%, 11/1/95 .................... 1,000,000 SP1+ 1,000,528
South Coast, CA, Local Education Agencies,
Tax and Revenue Anticipation Note, 5%, 8/14/96 .... 2,000,000 SP1+ 2,008,561
South San Francisco, CA, 1991 Water Quality
Control, Variable Rate Demand Bond,
4.35%, 7/1/12* .................................... 500,000 A1+ 500,000
Southern California Metropolitan Water District,
Tax Exempt Commercial Paper, 3.8%, 11/10/95 ....... 1,000,000 A1+ 1,000,000
Southern California Public Power Authority,
Transmission Project, Series 1991,
Weekly Demand Note, 4%, 7/1/19 (c)* ............... 1,700,000 AAA 1,700,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ventura, CA, Unified School District,
Tax and Revenue Anticipation Notes,
4.75%, 7/5/96 ............................... 1,500,000 SP1+ 1,508,177
------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $66,235,796) (a) ...................... 66,235,796
============
- -------------------------------------------------------------------------------------------------------------
<FN>
(a) The cost for the federal income tax purposes was $66,235,796.
(b) All of the securities held have been determined to be of appropriate credit quality as required by the
Fund's investment objectives. Credit ratings shown are assigned by either Standard & Poor's Rating
Group, Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Unrated securities (NR) and
securities rated by Scudder (SS&C) have been determined to be of comparable quality to rated eligible
securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC or MBIA.
* Floating rate and monthly, weekly, or daily demand notes are securities whose yields vary with a
designated market index or market rate, such as the coupon#equivalent of the Treasury bill rate.
Variable rate demand notes are securities whose yields are periodically reset at levels that are
generally comparable to tax#exempt commercial paper. These securities are payable on demand within seven
calendar days and normally incorporate an irrevocable letter of credit from a major bank. These notes
are carried, for purposes of calculating average weighted maturity, at the longer of the period
remaining until the next rate change or to the extent of the demand period.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ------------------------------------------------------------------------------------
<CAPTION>
SEPTEMBER 30, 1995 (UNAUDITED)
- ------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (identified cost $66,235,796)
(Note A) ........................................... $ 66,235,796
Cash ................................................. 54,604
Receivables:
Interest ........................................... 428,207
Fund shares sold ................................... 72,535
Other assets ......................................... 647
------------
Total assets ................................. 66,791,789
LIABILITIES
Payables:
Fund shares redeemed ............................... $ 37,029
Dividends .......................................... 24,482
Accrued management fee (Note C) .................... 14,885
Other accrued expenses (Note C) .................... 36,145
--------
Total liabilities ............................ 112,541
------------
Net assets, at value ................................. $ 66,679,248
============
NET ASSETS
Net assets consist of:
Accumulated net realized loss ...................... $ (40,069)
Shares of beneficial interest ...................... 666,897
Additional paid-in capital ......................... 66,052,420
------------
Net assets, at value ................................. $ 66,679,248
============
NET ASSET VALUE, offering and redemption price per share
($66,679,248 -:- 66,689,691 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) .............................. $1.00
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest .............................................. $ 1,294,364
Expenses:
Management fee (Note C) ............................... $ 89,785
Services to shareholders (Note C) ..................... 39,310
Custodian and accounting fees (Note C) ................ 26,293
Trustees' fees (Note C) ............................... 7,430
Auditing .............................................. 13,523
Reports to shareholders ............................... 6,040
Legal ................................................. 4,689
Other ................................................. 8,850 195,920
----------------------------
Net investment income ................................. 1,098,444
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments .................... (1,913)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $ 1,096,531
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1995 MARCH 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................ $ 1,098,444 $ 1,830,748
Net realized loss from investments ............... (1,913) (16,732)
------------ ------------
Net increase in net assets resulting from
operations ..................................... 1,096,531 1,814,016
------------ ------------
Distributions to shareholders from net investment
income ($.017 and $.027 per share,
respectively) .................................. (1,098,444) (1,830,748)
------------ ------------
Fund share transactions at net asset value of
$1.00 per share:
Shares sold ...................................... 28,872,060 88,435,904
Net asset value of shares issued to
shareholders in reinvestment of
distributions .................................. 946,221 1,538,711
Shares redeemed .................................. (27,364,316) (97,929,860)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions ........................ 2,453,965 (7,955,245)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ................ 2,452,052 (7,971,977)
Net assets at beginning of period ................ 64,227,196 72,199,173
------------ ------------
NET ASSETS AT END OF PERIOD ...................... $ 66,679,248 $ 64,227,196
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER PERFORMANCE INFORMATION
DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
FOR THE PERIOD
SIX MONTHS MAY 28, 1987
ENDED (COMMENCEMENT
SEPTEMBER 30, YEARS ENDED MARCH 31, OF OPERATIONS)
1995 --------------------------------------------------------------------- TO MARCH 31,
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988
----------- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ............. $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------ ------ ------ ------ ------ ------ ------ ------ ------
Net investment income (a) ......... .017 .027 .019 .023 .035 .047 .052 .049 .035
Distributions from net
investment income ............... (.017) (.027) (.019) (.023) (.035) (.047) (.052) (.049) (.035)
------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of period .... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (b) .............. 1.70** 2.72 1.92 2.35 3.54 4.79 5.35 5.04 3.86**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) .................... 67 64 72 56 58 64 65 64 53
Ratio of operating expenses,
net to average daily net
assets (%) (a) .................. .60* .60 .60 .60 .60 .65 .75 .67 .45*
Ratio of net investment income
to average daily net
assets (%) ...................... 3.37* 2.68 1.90 2.33 3.50 4.68 5.22 4.98 4.41*
<FN>
(a) Reflects a per share amount
of expenses, exclusive of
management fees,
reimbursed by the
Adviser of .................. $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ -- $ .002
Reflects a per share amount
of management fee not
imposed by the Adviser of.... $ .001 $ .002 $ .003 $ .003 $ .003 $ .003 $ .001 $ .002 $ .004
Operating expense ratio
including expenses
reimbursed, management
fee and other expenses
not imposed (%) ............. .83* .84 .90 .86 .88 .92 .90 .84 1.32*
(b) Returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</FN>
</TABLE>
20
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
INVESTMENT PORTFOLIO as of September 30, 1995 (Unaudited)
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------
2.7% SHORT-TERM MUNICIPAL INVESTMENTS
--------------------------------------------------------------------------------------------------
CALIFORNIA California Pollution Control Finance Authority,
Resource Recovery, Atlantic Richfield, Daily
Demand Note, 4.60%, 12/1/24* .......................... 600,000 MIG1 600,000
California, Revenue Anticipation Warrants, Series D,
6.5%, 4/25/96 (b) .................................... 5,000,000 SP2 5,055,600
California Statewide Community Development
Authority, Solid Waste Disposal, Chevron U.S.A.
Project, Daily Demand Note, 4.55%, 12/15/24* .......... 2,890,000 P1 2,890,000
Irvine, CA, Improvement Bond, Assessment District
89-10, Daily Demand Bond, 4.70%, 9/2/15* .............. 4,500,000 MIG1 4,500,000
------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $13,024,871) .................................... 13,045,600
------------
--------------------------------------------------------------------------------------------------
97.3% LONG-TERM MUNICIPAL INVESTMENTS
--------------------------------------------------------------------------------------------------
CALIFORNIA ABAG Financing Authority, CA, Stanford Health
Systems, Certificate of Participation, 6%,
11/1/07 (d) ........................................... 605,000 AAA 640,193
Anaheim County, CA, Convention Center
Financing, Certificate of Participation, Zero
Coupon, 8/1/05 (d) .................................... 1,250,000 AAA 737,863
Benecia, CA, Unified School District, Series B,
Zero Coupon, 8/1/18 (d) ............................... 545,000 AAA 128,991
California Health Facilities Finance Authority:
Catholic Healthcare West:
Series A, 5%, 7/1/06 (d) ............................. 2,000,000 AAA 1,976,900
Series A, 5.75%, 7/1/15 (d) .......................... 2,250,000 AAA 2,185,133
Series A, 5%, 7/1/21 (d) ............................. 4,900,000 AAA 4,255,209
5%, 7/1/08 (d) ....................................... 5,745,000 AAA 5,483,545
4.75%, 7/1/19 (d) .................................... 2,635,000 AAA 2,205,969
Downey Community Hospital:
5.625%, 5/15/08 ...................................... 6,000,000 A 5,970,060
5.75%, 5/15/15 ....................................... 1,000,000 A 940,590
Henry Mayo Newhall, Series A, 8%, 10/1/18 ............. 3,655,000 A 3,978,687
Kaiser Permanente Medical Care Program, 5.55%,
8/15/25 .............................................. 4,000,000 AA 3,714,400
St. Francis Medical Center, Series A, 5.65%,
10/1/14 (d) .......................................... 1,500,000 AAA 1,508,670
California Housing Finance Agency:
Series G, 5.7%, 2/1/07 (d) ............................ 500,000 AAA 493,795
Series G, 5.8%, 2/1/08 (d) ............................ 1,330,000 AAA 1,309,172
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Series G, 5.9%, 2/1/09 (d) .............................. 200,000 AAA 196,544
Series G, 6%, 8/1/10 (d) ................................ 1,400,000 AAA 1,370,292
Series K, 5.55%, 2/1/21 (d) ............................. 1,500,000 AAA 1,501,140
Home Mortgage, Series F1:
6.2%, 8/1/05 (d) ....................................... 845,000 AAA 881,242
6.3%, 8/1/06 (d) ....................................... 1,325,000 AAA 1,383,035
Home Ownership and Improvements Revenue,
Series 1985 A, FHA Insured, 9.2%, 8/1/15 ............... 15,000 AA 15,342
Multi-Unit Rental Housing Revenue:
Series 1992 A, 7.1%, 8/1/96 ............................ 1,475,000 A 1,506,831
Series 1992 A, 7.2%, 8/1/97 ............................ 1,620,000 A 1,692,560
Series 1992 A, 7.3%, 8/1/99 ............................ 2,435,000 A 2,638,785
Series 1992 A, 7.35%, 8/1/00 ........................... 2,615,000 A 2,874,774
Series 1992 A, 7.4%, 8/1/01 ............................ 1,555,000 A 1,728,507
Series 1992 A, 7.45%, 8/1/02 ........................... 1,015,000 A 1,141,814
Series 1992 A, 7.6%, 8/1/06 ............................ 4,030,000 A 4,476,645
Series 1992 A, 7.65%, 8/1/07 ........................... 2,335,000 A 2,583,561
Series 1992 A, 7.8%, 8/1/23 ............................ 2,635,000 A 2,843,218
Series II, 6.75%, 8/1/96 ............................... 265,000 A 271,045
Series II, 7%, 8/1/97 .................................. 280,000 A 295,081
Series II, 7.25%, 8/1/98 ............................... 300,000 A 326,316
Series II, 7.3%, 8/1/99 ................................ 325,000 A 358,231
Series II, 7.3%, 8/1/00 ................................ 345,000 A 379,317
Series II, 7.3%, 8/1/01 ................................ 375,000 A 415,170
Series II, 7.35%, 8/1/02 ............................... 400,000 A 445,276
Series II, 7.35%, 8/1/03 ............................... 430,000 A 478,323
Series II, 7.35%, 8/1/04 ............................... 460,000 A 515,131
Series II, 7.35%, 8/1/05 ............................... 495,000 A 556,197
Series A, 7.7%, 8/1/09 ................................. 700,000 A 772,716
Series A, 7.75%, 8/1/16 ................................ 2,440,000 A 2,661,454
California Pollution Control Revenue:
Pacific Gas and Electric, Series B, 8.75%, 1/1/07 ...... 5,000,000 A 5,530,850
Southern California Edison, Series A, 6.9%,
9/1/06 ................................................ 3,750,000 A 3,991,988
California State Public Works Board, Lease Revenue,
Department of Corrections:
Del Norte/Imperial:
Series 1993 C, 4.6%, 12/1/04 (d) ..................... 4,000,000 AAA 3,900,360
Series C-2, 5.375%, 6/1/18 (d) ....................... 4,750,000 AAA 4,384,250
Medera Prison, Series A-2, 7.4%, 9/1/10 (d) ........... 1,000,000 AAA 1,186,000
California Statewide Communities Development
Authority, Certificate of Participation:
Lutheran Homes:
Series 1993, 5.5%, 11/15/08 .......................... 1,500,000 A 1,501,275
Series 1993, 5.6%, 11/15/13 .......................... 4,750,000 A 4,516,205
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Keiro Nursing Home, California Mortgage
Insured, 5.875%, 3/1/19 ................................ 1,685,000 A 1,603,732
Sisters of Charity - Leavenworth Health Services
Corp.:
4.875%, 12/1/10 (d) ................................... 2,500,000 AAA 2,268,550
5%, 12/1/23 (d) ....................................... 2,500,000 AAA 2,146,825
St. Joseph's Health System, 6.2%, 7/1/08 ................ 200,000 AA 206,798
Sutter Health - Obligated Group, 5.5%,
8/15/22 (d) ............................................ 2,450,000 AAA 2,287,320
Unihealth America, Series A, Zero Coupon,
10/1/05 (d) ............................................ 1,450,000 AAA 848,323
Castaic Lake Water Agency, CA, Certificate of
Participation, Series A, 7.25%, 8/1/07 (d) ............... 1,000,000 AAA 1,171,670
Chino Basin, CA, Regional Financing Authority,
Municipal Water District, Sewer System, 5.9%,
8/1/11 (d) ............................................... 1,290,000 AAA 1,335,653
Costa Mesa, CA, Public Financing Authority, Public
Facilities Project, Series 1993 A, 5.25%, 10/1/18 ........ 4,500,000 A 3,861,900
Duarte, CA, Certificate of Participation, City of Hope
Medical Center:
5.75%, 4/1/02 ........................................... 3,525,000 BBB 3,530,640
5.8%, 4/1/03 ............................................ 3,735,000 BBB 3,725,999
6%, 4/1/08 .............................................. 3,750,000 BBB 3,678,975
Elk Grove, CA, Unified School District #1, Special Tax,
Community Facilities:
Zero Coupon, 12/1/09 (d) ................................ 2,465,000 AAA 1,078,240
Zero Coupon, 12/1/10 (d) ................................ 1,670,000 AAA 683,047
Zero Coupon, 12/1/11 (d) ................................ 2,425,000 AAA 917,644
Zero Coupon, 12/1/12 (d) ................................ 2,680,000 AAA 958,180
6.5%, 12/1/08 (d) ....................................... 1,000,000 AAA 1,111,620
Eureka, CA, Public Financing Authority, Tax Allocation
Revenue, Capital Guaranty Insured, 5%, 11/1/16 ........... 1,380,000 AAA 1,228,117
Fairfield, CA, Public Finance Authority, Redevelopment
Project, Series C, Capital Guaranty Insured,
5.25%, 8/1/13 ............................................ 1,000,000 AAA 934,010
Fontana, CA, Tax Allocation Revenue, North Fontana
Redevelopment Project, Series 1993 A, 5%,
9/1/20 (d) ............................................... 1,200,000 AAA 1,049,952
Fontana, CA, Unified School District, FSA Insured,
5.7%, 9/1/08 ............................................. 700,000 AAA 713,307
Foothill Eastern Transportation Toll Road Revenue,
Corridor Agency, Senior Lien, Series A,
Zero Coupon:
1/1/11 ............................................ 6,000,000 BBB 3,349,860
1/1/13 ............................................ 975,000 BBB 547,365
1/1/14 ............................................ 2,875,000 BBB 1,614,025
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- ------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fresno, CA, Health Facilities Revenue, Holy Cross
Health, Series A, 5.625%, 12/1/18 (d) ..................... 1,200,000 AAA 1,146,828
Imperial, CA, Irrigation District, Electric System
Revenue, Certificate of Participation, 5.2%,
11/1/09 (d) ............................................... 2,500,000 AAA 2,417,475
La Canada, CA, Unified School District, Zero Coupon:
8/1/08 (d) ................................................ 1,315,000 AAA 636,670
8/1/09 (d) ................................................ 1,280,000 AAA 570,906
Los Angeles County, CA, Certificate of Participation:
Marina Del Ray, Series 1993 A:
5.75%, 7/1/98 ............................................ 5,000,000 NR 5,082,050
6.25%, 7/1/03 ............................................ 2,500,000 NR 2,505,775
Disney Parking Project, Zero Coupon, 9/1/13 ............... 4,500,000 A 1,198,710
Los Angeles County, CA, Convention & Exhibition
Center Authority, Certificate of Participation:
Zero Coupon, 8/15/04 (d) ................................. 3,730,000 AAA 2,324,126
Series A, 5.2%, 8/15/09 (d) .............................. 4,000,000 AAA 3,824,400
Los Angeles County, CA, Metropolitan Transportation
Authority, Sales Tax Revenue, Series B, 4.8%,
7/1/05 (d) ................................................ 950,000 AAA 927,523
Los Angeles County, CA, Wastewater Revenue,
Series 1993 D, 4.7%, 11/1/17 (d) .......................... 1,960,000 AAA 1,650,261
Metropolitan Water District of Southern California,
Waterworks Revenue, 8%, 7/1/08 ............................ 4,800,000 AA 5,964,432
Modesto, CA, Certificate of Participation, Community
Project, Series A, 5.6%, 11/1/14 (d) ...................... 1,370,000 AAA 1,332,366
Oceanside, CA, Certificate of Participation, Oceanside
Building Authority, Series A, 6%, 4/1/17 .................. 3,000,000 A 2,874,330
Orange County, CA, Local Transportation Authority:
Sales Tax Revenue, 5.1%, 2/15/01 (d) ...................... 5,000,000 AAA 4,778,300
5.15%, 2/15/11 (d) ........................................ 5,775,000 AAA 5,286,031
Oxnard, CA, Finance Authority, Lease Revenue,
FSA Insured, 5.375%, 6/1/16 ............................... 2,000,000 AAA 1,861,780
Palmdale, CA, Civic Center Authority, Redevelopment
Project #1, Series A, 5.25%, 7/1/15 (d) ................... 1,000,000 AAA 918,110
Palomar Pomerado, CA, Health Systems, 4.75%,
11/1/23 (d) ............................................... 1,000,000 AAA 825,350
Pittsburgh, CA, Public Finance Authority, Wastewater
System Revenue, Series A, 5.125%, 6/1/15 (d) .............. 1,000,000 AAA 908,240
Pittsburgh, CA, Redevelopment Agency, Los Medanos
Community Development Project, Series 1993 C,
4.625%, 8/1/21 (d) ........................................ 3,500,000 AAA 2,867,760
Pomona, CA, Public Finance Authority, Pomona
Redevelopment, CAPMAC Insured, 5.75%,
2/1/20 .................................................... 1,000,000 AAA 971,860
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pomona, CA, Unified School District, General
Obligation:
5.6%, 8/1/14 (d) ....................................... 170,000 AAA 166,882
5.6%, 8/1/15 (d) ....................................... 180,000 AAA 175,567
5.6%, 8/1/16 (d) ....................................... 190,000 AAA 185,197
5.6%, 8/1/17 (d) ....................................... 175,000 AAA 170,468
5.6%, 8/1/18 (d) ....................................... 205,000 AAA 198,317
Port of Hueneme, CA, Certificate of Participation,
Capital Improvement, 6%, 4/1/19 (d) ..................... 925,000 AAA 946,173
Redding, CA, Joint Power Water Revenue, Series
1993 A, 5%, 6/15/19 (d) ................................. 1,330,000 AAA 1,167,341
Rialto, CA, Redevelopment Agency, Tax Allocation
Revenue, Industrial Redevelopment Project,
Series A, 6%, 9/1/23 .................................... 2,500,000 BBB 2,288,875
Roseville, CA, Joint Union High School District:
Series B, Zero Coupon:
8/1/05 (d) ............................................. 1,130,000 AAA 671,503
8/1/06 (d) ............................................. 1,000,000 AAA 556,560
8/1/07 (d) ............................................. 1,380,000 AAA 717,641
Sacramento, CA, City Financing Authority Lease
Revenue Refunding, Series A, 5.4%, 11/1/20 (d) .......... 11,785,000 AAA 11,017,797
Sacramento, CA, Municipal Utility District:
5.4%, 11/15/07 (d) ...................................... 3,475,000 AAA 3,509,854
Series G, 4.75%, 9/1/21 (d) ............................. 6,450,000 AAA 5,388,717
San Bernardino County, CA, Certificate of
Participation, Imbedded Swap Inverse Floater,
Series 1992 A, 6.2%, 7/1/16 (d) ......................... 4,500,000 AAA 4,202,865
San Bernardino County, CA, Joint Powers Financing
Authority, Tax Allocation, State College Project,
6.9%, 9/1/01 (d) ........................................ 500,000 AAA 547,480
San Francisco, CA, Redevelopment Financing Agency,
Tax Allocation Revenue, Series A, Zero Coupon:
8/1/03 (d) ........................................... 1,080,000 AAA 724,399
8/1/04 (d) ........................................... 1,080,000 AAA 682,506
San Joaquin County, CA, Certificate of Participation,
County Public Facilities Project, 4.75%,
11/15/19 (d) ............................................ 2,000,000 AAA 1,681,000
San Joaquin Hills, CA, Transportation Corridor
Agency, Toll Road Revenue, Senior Lien,
Zero Coupon, 1/1/07 ..................................... 6,000,000 NR 4,177,440
San Jose, CA, Financing Revenue, Community
Facilities Project, Zero Coupon:
11/15/03 ............................................... 735,000 A 478,544
11/15/04 ............................................... 1,605,000 A 982,453
11/15/05 ............................................... 1,605,000 A 921,880
11/15/06 ............................................... 1,605,000 A 861,516
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- ----------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
San Jose, CA, Redevelopment Agency, Merged Area
Redevelopment Project, Tax Allocation, 4.75%,
8/1/24 (d) ...................................... 5,000,000 AAA 4,141,300
San Mateo County, CA, Joint Powers Finance
Authority, County Healthcare Center, Series A,
FSA Insured, 5.75%, 7/15/22 ..................... 2,250,000 AAA 2,169,428
San Mateo County, CA, Capital Projects Program,
Correctional and Parking Facilities, Series 1991,
Zero Coupon:
7/1/04 (d) ..................................... 1,890,000 AAA 1,199,583
7/1/05 (d) ..................................... 1,520,000 AAA 907,258
San Mateo County, CA, Joint Power Finance
Authority, Capital Project Program, Zero Coupon:
7/1/01 (d) ..................................... 1,765,000 AAA 1,330,528
7/1/02 (d) ..................................... 1,715,000 AAA 1,222,829
7/1/03 (d) ..................................... 1,725,000 AAA 1,161,960
Santa Anna, CA, Police Administration and
Holding Facility, Lease Revenue, Series A, 5.3%,
7/1/05 (d) ...................................... 725,000 AAA 733,751
Santa Clara County, CA, Certificate of Participation,
Series A, 4.75%, 2/1/14 (d) ..................... 3,000,000 AAA 2,607,180
Santa Clara County, CA, Finance Authority, Lease
Revenue, YMC Replacement Project, 7.75%,
11/15/08 (d) .................................... 3,250,000 AAA 3,992,528
Santa Margarita/Dana Point, CA, Improvement
Districts 3, 3A, 4 and 4A, Series B, 7.25%,
8/1/05 (d) ...................................... 2,895,000 AAA 3,408,370
Santa Monica, CA, Wastewater Revenue, Hyperion
Project, 4.75%, 1/1/12 (d) ...................... 3,000,000 AAA 2,627,940
Saugus, CA, Unified School District, Series A,
5.7%, 9/1/18 (d) ................................ 1,700,000 AAA 1,645,022
South Orange County, CA, Public Power Authority,
Special Tax Revenue, Series A, 7%, 9/1/06 (d) ... 2,230,000 AAA 2,587,447
Southern California Public Power Authority, Power
Project Revenue:
Mead Phoenix Project, Series A, 4.75%,
7/1/09 (d) .................................... 1,220,000 AAA 1,099,610
Palo Verde Project, Series A, 5%, 7/1/15 ....... 1,350,000 AA 1,191,996
Stockton, CA, Health Facilities Revenue, St. Joseph
Medical Center, Series A, 5.625%, 6/1/13 (d) .... 1,930,000 AAA 1,867,912
University of California, Certificate of Participation,
UCLA Central, Chiller Cogeneration Project,
Connie Lee Insured, 5.1%, 11/1/06 ............... 3,845,000 AAA 3,799,937
Vista, CA, Community Development Commission,
Tax Allocation, Vista Redevelopment Project,
5.5%, 9/1/23 (d) ................................ 3,000,000 AAA 2,793,960
</TABLE>
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------------------------------------------
<CAPTION>
Principal Credit Market
Amount ($) Rating (c) Value ($)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walnut Creek, CA, Certificate of Participation, John
Muir Medical Center:
5%, 2/15/16 (d) ....................................... 1,500,000 AAA 1,334,520
5%, 2/15/20 (d) ....................................... 1,000,000 AAA 873,860
West Covina, CA, Queen of the Valley Hospital,
Certificate of Participation, Hospital Revenue,
Series 1994:
5.7%, 8/15/00 ......................................... 380,000 A 386,753
5.8%, 8/15/01 ......................................... 750,000 A 764,505
Westminster, CA, Redevelopment Agency, Tax
Allocation Revenue, Community Development,
Project #1, Series A, 7.3%, 8/1/21 ..................... 2,000,000 BBB 2,049,960
PUERTO RICO Commonwealth of Puerto Rico, Public Improvement
Refunding, General Obligation, 5.375%, 7/1/06 .......... 1,225,000 A 1,236,331
VIRGIN ISLANDS Virgin Islands Public Finance Authority, General
Obligation, Matching Fund Loan Notes,
Series 1992 A:
6.25% 10/1/96 (b) ..................................... 3,400,000 BBB 3,451,102
6.5% 10/1/97 .......................................... 2,955,000 BBB 3,041,936
7%, 10/1/02 ........................................... 1,000,000 BBB 1,071,230
--------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $277,267,501) .................................... 283,693,398
--------------
- --------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $290,292,372) (a) ................................ 296,738,998
==============
<FN>
(a) The cost for federal income tax purposes was $290,301,466. At September 30, 1995, net unrealized appreciation
for all securities based on tax cost was $6,437,532. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax cost of $9,379,906 and aggregate
gross unrealized depreciation for all securities in which there was an excess of tax cost over market value of
$2,942,374.
(b) At September 30, 1995 these securities, in part, have been pledged to cover initial margin requirements for
open futures contracts.
</FN>
</TABLE>
<TABLE>
AT SEPTEMBER 30, 1995 OPEN FUTURES CONTRACTS SOLD SHORT WERE AS FOLLOWS (NOTE A):
<CAPTION>
Aggregate Market
Futures Expiration Contracts Face Value ($) Value ($)
------------ -------------- --------------- ------------------ ------------
<S> <C> <C> <C> <C> <C>
30 Year U.S.
Treasury Bonds Dec. 1995 125 14,010,469 14,292,969
---------- ----------
Total net unrealized depreciation on open futures contracts sold short ... (282,500)
==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(c) All of the securities held have been determined to be of appropriate
credit quality as required by the Fund's investment objectives.
Credit ratings shown are assigned by either Standard & Poor's Rating
Group, Moody's Investors Service, Inc. or Fitch Investors Service, Inc.
Unrated securities (NR) have been determined to be of comparable
quality to rated eligible securities.
(d) Bond is insured by one of these companies: AMBAC, FGIC, or MBIA.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such
as the coupon-equivalent of the Treasury bill rate. Variable rate
demand notes are securities whose yields are periodically reset at
levels that are generally comparable to tax-exempt commercial paper.
These securities are payable on demand within seven calendar days and
normally incorporate an irrevocable letter of credit from a major bank.
These notes are carried, for purposes of calculating average weighted
maturity, at the longer of the period remaining until the next rate
change or to the extent of the demand period.
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------
<CAPTION>
- ----------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- ----------------------------------------------------------------------------------------------
SEPTEMBER 30, 1995 (UNAUDITED)
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $290,292,372)
(Note A) ................................................ $ 296,738,998
Cash ...................................................... 46,640
Receivables:
Interest ................................................ 4,246,516
Fund shares sold ........................................ 316,241
Other assets .............................................. 2,574
-------------
Total assets ...................................... 301,350,969
LIABILITIES
Payables:
Investments purchased ................................... $ 4,064,470
Dividends ............................................... 463,140
Fund shares redeemed .................................... 147,592
Daily variation margin on open futures contracts
(Note A) .......................................... 171,875
Accrued management fee (Note C) ......................... 150,439
Other accrued expenses (Note C) ......................... 103,627
-------------
Total liabilities ................................. 5,101,143
-------------
Net assets, at market value ............................... $ 296,249,826
=============
NET ASSETS
Net assets consist of:
Net unrealized appreciation (depreciation) on:
Investments ....................................... $ 6,446,626
Futures ........................................... (282,500)
Accumulated net realized loss ........................... (12,929,768)
Shares of beneficial interest ........................... 288,124
Additional paid-in capital .............................. 302,727,344
-------------
Net assets, at market value ............................... $ 296,249,826
=============
NET ASSET VALUE, offering and redemption price per share
($296,249,826 -:- 28,812,397 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) $10.28
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- -----------------------------------------------------------------------------------
<CAPTION>
- -----------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- -----------------------------------------------------------------------------------
SIX MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
- -----------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ............................................ $ 8,456,388
Expenses:
Management fee (Note C) ............................. $ 911,501
Services to shareholders (Note C) ................... 114,813
Custodian and accounting fees (Note C) .............. 65,895
Trustees' fees (Note C) ............................. 7,430
Auditing ............................................ 24,765
Reports to shareholders ............................. 14,856
Legal ............................................... 5,950
Other ............................................... 23,079 1,168,289
---------------------------
Net investment income ............................... 7,288,099
--------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments ....................................... 1,411,929
Futures ........................................... (216,588) 1,195,341
------------
Net unrealized appreciation (depreciation) on:
Investments ....................................... 5,324,761
Futures ........................................... (282,500) 5,042,261
----------------------------
Net gain on investment transactions ................. 6,237,602
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS. $13,525,701
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
30
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
<CAPTION>
- ------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1995 MARCH 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1995
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................ $ 7,288,099 $ 15,647,975
Net realized gain (loss) from investment
transactions ................................... 1,195,341 (9,865,784)
Net unrealized appreciation on investment
transactions during the period ................. 5,042,261 12,444,920
------------ ------------
Net increase in net assets resulting from
operations ..................................... 13,525,701 18,227,111
------------ ------------
Distributions to shareholders:
From net investment income ($.25 and
$.51 per share, respectively) ................ (7,288,099) (15,647,975)
------------ ------------
From net realized gains from investment
transactions ($.09 per share) ................ -- (2,705,552)
------------ ------------
Fund share transactions:
Proceeds from shares sold ........................ 17,581,978 54,322,312
Net asset value of shares issued to
shareholders in reinvestment
of distributions ............................... 4,392,749 12,092,024
Cost of shares redeemed .......................... (26,025,877) (97,589,593)
------------ ------------
Net decrease in net assets from
Fund share transactions ........................ (4,051,150) (31,175,257)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ................ 2,186,452 (31,301,673)
Net assets at beginning of period ................ 294,063,374 325,365,047
------------ ------------
NET ASSETS AT END OF PERIOD ...................... $296,249,826 $ 294,063,374
============ =============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ........ 29,207,833 32,478,431
------------ ------------
Shares sold ...................................... 1,720,492 5,531,252
Shares issued to shareholders in
reinvestment of distributions .................. 430,372 1,227,120
Shares redeemed .................................. (2,546,300) (10,028,970)
------------ ------------
Net decrease in Fund shares ...................... (395,436) (3,270,598)
------------ ------------
Shares outstanding at end of period .............. 28,812,397 29,207,833
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
31
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
FINANCIAL HIGHLIGHTS
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD AND OTHER
PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL STATEMENTS.
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31,
1995 ----------------------------------------------------------------------------------
(UNAUDITED) 1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
----------- ----------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99 $11.18 $10.95 $ 9.54
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income.................. .25 .51 .53 .59 .61 .63 .65 .68 .69 .71 .73
Net realized and
unrealized gain
(loss) on investment
transactions............ .21 .14 (.35) .94 .47 .21 .22 .27 (.93) .53 1.41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................ .46 .65 .18 1.53 1.08 .84 .87 .95 (.24) 1.24 2.14
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income.................. (.25) (.51) (.53) (.59) (.61) (.63) (.65) (.68) (.69) (.71) (.73)
From net realized
gains on
investments............. -- (.09) (.63) (.49) (.28) (.09) (.19) -- (.26) (.30) --
In excess of net
realized gains.......... -- -- (.05) -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions......... (.25) (.60) (1.21) (1.08) (.89) (.72) (.84) (.68) (.95) (1.01) (.73)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period.................... $10.28 $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99 $11.18 $10.95
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)............ 4.63** 6.75 1.30 15.13 10.74 8.53 8.62 9.80 (1.70) 12.11 23.19
RATIO AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions)....... 296 294 325 309 242 208 193 171 153 195 133
Ratio of operating
expenses, net to
average daily net
assets (%)................ .79* .80 .78 .79 .81 .84 .83 .89 .88 .84 .88
Ratio of net investment
income to average
daily net assets (%)...... 4.92* 5.18 4.85 5.42 5.79 6.13 6.23 6.71 6.95 6.55 7.11
Portfolio turnover rate..... 51.5* 87.3 126.5 208.6 143.0 170.6 70.4 158.9 52.3 68.0 92.6
<FN>
* Annualized
** Not annualized
</FN>
</TABLE>
32
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND (Unaudited)
- --------------------------------------------------------------------------------
A. SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------------------------------------
Scudder California Tax Free Money Fund ("Tax Free Money Fund"), a
nondiversified fund, and California Tax Free Fund ("Tax Free Fund"), a
diversified fund, are each a series of Scudder California Tax Free Trust (the
"Trust") which is organized as a Massachusetts business trust and registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. The policies described below are
followed consistently by the Funds in the preparation of their financial
statements in conformity with generally accepted accounting principles.
SECURITY VALUATION. Tax Free Money Fund values all portfolio securities
utilizing the amortized cost method permitted in accordance with Rule 2a-7
under the 1940 Act and pursuant to which Tax Free Money Fund must adhere
to certain conditions. Under this method, which does not take into account
unrealized gains and losses on securities, an instrument is initially valued
at its cost and thereafter assumes a constant accretion/amortization to
maturity of any discount/premium.
Tax Free Fund's portfolio debt securities with remaining maturities greater
than sixty days are valued by pricing agents approved by the Officers of the
Fund, which prices reflect broker/dealer-supplied valuations and electronic
data processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Trustees. Short-term
investments having a maturity of sixty days or less are valued at amortized
cost.
FUTURES CONTRACTS. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer
or seller agrees to take or make a delivery of a specific amount of an item
at a specified price on a specific date (settlement date). During the period,
the Tax Free Fund purchased interest rate futures to manage the duration of
the portfolio. Additionally, during the period the Tax Free Fund sold interest
rate futures to hedge against declines in the value of portfolio securities.
33
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
Upon entering into a futures contract, the Tax Free Fund is required to deposit
with a financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Tax Free Fund each
day, dependent on the daily fluctuations in the value of the underlying
security, and are recorded for financial reporting purposes as unrealized gains
or losses by the Tax Free Fund. When entering into a closing transaction, the
Tax Free Fund will realize a gain or loss equal to the difference between the
value of the futures contract to sell and the futures contract to buy. Futures
contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Tax Free Fund's ability
to close out a futures contract prior to the settlement date and that a change
in the value of a futures contract may not correlate exactly with changes in
the value of the securities or currencies hedged. When utilizing futures
contracts to hedge, the Tax Free Fund gives up the opportunity to profit from
favorable price movements in the hedged positions during the term of the
contract.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Funds' policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of their taxable and tax-exempt income to their
shareholders. Accordingly, the Funds paid no federal income taxes and no
provisions for federal income taxes were required.
As of March 31, 1995, the Tax Free Money Fund had a net tax basis capital loss
carryforward of approximately $76,000, which may be applied against any realized
net taxable capital gains of each succeeding year until fully utilized or until
March 31, 2000 ($14,000), March 31, 2002 ($7,000) and March 31, 2003 ($55,000),
the respective expiration dates, whichever occurs first.
As of March 31, 1995, the Tax Free Fund had a net tax basis capital loss
carryforward of approximately $8,963,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until March 31, 2003, the expiration date, whichever occurs first.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
The Tax Free Money Fund and the Tax Free Fund, from November 1, 1994 through
March 31, 1995, incurred approximately $12,000 and $3,569,000, respectively,
of net realized capital losses which the Funds intend to elect to defer and
treat as arising in the fiscal year ended March 31, 1996.
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Funds
is declared as dividends to shareholders of record as of the close of business
each day and is paid to shareholders monthly.
During any particular year, net realized gains from investment transactions,
in excess of available capital loss carryforwards, would be taxable to the
Funds if not distributed and, therefore, will be distributed to shareholders.
An additional distribution may be made to the extent necessary to avoid the
payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. These differences
primarily relate to investments in options, futures, and certain securities
sold at a loss for the Tax Free Fund. As a result, net investment income
and net realized gain (loss) on investment transactions for a reporting period
may differ significantly from distributions during such period. Accordingly,
the Funds may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Funds.
The Funds use the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment transactions are accounted for on a trade-date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the
call or maturity date.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the six months ended September 30, 1995, purchases and sales of long-term
municipal securities aggregated $80,206,295 and $71,116,184, respectively, for
the Tax Free Fund.
35
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
The aggregate face value of futures contracts opened and closed during the six
months ended September 30, 1995, for the Tax Free Fund, was $214,033,196
and $200,022,727, respectively.
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Each Fund has entered into an Investment Management Agreement (each an
"Agreement" and collectively the "Agreements") with Scudder, Stevens & Clark,
Inc. (the "Adviser"), under which each Fund agrees to pay the Adviser a fee
computed and accrued daily and paid monthly. The management fee payable under
the Agreements is equal to an annual rate of 0.50% of the average daily net
assets of Tax Free Money Fund, and 0.625% of the first $200,000,000 of the
average daily net assets and 0.60% of such net assets in excess of $200,000,000
for Tax Free Fund. As manager of the assets of Tax Free Money Fund and Tax Free
Fund, the Adviser directs the investments of Tax Free Money Fund and Tax Free
Fund in accordance with the investment objectives, policies, and restrictions of
each Fund. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by each
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreements. The Agreements also
provide that if the Funds' expenses, exclusive of taxes, interest and certain
other expenses exceed specified limits, such excess, up to the amount of the
management fee, will be paid by the Adviser. For the six months ended
September 30, 1995, the fee for the Tax Free Fund pursuant to the Agreement
amounted to $911,501, which was equivalent to an annualized effective rate
of .62% of the Fund's average daily net assets.
With respect to Tax Free Money Fund, the Adviser has agreed not to impose all
or a portion of its management fee until July 31, 1996 and during such period
to maintain the annualized expenses of Tax Free Money Fund at not more than
0.60% of average daily net assets. For the six months ended September 30, 1995,
the Adviser did not impose a portion of its fee amounting to $72,983, and the
portion imposed amounted to $89,785.
36
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Scudder Service Corporation ("SSC"), a wholly-owned subsidiary of the Adviser,
is the transfer, dividend-paying and shareholder service agent for the Funds.
For the six months ended September 30, 1995, $36,548 and $84,755 were charged
by SSC to Tax Free Money Fund and Tax Free Fund, of which $5,982 and $13,857
are unpaid at September 30, 1995, respectively.
Scudder Fund Accounting Corporation ("SFAC"), a wholly-owned subsidiary of
the Adviser, is responsible for determining the daily net asset value per share
and maintaining the portfolio and general accounting records for the Tax Free
Money Fund and Tax Free Fund. For the six months ended September 30, 1995,
SFAC imposed fees amounting to $15,000 and $33,004 of which $5,000 and $10,440
are unpaid at September 30, 1995 for the Tax Free Money Fund and Tax Free Fund,
respectively.
The Trust pays each Trustee not affiliated with the Adviser $4,000 annually
plus specified amounts for attended board and committee meetings. For the six
months ended September 30, 1995, Trustees' fees aggregated $7,430 each for
both Tax Free Money Fund and Tax Free Fund.
37
<PAGE>
<TABLE>
<CAPTION>
INVESTMENT PRODUCTS AND SERVICES
- ------------------------------------------------------------------------------------------------------------------
The Scudder Family of Funds
-----------------------------------------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder GNMA Fund
Tax Free Money Market+ Scudder Income Fund
Scudder Tax Free Money Fund Scudder International Bond Fund
Scudder California Tax Free Money Fund* Scudder Short Term Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Global Income Fund
Tax Free+ Scudder Zero Coupon 2000 Fund
Scudder California Tax Free Fund* Growth
Scudder High Yield Tax Free Fund Scudder Capital Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Managed Municipal Bonds Scudder Global Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Small Company Fund
Scudder Massachusetts Tax Free Fund* Scudder Gold Fund
Scudder Medium Term Tax Free Fund Scudder Greater Europe Growth Fund
Scudder New York Tax Free Fund* Scudder International Fund
Scudder Ohio Tax Free Fund* Scudder Latin America Fund
Scudder Pennsylvania Tax Free Fund* Scudder Pacific Opportunities Fund
Growth and Income Scudder Quality Growth Fund
Scudder Balanced Fund Scudder Small Company Value Fund
Scudder Growth and Income Fund Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
-----------------------------------------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
-----------------------------------------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
-----------------------------------------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
-----------------------------------------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including management fees and expenses, call or
write for a free prospectus. Read it carefully before you invest or send money. +A portion of the income
from the tax-free funds may be subject to federal, state, and local taxes. *Not available in all states. +++A
no-load variable annuity contract provided by Charter National Life Insurance Company and its affiliate,
offered by Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by Scudder, Stevens & Clark,
Inc. are traded on various stock exchanges. ++For information on Scudder Treasurers Trust,(TM) an institutional
cash management service that utilizes certain portfolios of Scudder Fund, Inc. ($100,000 minimum), call
1-800-541-7703.
38
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HOW TO CONTACT SCUDDER
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<C> <C>
Account Service and Information
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For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
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To receive information about the Scudder funds, for additional
applications and prospectuses, or for investment questions
SCUDDER INVESTOR RELATIONS
1-800-225-2470
For establishing 401(k) and 403(b) plans
SCUDDER DEFINED CONTRIBUTION SERVICES
1-800-323-6105
Please address all correspondence to
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THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
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Many shareholders enjoy the personal, one-on-one service of the
Scudder Funds Centers. Check for a Funds Center near you--they can
be found in the following cities:
Boca Raton New York
Boston Portland, OR
Chicago San Diego
Cincinnati San Francisco
Los Angeles Scottsdale
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For information on Scudder For information on Scudder
Treasurers Trust,(TM) an institutional Institutional Funds,* funds
cash management service for designed to meet the broad
corporations, non-profit investment management and
organizations and trusts that uses service needs of banks and
certain portfolios of Scudder Fund, other institutions, call
Inc.* ($100,000 minimum), call 1-800-854-8525.
1-800-541-7703.
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Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder
Investor Services, Inc., Distributor.
* Contact Scudder Investor Services, Inc., Distributor, to receive a prospectus with more complete information,
including management fees and expenses. Please read it carefully before you invest or send money.
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39
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<PAGE>
Celebrating Over 75 Years of Serving Investors
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Established in 1919 by Theodore Scudder, Sidney Stevens, and F. Haven
Clark, Scudder, Stevens & Clark was the first independent investment counsel
firm in the United States. Since its birth, Scudder's pioneering spirit and
commitment to professional long-term investment management have helped shape the
investment industry. In 1928, we introduced the nation's first no-load mutual
fund. Today we offer 37 pure no load(TM) funds, including the first
international mutual fund offered to U.S. investors.
Over the years, Scudder's global investment perspective and dedication to
research and fundamental investment disciplines have helped us become one of the
largest and most respected investment managers in the world. Though times have
changed since our beginnings, we remain committed to our long-standing
principles: managing money with integrity and distinction; keeping the interests
of our clients first; providing access to investments and markets that may not
be easily available to individuals; and making investing as simple and
convenient as possible through friendly, comprehensive service.
