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
Annual Report
March 31, 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 FUND
SCUDDER CALIFORNIA TAX FREE MONEY FUND
CONTENTS
2 Highlights
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
7 Scudder California Tax Free Fund Portfolio Management Discussion
11 Scudder California Tax Free Money Fund Investment Portfolio
15 Scudder California Tax Free Money Fund Financial Statements
18 Scudder California Tax Free Money Fund Financial Highlights
19 Scudder California Tax Free Fund Investment Portfolio
25 Scudder California Tax Free Fund Financial Statements
28 Scudder California Tax Free Fund Financial Highlights
29 Notes to Financial Statements
34 Report of Independent Accountants
35 Tax Information
37 Officers and Trustees
38 Investment Products and Services
39 How to Contact Scudder
HIGHLIGHTS
Scudder California Tax Free Money Fund
* Scudder California Tax Free Money Fund offered a 7-day effective yield of
3.58% on March 31, 1995, equivalent to a 6.66% taxable yield for investors
in the top federal and state income tax brackets.
(bar chart title)
7-Day Effective Yields on March 31, 1995
(bar chart data)
Scudder
California Tax Taxable
Free Money Fund Equivalent Yield
--------------- ----------------
3.58% 6.66%
Scudder California Tax Free Fund
* Scudder California Tax Free Fund provided a 5.04% 30-day net annualized SEC
yield on March 31, 1995.
* For shareholders subject to the 46.24% maximum combined federal and state
income tax rate, the Fund's yield was equal to a 9.38% taxable yield.
(bar chart title)
30-Day Yield on March 31, 1995
(bar chart data)
Scudder
California Tax Taxable
Free Fund Equivalent Yield
-------------- ----------------
5.04% 9.38%
* Scudder California Tax Free Fund earned the number-one ranking from Lipper
among California tax-free funds for the five-year period ended March 31, 1995.
Page 7 contains additional information about the Fund's ranking.
2
<PAGE>
LETTER FROM THE FUNDS' PRESIDENT
Dear Shareholders,
Investors' concerns about inflationary economic growth have abated in
recent months, after creating much turmoil for the world's investment markets in
1994. Indications of continued low inflation and weakness in certain segments of
the economy, combined with the Federal Reserve's most recent interest-rate
increases in November and February, have reassured many investors. Yields have
declined from their November highs, and municipal bond prices have made a
substantial recovery. Year-to-date through March 31, long-term municipal bonds,
as measured by the unmanaged Lehman Brothers Municipal Bond Index, returned
7.07% on average, more than making up for the -5.17% return reported for all of
1994.
Given the swings in interest rates over the past year and a half, the
question for municipal bond investors is, can the recent positive shift in
interest rates be sustained? We believe rates will remain relatively stable if
economic growth continues to slacken in the United States. Nevertheless,
additional interest-rate increases are not out of the question given some
lingering inflationary concerns: Commodity prices continue to rise, factory
production is pushing the limits of capacity, and the dollar has fallen to
record lows against the Japanese yen and German mark.
Your portfolio managers will continue to concentrate their efforts on
fundamental investment research and security selection as a means to generate
high current double tax-free income and attractive total returns for the
California bond portfolio. For the money market portfolio, your Fund managers
will continue to focus on a combination of competitive yields and price
stability. As always, please call a Scudder Investor Relations representative at
1-800-225-2470 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 Fund
Scudder California Tax Free Money Fund
3
<PAGE>
Scudder California Tax Free Fund
Performance Update as of March 31, 1995
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
Scudder California Tax Free Fund
- ----------------------------------------
Total Return
Period Growth -------------
Ended of Average
3/31/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,675 6.75% 6.75%
5 Year $14,962 49.62% 8.39%
10 Year $24,225 142.25% 9.25%
Lehman Brothers Municipal Bond Index
- --------------------------------------
Total Return
Period Growth -------------
Ended of Average
3/31/95 $10,000 Cumulative Annual
- --------- ------- ---------- -------
1 Year $10,743 7.43% 7.43%
5 Year $14,859 48.59% 8.24%
10 Year $25,456 154.56% 9.79%
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 March 31
Scudder California Tax Free Fund
Year Amount
- ----------------------
85 10000
86 12319
87 13811
88 13576
89 14906
90 16191
91 17572
92 19459
93 22402
94 22692
95 24225
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
85 10000
86 12707
87 14100
88 14455
89 15496
90 17131
91 18712
92 20581
93 23158
94 23695
95 25456
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 March 31
- -----------------------------
<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... $10.95 $11.18 $ 9.99 $10.26 $10.29 $10.41 $10.60 $11.05 $10.02 $10.07
Income Dividends.. $ .73 $ .71 $ .69 $ .68 $ .65 $ .63 $ .61 $ .59 $ .53 $ .51
Capital Gains and
Other Distributions $ -- $ .30 $ .26 $ -- $ .19 $ .09 $ .28 $ .49 $ .68 $ .09
Fund Total
Return (%)........ 23.19 12.11 -1.70 9.80 8.62 8.53 10.74 15.13 1.30 6.75
Index Total
Return (%)........ 27.07 10.97 2.52 7.21 10.56 9.22 10.02 12.52 2.32 7.43
</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 March 31, 1995
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Lease Rentals 37%
Hospital/Health 14%
General Obligation 12% We continue to emphasize broad
Sales & Special Tax 11% portfolio diversification, although
Housing Finance Authority 11% we have reduced our exposure to Los
Water/Sewer Revenue 5% Angeles County bonds.
Electric Utility Revenue 4%
Escrow & Collateral 1%
Miscellaneous Municipal 5%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 61%
AA 5% Portfolio quality remains high --
A 26% over the 12-month period AAA-rated
BBB 6% bonds increased to 61% of the Fund's
Not Rated 2% portfolio from 39%.
----
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 4%
1 < 5 years 20% Bonds with effective maturities
5 < 10 years 15% of five to less than 20 years --
10 < 20 years 33% 48% of the portfolio -- currently
Greater than 20 years 28% offer good value 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 19.
5
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
The effects of the Federal Reserve's 1994-95 monetary policy have been
felt everywhere, including the tax-exempt money markets. Interest rates of
tax-exempt money market instruments have risen substantially over the past 12
months. Scudder California Tax Free Money Fund's 7-day effective yield rose to
3.58% on March 31, 1995, from 1.78% a year earlier. For investors in the highest
combined state and federal income tax bracket, this yield equaled a 6.66%
compounded taxable yield, well above the 5.53% average for taxable money funds,
according to IBC/Donoghue, Inc., an independent firm that tracks money fund
performance.
Scudder California Tax Free Money Fund seeks to maximize tax-free
income while preserving high portfolio quality and a stable $1.00 share price.
During the first half of the Fund's fiscal year, we took advantage of the
increase in short-term interest rates by keeping the Fund's average maturity
longer than its money fund peers. When the news of Orange County's bankruptcy
shook the market, we became more defensive and shortened the Fund's average
maturity substantially. During this period of heightened market volatility, our
principal focus was price stability. This cautious approach helped the Fund
through a difficult period for California tax-exempt securities, and provides us
with a degree of flexibility. Since then, we have staggered the maturities in
the portfolio to provide us with regular opportunities to extend the average
maturity in an uncertain interest-rate environment. As of March 31, 1995, the
Fund's average maturity was 39 days, compared with 65 days six months before.
For the 12 months ended March 31, 1995, the Fund provided a total return of
2.72%, assuming reinvestment of all income distributions, which totaled $0.027
during the period.
As always, we will continue to search for high-quality, short-term
municipal securities for Scudder California Tax Free Money Fund while actively
managing the Fund's average maturity to provide a competitive double tax-free
yield.
Sincerely,
Your Portfolio Management Team
/s/Rebecca Wilson /s/K. Sue Cote
Rebecca Wilson K. Sue Cote
Scudder California Tax Free Money Fund:
A Team Approach to Investing
Rebecca L. Wilson is Lead Portfolio Manager for California Tax Free Money
Fund and contributes nine years of experience in municipal investing and
research. Rebecca assumed responsibility for the Fund in 1987 after joining
Scudder in 1986. K. Sue Cote, Portfolio Manager, joined the Fund's team in 1987
and has spent 11 years working with short-term fixed-income investments.
6
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
On March 31, 1995, Scudder California Tax Free Fund provided a 30-day
net annualized SEC yield of 5.04%. For shareholders subject to the 39.6% maximum
federal income tax rate and the 11.00% maximum California state income tax rate,
the Fund's yield is equivalent to a 9.38% taxable yield, higher than yields
provided by taxable investments of comparable credit quality. During the
12-month period ended March 31, 1995, shareholders received $0.51 per share of
income exempt from both federal and California state income taxes, and capital
gains of $0.09 per share.
Despite wide fluctuations in California's municipal bond prices, the
Fund's share price increased $0.05 to $10.07 per share over the 12-month period.
The Fund posted a positive total return of 6.75% for the year through a
combination of interest income, capital gain distributions, and share price
appreciation. This return compares favorably with the 5.94% average total return
of the 83 California municipal bond funds tracked by Lipper Analytical Services
for the same period.
Scudder California Tax Free Fund has consistently exceeded the average
performance of California tax-exempt funds for longer time periods as well. In
fact, the Fund earned the number-one ranking for total return among California
tax-free funds for the five years ended March 31, 1995. The Fund's rankings for
the one- and 10-year periods were 20th and 6th, respectively. The chart below
illustrates how the Fund ranked for various periods.
Scudder California Tax Free Fund's Average Annual Return
Versus the Lipper Average of all California Tax-Free Funds*
(Returns for periods ended March 31, 1995)
<TABLE>
<CAPTION>
Period Scudder California Lipper average Number of
Tax Free Fund return annual return Funds tracked
<S> <C> <C> <C>
1 year 6.75% 5.94% 83
2 years 3.99 3.92 65
3 years 7.58 6.77 55
4 years 8.36 7.50 49
5 years 8.39 7.57 44
10 years 9.25 8.83 16
<FN>
* Past performance is no guarantee of future results.
</FN>
</TABLE>
California's Economy
After a protracted recession, California's economic recovery is well
underway, although considerably more moderate than those of recent decades.
7
<PAGE>
California's unemployment rate fell to a four-year low of 7.3% in February,
compared with 5.4% for the nation. Defense-related jobs continue to contract,
but most other segments of the economy are showing signs of job growth. The
impact of the floods in March 1995, military base closures, and a likely
decrease in trade with Mexico due to the devaluation of the peso are expected to
be manageable for the state, but these events will affect certain local
economies for some time.
California's finances continue to improve. After running budget
deficits from fiscal year 1990 through 1993, the state was left with a $2.8
billion debt. California began balancing its budget in fiscal year 1994 mainly
by controlling expenditures. The state expects to end fiscal years 1995 and 1996
with surpluses and eliminate its accumulated deficit by April 1996. Governor
Wilson's budget for fiscal year 1996 is extremely conservative, with general
fund revenues growing less than 1%.
Municipal Bonds Rally
Most of 1994 stood in marked contrast to performance in the last five
months of the Fund's fiscal year. The Federal Reserve repeatedly raised
short-term interest rates to try to slow the pace of economic growth, which led
to falling bond prices and rising yields across the maturity spectrum. All told,
yields of Treasury bonds rose almost 2 1/2 percentage points during the 12
months ended November 1994. Bond prices dropped 20% during the same time period,
amounting to their worst 12-month total return in history. Yields on long-term
municipal bonds rose almost as much as Treasury yields during the period. As the
environment for bond investments grew more challenging, we took a defensive
stance to help reduce price erosion, maintaining a shorter average effective
maturity and higher cash position than we had during the preceding three years.
In recent months, the municipal bond market has enjoyed a significant
rally. Concerns over the possible overheating of the U.S. economy eased
considerably in late 1994 as economic statistics pointed to weakness in several
sectors. Retail sales and job growth plateaued, while demand for housing and new
cars slackened. The steady decline in the supply of tax-free bonds also helped
municipal bond prices. During this period, we increased the Fund's average
effective maturity and reduced our cash position to help the Fund regain ground
lost during 1994.
8
<PAGE>
Orange County Update
On December 6, Orange County, California, declared bankruptcy -- the
largest municipal bankruptcy in U.S. history. The county's fiscal crisis was
sparked by steep losses in its investment fund, which had repeatedly borrowed
large amounts of money in the short-term market and invested the proceeds in
longer-maturity bonds. As the Federal Reserve initiated its string of short-term
interest-rate increases in February 1994, the borrowing costs of the Orange
County fund began to mount, while the market value of the securities purchased
with the borrowed funds fell. Finally, in early December, the county
acknowledged that the losses in its investment pool had become so large as to
make the county insolvent. At the time of the bankruptcy, Scudder California Tax
Free Fund held no direct investments in Orange County bonds. In fact, no Fund
holding was downgraded or otherwise materially affected by the county's
problems. Our strong emphasis on credit selection and quality investments helped
the Fund during this difficult period.
We expect that Orange County will take the necessary steps over the
next year to emerge from bankruptcy and re-enter the capital markets as a
borrower for traditional municipal needs. As of March 31, 1995, the county had
reached agreements with the more than 180 municipalities invested in its pool
that it would repay 80% to 90% of the monies originally invested. The county has
proposed an increase in its sales tax along with various other measures to raise
revenues. In the coming months, if market conditions warrant, we intend to
survey various opportunities in Orange County municipal bonds for possible
investment.
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 48% of the portfolio on March 31, 1995, compared with
approximately 50% on March 31, 1994. Bonds in this maturity range generally
offer good value and provide attractive yields with less price volatility than
longer-term bonds.
9
<PAGE>
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 bonds maturing on similar call dates.
Scudder California Tax Free Fund continues to emphasize careful credit
selection and portfolio diversification, investing in a variety of issues,
including general obligation, revenue, water district, hospital, single family
housing, multi-family housing, school district, lease, and tax allocation bonds
as of March 31, 1995. However, we have reduced our exposure to Los Angeles
County bonds because of the series of natural and man-made disasters that have
occurred there in recent years -- since 1992 the County has been declared a
disaster area six times. The average weighted credit quality of the Fund's
portfolio at the end of March was AA.
Our Near-Term Outlook
Recent signs point to a slowing growth rate for the U.S. economy. Even
export sales are moderating, partly due to the economic problems in Mexico, our
largest trading partner. Still, we cannot rule out additional rate hikes. It is
unclear, for example, whether consumer spending will remain restrained or
increase and add to inflationary pressures. Despite economic uncertainties, we
expect a calmer municipal marketplace for the near term relative to last year,
with firm prices due to the limited supply of tax-free bonds. Another potential
concern is recent congressional discussions regarding possible alterations of
U.S. tax law. We believe that when all is said and done, municipal bonds will
remain attractive investments for investors who need tax-free income.
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
Scudder California
Tax Free Fund:
A Team Approach to Investing
Scudder California Tax Free Fund is managed by a team of Scudder investment
professionals who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders, and other investment specialists who
work in our offices across the United States and abroad. We believe our team
approach benefits Fund investors by bringing together many disciplines and
leveraging Scudder's extensive resources.
Scudder California Tax Free Fund's Lead Portfolio Manager Jeremy L. Ragus has
had responsibility for the Fund's day-to-day operations since he joined Scudder
in 1990. Jeremy has 14 years of experience in municipal investing. Donald C.
Carleton, Portfolio Manager, has over 25 years of investment management
experience and has worked on the Fund since he arrived at Scudder in 1983.
10
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
INVESTMENT PORTFOLIO as of March 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
100.0% MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------------
CALIFORNIA Anaheim, CA, Electric Utility District,
Tax Exempt Commercial Paper:
4.3%, 5/22/95 .......................................... 1,000,000 A1+ 1,000,000
4.6%, 5/16/95 .......................................... 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+ 1,004,392
California Health Facilities Authority,
Pooled Loan Program:
Series 1985 A, Weekly Demand Note,
4.15%, 5/1/95 (c)* .................................... 200,000 MIG1 200,000
Series 1985 B, Weekly Demand Note, 4.15%,
10/1/10 (c)* .......................................... 100,000 MIG1 100,000
California Health Facilities Finance Authority,
Catholic Healthcare West, Series C, Variable Rate
Demand Note, 3.95%, 7/1/20 (c)* ......................... 1,000,000 A1+ 1,000,000
California Pollution Control Revenue, Minnesota,
Mining & Manufacturing, Weekly Demand Bond,
3.85%, 11/1/96* ....................................... 400,000 MIG1 400,000
California Pollution Control Revenue, Pacific Gas
& Electric Company, Series C, Tax Exempt
Commercial Paper:
3.95%, 4/3/95 ......................................... 1,000,000 A1+ 1,000,000
4.05%, 5/12/95 ........................................ 500,000 A1+ 500,000
California Revenue Anticipation Warrant,
5.75%, 4/25/96 ........................................ 1,000,000 SP-1 1,010,436
Chino, CA, Unified School District, Certificate of
Participation, Refunding Capital Construction
Project, Variable Rate Demand Bond, 4%, 9/1/00* ......... 2,600,000 MIG1 2,600,000
City of Industry, Los Angeles County, CA, Industrial
Development Revenue, Helene Curtis, Inc.,
Weekly Demand Bond, 4%, 10/1/06* ........................ 1,900,000 A1+ 1,900,000
Delmar Racetrack Authority, CA, Tax Exempt
Commercial Paper:
4%, 5/11/95 ............................................ 1,000,000 A1+ 1,000,000
4.25%, 5/15/95 ......................................... 500,000 A1+ 500,000
East Bay, CA, Municipal Utility District, Tax Exempt
Commercial Paper:
3.9%, 4/11/95 .......................................... 900,000 A1+ 900,000
4.25%, 5/15/95 ......................................... 1,500,000 A1+ 1,500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Escondido, CA, Multi-Family Housing Revenue,
Series 1985 A, Morning View Terrace Project,
Variable Rate Demand Note, 4.0%, 2/15/07* .............. 700,000 MIG1 700,000
Fresno, CA, Unified School District, Tax and
Revenue Anticipation Note, 4.75%, 7/19/95 .............. 1,000,000 MIG1 1,001,746
Glendale, CA, Reliance Development Co. Inc.,
Public Parking Project, Series 1984 A, Variable Rate
Demand Bond, 3.6%, 12/1/14* ............................ 700,000 A1+ 700,000
Golden Empire Schools Financing Authority, CA,
Kern High School District, Project B, Variable Rate
Demand Note, 4.2%, 12/1/22* ............................ 1,000,000 A1+ 1,000,000
Huntington Beach, CA, River Meadows Apartments,
Variable Rate Demand Bond, 4.625%, 10/1/05* ............ 1,500,000 A1 1,500,000
Irvine, CA, Improvement Bond, Assessment District
89-10, Daily Demand Bond, 4.8%, 9/2/15* ................ 1,200,000 MIG1 1,200,000
Kern County, CA, Certificate of Participation,
Public Facilities Project, Variable Rate Demand Bond:
Series A, 3.95%, 8/1/06* .............................. 1,400,000 MIG1 1,400,000
Series D, 3.95%, 8/1/06* .............................. 1,800,000 MIG1 1,800,000
Lancaster, CA, Redevelopment Agency, Multi-Family
Housing Revenue, Westwood Park Apartments,
Variable Rate Demand Notes, 4%, 12/1/07* ............... 600,000 MIG1 600,000
Long Beach, CA, Tax & Revenue Anticipation Note,
4.75%, 9/20/95 ......................................... 1,000,000 MIG1 1,002,939
Los Angeles, CA, Metropolitan Transportation Authority,
Sales Tax Revenue, Tax Exempt Commercial Paper:
3.8%, 4/10/95 ......................................... 1,000,000 P1 1,000,000
4.05%, 4/13/95 ........................................ 1,771,000 P1 1,771,000
Los Angeles, CA, Multi-Family Housing Revenue,
Series K, Variable Rate Demand Bond,
4.0%, 7/1/10* .......................................... 3,300,000 A1+ 3,300,000
Ontario, CA, Multi-Family Residential Mortgage
Revenue, Park Centre Partners, Variable Rate
Demand Bond, 4.1%, 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, 4%, 11/1/04* .............................. 100,000 MIG1 100,000
Weekly Demand Bond, 4.1%, 4/1/98* ...................... 1,082,000 A1+ 1,082,000
Orange County, CA, Water District, Tax Exempt
Commercial Paper:
4.85%, 5/18/95 ........................................ 1,000,000 A1+ 1,000,000
4.75%, 4/3/95 ......................................... 1,000,000 A1+ 1,000,000
Rincon Del Diablio, CA, Municipal Water District,
Quarterly Optional Tender Bond, 5%, 5/1/95 ............. 2,625,000 MIG1 2,625,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Riverside County, CA, Tax and Revenue
Anticipation Note, 4.25%, 6/30/95 ....................... 1,000,000 SP1+ 1,000,442
Sacramento, CA, Municipal Utility District,
Tax Exempt Commercial Paper:
4.1%, 4/12/95 .......................................... 2,000,000 A1+ 2,000,000
4.2%, 5/16/95 .......................................... 500,000 A1+ 500,000
4%, 7/17/95 ............................................ 1,000,000 A1+ 1,000,000
4.05%, 7/17/95 ......................................... 500,000 A1+ 500,000
Saddleback Valley Central School District, CA,
Tax and Revenue Anticipation Note, 4.5%, 7/28/95 ........ 1,000,000 SP1+ 1,001,378
San Bernardino County, CA, Multi-Family Housing Revenue:
Woodview Apartments Project, Variable Rate
Demand Bond, 4%, 4/1/07* ............................... 1,100,000 MIG1 1,100,000
Western Properties 1, Variable Rate Demand
Bond, 3.9%, 2/1/05* .................................... 1,000,000 MIG1 1,000,000
San Diego, CA, Multi-Family Housing Revenue, Lusk
Mira Mesa Project, Issue E, Variable Rate
Demand Bond, 4%, 4/1/07* ................................ 1,900,000 MIG1 1,900,000
San Jose, CA, Multi-Family Housing Revenue,
Kimberly Woods Project, Variable Rate
Demand Bond, 4%, 11/1/08* ............................... 500,000 MIG1 500,000
San Marcos, CA, Multi-Family Housing Revenue,
Household Bank Project, Series 1985, Weekly
Demand Note, 4.75%, 6/1/05* ............................. 2,700,000 SS&C 2,700,000
Santa Clara, CA, Electric Revenue:
Series B, Junior Lien, Variable Rate Demand
Bonds, 4%, 7/1/10* ...................................... 1,100,000 MIG1 1,100,000
Series C, Junior Lien, Variable Rate Demand
Bond, 4%, 7/1/10* ....................................... 1,300,000 MIG1 1,300,000
Santa Clara County, CA, Housing Authority, Fox
Chase I Project, Weekly Demand Bond, 4%, 11/1/08 (c)* ... 1,000,000 MIG1 1,000,000
Solano County, CA, Tax and Revenue Anticipation
Note, 5%, 11/1/95 ....................................... 1,000,000 SP1+ 1,003,647
South San Francisco, CA, 1991 Water Quality
Control, Variable Rate Demand Bond,
4.05%, 7/1/12* .......................................... 500,000 MIG1 500,000
Southern California Metropolitan Water District,
Tax Exempt Commercial Paper:
3.8%, 4/7/95 ........................................... 700,000 P1 700,000
4%, 5/11/95 ............................................ 1,000,000 A1+ 1,000,000
Southern California Public Power Authority,
Transmission Project, Series 1991, Weekly
Demand Note, 3.85%, 7/1/19 (c)* ......................... 700,000 A1+ 700,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Whittier, CA, Short Term Notes, 4.25%, 6/30/95 ............ 1,000,000 SP1+ 1,000,458
Yucaipa-Calimesa, CA, Joint Unified School District,
Tax and Revenue Anticipation Note, 4.5%, 7/12/95 ........ 1,500,000 MIG1 1,502,417
- -----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $63,405,855) (a) .................................. 63,405,855
==========
<FN>
(a) The cost for the federal income tax purposes was $63,405,855.
(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.
14
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
MARCH 31, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (identified cost $63,405,855)
(Note A) ..................................................... $ 63,405,855
Cash ............................................................. 52,179
Receivables:
Interest ..................................................... 567,363
Fund shares sold ............................................. 448,208
Other assets ..................................................... 647
------------
Total assets ............................................. 64,474,252
LIABILITIES
Payables:
Fund shares redeemed ......................................... $ 163,936
Dividends ................................................... 25,780
Accrued management fee (Note C) .............................. 20,284
Other accrued expenses (Note C) .............................. 37,056
----------
Total liabilities ........................................ 247,056
------------
Net assets, at value ............................................. $ 64,227,196
============
NET ASSETS
Net assets consist of:
Accumulated net realized loss ................................ $ (38,156)
Shares of beneficial interest ................................ 642,358
Additional paid-in capital ................................... 63,622,994
------------
Net assets, at value ............................................. $ 64,227,196
============
NET ASSET VALUE, offering and redemption price per share
($64,227,196 / 64,235,726 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.
15
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- --------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
YEAR ENDED MARCH 31, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ............................................................. $ 2,241,087
Expenses:
Management fee (Note C) .............................................. $ 180,098
Services to shareholders (Note C)..................................... 105,050
Custodian and accounting fees (Note C) ............................... 54,199
Trustees' fees (Note C) .............................................. 14,177
Auditing ............................................................. 24,315
Reports to shareholders .............................................. 12,486
Legal ................................................................ 4,076
Other ................................................................ 15,938 410,339
-----------------------------
Net investment income ................................................ 1,830,748
NET REALIZED LOSS ON INVESTMENTS
Net realized loss from investments ................................... (16,732)
------------
Net increase in net assets resulting from operations ................. $ 1,814,016
============
</TABLE>
The accompanying notes are an integral part of the financial statements.
16
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ----------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ----------------------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 1,830,748 $ 1,051,076
Net realized loss from investments .......................... (16,732) (6,414)
------------ ------------
Net increase in net assets resulting from operations ........ 1,814,016 1,044,662
------------ ------------
Distributions to shareholders from net investment
income ($.027 and $.019 per share, respectively) .......... (1,830,748) (1,051,076)
------------ ------------
Fund share transactions at net asset value of
$1.00 per share:
Shares sold ................................................. 88,435,904 90,115,262
Net asset value of shares issued to
shareholders in reinvestment of distributions ............. 1,538,711 848,492
Shares redeemed ............................................. (97,929,860) (74,302,175)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions ................................... (7,955,245) 16,661,579
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ........................... (7,971,977) 16,655,165
Net assets at beginning of period ........................... 72,199,173 55,544,008
------------ ------------
NET ASSETS AT END OF PERIOD ................................. $ 64,227,196 $ 72,199,173
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<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
MAY 28, 1987
(COMMENCEMENT
YEARS ENDED MARCH 31, OF OPERATIONS)
----------------------------------------------------------------------- TO MARCH 31,
1995 1994 1993 1992 1991 1990 1989 1988
----------------------------------------------------------------------- ---------------
<S> <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
------ ------ ------ ------ ------ ------ ------ ------
Net investment income (a) .027 .019 .023 .035 .047 .052 .049 .035
Distributions from net
investment income....... (.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 $1.000
====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) (B)..... 2.72 1.92 2.35 3.54 4.79 5.35 5.04 3.86**
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
($ millions)............. 64 72 56 58 64 65 64 53
Ratio of operating expenses,
net to average daily
net assets (%) (a)........ .60 .60 .60 .60 .65 .75 .67 .45*
Ratio of net investment
income to average daily
net assets (%)............ 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....... $ .002 $.003 $.003 $.003 $.003 $.001 $.002 $.004
Operating expense
ratio including
expenses reimbursed,
management fee and
other expenses
not imposed (%)...... .84 .90 .86 .88 .92 .90 .84 1.32*
(b) Returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</FN>
</TABLE>
18
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
INVESTMENT PORTFOLIO as of March 31, 1995
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------------------------
4.1% SHORT-TERM MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------------
California California Pollution Control Finance Authority, Solid
Waste Disposal, Colmac Energy, Weekly Demand
Note, 3.85%, 12/1/15* ......................................... 5,000,000 A1+ 5,000,000
Irvine, CA, Improvement Bond, Assessment
District 89-10, Daily Demand Bond, 4.8%, 9/2/15* ............... 7,200,000 A1+ 7,200,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $12,200,000) ............................................. 12,200,000
----------
-------------------------------------------------------------------------------------------------------
95.9% LONG-TERM MUNICIPAL INVESTMENTS
-------------------------------------------------------------------------------------------------------
CALIFORNIA Anaheim County, CA, Convention Center Financing,
Certificate of Participation, Zero Coupon, 8/1/05 (c) .......... 1,250,000 AAA 695,125
California Health Facilities Finance Authority:
Catholic Healthcare West:
4.75%, 7/1/19 (c) ............................................. 2,635,000 AAA 2,158,671
5%, 7/1/08 (c) ................................................ 5,745,000 AAA 5,353,651
Series A, 5%, 7/1/06 (c) ...................................... 2,000,000 AAA 1,910,280
Series A, 5%, 7/1/21 (c) ...................................... 4,900,000 AAA 4,204,102
Downey Community Hospital, 5.625%, 5/15/08 ..................... 4,000,000 A 3,781,400
Henry Mayo Newhall, Series A, 8%, 10/1/18 ...................... 9,350,000 A 10,122,217
Kaiser Permanente Medical Care Program,
5.55%, 8/15/25 ................................................ 4,000,000 AA 3,620,720
St. Francis Medical Center, 5.65%, 10/1/14 (c) ................. 1,500,000 AAA 1,404,150
California Housing Finance Agency:
Home Mortgage, Series F1:
6.2%, 8/1/05 (c) .............................................. 845,000 AAA 868,922
6.3%, 8/1/06 (c) .............................................. 1,325,000 AAA 1,361,597
Home Ownership and Improvements Revenue,
Series 1985 A, FHA Insured, 9.2%, 8/1/15 ...................... 45,000 AA 46,577
Multi-Unit Rental Housing Revenue:
Series 1992 A, 7.35%, 8/1/00 .................................. 2,615,000 A 2,823,180
Series 1992 A, 7.4%, 8/1/01 ................................... 1,555,000 A 1,693,706
Series 1992 A, 7.45%, 8/1/02 .................................. 1,015,000 A 1,114,399
Series 1992 A, 7.6%, 8/1/06 ................................... 4,030,000 A 4,409,384
Series 1992 A, 7.75%, 8/1/16 .................................. 2,440,000 A 2,635,468
Series 1992 A, 7.8%, 8/1/23 ................................... 2,635,000 A 2,810,728
Series 1992 A, 7.65%, 8/1/07 .................................. 2,335,000 A 2,548,629
Series 1992 A, 7.1%, 8/1/96 ................................... 1,475,000 A 1,508,394
Series 1992 A, 7.2%, 8/1/97 ................................... 1,620,000 A 1,684,039
Series 1992 A, 7.3%, 8/1/99 ................................... 2,435,000 A 2,599,752
</TABLE>
The accompanying notes are an integral part of the financial statements.
19
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
District 89-10, Daily Demand Bond, 4.8%, 9/2/15* ............... 7,200,000 A1+ 7,200,000
Series II, 7.3%, 8/1/00 ....................................... 345,000 A 374,325
Series II, 7.3%, 8/1/01 ....................................... 375,000 A 408,559
Series II, 7.35%, 8/1/02 ...................................... 400,000 A 438,556
Series lI, 7.35%, 8/1/04 ...................................... 460,000 A 510,779
Series II, 7.35%, 8/1/05 ...................................... 495,000 A 543,050
Series II, 6.5%, 8/1/95 ....................................... 250,000 A 251,135
Series II, 6.75%, 8/1/96 ...................................... 265,000 A 271,228
Series II, 7.35%, 8/1/03 ...................................... 430,000 A 472,901
Series II, 7%, 8/1/97 ......................................... 280,000 A 292,916
Series II, 7.25%, 8/1/98 ...................................... 300,000 A 321,792
Series II, 7.3%, 8/1/99 ....................................... 325,000 A 352,713
Series A, 7.7%, 8/1/09 ........................................ 700,000 761,327
California Pollution Control Revenue:
Pacific Gas and Electric, 8.75%, 1/1/07 ........................ 5,000,000 A 5,493,750
Southern California Edison, Series A, 6.9%, 9/1/06 ............. 3,750,000 A 3,942,863
California State Public Works Board, Lease Revenue,
Department of Corrections:
Del Norte/Imperial:
5.375%, 6/1/18 (c) ........................................... 4,750,000 AAA 4,352,805
Series 1993 C, 4.6%, 12/1/04 (c) ............................. 4,000,000 AAA 3,704,160
Medera Prison, Series A-2, 7.4%, 9/1/10 (c) ................... 1,000,000 AAA 1,161,520
California State Revenue Anticipation Warrants,
RITES Restricted, Series C:
8.47%, 4/25/96** .............................................. 7,500,000 MIG-1 7,790,625
9.66%, 4/25/96** .............................................. 7,500,000 MIG-1 7,790,625
California Statewide Communities
Development Authority, Certificate of Participation:
Lutheran Homes:
Series 1993, 5.5%, 11/15/08 .................................. 1,500,000 A 1,410,780
Series 1993, 5.6%, 11/15/13 .................................. 4,000,000 A 3,618,040
Sisters of Charity - Leavenworth Health Services Corp.:
4.875%, 12/1/10 .............................................. 2,500,000 AA 2,182,075
5%, 12/1/23 .................................................. 2,000,000 AA 1,647,680
Unihealth America, Series A, Zero Coupon,
10/1/05 (c) .................................................... 1,450,000 AAA 798,762
Colleguas-Las Virgines, CA, Public Finance Authority,
Municipal Water District Refunding Project,
Series 1993, 5.125%, 7/1/21 .................................... 2,000,000 AAA 1,753,240
Castaic Lake Water Agency, CA, Certificate of
Participation, 7.25%, 8/1/07 (c) ............................... 1,000,000 AAA 1,146,390
Costa Mesa, CA, Public Financing Authority, Public
Facilities Project, Series 1993 A, 5.25%, 10/1/18 .............. 4,500,000 A 3,827,070
Duarte, CA, Certificate of Participation, City of
Hope Medical Center:
5.75%, 4/1/02 ................................................. 3,525,000 BBB 3,359,149
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.8%, 4/1/03 ................................................... 3,735,000 BBB 3,536,037
Eureka, CA, Public Financing Authority, Tax
Allocation Revenue, Capital Guaranty Insured, 5%, 11/1/16 ...... 1,000,000 AAA 879,790
Fairfield, CA, Public Financing Authority,
Redevelopment Project, 5.25%, 8/1/13 ........................... 1,000,000 AAA 905,850
Fontana, CA, Tax Allocation Revenue, North Fontana
Redevelopment Project, Series 1993 A, 5%, 9/1/20 (c) ........... 1,200,000 AAA 1,034,676
Fresno, CA, Health Facilities Revenue, Holy Cross
Health, 5.625%, 12/1/18 (c) .................................... 1,200,000 AAA 1,116,216
Imperial, CA, Irrigation District Revenue, Certificate
of Participation, 5.2%, 11/1/09 (c) ............................ 2,500,000 AAA 2,370,050
Los Angeles County, CA, Metropolitan Transportation
Authority, Sales Tax Revenue, 4.8%, 7/1/05 (c) ................. 950,000 AAA 885,619
Los Angeles County, CA, Certificate of Participation,
Marina Del Rey, Series 1993 A, 5.75%, 7/1/98 ................... 5,000,000 NR 4,989,250
Los Angeles County, CA, Community Redevelopment
Agency, Bunker Hill Project, Series A, FSA Insured,
5.6%, 12/1/28 ................................................. 2,000,000 AAA 1,815,400
Los Angeles County, CA, Convention & Exhibition
Center Authority, Certificate of Participation:
5.2%, 8/15/09 (c) ............................................. 4,000,000 AAA 3,786,480
Zero Coupon, 8/15/04 (c) ......................................... 3,730,000 AAA 2,156,984
Los Angeles County, CA, Wastewater Revenue, Series
1993 D, 4.7%, 11/1/17 (c)....................................... 1,520,000 AAA 1,260,855
Metropolitan Water District of Southern California,
Waterworks Revenue, 8%, 7/1/08 ................................. 4,800,000 AA 5,826,432
Midpeninsula Regional Open Space District, CA,
Special District Finance Corp., Certificate of
Participation, Series 1993, 5.7%, 9/1/14 ........................ 2,550,000 A 2,313,590
Modesto, CA, Certificate of Participation, Community,
Project, Series A, 5.6%, 11/1/14 ............................... 1,370,000 AAA 1,311,844
Oceanside, CA, Certificate of Participation,
Oceanside Building Authority, Series A, 6%, 4/1/17 ............. 3,000,000 A 2,822,340
Orange County, CA, Local Transportation Authority,
Sales Tax Revenue, 5.1%, 2/15/98 (c) ........................... 5,000,000 AAA 4,747,400
Orange County, CA, Local Transportation Authority:
5.1%, 2/15/10 (c) .............................................. 6,100,000 AAA 5,620,723
5.15%, 2/15/11 (c) ............................................. 5,775,000 AAA 5,304,222
Oxnard, CA, Finance Authority, Lease Revenue,
FSA Insured, 5.375%, 6/1/16 .................................... 2,000,000 AAA 1,835,400
Palmdale, CA, Civic Center Authority,
5.25%, 7/1/15 (c) .............................................. 1,000,000 AAA 912,660
Palomar Pomerado, CA, Health Systems,
4.75%, 11/1/23 (c) ............................................. 1,000,000 AAA 806,900
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Pittsburgh, CA, Public Finance Authority, Wastewater
System Revenue, 5.125%, 6/1/15 (c) ............................. 1,000,000 AAA 896,190
Pittsburgh, CA, Redevelopment Agency, Series 1993 C,
4.625%, 8/1/21 (c) ............................................. 3,500,000 AAA 2,784,845
Pomona, CA, Unified School District, General Obligation:
5.6%, 8/1/14 (c) ............................................... 170,000 AAA 162,824
5.6%, 8/1/15 (c)................................................ 180,000 AAA 171,587
5.6%, 8/1/16 (c) ............................................... 190,000 AAA 180,464
5.6%, 8/1/17 (c) ............................................... 175,000 AAA 166,021
5.6%, 8/1/18 (c) ............................................... 205,000 AAA 194,508
Port of Hueneme, CA, Certificate of Participation,
Capital Improvement, 6%, 4/1/19 (c) ............................ 925,000 AAA 929,690
Redding, CA, Joint Power Water Revenue, Series
1993 A, 5%, 6/15/19 (c) ........................................ 1,330,000 AAA 1,153,576
Rialto, CA, Redevelopment Agency, Tax Allocation
Revenue, Industrial Redevelopment Project,
Series A, 6%, 9/1/23 .......................................... 2,500,000 BBB 2,293,500
Sacramento, CA:
City Financing Authority Lease Revenue Refunding,
5.4%, 11/1/20 (c) ............................................. 11,785,000 AAA 10,822,166
Municipal Utility District:
4.75%, 9/1/21 (c) ............................................. 6,450,000 AAA 5,234,691
5.4%, 11/15/07 (c) ............................................ 3,475,000 AAA 3,403,207
San Bernardino County, CA, Certificate of Participation:
Medical Center Financing Project:
5.25%, 8/1/06 ................................................. 1,000,000 A 866,640
6%, 8/1/09 .................................................... 4,700,000 A 4,286,259
5%, 8/1/26 .................................................... 3,000,000 A 2,157,240
Imbedded Swap Inverse Floater, Series 1992 A,
6.38%, 7/1/16 (c)** ........................................... 4,500,000 AAA 4,104,855
San Bernardino County, CA, Joint Powers Financing
Authority, 6.9%, 9/1/01 (c) .................................... 500,000 AAA 541,715
San Francisco, CA, Redevelopment Financing Agency,
Tax Allocation Revenue, Series A, Zero Coupon, Insured:
8/1/03 (c) .................................................... 1,080,000 AAA 683,824
8/1/04 (c) .................................................... 1,080,000 AAA 643,518
San Joaquin County, CA, Certificate of Participation,
4.75%, 11/15/19 (c) ............................................ 2,000,000 AAA 1,636,100
San Jose, CA, Financing Revenue, Community Facilities Project:
Zero Coupon:
11/15/03 ....................................................... 735,000 A 441,485
11/15/04 ....................................................... 1,605,000 A 899,956
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
11/15/05 ..................................................... 1,605,000 A 839,062
11/15/06 ..................................................... 1,605,000 A 780,528
Tax Allocation, 4.75%, 8/1/24 (c) ............................. 5,000,000 AAA 4,019,550
San Mateo County, CA, Capital Projects Program,
Correctional Parking Facilities, Series 1991, Zero Coupon:
7/1/05 (c) ................................................... 1,520,000 AAA 862,083
7/1/04 (c) ................................................... 1,890,000 AAA 1,139,027
County Healthcare Center, Series A, FSA Insured, 5.75%, 7/15/22.. 3,000,000 AAA 2,823,060
Joint Power Finance Authority, Capital
Project Program, Zero Coupon:
7/1/01 (c) .................................................. 1,765,000 AAA 1,266,970
7/1/02 (c) .................................................. 1,715,000 AAA 1,162,959
7/1/03 (c) .................................................. 1,725,000 AAA 1,103,379
Santa Anna, CA, Police Administration and Holding
Facility, Lease Revenue, Series A, 5.3%, 7/1/05 (c) ........... 725,000 AAA 705,940
Santa Clara County, CA, Certificate of Participation:
Foothill De Ana Community College, CA, Series 1993, Connie
Lee Insured, 5.25%, 9/1/21 ................................... 500,000 AAA 436,875
Series A Insured, 4.75%, 2/1/14 (c) ............................. 3,000,000 AAA 2,549,940
Santa Clara County, CA, Finance Authority, Lease
Revenue, YMC Replacement Project, 7.75%, 11/15/08 (c) ......... 3,250,000 AAA 3,871,498
Santa Margarita/Dana Point, CA, Improvement
Districts 3, 3A, 4 and 4A, 7.25%, 8/1/05 (c) .................. 2,895,000 AAA 3,320,768
Santa Monica, CA, Wastewater Revenue, Hyperion
Project, 4.75%, 1/1/12 (c) .................................... 3,000,000 AAA 2,592,630
Saugus, CA, Unified School District, Series A,
5.7%, 9/1/18 (c) .............................................. 1,700,000 AAA 1,615,714
South Orange County, CA, Public Power Authority,
Special Tax Revenue, 7%, 9/1/06 (c) ........................... 2,230,000 AAA 2,500,588
Southern California Public Finance Authority, Power
Project, Revenue Refunding, Zero Coupon, 7/1/14 (c) ........... 13,000,000 AAA 3,938,740
Stockton, CA, Health Facilities Revenue, St. Joseph
Medical Center, Series A, 5.625%, 6/1/13 (c) .................. 1,930,000 AAA 1,831,975
United Water Conservation District, Certificate
of Participation, FSA Insured, 5.8%, 5/1/13 ................... 1,350,000 AAA 1,304,478
University of California, Certificate of Participation,
UCLA Center, Chiller Cogeneration Project, Connie Lee Insured:
5%, 11/1/05 ................................................... 3,920,000 AAA 3,745,913
5.1%, 11/1/06 ................................................. 4,395,000 AAA 4,194,896
5.6%, 11/1/20 ................................................. 5,735,000 AAA 5,282,279
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- -----------------------------------------------------------------------------------------------------------------------
<CAPTION>
Unaudited
-----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Walnut Creek, CA, Certificate of Participation, John
Muir Medical Center:
5%, 2/15/20 (c) .............................................. 1,000,000 AAA 863,480
5%, 2/15/16 (c) .............................................. 1,500,000 AAA 1,316,190
West Covina, CA, Queen of the Valley Hospital,
Certificate of Participation, Hospital Revenue, Series 1994:
5.7%, 8/15/00 ................................................ 380,000 A 373,772
5.8%, 8/15/01 ................................................ 750,000 A 737,423
Westminster, CA, Redevelopment Agency,
Tax Allocation Revenue, Community Development,
Project -1, Series A, 7.3%, 8/1/21 ........................... 2,000,000 BBB 2,068,940
VIRGIN ISLANDS Virgin Islands Public Finance Authority, General
Obligation, Mortgage Fund Loan Notes, Series 1992 A:
6.25%, 10/1/96 ............................................... 3,400,000 BBB 3,449,878
6.5%, 10/1/97 ................................................ 2,955,000 BBB 3,027,980
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $281,832,135 ............................................ 282,954,000
-----------
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $294,032,135) (a) ....................................... 295,154,000
===========
<FN>
(a) The cost for federal income tax purposes was $294,041,229. At March 31, 1995, net unrealized appreciation for all
securities based on tax cost was $1,112,771. This consisted of aggregate gross unrealized appreciation for all securities
in which there was an excess of market value over tax cost of $6,472,545 and aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value of $5,359,774.
(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) 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.
** Inverse floating rate notes are instruments whose yields have an inverse relationship to benchmark interest rates. These
securities are shown at their rate as of March 31, 1995.
</FN>
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------------------------------------
MARCH 31, 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $294,032,135)
(Note A) .................................................. $295,154,000
Receivables:
Interest ................................................... 5,145,929
Fund shares sold ........................................... 113,963
Other assets ................................................. 2,574
------------
Total assets .......................................... 300,416,466
LIABILITIES
Payables:
Due to custodian bank ...................................... $ 29,860
Investments purchased ...................................... 5,404,793
Dividends .................................................. 503,997
Fund shares redeemed ....................................... 172,823
Accrued management fee (Note C) ............................ 150,300
Other accrued expenses (Note C) ............................ 91,319
------------
Total liabilities ..................................... 6,353,092
------------
Net assets, at market value .................................. $294,063,374
============
NET ASSETS
Net assets consist of:
Unrealized appreciation on investments................ $ 1,121,865
Accumulated net realized loss ........................ (14,125,109)
Shares of beneficial interest ........................ 292,078
Additional paid-in capital ........................... 306,774,540
------------
Net assets, at market value .................................. $294,063,374
============
NET ASSET VALUE, offering and redemption price per share
($294,063,374 / 29,207,833 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) ................................ $10.07
======
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
<TABLE>
SCUDDER CALIFORNIA TAX FREE FUND
- ------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- ------------------------------------------------------------------------------------------
YEAR ENDED MARCH 31, 1995
- ------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest.................................................... $18,052,189
Expenses:
Management fee (Note C)..................................... $ 1,861,185
Services to shareholders (Note C)........................... 273,937
Custodian and accounting fees (Note C)...................... 120,704
Trustees' fees (Note C)..................................... 14,177
Reports to shareholders..................................... 45,604
Auditing.................................................... 37,130
Legal....................................................... 6,740
Other....................................................... 44,737 2,404,214
--------------------------
Net investment income....................................... 15,647,975
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized loss from:
Investments......................................... (9,631,420)
Futures contracts................................... (45,176)
Option contracts.................................... (189,188) (9,865,784)
----------
Net unrealized appreciation on Investments.................. 12,444,920
-----------
Net gain on investment transactions......................... 2,579,136
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........ $18,227,111
===========
</TABLE>
26
<PAGE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
- ------------------------------------------------------------------------------------
<CAPTION>
YEARS ENDED MARCH 31,
----------------------------
INCREASE (DECREASE) IN NET ASSETS 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income.............................. $ 15,647,975 $ 16,470,180
Net realized gain (loss) from investment
transactions................................... (9,865,784) 10,581,523
Net unrealized appreciation (depreciation)
on investment transactions during the
period......................................... 12,444,920 (23,705,226)
------------ ------------
Net increase in net assets resulting from
operations..................................... 18,227,111 3,346,477
------------ ------------
Distributions to shareholders:
From net investment income ($.51 and
$.53 per share, respectively)............. (15,647,975) (16,470,180)
------------ ------------
From net realized gains from investment
transactions ($.09 and $.63 per share,
respectively)............................. (2,705,552) (18,977,992)
------------ ------------
In excess of net realized gains ($.05 per
share).................................... -- (1,553,773)
------------ ------------
Fund share transactions:
Proceeds from shares sold.......................... 54,322,312 106,045,976
Net asset value of shares issued to
shareholders in reinvestment
of distributions............................... 12,092,024 27,738,803
Cost of shares redeemed............................ (97,589,593) (83,273,345)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions........................ (31,175,257) 50,511,434
------------ ------------
INCREASE (DECREASE) IN NET ASSETS.................. (31,301,673) 16,855,966
Net assets at beginning of period.................. 325,365,047 308,509,081
------------ ------------
NET ASSETS AT END OF PERIOD........................ $294,063,374 $325,365,047
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period.......... 32,478,431 27,912,312
------------ ------------
Shares sold........................................ 5,531,252 9,646,082
Shares issued to shareholders in
reinvestment of distributions.................. 1,227,120 2,556,726
Shares redeemed.................................... (10,028,970) (7,636,689)
------------ ------------
Net increase (decrease) in Fund shares............. (3,270,598) 4,566,119
------------ ------------
Shares outstanding at end of period................ 29,207,833 32,478,431
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<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>
YEARS ENDED MARCH 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991 1990 1989 1988 1987 1986
------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period....... $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..... .51 .53 .59 .61 .63 .65 .68 .69 .71 .73
Net realized and
unrealized gain
(loss) on investment
transactions............ .14 (.35) .94 .47 .21 .22 .27 (.93) .53 1.41
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations................ .65 .18 1.53 1.08 .84 .87 .95 (.24) 1.24 2.14
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income.................. (.51) (.53) (.59) (.61) (.63) (.65) (.68) (.69) (.71) (.73)
From net realized gains
on investment........... (.09) (.63) (.49) (.28) (.09) (.19) -- (.26) (.30) --
In excess of net
realized gains.......... -- (.05) -- -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions......... (.60) (1.21) (1.08) (.89) (.72) (.84) (.68) (.95) (1.01) (.73)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period.................... $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99 $11.18 $10.95
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%)............ 6.75 1.30 15.13 10.74 8.53 8.62 9.80 (1.70) 12.11 23.19
RATIO AND SUPPLEMENTAL
DATA
Net assets, end of period
($ millions).............. 294 325 309 242 208 193 171 153 195 133
Ratio of operating
expenses, net to
average daily net
assets (%)................ .80 .78 .79 .81 .84 .83 .89 .88 .84 .88
Ratio of net investment
income to average daily
net assets (%)............ 5.18 4.85 5.42 5.79 6.13 6.23 6.71 6.95 6.55 7.11
Portfolio turnover rate..... 87.3 126.5 208.6 143.0 170.6 70.4 158.9 52.3 68.0 92.6
</TABLE>
28
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
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.
OPTIONS. The Tax Free Fund may write (sell) exchange-listed and over-the-counter
call and put options on securities and other financial instruments. When the Tax
Free Fund writes a call, it gives the purchaser of the call option the right to
buy the underlying security at the price specified in the option (the "exercise
price") at any time during the option period, generally ranging up to nine
months. When the Tax Free Fund writes a put option, it gives the purchaser of
the put option the right to sell the underlying security to the Tax Free Fund at
the exercise price at any time during the option period, generally ranging up to
nine months.
29
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
If the option expires unexercised, the Tax Free Fund Fund will realize income,
in the form of a capital gain, to the extent of the amount received for the
option (the "premium"). If the option is exercised, a decision over which the
Tax Free Fund Fund has no control, the Tax Free Fund Fund must sell the
underlying security to the option holder or purchase the underlying security
from the option holder at the exercise price. Certain options, including
options on indices will require cash settlement by the Tax Free Fund Fund if
the option is exercised. By writing a call option, the Tax Free Fund Fund
foregoes, in exchange for the premium less the commission ("net premium"), the
opportunity to profit during the option period from an increase in the market
value of the underlying security above the exercise price. By writing a put
option, the Tax Free Fund Fund , in exchange for the net premium received,
accepts the risk of a decline in the market value of the underlying security
below the exercise price.
The liability representing the Tax Free Fund Fund's obligation under an exchange
traded written options are valued at the last sale price or, in the absence of a
sale, the mean between the closing bid and asked quotations or at the most
recent asked quotation if no bid and asked quotations are available. Over the
counter written options are valued at the most recent asked quotation.
In addition, the Tax Free Fund Fund may purchase, singly and in combination,
call and put options on securities and other financial instruments. Exchange
traded purchased options are valued at the last sales price or, in the absence
of a sale, the mean between the closing bid and asked quotations or at the most
recent bid quotation if no bid and asked quotations are available.
Over-the-counter purchased options are valued at the most recent bid quotation.
FUTURES CONTRACTS. The Tax Free Fund may enter into interest rate and
securities index futures contracts for bona fide hedging purposes. Upon
entering into a futures contract, the Tax Free Fund is required to deposit with
a broker an amount ("initial margin") equal to a certain percentage of the
purchase price 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, for book purposes, a gain or loss equal to the difference
30
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 from the contingency of
imperfect market conditions.
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), and March 31, 2002 ($7,000) and March 31, 2003
($55,000), the respective expiration dates, whichever occurs first.
The Tax Free Money Fund and the Tax Free Fund, from November 1, 1994 through
March 31, 1995, incurred approximately $12,000 and $2,901,000, respectively, of
net realized capital losses which the funds intends 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.
31
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
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. 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 year ended March 31, 1995, purchases and sales of long-term municipal
securities aggregated $247,881,413 and $261,258,316, respectively, for the Tax
Free Fund.
The aggregate face value of futures contracts opened and closed during the
year ended March 31, 1995, for the Tax Free Fund, was $484,601,894.
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
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 year ended March 31, 1995, the fee for Tax Free
Fund pursuant to the Agreement amounted to $1,861,185, 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, 1995 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 year ended March 31, 1995, the
Adviser did not impose a portion of its fee amounting to $162,146, and the
portion imposed amounted to $180,098.
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 year ended March 31, 1995, $84,167 and $188,774 were charged by SSC
to Tax Free Money Fund and Tax Free Fund, of which $6,217 and $14,456 are unpaid
at March 31, 1995, respectively.
Effective September 27, 1994 and August 1, 1994, Scudder Fund Accounting
Corporation ("SFAC"), a wholly-owned subsidiary of the Adviser, assumed
responsibility for determining the daily net asset value per share and
maintaining the portfolio and general accounting records for the California Tax
Free Money Fund, and California Tax Free Fund, respectively. For the period
September 27, 1994 to March 31, 1995, SFAC imposed fees amounting to $15,684 of
which $2,500 was unpaid at March 31, 1995 for the California Tax Free Money
Fund. For the period August 1, 1994 to March 31, 1995, SFAC imposed fees
amounting to $42,784 of which $5,391 4 was unpaid at March 31, 1995 for the
California Tax Free Fund .
The Trust pays each Trustee not affiliated with the Adviser $4,000 annually
plus specified amounts for attended board and committee meetings. For the year
ended March 31, 1995, Trustees' fees aggregated $14,177 each for both Tax Free
Money Fund and Tax Free Fund.
33
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
TO THE TRUSTEES OF SCUDDER CALIFORNIA TAX FREE TRUST AND THE SHAREHOLDERS OF
SCUDDER CALIFORNIA TAX FREE MONEY FUND AND SCUDDER CALIFORNIA TAX FREE FUND:
We have audited the accompanying statements of assets and liabilities of Scudder
California Tax Free Money Fund and Scudder California Tax Free Fund, including
the investment portfolios, as of March 31, 1995, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder California Tax Free Money Fund and Scudder California Tax Free Fund as
of March 31, 1995, the results of their operations for the year then ended,
the changes in their net assets for each of the two years in the period then
ended, and their financial highlights for each of the periods indicated therein
in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 10, 1995
34
<PAGE>
TAX INFORMATION
- --------------------------------------------------------------------------------
Of the dividends paid by the California Tax Free Money Fund and California Tax
Free Fund from net investment income for the taxable year ended March31, 1995,
100% constituted exempt interest dividends for regular federal income tax and
California State income tax purposes.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
35
<PAGE>
(This page intentionally left blank.)
36
<PAGE>
OFFICERS AND TRUSTEES
David S. Lee*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
Peter B. Freeman
Trustee; Corporate Director and Trustee
Daniel Pierce*
Trustee
Olin Barrett*
Vice President
Donald C. Carleton*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
37
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
The Scudder Family of Funds
<CAPTION>
<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 Value Fund
Scudder Growth and Income 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 Fund, Inc.
Scudder Treasurers Trust(TM)++
<FN>
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.
</FN>
</TABLE>
38
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<S> <C>
Account Service and Information
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For account updates, prices, yields, exchanges, and redemptions
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
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
THE SCUDDER FUNDS
P.O. BOX 2291
BOSTON, MASSACHUSETTS
02107-2291
Or stop by a Scudder Funds Center
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
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.
Scudder Investor Relations and Scudder Funds Centers are services provided through Scudder
Investor Services, Inc., Distributor.
<FN>
* 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.
</FN>
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39
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Celebrating 75 Years of Serving Investors
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 36 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.
