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, 1996
o For investors seeking double-tax-free income exempt from both California
and regular federal income taxes.
o Pure no-load(TM) funds with no commissions to buy, sell, or exchange
shares.
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
CONTENTS
2 In Brief
3 Letter from the Funds' President
4 Scudder California Tax Free Fund Performance Update
5 Scudder California Tax Free Fund Portfolio Summary
6 Scudder California Tax Free Money Fund Portfolio Management Discussion
7 Scudder California Tax Free Fund Portfolio Management Discussion
12 Scudder California Tax Free Money Fund Investment Portfolio
16 Scudder California Tax Free Money Fund Financial Statements
19 Scudder California Tax Free Money Fund Financial Highlights
20 Scudder California Tax Free Fund Investment Portfolio
27 Scudder California Tax Free Fund Financial Statements
30 Scudder California Tax Free Fund Financial Highlights
31 Notes to Financial Statements
36 Report of Independent Accountants
37 Tax Information
37 Officers and Trustees
38 Investment Products and Services
39 How to Contact Scudder
IN BRIEF
Scudder California Tax Free Money Fund
* Scudder California Tax Free Money Fund offered a 7-day yield of 2.78% on
March 31, 1996, equivalent to a 5.17% taxable yield for investors in the
top federal and state income tax brackets.
(bar chart title)
7-Day Effective Yields on March 31, 1996
(bar chart data)
Scudder
California Tax Taxable
Free Money Fund Equivalent Yield
--------------- ----------------
2.78% 5.17%
Scudder California Tax Free Fund
* Scudder California Tax Free Fund provided a 4.88% 30-day net annualized SEC
yield on March 31, 1996.
* For shareholders subject to the 46.24% maximum combined federal and state
income tax rate, the Fund's yield was equal to a taxable yield of 9.08%.
(bar chart title)
30-Day Yield on March 31, 1996
(bar chart data)
Scudder
California Tax Taxable
Free Fund Equivalent Yield
-------------- ----------------
4.88% 9.08%
* Scudder California Tax Free Fund has exceeded the average performance of
California tax-exempt funds over one-, two-, three-, four-, five-, and
10-year periods, according to Lipper.
2
<PAGE>
LETTER FROM THE FUNDS' PRESIDENT
Dear Shareholders,
Widespread declines in U.S. interest rates helped create generally
hospitable conditions for bonds during the past 12 months. Scudder California
Tax Free Fund wrapped up the fiscal year ended March 31, 1996, with a total
return of 8.01%, reflecting appreciation in the Fund's share price and an
attractive stream of double-tax-free income to investors. From a competitive
standpoint, these results were especially rewarding, as the Fund outpaced the
average performance of similar California tax-free funds over all time periods
tracked by Lipper Analytical Services, Inc. For money fund investors in the
highest state and federal tax brackets, Scudder California Tax Free Money Fund
posted a 5.17% tax equivalent yield as of the close of the period.
As bond markets regained strength during 1995, taxable bonds led the pack,
while tax-free municipal bonds recovered at a more leisurely pace. By fall,
municipal bonds had become attractively valued versus Treasuries, which helped
renew investor interest and resulted in outperformance over taxable bonds.
Recent indicators raised concerns that the economy may be stronger than
originally believed, which unsettled investors. Still, ample evidence of slower
economic growth and the absence of mounting inflationary pressures suggest that
the economic expansion is indeed winding down. This latter scenario would be
beneficial to bonds. Given the current economic uncertainties, the Fund's
challenge is to stand ready to participate in potential price rallies but also
provide a measure of price stability should the market weaken.
In closing, we wish to take this opportunity to announce that a new member
joins the Scudder Family of Funds as of May 8 -- Scudder Emerging Markets Growth
Fund. The new Fund focuses on stocks of developing nations around the globe. For
more information about Scudder Emerging Markets Growth Fund and other Scudder
products and services, please see page 38. For questions about Scudder
California Tax Free Money Fund or Scudder California Tax Free Fund, please call
a Scudder Investor Relations representative at 1-800-225-2470.
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, 1996
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
SCUDDER CALIFORNIA TAX FREE FUND
- ----------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,801 8.01% 8.01%
5 Year $14,890 48.90% 8.29%
10 Year $21,240 112.40% 7.82%
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/96 $10,000 Cumulative Annual
- -------- ------- ---------- ------
1 Year $10,838 8.38% 8.38%
5 Year $14,745 47.45% 8.07%
10 Year $21,713 117.13% 8.05%
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
- ----------------------
'86 $10,000
'87 $11,211
'88 $11,020
'89 $12,100
'90 $13,143
'91 $14,264
'92 $15,795
'93 $18,185
'94 $18,420
'95 $19,664
'96 $21,240
Lehman Brothers Municipal Bond Index
Year Amount
- ----------------------
'86 $10,000
'87 $11,097
'88 $11,376
'89 $12,196
'90 $13,482
'91 $14,726
'92 $16,197
'93 $18,225
'94 $18,648
'95 $20,034
'96 $21,713
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>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
--------------------------------------------------------------------------------
NET ASSET VALUE... $11.18 $ 9.99 $10.26 $10.29 $10.41 $10.60 $11.05 $10.02 $10.07 $10.36
INCOME DIVIDENDS.. $ .71 $ .69 $ .68 $ .65 $ .63 $ .61 $ .59 $ .53 $ .51 $ .51
CAPITAL GAINS
DISTRIBUTIONS..... $ .30 $ .26 $ -- $ .19 $ .09 $ .28 $ .49 $ .68 $ .09 $ --
FUND TOTAL
RETURN (%)........ 12.11 -1.70 9.80 8.62 8.53 10.74 15.13 1.30 6.75 8.01
INDEX TOTAL
RETURN (%)........ 10.97 2.52 7.21 10.56 9.22 10.02 12.52 2.32 7.43 8.38
</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, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Lease Rentals 29%
Hospital/Health 19%
Housing Finance
Authority 16% We continue to emphasize
Sales & Special Tax 11% careful overall credit
Water/Sewer Revenue 8% selection and portfolio
Electric Utility Revenue 5% diversification.
Toll Revenue 4%
School District/Lease 4%
Pollution Control 2%
Miscellaneous Municipal 2%
----
100%
====
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
AAA 52% We increased somewhat
AA 2% the percentage of BBB and
A 29% non-rated bonds in the
BBB 14% Fund's portfolio to
Not Rated 3% enhance yield while
---- maintaining our
100% higher-quality orientation.
====
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 8% Bonds with effective
1 - 5 years 9% maturities from five to 20
5 - 10 years 25% years represented 61% of
10 - 20 years 36% the Fund's portfolio as of
Greater than 20 years 22% the close of its fiscal year,
---- compared with 48% a year
100% earlier.
====
Weighted average effective maturity: 13 years
- -----------------------------------------------------------------------
For more complete details about the Fund's Investment Portfolio,
see page 20.
5
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
During the course of Scudder California Tax Free Money Fund's
most recent fiscal year, short-term interest rates generally declined. As fears
of renewed inflation diminished, the Fed lowered interest rates in July and
December of 1995, and most recently in January of 1996. These rate decreases
fueled a strong recovery in the bond markets. Since then, intermediate- and
long-term rates have risen on news of stronger-than-expected economic growth.
Short-term interest rates held firm, however, as sellers of long-term issues
seeking a temporary haven created strong demand for money market securities. For
California investors, the combination of low supply and high demand, along with
the pending maturity of $4 billion of California Revenue Anticipation Warrants
in April resulted in lower short-term rates than in comparable national issues.
In addition, with the revitalization of California's economy and a final
resolution to the Orange County crisis, many investors have been willing to pay
a premium for California short-term tax-free securities.
In this environment, our strategy has been to seek a
relatively high yield by maintaining an average maturity slightly longer than
Scudder California Tax Free Money Fund's peers. As of March 31, 1996, the Fund's
average maturity stood at 54 days, compared with 39 days on March 31, 1995. The
Fund's 7-day yield as of March 31, 1996, was 2.78%. For investors in the highest
combined state and federal income tax bracket, the Fund's yield equaled a 5.17%
taxable yield, higher than the 4.76% average for taxable money funds, according
to IBC/Donoghue, Inc., an independent firm that tracks money fund performance.
The Fund provided a total return of 3.28% for the 12 months ended March 31,
1996, assuming reinvestment of all income distributions, which totaled $0.032
during the period.
If you have any questions about the Fund or your investments,
please call a Scudder Investor Relations representative at 1-800-225-2470. Page
39 provides more information on how to contact Scudder. Thank you for choosing
Scudder California Tax Free Money Fund to help meet your investment needs.
Sincerely,
Your Portfolio Management Team
/s/Rebecca Wilson /s/K. Sue Cote
Rebecca Wilson K. Sue Cote
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 10 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 12 years working with short-term fixed-income investments.
6
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
PORTFOLIO MANAGEMENT DISCUSSION
Dear Shareholders,
Through the ups and downs of the past year, Scudder California Tax Free
Fund performed well and continued to provide a high double-tax-free yield. On
March 31, 1996, the Fund's 30-day net annualized SEC yield was 4.88%--equivalent
to a taxable yield of 9.08% for shareholders subject to the 39.6% maximum
federal income tax rate and the 11% maximum California state income tax rate.
With such a yield, the Fund has a clear advantage over yields provided by
taxable investments of comparable credit quality. During the 12-month period
ended March 31, 1996, the Fund's shareholders received $0.51 per share of income
exempt from both federal and California state income taxes.
Over the period, the Fund's share price increased $0.29 to $10.36 per
share. The combination of share price appreciation and interest income of $0.51
per share during the fiscal year enabled the Fund to post a positive total
return of 8.01% over the 12-month period. This return compares favorably with
the 7.27% average total return of the 94 California municipal bond funds tracked
by Lipper Analytical Services for the same period.
Scudder California Tax Free Fund also exceeded the average performance of
California tax-exempt funds over one-, two-, three-, four-, five-, and 10-year
periods. The chart below provides the Fund's specific rankings over these
periods:
Scudder California Tax Free Fund's Average Annual Return
Versus Lipper Average of All California Tax Free Funds
(returns for periods ended March 31, 1996)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Period Scudder Lipper Rank Number of
California average funds
Tax Free annual return tracked
Fund return
- --------------------------------------------------------------------------------
1 year 8.01% 7.27% 26 94
2 years 7.37 6.65 15 72
3 years 5.31 5.07 24 60
4 years 7.68 6.93 3 51
5 years 8.29 7.48 3 45
10 years 7.82 7.18 6 22
<FN>
Past performance does not guarantee future results.
</FN>
</TABLE>
7
<PAGE>
Major Market Influences
During the Fund's 1995-1996 fiscal year, credit markets in general were
choppy as a result of alternating periods of increasing and declining interest
rates. As we mentioned in our September 1995 report, April through June 1995 was
marked by steadily rising bond prices and declining yields as a relatively slow
U.S. economy created the conditions for a rally. In July the Federal Reserve
made the first of three moves to ease interest rates, but the market reacted
with a two-month downturn, temporarily losing faith that the Fed would ease
rates further.
From there, other influences spurred a sustained rally. From August through
December the Republican majority in Congress staged a series of partial
government shutdowns in their efforts to achieve a balanced budget agreement on
their terms. Many bond market participants viewed these events as indications
that significant U.S. budget deficit reduction would now be possible. Another
plus for bonds during this period was low Japanese borrowing rates--as low as
0.5%. With these rates in mind, many arbitrageurs took the opportunity to borrow
Japanese yen inexpensively and then purchase U.S. Treasury securities in heavy
volume over the five-month period, providing an additional boost for U.S. bond
prices. In the first quarter of 1996, however, bonds were once again set back as
Congressional balanced budget efforts failed and the Japanese and U.S. economies
showed some signs of heating up.
Municipals Regain Momentum
The municipal market, which typically follows the Treasury market but at a
more moderate pace, was significantly affected by Congressional discussions of
"flat tax" legislation beginning in the second quarter of 1995. The flat tax
cloud overhanging the market did not completely lift until the Presidential
primaries were underway in early 1996, when additional scrutiny from the press
and public deflated the proposal. As a result, municipal bonds underperformed
Treasuries during the first three quarters of the Fund's fiscal year, but more
than made up lost ground during the first quarter of 1996, when Treasuries and
many taxable bonds were negatively affected by stronger-than-expected economic
indicators.
8
<PAGE>
Near- and Long-Term Strategy
To take advantage of the fact that municipals were undervalued compared to
Treasuries for most of the Fund's fiscal year, we generally maintained an
average effective maturity slightly longer than the average California tax free
fund. Additionally, to maintain as high a yield as possible given the Fund's
broad diversification and conservative strategy, we increased somewhat the
number of BBB-rated and non-rated bonds in the Fund's portfolio. These bonds,
while carrying some additional credit risk, generally exhibit less price
volatility than municipal bonds rated A and above. As of March 31, the Fund's
portfolio held 17% of bonds in these two categories. (For a summary of the
Fund's quality, diversification, and maturity structure, see page 5.)
The Fund's longer-term 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 61% of the portfolio on March 31, 1996, compared with
approximately 48% a year earlier. Bonds in this maturity range currently offer
good value and provide attractive yields with less price volatility than
longer-term bonds. These bonds are also generally less price sensitive to
changes in interest rates because of their shorter maturities.
While shorter-maturity bonds and noncallable bonds offer a relative degree
of price stability, they also typically yield less than longer-maturity,
callable debt instruments. In order to enhance the portfolio's overall yield, we
selectively purchased higher-coupon bonds that can be called by their issuer in
a relatively short time. Typically, these bonds provide yields three quarters to
one percentage point higher than bonds maturing on similar dates.
Scudder California Tax Free Fund continues to emphasize careful overall
credit selection and portfolio diversification, investing in a variety of
issues, including lease rentals, hospital/health, and housing finance authority
bonds as of March 31, 1996. The Fund's average credit quality at the close of
its fiscal year was AA.
9
<PAGE>
California On the Rebound
California's economy and finances are well on the road to complete recovery
from the recession that began almost six years ago. California has balanced its
operating budget for the past five years and in April 1996 paid off the balance
of the California Revenue Anticipation Warrants issued to fund its accumulated
deficit. In addition, the state continues to add jobs, gaining 600,000 new ones,
for example, in 1994. Despite its steady employment growth, California's economy
has been unable to keep up with the growth in its population. Thus California's
unemployment rate of 7.6%, while steadily declining during the past three years,
is still above the national average of 5.5%.
California's economy is well positioned for growth into the next century.
The state's recession was not cyclical, but was caused by declines in the
construction and aerospace industries. These declines forced the state to
re-invent itself to create new jobs -- California is now home to the majority of
the nation's "Inc. (Magazine) 500" companies, the fastest-growing small
companies in the country. Additionally, 1995 was a record year for the state's
agricultural, high-tech, and entertainment exports. Our Near-Term Outlook
As we stated earlier, demand for municipals has improved now that the
low-rate flat tax proposal has disappeared from current political discourse. In
terms of the U.S. economy, we still believe that consumers' heavy debt loads
could hinder momentum and create a slowdown sometime later this year or early
next year, which would benefit bonds. But economic indicators are sufficiently
mixed that it is unclear to us when and to what extent this might occur.
Meanwhile, the Federal Reserve is in a neutral stance, neither easing nor
tightening credit, and inflation remains in check. Adding to the uncertainty is
the wait until Presidential and Congressional elections, which will play a
significant role in how optimistically the bond market will view the prospects
for federal budget deficit reduction. Market participants have applauded,
however, as both parties have claimed fiscal responsibility as part of their
respective political platforms.
10
<PAGE>
For these reasons we are currently maintaining a neutral average effective
maturity for the Fund, and will continue to do so until the direction of the
U.S. economy becomes clearer. In pursuit of Scudder California Tax Free Fund's
objectives, we will continue to emphasize noncallable bonds with effective
maturities between five and 20 years. We will also 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 15 years of experience in municipal investing.
Donald C. Carleton, Portfolio Manager, has over 26 years of investment
management experience and has worked on the Fund since he arrived at Scudder in
1983.
11
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
INVESTMENT PORTFOLIO as of March 31, 1996
<TABLE>
<CAPTION>
Unaudited
-----------------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------
100.0% MUNICIPAL INVESTMENTS
<S> <C> <C> <C> <C>
CALIFORNIA Anaheim, CA, Electric Revenue Tax, Commercial
Paper, 3.2%, 5/17/96 ............................... 750,000 A1+ 750,000
Anaheim, CA, Electric Utility Revenue Anticipation
Notes, Tax Exempt Commercial Paper,
3.45%, 7/15/96 ..................................... 1,000,000 A1+ 1,000,000
Anaheim, CA, Multi-Family Housing Revenue,
Harbor Cliff Project, Variable Rate Demand Note,
3%, 7/1/06* ........................................ 400,000 MIG1 400,000
California Health Facilities Finance Authority:
Catholic Healthcare West, Series C, Variable Rate
Demand Note, 3.05%, 7/1/20* (c) ................... 1,000,000 A1+ 1,000,000
Pooled Loan Program, Series 1985 B, Weekly
Demand Note, 3.1%, 10/1/10* (c) ................... 100,000 MIG1 100,000
California Pollution Control Revenue:
Minnesota Mining & Manufacturing, Weekly
Demand Bond, 3%, 11/1/96* ......................... 400,000 MIG1 400,000
Southern California Edison Co., Daily Demand Note,
Series 1986 A, 3.4%, 2/28/08* ..................... 500,000 A-1 500,000
Southern California Edison Co., Daily Demand Note,
Series 1986 B, 3.4%, 2/28/08* ..................... 100,000 A1+ 100,000
California State Revenue Anticipation Warrants,
Series C, 5.75%, 4/25/96 ........................... 3,000,000 SP-1 3,002,235
City of Industry, Los Angeles County, CA, Industrial
Development Revenue, Helene Curtis, Inc., Weekly
Demand Bond, 3.3%, 10/1/06* ....................... 1,900,000 A1+ 1,900,000
Delmar Race Track Authority, CA, Tax Exempt
Commercial Paper, 3.1%, 5/17/96 .................... 2,000,000 A1+ 2,000,000
East Bay, CA, Municipal Utility District, Tax Exempt
Commercial Paper, 3.4%, 7/15/96 .................... 500,000 A1+ 500,000
Eastern Municipal Water District, CA, Water & Sewer
Revenues Series 1993 B Weekly Demand Notes,
3%, 7/1/20* (c) .................................... 1,100,000 MIG1 1,100,000
El Cerrito, CA, Tax & Revenue Anticipation Note,
4.5%, 7/5/96 ....................................... 1,000,000 MIG1 1,001,247
Escondido, CA, Multi-Family Housing Revenue,
Series 1985 A, Morning View Terrace Project,
Variable Rate Demand Note, 3%, 2/15/07* ............ 600,000 MIG1 600,000
Fontana, CA, Unified School District, Tax and
Revenue Anticipation Note, 4.5%, 7/5/96 ............ 1,500,000 SP1+ 1,501,496
</TABLE>
The accompanying notes are an integral part of the financial statements.
12
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
-----------------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Huntington Beach, CA, Multi-Family Housing
Revenue, River Meadows Apartments, Series B,
Weekly Demand Bonds, 3.675%, 10/1/05* ................ 1,500,000 SS&C 1,500,000
Irvine Ranch, CA, Series A, Variable Rate Demand
Note, 3.6%, 10/1/00* ................................. 200,000 A1+ 200,000
Kern County, CA, Certificate of Participation, Public
Facilities Project:
Series A, Variable Rate Demand Bond,
3.05%, 8/1/06* ..................................... 1,400,000 MIG1 1,400,000
Series D, Variable Rate Demand Bond,
3.05%, 8/1/06* ..................................... 1,700,000 MIG1 1,700,000
Lancaster, CA, Redevelopment Agency, Multi-Family
Housing Revenue, Westwood Park Apartments,
Variable Rate Demand Notes, 3%, 12/1/07* ............ 600,000 MIG1 600,000
Los Angeles County, CA, Tax and Revenue
Anticipation Note, 4.5%, 7/1/96 ..................... 2,000,000 MIG1 2,004,114
Los Angeles, CA, Dept. of Water & Power Electric
Plant, Commercial Paper, Tax Exempt, 3.2%, 4/8/96 ... 1,000,000 A1+ 1,000,000
Los Angeles, CA, Wastewater Revenues, Tax Exempt
Commercial Paper, Series 1991, 3.15%, 7/8/96 ........ 3,000,000 P1 3,000,000
Los Angeles, CA, Wastewater Revenues, Tax Exempt
Commercial Paper, 3.45%, 7/15/96 .................... 1,400,000 P1 1,400,000
Los Angeles, CA, Multi-Family Housing Revenue,
Series K, Variable Rate Demand Bond,
3.15%, 7/1/10* ...................................... 3,800,000 A1+ 3,800,000
Los Rios Community College District, Sacramento
County, CA, Tax & Revenue Anticipation Notes,
4.75%, 9/19/96 ...................................... 2,000,000 MIG1 2,006,550
MSR Public Power Agency, San Juan, CA, San Juan
Project Revenue, Subordinate Lien, Series B,
Weekly Demand Bonds, 3.05%, 7/1/22* ................. 1,000,000 A1+ 1,000,000
Ontario, CA, Multi-Family Residential Mortgage
Revenue, Park Centre Partners, Variable
Rate Demand Bond, 3.1%, 8/1/07* ..................... 2,000,000 MIG1 2,000,000
Ontario, CA, Redevelopment Agency, Multi-Family
Housing Revenue, Weekly Demand Bond,
3%, 4/1/98* ......................................... 1,000,000 A1+ 1,000,000
Ontario, CA, Redevelopment Agency, Multi-Family
Housing Revenue, Daisy Associates, Ltd. Project,
Variable Rate Demand Note, 3%, 11/1/04* ............. 100,000 MIG1 100,000
Orange County, CA, Local Transportation Authority,
Sales Tax Revenue, 4.6%, 2/15/97 (c) ................ 1,500,000 AAA 1,515,276
Orange County, CA, Water District Public Facilities
Corp., Commercial Paper, Tax Exempt:
3%, 8/13/96 ......................................... 1,000,000 P1 1,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
13
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
-----------------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3.15%, 5/22/96 ...................................... 1,000,000 A1+ 1,000,000
Riverside County, CA, School Financing Authority,
School Districts Financing, Revenue Anticipation
Notes, 4.75%, 7/18/96 ................................ 2,000,000 SP1+ 2,005,113
Sacramento Municipal Utility District, CA, Series I,
Tax Exempt Commercial Paper:
3.25%, 8/23/96 ....................................... 1,500,000 A1+ 1,500,000
3.1%, 8/12/96 ........................................ 1,000,000 A1+ 1,000,000
San Bernadino County, CA, Multi-Family Housing
Revenue, Variable Rate Demand Bond:
Western Properties 1, 3%, 2/1/05* ................... 900,000 MIG1 900,000
Western Properties 2, 3.15%, 5/1/05* ................ 400,000 MIG1 400,000
San Bernadino, CA, Multi-Family Housing Revenue,
Woodview Apartment Project, Variable Rate
Demand Note, 3.15%, 4/1/07* .......................... 1,100,000 MIG1 1,100,000
San Diego, CA, Multi-Family Housing Revenue, Lusk
Mira Mesa Project, Issue E, Variable Rate Demand
Bond, 3.15%, 4/1/07* ................................. 1,900,000 MIG1 1,900,000
San Jose, CA, Clean Water Financing Sewer Revenue
Bonds, Series 1995 B, Weekly Demand Note,
2.95%, 11/15/20* (c) ................................. 1,000,000 AAA 1,000,000
San Jose, CA, Multi-Family Housing Revenue,
Kimberly Woods Project, Variable Rate
Demand Bond, 3%, 11/1/08* ............................ 500,000 MIG1 500,000
San Marcos, CA, Redevelopment Agency,
Multi-Family Rental Housing Agency, Variable Rate
Demand Notes, 3.675%, 6/1/05* ........................ 2,700,000 SS&C 2,700,000
Santa Clara County, CA, Housing Authority, Fox
Chase I Project, Weekly Demand Bond,
3.25%, 11/1/08* (c) .................................. 1,000,000 MIG1 1,000,000
Santa Clara, CA, Electric Revenue, Junior Lien,
Variable Rate Demand Bond:
Series B, 3.1%, 7/1/10* ............................. 1,100,000 MIG1 1,100,000
Series C, 3.1%, 7/1/10* ............................. 1,300,000 MIG1 1,300,000
Santa Cruz, CA, Tax & Revenue Anticipation Notes,
4.5%, 7/11/96 ........................................ 1,000,000 SP1+ 1,001,172
South Coast, CA, Local Education Agencies, Pooled
Tax and Revenue Anticipation Note Program,
5%, 8/14/96 .......................................... 2,000,000 SP1+ 2,003,634
South San Francisco, CA, 1991 Water Quality Control,
Variable Rate Demand Bond, 3.4%, 7/1/12* ............. 500,000 MIG1 500,000
Southern California Public Power Authority,
Transmission Project, Series 1991, Weekly
Demand Note, 2.95%, 7/1/19* (c) ...................... 1,700,000 A1+ 1,700,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
14
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
-----------------
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Southern California, Metropolitan Water District,
Commercial Paper, Tax Exempt, 3.05%, 5/17/96 ......... 1,000,000 A1+ 1,000,000
Ventura, CA, Unified School District, Tax and
Revenue Anticipation Notes, 4.75%, 7/5/96 ............ 1,500,000 SP1+ 1,502,794
----------
TOTAL INVESTMENT PORTFOLIO - 100.0%
(Cost $66,193,631) (a) ............................... 66,193,631
==========
</TABLE>
(a) The cost for the federal income tax purposes was $66,193,631.
(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.
The accompanying notes are an integral part of the financial statements.
15
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1996
----------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at value (identified cost $66,193,631)
(Note A) ............................................... $ 66,193,631
Cash ...................................................... 144,987
Receivables:
Interest ............................................... 754,090
Fund shares sold ....................................... 22,641
Other assets .............................................. 647
------------
Total assets ....................................... 67,115,996
LIABILITIES
Payables:
Fund shares redeemed ................................... $ 54,877
Dividends .............................................. 23,861
Accrued management fee (Note C) ........................ 22,483
Other accrued expenses (Note C) ........................ 48,727
--------
Total liabilities ................................... 149,948
Net assets, at value ...................................... $ 66,966,048
============
NET ASSETS
Net assets consist of:
Accumulated net realized loss ......................... $ (94,492)
Shares of beneficial interest ......................... 669,765
Additional paid-in capital ............................ 66,390,775
------------
Net assets, at value ...................................... $ 66,966,048
============
NET ASSET VALUE, offering and redemption price per share
($66,966,048/66,976,491 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.
16
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED MARCH 31, 1996
- --------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest ............................................... $ 2,542,099
Expenses:
Management fee (Note C) ................................ $ 332,010
Services to shareholders (Note C) ...................... 81,659
Custodian and accounting fees (Note C) ................. 52,253
Trustees' fees and expenses (Note C) ................... 13,032
Auditing ............................................... 26,711
Reports to shareholders ................................ 11,674
Legal .................................................. 6,723
Other .................................................. 14,250
---------
Total expenses before reductions ....................... 538,312
Expense reductions (Note C) ............................ (138,996)
---------
Expenses, net .......................................... 399,316
---------
Net investment income .................................. 2,142,783
NET REALIZED GAIN (LOSS) ON INVESTMENTS
Net realized loss from investments ..................... (1,913)
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $ 2,140,870
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
17
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
---------------------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ................................ $ 2,142,783 $ 1,830,748
Net realized loss from investments.................... (1,913) (16,732)
------------ ------------
Net increase in net assets resulting from
operations ....................................... 2,140,870 1,814,016
------------ ------------
Distributions to shareholders from net investment
income ($.032 and $.027 per share,
respectively) .................................... (2,142,783) (1,830,748)
------------ ------------
Fund share transactions at net asset value of
$1.00 per share:
Shares sold .......................................... 53,468,668 88,435,904
Net asset value of shares issued to
shareholders in reinvestment of
distributions ................................ 1,832,601 1,538,711
Shares redeemed ...................................... (52,560,504) (97,929,860)
------------ ------------
Net increase (decrease) in net assets from
Fund share transactions ...................... 2,740,765 (7,955,245)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS .................... 2,738,852 (7,971,977)
Net assets at beginning of period .................... 64,227,196 72,199,173
------------ ------------
NET ASSETS AT END OF PERIOD .......................... $ 66,966,048 $ 64,227,196
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
18
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
THE FOLLOWING TABLE INCLUDES SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT
EACH PERIOD AND OTHER PERFORMANCE INFORMATION DERIVED FROM THE FINANCIAL
STATEMENTS.
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 28, 1987
(COMMENCEMENT
YEARS ENDED MARCH 31, OF OPERATIONS)
----------------------------------------------------------------------------------- TO MARCH 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
----------------------------------------------------------------------------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period............. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- ------- ------- ------- ------- -------
Net investment income (a)........ .032 .027 .019 .023 .035 .047 .052 .049 .035
Distributions from net
investment income............ (.032) (.027) (.019) (.023) (.035) (.047) (.052) (.049) (.035)
------- ------- ------- ------- ------- ------- ------- ------- -------
Net asset value,
end of period................ $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= ======= ======= ======= ======= =======
TOTAL RETURN (%) (b)............ 3.28 2.72 1.92 2.35 3.54 4.79 5.35 5.04 3.86**
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions)................. 67 64 72 56 58 64 65 64 53
Ratio of operating expenses,
net to average daily net
assets (%) (a)................. .60 .60 .60 .60 .60 .65 .75 .67 .45*
Ratio of net investment income
to average daily net
assets (%)..................... 3.23 2.68 1.90 2.33 3.50 4.68 5.22 4.98 4.41*
(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 $ .002 $ .003 $ .003 $ .003 $ .003 $ .001 $ .002 $ .004
Operating expense ratio before
expense reductions (%)...... .81 .84 .90 .86 .88 .92 .90 .84 1.32*
</TABLE>
(b) Returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
19
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
INVESTMENT PORTFOLIO as of March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
7.3% SHORT-TERM MUNICIPAL INVESTMENTS
CALIFORNIA California Health Facilities Finance Authority, Sutter
Health, Series 1990 A, Daily Demand Note,
3.55%, 3/1/20* .................................................... 300,000 A1+ 300,000
Irvine, CA, Improvement Bond, Assessment
District 89-10, Daily Demand Bond, 3.5%, 9/2/15* .................. 1,040,000 MIG1 1,040,000
Irvine Ranch Water District, CA:
Capital Improvements Projects, Daily Demand
Bond, 3.2%, 8/1/16* ............................................. 1,300,000 MIG1 1,300,000
Daily Demand Note, 3.35%, 6/1/15* ................................. 1,300,000 A1 1,300,000
Daily Demand Note, 3.55%, 8/1/16* ................................. 400,000 MIG1 400,000
Series A, Variable Rate Demand Note,
3.6%, 10/1/00* .................................................. 200,000 A1+ 200,000
Series A, Daily Demand Note, 3.35%, 11/15/13* ..................... 600,000 A1 600,000
Series B, Variable Rate Demand Note,
3.35%, 10/1/1999* ............................................... 200,000 A1 200,000
Series 1985, Variable Rate Demand Note,
3.35%, 10/1/09* ................................................. 2,200,000 A1 2,200,000
Los Angeles, CA, Regional Airport Improvement Lease:
Series 1984, Daily Demand Note, 3.8%, 12/1/24* .................. 2,300,000 A1+ 2,300,000
Series 1985, Daily Demand Note, 3.8%, 12/1/25* .................. 2,000,000 MIG1 2,000,000
Orange County, CA, Daily Demand Note,
3.55%, 8/1/15* .................................................. 9,200,000 A1+ 9,200,000
Southern California Pollution Control Revenue,
Edison Co. Series 1986 A, Daily Demand Note,
3.4%, 2/28/08* .................................................. 300,000 A1+ 300,000
----------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS
(Cost $21,340,000) .............................................. 21,340,000
----------
92.7% LONG-TERM MUNICIPAL INVESTMENTS
CALIFORNIA ABAG Financing Authority:
Non-Profit Corps., Certificate of Participation,
5.75%, 8/15/14 (c) ............................................ 1,000,000 A 965,840
Stanford Health Systems, Certificates of
Participation, 6%, 11/1/07 (c) ................................ 605,000 AAA 644,531
Anaheim County, CA, Convention Center Financing,
Certificate of Participation, Zero Coupon, 8/1/05 (c) ........ 1,250,000 AAA 764,138
Benecia, CA, Unified School District, Series B, Zero
Coupon, 8/1/18 (c) ........................................... 545,000 AAA 136,397
</TABLE>
The accompanying notes are an integral part of the financial statements.
20
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Health Facilities Finance Authority:
Catholic Healthcare West, Series A, 5%, 7/1/06 (c) ....... 2,000,000 AAA 1,976,160
Downey Community Hospital, 5.625%, 5/15/08 ............... 6,000,000 A 5,945,040
Catholic Healthcare West, 5%, 7/1/08 (c) ................. 5,745,000 AAA 5,580,521
Hospital Revenue, Downey Community Hospital,
5.75%, 5/15/15 ......................................... 1,000,000 A 938,210
Catholic Healthcare West, Series A, 5.75%, 7/1/15 (c) .... 2,250,000 AAA 2,206,170
Catholic Healthcare West, Series A, 5%, 7/1/21 (c) ....... 1,935,000 AAA 1,691,596
Kaiser Permanente Medical Care Program,
5.55%, 8/15/25 ......................................... 4,000,000 AA 3,705,880
Henry Mayo Newhall, Series A, 8%, 10/1/18 ................ 3,655,000 A 3,990,200
St. Francis Medical Center, Series A,
5.65%, 10/1/14 (c) ..................................... 1,500,000 AAA 1,523,820
California Housing Finance Agency:
Home Mortgage, Series F1:
6.2%, 8/1/05 (c) ....................................... 845,000 AAA 874,076
6.3%, 8/1/06 (c) ....................................... 1,325,000 AAA 1,369,600
Series 1996 C, 7.816%, 2/1/27, Inverse
Floaters (c)** ......................................... 11,800,000 AAA 10,929,750
Series G, 5.7%, 2/1/07 (c) ............................... 500,000 AAA 502,605
Series G, 5.8%, 2/1/08 (c) ............................... 1,330,000 AAA 1,332,075
Series G, 5.9%, 2/1/09 (c) ............................... 200,000 AAA 200,014
Series G, 6%, 8/1/10 (c) ................................. 1,400,000 AAA 1,394,540
Series K, 5.55%, 2/1/21 (c) .............................. 1,000,000 AAA 987,970
Multi-Unit Rental Housing Revenue:
Series A, 7.1%, 8/1/96 ................................. 1,475,000 A 1,491,977
Series II, 6.75%, 8/1/96 ............................... 265,000 A 267,192
Series A, 7.2%, 8/1/97 ................................. 1,620,000 A 1,686,663
Series II, 7%, 8/1/97 .................................. 280,000 A 289,638
Series II, 7.25%, 8/1/98 ............................... 300,000 A 317,685
Series A, 7.3%, 8/1/99 ................................. 2,435,000 A 2,632,065
Series II, 7.3%, 8/1/99 ................................ 325,000 A 351,218
Series A, 7.35%, 8/1/00 ................................ 2,615,000 A 2,868,446
Series II, 7.3%, 8/1/00 ................................ 345,000 A 375,857
Series A, 7.4%, 8/1/01 ................................. 1,555,000 A 1,690,674
Series II, 7.3%, 8/1/01 ................................ 375,000 A 412,365
Series A, 7.45%, 8/1/02 ................................ 1,015,000 A 1,141,662
Series II, 7.35%, 8/1/02 ............................... 400,000 A 441,584
Series II, 7.35%, 8/1/03 ............................... 430,000 A 475,004
Series II, 7.35%, 8/1/04 ............................... 460,000 A 511,060
Series II, 7.35%, 8/1/05 ............................... 495,000 A 551,183
Series A, 7.6%, 8/1/06 ................................. 4,030,000 A 4,447,750
Series A, 7.65%, 8/1/07 ................................ 2,335,000 A 2,570,111
Series A, 7.7%, 8/1/09 ................................. 700,000 A 768,411
Series A, 7.75%, 8/1/16 ................................ 2,440,000 A 2,640,544
Series A, 7.8%, 8/1/23 ................................. 2,635,000 A 2,844,008
</TABLE>
The accompanying notes are an integral part of the financial statements.
21
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
----------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Pollution Control Revenue, Southern
California Edison, Series A, 6.9%, 9/1/06 ................ 3,750,000 A 4,044,563
California State Public Works Board, Department of
Corrections, Lease Revenue, Madera Prison,
Series A-2, 7.4%, 9/1/10 (c) ............................. 1,000,000 AAA 1,202,150
California Statewide Communities Development
Authority, Certificate of Participation:
Lutheran Homes, Series 1993, 5.6%, 11/15/13 ............ 4,750,000 A 4,569,595
St. Joseph's Health System, 6.2%, 7/1/08 ............... 200,000 AA 208,452
Keiro Nursing Home, California Mortgage Insured,
5.875%, 3/1/19 ....................................... 1,685,000 A 1,604,524
Sisters of Charity-Leavenworth Health
Services Corp., 4.875%, 12/1/10 (c) .................. 2,500,000 AAA 2,282,650
Sisters of Charity-Leavenworth Health
Services Corp., 5%, 12/1/23 (c) ...................... 2,500,000 AAA 2,173,350
Unihealth America, Series A, Zero Coupon,
10/1/05 (c) .......................................... 1,450,000 AAA 878,642
Lutheran Homes, 5.5%, 11/15/08 ......................... 1,500,000 A 1,508,040
Castaic Lake Water Agency, CA, Certificate of
Participation, Series A, 7.25%, 8/1/07 (c) ............... 1,000,000 AAA 1,171,050
Central California Joint Powers Health Financing
Authority, Community Hospitals of Central California,
Certificate of Participation, Series 1993,
5.25%, 2/1/04 ............................................ 1,780,000 A 1,755,169
Chino Basin, CA, Regional Financing Authority,
Municipal Water District, Sewer System,
5.9%, 8/1/11 (c) ......................................... 1,290,000 AAA 1,344,245
Costa Mesa, CA, Public Financing Authority,
Public Facilities Project, Series A, 5.25%, 10/1/18 ...... 4,500,000 A 3,979,980
Duarte, CA, Certificates of Participation, City of Hope
Medical Center:
6%, 4/1/08 ............................................. 3,750,000 BBB 3,721,538
5.75%, 4/1/02 .......................................... 3,525,000 BBB 3,500,325
5.8%, 4/1/03 ........................................... 3,735,000 BBB 3,691,076
Elk Grove, CA, Unified School District #1, Special Tax,
Community Facilities:
6.5%, 12/1/08 (c) ...................................... 1,000,000 AAA 1,119,460
Zero Coupon:
12/1/09 (c) .......................................... 2,465,000 AAA 1,137,080
12/1/10 (c) .......................................... 1,670,000 AAA 722,793
12/1/11 (c) .......................................... 2,425,000 AAA 983,823
12/1/12 (c) .......................................... 2,680,000 AAA 1,018,159
Eureka, CA, Public Finance Authority, Tax Allocation
Revenue, Capital Guaranty Insured, 5%, 11/1/16 ........... 1,380,000 AAA 1,233,002
Fairfield, CA, Public Finance Authority, Redevelopment
Project, Series C, Capital Guaranty Insured,
5.25%, 8/1/13 ............................................ 1,000,000 AAA 942,360
</TABLE>
The accompanying notes are an integral part of the financial statements.
22
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fontana, CA, Tax Allocation Revenue, North Fontana
Redevelopment Project, Series 1993 A,
5%, 9/1/20 (c) ............................................. 1,200,000 AAA 1,065,384
Fontana, CA, Unified School District, FSA Insured,
5.7%, 9/1/08 ............................................... 700,000 AAA 719,495
Foothill Eastern Transportation Corridor Agency, CA,
Toll Road Revenue, Senior Lien, Series A, Zero
Coupon:
1/1/11 ................................................... 6,000,000 BBB 3,530,400
1/1/13 ................................................... 975,000 BBB 573,398
1/1/14 ................................................... 2,875,000 BBB 1,679,029
Imperial Irrigation District, CA, Certificate of
Participation, 5.2%, 11/1/09 (c) ........................... 2,500,000 AAA 2,457,350
La Canada, CA, Unified School District, Zero Coupon:
8/1/08 (c) ................................................. 1,315,000 AAA 662,024
8/1/09 (c) ................................................. 1,280,000 AAA 601,690
Los Angeles County, CA, Certificate of Participation:
Disney Parking Project, Zero Coupon, 9/1/13 ................ 4,500,000 A 1,422,675
Marina Del Ray, Series A, 6.25%, 7/1/03 .................... 2,500,000 NR 2,517,075
Disney Parking Project, Zero Coupon, 3/1/08 ................ 2,780,000 BBB 1,301,207
Disney Parking Project, Zero Coupon, 9/1/08 ................ 4,865,000 BBB 2,205,791
Disney Parking Project, Zero Coupon, 3/1/14 ................ 2,290,000 A 694,397
Marina Del Rey, Series A, 5.75%, 7/1/98 .................... 5,000,000 NR 5,087,150
Los Angeles, CA, Convention & Exhibition Center
Authority:
Series A, 5.2%, 8/15/09 (c) .............................. 4,000,000 AAA 3,898,960
Certificate of Participation, Zero Coupon, 8/15/04 (c) ... 3,730,000 AAA 2,398,651
Los Angeles County, CA:
Metropolitan Transportation Authority, Sales
Tax Revenue, Series B, 4.8%, 7/1/05 (c) .................. 950,000 AAA 928,967
Wastewater System Revenue, Series D,
4.7%, 11/1/17 (c) ........................................ 1,960,000 AAA 1,664,256
Modesto, CA, Certificate of Participation, Community
Project, Series A, 5.6%, 11/1/14 (c) ....................... 1,370,000 AAA 1,368,671
Oceanside, CA, Certificate of Participation, Oceanside
Building Authority, Series A, 6%, 4/1/17 ................... 3,000,000 A 2,906,130
Orange County, CA:
Local Transportation Authority, Sales Tax Revenue,
5.1%, 2/15/01 (c) ........................................ 5,000,000 AAA 4,889,100
Local Transportation Authority, 5.15%, 2/15/11 (c) ......... 4,975,000 AAA 4,668,490
Recovery Notes, Series A, 5.6%, 6/1/07 (c) ................. 4,430,000 AAA 4,486,172
Palomar Pomerado, CA, Health Systems,
4.75%, 11/1/23 (c) ......................................... 1,000,000 AAA 832,390
Pittsburgh, CA:
Public Finance Authority, Wastewater System
Revenue, Series A, 5.125%, 6/1/15 (c) .................... 1,000,000 AAA 923,510
</TABLE>
The accompanying notes are an integral part of the financial statements.
23
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Redevelopment Agency, Los Medanos Community
Development Project, 4.625%, 8/1/21 (c) .................. 3,500,000 AAA 2,896,740
Pomona, CA, Unified School District, General
Obligation, 5.6%:
8/1/14 (c) ............................................... 170,000 AAA 169,832
8/1/15 (c) ............................................... 180,000 AAA 178,726
8/1/16 (c) ............................................... 190,000 AAA 188,843
8/1/17 (c) ............................................... 175,000 AAA 173,479
8/1/18 (c) ............................................... 205,000 AAA 202,157
Port of Hueneme, CA, Certificate of Participation,
Capital Improvement, 6%, 4/1/19 (c) ........................ 925,000 AAA 957,902
Rialto, CA, Redevelopment Agency, Tax Allocation
Revenue, Industrial Redevelopment Project,
Series A, 6%, 9/1/23 ....................................... 2,500,000 BBB 2,328,775
Roseville, CA, Joint Union High School District,
Series B, Zero Coupon:
8/1/05 (c) ............................................... 1,130,000 AAA 697,086
8/1/06 (c) ............................................... 1,000,000 AAA 579,930
8/1/07 (c) ............................................... 1,380,000 AAA 746,746
Sacramento, CA:
Power Authority Cogeneration Project, Series 1995,
6.5%, 7/1/04 ............................................. 2,000,000 BBB 2,114,760
City Financing Authority, Lease Revenue Refunding,
Series A, 5.4%, 11/1/20 (c) .............................. 11,785,000 AAA 11,274,827
Municipal Utility District, 5.4%, 11/15/07 (c) ............. 3,475,000 AAA 3,506,449
Municipal Utility District, Series G, 4.75%, 9/1/21 (c) .... 6,450,000 AAA 5,441,865
San Bernadino County, CA, Certificates of
Participation:
Medical Center Financing Project, Series 1996,
5.25%, 8/1/16 (c) ..................................... 2,145,000 AAA 1,988,115
Imbedded Swap Inverse Floaters, Series 1992 A,
7.17%, 7/1/16 (c)** ................................... 4,500,000 AAA 4,360,005
San Francisco, CA, Redevelopment Financing Agency,
Tax Allocation Revenue, Series A, Zero Coupon:
8/1/03 (c) ............................................... 1,080,000 AAA 746,831
8/1/04 (c) ............................................... 1,080,000 AAA 704,473
San Joaquin County, CA, Certificate of Participation,
4.75%, 11/15/19 (c) ........................................ 3,500,000 AAA 2,950,990
San Joaquin Hills, CA, Transportation Corridor
Agency, Toll Road Revenue:
Senior Lien, Zero Coupon, 1/1/07 ......................... 6,000,000 BBB 4,397,100
Junior Lien, Series 1993, Zero Coupon, 1/1/10 ............ 1,500,000 NR 556,485
Senior Lien, Zero Coupon, 1/1/05 ......................... 2,500,000 BBB 1,822,550
San Jose, CA, Financing Revenue, Community
Facilities Project, Zero Coupon:
11/15/03 ................................................. 735,000 A 493,538
</TABLE>
The accompanying notes are an integral part of the financial statements.
24
<PAGE>
INVESTMENT PORTFOLIO
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount ($) Rating (b) Value ($)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
11/15/04 ................................................. 1,605,000 A 1,014,344
11/15/05 ................................................. 1,605,000 A 952,824
11/15/06 ................................................. 1,605,000 A 893,311
San Mateo County, CA, Capital Projects Program:
Correctional Parking Facilities, Series 1991,
Zero Coupon, 7/1/04 (c) .................................. 1,890,000 AAA 1,238,101
Correctional Parking Facilities, Series 1991,
Zero Coupon, 7/1/05 (c) .................................. 1,520,000 AAA 937,490
San Mateo County, CA, Joint Powers Financing
Authority, Capital Projects Program, Zero Coupon:
7/1/01 (c) ............................................... 1,765,000 AAA 1,376,276
7/1/02 (c) ............................................... 1,715,000 AAA 1,259,976
7/1/03 (c) ............................................... 1,725,000 AAA 1,197,857
Santa Anna, CA, Police Administration and Holding
Facility, Lease Revenue, Series A, 5.3%, 7/1/05 (c) ........ 725,000 AAA 731,801
Santa Clara County, CA, Certificate of Participation,
Series A, 4.75%, 2/1/14 (c) ................................ 3,000,000 AAA 2,622,270
Santa Clara County, CA, Finance Authority, Lease
Revenue, YMC Replacement Project,
7.75%, 11/15/08 (c) ........................................ 3,250,000 AAA 4,009,980
Santa Margarita/Dana Point, CA, Improvement
Districts 3, 3A, 4 and 4A, Series B, 7.25%, 8/1/05 (c) ..... 2,895,000 AAA 3,368,998
Santa Monica, CA, Wastewater Revenue, Hyperion
Project, 4.75%, 1/1/12 (c) ................................. 3,000,000 AAA 2,682,990
South Orange County, CA, Public Finance Authority,
Special Tax Revenue, Series A, 7%, 9/1/06 (c) .............. 2,230,000 AAA 2,576,966
Southern California Public Power Authority, Power
Project Revenue:
Mead Phoenix Project, Series A, 4.75%, 7/1/09 (c) ........ 1,220,000 AAA 1,123,779
Palo Verde Project, Series A, 5%, 7/1/15 ................. 1,350,000 AA 1,198,368
Stockton, CA, Health Facilities Revenue, St. Joseph
Medical Center, Series A, 5.625%, 6/1/13 (c) ............... 1,930,000 AAA 1,899,583
Tracy California Area Public Facilities Agency,
Special Tax, Community Facilities District,
Series 1996, 5.2%, 10/1/06 (c) ............................. 1,800,000 AAA 1,778,526
Valley Health System, CA, Revenue Bonds, Refunding
and Improvement Project, Series 1996 A, 6.5%:
5/15/15 .................................................. 385,000 BBB 362,135
5/15/25 .................................................. 2,325,000 BBB 2,171,527
West Covina, CA, Queen of the Valley Hospital,
Certificate of Participation:
5.7%, 8/15/00 ............................................ 380,000 A 385,844
5.8%, 8/15/01 ............................................ 750,000 A 760,365
Westminster, CA, Redevelopment Agency, Tax
Allocation Revenue, Community Development,
Project #1, Series A, 7.3%, 8/1/21 ......................... 2,000,000 BBB 2,088,420
</TABLE>
The accompanying notes are an integral part of the financial statements.
25
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Unaudited
---------
Principal Credit Market
Amount($) Rating (b) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Whittier, CA, Health Facilities Revenue, Presbyterian
Inter Community Health, 6.25%, 6/1/10 (c) ..................... 1,250,000 AAA 1,355,475
PUERTO RICO Commonwealth of Puerto Rico, Public Improvement
Refunding, General Obligation, 5.375%, 7/1/06 ................. 1,225,000 A 1,226,801
VIRGIN ISLANDS Virgin Islands, Special Tax Bonds, Hugo Bonds,
7.75%, 10/1/06 ................................................ 1,830,000 NR 1,968,989
Virgin Islands Public Finance Authority, General
Obligation, Mortgage Fund Loan Notes,
Series 1992 A:
6.5%, 10/1/97 ............................................... 2,955,000 BBB 3,037,504
7%, 10/1/02 ................................................. 1,000,000 BBB 1,059,261
-----------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS
(Cost $261,847,909) ........................................... 269,466,583
-----------
- -------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0%
(Cost $283,187,909) (a) ....................................... 290,806,583
===========
</TABLE>
(a) The cost for federal income tax purposes was $283,207,362. At March 31,
1996, net unrealized appreciation for all securities based on tax cost was
$7,599,221 This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $9,990,424 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$2,391,203.
(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, 1996.
The accompanying notes are an integral part of the financial statements.
26
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
March 31, 1996
- ------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Investments, at market (identified cost $283,187,909)
(Note A) ............................................ $290,806,583
Cash ........................................................ 29,410
Receivables:
Investments sold .................................... 503,125
Interest ............................................ 3,774,851
Fund shares sold .................................... 33,644
Other assets ................................................ 2,574
-----------
Total assets ................................ 295,150,187
LIABILITIES
Payables:
Investments purchased ............................... $1,778,526
Dividends ........................................... 467,862
Fund shares redeemed ................................ 36,661
Accrued management fee (Note C) ..................... 151,421
Other accrued expenses (Note C)
90,873
----------
Total liabilities ........................... 2,525,343
------------
Net assets, at market value ................................. $292,624,844
============
Net Assets
Net assets consist of:
Net unrealized appreciation on investments .......... $ 7,618,674
Accumulated net realized loss ....................... (11,995,644)
Shares of beneficial interest ....................... 282,322
Additional paid-in capital .......................... 296,719,492
------------
Net assets, at market value ................................. $292,624,844
============
NET ASSET VALUE, offering and redemption price per share
($292,624,844 / 28,232,177 outstanding shares of
beneficial interest, $.01 par value, unlimited number
of shares authorized) ............................... $ 10.36
=====
</TABLE>
The accompanying notes are an integral part of the financial statements.
27
<PAGE>
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended March 31, 1996
- ----------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME
Interest .............................................. $16,884,377
Expenses:
Management fee (Note C) ............................... $1,842,488
Services to shareholders (Note C) ..................... 204,674
Custodian and accounting fees (Note C) ................ 135,449
Trustees' fees and expenses (Note C) .................. 13,032
Auditing .............................................. 45,605
Reports to shareholders ............................... 33,018
Legal ................................................. 10,975
Other ................................................. 26,844 2,312,085
--------------------------
Net investment income ................................. 14,572,292
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT
TRANSACTIONS
Net realized gain (loss) from:
Investments ................................... 3,031,291
Futures ....................................... (770,683) 2,260,608
----------
Net unrealized appreciation on investments ............ 6,496,809
-----------
Net gain on investment transactions ................... 8,757,417
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS... $23,329,709
===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
28
<PAGE>
FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEARS ENDED MARCH 31,
--------------------------------
INCREASE (DECREASE) IN NET ASSETS 1996 1995
- -----------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................ $ 14,572,292 $ 15,647,975
Net realized gain (loss) from investment
transactions ................................... 2,260,608 (9,865,784)
Net unrealized appreciation on investment
transactions during the period ................. 6,496,809 12,444,920
----------- -----------
Net increase in net assets resulting from
operations ..................................... 23,329,709 18,227,111
----------- -----------
Distributions to shareholders:
From net investment income ($.51 and
$.51 per share, respectively) ................ (14,572,292) (15,647,975)
----------- -----------
From net realized gains from investment
transactions ($.09 per share) ................ -- (2,705,552)
----------- -----------
Fund share transactions:
Proceeds from shares sold ........................ 34,646,046 54,322,312
Net asset value of shares issued to
shareholders in reinvestment
of distributions ............................... 8,891,876 12,092,024
Cost of shares redeemed .......................... (53,733,869) (97,589,593)
----------- -----------
Net decrease in net assets from
Fund share transactions ........................ (10,195,947) (31,175,257)
----------- -----------
Increase (decrease) in net assets ................ (1,438,530) (31,301,673)
Net assets at beginning of period ................ 294,063,374 325,365,047
----------- -----------
NET ASSETS AT END OF PERIOD ...................... $292,624,844 $294,063,374
============ ============
OTHER INFORMATION
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ........ 29,207,833 32,478,431
----------- -----------
Shares sold ...................................... 3,337,194 5,531,252
Shares issued to shareholders in
reinvestment of distributions .................. 855,726 1,227,120
Shares redeemed .................................. (5,168,576) (10,028,970)
----------- -----------
Net decrease in Fund shares ...................... (975,656) (3,270,598)
----------- -----------
Shares outstanding at end of period .............. 28,232,177 29,207,833
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
29
<PAGE>
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.
<TABLE>
<CAPTION>
YEARS ENDED March 31,
---------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period ........... $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99 $11.18 $10.95
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income ................ .51 .51 .53 .59 .61 .63 .65 .68 .69 .71
Net realized and
unrealized gain
(loss) on investment
transactions .......... .29 .14 (.35) .94 .47 .21 .22 .27 (.93) .53
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from investment
operations .................... .80 .65 .18 1.53 1.08 .84 .87 .95 (.24) 1.24
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less distributions:
From net investment
income ................ (.51) (.51) (.53) (.59) (.61) (.63) (.65) (.68) (.69) (.71)
From net realized
gains on
investments ........... -- (.09) (.63) (.49) (.28) (.09) (.19) -- (.26) (.30)
In excess of net
realized gains ........ -- -- (.05) -- -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total distributions ............. (.51) (.60) (1.21) (1.08) (.89) (.72) (.84) (.68) (.95) (1.01)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net asset value, end of
period ........................ $10.36 $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99 $11.18
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
TOTAL RETURN (%) ................ 8.01 6.75 1.30 15.13 10.74 8.53 8.62 9.80 (1.70) 12.11
RATIO AND
SUPPLEMENTAL DATA
Net assets, end of
period ($ millions) ........... 293 294 325 309 242 208 193 171 153 195
Ratio of operating
expenses, net to
average daily net
assets (%) .................... .77 .80 .78 .79 .81 .84 .83 .89 .88 .84
Ratio of net investment
income to average
daily net assets (%) .......... 4.88 5.18 4.85 5.42 5.79 6.13 6.23 6.71 6.95 6.55
Portfolio turnover rate ......... 49.2 87.3 126.5 208.6 143.0 170.6 70.4 158.9 52.3 68.0
</TABLE>
30
<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 Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Funds in the
preparation of their financial statements.
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 quotations 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 Board of Trustees.
Short-term investments having a maturity of sixty days or less are valued at
amortized cost.
FUTURES CONTRACTS. A futures contract is an agreement between a buyer or seller
and an established futures exchange or its clearinghouse in which the buyer or
seller agrees to take or make a delivery of a specific amount of an item at a
specified price on a specific date (settlement date). During the period, the Tax
Free Fund purchased interest rate futures to manage the duration of the
portfolio. Additionally, during the period the Tax Free Fund sold interest rate
futures to hedge against declines in the value of portfolio securities.
31
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
Upon entering into a futures contract, the Tax Free Fund is required to deposit
with a financial intermediary an amount ("initial margin") equal to a certain
percentage of the face value indicated in the futures contract. Subsequent
payments ("variation margin") are made or received by the Tax Free Fund each
day, dependent on the daily fluctuations in the value of the underlying
security, and are recorded for financial reporting purposes as unrealized gains
or losses by the Tax Free Fund. When entering into a closing transaction, the
Tax Free Fund will realize a gain or loss equal to the difference between the
value of the futures contract to sell and the futures contract to buy. Futures
contracts are valued at the most recent settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Tax Free Fund's ability to
close out a futures contract prior to the settlement date and that a change in
the value of a futures contract may not correlate exactly with changes in the
value of the securities or currencies hedged. When utilizing futures contracts
to hedge, the Tax Free Fund gives up the opportunity to profit from favorable
price movements in the hedged positions during the term of the contract.
AMORTIZATION AND ACCRETION. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
FEDERAL INCOME TAXES. The Funds' policy is to comply with the requirements of
the Internal Revenue Code which are applicable to regulated investment companies
and to distribute all of their taxable and tax-exempt income to their
shareholders. Accordingly, the Funds paid no federal income taxes and no
provisions for federal income taxes were required.
As of March 31, 1996, the Tax Free Money Fund had a net tax basis capital loss
carryforward of approximately $94,000, which may be applied against any realized
net taxable capital gains of each succeeding year until fully utilized or until
March 31, 2000 ($14,000), March 31, 2002 ($7,000), March 31, 2003 ($55,000) and
March 31, 2004 ($18,000), the respective expiration dates, whichever occurs
first.
As of March 31, 1996, the Tax Free Fund had a net tax basis capital loss
carryforward of approximately $9,355,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until March 31, 2003 ($8,963,000) and March 31, 2004 ($392,000), the
respective expiration dates, whichever occurs first.
32
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Funds
is declared as dividends to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Funds if not distributed and, therefore,
will be distributed to shareholders. An additional distribution may be made to
the extent necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. These differences
primarily relate to investments in options, futures, and certain securities sold
at a loss for the Tax Free Fund. As a result, net investment income and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Funds may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Funds.
The Funds use the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
Other. Investment transactions are accounted for on a trade-date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the call
or maturity date.
B. PURCHASES AND SALES OF SECURITIES
- --------------------------------------------------------------------------------
During the year ended March 31, 1996, purchases and sales of long-term municipal
securities aggregated $139,130,126 and $163,477,889, respectively, for the Tax
Free Fund.
The aggregate face value of futures contracts opened and closed during the year
ended March 31, 1996, for the Tax Free Fund, was $365,168,728.
33
<PAGE>
SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------------------------------------------------
C. RELATED PARTIES
- --------------------------------------------------------------------------------
Each Fund has entered into an Investment Management Agreement (each an
"Agreement" and collectively the "Agreements") with Scudder, Stevens & Clark,
Inc. (the "Adviser"), under which each Fund agrees to pay the Adviser a fee
computed and accrued daily and paid monthly. The management fee payable under
the Agreements is equal to an annual rate of 0.50% of the average daily net
assets of Tax Free Money Fund, and 0.625% of the first $200,000,000 of the
average daily net assets and 0.60% of such net assets in excess of $200,000,000
for Tax Free Fund. As manager of the assets of Tax Free Money Fund and Tax Free
Fund, the Adviser directs the investments of Tax Free Money Fund and Tax Free
Fund in accordance with the investment objectives, policies, and restrictions of
each Fund. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by each
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreements. The Agreements also
provide that if the Funds' expenses, exclusive of taxes, interest and certain
other expenses exceed specified limits, such excess, up to the amount of the
management fee, will be paid by the Adviser. For the year ended March 31, 1996,
the fee for the Tax Free Fund pursuant to the Agreement amounted to $1,842,488,
which was equivalent to an annualized effective rate of .62% of the Fund's
average daily net assets.
With respect to Tax Free Money Fund, the Adviser has agreed not to impose all or
a portion of its management fee until July 31, 1996 and during such period to
maintain the annualized expenses of Tax Free Money Fund at not more than 0.60%
of average daily net assets. For the year ended March 31, 1996, the Adviser did
not impose a portion of its fee amounting to $138,996, and the portion imposed
amounted to $193,014.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. For the
year ended March 31, 1996, $71,043 and $164,689 were charged by SSC to Tax Free
Money Fund and Tax Free Fund, of which $5,628 and $13,172 are unpaid at March
31, 1996, respectively.
34
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Tax Free Money Fund and Tax
Free Fund. For the year ended March 31, 1996, SFAC imposed fees amounting to
$30,000 and $66,107 of which $2,500 and $5,763 are unpaid at March 31, 1996 for
the Tax Free Money Fund and Tax Free Fund, respectively.
The Trust pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the year ended
March 31, 1996, Trustees' fees and expenses aggregated $13,032 each for both Tax
Free Money Fund and Tax Free Fund.
35
<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, 1996, 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, 1996 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder California Tax Free Money Fund and Scudder California Tax Free Fund as
of March 31, 1996, 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 16, 1996
36
<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 year ended March 31, 1996, 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.
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
Jeremy L. Ragus*
Vice President
Rebecca Wilson*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
* Scudder, Stevens & Clark, Inc.
37
<PAGE>
INVESTMENT PRODUCTS AND SERVICES
<TABLE>
<CAPTION>
The Scudder Family of Funds
- --------------------------------------------------------------------------------
<C> <C>
Money Market Income
Scudder Cash Investment Trust Scudder Emerging Markets Income Fund
Scudder U.S. Treasury Money Fund Scudder Global Bond Fund
Tax Free Money Market+ Scudder GNMA Fund
Scudder Tax Free Money Fund Scudder Income Fund
Scudder California Tax Free Money Fund* Scudder International Bond Fund
Scudder New York Tax Free Money Fund* Scudder Short Term Bond 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 Emerging Markets Growth Fund
Scudder Massachusetts Limited Term Tax Free Fund* Scudder Global Fund
Scudder Massachusetts Tax Free Fund* Scudder Global Discovery Fund
Scudder Medium Term Tax Free Fund Scudder Gold Fund
Scudder New York Tax Free Fund* Scudder Greater Europe Growth Fund
Scudder Ohio Tax Free Fund* Scudder International Fund
Scudder Pennsylvania Tax Free Fund* Scudder Latin America Fund
Growth and Income Scudder Pacific Opportunities Fund
Scudder Balanced Fund Scudder Quality Growth Fund
Scudder Growth and Income Fund Scudder Small Company Value Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs 403(b) Plans
Keogh Plans SEP-IRAs
Scudder Horizon Plan+++* (a variable annuity) Profit Sharing and Money Purchase
401(k) Plans Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc. The Latin America Dollar Income Fund, Inc.
The Brazil Fund, Inc. Montgomery Street Income Securities, Inc.
The First Iberian Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Scudder World Income
Opportunities Fund, Inc.
Institutional Cash Management
- --------------------------------------------------------------------------------
Scudder Institutional Fund, Inc. Scudder Treasurers Trust(TM)++
Scudder Fund, Inc.
- --------------------------------------------------------------------------------
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +A portion of the income from the
tax-free funds may be subject to federal, state, and local taxes. *Not
available in all states. +++A no-load variable annuity contract provided by
Charter National Life Insurance Company and its affiliate, offered by
Scudder's insurance agencies, 1-800-225-2470. #These funds, advised by
Scudder, Stevens & Clark, Inc. are traded on various stock exchanges. ++For
information on Scudder Treasurers Trust,^(TM) an institutional cash
management service that utilizes certain portfolios of Scudder Fund, Inc.
($100,000 minimum), call 1-800-541-7703.
</TABLE>
38
<PAGE>
HOW TO CONTACT SCUDDER
<TABLE>
<CAPTION>
<S> <C>
Account Service and Information
-------------------------------------------------------------------------------------------------------------
For existing account service and transactions
SCUDDER INVESTOR RELATIONS
1-800-225-5163
For personalized information about your Scudder accounts;
exchanges and redemptions; or information on any Scudder fund
SCUDDER AUTOMATED INFORMATION LINE (SAIL)
1-800-343-2890
Investment Information
-------------------------------------------------------------------------------------------------------------
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.
* 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.
</TABLE>
39
<PAGE>
Celebrating Over 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 38 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.
