Scudder
California
Tax Free Money Fund
Scudder
California
Tax Free Fund
Semiannual Report
September 30, 1996
Pure No-Load(TM) Funds
For investors seeking double-tax-free income exempt from both California and
regular federal income taxes.
A pure no-load(TM) fund with no commissions to buy, sell, or exchange shares.
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Fund's President
Scudder California
Tax Free Fund
4 Performance Update
5 Portfolio Summary
7 Portfolio Management Discussion
18 Investment Portfolio
25 Financial Statements
28 Financial Highlights
Scudder California
Tax Free Money Fund
6 Portfolio Management Discussion
10 Investment Portfolio
14 Financial Statements
17 Financial Highlights
29 Notes to Financial Statements
33 Officers and Trustees
34 Investment Products and Services
35 How to Contact Scudder
In Brief
Scudder California Tax Free Money Fund
o Scudder California Tax Free Money Fund offered a 7-day yield of 3.01% on
September 30, 1996, equivalent to a 5.60% taxable yield for investors in the top
federal and state income tax brackets.
Scudder California Tax Free Fund
o Scudder California Tax Free Fund provided a 4.89% 30-day net annualized SEC
yield on September 30, 1996.
o For shareholders subject to the maximum combined federal and state income tax
brackets, the Fund's yield was equal to a taxable yield of 9.10%.
o The Fund received a four-star rating from Morningstar, reflecting
"above-average" risk- adjusted performance through September 30, 1996.
For your information, these ratings are subject to change every month and are
calculated from the Fund's five-year average annual return in excess of 90-day
Treasury bill returns with appropriate fee adjustments, and a risk factor that
reflects fund performance below T-bill returns. 561 municipal funds were rated.
10% received five stars, 22.5% received four stars, 35% three stars, 22.5% two
stars, and the bottom 10% one star. The Fund received four stars for three- and
five-year performance as well. Past performance is no guarantee of future
returns.
2 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We hope you enjoy our newly redesigned shareholder report. The new format,
which is being gradually introduced for all Scudder funds, is intended to
enhance the usefulness and readability of the reports.
Let us know what you think.
Scudder California Tax Free Fund continues to post a high double tax-free
yield by investing in a wide variety of California municipal bonds. We're
pleased to report that the Fund's yield equaled a 9.10% taxable yield for
shareholders subject to the 46.24% maximum combined federal and California state
tax rates at the close of the Fund's most recent semiannual period.
In addition, Scudder California Tax Free Money Fund posted a 5.60% tax
equivalent yield based on the maximum federal and state tax rates at the close
of the period, compared with 5.17% six months ago. Please read the portfolio
management discussions beginning on page 6 for more information.
We would also like to take this opportunity to introduce the two newest
members of Scudder's family of pure no-load(TM) funds -- Scudder 21st Century
Growth Fund and Scudder Classic Growth Fund. Scudder 21st Century Growth Fund
seeks long-term growth by investing primarily in the securities of emerging
growth companies poised to be leaders in the 21st century. Scudder Classic
Growth Fund seeks long-term growth by investing primarily in common stocks of
medium to large U.S. companies; additionally, it seeks to keep the value of its
shares more stable than the typical capital growth mutual fund. For more
information on either of these new funds and other Scudder products and
services, please see page 34. For questions about Scudder California Tax Free
Fund, please call a Scudder Investor Information representative at
1-800-225-2470.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
3 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
PERFORMANCE UPDATE as of SEPTEMBER 30, 1996
- ----------------------------------------------------------------
FUND INDEX COMPARISONS
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/31/96 $10,000 Cumulative Annual
- --------------------------------------
SCUDDER CALIFORNIA TAX FREE FUND
- --------------------------------------
1 Year $10,668 6.68% 6.68%
5 Year $14,429 44.29% 7.61%
10 Year $21,001 110.01% 7.70%
- --------------------------------------
LEHMAN BROTHERS MUNICIPAL BOND INDEX
- --------------------------------------
1 Year $10,604 6.04% 6.04%
5 Year $14,323 43.23% 7.44%
10 Year $21,371 113.71% 7.88%
- -----------------------------------------------------------------
GROWTH OF A $10,000 INVESTMENT
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
YEARLY PERIODS ENDED SEPTEMBER 30
SCUDDER CALIFORNIA TAX FREE FUND
Year Amount
- ----------------------
'86 $10,000
'87 $ 9,836
'88 $11,095
'89 $12,195
'90 $12,775
'91 $14,555
'92 $16,187
'93 $18,764
'94 $17,804
'95 $19,685
'96 $21,001
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- ----------------------
'86 $10,000
'87 $10,053
'88 $11,357
'89 $12,343
'90 $13,182
'91 $14,921
'92 $16,480
'93 $18,580
'94 $18,127
'95 $20,154
'96 $21,371
The unmanaged Lehman Brothers Municipal Bond Index is a market value weighted
measure of municipal bonds issued across the United States. Index issues have a
credit rating of at least Baa and a maturity of at least two years. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
- -----------------------------------------------------------------
RETURNS AND PER SHARE INFORMATION
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
YEARLY PERIODS ENDED SEPTEMBER 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
-------------------------------------------------------------------------------
NET ASSET VALUE... $9.65 $10.16 $10.43 $10.11 $10.62 $10.83 $11.29 $9.78 $10.28 $10.44
INCOME DIVIDENDS.. $ .70 $ .68 $ .67 $ .63 $ .63 $ .60 $ .56 $ .52 $ .50 $ .52
CAPITAL GAINS
DISTRIBUTIONS..... $ .26 $ - $ .05 $ .17 $ .22 $ .34 $ .60 $ .44 $ - $ -
FUND TOTAL
RETURN (%)........ -1.64 12.79 9.91 4.76 13.93 11.22 15.92 -5.12 10.57 6.68
INDEX TOTAL
RETURN (%)........ .52 12.98 8.68 6.80 13.19 10.45 12.74 -2.44 11.18 6.04
</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 - Scudder California Tax Free Fund
<PAGE>
PORTFOLIO SUMMARY as of SEPTEMBER 30, 1996
- ---------------------------------------------------------------------------
DIVERSIFICATION
- ---------------------------------------------------------------------------
Housing Finance Authority 20%
Hospital/Health 18%
County General Obligation 14%
Other General Obligation/Lease 11%
Toll Revenue 8%
Sales & Special Tax 6%
Water/Sewer Revenue 4%
State General Obligation 4%
Electric Utility Revenue 4%
Miscellaneous Municipal 11%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund is broadly diversified, with investments
in more than 10 categories of California municipal bonds.
- --------------------------------------------------------------------------
QUALITY
- --------------------------------------------------------------------------
AAA 49%
AA 4%
A 28%
BBB 14%
Not rated 5%
- ---------------------------------
100%
- ---------------------------------
Weighted average quality: AA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Overall quality remains high, with 81%
of portfolio securities rated A or better.
- --------------------------------------------------------------------------
EFFECTIVE MATURITY
- --------------------------------------------------------------------------
Less than 1 year 3%
1-5 year 11%
5-10 year 28%
10-20 years 37%
Greater than 20 year 21%
- ---------------------------------
100%
- ---------------------------------
Weighted average effective maturity: 13 years
To take advantage of opportunities to lock in a substantial
income stream over time, we purchased noncallable intermediate maturity bonds.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 18.
5 - Scudder California Tax Free Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Money Fund
Dear Shareholders,
The six months ended September 30, 1996, witnessed a change in short-term debt
market psychology. As the U.S. economy gained momentum during the second quarter
of this year, some market watchers began to look for additional credit
tightening moves by the Federal Reserve. Despite some signs that the economy was
cooling to a slow-growth mode during the third quarter, the market continued to
await Fed action. This was evidenced by a modest increase in short-term rates
during the six-month period. The Fed, however, remained "on hold" throughout.
California's municipal market was characterized by increased demand for
short-term tax-exempt securities during the period. Demand kept pace with
supply, allowing issuers in California to offer their debt at lower yields than
national issuers. Our strategy in light of lower prevailing yields and a
potential tightening by the Federal Reserve was to maintain an above-average
weighting in short-term commercial paper, which allows us flexibility in
managing the Fund's average maturity. We also invested in the longer-term market
when it offered attractive relative yields.
As of September 30, 1996, the Fund's average maturity was 60 days, compared with
54 days as of March 31, 1996. The Fund's 7-day yield as of September 30 was
3.01%. For investors in the highest combined state and federal income tax
bracket, the Fund's yield equaled a 5.60% compounded taxable yield, higher than
the 4.83% average for taxable money funds, according to IBC/Donoghue, Inc., an
independent firm that tracks money fund performance. The Fund provided a total
return of 1.43% for the six-month period ended September 30, 1996, assuming
reinvestment of all income distributions, which totaled $0.014 per share during
the period.
Our continuing goal is to provide Fund shareholders with a competitive
double-tax-free yield by searching for high-quality, short-term municipal
securities while actively managing the Fund's average maturity.
Sincerely,
Your Portfolio Management Team
/s/Rebecca Wilson /s/K. Sue Cote
Rebecca Wilson K. Sue Cote
6 - Scudder California Tax Free Money Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Fund
Dear Shareholders,
Over two contrasting quarters of municipal bond market performance, Scudder
California Tax Free Fund continued to post a high double tax-free yield. On
September 30, 1996, the Fund's 30-day net annualized SEC yield was 4.89%,
equivalent to a 9.10% taxable yield for shareholders subject to the 46.24%
maximum combined federal and state income tax rate. This "tax-equivalent" yield
is significantly higher than current yields available from taxable investments
of similar maturity and credit quality. During its most recent semiannual period
ended September 30, the Fund's shareholders received $0.26 per share of income
exempt from federal and California state income taxes.
During a six-month period that saw only modest price gains for the
intermediate-maturity municipal bonds the Fund primarily invests in, the Fund's
share price increased $0.08 to $10.44 per share. The combination of the increase
in the Fund's share price and $0.26 in interest income enabled the Fund to post
a positive total return of 3.34% over the semiannual period, compared with the
3.39% average total return of similar funds tracked by Lipper Analytical
Services. The Fund slightly underperformed the Lipper average during the period
mainly because we did not anticipate the sharp acceleration of economic growth
and resulting increases in municipal bond interest rates that occurred during
the second quarter of 1996. With the Fund's duration (a measure of sensitivity
to interest rate changes) positioned longer than average during that time, the
Fund's net asset value did not perform as well as it would have if we had
foreseen the economy's growth spurt.
Economic and Market Review
Overall, the U.S. economy actually grew at a moderate to slow pace during the
Fund's most recent semiannual period. But the two quarters were mixed in terms
of bond market performance; for the second quarter of 1996, the economy picked
up steam as snow from heavy winter storms melted, shoppers returned to retail
stores, and hiring increased. In addition, the collapse of the Congressional
Republicans' budget initiatives was viewed unfavorably by the bond market. These
two factors helped to drive bond yields higher (and prices lower) during the
second quarter. Bond yields as well as the economy retreated during the third
quarter as consumers seemed to feel the weight of their personal debt -- credit
card debt service payments as a percentage of disposable income rose to an
all-time high this year, and analysts predicted over a million people will
declare bankruptcy in 1996.
Over the past several years, the economy has progressed at a fairly consistent
pace, with inflation restrained throughout. The bond market, on the other hand,
has been fairly volatile, constantly anticipating far greater changes than the
economy has exhibited. Now, after six years of expansion, the U.S. economy may
actually be slowing. Consumers appear to be overburdened, retail sales weakened
7 - Scudder California Tax Free Fund
<PAGE>
during the third quarter, the government's monetary policy is tight by
historical standards (with a Fed Funds rate of 5 1/4%), and business investment
is slowing. In recent months, bond yields have fluctuated, but have generally
declined in step with this pullback.
For the semiannual period, municipal bonds, which typically exhibit less price
volatility than Treasury bonds, strongly outperformed Treasuries, thanks in part
to a relatively light supply. While yields of long-term Treasury bonds rose two
tenths of a percentage point and prices declined 2.4%, yields of municipal bonds
of similar maturity declined two tenths of a percentage point while prices rose
2.9%. Large numbers of municipal bonds were called or reached maturity during
the period, especially in June and July. In September, new municipal issues
totaled $10.5 billion, the lowest monthly number in over a year. The municipal
market continues to be supported both by retail bond buyers and institutions
such as insurance companies.
Our Strategy
Our strategy in managing Scudder California Tax Free Fund's portfolio is to buy
and hold noncallable intermediate maturity bonds (those with maturities of 15
years or less) to take advantage of opportunities to lock in a substantial
income stream for the Fund over time. As of September 30, 68% of the Fund's
securities had maturities in this range. We also continue to look for
opportunities to add some BBB-rated and non-rated bonds to the portfolio. These
bonds, while carrying some additional credit risk, generally exhibit less
interest rate sensitivity than municipal bonds rated A or above. The Fund held
19% of BBB and nonrated bonds combined at the close of the period. (For a
summary of the Fund's quality, diversification, and maturity structure, see page
5.)
The Fund's overall quality remains high, with 81% of portfolio securities rated
A or better as of September 30. We continue to invest in a broad selection of
California municipal bonds, including housing finance authority,
hospital/health, and county general obligation bonds.
The Fund seeks to provide investors with a competitive level of federal and
state tax-exempt income. Its 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.
California's Steady Recovery
California's economy has been recovering steadily since the start of 1994, with
the strongest growth in the export-related industries -- business services,
electronics, entertainment, and tourism. Despite its recent recession,
California's "gross state product" of about $890 billion in 1995 was larger than
all but six nations in the world. The state's population was 32.1 million in
1995, representing 12.2 % of the total U.S. population. The August 1996
unemployment level of 7%, while less than the state's 1993 peak, was still above
the national average of 5.1%. Wealth levels in California have declined in the
1990s, but are still above the national average.
8 - Scudder California Tax Free Fund
<PAGE>
The state recently eliminated its accumulated deficit with the final payment on
its Revenue Anticipation Warrants (deficit notes). California's 1996 fiscal year
ended with a slight surplus and the fiscal year `97 budget is conservative. Last
summer, the federal government enacted a welfare reform bill which may impact
California's finances in the future, but it is too soon to tell whether that
impact will be positive or negative.
A Further Slowdown?
The U.S. economy is flashing several caution lights. Some companies -- notably
fast food outlets and department stores -- are attempting to interest their
customers in higher priced items. That these and other companies are even
considering raising prices makes us believe that the economy may slow further,
because we are confident that the Federal Reserve will raise interest rates at
the first signs of any uptick in inflation. Though we believe that any excesses
in the U.S. economy would soon be corrected, and that the economy will remain
resilient, any further slowdown should benefit the municipal bond market.
Meanwhile, as managers we will retain our focus on noncallable,
intermediate-maturity tax-free bonds, because we believe they offer the most
attractive balance of return and risk. We will continue to purchase noncallable
intermediate maturity bonds and pay close attention to credit quality as we
pursue double tax-free income and competitive total return for Scudder
California Tax Free Fund shareholders.
Sincerely,
Your Portfolio Management Team
/s/Jeremy L. Ragus /s/Donald C. Carleton
Jeremy L. Ragus Donald C. Carleton
9 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of Setember 30, 1996 (Unaudited)
<CAPTION>
PRINCIPAL CREDIT VALUE ($)
AMOUNT ($) RATING (b) (NOTE a)
- ----------------------------------------------------------------------------------------------------------------------------
Municipal Investments 100.0%
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CALIFORNIA
Anaheim, CA, Electric Utility Revenue Anticipation Notes, Tax Exempt
Commercial Paper, 3.5%, 10/8/96 .............................................. 1,750,000 A1+ 1,750,000
Anaheim, CA, Housing Authority, Multi-Family Housing Revenue, Harbor Cliff
Project, Variable Rate Demand Notes, 3.55%, 7/1/06* .......................... 400,000 MIG1 400,000
Berkeley, CA, Tax & Revenue Anticipation Note, Series 1996, 4.5%, 8/13/97 ...... 2,000,000 MIG1 2,008,994
California Department of Water Resources, Series 1996, Tax Exempt Commercial
Paper, 3.4%, 10/15/96 ........................................................ 1,500,000 P1 1,500,000
California General Obligation Tax Exempt Commercial Paper:
3.4%, 11/12/96 ............................................................... 1,000,000 A1 1,000,000
3.3%, 11/19/96 ............................................................... 1,000,000 A1 1,000,000
3.45%, 12/10/96 .............................................................. 1,000,000 A1 1,000,000
California Health Facilities Finance Authority:
Catholic Healthcare West, Series C, Variable Rate Demand Bonds,
3.65%, 7/1/20 (c)* ......................................................... 1,000,000 A1+ 1,000,000
(Pooled Loan Program), 1985 Series B, Weekly Demand Note, 3.7%, 10/1/10 (c)* . 100,000 MIG1 100,000
California Pollution Control Revenue:
Minnesota Mining & Manufacturing, Weekly Demand Bonds, 3.2%, 11/1/96* ........ 400,000 MIG1 400,000
Southern California Edison, Series 1985C, Tax Exempt Commercial Paper,
3.55%, 10/3/96 ............................................................... 1,000,000 P1 1,000,000
California State Revenue Anticipation Note, Series 1996, 4.5%, 6/30/97 ......... 1,000,000 SP1+ 1,003,798
City of Escondido, CA, Multi-Family Housing Revenue, 1985 Series A, Morning View
Terrace Project, Variable Rate Demand Note, 3.55%, 2/15/07* .................. 500,000 MIG1 500,000
East Bay, Municipal Utility District, CA, Tax Exempt Commercial Paper,
3.5%, 11/12/96 ............................................................... 500,000 A1+ 500,000
Eastern Municipal Water District, CA, Water & Sewer Revenues Series 1993B
Weekly Demand Notes, 3.65%, 7/1/20 (c)* ...................................... 1,100,000 MIG1 1,100,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.75%, 10/1/05* ............................... 1,500,000 SS&C 1,500,000
Irvine Ranch, Orange County, CA, Water District, Series 1985 C, Variable
Rate Demand Bonds, 3.65%, 10/1/10* ........................................... 800,000 A1+ 800,000
Irvine Ranch, CA, Water District, Capital Improvements Project, Daily
Demand Bond, 3.8%, 8/1/16* ................................................... 800,000 MIG1 800,000
Kern County, CA, Certificate of Participation, Public Facilities Project:
Series A, Variable Rate Demand Bonds, 3.65%, 8/1/06* ......................... 1,300,000 MIG1 1,300,000
Series D, Variable Rate Demand Bonds, 3.65%, 8/1/06* ......................... 1,600,000 MIG1 1,600,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
10 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT VALUE ($)
AMOUNT ($) RATING (b) (NOTE a)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kern, CA, High School District, Tax & Revenue Anticipation Note, Series 1996,
4.5%, 7/31/97 ...................................................................... 1,500,000 SP1+ 1,507,205
Lancaster, CA, Redevelopment Agency, Multi-Family Housing Revenue, Westwood
Park Apartments, Variable Rate Demand Bonds, 3.55%, 12/1/07* ....................... 600,000 MIG1 600,000
Los Angeles County California Tax And Revenue Anticipation Notes, Series 1996 A,
4.5%, 6/30/97 ...................................................................... 2,000,000 MIG1 2,009,183
Los Angeles, CA, Department Water & Power, Power Electric Plant--Short-Term Certificates
Tax Exempt Commercial Paper, 3.4%, 11/21/96 ........................................ 2,000,000 A1+ 2,000,000
Los Angeles, CA, Multi-Family Housing Revenue, Series K, Variable Rate
Demand Bonds, 3.3%, 7/1/10* ........................................................ 3,100,000 A1+ 3,100,000
Los Angeles, CA, Wastewater Revenue, Tax Exempt Commercial Paper, 3.35%,
10/16/96 ........................................................................... 3,000,000 P1 3,000,000
Los Angeles, CA, Wastewater Revenue, Tax Exempt Commercial Paper,
3.5%, 10/22/96 ..................................................................... 1,400,000 P1 1,400,000
M-S-R Public Power Agency, San Juan Project Revenue, Subordinate Lien,
Series B, Weekly Demand Bonds, 3.65%, 7/1/22* ...................................... 1,000,000 A1+ 1,000,000
Ontario, CA, Multi-Family Residential Mortgage Revenue, (Park Center
Partners), Variable Rate Demand Bonds, 3.55%, 8/1/07* .............................. 2,000,000 MIG1 2,000,000
Ontario, CA, Redevelopment Agency, Multi-Family Housing Revenue:
(Daisy XX Associates, Ltd. Project), Variable Rate Demand Note, 3.55%, 11/1/04* .... 100,000 MIG1 100,000
Weekly Demand Bond, 3.55%, 4/1/98* ................................................. 1,000,000 A1+ 1,000,000
Orange County, CA, Local Transportation Authority, Sales Tax Revenue,
4.6%, 2/15/97 (c) .................................................................. 1,500,000 AAA 1,506,540
Orange County, CA, Sanitation District, Series 1990, Daily Demand Note,
3.65%, 8/1/15* .................................................................... 1,100,000 A1+ 1,100,000
Orange County, CA, Municipal Water District, Certificate of Participation, Project B
Daily Demand Bond, 3.75%, 8/15/15* ................................................. 500,000 A1+ 500,000
Orange County, CA, Water District Public Facilities Corporation, Tax Exempt
Commercial Paper, 3.6%, 10/9/96 .................................................... 1,000,000 P1 1,000,000
Riverside County, CA, School Financing Authority, Revenue Anticipation Notes,
Series 1996, 4.625%, 7/17/97 ....................................................... 1,000,000 SP1+ 1,004,369
Sacramento Municipal Utility District, CA, Series I, Tax Exempt Commercial
Paper, 3.5%, 11/6/96 ............................................................... 1,000,000 A1+ 1,000,000
Sacramento, CA, Municipal Utility District, California Series I, Tax Exempt
Commercial Paper, 3.4%, 12/17/96 ................................................... 1,500,000 A1+ 1,500,000
San Bernardino County, CA, Multi-Family Housing Revenue:
(Western Properties 1), Variable Rate Demand Bonds, 3.4%, 2/1/05* .................. 900,000 MIG1 900,000
(Woodview Apartments Project), Variable Rate Demand Bonds, 3.75%, 4/1/07* .......... 1,100,000 MIG1 1,100,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT VALUE ($)
AMOUNT ($) RATING (b) (NOTE a)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Bernardino County, CA, Certificates of Participation, County Center
Refinancing, Series 1996 Variable Rate Demand Note, 3.8%, 7/1/15* .............. 1,000,000 MIG1 1,000,000
San Bernardino, CA, Multi-Family Housing Revenue, (Western Properties 2),
Variable Rate Demand Bonds, 3.4%, 5/1/05* ...................................... 400,000 MIG1 400,000
San Carlos, CA, School District, Tax and Revenue Anticipation Notes,
Series 1996, 4.25%, 7/10/97 .................................................... 1,600,000 SP1+ 1,604,041
San Diego County, CA, Tax and Revenue Anticipation Notes, Series 1996,
4.375%, 9/30/97 ................................................................ 1,500,000 MIG1 1,507,680
San Diego, CA, Area Local Governments, Tax and Revenue Anticipation Notes,
4.75%, 10/18/96 ................................................................ 1,400,000 SP1+ 1,400,562
San Diego, CA, Industrial Development Revenue Refunding Bonds, Tax Exempt
Commercial Paper, 3.5%, 11/21/96 ............................................... 2,000,000 P1 2,000,000
San Diego, CA, Multi-Family Housing Revenue, (Lusk Mira Mesa Project),
Issue E, Variable Rate Demand Bond, 3.75%, 4/1/07* ............................. 1,900,000 MIG1 1,900,000
San Jose-Santa Clara, CA, Clean Water Financing Sewer Revenue Bonds,
Series 1995 B, Weekly Demand Note, 3.7%, 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, 3.55%, 11/1/08* ..................................... 500,000 MIG1 500,000
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Revenue,
Variable Rate Demand Bonds, 3.925%, 6/1/05* .................................... 2,700,000 SS&C 2,700,000
Santa Clara County, CA, Housing Authority, Fox Chase I Project, Weekly Demand
Note, 3.65%, 11/1/08 (c)* ...................................................... 1,000,000 MIG1 1,000,000
Santa Clara, CA, Electric Revenue:
Series B, Variable Rate Demand Bonds, 3.8%, 7/1/10* ............................ 1,100,000 MIG1 1,100,000
Series C, Junior Lien, Variable Rate Demand Bond, 3.8%, 7/1/10* ................ 1,300,000 MIG1 1,300,000
Santa Paula County, California School District Tax and Revenue Anticipation Notes,
Series 1996, 4.5%, 7/2/97 ...................................................... 1,000,000 SP1 1,004,622
City of South San Francisco, CA, (1991 Water Quality Control), Variable Rate
Demand Bonds, 3.75%, 7/1/12* ................................................... 275,000 MIG1 275,000
Metropolitan Water District of Southern California, Tax Exempt Commercial
Paper, 3.45%, 11/18/96 ......................................................... 1,000,000 A1+ 1,000,000
Southern California Edison, Series 1985C, California Pollution Control Revenue,
Tax Exempt Commercial Paper, 3.5%, 10/9/96 ..................................... 1,000,000 P1 1,000,000
Southern California Public Power Authority, Transmission Project, Series 1991,
Weekly Demand Note, 3.7%, 7/1/19 (c)* .......................................... 1,300,000 A1+ 1,300,000
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL MUNICIPAL INVESTMENTS (Cost $69,581,994) 69,581,994
- ------------------------------------------------------------------------------------------------------------------------------
==============================================================================================================================
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO -- 100.0% (Cost $69,581,994)(a) 69,581,994
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 - Scudder California Tax Free Money Fund
<PAGE>
- -------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $69,581,994.
(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.
The accompanying notes are an integral part of the financial statements.
13 -- Scudder California Tax Free Money Fund
<PAGE>
FINANCIAL STATEMENTS
<TABLE>
Statement of Assets and Liabilities
as of September 30, 1996 (Unaudited)
<S> <C>
ASSETS
- --------------------------------------------------------------------------------------------------------
Investments, at value (identified cost $69,581,994) (Note A) ..................... $69,581,994
Interest receivable .............................................................. 357,067
Receivable on Fund shares sold ................................................... 315,774
Other assets ..................................................................... 42,918
-----------
Total assets ..................................................................... 70,297,753
LIABILITIES
- --------------------------------------------------------------------------------------------------------
Due to custodian bank ............................................................ $ 224,345
Payable for Investments purchased ................................................ 1,523,904
Dividends payable ................................................................ 29,826
Payable for Fund shares redeemed ................................................. 102,623
Accrued management fee (Note C) .................................................. 23,419
Other accrued expenses (Note C) .................................................. 37,969
-----------
Total liabilities ................................................................ 1,942,086
-------------------------------------------------------------------------------------------------
NET ASSETS, AT VALUE $68,355,667
-------------------------------------------------------------------------------------------------
NET ASSETS
- --------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized loss .................................................... (95,169)
Shares of beneficial interest .................................................... 683,668
Additional paid-in capital ....................................................... 67,767,168
-------------------------------------------------------------------------------------------------
NET ASSETS, AT VALUE $68,355,667
-------------------------------------------------------------------------------------------------
NET ASSET VALUE
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ($68,355,667 / 68,366,787
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.
14 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
Statement of Operations
six months ended September 30, 1996 (Unaudited)
<S> <C>
INVESTMENT INCOME
- ----------------------------------------------------------------------
Interest ........................................... $1,168,833
----------
Expenses:
Management fee (Note C) ............................ 173,306
Services to shareholders (Note C) .................. 37,648
Custodian and accounting fees (Note C) ............. 25,968
Trustees' fees and expenses (Note C) ............... 8,928
Auditing ........................................... 13,352
Reports to shareholders ............................ 4,579
Legal .............................................. 2,252
Registration fees .................................. 4,029
Other .............................................. 2,242
----------
Total expenses before reductions ................... 272,304
Expense reductions (Note C) ........................ (67,889)
----------
Expenses, net ...................................... 204,415
----------------------------------------------------------------
NET INVESTMENT INCOME 964,418
----------------------------------------------------------------
REALIZED GAIN (LOSS) ON INVESTMENT
- ----------------------------------------------------------------------
Net realized loss from investments ................. (677)
----------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 963,741
----------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 -- Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1996 MARCH 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1996
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................. $ 964,418 $ 2,142,783
Net realized loss from investments ................................ (677) (1,913)
------------ ------------
Net increase in net assets resulting from operations .............. 963,741 2,140,870
------------ ------------
Distributions to shareholders from net investment income .......... (964,418) (2,142,783)
------------ ------------
Fund share transactions at net asset value of $1.00 per share:
Shares sold ....................................................... 31,693,639 53,468,668
Net asset value of shares issued to shareholders in reinvestment of
distributions ................................................... 796,647 1,832,601
Shares redeemed ................................................... (31,099,990) (52,560,504)
------------ ------------
Net increase in net assets from Fund share transactions ........... 1,390,296 2,740,765
------------ ------------
INCREASE IN NET ASSETS ............................................ 1,389,619 2,738,852
Net assets at beginning of period ................................. 66,966,048 64,227,196
------------ ------------
NET ASSETS AT END OF PERIOD ....................................... $ 68,355,667 $ 66,966,048
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder California Tax Free Money Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<CAPTION>
FOR THE PERIOD
SIX MONTHS MAY 28, 1987
ENDED (COMMENCEMENT OF
SEPTEMBER 30, YEARS ENDED MARCH 31, OPERATIONS) TO
1996 MARCH 31,
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $1.000
----------------------------------------------------------------------------------------------------
Net investment income ...... .014 .032 .027 .019 .023 .035 .047 .052 .049 .035
Distributions from net
investment income ........ (.014) (.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 $1.000
- ----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) (a) ....... 1.43** 3.28 2.72 1.92 2.35 3.54 4.79 5.35 5.04 3.86**
RATIOS AND SUPPLEMENTAL
DATA
Net assets, end of period
($ millions) ............. 68 67 64 72 56 58 64 65 64 53
Ratio of operating expenses,
net to average daily net
assets (%) ............... .60* .60 .60 .60 .60 .60 .65 .75 .67 .45*
Ratio of operating expenses
before expense
reductions (%) ........... .80* .81 .84 .90 .86 .88 .92 .90 .84 1.32*
Ratio of net investment
income to average daily
net assets (%) ........... 2.84* 3.23 2.68 1.90 2.33 3.50 4.68 5.22 4.98 4.41*
(a) Returns are higher due to maintenance of the Fund's expenses.
* Annualized
** Not annualized
</TABLE>
17 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
INVESTMENT PORTFOLIO as of September 30, 1996 (Unaudited)
<CAPTION>
PRINCIPAL CREDIT MARKET
AMOUNT ($) RATING (b) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHORT-TERM MUNICIPAL INVESTMENTS 1.5%
- ----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA
California Pollution Control Financing Authority, Pacific Gas & Electric, Series C,
Variable Rate Demand Note, 3.85%, 11/1/26* ........................................ 400,000 A-1+ 400,000
Irvine Ranch Water District, CA:
Series 1985B, Daily Demand Bond, 3.85%, 10/1/04* .................................. 100,000 A 100,000
Conservation District Daily Demand Bond, 3.65%, 8/1/16* ........................... 600,000 MIG1 600,000
Refunding, Series B, Daily Demand Notes, 3.85%, 10/1/99* .......................... 200,000 A-1 200,000
Conservation District, Daily Demand Note, 3.85%, 5/1/09* .......................... 3,000,000 A-1+ 3,000,000
Orange County, CA, Municipal Water District, Certificate of Participation, Project B,
Daily Demand Bond, 3.75%, 8/15/15* ................................................ 200,000 A-1+ 200,000
- ----------------------------------------------------------------------------------------------------------------------------
TOTAL SHORT-TERM MUNICIPAL INVESTMENTS (Cost $4,500,000) 4,500,000
- ----------------------------------------------------------------------------------------------------------------------------
LONG-TERM MUNICIPAL INVESTMENTS 98.4%
- ----------------------------------------------------------------------------------------------------------------------------
CALIFORNIA
ABAG Financing Authority:
Non-Profit Corps., Certificate of Participation, 5.75%, 8/15/14 ................... 1,000,000 A 984,570
Stanford Health Systems, Certificates of Participation, 6%, 11/1/07 (c) ........... 605,000 AAA 646,412
Anaheim, CA, Convention Center Financing, Certificate of Participation,
Zero Coupon, 8/1/05 (c) ........................................................... 1,250,000 AAA 791,438
California State Department of Veterans Affairs, Home Purchase Revenue,
Series 1986A, 7.375%, 8/1/12 ...................................................... 3,000,000 AA 3,062,100
California, General Obligation, 4.75%, 9/1/18 (c) ................................... 4,040,000 AAA 3,494,802
California Health Facilities Finance Authority:
Catholic Healthcare West, Series A, 5%, 7/1/21 (c) ................................ 1,935,000 AAA 1,746,841
Catholic Healthcare West, 5%, 7/1/14 (c) .......................................... 1,500,000 AAA 1,388,310
Children's Hospital, Series 1996, 5.375%, 7/1/16 (c) .............................. 1,935,000 AAA 1,860,851
Hospital Revenue, Downey Community Hospital, 5.625%, 5/15/08 ...................... 6,000,000 A 5,991,960
Hospital Revenue, Downey Community Hospital, 5.75%, 5/15/15 ....................... 400,000 A 386,236
Kaiser Permanent Medical Care Program, 5.55%, 8/15/25 ............................. 4,000,000 AA 3,775,000
Henry Mayo Newhall, Series A, 8%, 10/1/18 ......................................... 3,655,000 A 3,964,250
St. Francis Medical Center, Series A, ETM, 5.65%, 10/1/14 (c)** ................... 1,500,000 AAA 1,524,135
California Housing Finance Agency:
Home Mortgage Revenue, Series F1, Subject to AMT, 6.2%, 8/1/05 (c) ................ 840,000 AAA 866,880
Home Mortgage Revenue, Series F1, Subject to AMT, 6.3%, 8/1/06 (c) ................ 1,310,000 AAA 1,357,252
Series G, Subject to AMT, 5.7%, 2/1/07 (c) ........................................ 500,000 AAA 508,075
Series G, Subject to AMT, 5.8%, 2/1/08 (c) ........................................ 1,330,000 AAA 1,348,474
Series G, Subject to AMT, 5.9%, 2/1/09 (c) ........................................ 200,000 AAA 202,762
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT MARKET
AMOUNT ($) RATING (b) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series G, Subject to AMT, 6%, 8/1/10 (c) .......................................... 1,400,000 AAA 1,415,428
Multi-Unit Rental Housing Revenue:
Series A, 7.7%, 8/1/09 ............................................................ 700,000 A 766,976
Series A, 7.75%, 8/1/16 ........................................................... 2,440,000 A 2,638,006
Series A, 7.4%, 8/1/01 ............................................................ 1,555,000 A 1,684,283
Series A, 7.45%, 8/1/02 ........................................................... 1,015,000 A 1,136,221
Series A, 7.2%, 8/1/97 ............................................................ 1,620,000 A 1,663,011
Series A, 7.3%, 8/1/99 ............................................................ 2,435,000 A 2,606,668
Series A, 7.35%, 8/1/00 ........................................................... 2,615,000 A 2,844,231
Series A, 7.6%, 8/1/06 ............................................................ 4,030,000 A 4,437,876
Series A, 7.65%, 8/1/07 ........................................................... 2,335,000 A 2,564,857
Series A, 7.8%, 8/1/23 ............................................................ 2,635,000 A 2,841,768
Series II, 7%, 8/1/97 ............................................................. 280,000 A 286,306
Series II, 7.25%, 8/1/98 .......................................................... 300,000 A 314,412
Series II, 7.3%, 8/1/99 ........................................................... 325,000 A 348,143
Series II, 7.3%, 8/1/00 ........................................................... 345,000 A 373,480
Series II, 7.3%, 8/1/01 ........................................................... 375,000 A 410,434
Series II, 7.35%, 8/1/02 .......................................................... 400,000 A 440,240
Series II, 7.35%, 8/1/03 .......................................................... 430,000 A 474,260
Series II, 7.35%, 8/1/04 .......................................................... 460,000 A 510,756
Series II, 7.35%, 8/1/05 .......................................................... 495,000 A 551,029
California Housing Financial Agency Revenue Bonds, Series 1996C,
5.875%, 2/2/27 (c) ................................................................ 23,600,000 AAA 22,710,516
California Pollution Control Finance Authority, Southern California Edison, Series A,
6.9%, 9/1/06 ...................................................................... 3,750,000 A 4,036,838
California State Public Works Board, Lease Based Revenue, Medera Prison, Series A,
7.4%, 9/1/10 (c) .................................................................. 1,000,000 AAA 1,195,200
California Statewide Community Development Authority, Certificate of Participation:
Lutheran Homes, 5.5%, 11/15/08 .................................................... 1,500,000 A 1,544,085
Lutheran Homes, 5.6%, 11/15/13 .................................................... 4,750,000 A 4,708,390
Sisters of Charity, 4.875%, 12/1/10 (c) ........................................... 2,500,000 AAA 2,301,150
Sisters of Charity, 5%, 12/1/23 (c) ............................................... 2,500,000 AAA 2,221,675
St. Joseph's Health System, 6.2%, 7/1/08 .......................................... 200,000 AA 208,292
UniHealth America, Series A, Zero Coupon, 10/1/05 (c) ............................. 1,450,000 AAA 910,180
Castaic Lake, CA, Certificates of Participation, Water System Improvement Project,
Series A, 7.25%, 8/1/07 (c) ....................................................... 1,000,000 AAA 1,173,370
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT MARKET
AMOUNT ($) RATING (b) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Central California Joint Powers Health Financing Authority, Certificate of
Participation, Community Hospital of Central California, Series 1993,
5.25%, 2/1/04 ...................................................................... 1,780,000 A 1,758,569
Chino Basin, CA, Regional Financing Authority, Municipal Water District,
Sewer System, 5.9%, 8/1/11 (c) ..................................................... 1,290,000 AAA 1,350,037
City of Port of Hueneme, CA, Certificates of Participation, Capital Improvement,
6%, 4/1/19 (c) ..................................................................... 925,000 AAA 965,941
Coronado, CA, Community Development Agency, Tax Allocation Bonds,
6%, 9/1/07 (c) ..................................................................... 1,150,000 AAA 1,227,832
Costa Mesa, CA, Public Financing Authority, Lease Revenue Refunding, Series A,
5.25%, 10/1/18 ..................................................................... 4,500,000 A 4,121,460
Delmar, CA, Race Track Authority Revenue, Series 1996, 6%, 8/15/06 ................... 2,000,000 1,998,360
Duarte, CA, Certificates of Participation, City of Hope Medical Center, 6%,
4/1/08 ............................................................................ 3,750,000 BBB 3,750,750
Duarte, CA, Certificates of Participation, City of Hope Medical Center,
5.75%, 4/1/02 ...................................................................... 3,525,000 BBB 3,558,029
Duarte, Ca, Certificates of Participation, City of Hope Medical Center, 5.8%,
4/1/03 ............................................................................ 3,735,000 BBB 3,745,010
Elk Grove, CA, Unified School District, Special Tax, Community Facilities, District #1
6.5%, 12/1/08 (c) .................................................................. 1,000,000 AAA 1,113,180
Eureka, CA, Public Financing Authority, Tax Allocation Revenue Bonds,
5%, 11/1/16 (c) .................................................................... 1,380,000 AAA 1,259,112
Fontana, CA, Public Finance Authority, Tax Allocation Revenue, North Fontana
Redevelopment Project, 5%, 9/1/20 (c) .............................................. 1,200,000 AAA 1,088,088
Foothill/Eastern Transportation Corridor Agency, CA, Toll Road Revenue, Senior Lien:
Series A, Zero Coupon, 1/1/11 ...................................................... 6,000,000 BBB 3,716,040
Series A, Zero Coupon, 1/1/14 ...................................................... 2,875,000 BBB 1,769,821
Series A, Zero Coupon, 1/1/13 ...................................................... 975,000 BBB 600,200
Hayward, CA, Certificate of Participation, Civic Center Project, Series 1996
5.250%, 8/1/26 (c) ................................................................. 2,000,000 AAA 1,847,280
Imperial, CA, Irrigation District, Certificate of Participation, Refunding, Electric
System Revenue, 5.2%, 11/1/09 (c) .................................................. 2,500,000 AAA 2,465,375
Inland Empire Solid Waste Financing Authority, California Landfill Improvement
Financing Project B, AMT. Series 1996B, 6%, 8/1/06 (c) ............................. 1,000,000 AAA 1,039,820
Los Angeles County, CA, Public Works Financing Authority Lease Revenue, Multi Cap
Facilities Project IV, Series 1993, 4.75%, 12/1/13 (c) ............................. 5,000,000 AAA 4,473,700
Los Angeles County, CA, Certificate of Participation:
Capital Appreciation, Disney Parking Project, Series 1993, Zero Coupon, 3/1/08 ..... 2,780,000 BBB 1,319,972
Capital Appreciation, Disney Parking Project, Series 1993, Zero Coupon, 9/1/08 ..... 4,865,000 BBB 2,235,857
Marina Del Rey, Series A, 5.75%, 7/1/98 ............................................ 5,000,000 NR 5,070,100
Marina Del Ray, Series A, 6.25%, 7/1/03 ............................................ 2,500,000 NR 2,588,650
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT MARKET
AMOUNT ($) RATING (b) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Marina Del Ray, Series A, 6.5%, 7/1/08 ......................................... 2,500,000 NR 2,543,025
Los Angeles County, CA, Public Works Financing Authority, 5.125%, 6/1/17 (c) ..... 1,000,000 AAA 930,610
Los Angeles County, CA, Wastewater System Revenue, Series D, 4.7%, 11/1/17 (c) ... 1,960,000 AAA 1,697,380
Los Angeles, CA, Convention & Exhibition Center Authority, Series A,
5.2%, 8/15/09 (c) .............................................................. 1,500,000 AAA 1,471,230
Los Angeles, CA, State Building, Authority Lease Revenue, California Department
General Services, Series 1993A 5.6%, 5/1/08 .................................... 7,000,000 A 7,032,830
Modesto, CA, Certificate of Participation, Community Project, Series A,
5.6%, 11/1/14 (c) .............................................................. 1,370,000 AAA 1,380,494
Mojave Desert & Mountain Region, Solid Waste Joint Powers Authority, California
Project Revenue, 7.875%, 6/1/20 ................................................ 2,350,000 BBB 2,591,463
Newport Mesa, CA, United School District Special Tax District Number 90-1
Series 1996, 6.625%, 9/1/14 .................................................... 500,000 NR 503,445
Orange County, CA:
Recovery Participation Certificates, 6%, 7/1/06 (c) ............................ 3,000,000 AAA 3,188,580
Local Transportation Authority, Sales Tax Revenue, Measure M, 5.1%, 2/15/01 (c) 5,000,000 AAA 4,878,000
Local Transportation Authority, Sales Tax Revenue, Measure M, 5.15%, 2/15/11 (c) 4,975,000 AAA 4,732,966
Recovery Notes, Series 1995A, 6%, 6/1/08 ....................................... 2,500,000 AAA 2,652,875
Recovery Notes, Series A, 5.6%, 6/1/07 (c) ..................................... 4,430,000 AAA 4,567,507
Palomar Pomerado, CA, Health Systems, 4.75%, 11/1/23 (c) ......................... 1,000,000 AAA 845,390
Pittsburgh, CA, Public Finance Authority, Wastewater System Revenue, Series A,
5.125%, 6/1/15 (c) ............................................................. 1,000,000 AAA 937,640
Pittsburgh, CA, Redevelopment Agency, Tax Allocation, Los Medaros Community
Development Project, 4.625%, 8/1/21 (c) ........................................ 3,500,000 AAA 2,945,880
Pomona, CA, Unified School District, Series 1992B, 6.25%, 8/1/14 (c) ............. 1,020,000 AAA 1,106,149
Pomona, CA, Unified School District, General Obligation:
5.6%, 8/1/14 (c) ............................................................... 170,000 AAA 171,285
5.6%, 8/1/15 (c) ............................................................... 180,000 AAA 181,447
5.6%, 8/1/16 (c) ............................................................... 190,000 AAA 191,573
5.6%, 8/1/17 (c) ............................................................... 175,000 AAA 176,489
5.6%, 8/1/18 (c) ............................................................... 205,000 AAA 205,240
Richmond, CA, Joint Powers Finance Authority, Port Term Lease Revenue:
Series 1996, 5.875%, 9/1/06 .................................................... 500,000 BBB 497,930
Series 1996, 6.6%, 9/1/16 ...................................................... 1,000,000 BBB 1,013,930
Sacramento, CA, Power Authority Cogeneration Project, Revenue Bonds
Series 1995, 6.5%, 7/1/04 ...................................................... 2,000,000 BBB 2,098,920
Sacramento, CA, Finance Authority Lease, Series 1993, 5%, 11/1/14 ................ 3,200,000 AA 2,983,264
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT MARKET
AMOUNT ($) RATING (b) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Bernardino, CA, Certificates of Participation, Medical Center Financing Project,
Refunding Series 1994, 5.5%, 8/1/17 ................................................. 2,215,000 A 2,084,071
San Bernardino County, CA, Certificates of Participation, Medical Center
Financing Project:
Series 1996, 5.25%, 8/1/16 (c) .................................................... 2,145,000 AAA 2,028,591
Refunding Revenue, 6%, 8/1/09 ..................................................... 3,000,000 A 3,039,930
San Diego County, CA, Water Authority, Water Revenue Certificates of
Participation, Series 1991A, 6.4%, 5/1/07 ........................................... 900,000 AA 963,072
San Francisco, CA, Redevelopment Financing Agency, Tax Allocation Revenue, Series A,
Zero Coupon, 8/1/03 (c) ............................................................. 1,080,000 AAA 767,988
San Joaquin County, CA, Certificate of Participation, County Public Facilities Project,
4.75%, 11/15/19 (c) ................................................................. 3,500,000 AAA 2,995,370
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue:
Orange County, Senior Lien, Zero Coupon, 1/1/05 ..................................... 2,500,000 BBB 1,915,400
Senior Lien, Zero Coupon, 1/1/07 .................................................... 6,000,000 BBB 4,620,300
Senior Lien, Zero Coupon, 1/1/04 .................................................... 1,000,000 NR 761,630
San Joaquin Hills, CA, Transcorridor Agency Toll Road Revenue, Junior Lien,
Series 1993, Zero Coupon, 1/1/10 .................................................... 1,500,000 NR 587,445
San Jose, CA, Financing Revenue, Community Facilities Project, Zero Coupon:
11/15/03 ............................................................................ 735,000 A 506,319
11/15/04 ............................................................................ 1,605,000 A 1,041,838
11/15/05 ............................................................................ 1,605,000 A 979,130
11/15/06 ............................................................................ 1,605,000 A 918,429
San Mateo County, CA, Joint Power Finance Authority, Capital Project Program,
Zero Coupon:
7/1/01 (c) ........................................................................ 1,765,000 AAA 1,404,852
7/1/02 (c) ........................................................................ 1,715,000 AAA 1,293,762
7/1/03 (c) ........................................................................ 1,725,000 AAA 1,231,771
Santa Ana, CA, Financing Authority, Lease Revenue, Series 1994A,
6.25%, 7/1/24 (c) ................................................................... 1,000,000 AAA 1,086,430
Santa Clara County, CA, Police Administration & Holding Facility, Certificates
of Participation, Series A, 4.75%, 2/1/14 (c) ....................................... 3,000,000 AAA 2,679,360
Santa Clara County, CA, Finance Authority, Lease Revenue, Replacement Project,
7.75%, 11/15/08 (c) ................................................................. 3,250,000 AAA 3,972,345
Santa Margarita/Dana Point, CA:
Improvement Districts 1-2-2A & 8, Series 1994A, 7.25%, 8/1/06 (c) ................... 465,000 AAA 544,794
Improvement Districts 3-3A-4-4A, Series 1994B, 7.25%, 8/1/06 (c) .................... 3,315,000 AAA 3,857,798
Improvement Districts 3, 3A, 4 and 4A, Series B, 7.25%, 8/1/05 (c) .................. 2,895,000 AAA 3,355,392
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL CREDIT MARKET
AMOUNT ($) RATING (b) VALUE ($)
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Santa Monica, CA, Wastewater Enterprise Revenue, Hyperion Project, 4.75%,
1/1/12 (c) .................................................................... 3,000,000 AAA 2,709,090
South Orange County, CA, Public Finance Authority, Special Tax Revenue, Series A,
7%, 9/1/06 (c) ................................................................ 2,230,000 AAA 2,573,442
Southern California Public Power Authority, Power Project Revenue, Mead Phoenix
Project, Series A, 4.75%, 7/1/09 (c) .......................................... 1,220,000 AAA 1,130,476
Southern California Public Power Authority, Series 1989, 6.75%, 7/1/10 .......... 6,000,000 A 6,722,520
University of California, Revenue Bonds, Multiple Purpose Projects, Series 1994C,
4.75%, 9/1/15 (c) ............................................................. 3,000,000 AAA 2,644,020
University of California, Revenue Bonds, University of California Medical Center,
Series 1996, 10%, 7/1/03 (c) .................................................. 4,470,000 AAA 5,784,538
Valley Health System, Hospital Revenue Bonds, Refunding and
Improvement Project, Series 1996 A, 6.5%, 5/15/25 ............................. 4,325,000 BBB 4,205,933
Valley Health System, Hospital Revenue Bonds, Refunding and
Improvement Project, Series 1996 A, 6.5%, 5/15/15 ............................. 385,000 BBB 379,371
Watsonville, CA, Insured Hospital, Community Hospital Revenue, Series 1996,
5.95%, 7/1/07 ................................................................. 1,135,000 A 1,157,462
West Covina, CA, Redevelopment Agency Community Facilities District, Special Tax
Fashion Plaza, Series 1996, 5.75%, 9/1/09 ..................................... 865,000 A 858,729
West Covina, CA, Queen of the Valley Hospital, Certificate of Participation,
Hospital Revenue, 5.7%, 8/15/00 ............................................... 380,000 A 389,242
West Covina, CA, Queen of the Valley Hospital, Certificate of Participation,
Hospital Revenue, 5.8%, 8/15/01 ............................................... 750,000 A 769,433
Westminster, CA, Redevelopment Agency, Tax Allocation Revenue, Community
Development, Project #1, Series A, 7.3%, 8/1/21 ............................... 2,690,000 BBB 2,934,279
Whittier, CA, Health Facilities Revenue, Presbyterian Inter-community,
6.25%, 6/1/08 (c) ............................................................. 1,000,000 AAA 1,088,170
Whittier, CA, Health Facilities Revenue, Presbyterian Inter Community Health,
6.25%, 6/1/10 (c) ............................................................. 1,250,000 AAA 1,354,182
PUERTO RICO
Commonwealth of Puerto Rico, Public Improvement Refunding General Obligation,
5.375%, 7/1/06 ................................................................ 1,225,000 A 1,210,717
VIRGIN ISLANDS
Virgin Islands, Special Tax Bonds, Hugo Bonds, 7.75%, 10/1/06 ................... 1,720,000 NR 1,860,834
Virgin Islands General Obligation, Public Finance Authority, Mortgage Fund Loan
Notes, Series A, 7%, 10/1/02 .................................................... 1,000,000 BBB 1,073,170
- -------------------------------------------------------------------------------------------------------------------------
TOTAL LONG-TERM MUNICIPAL INVESTMENTS (Cost $280,927,161) 289,288,779
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
MARKET
CONTRACTS VALUE ($)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PURCHASED OPTIONS - 0.1%
- -------------------------------------------------------------------------------------------------------------------------
Call option on Chicago Board of Trade Municipal Bond Index Future, -----------
strike price 115, expiration date 12/23/96 (Cost $330,125) ............................ 200 309,375
-----------
- -------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT PORTFOLIO - 100.0% (Cost $285,757,286)(a) 294,098,154
- -------------------------------------------------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $285,776,739. At September 30,
1996, net unrealized appreciation for all securities based on tax cost was
$8,321,415. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $10,016,067 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$1,694,652.
(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.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow by a
trustee and used to pay principal and interest on bonds so designated.
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
FINANCIAL STATEMENTS
Statement of Assets and Liabilities
as of September 30, 1996 (Unaudited)
<S> <C>
ASSETS
- ------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $285,757,286) (Note A) .................. $294,098,154
Receivable on investments sold .................................................. 4,243,910
Interest receivable ............................................................. 4,040,234
Receivable on Fund shares sold .................................................. 74,446
Other assets .................................................................... 2,573
------------
Total assets .................................................................... 302,459,317
LIABILITIES
- ------------------------------------------------------------------------------------------------------
Due to Custodian ................................................................ $ 19,718
Payable for investments purchased ............................................... 9,349,551
Dividends payable ............................................................... 468,126
Payable for Fund shares redeemed ................................................ 64,456
Accrued management fee (Note C) ................................................. 151,799
Other accrued expenses (Note C) ................................................. 91,808
------------
Total liabilities ............................................................... 10,145,458
-------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $292,313,859
-------------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments ...................................... $ 8,340,868
Accumulated net realized loss ................................................... (10,794,663)
Shares of beneficial interest ................................................... 280,083
Additional paid-in capital ...................................................... 294,487,571
-------------------------------------------------------------------------------------------------
NET ASSETS, AT MARKET VALUE $292,313,859
-------------------------------------------------------------------------------------------------
NET ASSET VALUE
- ------------------------------------------------------------------------------------------------------
NET ASSET VALUE, offering and redemption price per share ($292,313,859 /
28,008,305 outstanding shares of beneficial interest, $.01 par value, unlimited ------------
number of shares authorized) .................................................. $10.44
------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
25 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
Statement of Operations
six months ended September 30, 1996 (Unaudited)
<S> <C>
INVESTMENT INCOME
- --------------------------------------------------------------------------------
Interest ..................................................... $8,442,203
----------
Expenses:
Management fee (Note C) ...................................... 893,825
Services to shareholders (Note C) ............................ 106,173
Trustees' fees and expenses (Note C) ......................... 8,582
Custodian and accounting fees (Note C) ....................... 72,665
Reports to shareholders ...................................... 18,955
Auditing ..................................................... 21,021
Legal ........................................................ 5,661
Registration fees ............................................ 7,075
Other ........................................................ 13,718
----------
1,147,675
---------------------------------------------------------------------------
NET INVESTMENT INCOME 7,294,528
---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT TRANSACTIONS
- --------------------------------------------------------------------------------
Net realized gain from:
Investments .................................................. 1,186,796
Futures ...................................................... 14,185
----------
1,200,981
Net unrealized appreciation on investments ................... 722,194
----------
Net gain on investment transactions .......................... 1,923,175
---------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $9,217,703
---------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
Statements of Changes in Net Assets
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED
1996 MARCH 31,
INCREASE (DECREASE) IN NET ASSETS (UNAUDITED) 1996
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................. $ 7,294,528 $ 14,572,292
Net realized gain from investment transactions .................... 1,200,981 2,260,608
Net unrealized appreciation on investment transactions
during the period ............................................... 722,194 6,496,809
------------ ------------
Net increase in net assets resulting from operations .............. 9,217,703 23,329,709
------------ ------------
Distributions to shareholders:
From net investment income ........................................ (7,294,528) (14,572,292)
------------ ------------
From net realized gains from investment transactions .............. -- --
------------ ------------
Fund share transactions:
Proceeds from shares sold ......................................... 20,665,119 34,646,046
Net asset value of shares issued to shareholders in reinvestment of
distributions ................................................... 4,418,411 8,891,876
Cost of shares redeemed ........................................... (27,317,690) (53,733,869)
------------ ------------
Net decrease in net assets from Fund share transactions ........... (2,234,160) (10,195,947)
------------ ------------
INCREASE (DECREASE) IN NET ASSETS ................................. (310,985) (1,438,530)
Net assets at beginning of period ................................. 292,624,844 294,063,374
------------ ------------
NET ASSETS AT END OF PERIOD ....................................... $292,313,859 $292,624,844
------------ ------------
OTHER INFORMATION
- ---------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN FUND SHARES
Shares outstanding at beginning of period ......................... 28,232,177 29,207,833
------------ ------------
Shares sold ....................................................... 2,006,634 3,337,194
Shares issued to shareholders in reinvestment of distributions .... 428,311 855,726
Shares redeemed ................................................... (2,658,817) (5,168,576)
------------ ------------
Net decrease in Fund shares ....................................... (223,872) (975,656)
------------ ------------
Shares outstanding at end of period ............................... 28,008,305 28,232,177
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27 - Scudder California Tax Free Fund
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<CAPTION>
SIX MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31,
1996
(UNAUDITED) 1996 1995 1994 1993 1992 1991 1990 1989 1988 1987
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ------------------------------------------------------------------------------------------------
period ......................... $10.36 $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 ............ .26 .51 .51 .53 .59 .61 .63 .65 .68 .69 .71
Net realized and unrealized
gain (loss) on
investment transactions ........ .08 .29 .14 (.35) .94 .47 .21 .22 .27 (.93) .53
Total from investment ------------------------------------------------------------------------------------------------
operations ..................... .34 .80 .65 .18 1.53 1.08 .84 .87 .95 (.24) 1.24
------------------------------------------------------------------------------------------------
Less distributions:
From net investment
income ......................... (.26) (.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 .............. (.26) (.51) (.60) (1.21) (1.08) (.89) (.72) (.84) (.68) (.95) (1.01)
------------------------------------------------------------------------------------------------
Net asset value, end of ------------------------------------------------------------------------------------------------
period ......................... $10.44 $10.36 $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $9.99 $11.18
------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%) ................. 3.34** 8.01 6.75 1.30 15.13 10.74 8.53 8.62 9.80 (1.70) 12.11
RATIOS AND SUPPLEMENTAL DATA
Net assets, end of period
($ millions) ................... 292 293 294 325 309 242 208 193 171 153 195
Ratio of operating expenses, net
to average daily net
assets (%) ..................... .79* .77 .80 .78 .79 .81 .84 .83 .89 .88 .84
Ratio of net investment income
to average net assets (%) ...... 5.04* 4.88 5.18 4.85 5.42 5.79 6.13 6.23 6.71 6.95 6.55
Portfolio turnover rate .......... 71.2* 49.2 87.3 126.5 208.6 143.0 170.6 70.4 158.9 52.3 68.0
* Annualized
** Not annualized
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 - Scudder California Tax Free Fund
<PAGE>
NOTES TO FINANCIAL STATEMENTS (Unaudited)
A. Significant Accounting Policies
Scudder California Tax Free Money Fund ("Tax Free Money Fund"), a nondiversified
fund, and California Tax Free Fund ("Tax Free Fund"), a diversified fund, are
each a series of Scudder California Tax Free Trust (the "Trust") which is
organized as a Massachusetts business trust and registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company.
The 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.
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.
OPTIONS. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Tax Free Fund if the option is exercised.
29 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
During the period, the Tax Free Fund purchased call options on interest rate
futures to manage the duration of the portfolio.
If the Tax Free Fund writes an option and the option expires unexercised, the
Tax Free Fund will realize income, in the form of a capital gain, to the extent
of the amount received for the option (the "premium"). If the Tax Free Fund
elects to close out the option it would recognize a gain or loss based on the
difference between the cost of closing the option and the initial premium
received. If the Tax Free Fund purchased an option and allows the option to
expire it would realize a loss to the extent of the premium paid. If the Tax
Free Fund elects to close out the option it would recognize a gain or loss equal
to the difference between the cost of acquiring the option and the amount
realized upon the sale of the option.
The gain or loss recognized by the Tax Free Fund upon the exercise of a written
call or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the Tax Free Fund's cost basis
of the acquired security or currency would be the exercise price adjusted for
the amount of the option premium.
The liability representing the Tax Free Fund's obligation under an exchange
traded written option or investment in a purchased option is valued at the last
sale price or, in the absence of a sale, the mean between the closing bid and
asked price or at the most recent asked price (bid for purchased options) if no
bid and asked price are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
When the Tax Free Fund writes a covered call option, the Tax Free Fund foregoes,
in exchange for the premium, the opportunity to profit during the option period
from an increase in the market value of the underlying security or currency
above the exercise price. When the Tax Free Fund writes a put option it accepts
the risk of a decline in the market value of the underlying security or currency
below the exercise price. Over-the-counter options have the risk of the
potential inability of counterparties to meet the terms of their contracts. The
Tax Free Fund's maximum exposure to purchased options is limited to the premium
initially paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit the
Tax Free Fund's ability to close out an option contract prior to the expiration
date and, that a change in the value of the option contract may not correlate
exactly with changes in the value of the securities or currencies hedged.
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.
30 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
DISTRIBUTION OF INCOME AND GAINS. All of the net investment income of the Funds
is declared as dividends to shareholders of record as of the close of business
each day and is paid to shareholders monthly. During any particular year, net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Funds if not distributed and, therefore,
will be distributed to shareholders. An additional distribution may be made to
the extent necessary to avoid the payment of a four percent federal excise tax.
The timing and characterization of certain income and capital gains
distributions are determined in accordance with federal tax regulations which
may differ from generally accepted accounting principles. These differences
primarily relate to investments in options, futures, and certain securities sold
at a loss for the Tax Free Fund. As a result, net investment income and net
realized gain (loss) on investment transactions for a reporting period may
differ significantly from distributions during such period. Accordingly, the
Funds may periodically make reclassifications among certain of its capital
accounts without impacting the net asset value of the Funds.
The Funds use the specific identification method for determining realized gain
or loss on investments for both financial and federal income tax reporting
purposes.
OTHER. Investment transactions are accounted for on a trade-date basis.
Distributions of net realized gains to shareholders are recorded on the
ex-dividend date. Interest income is accrued pro rata to the earlier of the call
or maturity date.
B. Purchases and Sales of Securities
During the six months ended September 30, 1996, purchases and sales of long-term
municipal securities aggregated $115,298,688 and $97,245,097, respectively, for
the Tax Free Fund.
The aggregate face value of futures contracts opened and closed during the six
months ended September 30, 1996, for the Tax Free Fund, was $86,934,261.
C. Related Parties
Each Fund has entered into an Investment Management Agreement (each an
"Agreement" and collectively the "Agreements") with Scudder, Stevens & Clark,
Inc. (the "Adviser"), under which each Fund agrees to pay the Adviser a fee
computed and accrued daily and paid monthly. The management fee payable under
the Agreements is equal to an annual rate of 0.50% of the average daily net
assets of Tax Free Money Fund, and 0.625% of the first $200,000,000 of the
average daily net assets and 0.60% of such net assets in excess of $200,000,000
for Tax Free Fund. As manager of the assets of Tax Free Money Fund and Tax Free
Fund, the Adviser directs the investments of Tax Free Money Fund and Tax Free
Fund in accordance with the investment objectives, policies, and restrictions of
each Fund. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by each
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreements. The Agreements also
provide that if the Funds' expenses, exclusive of taxes, interest and certain
other expenses exceed specified limits, such excess, up to the amount of the
management fee, will be paid by the Adviser. For the six months ended September
30, 1996, the fee for the Tax Free Fund pursuant to the Agreement amounted to
$893,825, which was equivalent to an annualized effective rate of .62% of the
Fund's average daily net assets.
31 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
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, 1997 and during such period to
maintain the annualized expenses of Tax Free Money Fund at not more than 0.60%
of average daily net assets. For the six months ended September 30, 1996, the
Adviser did not impose a portion of its fee amounting to $67,889, and the
portion imposed amounted to $105,417.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. For the
six months ended September 30, 1996, $33,731 and $77,616 were charged by SSC to
Tax Free Money Fund and Tax Free Fund, of which $5,541 and $12,649 are unpaid at
September 30, 1996, respectively.
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 six months ended September 30, 1996, SFAC imposed fees
amounting to $15,000 and $32,607 of which $2,500 and $5,388 are unpaid at
September 30, 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 six months
ended September 30, 1996, Trustees' fees and expenses aggregated $8,928 and
$8,582 each for the Tax Free Money Fund and Tax Free Fund respectively.
32 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Officers and Trustees
David S. Lee*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Attorney and Corporate Director
Peter B. Freeman
Trustee; Corporate Director and Trustee
Daniel Pierce*
Trustee
Olin Barrett*
Vice President
Donald C. Carleton*
Vice President
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President and Secretary
Pamela A. McGrath*
Vice President and Treasurer
Edward J. O'Connell*
Vice President and Assistant Treasurer
Jeremy L. Ragus*
Vice President
Rebecca L. Wilson*
Vice President
Coleen Downs Dinneen*
Assistant Secretary
*Scudder, Stevens & Clark, Inc.
33 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds
- --------------------------------------------------------------------------------
Money Market
Scudder Cash Investment Trust
Scudder U.S. Treasury Money Fund
Tax Free Money Market+
Scudder Tax Free Money Fund
Scudder California Tax Free Money Fund*
Scudder New York Tax Free Money Fund*
Tax Free+
Scudder California Tax Free Fund*
Scudder High Yield Tax Free Fund
Scudder Limited Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder Massachusetts Limited Term
Tax Free Fund*
Scudder Massachusetts Tax Free Fund*
Scudder Medium Term Tax Free Fund
Scudder New York Tax Free Fund*
Scudder Ohio Tax Free Fund*
Scudder Pennsylvania Tax Free Fund*
Growth and Income
Scudder Balanced Fund
Scudder Growth and Income Fund
Income
Scudder Emerging Markets Income Fund
Scudder Global Bond Fund
Scudder GNMA Fund
Scudder High Yield Bond Fund
Scudder Income Fund
Scudder International Bond Fund
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Growth
Scudder Capital Growth Fund
Scudder Classic Growth Fund
Scudder Development Fund
Scudder Emerging Markets Growth Fund
Scudder Global Discovery Fund
Scudder Global Fund
Scudder Gold Fund
Scudder Greater Europe Growth Fund
Scudder International Fund
Scudder Latin America Fund
Scudder Micro Cap Fund
Scudder Pacific Opportunities Fund
Scudder Quality Growth Fund
Scudder Small Company Value Fund
Scudder 21st Century Growth Fund
Scudder Value Fund
The Japan Fund
Retirement Plans and Tax-Advantaged Investments
- --------------------------------------------------------------------------------
IRAs
Keogh Plans
Scudder Horizon Plan*+++ (a variable annuity)
401(k) Plans
403(b) Plans
SEP-IRAs
Profit Sharing and Money Purchase
Pension Plans
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The First Iberian Fund, Inc.
The Korea Fund, Inc.
The Latin America Dollar Income Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
Institutional Cash Management
- --------------------------------------------------------------------------------
Scudder Institutional Fund, Inc.
Scudder Fund, Inc.
Scudder Treasurers Trust(TM)++
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.
34 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
How to Contact Scudder
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
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The Scudder Funds
P.O. Box 2291
Boston, Massachusetts
02107-2291
Visit the Scudder World Wide Web Site at:
- --------------------------------------------------------------------------------
http://funds.scudder.com
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 Treasurers Trust(TM), an
institutional cash management service for corporations,
non-profit organizations and trusts which utilizes certain
portfolios of Scudder Fund, Inc.* ($100,000 minimum), call:
1-800-541-7703.
For information on Scudder Institutional Funds*, funds designed
to meet the broad investment management and service needs of
banks and other institutions, call:
1-800-854-8525.
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.
35 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<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 over 40 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.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
