Scudder
California
Tax Free Money Fund
Scudder
California
Tax Free Fund
Annual Report
March 31, 1997
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.
SCUDDER
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Funds' President
Scudder California
Tax Free Fund
4 Performance Update
5 Portfolio Summary
8 Portfolio Management Discussion
19 Investment Portfolio
27 Financial Statements
30 Financial Highlights
Scudder California
Tax Free Money Fund
6 Portfolio Management Discussion
11 Investment Portfolio
15 Financial Statements
18 Financial Highlights
31 Notes to Financial Statements
35 Report of Independent Accountants
36 Tax Information
36 Officers and Trustees
37 Investment Products and Services
38 Scudder Solutions
In Brief
Scudder California Tax Free Money Fund
o Scudder California Tax Free Money Fund offered a seven-day effective yield of
2.82% on March 31, 1997, equivalent to a 5.15% 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 4.73% 30-day net annualized SEC
yield on March 31, 1997.
o For shareholders subject to the 45.22% maximum combined federal and state
income tax rate, the Fund's yield was equal to a taxable yield of 8.63%.
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
30-Day Yield on March 31, 1997
BAR CHART DATA:
Scudder California Tax Free Fund 4.73%
Taxable Equivalent Yield 8.63%
2-Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Letter From the Fund's President
Dear Shareholders,
We are pleased to report to you on Scudder California Tax Free Fund's
performance over its most recent fiscal year ended March 31, 1997. The Fund
posted a 4.73% 30-day net annualized SEC yield as of March 31, which is
equivalent to a taxable yield of 8.63% for investors in the top California tax
bracket. The Fund also earned a total return of 5.44% for the 12 months ended
March 31.
In addition, Scudder California Tax Free Money Fund posted a 5.15% tax
equivalent yield based on the maximum federal and state tax rates at the close
of the period. Please read the portfolio management discussions beginning on
page 6 for more information.
As part of Scudder's ongoing efforts to meet the needs of investors, last
fall we launched an innovative new product called Scudder Pathway Series. A
"fund of funds," Pathway Series is a collection of four distinct portfolios --
Conservative, Balanced, Growth, and International -- that offers flexibility,
diversification, and simplicity. Each portfolio invests in a diverse mix of
Scudder funds, and each is geared toward people with different investment goals
and risk tolerances. Moreover, a team of Scudder's investment professionals
rebalances the mix within the portfolios as market conditions warrant.
Before closing, we'd like to take this opportunity to tell you that the
Scudder Family of Funds was recently recognized by Morningstar* for stability in
management and conformity to investment style. The mutual fund rating service
ranked Scudder 4th among 20 leading mutual fund companies for overall management
consistency. We are pleased with this superior track record and will strive to
maintain our reputation for consistency going forward. Please see pages 37
through 39 for more information on Scudder products and services. As always,
please call a Scudder Investor Information representative at 1-800-225-2470 if
you have questions about your account or any Scudder fund. Thank you for
choosing Scudder's California Tax Free Funds to help meet your investment needs.
Sincerely,
/s/David S. Lee
David S. Lee
President,
Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
* Morningstar Investor, February 1997
3-Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
PERFORMANCE UPDATE as of March 31, 1997
- ----------------------------------------------------------------
Fund Index Comparisons
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
3/31/97 $10,000 Cumulative Annual
- --------------------------------------------
Scudder California Tax Free Fund
- --------------------------------------------
1 Year $ 10,544 5.44% 5.44%
5 Year $ 14,178 41.78% 7.23%
10 Year $ 19,976 99.76% 7.16%
- --------------------------------------------
Lehman Brothers Municipal Bond Index
- --------------------------------------------
1 Year $ 10,545 5.45% 5.45%
5 Year $ 14,135 41.35% 7.16%
10 Year $ 20,632 106.32% 7.51%
- --------------------------------------------
- -----------------------------------------------------------------
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:
SCUDDER CALIFORNIA TAX FREE FUND
Year Amount
- ----------------------
87 $10,000
88 $ 9,830
89 $10,793
90 $11,724
91 $12,723
92 $14,089
93 $16,221
94 $16,431
95 $17,540
96 $18,946
97 $19,976
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- ----------------------
87 $10,000
88 $10,251
89 $10,990
90 $12,149
91 $13,270
92 $14,596
93 $16,424
94 $16,805
95 $18,053
96 $19,566
97 $20,632
Yearly periods ended March 31
The Lehman Brothers Municipal Bond Index is a market value weighted measure
of municipal bonds issued across the United States. Index issues have a credit
rating of at least Baa and a maturity of at least two years. Index returns
assume reinvestment of dividends and, unlike Fund returns, do not reflect any
fees or expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly Periods Ended March 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------------------------------------------------------------------------------------------------
NET ASSET VALUE... $ 9.99 $ 10.26 $ 10.29 $ 10.41 $ 10.60 $ 11.05 $ 10.02 $ 10.07 $ 10.36 $ 10.39
INCOME DIVIDENDS.. $ .69 $ .68 $ .65 $ .63 $ .61 $ .59 $ .53 $ .51 $ .51 $ .52
CAPITAL GAINS
AND OTHER
DISTRIBUTIONS..... $ .26 $ - $ .19 $ .09 $ .28 $ .49 $ .68 $ .09 $ - $ .01
FUND TOTAL
RETURN (%)........ -1.70 9.80 8.62 8.53 10.74 15.13 1.30 6.75 8.01 5.44
INDEX TOTAL
RETURN (%)........ 2.52 7.21 10.56 9.22 10.02 12.52 2.32 7.43 8.38 5.45
</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 March 31, 1997
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
County General Obligation/
Lease 15%
Hospital/Health 14%
Housing Finance Authority 13%
Other General Obligation/Lease 11%
Toll Revenue/Transportation 8%
State General Obligation 6%
Project Revenue/
Special Assessment 6%
Sales/Special Tax 5%
School District/Lease 4%
Miscellaneous Municipal 18%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Diversification remains an
important strategy for the Fund,
allowing us to spread risk over a
large number of sectors and
maturities.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 49%
AA 5%
A 24%
BBB 16%
Not Rated 6%
- --------------------------------------
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.
The Fund's overall quality remains
high, with 78% of portfolio
securities rated A or better.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 5%
1-5 years 12%
5-10 years 27%
10-20 years 41%
Greater than 20 years 15%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 12.05 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
To take advantage of
opportunities to lock in a
substantial income stream, we
purchased premium noncallable
intermediate maturity bonds.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 19.
5 - Scudder California Tax Free Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Money Fund
Dear Shareholders,
Scudder California Tax Free Money Fund's most recent fiscal year marked a change
in the short-term debt market's stance from anticipating a "Fed ease" (lower
yields) to anticipating a "Fed tightening" (higher yields) due to stronger than
expected labor market statistics. The Federal Reserve raised the federal funds
rate by one quarter of a percentage point on March 25 in an attempt to slow down
the economy and ward off wage inflation. The effect on short-term California
tax-exempt yields has been somewhat muted, however, because of limited supply in
this market. Our strategy over the past fiscal year was to use commercial paper
as an effective tool for managing the average maturity of the Fund in a
potentially volatile market by "locking in" yields for one to three months. We
also maintained a substantial variable rate demand bond position to provide
stability for the fund given the uncertainty of the market. These securities
maintain their principal value and accrue a current market interest rate that
resets daily, weekly or monthly.
During the period we sought a relatively high yield by maintaining an average
maturity slightly longer than Scudder California Tax Free Money Fund's peers. As
of March 31, 1997, the Fund's average maturity was 58 days, compared with 54
days as of March 31, 1996. The Fund's 7-day effective yield as of March 31 was
2.82%. For investors in the highest combined state and federal income tax
bracket, the Fund's yield equaled a 5.15% compounded taxable yield, higher than
6-Scudder California Tax Free Money Fund
<PAGE>
the 5.08% average for taxable money funds, according to IBC Financial Data,
Inc., an independent firm that tracks money fund performance. The Fund provided
a total return of 2.87% for the 12-month period ended March 31, assuming
reinvestment of all income distributions, which totaled $0.028 per share during
the most recent fiscal year.
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
Scudder California Tax Free Money Fund:
A Team Approach to Investing
Scudder California Tax Free Money Fund is managed by a team of Scudder
investment professionals who each play an important role in the Fund's
management process. Team members work together to develop investment strategies
and select securities for the Fund's portfolio. They are supported by Scudder's
large staff of economists, research analysts, traders, and other investment
specialists who work in Scudder's offices across the United States and abroad.
We believe our team approach benefits Fund investors by bringing together many
disciplines and leveraging Scudder's extensive resources.
Lead Portfolio Manager Rebecca Wilson has had responsibility for Scudder
California Tax Free Money Fund's day-to-day management since 1986. Ms. Wilson,
who joined Scudder in 1986, has 11 years of experience in municipal investing
and research. K. Sue Cote, Portfolio Manager, has been a member of Scudder
California Tax Free Money Fund's team since 1987 and has 13 years of short-term
fixed-income investment experience.
7-Scudder California Tax Free Money Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Fund
Dear Shareholders,
Scudder California Tax Free Fund performed well over a fiscal year that
witnessed mixed performance for California municipal bonds, and ended with an
interest rate hike by the Federal Reserve. On March 31, 1997, the Fund's 30-day
net annualized SEC yield was 4.73%, equivalent to a taxable yield of 8.63% for
shareholders subject to the 45.22% maximum combined state and federal income tax
rate. The Fund's "tax-equivalent" yield is significantly higher than current
yields available from taxable investments of similar maturity and credit
quality.
During a 12-month period that saw little price movement in the
intermediate-maturity municipal bonds the Fund primarily invests in, the Fund's
share price increased $0.03 to $10.39 per share. The modest increase in the
Fund's share price along with distributions during the fiscal year of $0.52 in
interest income and $0.01 in short-term capital gains combined to produce a
total return of 5.44% for the Fund over the fiscal year ended March 31, 1997.
The Fund's return compares favorably with the 5.23% average total return of 99
similar funds tracked by Lipper Analytical Services over the same period. The
Fund placed in the top 30% of similar California tax free funds tracked by
Lipper for total return performance over three-, five-, and 10-year periods.
California Update
California was one of the last states to emerge from the nationwide recession
that began in 1990, and the State is now reaping the benefits of a strong
economy. All of the jobs lost during the recession have been restored, as
aerospace and defense jobs were replaced by high technology jobs. In addition to
a declining unemployment rate, the strength of the State's economy has resulted
in operating surpluses, growth in international trade, and more spending on
schools.
California ended its 1996 fiscal year with an operating surplus in its General
Fund of $1.3 billion, or 3% of revenues. Sizable increases in the State's
personal income tax and sales tax receipts, up 12% and 8% respectively over the
State's 1995 fiscal year, are indicative of the strength of its economy. Barring
any unforeseen revenue shortfalls, the State will end its 1997 fiscal year with
an operating surplus. California is also one of the largest issuers of municipal
debt with over $24 billion of debt outstanding, but the State's size and wealth
levels mitigate the impact that debt of such magnitude might otherwise have.
Municipals Outperform
Treasuries
Scudder California Tax Free Fund's most recent fiscal year witnessed a healthy
U.S. economy spurred on by increased consumer spending with continued low
inflation. The economy experienced real (inflation-adjusted) Gross Domestic
8-Scudder California Tax Free Fund
<PAGE>
Product (GDP) growth of 2.4% during 1996, and at the close of the first quarter
was on track for GDP growth of 2.5% or higher in 1997. The stock market scaled
unprecedented heights until mid-March, and the bond market struggled
unsuccessfully to keep up. In the midst of this healthy environment for
corporate profits and the stock market, bond market participants continued to
closely monitor indicators for signs of economic overheating and accelerating
inflation. Their worry was reflected in the performance of the Treasury market
over the Fund's most recent fiscal year, where yields of 10-year Treasury bonds
rose almost one half of a percentage point, and prices declined 3.64%. Concern
over the Federal Reserve Open Market Committee's decision to raise the Fed Funds
rate by one quarter of a percentage point on March 25 was balanced by the
feeling in some quarters that this and any further increases had already been
priced into the market.
Municipals outperformed Treasuries during the 12-month period, as yields of
10-year municipals rose only one tenth of a percentage point, and prices
declined 0.66%. Municipal bond prices were supported by shrinking overall supply
as large numbers of bonds were called away in June and July, a moderate level of
new issuance, and steady demand from both individuals and institutions such as
insurance companies.
Focus on Intermediate
Noncallable Bonds
Our portfolio strategy over the Fund's most recent fiscal year has been to take
advantage of opportunities to lock in a substantial income stream for the Fund
over time by purchasing premium noncallable intermediate maturity bonds (those
with maturities of 15 years or less). As of March 31, 70% of the Fund's
securities had maturities in this range. We also looked for opportunities to add
higher yielding BBB-rated and non-rated bonds to the portfolio. These issues,
while carrying some additional credit risk, generally exhibit less interest rate
sensitivity than municipal bonds rated A or above. The Fund held 22% of bonds in
these two categories as of March 31. (For a summary of the Fund's quality,
diversification, and maturity structure, see page 5.)
The Fund's overall quality remains high, with 78% of portfolio securities rated
A or better as of March 31. We continue to invest in a broad selection of
California municipal bonds, including county general obligation, hospital/health
care, and housing finance authority bonds.
The Fund seeks to provide investors with a competitive level of federal and
state tax-exempt income as well as the best possible total return performance.
Our 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.
9-Scudder California Tax Free Fund
<PAGE>
Our Outlook
Though it is possible that the national economy's favorable momentum will carry
over for the remainder of 1997, we believe that a slight slowdown could occur in
the spring or summer. U.S. consumers, the major drivers of the country's
economic growth, continue to be overextended: Credit card defaults recently
matched levels last seen just after the 1989-90 recession. Deregulation of key
industries worldwide, the globalization of economic activity, and technological
advances continue to dampen any resurgence of inflation, and any signs that the
economy is slowing even slightly could soothe the bond market and diminish
upward pressure on rates coming from the Federal Reserve or market participants.
In the near term, we will continue to focus on bonds with favorable call
structures as well as search for high yield bonds that meet our credit
standards. We will continue to purchase premium noncallable intermediate
maturity bonds and to 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
Scudder California Tax
Free Fund:
A Team Approach to Investing
Scudder California Tax Free Fund is managed by a team of Scudder investment
professionals, who each play an important role in the Fund's management process.
Team members work together to develop investment strategies and select
securities for the Fund's portfolio. They are supported by Scudder's large staff
of economists, research analysts, traders and other investment specialists who
work in Scudder's offices across the United States and abroad. Scudder believes
its team approach benefits Fund investors by bringing together many disciplines
and leveraging Scudder's extensive resources.
Lead Portfolio Manager Jeremy L. Ragus has had responsibility for Scudder
California Tax Free Fund's day-to-day management since 1990. Mr. Ragus, who
joined Scudder in 1990, has 16 years of experience in municipal investing and
research. Donald C. Carleton, Portfolio Manager, has been a member of Scudder
California Tax Free Fund's team since 1983 and has over 27 years of investment
experience.
10-Scudder California Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid by the California Tax Free Money Fund and California Tax
Free Fund from net investment income for the year ended March 31, 1997, 100%
constituted exempt interest dividends for regular federal income tax and
California State income tax purposes.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
Officers and Trustees
David S. Lee*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General Manager, WGBH Educational Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow; President, Driscoll Associates
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
*Scudder, Stevens & Clark, Inc.
36-Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Investment Portfolio as of March 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Municipal Investments 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California
Anaheim, CA, Electric Utility Revenue Anticipation Notes, Tax Exempt
Commercial Paper, 3.45%, 6/24/97 ............................................. 1,750,000 A1+ 1,750,000
Anaheim, CA, Housing Authority, Multi-Family Housing Revenue, Harbor Cliff
Project, Variable Rate Demand Note, 3.2%, 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 2,003,814
California Health Facilities Finance Authority:
Catholic Healthcare West, Series C, Variable Rate Demand Note, 3.2%,
7/1/20 (c)* ............................................................... 1,000,000 A1+ 1,000,000
Pooled Loan Program, Series 1985B, Weekly Demand Note, 3.3%, 10/1/10 (c)* .... 100,000 MIG1 100,000
California Pollution Control, Southern California Edison, Series 1985C,
Tax Exempt Commercial Paper:
3.45%, 5/22/97 .............................................................. 1,000,000 P1 1,000,000
3.4%, 6/19/97 ............................................................... 1,000,000 P1 1,000,000
California Pollution Control Finance Authority:
Colmac Energy Project, Weekly Demand Note, 3.3%, 12/1/16* .................... 1,900,000 A1+ 1,900,000
Pacific Gas & Electric Company, Series C, Tax Exempt Commercial Paper, 3.35%,
7/22/97 ................................................................... 1,000,000 A1+ 1,000,000
Shell Oil Co., Martinez Project, Daily Demand Note, 3.6%, 10/1/24* ........... 700,000 MIG1 700,000
Shell Oil Co. Project, Series A, Daily Demand Bonds, 3.65%, 10/1/10* ......... 100,000 A1+ 100,000
Solid Waste Revenue, CR&R Inc. Project, Series 1995A, Weekly Demand Notes,
3.4%, 10/1/10* ............................................................ 1,100,000 NR 1,100,000
California School Cash Reserve Program Authority, Pool Note, Series 1996B, 4.5%,
12/19/97 ..................................................................... 1,500,000 MIG1 1,509,351
California General Obligation, Revenue Anticipation Note, Series 1996, 4.5%,
6/30/97 ...................................................................... 1,000,000 SP1+ 1,001,257
California General Obligation, Series 1996, Tax Exempt Commercial Paper,
3.25%, 5/20/97 ............................................................... 2,000,000 A1 2,000,000
East Bay Municipal Utility District, CA, Tax Exempt Commercial Paper, 3.45%,
5/28/97 ...................................................................... 500,000 A1+ 500,000
Eastern Municipal Water District, CA, Water & Sewer Revenues, Series 1993B,
Weekly Demand Notes, 3.2%, 7/1/20 (c)* ....................................... 1,100,000 MIG1 1,100,000
Escondido, CA, Multi-Family Housing Revenue, Series 1985A, Morning View Terrace
Project, Variable Rate Demand Note, 3.2%, 2/15/07* ........................... 500,000 MIG1 500,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.425%, 10/1/05* .............................. 1,500,000 NR 1,500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Irvine Ranch Water District, CA:
California Refunding, Series B, Daily Demand Notes, 3.55%, 10/1/99* .......... 1,300,000 A1+ 1,300,000
Conservation District, Daily Demand Note, 3.55%, 5/1/09* ..................... 300,000 A1+ 300,000
Series 1985B, Daily Demand Note, 3.55%, 10/1/04* ............................. 400,000 A1+ 400,000
Kern County, CA, Certificates of Participation, Public Facilities Project:
Series A, Variable Rate Demand Bond, 3.2%, 8/1/06* ........................... 1,300,000 MIG1 1,300,000
Series D, Variable Rate Demand Bond, 3.2%, 8/1/06* ........................... 1,600,000 MIG1 1,600,000
Kern, CA, High School District, Tax & Revenue Anticipation Note, 4.5%, 7/31/97 . 1,500,000 SP1+ 1,502,877
Lancaster, CA, Redevelopment Agency, Multi-Family Housing Revenue, Westwood
Park Apartments, Variable Rate Demand Notes, 3.2%, 12/1/07* .................. 600,000 MIG1 600,000
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue,
Tax Exempt Commercial Paper, 3.35%, 6/12/97 .................................. 1,900,000 P1 1,900,000
Los Angeles County, CA, Tax and Revenue Anticipation Note, Series 1996A, 4.5%,
6/30/97 ...................................................................... 1,000,000 MIG1 1,001,501
Los Angeles Department of Water & Power Electric Plant-Short Term Certificates,
Tax Exempt Commercial Paper, 3.45%, 9/8/97 ................................... 2,000,000 A1+ 2,000,000
Los Angeles, CA, Multi-Family Housing Revenue, Series K, Variable Rate Demand
Bond, 3.1%, 7/1/10* .......................................................... 3,100,000 A1+ 3,100,000
M-S-R Public Power Agency, San Juan Project Revenue, Subordinate Lien, Series B,
Weekly Demand Bonds, 3.25%, 7/1/22* .......................................... 1,000,000 A1+ 1,000,000
Metropolitan Water District of Southern California, Tax Exempt Commercial Paper,
3.35%, 6/26/97 ............................................................... 1,000,000 A1+ 1,000,000
Ontario, CA, Multi-Family Residential Mortgage Revenue, Park Centre Partners,
Variable Rate Demand Bond, 3.2%, 8/1/07* ..................................... 2,000,000 MIG1 2,000,000
Ontario, CA, Redevelopment Agency, Multi-Family Housing Revenue, Weekly
Demand Bond, 3.2%, 4/1/98* ................................................... 1,000,000 A1+ 1,000,000
Orange County, CA, Sanitation District, Series 1990, Daily Demand Note, 3.7%,
8/1/15* ...................................................................... 500,000 A1+ 500,000
Orange County, CA, Water District Public Facilities Corporation, Tax Exempt
Commercial Paper, 3.4%, 5/15/97 .............................................. 1,000,000 P1 1,000,000
Riverside County, CA, School Financing Authority, Revenue Anticipation Note,
Series 1996, 4.625%, 7/17/97 ................................................. 1,000,000 SP1+ 1,001,618
Sacramento County, CA Tax and Revenue Anticipation Notes, Series 1996,
4.5%, 9/30/97 ................................................................ 1,000,000 MIG1 1,003,299
Sacramento Municipal Utility District, CA, Series 1, Tax Exempt Commercial Paper:
3.35%, 5/22/97 ............................................................... 1,500,000 A1+ 1,500,000
3.4%, 6/23/97 ................................................................ 1,000,000 A1+ 1,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Bernardino County, CA, Multi-Family Housing Revenue,
Variable Rate Demand Bonds:
Western Properties 1, 3%, 2/1/05* ........................................... 900,000 MIG1 900,000
Western Properties, 3%, 5/1/05* ............................................. 400,000 MIG1 400,000
Woodview Apartments Project, 3.35%, 4/1/07* ................................. 1,100,000 MIG1 1,100,000
San Bernardino, CA, Certificates of Participation, County Center Refinancing,
Series 1996, Weekly Demand Note, 3.3%, 7/1/15* ............................... 1,000,000 MIG1 1,000,000
San Carlos CA, School District, Tax & Revenue Anticipation Note, Series 1996,
4.25%, 7/10/97 ............................................................... 1,600,000 SP1+ 1,601,433
San Diego County, CA, Tax and Revenue Anticipation Note, Series 1996, 4.375%,
9/30/97 ...................................................................... 1,500,000 MIG1 1,503,840
San Diego, CA, Multi-Family Housing Revenue, Lusk Mira Mesa Project, Issue E,
Variable Rate Demand Bond, 3.35%, 4/1/07* .................................... 1,900,000 MIG1 1,900,000
San Diego Industrial Revenue Refunding Bonds, San Diego Gas & Electric,
Series 1995, Tax Exempt Commercial Paper, 3.45%, 7/15/97 ..................... 2,000,000 P1 2,000,000
San Jose-Santa Clara, CA, Clean Water Financing Sewer Revenue Bonds, Series
1995B, Weekly Demand Note, 3.2%, 11/15/11 (c)* ............................... 1,000,000 MIG1 1,000,000
San Jose, CA, Multi-Family Housing Revenue, Kimberly Woods Project,
Variable Rate Demand Bond, 3.2%, 11/1/08* .................................... 500,000 MIG1 500,000
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Agency,
Variable Rate Demand Bonds, 3.55%, 6/1/05* ................................... 2,700,000 NR 2,700,000
Santa Clara County, CA, Housing Authority, Fox Chase I Project, Weekly Demand
Note, 3.2%, 11/1/07 (c)* ..................................................... 1,000,000 MIG1 1,000,000
Santa Clara, CA, Electric Revenue:
Series B, Junior Lien, Variable Rate Demand Bonds, 3.3%, 7/1/10* ............. 1,100,000 MIG1 1,100,000
Series C, Junior Lien, Variable Rate Demand Bond, 3.3%, 7/1/10* .............. 1,300,000 MIG1 1,300,000
Santa Paula County, CA, School District Tax and Revenue Anticipation Notes,
Series 1996, 4.5%, 7/2/97 .................................................... 1,000,000 SP1+ 1,001,552
South San Francisco, CA, 1991 Water Quality Control, Variable Rate Demand Bond,
3.35%, 7/1/12* ............................................................... 275,000 MIG1 275,000
Southern California Public Power Authority, Transmission Project, Series 1991,
Weekly Demand Note, 3.2%, 7/1/19 (c)* ........................................ 1,300,000 A1+ 1,300,000
Sutter County, CA Office of Education, Tax and Revenue Anticipation Notes,
Series 1996, 4.5%, 10/22/97 .................................................. 1,000,000 SP1+ 1,003,767
- -------------------------------------------------------------------------------------------------------------------------------
Total Municipal Investments (Cost $67,759,309) 67,759,309
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $67,759,309) (a) 67,759,309
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 -- Scudder California Tax Free Money Fund
<PAGE>
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $67,759,309.
(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 by the Investment Adviser 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.
14 -- Scudder California Tax Free Money Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets
----------------------------------------------------------------------------------------------------------------------------
Investments, at value (identified cost $67,759,309) .............. $ 67,759,309
Cash ............................................................. 126,501
Interest receivable .............................................. 593,784
Receivable on Fund shares sold ................................... 496,293
Other assets ..................................................... 2,104
----------------
Total assets ..................................................... 68,977,991
Liabilities
----------------------------------------------------------------------------------------------------------------------------
Dividends payable ................................................ 28,595
Payable for Fund shares redeemed ................................. 173,694
Accrued management fee ........................................... 33,729
Other accrued expenses ........................................... 46,293
----------------
Total liabilities ................................................ 282,311
-------------------------------------------------------------------------------------------
Net assets, at value $ 68,695,680
-------------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized loss .................................... (94,865)
Paid-in capital .................................................. 68,790,545
-------------------------------------------------------------------------------------------
Net assets, at value $ 68,695,680
-------------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($68,695,680 / 68,706,496 outstanding shares of beneficial ----------------
interest, $.01 par value, unlimited number of shares authorized) . $ 1.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 -- Scudder California Tax Free Money Fund
<PAGE>
Statement of Operations
year ended March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Investment Income
------------------------------------------------------------------------------------------------------------------------------
Interest ........................................................ $ 2,319,754
-----------------
Expenses:
Management fee .................................................. 338,329
Services to shareholders ........................................ 76,430
Custodian and accounting fees ................................... 50,983
Trustees' fees and expenses ..................................... 14,241
Auditing ........................................................ 25,852
Reports to shareholders ......................................... 11,917
Legal ........................................................... 4,627
Registration fees ............................................... 5,082
Other ........................................................... 6,772
-----------------
Total expenses before reductions ................................ 534,233
Expense reductions .............................................. (128,299)
-----------------
Expenses, net ................................................... 405,934
--------------------------------------------------------------------------------------------
Net investment income 1,913,820
--------------------------------------------------------------------------------------------
Realized gain (loss) on investment transactions
------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net realized loss from investments (373)
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 1,913,447
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended March 31,
Increase (Decrease) in Net Assets 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ....................................... $ 1,913,820 $ 2,142,783
Net realized loss from investments .......................... (373) (1,913)
---------------- ---------------
Net increase in net assets resulting from operations ........ 1,913,447 2,140,870
---------------- ---------------
Distributions to shareholders from net investment income .... (1,913,820) (2,142,783)
---------------- ---------------
Fund share transactions at net asset value of $1.00 per share:
Shares sold ................................................. 61,962,492 53,468,668
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................ 1,568,824 1,832,601
Shares redeemed ............................................. (61,801,311) (52,560,504)
---------------- ---------------
Net increase in net assets from Fund share transactions ..... 1,730,005 2,740,765
---------------- ---------------
Increase in net assets ...................................... 1,729,632 2,738,852
Net assets at beginning of period ........................... 66,966,048 64,227,196
---------------- ---------------
Net assets at end of period ................................. $ 68,695,680 $ 66,966,048
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 -- Scudder California Tax Free Money Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
For the Period
May 28, 1987
(commencement of
operations) to
Years Ended March 31, March 31,
1997 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 ...... .028 .032 .027 .019 .023 .035 .047 .052 .049 .035
Distributions from net
investment income ....... (.028) (.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) ....... 2.87 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) ............ 69 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 (%) .. .79 .81 .84 .90 .86 .88 .92 .90 .84 1.32*
Ratio of net investment
income to average daily
net assets (%) .......... 2.83 3.23 2.68 1.90 2.33 3.50 4.68 5.22 4.98 4.41*
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
18 -- Scudder California Tax Free Money Fund
<PAGE>
Investment Portfolio as of March 31, 1997
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 2.6%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Health Facilities Finance Authority:
Sutter Health, Series 1990B, Daily Demand Bond, 3.6%, 3/1/20* ................ 1,500,000 A1+ 1,500,000
St. Joseph's Health, Series 1991B, Daily Demand Note, 3.6%, 7/1/09* .......... 3,100,000 A1+ 3,100,000
California Statewide Community Development Authority, Certificate of
Participation, Northern California-Retired Officers, Daily Demand Note,
3.7%, 6/1/26* ................................................................ 800,000 MIG1 800,000
Irvine Ranch Water District, CA, Conservation District,
Daily Demand Note, 3.55%, 5/1/09* ............................................ 2,000,000 A1+ 2,000,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $7,400,000) 7,400,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 97.4%
- ------------------------------------------------------------------------------------------------------------------------------
California
ABAG Financing Authority, CA, Stanford Health Systems,
Certificates of Participation, 6%, 11/1/07 (c) ............................... 605,000 AAA 645,504
Anaheim, CA, Convention Center Financing, Certificate of Participation,
Zero Coupon, 8/1/05 (c) ...................................................... 1,250,000 AAA 822,250
Anaheim, CA, Public Financing Authority, Lease Revenue Public
Improvements Project:
Series 1997A, 6%, 9/1/24 (c) ................................................ 2,500,000 AAA 2,589,100
Series 1997C, Zero Coupon, 9/1/18 (c) ....................................... 1,000,000 AAA 275,550
Series 1997C:
6%, 9/1/10 (c) ............................................................ 1,000,000 AAA 1,056,700
6%, 9/1/11 (c) ............................................................ 4,570,000 AAA 4,809,142
6%, 9/1/14 (c) ............................................................ 1,000,000 AAA 1,035,040
6%, 9/1/16 (c) ............................................................ 1,000,000 AAA 1,027,770
California Department of Veterans Affairs, Series 1986A, 7.375%, 8/1/12 ........ 2,915,000 AA 2,975,253
California Educational Facilities Authority Revenue,
University of Southern California, Series 1997A, 5.6%, 10/1/07 (d) ........... 500,000 AA 510,305
California Health Facilities Finance Authority Revenue,
Capital Appreciation, Kaiser, Series 1989A, Zero Coupon, 10/1/12 (c) ......... 4,900,000 AAA 2,041,242
Catholic Healthcare West, Series 1996E:
5.25%, 7/1/16 (c) ........................................................... 1,500,000 AAA 1,380,465
5.25%, 7/1/23 (c) ........................................................... 1,000,000 AAA 908,730
Children's Hospital, Series 1996, 5.375%, 7/1/16 (c) ......................... 1,935,000 AAA 1,808,296
Henry Mayo Newhall, Series A, 8%, 10/1/18 .................................... 3,655,000 A 3,906,391
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Housing Finance Agency:
Home Mortgage Revenue, Series F1, Subject to AMT:
6.2%, 8/1/05 (c) ............................................................ 840,000 AAA 861,202
6.3%, 8/1/06 (c) ............................................................ 1,310,000 AAA 1,348,763
Multi-Unit Rental Housing Revenue, Series A:
7.2%, 8/1/97 ................................................................ 1,620,000 A 1,637,302
7.3%, 8/1/99 ................................................................ 2,435,000 A 2,575,962
7.35%, 8/1/00 ............................................................... 2,615,000 A 2,808,510
7.4%, 8/1/01 ................................................................ 1,555,000 A 1,661,207
7.45%, 8/1/02 ............................................................... 1,015,000 A 1,125,310
7.6%, 8/1/06 ................................................................ 4,030,000 A 4,405,999
7.65%, 8/1/07 (e) ........................................................... 2,335,000 A 2,546,901
7.7%, 8/1/09 ................................................................ 700,000 A 761,754
7.75%, 8/1/16 ............................................................... 2,440,000 A 2,622,561
7.8%, 8/1/23 ................................................................ 2,635,000 A 2,825,669
Series G, Subject to AMT:
5.7%, 2/1/07 (c) ............................................................ 500,000 AAA 504,300
5.8%, 2/1/08 (c) ............................................................ 1,330,000 AAA 1,335,626
5.9%, 2/1/09 (c) ............................................................ 200,000 AAA 200,288
Series II:
7%, 8/1/97 .................................................................. 280,000 A 282,486
7.25%, 8/1/98 ............................................................... 300,000 A 310,416
7.3%, 8/1/00 ................................................................ 345,000 A 369,599
7.3%, 8/1/99 ................................................................ 325,000 A 343,954
7.3%, 8/1/01 ................................................................ 375,000 A 406,526
7.35%, 8/1/02 ............................................................... 400,000 A 436,460
7.35%, 8/1/03 ............................................................... 430,000 A 470,571
7.35%, 8/1/04 ............................................................... 460,000 A 506,952
7.35%, 8/1/05 ............................................................... 495,000 A 547,148
California Pollution Control Financing Authority:
Mobil Oil Corp Project, Series 1996, Subject to AMT, 5.5%, 12/1/29 ........... 2,000,000 AA 1,841,280
Southern California Edison, Subject to AMT, Series A, 6.9%, 9/1/06 ........... 3,750,000 A 3,974,438
California Public Works Board, Department of Corrections:
Lease Based Revenue, Medera Prison, Series A-2, 7.4%, 9/1/10 (c) ............. 1,000,000 AAA 1,182,340
Series 1997D, 5.75%, 9/1/07 (c) .............................................. 3,500,000 AAA 3,681,930
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Public Works Board, Lease Revenue:
Various Cal State University Projects, Series 1997A, 5.1%, 12/1/10 (c) ....... 1,430,000 AAA 1,379,421
Various State University Projects, Series 1997A, 5.5%, 10/1/07 ............... 2,000,000 A 2,043,200
California Statewide Community Development Authority, Certificates of
Participation:
Children's Hospital, Series 1993, 6%, 6/1/08 (c) ............................. 1,700,000 AAA 1,803,598
Lutheran Homes, 5.5%, 11/15/08 ............................................... 1,500,000 A 1,525,680
Lutheran Homes, Series 1993, 5.6%, 11/15/13 .................................. 4,750,000 A 4,639,278
St. Joseph's Health System, 6.2%, 7/1/08 ..................................... 200,000 AA 208,404
Unihealth America, Series A, Zero Coupon, 10/1/05 (c) ........................ 1,450,000 AAA 941,935
Castaic Lake, CA, Water Agency, Certificate of Participation, Water System
Improvement Project, Series A, 7.25%, 8/1/07 (c) ............................. 1,000,000 AAA 1,168,130
Center, CA, Unified School District, Capital Appreciation, Series 1997C:
Zero Coupon, 9/1/14 (c) ..................................................... 2,240,000 AAA 820,557
Zero Coupon, 9/1/15 (c) ..................................................... 2,270,000 AAA 776,567
Central Coast Water Authority Revenue, CA, State Water Project Regional
Facilities, Series 1996A, 5%, 10/1/22 (c) .................................... 3,000,000 AAA 2,657,070
Chino Basin, CA, Regional Financing Authority, Municipal Water District,
Sewer System, 5.9%, 8/1/11 (c) ............................................... 1,290,000 AAA 1,348,424
Coronado, CA, Community Development Agency,
Tax Anticipation Note, 6%, 9/1/07 (c) ........................................ 1,150,000 AAA 1,232,777
Costa Mesa, CA, Public Financing Authority, Public Facilities Project,
Series 1993A, 5.25%, 10/1/18 ................................................. 4,500,000 A 4,075,155
Delmar, CA, Race Track Authority, Series 1996, 6%, 8/15/06 ..................... 2,000,000 NR 2,002,680
Duarte, CA, Certificates of Participation, City of Hope Medical Center:
6%, 4/1/08 ................................................................... 3,750,000 BBB 3,782,438
5.75%, 4/1/02 ................................................................ 3,525,000 BBB 3,555,421
5.8%, 4/1/03 ................................................................. 3,735,000 BBB 3,759,390
Elk Grove, CA, Unified School District #1, Special Tax, Community Facilities,
6.5%, 12/1/08 (c) ............................................................ 1,000,000 AAA 1,119,070
Fontana, CA, Tax Allocation Revenue, North Fontana Redevelopment Project,
Series 1993A, 5%, 9/1/20 (c) ................................................. 1,200,000 AAA 1,059,636
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue, Senior
Lien, Series A:
Step-up Coupon, 0% to 1/1/05, 7.10% to 1/1/11 ............................... 6,000,000 BBB 3,928,740
Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/13 ............................... 975,000 BBB 639,805
Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/14 ............................... 2,875,000 BBB 1,874,356
Senior Lien, Series 1995A, Step-up Coupon, 0% to 1/1/05, 6.95% to 1/1/07 ..... 575,000 BBB 375,320
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Hayward, CA, Certificate of Participation, Civic Center Projects,
Series 1996, 5.25%, 8/1/26 (c) ............................................... 2,000,000 AAA 1,819,520
Healdsburg, CA, Unified School District, Capital Appreciation, Series 1997:
Zero Coupon, 7/15/11 (c) .................................................... 400,000 AAA 179,928
Zero Coupon, 7/15/12 (c) .................................................... 400,000 AAA 168,632
Zero Coupon, 7/15/13 (c) .................................................... 400,000 AAA 157,864
Zero Coupon, 7/15/14 (c) .................................................... 400,000 AAA 147,612
Imperial Irrigation District, CA, Certificate of Participation, Refunding
Electric System Revenue, 5.2%, 11/1/09 (c) ................................... 2,500,000 AAA 2,484,150
Inland Empire Solid Waste Financing Authority, California Landfill Improvement
Financing Project B Series 1996B, 6%, Zero Coupon, 8/1/06 (c) ................ 1,000,000 AAA 1,041,960
La Cananda, CA, Unified School District, Capital Appreciation,
Series 1995, Zero Coupon, 8/1/18 (c) ......................................... 2,000,000 AAA 565,460
Los Angeles, CA, Harbor Department Revenue, Subject to AMT,
Series 1995B, 6%, 8/1/06 ..................................................... 2,000,000 AA 2,095,120
Los Angeles, CA, State Building Authority Lease Revenue, California Department,
General Services, Series 1993A, 5.6%, 5/1/08 ................................. 7,000,000 A 7,136,360
Los Angeles County, CA, Certificate of Participation, Capital Appreciation,
Disney Parking Project:
Zero coupon, 9/1/06 ......................................................... 2,500,000 A 1,399,625
Zero coupon, 3/1/08 ......................................................... 2,780,000 BBB 1,406,458
Zero coupon, 9/1/08 ......................................................... 4,865,000 BBB 2,385,699
Marina Del Ray, Series A:
6.25%, 7/1/03 ............................................................... 2,500,000 NR 2,585,775
6.5%, 7/1/08 ................................................................ 2,500,000 NR 2,567,850
Series 1993 A, 5.75%, 7/1/98 ................................................. 5,000,000 NR 5,045,650
Los Angeles County, CA, Convention and Exhibition Center Authority
Lease Revenue, Series 1993A, 6.125%, 8/15/11 (c) ............................. 1,000,000 AAA 1,069,690
Los Angeles County, CA, Public Works Financing Authority, Lease Revenue,
Multiple Cap Facilities:
Project IV, Series 1993, 4.75%, 12/1/13 (c) ................................. 5,000,000 AAA 4,404,500
Project V, Series 1996A, 5.125%, 6/1/17 (c) ................................. 1,000,000 AAA 919,160
Los Angeles County, CA, Wastewater Revenue, Series 1993 D, 4.7%, 11/1/17 (c) ... 1,960,000 AAA 1,661,002
Metropolitan Water District, Southern California Waterworks
Revenue, Series 1996C, 5%, 7/1/37 ............................................ 2,000,000 AA 1,710,640
Modesto, CA, Certificate of Participation, Community Project,
Series A, 5.6%, 11/1/14 (c) .................................................. 1,370,000 AAA 1,364,767
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Mojave Desert & Mountain Region, Solid Waste Joint Powers Authority,
California Project Revenue, 7.875%, 6/1/20 ................................... 2,350,000 BBB 2,583,496
Newport Mesa, CA, United School District Special Tax District Number 90-1,
Series 1996, 6.625%, 9/1/14 .................................................. 500,000 NR 508,170
Oakland, CA, Port Revenue, Subject to AMT, Series 1997G, 5.375%, 11/1/25 (c) ... 1,000,000 AAA 915,000
Orange County, CA:
Local Transportation Authority, Sales Tax Revenue, Measure M, Step-up Coupon,
5.07% to 2/15/98, 4/30% to 2/15/01 (c) .................................... 5,000,000 AAA 4,894,400
Recovery Note:
Series 1995A, 5.6%, 6/1/07 (c) .............................................. 4,430,000 AAA 4,585,892
Series 1995A, 6%, 6/1/08 (c) ................................................ 2,500,000 AAA 2,667,600
Recovery Participation Certification:
Series 1996A, 6%, 7/1/06 (c) ................................................ 3,000,000 AAA 3,185,490
Series 1996A, 6%, 7/1/08 (c) ................................................ 1,000,000 AAA 1,049,980
Pomona, CA, Unified School District, General Obligation, ETM:
Series 1992B, 6.25%, 8/1/14 (c)** ............................................ 1,020,000 AAA 1,094,021
Series 1993D, 5.6%, 8/1/14 (c)** ............................................. 170,000 AAA 170,323
Series 1993D, 5.6%, 8/1/15 (c)** ............................................. 180,000 AAA 179,739
Series 1993D, 5.6%, 8/1/16 (c)** ............................................. 190,000 AAA 188,434
Series 1993D, 5.6%, 8/1/17 (c)** ............................................. 175,000 AAA 173,518
Series 1993D, 5.6%, 8/1/18 (c)** ............................................. 205,000 AAA 202,968
Port of Hueneme, CA, Certificate of Participation, Capital Improvement,
6%, 4/1/19 (c) ............................................................... 925,000 AAA 950,160
Richmond, CA, Joint Powers Finance Authority:
Series 1996, Port Term Lease Revenue, 5.875%, 9/1/06 ......................... 500,000 BBB 504,465
Series 1996, 6.6%, 9/1/16 .................................................... 1,000,000 BBB 1,011,920
Riverside County, CA, Asset Leasing Corp., Leasehold Revenue,
Hospital Project, Series 1997, Zero Coupon, 6/1/16 (c) ....................... 1,000,000 AAA 315,510
Sacramento, CA, Power Authority Cogeneration Project, Revenue Bonds,
Series 1995, 6.5%, 7/1/04 .................................................... 2,000,000 BBB 2,111,920
Sacramento, CA, Finance Authority Lease, Series 1993B, 5%, 11/1/14 ............. 3,200,000 AA 2,943,136
Sacramento, CA, City Financing Authority Revenue,
Capital Appreciation, Tax Allocation, Series 1993B, Zero Coupon, 11/1/16 (c) . 2,685,000 AAA 850,071
Saddleback Valley Unified School District, Public Financing Authority,
Special Tax Revenue, Series 1997A:
5.25%, 9/1/09 (c) ........................................................... 1,440,000 AAA 1,433,448
6%, 9/1/10 (c) .............................................................. 1,565,000 AAA 1,656,803
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
6%, 9/1/13 (c) .............................................................. 1,000,000 AAA 1,043,620
6%, 9/1/14 (c) .............................................................. 1,000,000 AAA 1,037,290
6%, 9/1/15 (c) .............................................................. 1,000,000 AAA 1,032,720
San Bernardino County, CA, Certificates of Participation,
Medical Center Financing Project:
Refunding, Series 1994, 5.5%, 8/1/17 (c) ..................................... 2,215,000 AAA 2,161,884
Refunding Revenue, Series 1994, 6%, 8/1/09 (c) ............................... 3,000,000 AAA 3,193,710
Series 1996, 5.25% 8/1/16, (c) ............................................... 2,145,000 AAA 1,992,297
San Francisco, CA, City and County Redevelopment Agency, Residential
Facility, Coventry Park Project, Series 1996A, 8.5%, 12/1/26 ................. 2,000,000 NR 1,988,880
San Francisco, CA, Redevelopment Financing Agency, Tax Allocation Revenue,
Series A, Zero Coupon, 8/1/03 (c) ............................................ 1,080,000 AAA 795,809
San Francisco, CA, State Building Authority, Lease Revenue,
San Francisco Civic Center Complex, Series 1996A, 5.25%, 12/1/21 (c) ......... 2,000,000 AAA 1,839,280
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue:
Junior Lien, Series 1993:
Zero Coupon, 1/1/10 ......................................................... 1,500,000 NR 634,755
Zero Coupon, 1/1/02 ......................................................... 515,000 NR 382,516
Zero Coupon, 1/1/06 ......................................................... 200,000 BBB 112,738
Senior Lien:
Zero Coupon, 1/1/00 ......................................................... 1,500,000 BBB 1,300,410
Step-up Coupon, 0% to 1/1/02, 7.3% to 1/1/04 ................................ 1,000,000 BBB 763,500
Step-up Coupon, 0% to 1/1/02, 7.35% to 1/1/05 .............................. 2,500,000 BBB 1,914,700
Step-up Coupon, 0% to 1/1/02, 7.4% to 1/1/07 ............................... 6,000,000 BBB 4,615,860
Zero Coupon, 1/1/14 ......................................................... 2,500,000 NR 854,900
San Jose, CA, Financing Revenue, Community Facilities Project:
Zero Coupon, 11/15/03 ........................................................ 735,000 A 530,663
Zero Coupon, 11/15/04 ........................................................ 1,605,000 A 1,094,995
Zero Coupon, 11/15/05 ........................................................ 1,605,000 A 1,031,838
Zero Coupon, 11/15/06 ........................................................ 1,605,000 A 971,153
Santa Ana, CA, Financing Authority, Lease Revenue, Bonds, Police Administration
and Holding Facility, Series 1994A, 6.25%, 7/1/24 (c) ....................... 2,000,000 AAA 2,127,980
Santa Clara County, CA, Finance Authority, Lease Revenue, VMC Facility
Replacement Project, 7.75%, 11/15/08 (c) ..................................... 3,250,000 AAA 3,951,513
Santa Clara, CA,
Certificate of Participation, Series A, 4.75%, 2/1/14 (c) .................... 3,000,000 AAA 2,620,230
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Santa Cruz County, CA, Certificates of Participation,
Capital Facilities Project, Series 1997:
5.5%, 9/1/16 (c) ............................................................ 955,000 AAA 927,238
5.5%, 9/1/17 (c) ............................................................ 1,005,000 AAA 972,639
5.5%, 9/1/18 (c) ............................................................ 1,060,000 AAA 1,021,225
5.6%, 9/1/19 (c) ............................................................ 1,115,000 AAA 1,084,438
5.6%, 9/1/20 (c) ............................................................ 1,180,000 AAA 1,142,582
5.65%, 9/1/24 (c) ........................................................... 1,445,000 AAA 1,401,462
5.65%, 9/1/25 (c) ........................................................... 1,520,000 AAA 1,473,549
5.65%, 9/1/26 (c) ........................................................... 1,605,000 AAA 1,552,886
Santa Margarita/Dana Point, CA:
Improvement Districts 1-2-2A and 8, Series 1994A, 7.25%, 8/1/06 (c) .......... 465,000 AAA 541,172
Improvement Districts 3, 3A, 4 and 4A, Series B, 7.25%, 8/1/05 (c) ........... 2,895,000 AAA 3,336,777
South Orange County, CA, Public Power Authority,
Special Tax Revenue, Series A, 7%, 9/1/06 (c) ................................ 2,230,000 AAA 2,534,663
Southern California Public Power Authority, Series 1989, 6.75%, 7/1/10 ......... 6,000,000 A 6,620,940
Tustin, CA, Public Financing Authority Revenue, Tustin Ranch,
Series 1996A, 5%, 9/2/13 (c) .................................................. 4,995,000 AAA 4,615,080
University of California Medical Center, Revenue Bonds,
Series 1996, 10%, 7/1/03 (c) ................................................. 4,470,000 AAA 5,678,420
Valley Health System, CA, Revenue Bonds, Refunding and Improvement Project,
Series 1996A:
6.5%, 5/15/15 ............................................................... 385,000 BBB 387,995
6.5%, 5/15/25 ............................................................... 5,075,000 BBB 5,074,493
Watsonville, CA, Community Hospital Revenue, Series 1996, 5.95%, 7/1/07 ........ 1,135,000 A 1,158,449
West Covina, CA, Redevelopment Agency Facility, Series 1996, 5.75%, 9/1/09 ..... 865,000 A 866,471
West Covina, CA, Queen of the Valley Hospital, Certificate of Participation,
Hospital Revenue, Series 1994:
5.7%, 8/15/00 ............................................................... 380,000 A 387,193
5.8%, 8/15/01 ............................................................... 750,000 A 766,463
Westminster, CA, Redevelopment Agency, Tax Allocation Revenue,
Community Development, Project #1, Series A, 7.3%, 8/1/21 .................... 2,690,000 BBB 2,883,277
Whittier, CA, Presbyterian Intercommunity Hospital, Health Facilities Revenue:
6.25%, 6/1/08 (c) ............................................................ 1,000,000 AAA 1,094,230
6.25%, 6/1/10 (c) ............................................................ 1,250,000 AAA 1,355,238
</TABLE>
The accompanying notes are an integral part of the financial statements.
25 -- Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Virgin Islands
Virgin Islands, General Obligation, Public Finance Authority, Mortgage Fund
Loan Notes, Series 1992 A, 7%, 10/1/02 .................................... 1,000,000 BBB 1,066,460
Virgin Islands, Special Tax Bonds, Hugo Bonds, 7.75%, 10/1/06 ................ 1,720,000 NR 1,851,546
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $273,348,950) (a) 278,366,257
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $280,748,950) (a) 285,766,257
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $280,763,673. At March 31,
1997, net unrealized appreciation for all securities based on tax cost was
$5,002,584. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $7,172,737 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$2,170,153.
(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 by the Investment Adviser to be of comparable
quality to rated eligible securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC, FSA, or MBIA.
(d) When-issued or forward delivery securities.
(e) At March 31, 1997, these securities, in part or in whole, have been
segregated to cover when-issued or forward delivery securities.
* 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.
AMT: Alternative minimum tax
The accompanying notes are an integral part of the financial statements.
26 -- Scudder California Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Assets
----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $280,748,950) ........... $ 285,766,257
Receivable on investments sold .................................. 1,302,917
Cash ............................................................ 31,669
Interest receivable ............................................. 3,795,939
Receivable on Fund shares sold .................................. 87,101
Other assets .................................................... 9,034
----------------
Total assets .................................................... 290,992,917
Liabilities
----------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ............................... 1,065,858
Payable for when issued and forward delivery securities ......... 506,950
Dividends payable ............................................... 458,113
Payable for Fund shares redeemed ................................ 139,457
Accrued management fee .......................................... 150,299
Other accrued expenses .......................................... 96,199
----------------
Total liabilities ............................................... 2,416,876
-------------------------------------------------------------------------------------------
Net assets, at market value $ 288,576,041
-------------------------------------------------------------------------------------------
Net Assets
----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments ...................... 5,017,307
Accumulated net realized loss ................................... (9,163,495)
Paid-in capital ................................................. 292,722,229
-------------------------------------------------------------------------------------------
Net assets, at market value $ 288,576,041
-------------------------------------------------------------------------------------------
Net Asset Value
----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($288,576,041 / 27,774,183 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) .................................................. $10.39
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27 -- Scudder California Tax Free Fund
<PAGE>
Statement of Operations
year ended March 31, 1997
<TABLE>
<CAPTION>
<S> <C>
Investment Income
------------------------------------------------------------------------------------------------------------------------------
Interest ........................................................ $ 16,803,173
-----------------
Expenses:
Management fee .................................................. 1,800,657
Services to shareholders ........................................ 227,189
Trustees' fees and expenses ..................................... 14,242
Custodian and accounting fees ................................... 133,195
Reports to shareholders ......................................... 36,525
Auditing ........................................................ 41,540
Legal ........................................................... 8,467
Registration fees ............................................... 11,610
Other ........................................................... 12,333
-----------------
2,285,758
--------------------------------------------------------------------------------------------
Net investment income 14,517,415
--------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
------------------------------------------------------------------------------------------------------------------------------
Net realized gain from:
Investments ..................................................... 3,235,400
Futures ......................................................... 75,382
Options ......................................................... 77,613
-----------------
3,388,395
Net unrealized depreciation on investments ...................... (2,601,367)
--------------------------------------------------------------------------------------------
Net gain on investment transactions 787,028
--------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 15,304,443
--------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 -- Scudder California Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended March 31,
Increase (Decrease) in Net Assets 1997 1996
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 14,517,415 $ 14,572,292
Net realized gain from investment transactions ............ 3,388,395 2,260,608
Net unrealized appreciation (depreciation) on investment
transactions during the period ......................... (2,601,367) 6,496,809
---------------- ---------------
Net increase in net assets resulting from operations ...... 15,304,443 23,329,709
---------------- ---------------
Distributions to shareholders:
From net investment income ................................ (14,517,415) (14,572,292)
---------------- ---------------
From net realized gains from investment transactions ...... (140,246) --
---------------- ---------------
Fund share transactions:
Proceeds from shares sold ................................. 42,826,716 34,646,046
Net asset value of shares issued to shareholders in
reinvestment of distributions .......................... 8,972,653 8,891,876
Cost of shares redeemed ................................... (56,494,954) (53,733,869)
---------------- ---------------
Net decrease in net assets from Fund share transactions ... (4,695,585) (10,195,947)
---------------- ---------------
Increase (decrease) in net assets ......................... (4,048,803) (1,438,530)
Net assets at beginning of period ......................... 292,624,844 294,063,374
---------------- ---------------
Net assets at end of period ............................... $ 288,576,041 $ 292,624,844
---------------- ---------------
Other Information
---------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................. 28,232,177 29,207,833
---------------- ---------------
Shares sold ............................................... 4,110,618 3,337,194
Shares issued to shareholders in reinvestment of
distributions .......................................... 860,296 855,726
Shares redeemed ........................................... (5,428,908) (5,168,576)
---------------- ---------------
Net decrease in Fund shares ............................... (457,994) (975,656)
---------------- ---------------
Shares outstanding at end of period ....................... 27,774,183 28,232,177
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29 -- Scudder California Tax Free Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended March 31,
1997 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 ..................... $ 10.36 $ 10.07 $ 10.02 $ 11.05 $ 10.60 $ 10.41 $ 10.29 $ 10.26 $ 9.99 $ 11.18
--------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income ......... .52 .51 .51 .53 .59 .61 .63 .65 .68 .69
Net realized and unrealized
gain (loss) on investment
transactions ............... .04 .29 .14 (.35) .94 .47 .21 .22 .27 (.93)
Total from investment --------------------------------------------------------------------------------------------------
operations ................. .56 .80 .65 .18 1.53 1.08 .84 .87 .95 (.24)
--------------------------------------------------------------------------------------------------
Less distributions:
From net investment income .... (.52) (.51) (.51) (.53) (.59) (.61) (.63) (.65) (.68) (.69)
From net realized gains on
investments ................ (.01) -- (.09) (.63) (.49) (.28) (.09) (.19) -- (.26)
In excess of net realized gains -- -- -- (.05) -- -- -- -- -- --
--------------------------------------------------------------------------------------------------
Total distributions ........... (.53) (.51) (.60) (1.21) (1.08) (.89) (.72) (.84) (.68) (.95)
--------------------------------------------------------------------------------------------------
Net asset value, end of --------------------------------------------------------------------------------------------------
period ..................... $ 10.39 $ 10.36 $ 10.07 $ 10.02 $ 11.05 $ 10.60 $ 10.41 $ 10.29 $ 10.26 $ 9.99
- -----------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .............. 5.44 8.01 6.75 1.30 15.13 10.74 8.53 8.62 9.80 (1.70)
Ratios and Supplemental Data
Net assets, end of period
($ millions) ............... 289 293 294 325 309 242 208 193 171 153
Ratio of operating expenses
to average daily net
assets (%) ................. .78 .77 .80 .78 .79 .81 .84 .83 .89 .88
Ratio of net investment income
to average daily net assets
(%) ........................ 4.98 4.88 5.18 4.85 5.42 5.79 6.13 6.23 6.71 6.95
Portfolio turnover rate ....... 70.8 49.2 87.3 126.5 208.6 143.0 170.6 70.4 158.9 52.3
</TABLE>
30 -- Scudder California Tax Free Fund
<PAGE>
Notes to Financial Statements
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.
When-issued and Forward Delivery Securities. The Tax Free Fund may purchase
securities on a when-issued or forward delivery basis, for payment and delivery
at a later date. The price of such securities, which may be expressed in yield
terms, is fixed at the time the commitment to purchase is made, but delivery and
payment take place at a later time. At the time the Tax Free Fund makes the
commitment to purchase a security on a when-issued or forward delivery basis, it
will record the transaction and reflect the value of the security in determining
its net asset value. During the period between purchase and settlement, no
payment is made by the Tax Free Fund to the issuer and no interest accrues to
the Tax Free Fund. At the time of settlement, the market value of the security
may be more or less than the purchase price.
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.
31 -- Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
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.
During the period, the Tax Free Fund wrote call options on securities as a hedge
against potential adverse price movements in the value of portfolio assets. In
addition, 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.
32 -- Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
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, 1997, the Tax Free Money Fund had a net tax basis capital loss
carryforward of approximately $95,000, 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),
March 31, 2004 ($18,000), and March 31, 2005 ($1,000), the respective expiration
dates, whichever occurs first.
As of March 31, 1997, the Tax Free Fund had a net tax basis capital loss
carryforward of approximately $6,884,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until March 31, 2003 ($6,492,000) and March 31, 2004 ($392,000), the
respective expiration dates, whichever occurs first.
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
For the year ended March 31, 1997, purchases and sales of long-term municipal
securities aggregated $201,353,395 and $194,558,548, respectively, for the Tax
Free Fund.
The aggregate face value of futures contracts opened and closed during the year
ended March 31, 1997 for the Tax Free Fund, was $208,550,491.
33 -- Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Transactions in written call options on securities for the year ended March 31,
1997 were as follows:
Number of Contracts Premiums Received ($)
------------------- ---------------------
Outstanding at March 31, 1996 .. -- --
Contracts written .............. 300 49,013
Contracts closed ............... (300) (49,013)
------------------------------------------------------------------------------
Outstanding at March 31, 1997 -- --
C. Related Parties
Each Fund has entered into an Investment Management Agreement (each an
"Agreement" and collectively the "Agreements") with Scudder, Stevens & Clark,
Inc. (the "Adviser"), under which each Fund agrees to pay the Adviser a fee
computed and accrued daily and paid monthly. The management fee payable under
the Agreements is equal to an annual rate of 0.50% of the average daily net
assets of Tax Free Money Fund, and 0.625% of the first $200,000,000 of the
average daily net assets and 0.60% of such net assets in excess of $200,000,000
for Tax Free Fund. As manager of the assets of Tax Free Money Fund and Tax Free
Fund, the Adviser directs the investments of Tax Free Money Fund and Tax Free
Fund in accordance with the investment objectives, policies, and restrictions of
each Fund. The Adviser determines the securities, instruments, and other
contracts relating to investments to be purchased, sold or entered into by each
Fund. In addition to portfolio management services, the Adviser provides certain
administrative services in accordance with the Agreements. The Agreements also
provide that if the Funds' expenses, exclusive of taxes, interest and certain
other expenses exceed specified limits, such excess, up to the amount of the
management fee, will be paid by the Adviser. For the year ended March 31, 1997,
the fee for the Tax Free Fund pursuant to the Agreement amounted to $1,800,657,
which was equivalent to an annualized effective rate of .62% of the Fund's
average daily net assets.
With respect to Tax Free Money Fund, the Adviser has agreed not to impose all or
a portion of its management fee until July 31, 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 year ended March 31, 1997, the Adviser did
not impose a portion of its fee amounting to $128,299, and the portion imposed
amounted to $210,030.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. For the
year ended March 31, 1997, $67,597 and $159,122 were charged by SSC to Tax Free
Money Fund and Tax Free Fund, of which $5,620 and $13,336 are unpaid at March
31, 1997, 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 year ended March 31, 1997, SFAC imposed fees amounting to
$30,000 and $66,630 of which $2,500 and $5,640 are unpaid at March 31, 1997 for
the Tax Free Money Fund and Tax Free Fund, respectively.
The Trust pays each Trustee not affiliated with the Adviser $4,000 annually plus
specified amounts for attended board and committee meetings. For the year ended
March 31, 1997, Trustees' fees and expenses aggregated $14,241 and $14,242 for
Tax Free Money Fund and Tax Free Fund, respectively.
34 -- Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder California Tax Free Trust and the Shareholders of
Scudder California Tax Free Money Fund and Scudder California Tax Free Fund:
We have audited the accompanying statements of assets and liabilities of Scudder
California Tax Free Money Fund and Scudder California Tax Free Fund, including
the investment portfolios, as of March 31, 1997, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the periods indicated therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1997 by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder California Tax Free Money Fund and Scudder California Tax Free Fund as
of March 31, 1997, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for each of the periods indicated therein in
conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 16, 1997
35 -- Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid by the California Tax Free Money Fund and California Tax
Free Fund from net investment income for the year ended March 31, 1997, 100%
constituted exempt interest dividends for regular federal income tax and
California State income tax purposes.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
36 -- Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds
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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
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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#
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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.
37-Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Scudder Solutions
<TABLE>
<S> <C> <C>
Convenient ways to invest, quickly and reliably:
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Automatic Investment Plan AutoBuy
A convenient investment program in which you designate Lets you purchase Scudder fund shares
the purchase details and the bank account, and money is electronically, avoiding potential mailing delays;
electronically debited from that account monthly to designate a bank account and the transaction
regularly purchase fund shares and "dollar cost average" details, and money for each of your transactions is
-- buy more shares when the fund's price is higher and electronically debited from that account.
fewer when it's lower, which can reduce your average
purchase price over time.
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- --------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(tm)-- Scudder's Web Site -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient, timely, and reliable
automated withdrawal programs:
- --------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan AutoSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you designate.
DistributionsDirect
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- --------------------------------------------------------------------------------------------------------------------------
38-Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- --------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 6,000 mutual funds from at least 150 mutual as well as equity, fixed-income, and money market funds,
fund companies. And Scudder Fund Folio(sm) provides using Scudder funds.
investors with access to a marketplace of more than
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(sm)
transaction fees or commissions. Scudder Developed for investors who prefer the benefits of no-load
shareholders can take advantage of a Scudder Scudder funds but want ongoing professional assistance in
Brokerage account already reserved for them, with managing a portfolio. Personal Counsel(sm) is a highly
no minimum investment. For information about customized, fee-based asset management service for
Scudder Brokerage Services, call 1-800-700-0820. individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(sm) and Personal Counsel(sm) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- --------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- --------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Funds Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Funds Centers. Check for a Funds Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
New From Scudder: Pathway Series
In a complex financial world, Scudder Pathway Series is a refreshingly simple concept. With one
investment, Pathway gives you instant access to broad diversification in U.S. markets and
across the globe. Select from four Portfolios -- Conservative, Balanced, Growth, or
International -- each with a distinct investment objective that can match your goals. Each
Portfolio, rather than investing in individual securities, invests in carefully selected
Scudder mutual funds.
The share price of each Pathway Series portfolio will fluctuate and the risk associated with
each portfolio is determined by the securities held in each underlying Scudder fund. Contact
Scudder Investor Services, Inc., Distributor, for a prospectus which contains more complete
information, including management fees and other expenses. Please read it carefully before you
invest or send money.
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39-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
