Scudder
California
Tax Free Money Fund
Scudder
California
Tax Free Fund
Semiannual Report
September 30, 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 [LOGO]
<PAGE>
Table of Contents
2 In Brief
3 Letter from the Funds' President
Scudder California
Tax Free Money Fund
6 Portfolio Management Discussion
11 Investment Portfolio
14 Financial Statements
17 Financial Highlights
Scudder California
Tax Free Fund
4 Performance Update
5 Portfolio Summary
7 Portfolio Management Discussion
18 Investment Portfolio
26 Financial Statements
29 Financial Highlights
10 Glossary of Investment Terms
30 Notes to Financial Statements
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
3.26% on September 30, 1997, equivalent to a 5.95% 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 4.37% 30-day net annualized SEC
yield on September 30, 1997. 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 7.98%.
THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
30-Day Net Annualized SEC Yield
on September 30, 1997
CHART DATA:
Taxable yield
Scudder California needed to equal
Tax Free Fund the Fund's yield
4.37% 7.98%
2 - SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Letter from the Funds' President
Dear Shareholders,
We are pleased to report to you on Scudder California Tax Free Fund's
performance over its most recent semiannual period ended September 30, 1997. The
Fund posted a 4.37% 30-day net annualized SEC yield as of September 30,
equivalent to a taxable yield of 7.98% for investors in the top California tax
bracket. In addition, the Fund earned a total return of 7.67% for the six months
ended September 30.
Scudder California Tax Free Money Fund posted a 5.95% 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 for more
information.
For those interested in other offerings from Scudder, we would like to take
this opportunity to tell you about a recent addition to Scudder's family of
funds -- Scudder International Growth and Income Fund. The Fund employs a
yield-oriented approach to international investing and seeks to provide
long-term growth of capital plus current income. Investors who desire exposure
to overseas equities but who wish to take a more conservative approach to
international investing may appreciate the Fund's emphasis on the dividend
paying stocks of established companies listed on foreign exchanges. For a
complete listing of Scudder's mutual fund offerings, see page 37.
Please call a Scudder Investor Information representative at 1-800-225-2470
if you have questions about your account or any Scudder fund. Page 38 provides
more information on how to contact Scudder. 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
3 - SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
PERFORMANCE UPDATE as of September 30, 1997
- ----------------------------------------------------------------
Fund Index Comparisons
- ----------------------------------------------------------------
Total Return
Period Growth --------------
Ended of Average
9/30/97 $10,000 Cumulative Annual
- --------------------------------------------
Scudder California Tax Free Fund
- --------------------------------------------
1 Year $ 10,986 9.86% 9.86%
5 Year $ 14,253 42.53% 7.34%
10 Year $ 23,455 134.55% 8.90%
- --------------------------------------------
Lehman Brothers Municipal Bond Index
- --------------------------------------------
1 Year $ 10,904 5.45% 9.04%
5 Year $ 14,140 41.40% 7.17%
10 Year $ 23,182 131.82% 8.76%
- --------------------------------------------
- -----------------------------------------------------------------
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 $11,279
'89 $12,398
'90 $12,987
'91 $14,797
'92 $16,457
'93 $19,076
'94 $18,100
'95 $20,013
'96 $21,350
'97 $23,455
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- -----------------------
'87 $10,000
'88 $11,296
'89 $12,277
'90 $13,113
'91 $14,842
'92 $16,395
'93 $18,484
'94 $18,033
'95 $20,051
'96 $21,260
'97 $23,182
Yearly periods ended September 30
The unmanaged Lehman Brothers Municipal Bond Index is a market value weighted
measure of municipal bonds issued across the United States. Index issues have
a credit rating of at least Baa and a maturity of at least two years. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly Periods Ended September 30
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------------------------------------------------------------------------------------------------
NET ASSET VALUE... $ 10.16 $ 10.43 $ 10.11 $ 10.62 $ 10.83 $ 11.29 $ 9.78 $ 10.28 $ 10.44 $ 10.92
INCOME DIVIDENDS.. $ .68 $ .67 $ .63 $ .63 $ .60 $ .56 $ .52 $ .50 $ .52 $ .52
CAPITAL GAINS
AND OTHER
DISTRIBUTIONS..... $ -- $ .05 $ .17 $ .22 $ .34 $ .60 $ .44 $ -- $ -- $ .01
FUND TOTAL
RETURN (%)........ 12.79 9.91 4.76 13.93 11.22 15.92 -5.12 10.57 6.68 9.86
INDEX TOTAL
RETURN (%)........ 12.98 8.68 6.80 13.19 10.45 12.74 -2.44 11.18 6.04 8.76
</TABLE>
All performance is historical, assumes reinvestment of all dividends and
capital gains, and is not indicative of future results. Investment return and
principal value will fluctuate, so an investor's shares, when redeemed, may be
worth more or less than when purchased.
4 - SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
PORTFOLIO SUMMARY as of September 30, 1997
- ---------------------------------------------------------------------------
Diversification
- ---------------------------------------------------------------------------
Hospital/Health 14%
Toll Revenue/Transportation 13%
County General Obligation/
Lease 13%
Other General Obligation/Lease 10%
Housing Finance Authority 10%
Water/Sewer Revenue 6%
School District/Lease 6%
Sales/Special Tax 5%
State General Obligation 5%
Miscellaneous Municipal 18%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund continues to invest in a
broad selection of California municipal
bonds, including hospital/health, toll
revenue/transportation, and general
obligation bonds.
- --------------------------------------------------------------------------
Quality
- --------------------------------------------------------------------------
AAA 48%
AA 5%
A 22%
BBB 16%
Not Rated 9%
- --------------------------------------
100%
- --------------------------------------
Weighted average quality: AA
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Overall quality remains
high, with 75% of portfolio
securities rated A or better.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 4%
1-5 years 15%
5-10 years 25%
10-15 years 29%
Greater than 15 years 27%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 11.92 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We continue to focus on the purchase
of noncallable bonds with maturities
of 15 years or less as a means of
locking in a substantial income
stream for the Fund over time.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 18.
5 - SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Money Fund
Dear Shareholders,
During the six-month period ended September 30, 1997, California tax-free money
market securities enjoyed a period of relative stability as the Federal Reserve
stayed on the sidelines, refraining from raising interest rates. Continued low
U.S. inflation and a lack of strong supply or demand pressure also contributed
to the calm market environment. During this period, California tax-exempt
one-year notes offered the most attractive value, offering yields as high as any
available nationally. Our strategy was to purchase California tax-exempt
one-year notes and balance them with shorter-term securities to lock in
attractive yields without overextending the Fund's average maturity (57 days as
of September 30, 1997).
The Fund's 7-day effective yield as of September 30 was 3.26%. For investors in
the highest combined state and federal income tax bracket, the Fund's yield
equaled a 5.95% compounded taxable yield, higher than the 5.02% 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 1.52%
for the six-month period ended September 30, assuming reinvestment of all income
distributions, which totaled $0.015 per share during the most recent semiannual
period.
Our continuing goal is to provide Fund shareholders with a competitive
double-tax-free yield by searching for high-quality, short-term municipal
securities while actively managing the Fund's average maturity.
Sincerely,
Your Portfolio Management Team
/s/Rebecca Wilson /s/K. Sue Cote
Rebecca Wilson K. Sue Cote
6 - SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Fund
Dear Shareholders,
For the six months ended September 30, 1997, Scudder California Tax Free Fund
posted a strong 7.67% total return as bonds continued to rack up solid gains. As
some analysts proclaimed a "New Era" of noninflationary growth, the bond market
inched its way upward, as any one statistical announcement that might imply a
resurgence of inflation was met by two others that more than allayed such fears.
The Fund's 7.67% total return for the period consisted of a $0.53 increase in
net asset value to $10.92 and income distributions of $0.26 per share. This
return outpaced the 6.92% average of 108 similar funds tracked by Lipper over
the six-month period. As shown in the chart below, the Fund's average annual
total returns place it in the top quartile of its peer group for one-, three-,
five-, and ten-year periods ended September 30, 1997.
On September 30, 1997, the Fund's 30-day net annualized SEC yield was 4.37%,
equivalent to a taxable yield of 7.98% 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.
Top Quartile Total Returns
(Average annual returns for periods ended September 30, 1997)
Scudder
California Lipper
Tax Free Average Number
Fund Annual of Funds Percentile
Period Return Return Rank Tracked Rank
----------------------------------------------------------------
1 Year 9.86% 8.84% 22 of 106 Top 21%
----------------------------------------------------------------
3 Years 9.02% 8.32% 17 of 77 Top 22%
----------------------------------------------------------------
5 Years 7.34% 6.78% 10 of 50 Top 20%
----------------------------------------------------------------
10 Years 8.90% 8.33% 5 of 30 Top 17%
----------------------------------------------------------------
Past performance does not guarantee future results.
7 - SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
California Update
As one of the last states to emerge from the recession that began in 1989,
California is now leading the country in job growth. The State's employment
sector shift from defense and aerospace industries to technology, multimedia,
and trade has led the State through this recovery. Throughout the State,
personal income continues to increase and deficit borrowing has ceased.
California is now attempting to replenish its financial reserves. The State
added more than 300,000 nonfarm jobs in 1996 and is projecting that it will add
another 400,000 in 1997. This rapid job growth reduced the State's unemployment
rate to 6.2% through August 1997, though the rate remains higher than the
national average of 5%. On an unaudited basis, California finished its 1997
fiscal year with an operating surplus of approximately $300 million in its
General Fund. Overall, California's economy continues to make great strides.
Intermediate Noncallable Bonds Still a Focus
As a means of locking in a substantial income stream for Scudder California Tax
Free Fund over time, we continue to focus on the purchase of noncallable bonds
with maturities of 15 years or less. As of September 30, over 70% of the Fund's
securities had maturities in this range. We also continue to look for
opportunities to add high yielding BBB-rated and non-rated bonds to the
portfolio. Higher yielding bonds, while carrying some additional credit risk,
generally exhibit less interest rate sensitivity than municipal bonds rated A or
above. The Fund held 25% of its assets in bonds in these two categories as of
the end of September. (For a summary of the Fund's quality, diversification, and
maturity structure, see page 5.)
Overall portfolio quality remains high, with 75% of portfolio securities rated A
or better at the close of the period. We continue to invest in a broad selection
of California municipal bonds, including hospital/health care, toll
revenue/transportation, and general obligation bonds.
The Fund seeks to provide investors with a competitive level of federal and
state tax-exempt income. Consistent with this investment objective, the Fund
also seeks to provide the best possible total return performance. Our long-term
investment strategy focuses 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.
Outlook
As a rising stock market continued to shatter records, the past six months also
witnessed increased activity in the bond market, as large and small investors
seeking additional diversification rebalanced their portfolios by adding bonds.
Amid Federal Reserve Chairman Greenspan's warnings about wage pressures, the
shrinking supply of labor, and the possible runout of the "peace dividend," it's
difficult to predict whether the Fed will continue to refrain from raising
interest rates in the near future and whether the currently favorable economic
and market conditions will prevail over the coming months. We do know, however,
8 - SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
that yields and prices of municipal bonds are currently attractive compared with
Treasuries, and that the continued low level of U.S. inflation -- aided by
business' strong investment in technological advances as well as subdued
economic activity in much of the rest of the world -- is a boon to investors.
Over the coming months we will continue our focus on bonds with favorable call
structures as well as search for high yield bonds that meet our credit
standards. We will also continue to purchase premium noncallable intermediate
maturity bonds and to pay close attention to credit quality as we pursue
double-tax-free income for Scudder California Tax Free Fund shareholders.
Sincerely,
Your Portfolio Management Team
/s/Jeremy L. Ragus /s/Donald C. Carleton
Jeremy L. Ragus Donald C. Carleton
9 - SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Glossary of Investment Terms
BOND An interest-bearing security issued by the federal,
state, or local government or a corporation that
obligates the issuer to pay the bondholder a
specified amount of interest for a stated period --
usually a number of years -- and to repay the face
amount of the bond at its maturity date.
GENERAL OBLIGATION BOND A municipal bond backed by the "full faith and
credit" (including the taxing and further borrowing
power) of the city, state, or agency that issues
the bond. A general obligation bond is repaid with
the issuer's general revenue and borrowings.
INFLATION An overall increase in the prices of goods and
services, as happens when business and consumer
spending increases relative to the supply of goods
available in the marketplace -- in other words,
when too much money is chasing too few goods. High
inflation has a negative impact on the prices of
fixed-income securities.
MUNICIPAL BOND An interest-bearing debt security issued by a state
or local government entity.
NET ASSET VALUE (NAV) The price per share of a mutual fund based on the sum
of the market value of all the securities owned by
the fund divided by the number of outstanding shares.
TAXABLE EQUIVALENT YIELD The level of yield a fully taxable instrument would
have to provide to equal that of a tax-free
municipal bond on an after-tax basis.
30-DAY SEC YIELD The standard yield reference for bond funds, based
on a formula prescribed by the SEC. This annualized
yield calculation reflects the 30-day average of the
income earnings of every holding in a given fund's
portfolio, net of expenses, assuming each is held to
maturity.
TOTAL RETURN The most common yardstick to measure the performance
of a fund. Total return -- annualized or compound --
is based on a combination of share price changes plus
income and capital gain distributions, if any,
expressed as a percentage gain or loss in value.
(Sources: Scudder; Barron's Dictionary of Finance and Investment Terms)
10 - SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Investment Portfolio as of September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Investments 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
California
Anaheim, CA, Electric Utility Revenue, Anticipation Notes, Tax Exempt
Commercial Paper, 3.8%, 11/13/97 ............................................. 1,750,000 A1+ 1,750,000
Anaheim, CA, Housing Authority, Multi-Family Housing Revenue, Harbor Cliff
Project, Variable Rate Demand Note, 3.65%, 7/1/06* ........................... 400,000 MIG1 400,000
California General Obligation, Tax Exempt Commercial Paper, 3.65%, 11/4/97 ..... 1,500,000 P1 1,500,000
California Health Facilities Finance Authority:
Catholic Healthcare West, Series C, Variable Rate Demand Bonds, 3.9%,
7/1/20 (c)* ............................................................... 1,000,000 A1+ 1,000,000
Pooled Loan Program, Series 1985 B, Weekly Demand Note, 3.95%, 10/1/10 (c)* .. 100,000 MIG1 100,000
California Pollution Control Finance Authority Revenue:
Colmac, Weekly Demand Note, 4%, 12/1/16* ..................................... 1,900,000 A1+ 1,900,000
Pacific Gas & Electric Company, Series C, Commercial Paper, 3.6%, 12/9/97 .... 1,000,000 A1+ 1,000,000
Pacific Gas & Electric Company, Subject to AMT, Weekly Demand Note,
4.2%, 1/1/10* ............................................................. 1,500,000 MIG1 1,500,000
Solid Waste Revenue, CR&R Inc. Project, Series 1995A, Weekly Demand Notes,
4.1%, 10/1/10* ............................................................ 1,040,000 A1 1,040,000
Solid Waste Disposal, Western Waste Ind., Series 1994, Subject to AMT, Weekly
Demand Note, 3.75%, 10/1/06* .............................................. 1,300,000 MIG1 1,300,000
Southern California Edison, Series 1985C, Tax Exempt Commercial Paper, 3.55%,
10/24/97 ..................................................................... 1,000,000 P1 1,000,000
California School, Cash Reserve Program Authority, Pool Note, Series 1996B,
4.5%, 12/19/97 ............................................................... 1,500,000 MIG1 1,502,820
California Statewide Community Development Authority, Solid Waste Disposal,
Chevron U.S.A. Project, Daily Demand Note, 4%, 12/15/24* ..................... 900,000 P1 900,000
Chowchilla, CA, Unified High School District, Tax & Revenue, General Obligation
Notes, Series 1997, 4.25%, 6/30/98 ........................................... 1,300,000 SP1+ 1,303,536
Eastern Municipal Water District, CA, Water & Sewer Revenues, Series 1993B,
Weekly Demand Notes, 4%, 7/1/20 (c)* ......................................... 1,100,000 MIG1 1,100,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.65%, 10/1/05* ............................... 1,500,000 A1+ 1,500,000
Irvine Ranch Water District, CA:
Capital Improvements Project, Daily Demand Bond, 3.7%, 8/1/16* ............... 600,000 MIG1 600,000
Variable Rate Demand Note, 3.65%, 8/1/16* .................................... 200,000 MIG1 200,000
Kern County Board of Education, Tax and Revenue Anticipation Notes, Series 1998,
4.5%, 7/7/98 ................................................................. 2,000,000 SP1+ 2,008,805
</TABLE>
The accompanying notes are an integral part of the financial statements.
11 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Kern County, CA, Certificate of Participation, Public Facilities Project:
Series A, Variable Rate Demand Bonds, 3.9%, 8/1/06* .......................... 1,200,000 MIG1 1,200,000
Series D, Variable Rate Demand Bonds, 3.9%, 8/1/06* .......................... 1,600,000 MIG1 1,600,000
Lancaster, CA, Redevelopment Agency, Multi-Family Housing Revenue, Westwood
Park Apartments, Variable Rate Demand Bonds, 3.65%, 12/1/07* ................. 500,000 MIG1 500,000
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue,
Tax Exempt Commercial Paper, 3.75%, 11/14/97 ................................. 1,900,000 P1 1,900,000
Los Angeles County, CA, Tax and Revenue Anticipation Notes, Series 1997 A,
4.5%, 6/30/98 ................................................................ 2,200,000 SP1+ 2,210,879
Los Angeles, CA, Multi-Family Housing Revenue, Series K, Variable Rate Demand
Bonds, 4.05%, 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, 3.9%, 7/1/22* ........................................... 1,000,000 A1+ 1,000,000
Metropolitan Water District of Southern California, Tax Exempt Commercial Paper,
3.8%, 10/16/97 ............................................................... 1,000,000 A1+ 1,000,000
Ontario, CA, General Obligation, Tax and Revenue Anticipation Notes, Series
1997,4.5%, 6/30/98 ........................................................... 1,000,000 SP1+ 1,004,231
Ontario, CA, Multi-Family Residential Mortgage Revenue, (Park Centre Partners),
Variable Rate Demand Bonds, 3.65%, 8/1/07* ................................... 2,000,000 MIG1 2,000,000
Sacramento Municipal Utility District, CA, Series 1, Tax Exempt Commercial Paper:
3.55%, 11/18/97 .............................................................. 1,000,000 A1+ 1,000,000
3.6%, 1/21/98 ................................................................ 1,500,000 A1+ 1,500,000
San Bernardino County, CA, Certificates of Participation, County Center
Refinancing, Series 1996, Variable Rate Demand Note, 4%, 7/1/15* ............. 1,000,000 MIG1 1,000,000
San Bernardino County, CA, Multi-Family Housing Revenue:
Western Properties 1, Variable Rate Demand Bonds, 3.65%, 2/1/05* ............. 900,000 MIG1 900,000
Western Properties 2, Variable Rate Demand Bonds, 3.65%, 5/1/05* ............. 400,000 MIG1 400,000
Woodview Apartments Project, Variable Rate Demand Bonds, 4%, 4/1/07* ......... 1,100,000 MIG1 1,100,000
San Diego Industrial Revenue Refunding Bonds, San Diego Gas & Electric,
Series 1995, Tax Exempt Commercial Paper, 3.75%, 11/18/97 .................... 2,000,000 P1 2,000,000
San Diego, CA, Multi-Family Housing Revenue, Lusk Mira Mesa Project, Issue E,
Variable Rate Demand Bond, 4%, 4/1/07* ....................................... 1,900,000 MIG1 1,900,000
San Francisco, CA, City and County Airport, Subject to AMT, Series 1997 A,
Tax Exempt Commercial Paper, 3.75%, 12/5/97 .................................. 1,010,000 A1+ 1,010,000
San Jose, CA, Clean Water Financing Sewer Revenue Bonds, Series 1995 B,
Weekly Demand Note, 3.95%, 11/15/11 (c)* ..................................... 1,000,000 A1+ 1,000,000
San Jose, CA, Multi-Family Housing Revenue, Kimberly Woods Project, Variable
Rate Demand Bond, 3.65%, 11/1/08* ............................................ 500,000 MIG1 500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
12 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating (b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Agency,
Variable Rate Demand Bonds, 4.05%, 6/1/05* ................................... 2,700,000 A1 2,700,000
Santa Barbara County, CA, Tax and Revenue, Anticipation Notes, Series 1997A,
4.5%, 10/1/98 ................................................................ 1,500,000 SP1+ 1,509,035
Santa Clara County, CA, Housing Authority, Fox Chase I Project, Weekly Demand
Note, 3.85%, 11/1/07 (c)* .................................................... 1,000,000 MIG1 1,000,000
Santa Clara, CA, Electric Revenue:
Series B, Junior Lien, Variable Rate Demand Bonds, 4%, 7/1/10* ............... 1,100,000 MIG1 1,100,000
Series C, Junior Lien, Variable Rate Demand Bond, 4%, 7/1/10* ................ 1,300,000 MIG1 1,300,000
South San Francisco, CA, 1991 Water Quality Control, Variable Rate Demand Bond,
3.95%, 7/1/12* ............................................................... 275,000 MIG1 275,000
Southern California Public Power Authority, Transmission Project, Series 1991,
Weekly Demand Note, 3.95%, 7/1/19 (c)* ....................................... 1,300,000 A1+ 1,300,000
State of California General Obligation, Series 1996, Tax Exempt Commercial
Paper, 3.65%, 11/12/97 ....................................................... 2,000,000 A1 2,000,000
Sutter County, CA, Office of Education, Tax and Revenue Anticipation Notes,
Series 1996, 4.5%, 10/22/97 .................................................. 1,000,000 SP1+ 1,000,388
- ------------------------------------------------------------------------------------------------------------------------------
Total Municipal Investments (Cost $61,614,694) 61,614,694
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $61,614,694) (a) 61,614,694
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $61,614,694.
(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.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such as
the coupon-equivalent of the Treasury bill rate. Variable rate demand
notes are securities whose yields are periodically reset at levels that
are generally comparable to tax-exempt commercial paper. These securities
are payable on demand within seven calendar days and normally incorporate
an irrevocable letter of credit from a major bank. These notes are
carried, for purposes of calculating average weighted maturity, at the
longer of the period remaining until the next rate change or to the extent
of the demand period.
The accompanying notes are an integral part of the financial statements.
13 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at value (cost $61,614,694) ............................... $ 61,614,694
Cash ................................................................... 2,369,830
Receivable for investments sold ........................................ 60,000
Interest receivable .................................................... 424,032
Receivable on Fund shares sold ......................................... 40,729
Reimbursement from Adviser ............................................. 67,247
Other assets ........................................................... 1,863
----------------
Total assets ........................................................... 64,578,395
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Dividends payable ...................................................... 28,453
Payable for Fund shares redeemed ....................................... 228,124
Accrued management fee ................................................. 85,184
Other payables and accrued expenses .................................... 38,438
----------------
Total liabilities ...................................................... 380,199
--------------------------------------------------------------------------------------------
Net assets, at value $ 64,198,196
--------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized loss .......................................... (95,159)
Paid-in capital ........................................................ 64,293,355
--------------------------------------------------------------------------------------------
Net assets, at value $ 64,198,196
--------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($64,198,196
/ 64,209,306 outstanding shares of beneficial interest, $.01 par ----------------
value, unlimited number of shares authorized) ...................... $1.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
Statement of Operations
six months ended September 30, 1997 (Unaudited)
<TABLE>
<S> <C>
Investment Income
- ------------------------------------------------------------------------------------------------------------------------------
Interest ............................................................... $ 1,193,476
-----------------
Expenses:
Management fee ......................................................... 165,055
Services to shareholders ............................................... 38,791
Custodian and accounting fees .......................................... 23,063
Trustees' fees and expenses ............................................ 8,273
Auditing ............................................................... 13,008
Reports to shareholders ................................................ 7,059
Legal .................................................................. 1,935
Registration fees ...................................................... 4,296
Other .................................................................. 4,348
-----------------
Total expenses before reductions ....................................... 265,828
Expense reductions ..................................................... (67,247)
-----------------
Expenses, net .......................................................... 198,581
---------------------------------------------------------------------------------------------
Net investment income 994,895
---------------------------------------------------------------------------------------------
Realized gain (loss) on investment transactions
- ------------------------------------------------------------------------------------------------------------------------------
Net realized loss from investments (294)
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 994,601
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1997 March 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ..................................... $ 994,895 $1,913,820
Net realized loss from investments ........................ (294) (373)
---------------- ---------------
Net increase in net assets resulting from operations ...... 994,601 1,913,447
---------------- ---------------
Distributions to shareholders from net investment income .. (994,895) (1,913,820)
---------------- ---------------
Fund share transactions at net asset value of $1.00 per
share:
Proceeds from shares sold ................................. 26,141,907 61,962,492
Net asset value of shares issued to shareholders in
reinvestment of distributions .......................... 806,514 1,568,824
Cost of shares redeemed ................................... (31,445,611) (61,801,311)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................... (4,497,190) 1,730,005
---------------- ---------------
Increase (decrease) in net assets ......................... (4,497,484) 1,729,632
Net assets at beginning of period ......................... 68,695,680 66,966,048
---------------- ---------------
Net assets at end of period ............................... $64,198,196 $68,695,680
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 -- 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>
Six Months
Ended
September 30,
1997 Years Ended March 31,
(Unaudited) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988(b)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <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 $1.000
---------------------------------------------------------------------------------------------
Net investment income .015 .028 .032 .027 .019 .023 .035 .047 .052 .049 .035
Distributions from
net investment
income (.015) (.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 $1.000
- --------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) 1.52** 2.87 3.28 2.72 1.92 2.35 3.54 4.79 5.35 5.04 3.86**
Ratios and Supplemental Data
Net assets, end of period
($ millions) 64 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 .60 .65 .75 .67 .45*
Ratio of operating
expenses before
expense
reductions (%) .80* .79 .81 .84 .90 .86 .88 .92 .90 .84 1.32*
Ratio of net investment
income to average daily
net assets (%) 3.01* 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.
(b) For the period May 28, 1987 (commencement of operations) to March 31, 1988.
* Annualized
** Not annualized
17 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
<PAGE>
Investment Portfolio as of September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Municipal Investments 1.6%
- ------------------------------------------------------------------------------------------------------------------------------
California
Irvine Ranch, CA, Water District, Capital Improvements Projects, Daily Demand -------------
Bond, 3.7%, 8/1/16* (Cost $5,000,000) ................................... 5,000,000 MIG1 5,000,000
-------------
Long-Term Municipal Investments 98.4%
- ------------------------------------------------------------------------------------------------------------------------------
California
ABAG Financing Authority, CA, Stanford Health Systems, Certificates of
Participation, 6%, 11/1/07 (c) .......................................... 605,000 AAA 674,260
Anaheim County, CA, Convention Center Financing, Certificate of Participation,
Zero Coupon, 8/1/05 (c) ................................................. 1,250,000 AAA 871,904
Anaheim, CA, Public Finance Authority, 5.25%, 2/1/18 (c) ................. 2,000,000 AAA 1,975,240
Anaheim, CA, Public Financing Authority, Lease Revenue Public
Improvements Project:
Series 1997A, 6%, 9/1/24 (c) ........................................... 2,500,000 AAA 2,772,375
Series 1997C, 6%, 9/1/11 (c) ........................................... 4,570,000 AAA 5,102,177
Series 1997C, 6%, 9/1/14 (c) ........................................... 1,000,000 AAA 1,109,580
Series 1997C, 6%, 9/1/16 (c) ........................................... 1,000,000 AAA 1,103,210
Series 1997C, 6%, 9/1/10 (c) ........................................... 1,000,000 AAA 1,115,520
Series 1997C, Zero Coupon, 9/1/18 (c) .................................. 1,000,000 AAA 326,030
California Educational Facilities Authority Revenue, Stanford University,
Series 1997N, 5.2%, 12/1/27 ............................................. 1,000,000 AAA 983,470
California Health Facilities Finance Authority Revenue:
Capital Appreciation, Kaiser, Series 1989A, Zero Coupon, 10/1/12 (c) .... 4,900,000 AAA 2,222,395
Henry Mayo Newhall, Series A, 8%, 10/1/18 ............................... 3,655,000 A 3,872,399
Refunding Insured Valley Presbyterian Hospital, 5%, 5/1/12 .............. 3,000,000 AAA 2,963,190
California Housing Finance Agency:
Home Mortgage Revenue:
Series F1, 6.2%, 8/1/05 (c) ............................................ 840,000 AAA 880,110
Series F1, 6.3%, 8/1/06 (c) ............................................ 1,310,000 AAA 1,386,963
Series G:
5.7%, 2/1/07 (c) ....................................................... 500,000 AAA 519,465
5.8%, 2/1/08 (c) ....................................................... 1,330,000 AAA 1,376,231
5.9%, 2/1/09 (c) ....................................................... 200,000 AAA 205,142
Multi-Unit Rental Housing Revenue:
Series A, 7.3%, 8/1/99 ................................................. 2,435,000 A 2,572,383
Series A, 7.35%, 8/1/00 ................................................ 2,615,000 A 2,829,744
Series A, 7.4%, 8/1/01 ................................................. 1,555,000 A 1,662,404
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A, 7.45%, 8/1/02 ................................................ 1,015,000 A 1,146,899
Series A, 7.6%, 8/1/06 ................................................. 4,030,000 A 4,421,434
Series A, 7.65%, 8/1/07 ................................................ 2,335,000 A 2,556,265
Series A, 7.7%, 8/1/09 ................................................. 700,000 A 764,687
Series A, 7.75%, 8/1/16 ................................................ 2,440,000 A 2,634,102
Series A, 7.8%, 8/1/23 ................................................. 2,635,000 A 2,838,580
Series II, 7.25%, 8/1/98 ............................................... 300,000 A 307,143
Series II, 7.3%, 8/1/99 ................................................ 325,000 A 341,364
Series II, 7.3%, 8/1/00 ................................................ 345,000 A 368,243
Series II, 7.3%, 8/1/01 ................................................ 375,000 A 406,230
Series II, 7.35%, 8/1/02 ............................................... 400,000 A 437,388
Series II, 7.35%, 8/1/03 ............................................... 430,000 A 472,807
Series II, 7.35%, 8/1/04 ............................................... 460,000 A 510,384
Series II, 7.35%, 8/1/05 ............................................... 495,000 A 551,945
California Pollution Control Financing Authority:
Mobil Oil Corp Project, Series 1996, Subject to AMT, 5.5%, 12/1/29 ...... 2,000,000 AA 1,963,420
Solid Waste Disposal Revenue, Canadian Fibre of Riverside PJ, Series 1997A,
9%, 7/1/19 ........................................................... 4,000,000 NR 4,051,040
Southern California Edison, Subject to AMT, Series A, 6.9%, 9/1/06 ...... 3,750,000 A 3,983,325
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 1,244,820
Series 1997D, 5.75%, 9/1/07 (c) ......................................... 3,500,000 AAA 3,832,150
California Public Works Board, Lease Revenue, Various State University
Projects, Series 1997A, 5.5%, 10/1/07 ................................ 2,000,000 A 2,139,700
California Residence Efficiency Financing Authority, Certification of
Participation, Capital Improvement Program:
Series 1997, 6%, 4/1/08 (c) ............................................ 1,335,000 AAA 1,486,936
Series 1997, 6%, 4/1/09 (c) ............................................ 1,420,000 AAA 1,581,255
Series 1997, 6%, 4/1/10 (c) ............................................ 1,500,000 AAA 1,669,245
Series 1997, 6%, 4/1/11 (c) ............................................ 1,590,000 AAA 1,771,292
California State Department of Water Resources, Central Valley Project
Revenue:
Series 1997S, 5%, 12/1/22 ............................................... 5,000,000 AA 4,745,900
Series 1997S, 5%, 12/1/29 ............................................... 1,000,000 AA 942,100
California Statewide Community Development Authority, Certificate of
Participation:
Children's Hospital, Series 1993, 6%, 6/1/08 (c) ........................ 1,700,000 AAA 1,883,634
Children's Hospital, Series 1993, 6%, 6/1/10 (c) ........................ 1,000,000 AAA 1,104,830
Lutheran Homes, 5.5%, 11/15/08 .......................................... 1,500,000 A 1,571,145
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lutheran Homes, Series 1993, 5.6%, 11/15/13 ............................. 4,750,000 A 4,882,050
St. Joseph's Health System, 6.2%, 7/1/08 ................................ 200,000 AA 218,752
Unihealth America, Series A, Zero Coupon, 10/1/05 (c) ................... 1,450,000 AAA 1,003,705
Castaic Lake, CA, Water Agency, Certificate of Participation, Water System
Improvement Project, Series A, 7.25%, 8/1/07 (c) 1,000,000 AAA 1,215,660
Center, California, Unified School District, Capital Appreciation, Series
1997C, Zero Coupon, 9/1/14 (c) .......................................... 2,240,000 AAA 919,878
Chino Basin, CA, Regional Financing Authority, Municipal Water District,
Sewer System, 5.9%, 8/1/11 (c) .......................................... 1,290,000 AAA 1,426,650
Coronado, CA, Tax Anticipation Note, 6%, 9/1/07 (c) ...................... 1,150,000 AAA 1,284,803
Costa Mesa, CA, Public Financing Authority, Public Facilities Project,
Series 1993A, 5.25%, 10/1/18 ............................................ 4,500,000 A 4,344,615
Delmar, CA, Race Track Authority, Series 1996, 6%, 8/15/06 ............... 2,000,000 NR 2,125,160
Dry Creek, CA, Joint Elementary School District, Capital Appreciation:
Series 1997A, Zero Coupon, 8/1/10 (c) ................................... 1,120,000 AAA 584,584
Series 1997A, Zero Coupon, 8/1/11 (c) ................................... 1,180,000 AAA 581,539
Series 1997A, Zero Coupon, 8/1/16 (c) ................................... 555,000 AAA 204,173
Series 1997A, Zero Coupon, 8/1/19 (c) ................................... 1,715,000 AAA 532,336
Series 1997A, Zero Coupon, 8/1/20 (c) ................................... 1,330,000 AAA 386,977
Series 1997A, Zero Coupon, 8/1/21 (c) ................................... 1,920,000 AAA 525,926
Series 1997A, Zero Coupon, 5/1/22 (c) ................................... 1,385,000 AAA 363,452
Duarte, CA, Certificates of Participation, City of Hope Medical Center:
5.75%, 4/1/02 ........................................................... 3,525,000 BBB 3,683,801
5.8%, 4/1/03 ............................................................ 3,735,000 BBB 3,926,643
6%, 4/1/08 .............................................................. 3,750,000 BBB 3,888,000
Elk Grove, CA, Unified School District #1, Special Tax, Community Facilities,
6.5%, 12/1/08 (c) ....................................................... 1,000,000 AAA 1,162,520
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue,
Senior Lien:
Series 1995A, Step-up Coupon, 0% to 1/1/05, 6.95% 1/1/05 ................ 575,000 BBB 409,320
Series A, Step-up Coupon 0% to 1/1/05, 7.15% to 1/1/13 .................. 2,875,000 BBB 2,107,864
Series A, Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/13 ................. 975,000 BBB 714,841
Series A, Step-up Coupon, 0% to 1/1/05, 7.1% to 1/1/11 .................. 6,000,000 BBB 4,402,200
Healdsburg, CA, Unified School District, Capital Appreciation:
Series 1997, Zero Coupon, 7/15/11 (c) ................................... 400,000 AAA 197,580
Series 1997, Zero Coupon, 7/15/12 (c) ................................... 400,000 AAA 186,384
Series 1997, Zero Coupon, 7/15/13 (c) ................................... 400,000 AAA 175,648
Series 1997, Zero Coupon, 7/15/14 (c) ................................... 400,000 AAA 165,372
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Inland Empire Solid Waste Financing Authority, California Landfill Improvement
Financing Project B, Series 1996B, 6%, 8/1/06 (c) ....................... 1,000,000 AAA 1,093,050
La Canada, CA, Unified School District, Capital Appreciation, Series 1995,
Zero Coupon, 8/1/18 (c) ................................................. 2,000,000 AAA 654,960
Los Angeles County, CA, Certificate of Participation:
Capital Appreciation, Disney Parking Project:
Zero Coupon, 9/1/06 .................................................... 2,500,000 A 1,546,225
Zero Coupon, 3/1/08 .................................................... 2,780,000 BBB 1,569,949
Zero Coupon, 9/1/08 .................................................... 4,865,000 BBB 2,673,074
Marina Del Ray:
Series 1993 A, 5.75%, 7/1/98 ........................................... 5,000,000 NR 5,032,450
Series A, 6.25%, 7/1/03 ................................................ 2,500,000 NR 2,689,225
Series A, 6.5%, 7/1/08 ................................................. 2,500,000 NR 2,686,425
Los Angeles County, CA, Public Works Financing Authority, Lease Revenue,
Multiple Cap Facilities, Project V Series 1996A, 5.125%, 6/1/17 (c) ..... 1,000,000 AAA 982,060
Los Angeles County, CA, Convention and Exhibition Center Authority Lease
Revenue, Series 1993A, 6.125%, 8/15/11 (c) .............................. 1,000,000 AAA 1,128,690
Los Angeles, CA, State Building Authority Lease Revenue, California Department,
General Services, Series 1993A, 5.6%, 5/1/08 ............................ 7,000,000 A 7,504,070
Metropolitan Water District, Southern California Waterworks Revenue,
Series 1996C, 5%, 7/1/37 ................................................ 1,765,000 AA 1,655,288
Millbrae California Residential Facilities, Revenue Magnolia of Millbrae
Project, Series 1997A, 7.375%, 9/1/27 ................................... 4,000,000 NR 4,000,120
Modesto, CA, Certificate of Participation, Community Project, Series A,
5.6%, 11/1/14 (c) ....................................................... 1,370,000 AAA 1,458,749
Modesto, CA, Wastewater Facilities Treatment Revenue, Series 1997, 6%,
11/1/11 (c) ............................................................. 1,255,000 AAA 1,402,362
Mojave Desert & Mountain Region, CA, Solid Waste Joint Powers Authority,
California Project Revenue, 7.875%, 6/1/20 .............................. 2,350,000 BBB 2,680,363
Newport Mesa, CA, United School District Special Tax District Number 90-1,
Series 1996, 6.625%, 9/1/14 ............................................. 500,000 NR 515,230
Oakland, CA, Port Revenue, Subject to AMT, Series 1997G, 5.375%,
11/1/25 (c) ............................................................. 1,000,000 AAA 971,040
Orange County, CA, Recovery, Certificates of Participation:
Series 1996A, 6%, 7/1/06 (c) ............................................ 3,000,000 AAA 3,326,940
Series 1996A, 6%, 7/1/08 (c) ............................................ 1,000,000 AAA 1,115,830
Orange County, CA, Recovery Note:
Series 1995A, 5.6%, 6/1/07 (c) .......................................... 4,430,000 AAA 4,783,115
Series 1995 A, 6%, 6/1/08 (c) ........................................... 2,500,000 AAA 2,787,850
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Orange County, CA, Local Transportation Authority, Sales Tax Revenue, Measure M,
Step-up Coupon, 5.1% to 2/15/98, 4.3% to 2/15/01 (c) .................... 5,000,000 AAA 4,988,000
Pomona, CA, Unified School District, General Obligation, ETM:
Series 1993D, 5.6%, 8/1/14 (c)** ........................................ 170,000 AAA 181,545
Series 1993D, 5.6%, 8/1/15 (c)** ........................................ 180,000 AAA 192,019
Series 1993D, 5.6%, 8/1/16 (c)** ........................................ 190,000 AAA 201,683
Series 1993D, 5.6%, 8/1/17 (c)** ........................................ 175,000 AAA 185,420
Series 1993D, 5.6%, 8/1/18 (c)** ........................................ 205,000 AAA 217,013
Series 1992B, 6.25%, 8/1/14 (c)** ....................................... 1,020,000 AAA 1,162,627
Port of Hueneme, CA, Certificate of Participation, Capital Improvement,
6%, 4/1/19 (c) .......................................................... 925,000 AAA 1,012,524
Richmond, CA, Joint Powers Finance Authority:
Series 1996, 5.875%, 9/1/06 ............................................. 500,000 BBB 533,000
Series 1996, 6.6%, 9/1/16 ............................................... 1,000,000 BBB 1,079,110
Riverside County, CA, Asset Leasing Corp., Leasehold Revenue Project,
Series 1997, Zero coupon, 6/1/16 (c) .................................... 1,000,000 AAA 371,150
Sacramento, CA, Power Authority Cogeneration Project, Revenue Bonds,
Series 1995, 6.5%, 7/1/04 ............................................... 2,000,000 BBB 2,204,840
Sacramento, CA, Finance Authority Lease, Series 1993B, 5%, 11/1/14 ....... 5,200,000 AA 5,152,628
Sacramento, CA, City Financing Authority Revenue, Capital Appreciation,
Tax Allocation, Series 1993B, Zero coupon, 11/1/16 (c) .................. 2,685,000 AAA 974,736
Saddleback Valley Unified School District, Public Financing Authority,
Special Tax Revenue:
Series 1997A, 6%, 9/1/10 (c) ........................................... 1,565,000 AAA 1,745,789
Series 1997A, 6%, 9/1/13 (c) ........................................... 1,000,000 AAA 1,113,510
Series 1997A, 6%, 9/1/14 (c) ........................................... 1,000,000 AAA 1,109,580
Series 1997A, 6%, 9/1/15 (c) ........................................... 1,000,000 AAA 1,106,090
San Bernardino, CA, Certificate of Participation, Medical Center Financing
Project:
Refunding Revenue, Series 1994, 6%, 8/1/09 (c) .......................... 3,000,000 AAA 3,304,860
Refunding, Series 1994, 5.5%, 8/1/17 (c) ................................ 3,965,000 AAA 4,105,837
San Francisco, CA, City and County Redevelopment Agency Residential Facility,
Coventry Park Project, Series 1996A, 8.5%, 12/1/26 ...................... 2,000,000 NR 2,174,160
San Francisco, CA, Redevelopment Financing Agency, Tax Allocation Revenue,
Series A, Zero Coupon, 8/1/03 (c) ....................................... 1,080,000 AAA 835,358
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue:
Capital Appreciation Refunding, Series 1997A, Zero Coupon, 1/15/12 (c) .. 2,500,000 AAA 1,187,050
Capital Appreciation Refunding, Series 1997A, Zero Coupon, 1/15/10 (c) .. 3,500,000 AAA 1,866,690
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Junior Lien, Series 1993:
Zero Coupon, 1/1/02 .................................................... 515,000 NR 428,156
Zero Coupon, 1/1/04 .................................................... 1,000,000 BBB 881,760
Zero Coupon, 1/1/06 .................................................... 200,000 BBB 136,308
Zero Coupon, 1/1/10 .................................................... 1,500,000 NR 813,165
Senior Lien, Series 1993:
Zero Coupon, 1/1/14 .................................................... 2,500,000 NR 1,075,125
Step-up Coupon, 0% to 1/1/02, 7.3% to 1/1/04 ........................... 2,500,000 BBB 2,262,800
Zero Coupon, 1/1/00 .................................................... 1,500,000 BBB 1,366,215
Step-up Coupon, 0% to 1/1/02, 7.4% to 1/1/07 ........................... 6,000,000 BBB 5,568,480
Series 1997A, Zero Coupon, 1/15/03 (c) .................................. 900,000 AAA 711,171
Series 1997A, Zero Coupon, 1/15/04 (c) .................................. 400,000 AAA 300,464
Series 1997A, Zero Coupon, 1/15/05 (c) .................................. 1,900,000 AAA 1,354,073
San Jose, CA, Financing Revenue, Community Facilities Project:
Zero Coupon, 11/15/03 ................................................... 735,000 A 557,968
Zero Coupon, 11/15/04 ................................................... 1,605,000 A 1,156,740
Zero Coupon, 11/15/05 ................................................... 1,605,000 A 1,100,388
Zero Coupon, 11/15/06 ................................................... 1,605,000 A 1,043,908
San Jose, CA, Unified School District, Santa Clara County, Capital
Appreciation, Series 1997A, Zero Coupon, 8/1/13 (c) ..................... 2,445,000 AAA 1,071,155
San Mateo County, CA, Transportation District:
Series 1997A, 5.5%, 6/1/15 (c) .......................................... 2,500,000 AAA 2,618,325
Series 1997A, 5.5%, 6/1/16 (c) .......................................... 4,065,000 AAA 4,239,023
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 2,288,680
Santa Clara County, CA, Finance Authority, Lease Revenue, VMC Replacement
Project, 7.75%, 11/15/08 (c) ............................................ 3,250,000 AAA 4,126,883
Santa Cruz County, CA, Certificates of Participation, Capital Facilities
Project:
Series 1997, 5.5%, 9/1/16 (c) ........................................... 955,000 AAA 996,237
Series 1997, 5.5%, 9/1/17 (c) ........................................... 1,005,000 AAA 1,045,893
Series 1997, 5.5%, 9/1/18 (c) ........................................... 1,060,000 AAA 1,096,496
Series 1997, 5.6%, 9/1/19 (c) ........................................... 1,115,000 AAA 1,165,409
Series 1997, 5.6%, 9/1/20 (c) ........................................... 1,180,000 AAA 1,233,006
Series 1997, 5.65%, 9/1/24 (c) .......................................... 1,445,000 AAA 1,519,793
Series 1997, 5.65%, 9/1/25 (c) .......................................... 1,520,000 AAA 1,599,511
Series 1997, 5.65%, 9/1/26 (c) .......................................... 1,605,000 AAA 1,687,561
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating (b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Santa Margarita/Dana Point, CA:
Improvement Districts 3, 3A, 4 and 4A, Series B, 7.25%, 8/1/05 (c) ...... 2,895,000 AAA 3,444,037
Improvement Districts 1-2-2A and 8, Series 1994A, 7.25%, 8/1/06 (c) ..... 465,000 AAA 561,306
South Orange County, CA, Public Power Authority, Special Tax Revenue,
7%, 9/1/06 (c) .......................................................... 2,230,000 AAA 2,639,361
Southern California Public Power Authority:
Series 1989, 6.75%, 7/1/10 .............................................. 6,000,000 A 7,024,140
Transmission Project Revenue, Capital Appreciation,
Zero Coupon, 7/1/15 ..................................................... 2,000,000 AA 780,660
Ukiah, CA, Unified School District, Series 1997,
Zero Coupon, 8/1/10 (c) ................................................. 1,200,000 AAA 626,340
University of California Medical Center, Revenue Bonds, Series 1996,
10%, 7/1/03 (c) ......................................................... 4,470,000 AAA 5,750,521
Vallejo Sanitation & Flood Control District, Solano County, CA,
Certificates of Participation, 5%, 7/1/19 (c) ........................... 2,500,000 AAA 2,416,175
Valley Health System, CA, Revenue Bonds, Refunding and Improvement Project:
Series 1996 A, 6.5%, 5/15/15 ............................................ 385,000 BBB 410,845
Series 1996 A, 6.5%, 5/15/25 ............................................ 5,075,000 BBB 5,394,827
Watsonville, CA, Community Hospital Revenue, Series 1996, 5.95%,
7/1/07 .................................................................. 1,135,000 A 1,236,537
West Covina, CA, Redevelopment Agency Facility, Series 1996, 5.75%,
9/1/09 .................................................................. 865,000 A 914,712
West Covina, CA, Queen of the Valley Hospital, Certificate of Participation,
Hospital Revenue:
Series 1994, 5.7%, 8/15/00 ............................................. 380,000 A 394,117
Series 1994, 5.8%, 8/15/01 ............................................. 750,000 A 786,173
Westminster, CA, Redevelopment Agency, Tax Allocation Revenue, Community
Development, Project #1, Series A, 7.3%, 8/1/21 ......................... 2,690,000 BBB 2,931,051
Whittier, CA, Presbyterian Intercommunity Hospital, Health Facilities
Revenue:
6.25%, 6/1/08 (c) ....................................................... 1,000,000 AAA 1,132,400
6.25%, 6/1/10 (c) ....................................................... 1,250,000 AAA 1,416,638
Virgin Islands
Virgin Islands, Special Tax Bonds, Hugo Bonds, 7.75%, 10/1/06 ............ 1,720,000 NR 1,887,648
Virgin Islands, General Obligation, Public Finance Authority,
Mortgage Fund Loan Notes, Series 1992 A, 7%, 10/1/02 .................... 1,000,000 BBB 1,096,350
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $284,991,065) 303,423,703
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio - 100.0% (Cost $289,991,065) (a) 308,423,703
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
(a) The cost for federal income tax purposes was $289,976,341. At September
30, 1997, net unrealized appreciation for all securities based on tax cost
was $18,447,362. This consisted of aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax
cost of $18,568,587 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$121,225.
(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, MBIA, or
MBIA/BIG.
* 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.
25 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Assets
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $289,991,065) ............ $ 308,423,703
Receivable on investments sold ................................... 1,000,000
Cash ............................................................. 59,924
Interest receivable .............................................. 3,744,061
Receivable on Fund shares sold ................................... 7,095
Other assets ..................................................... 7,092
----------------
Total assets ..................................................... 313,241,875
Liabilities
- --------------------------------------------------------------------------------------------------------------------------
Payable for investments purchased ................................ 5,427,147
Dividends payable ................................................ 453,684
Payable for Fund shares redeemed ................................. 232,392
Accrued management fee ........................................... 156,454
Other payables and accrued expenses .............................. 73,778
----------------
Total liabilities ................................................ 6,343,455
--------------------------------------------------------------------------------------------
Net assets, at market value $ 306,898,420
--------------------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments ....................... 18,432,638
Accumulated net realized loss .................................... (7,940,104)
Paid-in capital .................................................. 296,405,886
--------------------------------------------------------------------------------------------
Net assets, at market value $ 306,898,420
--------------------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($306,898,420 / 28,114,908 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ................................................... $10.92
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Statement of Operations
six months ended September 30, 1997 (Unaudited)
<TABLE>
<CAPTION>
Investment Income
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Interest ......................................................... $ 8,412,205
-----------------
Expenses:
Management fee ................................................... 918,990
Services to shareholders ......................................... 108,542
Trustees' fees and expenses ...................................... 9,720
Custodian and accounting fees .................................... 63,242
Reports to shareholders .......................................... 21,824
Auditing ......................................................... 20,800
Legal ............................................................ 2,760
Registration fees ................................................ 9,485
Other ............................................................ 6,255
-----------------
1,161,618
---------------------------------------------------------------------------------------------
Net investment income 7,250,587
---------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ---------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ...................................................... 1,269,390
Futures .......................................................... (36,950)
Options .......................................................... (9,049)
-----------------
1,223,391
Net unrealized appreciation on investments ....................... 13,415,331
---------------------------------------------------------------------------------------------
Net gain on investment transactions 14,638,722
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 21,889,309
---------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
27 -- SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1997 March 31,
Increase (Decrease) in Net Assets (Unaudited) 1997
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income .................................. $ 7,250,587 $ 14,517,415
Net realized gain from investment transactions ......... 1,223,391 3,388,395
Net unrealized appreciation (depreciation) on investment
transactions during the period ...................... 13,415,331 (2,601,367)
---------------- ---------------
Net increase in net assets resulting from operations ... 21,889,309 15,304,443
---------------- ---------------
Distributions to shareholders:
From net investment income ............................. (7,250,587) (14,517,415)
---------------- ---------------
From net realized gains from investment transactions ... -- (140,246)
---------------- ---------------
Fund share transactions:
Proceeds from shares sold .............................. 26,695,728 42,826,716
Net asset value of shares issued to shareholders in
reinvestment of distributions ....................... 4,466,780 8,972,653
Cost of shares redeemed ................................ (27,478,851) (56,494,954)
---------------- ---------------
Net increase (decrease) in net assets from Fund share
transactions ........................................ 3,683,657 (4,695,585)
---------------- ---------------
Increase (decrease) in net assets ...................... 18,322,379 (4,048,803)
Net assets at beginning of period ...................... 288,576,041 292,624,844
---------------- ---------------
Net assets at end of period ............................ $ 306,898,420 $ 288,576,041
---------------- ---------------
Other Information
- ------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period .............. 27,774,183 28,232,177
---------------- ---------------
Shares sold ............................................ 2,500,602 4,110,618
Shares issued to shareholders in reinvestment of
distributions ....................................... 416,738 860,296
Shares redeemed ........................................ (2,576,615) (5,428,908)
---------------- ---------------
Net increase (decrease) in Fund shares ................. 340,725 (457,994)
---------------- ---------------
Shares outstanding at end of period .................... 28,114,908 27,774,183
---------------- ---------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 -- 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>
Six Months
Ended
September 30,
1997 Years Ended March 31,
(Unaudited) 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning -------------------------------------------------------------------------------------------------
of period .............. $10.39 $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 ..... .26 .52 .51 .51 .53 .59 .61 .63 .65 .68 .69
Net realized and unrealized
gain (loss) on
investment
transactions ........... .53 .04 .29 .14 (.35) .94 .47 .21 .22 .27 (.93)
Total from investment -------------------------------------------------------------------------------------------------
operations ............. .79 .56 .80 .65 .18 1.53 1.08 .84 .87 .95 (.24)
-------------------------------------------------------------------------------------------------
Less distributions:
From net investment
income ................. (.26) (.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 ....... (.26) (.53) (.51) (.60) (1.21) (1.08) (.89) (.72) (.84) (.68) (.95)
-------------------------------------------------------------------------------------------------
Net asset value, end of -------------------------------------------------------------------------------------------------
period ................. $10.92 $10.39 $10.36 $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99
- -----------------------------------------------------------------------------------------------------------------------------
Total Return (%) .......... 7.67** 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) ........... 307 289 293 294 325 309 242 208 193 171 153
Ratio of operating expenses
to average daily net
assets (%) ............. .78* .78 .77 .80 .78 .79 .81 .84 .83 .89 .88
Ratio of net investment
income to average
daily net assets (%) ... 4.85* 4.98 4.88 5.18 4.85 5.42 5.79 6.13 6.23 6.71 6.95
Portfolio turnover rate ... 23.8* 70.8 49.2 87.3 126.5 208.6 143.0 170.6 70.4 158.9 52.3
</TABLE>
* Annualized
** Not annualized
29 -- SUDDER 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 original 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. Money market investments purchased with an original a maturity of
sixty days or less are valued at amortized cost. All other debt securities are
valued at their fair value as determined in good faith by the Valuation
Committee of the Trustees.
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.
30 -- 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 six months ended September 30, 1997, the Tax Free Fund wrote call options on
interest rate futures 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.
31 -- 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 six months ended September 30, 1997, purchases and sales of long-term
municipal securities aggregated $43,644,650 and $34,180,133, respectively, for
the Tax Free Fund.
The aggregate face value of futures contracts opened and closed during the six
months ended September 30, 1997 for the Tax Free Fund, was $19,210,188.
32 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Transactions in written call options on interest rate futures for the six months
ended September 30, 1997 were as follows:
Number of Contracts Premiums Received ($)
Outstanding at March 31, 1997 -- --
Contracts written 100 39,925
Contracts closed (100) (39,925)
--------------------------------------------------------------------------
Outstanding at September 30, -- --
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. For the six months
ended September 30, 1997, the fee for the Tax Free Fund pursuant to the
Agreement amounted to $918,990, which was equivalent to an annualized effective
rate of 0.62% 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, 1998 and during such period to
maintain the annualized expenses of Tax Free Money Fund at not more than 0.60%
of average daily net assets. For the six months ended September 30, 1997, the
Adviser did not impose a portion of its fee amounting to $67,247, and the
portion imposed amounted to $97,808.
On June 26, 1997, the Adviser entered into an agreement with The Zurich
Insurance Company ("Zurich"), an international insurance and financial services
organization, pursuant to which Zurich will acquire a majority interest in the
Adviser, and the Adviser will form a new global investment organization by
combining with Zurich's subsidiary, Zurich Kemper Investments, Inc. and change
its name to Scudder Kemper Investments, Inc. Subject to the receipt of the
required regulatory and shareholder approvals, the transaction is expected to
close in the fourth quarter of 1997.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. For the
six months ended September 30, 1997, $32,529 and $78,680 were charged by SSC to
Tax Free Money Fund and Tax Free Fund, of which $5,365 and $12,941 are unpaid at
September 30, 1997, respectively.
33 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Tax Free Money Fund and Tax
Free Fund. For the six months ended September 30, 1997, SFAC imposed fees
amounting to $15,000 and $33,958 of which $2,500 and $6,285 are unpaid at
September 30, 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 six months
ended September 30, 1997, Trustees' fees and expenses aggregated $8,273 and
$9,720 for Tax Free Money Fund and Tax Free Fund, respectively.
30 -- SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
This Page
intentionally
left blank.
35 - SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Officers and Trustees
David S. Lee*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and General
Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; Executive Fellow, Center
for Business Ethics; President,
Driscoll Associates
Peter B. Freeman
Trustee; Corporate Director and
Trustee
George M. Lovejoy, Jr.*
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 Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
U.S. Growth
- -----------
Value
Scudder Large Company Value Fund
Scudder Value Fund
Scudder Small Company Value Fund
Scudder Micro Cap Fund
Growth
Scudder Classic Growth Fund
Scudder Large Company Growth Fund
Scudder Development Fund
Scudder 21st Century Growth Fund
Global Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Retirement Programs
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IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Closed-End Funds#
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The Argentina Fund, Inc.
The Brazil 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 Spain and Portugal Fund, Inc.
Scudder World Income Opportunities
Fund, Inc.
For complete information on any of the above Scudder funds, including
management fees and expenses, call or write for a free prospectus. Read it
carefully before you invest or send money. +++Funds within categories are listed
in order from expected least risk to most risk. Certain Scudder funds may not be
available for purchase or exchange. +A portion of the income from the tax-free
funds may be subject to federal, state, and local taxes. *A class of shares of
the Fund. **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.
37 - SCUDDER CALIFORNIA TAX FREE MONEY FUND
SCUDDER CALIFORNIA TAX FREE FUND
<PAGE>
Scudder Solutions
<TABLE>
<CAPTION>
Convenient ways to invest, quickly and reliably:
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Automatic Investment Plan QuickBuy
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 lower and electronically debited from that account.
fewer when it's higher, 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:
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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 QuickSell
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
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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
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
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 Investor 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 Investor Centers. Check for an Investor 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
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New From Scudder: Scudder International Growth and Income Fund
Scudder International Growth and Income Fund takes a yield-oriented approach to investing in international equities. The
Fund seeks to provide long-term growth of capital plus current income. Investors who desire international exposure but
who wish to take a more conservative approach may appreciate the Fund's emphasis on the dividend paying stocks of
well-established companies outside the United States.
- ------------------------------------------------------------------------------------------------------------------------------
The share price of Scudder International Growth and Income Fund will fluctuate. International investing involves special
risks including currency fluctuation and political instability. 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
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