Scudder
California
Tax Free Money Fund
Scudder
California
Tax Free Fund
Semiannual Report
September 30, 1998
Pure No-Load(TM) Funds
For investors seeking double-tax-free income, exempt from both California
personal income tax and regular federal income tax.
Pure no-load(TM) funds with no commissions to buy, sell, or exchange shares.
SCUDDER (logo)
<PAGE>
Scudder California Tax Free Money Fund
- --------------------------------------------------------------------------------
Date of Inception: 5/28/87 Total Net Assets as of Ticker Symbol: SCAXX
9/30/98: $68.8 million
- --------------------------------------------------------------------------------
o Scudder California Tax Free Money Fund offered a seven-day effective yield of
3.21% on September 30, 1998, equivalent to a 5.86% taxable yield for investors
in the top federal and state income tax brackets.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
CHART TITLE:
7-Day Effective Yield
on September 30, 1998
CHART DATA:
Scudder
California Taxable yield
Tax Free needed to equal
Money Fund the Fund's yield
---------- ----------------
3.21% 5.86%
Table of Contents
4 Letter from the Funds' President 18 Financial Highlights
7 Portfolio Management Discussion 32 Notes to Financial Statements
11 Glossary of Investment Terms 36 Officers and Trustees
12 Investment Portfolio 37 Investment Products and Services
15 Financial Statements 38 Scudder Solutions
2 - Scudder California Tax Free Money Fund
<PAGE>
Scudder California Tax Free Fund
- --------------------------------------------------------------------------------
Date of Inception: 7/22/83 Total Net Assets as of Ticker Symbol: SCTFX
9/30/98: $343.4 million
- --------------------------------------------------------------------------------
o Scudder California Tax Free Fund provided a 3.95% 30-day net annualized SEC
yield on September 30, 1998. 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 7.21%. The Fund posted a solid 5.22% total return for its most
recent semiannual period ended September 30, 1998.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
CHART TITLE:
30-Day Net Annualized SEC Yield
on September 30, 1998
CHART DATA:
Scudder Taxable yield
California needed to equal
Tax Free Fund the Fund's yield
------------- ----------------
3.95% 7.21%
Table of Contents
4 Letter from the Funds' President 28 Financial Statements
5 Performance Update 31 Financial Highlights
6 Portfolio Summary 32 Notes to Financial Statements
8 Portfolio Management Discussion 36 Officers and Trustees
11 Glossary of Investment Terms 37 Investment Products and Services
19 Investment Portfolio 38 Scudder Solutions
3 - Scudder California Tax Free Fund
<PAGE>
Letter from the Funds' President
Dear Shareholders,
The municipal bond market has made a strong case for portfolio
diversification over the past several months. While volatility swept through
most global markets, including the U.S. stock market, municipal bonds posted
steady gains. We continue to see signs that investors, especially those in
higher tax brackets, are choosing to rebalance their portfolios with municipal
bond investments. Another positive sign for municipal bond investors: As shown
by the graph on page 10 of the Portfolio Management Discussion,
intermediate-term municipals (which make up most of Scudder California Tax Free
Fund's portfolio) represent their most attractive value versus Treasury bonds in
ten years.
Scudder California Tax Free Fund's total return over its most recent
semiannual period was 5.22%, outpacing the average performance of its peers as
tracked by Lipper. The Fund also ranked in the top one-third of similar funds
for the six-month, one-year, three-year, and ten-year periods ended September
30, 1998. Scudder California Tax Free Money Fund posted a 5.86% tax equivalent
yield based on the maximum federal and state tax rates at the close of the
period.
For those of you interested in new Scudder funds, we recently introduced
two international funds: Scudder International Growth Fund -- which seeks to
invest in high growth opportunities in both developed and developing markets,
and Scudder International Value Fund -- which seeks to invest in undervalued
foreign securities. Please see pages 37 through 39 for more information on
Scudder products and services.
Please call a Scudder Investor Information representative at 1-800-225-2470
or visit Scudder's Web site at www.scudder.com, if you have questions about your
Fund. Thank you for choosing Scudder California Tax Free Fund to help meet your
investment needs.
Sincerely,
/s/Daniel Pierce
President,
Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
4 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
PERFORMANCE UPDATE as of September 30, 1998
- ----------------------------------------------------------------
Fund Index Comparisons
- ----------------------------------------------------------------
Total Return
- --------------------------------------------
Period Ended Growth of Average
9/30/98 $10,000 Cumulative Annual
- --------------------------------------------
Scudder California Tax Free Fund
- --------------------------------------------
1 Year $ 10,930 9.30% 9.30%
5 Year $ 13,440 34.40% 6.09%
10 Year $ 22,730 127.30% 8.56%
- --------------------------------------------
Lehman Brothers Municipal Bond Index
- --------------------------------------------
1 Year $ 10,872 8.72% 8.72%
5 Year $ 13,635 36.35% 6.39%
10 Year $ 22,311 123.11% 8.35%
- --------------------------------------------
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
Yearly periods ended September 30
SCUDDER CALIFORNIA TAX FREE FUND
Year Amount
- -----------------------
'88 $10,000
'89 $10,991
'90 $11,515
'91 $13,119
'92 $14,590
'93 $16,912
'94 $16,047
'95 $17,743
'96 $18,929
'97 $20,795
'98 $22,730
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- -----------------------
'88 $10,000
'89 $10,868
'90 $11,608
'91 $13,138
'92 $14,514
'93 $16,363
'94 $15,964
'95 $17,750
'96 $18,821
'97 $20,522
'98 $22,311
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>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 10.43 $ 10.11 $ 10.62 $ 10.83 $ 11.29 $ 9.78 $ 10.28 $ 10.44 $ 10.92 $ 11.37
INCOME DIVIDENDS.. $ .67 $ .63 $ .63 $ .60 $ .56 $ .52 $ .50 $ .52 $ .52 $ .52
CAPITAL GAINS
AND OTHER
DISTRIBUTIONS... $ .05 $ .17 $ .22 $ .34 $ .60 $ .44 $ -- $ -- $ .01 $ .02
FUND TOTAL
RETURN (%)...... 9.91 4.76 13.93 11.22 15.92 -5.12 10.57 6.68 9.86 9.30
INDEX TOTAL
RETURN (%)...... 8.68 6.80 13.19 10.45 12.74 -2.44 11.18 6.04 8.76 8.72
</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.
5 - Scudder California Tax Free Fund
<PAGE>
Portfolio Summary as of September 30, 1998
Diversification
- --------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Hospital/Health 12%
Water/Sewer 11%
County General Obligation/Lease 10%
Housing Finance Authority 10%
School District/Lease 9%
Toll Revenue/Transportation 9%
Other General Obligation/Lease 8%
Sales/Special Tax 8%
Revenue/Special Assessment 7%
Miscellaneous Municipal 16%
-----------------------------------------
100%
-----------------------------------------
The Fund is broadly diversified, with investments in more than 10 categories of
municipal bonds and over 180 individual bond issues.
Quality
- --------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
AAA* 56%
AA 4%
A 18%
BBB 13%
SKI 3%
Not Rated 6%
--------------------------------------
100%
--------------------------------------
Weighted average quality: AA
*Includes Cash Equivalents
Overall credit quality remains at a high level, with more than 75% portfolio
securities rated A or better as of September 30.
Effective Maturity
- --------------------------------------
A graph in the form of a pie chart appears here, illustrating the exact data
points in the table below.
Less than 1 year 3%
1-5 years 14%
5-10 years 32%
10-15 years 25%
Greater than 15 years 26%
--------------------------------------
100%
--------------------------------------
Weighted average effective maturity:
12.0 years
We continue to emphasize noncallable bonds with maturities of 15 years or
less. We are also focusing on 6- to 9-year bonds, where we believe there is
significant capital appreciation potential should interest rates continue
their recent decline.
For more complete details about the Fund's investment portfolio, see page 19. A
quarterly Fund Summary and Portfolio Holdings are available upon request.
6 - Scudder California Tax Free Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Money Fund
Dear Shareholders,
In an environment of declining money market yields, Scudder California Tax Free
Money Fund maintained a conservative strategy during its most recent semiannual
period. The Fund's 7-day effective yield as of September 30 was 3.21%. For
investors in the highest combined state and federal income tax bracket, the
Fund's yield equaled a 5.86% compounded taxable yield, higher than the 4.98%
average for taxable money funds, according to IBC Financial Data, Inc., an
independent firm that tracks money fund performance.
The six months ended September 30 were marked by a strikingly low supply of
tax-exempt money market securities. As California's economy has continued to
thrive, despite economic turbulence in Asia (an important market for the State's
goods and services) and in the global financial markets, California state
authorities and municipalities have reduced their money market security
issuance, choosing instead to take advantage of low interest rates to issue
longer-term bonds. The resulting low level of supply has tended to drive down
the prevailing yields on tax-exempt money market securities even further. These
yield levels are almost unprecedented and seem unsustainable on a historical
basis.
In light of these market conditions, we have taken a "wait and see" strategy: We
have refrained from extending the Fund's average maturity (10 days as of
September 30, 1998) because we felt that yields of longer-term money market
securities were too low to justify incurring the additional risk that comes with
an extended maturity. We continue to invest in tax-free commercial paper and
variable rate demand notes, emphasizing high quality issuers and guarantors.
Variable rate demand notes are especially useful under current conditions,
giving us the flexibility to extend our average maturity quickly should yields
improve.
Over time, we believe the Federal Reserve will err on the side of easing credit
and lowering short-term interest rates, making the near-term outlook for money
market securities a challenging one. At the same time, however, we believe that
tax-exempt money market yields should eventually rise to resume their typical
relationship to Treasury yields.
Our continuing goal is to provide Scudder California Tax Free Money 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. We appreciate your investment with us.
Sincerely,
Your Portfolio Management Team
/s/Frank J. Rachwalski, Jr. /s/Jerri I. Cohen
Frank J. Rachwalski, Jr. Jerri I. Cohen
7 - Scudder California Tax Free Money Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Fund
Dear Shareholders,
Municipal bonds registered gains in the wake of a strong U.S. Treasury bond
rally during Scudder California Tax Free Fund's most recent semiannual period
ended September 30, 1998. During the six-month period, the Fund posted a 5.22%
total return, comparing favorably with the 4.83% average return of California
tax-exempt funds as tracked by Lipper Analytical Services, Inc. In addition, the
Fund ranked among the top one-third in total return among its peers for the
six-month, as well as the one-, three-, and ten-year periods ended September 30,
1998.
California Update
As one of the last states to emerge from the recession of the early 1990s,
California is now leading the country in job growth. The state's shift from
defense and aerospace industries to technology, multimedia, and trade has led it
through this recovery. Unemployment is trending down, personal income continues
to increase, deficit borrowing has ceased, and the state is attempting to
replenish its reserves.
International trade is a strong part of the state's economy. Although recent
economic turmoil in Asia has led to a decline in trade with Asian countries,
California has compensated by increasing trade with European and NAFTA
countries. As a result there has been no change in the volume of
"made-in-California" exports during the first six months of 1998 over the same
period in 1997.
Scudder California Tax Free Fund:
Competitive Long-Term Performance
(Average annual returns for periods ended September 30, 1998)
Scudder Number
California Lipper of
Tax Free Average California
Fund Annual State Funds Percentile
Period Return Return Rank Tracked Rank
------ ------ ------ ---- ------- ----
1 year 9.30% 8.69% 25 of 104 Top 24%
3 years 8.61% 7.99% 23 of 90 Top 26%
5 years 6.09% 5.87% 23 of 59 Top 39%
10 years 8.56% 7.87% 4 of 30 Top 13%
Past performance does not guarantee future results.
8 - Scudder California Tax Free Fund
<PAGE>
California is one of the largest issuers of municipal debt, with $25 billion
outstanding. The state's debt per capita is $773, 22% over the national average.
The size of the state and its wealth levels lessen the impact that debt of that
magnitude could have. And the state's cash flow position has improved
dramatically in the last year. California's economy continues to improve.
Bonds Provided a Safe Haven
Investors worldwide went in search of a relative "safe haven" in the form of
U.S. Treasury bonds during the period, as a series of dramatic financial crises
rocked the global markets, most notably in Russia, Japan, and Brazil. The
Federal Reserve lowered interest rates by one quarter of a percentage point on
September 29 in an attempt to restore order. Initial reaction from market
participants was that the Fed's action was insufficient, driving even more
investors to Treasury bonds. On the domestic front, the U.S. stock market
continually advanced to new highs until late July, when it succumbed to pressure
from overseas, as well as a series of domestic earnings disappointments. The
near collapse of the Long Term Capital Management hedge fund also contributed to
a sharp rise in Treasury bond prices near the close of the period.
As is typically true during a strong Treasury bond rally, prices of municipal
bonds did not keep up. During the six-month period, 10-year Treasury bond yields
declined one percentage point and their prices rose 9%. Over the same time
frame, 10-year AAA-rated municipal bond yields declined less than one half of a
percentage point, and their prices rose 3.3%. Two factors were most responsible
for the disparity in performance between the Treasury and municipal markets:
first, the "flight to quality" into Treasuries; second, the heavy supply of new
tax-exempt issues from January through September 1998. Municipal supply is
expected to reach approximately $282 billion in 1998, which would be second only
to 1993's total of $292 billion over the past ten years.
A Slight Shift in Focus
Scudder California Tax Free Fund seeks to provide investors with a competitive
level of federal and state tax-exempt income as well as the best possible total
return performance. Our long-term investment strategy focuses on four basic
elements: (1) purchasing bonds with effective maturities of 15 years or less;
(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.
As global events began to indicate a more volatile investment environment during
the period, we took some measures to reduce Scudder California Tax Free Fund's
level of risk exposure, though our overall emphasis on noncallable bonds with
maturities of 15 years or less remains in place. During the six months ended
September 30, we sold some of the Fund's nonrated and corporate-backed bonds,
and purchased AAA-insured bonds in their place as precautionary measures. By the
9 - Scudder California Tax Free Fund
<PAGE>
close of the period, the Fund had also begun to focus on 6- to 9-year bonds,
where we believe there is significant capital appreciation potential should
interest rates continue their recent decline.
The Fund's overall portfolio quality remains high, with over 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, water/sewer, and general obligation bonds.
Outlook
There are several factors that -- taken together or separately -- could boost
bond prices over the next several months: First, the Fed may choose to continue
its recent series of interest rate reductions, which could cause short-term as
well as intermediate-term municipal bond yields to decline further. Second, we
view the selling off of leveraged holdings by the large hedge funds that began
in late September as a "wild card" that could continue to drive investors to
"safe haven" fixed income securities, including municipals. Third, we expect
inflation -- at 1.8% as of September 30 -- to remain low and U.S. economic
growth to slow significantly in 1999.
In addition to these positive signs for bonds overall, municipal bonds are
currently attractively valued, as indicated by the fact that the ratio of
municipal yields to Treasury yields on bonds of similar maturity is by far the
highest it has been in 10 years. (Please see the chart above.) If, as we expect,
Treasury yields remain low, the tendency would be for municipals yields to
decline and prices to rise, restoring a more typical relationship between
municipals and Treasuries.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Yields of 10-year AAA-Municipal Bonds Compared With 10-year Treasury Bonds
January 1, 1988 - September 30, 1998
10-year 10-year
AAA-Municipal Bonds Treasury Bonds
------------------- --------------
1/88 6.60% 8.80%
6.70 8.80
6.70 9.21
6.50 8.12
1/90 6.40 7.89
6.60 8.44
6.40 8.09
6.30 8.30
1/92 5.60 6.84
5.55 7.13
5.30 6.68
4.75 5.85
1/94 4.40 5.78
5.50 7.32
5.80 7.81
5.05 6.26
1/96 4.65 5.62
5.15 6.82
4.85 6.34
4.80 6.48
1/98 4.40 5.74
4.40 5.46
9/98 4.00 4.42
(Chart indicates a 0.42% spread between the 10-year Treasury Bonds at 4.42%
(9/98) and the 10-year AAA-Municipal Bonds at 4.00% (9/98).)
CHART CAPTION:
The "spread" between yields of 10-year municipal bonds and 10-year Treasuries is
at its narrowest point in 10 years.
Source: Scudder Kemper Investments, Inc.
------
We will continue our overall focus on noncallable municipal bonds with
maturities of 15 years or less as we seek to boost yield and achieve attractive
long-term returns for our investors. In addition, we will attempt to limit
volatility by reducing portfolio risk, and by maintaining a neutral average
maturity and high overall credit quality as we pursue double-tax-free income and
competitive total return for Scudder California Tax Free Fund shareholders.
Sincerely,
Your Portfolio Management Team
/s/Jeremy L. Ragus /s/Christopher J. Mier
Jeremy L. Ragus Christopher J. Mier
10 - 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 Kemper Investments, Inc.; Barron's Dictionary of
Finance and Investment Terms)
11 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Investment Portfolio as of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating(b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Municipal Investments 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
California
Alhambra, CA, Redevelopment Agency, Multi-Family Housing Revenue, Main St.
Plaza Apartments, Series 1996, Weekly Demand Bond, 5.15%, 12/1/2028* ......... 1,000,000 SKI 1,000,000
California Department of Water, Series 1, Tax-Exempt Commercial Paper, 3.35%,
11/10/1998 ................................................................... 1,000,000 A1+ 1,000,000
California Health Facilities Finance Authority:
Catholic Healthcare West:
Series 1996 B, Weekly Demand Bond, 3%, 7/1/2006* ............................ 1,500,000 A1+ 1,500,000
Series 1988 C, Weekly Demand Bond, 3.6%, 7/1/2020 (c)* ...................... 1,000,000 A1+ 1,000,000
Pooled Loan Program, Series 1985 B, Weekly Demand Note, 3.2%, 10/1/2010 (c)*.. 485,000 MIG1 485,000
Sutter Health, Series 1990 B, Daily Demand Bond, 3.55%, 3/1/2020* ............ 2,600,000 A1+ 2,600,000
California Pollution Control Finance Authority:
Pacific Gas & Electric Company:
Series 1996 E, Tax-Exempt Commercial Paper, 3.2%, 11/13/1998 ................ 1,000,000 A1+ 1,000,000
Series 1997 D, AMT, Weekly Demand Note, 3.25%, 1/1/2010* .................... 1,500,000 MIG1 1,500,000
Solid Waste Disposal:
CR&R Inc. Project, Series 1995 A, AMT, Weekly Demand Note, 3.2%, 10/1/2010*.. 1,430,000 A1 1,430,000
Taormina Industries, Series 1994 B, AMT, 4.7%, 8/1/2014* .................... 2,000,000 A1 2,000,000
Western Waste Industries, Series 1994 A, AMT, Weekly Demand Note, 4.2%,
10/1/2006* ................................................................ 1,300,000 MIG1 1,300,000
California State Department of Water, Series I, Tax-Exempt Commercial Paper,
2.9%, 10/22/1998 ............................................................. 2,000,000 A1+ 2,000,000
Eastern Municipal Water District, CA, Water & Sewer Revenues, Series 1993 B,
Weekly Demand Note, 3.6%, 7/1/2020 (c)* ...................................... 1,100,000 MIG1 1,100,000
Guam Power Authority, Tax-Exempt Commercial Paper, 3.35%, 11/12/1998 (c) ....... 1,300,000 A1+ 1,300,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series 1985 B, Weekly Demand Bond, 3.45%, 10/1/2005* ......................... 800,000 A1+ 800,000
Irvine, CA, Improvement Bonds, Assessment District 97-17, Daily Demand Note,
3.8%, 9/2/2023* .............................................................. 2,600,000 MIG1 2,600,000
Irvine, CA, Ranch Water District, Daily Demand Bond, 3.8%, 4/1/2033* ........... 3,000,000 MIG1 3,000,000
Kern County, CA, Certificate of Participation, Public Facilities Project:
Series 1986 A, Weekly Demand Bond, 3%, 8/1/2006* ............................. 1,100,000 MIG1 1,100,000
Series 1986 D, Weekly Demand Bond, 3%, 8/1/2006* ............................. 1,500,000 MIG1 1,500,000
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue,
Series 1996, Weekly Demand Bond, 3.9%, 7/1/2017* ............................. 1,500,000 A1+ 1,500,000
</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>
Los Angeles County, CA, Certificate of Participation:
Willowbrook Project, Series 1985, Weekly Demand Bond, 3.2%, 11/1/2015* ....... 2,400,000 A1 2,400,000
County Museum of Arts, Series 1985 A, Weekly Demand Note, 3.25%,
11/1/2005* .................................................................. 1,300,000 A1 1,300,000
Los Angeles, CA, Multi-Family Housing Revenue, Series K, Weekly Demand
Bond, 3.8%, 7/1/2010* ........................................................ 3,100,000 A1+ 3,100,000
M-S-R Public Power Agency, San Juan Project, Revenue Bond, Subordinate Lien,
Series B, Weekly Demand Bond, 3.55%, 7/1/2022* ............................... 1,000,000 A1+ 1,000,000
Oakland, CA, Joint Powers Financing Authority, Lease Revenue, Weekly Demand
Bond:
Series 1998 A-2, 3.4%, 8/1/2021 (c)* ......................................... 1,000,000 A1+ 1,000,000
Series 1998 A-1, 3.7%, 8/1/2021 (c)* ......................................... 1,500,000 A1+ 1,500,000
Oakland, CA, Unified School District, Alameda County, Tax & Revenue Anticipation
Note, 4.25%, 10/28/1998 ...................................................... 2,000,587 SP1+ 2,000,587
Orange County, CA, Multi-Family Housing Revenue, Weekly Demand Bond,
5%, 11/1/2008* ............................................................... 700,000 MIG1 700,000
Orange County, CA, Sanitation District:
Series 1992, Daily Demand Note, 3.8%, 8/1/2015* .............................. 1,100,000 A1+ 1,100,000
Series 1992 C, Daily Demand Note, 4%, 8/1/2017 (c)* .......................... 1,700,000 MIG1 1,700,000
Sacramento, CA, Multi-Family Housing Revenue, Smoketree Apartments Project,
Series 1990 A, Weekly Demand Bond, 3%, 4/15/2010* ............................ 1,000,000 A1+ 1,000,000
San Bernadino County, CA, Certificates of Participation, County Center
Refinancing, Series 1996, Weekly Demand Note, 3.8%, 7/1/2015* ................ 1,000,000 MIG1 1,000,000
San Bernadino County, CA, Multi-Family Housing Revenue, Woodview Apartments
Project, Series 1985 I, Weekly Demand Bond, 4.25%, 4/1/2007* ................. 1,100,000 MIG1 1,100,000
San Diego, CA, Multi-Family Housing Revenue, Lusk Mira Mesa Project, Issue E,
Weekly Demand Bond, 4.25%, 4/1/2007* ......................................... 1,900,000 MIG1 1,900,000
San Francisco Airport, AMT, Series 1997, Tax-Exempt Commercial Paper, 3.3%,
10/21/1998 ................................................................... 2,000,000 A1+ 2,000,000
San Francisco, CA, City and County Industrial Development Revenue, Series 1992,
AMT, Weekly Demand Bond, 3.95%, 8/1/2007* .................................... 2,755,000 P1 2,755,000
San Jose, CA, Clean Water Financing Authority, Sewer Revenue Bond, Series
1995 B, Weekly Demand Note, 3%, 11/15/2011 (c)* .............................. 1,000,000 A1+ 1,000,000
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Revenue,
Series 1985 A, Weekly Demand Bond, 3.8%, 6/1/2005* ........................... 2,700,000 A1 2,700,000
Santa Barbara County, CA, Tax and Revenue Anticipation Notes, Series 1997 A,
4.5%, 10/1/1998 .............................................................. 1,500,000 A1+ 1,500,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
13 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Value ($)
Amount ($) Rating(b) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Santa Clara County, CA, Multi-Family Housing Authority, Fox Chase I Project,
Series 1985 E, Weekly Demand Note, 3.6%, 11/1/2007 (c)* ...................... 1,000,000 MIG1 1,000,000
Santa Clara, CA, Electric Revenue:
Series B, Junior Lien, Weekly Demand Bond, 3.05%, 7/1/2010* .................. 900,000 MIG1 900,000
Series C, Junior Lien, Weekly Demand Bond, 3.05%, 7/1/2010* .................. 1,300,000 MIG1 1,300,000
Southern California Metropolitan Water District, Series B, Tax-Exempt Commercial
Paper, 3.25%, 11/12/1998 ..................................................... 1,000,000 A1+ 1,000,000
Southern California Public Power Authority, Transmission Project, Series 1991,
Weekly Demand Note, 3%, 7/1/2019 (c)* ........................................ 1,300,000 A1+ 1,300,000
Vallejo, CA, Industrial Development Authority Revenue, Series 1993 A, AMT,
Weekly Demand Bond, 4.25%, 12/1/2023* ........................................ 1,500,000 SKI 1,500,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Municipal Investments (Cost $67,470,587) 67,470,587
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $67,470,587) (a) 67,470,587
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $67,470,587.
(b) All of the securities held have been determined by the Adviser to be of
the appropriate credit quality as required by the Fund's investment
objectives. Credit ratings shown are assigned by either Standard & Poor's
Ratings Group, Moody's Investors Service, Inc. or Fitch Investors Service,
Inc. Securities rated by Scudder Kemper Investments, Inc. (SKI) and
unrated securities (NR) have been determined by the Adviser to be of
comparable quality to rated securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC, FSA 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.
AMT: Alternative minimum tax
The accompanying notes are an integral part of the financial statements.
14 - Scudder California Tax Free Money Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at value (cost $67,470,587) ............................. $ 67,470,587
Cash ................................................................. 1,024,296
Receivable for investments sold ...................................... 110,229
Interest receivable .................................................. 300,733
Receivable for Fund shares sold ...................................... 148,960
Other assets ......................................................... 1,381
----------------
Total assets ......................................................... 69,056,186
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Dividends payable .................................................... 16,453
Payable for Fund shares redeemed ..................................... 193,400
Accrued management fee ............................................... 16,030
Other payables and accrued expenses .................................. 35,042
----------------
Total liabilities .................................................... 260,925
-------------------------------------------------------------------------------------------
Net assets, at value $ 68,795,261
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized gain (loss) ................................. (95,212)
Paid-in capital ...................................................... 68,890,473
-------------------------------------------------------------------------------------------
Net assets, at value $ 68,795,261
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($68,795,261 / 68,806,035 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ........................................................ $1.00
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder California Tax Free Money Fund
<PAGE>
Statement of Operations
six months ended September 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest ............................................................. $ 1,131,085
----------------
Expenses:
Management fee ....................................................... 168,467
Services to shareholders ............................................. 35,709
Custodian and accounting fees ........................................ 23,268
Trustees' fees and expenses .......................................... 9,562
Auditing ............................................................. 14,114
Reports to shareholders .............................................. 6,916
Legal ................................................................ 2,813
Registration fees .................................................... 2,518
Other ................................................................ 4,023
----------------
Total expenses before reductions ..................................... 267,390
Expense reductions ................................................... (65,230)
----------------
Expenses, net ........................................................ 202,160
-------------------------------------------------------------------------------------------
Net investment income 928,925
-------------------------------------------------------------------------------------------
Realized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments (806)
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 928,119
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
16 - Scudder California Tax Free Money Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1998 March 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ........................................... $ 928,925 $ 2,005,687
Net realized gain (loss) from investment transactions ........... (806) 459
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations .................................................... 928,119 2,006,146
---------------- ----------------
Distributions to shareholders from net investment
income ........................................................ (928,925) (2,005,687)
---------------- ----------------
Fund share transactions at net asset value of $1.00 per share:
Shares sold ..................................................... 31,997,977 77,305,649
Net asset value of shares issued to shareholders in
reinvestment of distributions ................................. 805,158 1,669,253
Shares redeemed ................................................. (34,553,669) (77,124,440)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .................................................. (1,750,534) 1,850,462
---------------- ----------------
Increase (decrease) in net assets ............................... (1,751,340) 1,850,921
Net assets at beginning of period ............................... 70,546,601 68,695,680
---------------- ----------------
Net assets at end of period ..................................... $ 68,795,261 $ 70,546,601
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
17 - Scudder California Tax Free Money Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Six Months
Ended
September 30,
1998 Years Ended March 31,
(Unaudited) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of period ............... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------
Net investment income .............................. .014 .029 .028 .032 .027 .019
Less: Distributions from net investment income ..... (.014) (.029) (.028) (.032) (.027) (.019)
----------------------------------------------------------------------------
Net asset value, end of period ..................... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............................... 1.39** 2.98 2.87 3.28 2.72 1.92
Ratios and Supplemental Data
Net assets, end of period ($ millions) ............. 69 71 69 67 64 72
Ratio of operating expenses, net to average
daily net assets (%) ............................. .60* .60 .60 .60 .60 .60
Ratio of operating expenses before expense
reductions to average daily net assets (%) ....... .79* .78 .79 .81 .84 .90
Ratio of net investment income to average daily
net assets (%) ................................... 2.76* 2.92 2.83 3.23 2.68 1.90
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
18 - Scudder California Tax Free Money Fund
<PAGE>
Investment Portfolio as of September 30, 1998 (Unaudited)
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Municipal Investments 0.6%
- ------------------------------------------------------------------------------------------------------------------------------
California
California Pollution Control Finance Authority Revenue, Pacific Gas & Electric
Company, Series 1997 B, Daily Demand Note, 3.75%, 11/1/2026* ................. 1,000,000 A1+ 1,000,000
Orange County, CA, Sanitation District, Series 1992 C, Daily Demand
Note, 4%, 8/1/2017 (c)* ...................................................... 1,200,000 MIG1 1,200,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $2,200,000) 2,200,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 99.4%
- ------------------------------------------------------------------------------------------------------------------------------
California
ABAG Finance Authority for Nonprofit Corporations, CA, Certificates of
Participation, 5.25%, 10/1/2007 .............................................. 2,000,000 BBB 2,070,640
ABAG Financing Authority, CA, Stanford Health Systems, Certificates of
Participation, 6%, 11/1/2007 (c) ............................................. 605,000 AAA 701,897
Anaheim County, CA, Convention Center Financing, Certificate of Participation,
Zero Coupon, 8/1/2005 (c) .................................................... 1,250,000 AAA 950,963
Anaheim, CA, Public Finance Authority, 5.25%, 2/1/2018 (c) ..................... 2,000,000 AAA 2,099,140
Anaheim, CA, Public Financing Authority, Lease Revenue:
Series 1997C, Zero Coupon, 9/1/2017 (c) ...................................... 1,455,000 AAA 581,171
Zero Coupon, 9/1/2032 (c) .................................................... 5,690,000 AAA 1,048,155
Anaheim, CA, Public Financing Authority, Lease Revenue Public Improvements
Project:
Series 1997 A, 6%, 9/1/2024 (c) ............................................. 3,500,000 AAA 4,153,940
Series 1997 C, 6%, 9/1/2010 (c) ............................................. 1,000,000 AAA 1,171,500
Series 1997 C, 6%, 9/1/2011 (c) ............................................. 4,570,000 AAA 5,368,600
Series 1997 C, 6%, 9/1/2014 (c) ............................................. 1,000,000 AAA 1,170,400
Series 1997 C, 6%, 9/1/2016 (c) ............................................. 1,000,000 AAA 1,170,930
Series 1997 C, Zero Coupon, 9/1/2018 (c) .................................... 1,000,000 AAA 378,300
Burbank, CA, School District, Capital Appreciation:
Series B, Zero Coupon, 8/1/2019 (c) .......................................... 3,740,000 AAA 1,358,480
Series B, Zero Coupon, 8/1/2020 (c) .......................................... 3,835,000 AAA 1,325,184
California Community Development Authority, Apartment Development
Revenue Bond:
5.1%, 5/15/2025 ............................................................. 1,000,000 BBB 1,030,030
5.25%, 5/15/2025 ............................................................ 1,000,000 BBB 1,029,110
</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>
California Health Facilities, Finance Authority Revenue:
5%, 11/15/2018 (c) ........................................................... 1,000,000 AAA 1,012,660
5.375%, 11/15/2013 (c) ....................................................... 2,260,000 AAA 2,447,105
Capital Appreciation, Kaiser:
Series 1989 A, Zero Coupon, 10/1/2012 (c) ................................... 4,900,000 AAA 2,542,757
Series A, 5.25%, 6/1/2012 (c) ............................................... 2,000,000 AAA 2,149,960
Zero Coupon, 10/1/2010 (c) ................................................... 3,040,000 AAA 1,763,261
California Housing Finance Agency:
Home Mortgage Revenue:
Series F1, AMT, 6.2%, 8/1/2005 (c) .......................................... 840,000 AAA 901,009
Series F1, AMT, 6.3%, 8/1/2006 (c) .......................................... 1,310,000 AAA 1,423,603
Multi-Unit Rental Housing Revenue:
Series A, 7.3%, 8/1/1999 .................................................... 2,435,000 A 2,501,670
Series A, 7.35%, 8/1/2000 ................................................... 2,615,000 A 2,766,958
Series A, 7.4%, 8/1/2001 .................................................... 1,555,000 A 1,674,533
Series A, 7.45%, 8/1/2002 ................................................... 1,015,000 A 1,120,083
Series A, 7.6%, 8/1/2006 .................................................... 4,030,000 A 4,498,407
Series A, 7.65%, 8/1/2007 ................................................... 2,335,000 A 2,601,727
Series A, 7.7%, 8/1/2009 .................................................... 700,000 A 776,230
Series A, 7.75%, 8/1/2016 ................................................... 2,440,000 A 2,692,784
Series A, 7.8%, 8/1/2023 .................................................... 2,635,000 A 2,898,974
Series G, AMT, 5.7%, 2/1/2007 (c) ........................................... 500,000 AAA 535,905
Series G, AMT, 5.8%, 2/1/2008 (c) ........................................... 1,330,000 AAA 1,422,395
Series G, AMT, 5.9%, 2/1/2009 (c) ........................................... 200,000 AAA 211,078
Series II, 7.3%, 8/1/1999 ................................................... 325,000 A 333,557
Series II, 7.3%, 8/1/2000 ................................................... 345,000 A 362,564
Series II, 7.3%, 8/1/2001 ................................................... 375,000 A 402,221
Series II, 7.35%, 8/1/2002 .................................................. 400,000 A 435,460
Series II, 7.35%, 8/1/2003 .................................................. 430,000 A 473,086
Series II, 7.35%, 8/1/2004 .................................................. 460,000 A 512,615
Series II, 7.35%, 8/1/2005 .................................................. 495,000 A 556,603
California Pollution Control Financing Authority:
Solid Waste Disposal Revenue, Canadian Fibre of Riverside PJ, AMT, Series
1997 A, 9%, 7/1/2019 ....................................................... 4,500,000 NR 4,689,315
Southern California Edison, AMT, Series A, 6.9%, 9/1/2006 .................... 3,750,000 A 3,921,750
</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>
California Public Works Board, Department of Corrections, Lease Based Revenue,
Medera Prison, Series A-2, 7.4%, 9/1/2010 (c) ................................ 1,000,000 AAA 1,297,840
California Residence Efficiency Financing Authority, Certificate of
Participation, Capital Improvement Program:
Series 1997, 6%, 4/1/2008 (c) ............................................... 1,335,000 AAA 1,553,540
Series 1997, 6%, 4/1/2009 (c) ............................................... 1,420,000 AAA 1,649,699
Series 1997, 6%, 4/1/2010 (c) ............................................... 1,500,000 AAA 1,750,290
Series 1997, 6%, 4/1/2011 (c) ............................................... 1,590,000 AAA 1,861,095
California Statewide Community Development Authority, Certificate of
Participation:
Children's Hospital, Series 1993, 6%, 6/1/2010 (c) ........................... 1,000,000 AAA 1,161,630
Lutheran Homes, 5.5%, 11/15/2008 ............................................. 1,500,000 A 1,654,200
Lutheran Homes, Series 1993, 5.6%, 11/15/2013 ................................ 4,750,000 A 5,210,418
Unihealth America, Series A, Zero Coupon, 10/1/2005 (c) ...................... 1,450,000 AAA 1,088,298
Castaic Lake, CA, Water Agency, Certificate of Participation, Water System
Improvement Project, Series A, 7.25%, 8/1/2007 (c) ........................... 1,000,000 AAA 1,250,420
Center, CA, Unified School District, Capital Appreciation, Series 1997 C,
Zero Coupon, 9/1/2014 (c) .................................................... 2,240,000 AAA 1,057,638
Central Valley, CA, School District Financing Authority, Capital Appreciation:
Zero Coupon, 2/1/2006 (c) .................................................... 2,850,000 AAA 2,117,636
Zero Coupon, 8/1/2006 (c) .................................................... 5,035,000 AAA 3,666,185
Zero Coupon, 2/1/2007 (c) .................................................... 2,210,000 AAA 1,570,514
Zero Coupon, 8/1/2007 (c) .................................................... 5,510,000 AAA 3,836,227
Chino Basin, CA, Regional Financing Authority, Municipal Water District, Sewer
System, 5.9%, 8/1/2011 (c) ................................................... 1,290,000 AAA 1,501,612
Clovis County, CA, Sewer Development Revenue Bond, 5.5%, 8/1/2019 (c) .......... 1,795,000 AAA 1,935,961
Coronado, CA, Tax Anticipation Note, 6%, 9/1/2007 (c) .......................... 1,150,000 AAA 1,334,357
Delmar, CA, Race Track Authority, Series 1996, 6%, 8/15/2006 ................... 2,000,000 NR 2,148,940
Dry Creek, CA, Joint Elementary School District, Capital Appreciation:
Series 1997 A, Zero Coupon, 8/1/2010 (c) ..................................... 1,120,000 AAA 666,008
Series 1997 A, Zero Coupon, 8/1/2011 (c) ..................................... 1,180,000 AAA 663,172
Series 1997 A, Zero Coupon, 8/1/2016 (c) ..................................... 555,000 AAA 236,508
Series 1997 A, Zero Coupon, 8/1/2019 (c) ..................................... 1,715,000 AAA 622,939
Series 1997 A, Zero Coupon, 8/1/2020 (c) ..................................... 1,330,000 AAA 459,582
Series 1997 A, Zero Coupon, 8/1/2021 (c) ..................................... 1,920,000 AAA 628,147
Series 1997 A, Zero Coupon, 5/1/2022 (c) ..................................... 1,385,000 AAA 436,289
</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>
Duarte, CA, Certificate of Participation, City of Hope Medical Center:
5.75%, 4/1/2002 .............................................................. 3,525,000 BBB 3,728,322
5.8%, 4/1/2003 ............................................................... 3,735,000 BBB 4,003,173
6%, 4/1/2008 ................................................................. 3,750,000 BBB 3,983,813
East Bay, CA, Utility District, Water System Revenue Bond, 4.75%, 6/1/2034 (c).. 8,550,000 AAA 8,376,606
Elk Grove, CA, Unified School District #1, Special Tax, Community Facilities,
6.5%, 12/1/2008 (c) .......................................................... 1,000,000 AAA 1,214,610
Encinitas, CA, Series 1997 A, 5%, 12/1/2016 (c) ................................ 1,000,000 AAA 1,046,320
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue, Senior
Lien:
Series 1995 A, Step-up Coupon, 0% to 1/1/05, 6.95% 1/1/2007 .................. 575,000 BBB 454,348
Series A, Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/2013 .................... 975,000 BBB 807,476
Series A, Step-up Coupon 0% to 1/1/05, 7.15% to 1/1/2014 ..................... 2,875,000 BBB 2,371,185
Series A, Zero Coupon, 1/1/2011 .............................................. 6,000,000 BBB 4,995,300
Healdsburg, CA, Unified School District, Capital Appreciation
Series 1997, Zero Coupon, 7/15/2011 (c) ...................................... 400,000 AAA 225,252
Series 1997, Zero Coupon, 7/15/2012 (c) ...................................... 400,000 AAA 212,480
Series 1997, Zero Coupon, 7/15/2013 (c) ...................................... 400,000 AAA 200,620
Series 1997, Zero Coupon, 7/15/2014 (c) ...................................... 400,000 AAA 190,004
Inland Empire Solid Waste Financing Authority, California Landfill Improvement
Financing Project, Series 1996 B, 6%, 8/1/2006 (c) ........................... 1,000,000 AAA 1,132,620
Los Angeles County, CA, Certificate of Participation:
Capital Appreciation, Disney Parking Project:
Zero Coupon, 9/1/2006 ....................................................... 2,500,000 A 1,729,125
Zero Coupon, 3/1/2008 ....................................................... 2,780,000 BBB 1,776,670
Zero Coupon, 9/1/2008 ....................................................... 4,865,000 BBB 3,036,149
Marina Del Ray:
Series A, 6.25%, 7/1/2003 ................................................... 2,500,000 SKI 2,650,025
Series A, 6.5%, 7/1/2008 .................................................... 2,500,000 NR 2,743,025
Los Angeles County, CA, Convention and Exhibition Center, Authority Lease
Revenue, Series 1993 A, 6.125%, 8/15/2011 (c) ................................ 1,000,000 AAA 1,182,210
Los Angeles, CA, Authority Lease Revenue, Department of General Services,
Series 1993 A, 5.6%, 5/1/2008 ................................................ 7,000,000 A 7,831,040
Metropolitan Water District, Southern California:
General Obligation, Election 1966, Series H, 4.75%, 3/1/2037 ................. 3,000,000 AAA 2,922,360
Waterworks Revenue, Series A, 4.75%, 7/1/2022 ................................ 5,000,000 AA 4,908,800
</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(c) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Midpeninsula Regional Open Space District, CA, Finance Authority Revenue,
Capital Appreciation, Zero Coupon, 9/1/2020 (c) .............................. 1,190,000 AAA 405,969
Millbrae, CA, Residential Facilities Revenue, Magnolia of Millbrae Project,
Series 1997 A, 7.375%, 9/1/2027 .............................................. 4,000,000 SKI 4,262,960
Modesto, CA, Certificate of Participation, Community Project, Series A, 5.6%,
11/1/2014 (c) ................................................................ 1,370,000 AAA 1,542,826
Modesto, CA, Wastewater Facilities Treatment Revenue, Series 1997, 6%,
11/1/2011 (c) ................................................................ 1,255,000 AAA 1,476,432
Mojave Desert & Mountain Region, CA, Solid Waste Joint Powers Authority,
Project Revenue, 7.875%, 6/1/2020 ............................................ 2,350,000 BBB 2,719,420
Monterey County, CA, Certificate of Participation, 4.75%, 8/1/2027 (c) ......... 2,000,000 AAA 1,949,280
Oakland, CA, Port Revenue, AMT, Series 1997 G, 5.375%, 11/1/2025 (c) ........... 1,000,000 AAA 1,035,020
Orange County, CA, Recovery Certificate of Participation:
Series 1995 A, 5.6%, 6/1/2007 (c) ............................................ 4,430,000 AAA 4,961,910
Series 1996 A, 6%, 7/1/2006 (c) .............................................. 3,000,000 AAA 3,419,940
Series 1996 A, 6%, 7/1/2008 (c) .............................................. 1,000,000 AAA 1,167,170
Palmdale, CA, Civic Authority Revenue, Series 1994 A, 6.6%, 9/1/2034 ........... 3,375,000 NR 3,791,441
Pomona, CA, Unified School District, General Obligation, ETM:
Series 1992 B, 6.25%, 8/1/2014 (c)** ......................................... 1,020,000 AAA 1,219,247
Series 1993 D, 5.6%, 8/1/2014 (c)** .......................................... 170,000 AAA 190,800
Series 1993 D, 5.6%, 8/1/2015 (c)** .......................................... 180,000 AAA 202,277
Series 1993 D, 5.6%, 8/1/2016 (c)** .......................................... 190,000 AAA 212,690
Series 1993 D, 5.6%, 8/1/2017 (c)** .......................................... 175,000 AAA 195,935
Series 1993 D, 5.6%, 8/1/2018 (c)** .......................................... 205,000 AAA 229,754
Port of Hueneme, CA, Certificate of Participation, Capital Improvement, 6%,
4/1/2019 (c) ................................................................. 925,000 AAA 1,079,457
Richmond, CA, Joint Powers Finance Authority:
Series 1996, 5.875%, 9/1/2006 ................................................ 500,000 BBB 556,975
Series 1996, 6.6%, 9/1/2016 .................................................. 1,000,000 BBB 1,122,650
Riverside County, CA, Asset Leasing Corp., Leasehold Revenue Project:
Series 1997, Zero Coupon, 6/1/2016 (c) ....................................... 2,395,000 AAA 1,011,169
Series 1998, Zero Coupon, 6/1/2015 (c) ....................................... 1,750,000 AAA 779,608
Sacramento, CA, Financing Authority Revenue:
Capital Appreciation, Tax Allocation, Series 1993 B, Zero Coupon,
11/1/2016 (c) ................................................................ 2,685,000 AAA 1,130,600
Series 1993 B, Zero Coupon, 11/1/2006 (c) .................................... 2,810,000 AAA 2,025,476
</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>
Sacramento, CA, Finance Authority Lease, Series 1993 B, 5%, 11/1/2014 .......... 5,200,000 AA 5,452,564
Sacramento, CA, Power Authority Cogeneration Project, Revenue Bonds, Series
1995, 6.5%, 7/1/2004 ......................................................... 2,000,000 BBB 2,254,520
Saddleback Valley Unified School District, Public Financing Authority, Special
Tax Revenue:
Series 1997 A, 6%, 9/1/2010 (c) ............................................. 1,565,000 AAA 1,833,398
Series 1997 A, 6%, 9/1/2013 (c) ............................................. 1,000,000 AAA 1,174,840
Series 1997 A, 6%, 9/1/2014 (c) ............................................. 1,000,000 AAA 1,170,400
Series 1997 A, 6%, 9/1/2015 (c) ............................................. 1,000,000 AAA 1,169,780
San Bernadino, CA, Certificate of Participation, Medical Center Financing
Project, Refunding Revenue:
Series 1994, 6%, 8/1/2009 (c) ............................................... 3,000,000 AAA 3,454,740
Series 1994, 5.5%, 8/1/2017 (c) ............................................. 3,965,000 AAA 4,374,069
San Bernardino County, CA, Certificate of Participation, 5.25%, 2/1/2015 (c) ... 2,215,000 AAA 2,368,743
San Diego, CA, Water Utility Funding, Network System Revenue:
5.375%, 8/1/2014 (c) ......................................................... 1,000,000 AAA 1,078,630
5.375%, 8/1/2015 (c) ......................................................... 2,000,000 AAA 2,147,340
4.75%, 8/1/2028 (c) .......................................................... 2,000,000 AAA 1,962,320
San Diego County, CA, Water Authority, Certificate of Participation, 4.75%,
5/1/2020 ..................................................................... 1,995,000 AA 1,984,247
San Francisco, CA, City and County Redevelopment Agency Residential Facility,
Coventry Park Project, Series 1996 A, 8.5%, 12/1/2026 ........................ 2,000,000 SKI 2,303,460
San Francisco, CA, Redevelopment Financing Agency, Tax Allocation Revenue,
Series A, Zero Coupon, 8/1/1903 (c) .......................................... 1,080,000 AAA 896,411
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue:
Capital Appreciation Refunding:
Series 1997 A, 1/15/2010 (c) ................................................ 3,500,000 AAA 2,131,640
Series 1997 A, Zero Coupon, 1/15/2012 (c) ................................... 2,500,000 AAA 1,358,800
Junior Lien:
Series 1993, Zero Coupon, 1/1/2002 .......................................... 515,000 AAA 453,473
Series 1993, Zero Coupon, 1/1/2004 .......................................... 1,000,000 AAA 927,840
Series 1993, Zero Coupon, 1/1/2006 .......................................... 200,000 AAA 147,422
Series 1993, Zero Coupon, 1/1/2010 .......................................... 1,500,000 AAA 909,105
Senior Lien:
Series 1993, Zero Coupon, 1/1/2000 .......................................... 1,500,000 AAA 1,430,730
Series 1993, Zero Coupon, 1/1/2007 .......................................... 6,000,000 AAA 5,945,400
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series 1993, Zero Coupon, 1/1/2014 .......................................... 2,500,000 AAA 1,221,700
Step-up Coupon, 0% to 1/1/02, 7.3% to 1/1/04, 1/1/2005 ...................... 2,500,000 AAA 2,377,225
Series 1997 A, Zero Coupon, 1/15/2003 (c) .................................... 900,000 AAA 762,840
Series 1997 A, Zero Coupon, 1/15/2004 (c) .................................... 400,000 AAA 325,384
Series 1997 A, Zero Coupon, 1/15/2005 (c) .................................... 1,900,000 AAA 1,477,288
San Jose, CA, Financing Revenue, Community Facilities Project:
Series 1993 B, Zero Coupon, 11/15/2003 ....................................... 735,000 A 598,775
Series 1993 B, Zero Coupon, 11/15/2004 ....................................... 1,605,000 A 1,252,494
Series 1993 B, Zero Coupon, 11/15/2005 ....................................... 1,605,000 A 1,194,425
Series 1993 B, Zero Coupon, 11/15/2006 ....................................... 1,605,000 A 1,141,364
San Jose, CA, Unified School District, Santa Clara County, Capital Appreciation,
Series 1997 A, 8/1/2013 (c) .................................................. 2,445,000 AAA 1,223,747
San Mateo, CA, Transportation District, Series 1997 A, 5.5%, 6/1/2015 (c) ...... 2,250,000 AAA 2,497,703
Santa Ana, CA, Financing Authority, Lease Revenue Bonds, Police Administration
and Holding Facility, Series 1994 A, 6.25%, 7/1/2024 (c) ..................... 2,000,000 AAA 2,446,280
Santa Clara County, CA, Finance Authority, Lease Revenue, VMC Replacement
Project, 7.75%, 11/15/2008 (c) ............................................... 3,250,000 AAA 4,257,890
Santa Cruz County, CA, Certificates of Participation, Capital Facilities
Project:
Series 1997, 5.5%, 9/1/2016 (c) .............................................. 955,000 AAA 1,060,337
Series 1997, 5.5%, 9/1/2017 (c) .............................................. 1,005,000 AAA 1,117,068
Series 1997, 5.5%, 9/1/2018 (c) .............................................. 1,060,000 AAA 1,177,628
Series 1997, 5.6%, 9/1/2019 (c) .............................................. 1,115,000 AAA 1,252,457
Series 1997, 5.6%, 9/1/2020 (c) .............................................. 1,180,000 AAA 1,326,025
Series 1997, 5.65%, 9/1/2024 (c) ............................................. 1,445,000 AAA 1,645,855
Series 1997, 5.65%, 9/1/2025 (c) ............................................. 1,520,000 AAA 1,734,366
Series 1997, 5.65%, 9/1/2026 (c) ............................................. 1,605,000 AAA 1,835,189
Santa Margarita/Dana Point, CA:
Improvement Districts 3, 3A, 4 and 4A, Series B, 7.25%, 8/1/2005 (c) ......... 2,895,000 AAA 3,499,852
Improvement Districts 1-2-2A and 8, Series 1994 A, 7.25%, 8/1/2006 (c) ....... 465,000 AAA 572,280
Simi Valley California Ambrac NC S98, 5.25%, 8/1/2017 (c) ...................... 575,000 AAA 618,694
South Orange County, CA, Public Power Authority, Special Tax Revenue, 7%,
9/1/2006 (c) ................................................................. 2,230,000 AAA 2,688,577
Southern California Public Power Authority:
Series 1989, 6.75%, 7/1/2010 ................................................. 6,000,000 A 7,325,940
Transmission Project Revenue, Capital Appreciation, 7/1/2015 ................. 2,000,000 AA 902,020
</TABLE>
The accompanying notes are an integral part of the financial statements.
25 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Credit Market
Amount ($) Rating(b) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Torrance, CA, Redevelopment Agency, Tax Allocation, Sub Lien:
5.1%, 9/1/2008 ............................................................... 495,000 NR 500,123
5.2%, 9/1/2009 ............................................................... 540,000 NR 545,265
5.3%, 9/1/2010 ............................................................... 605,000 NR 613,627
5.4%, 9/1/2011 ............................................................... 665,000 NR 674,077
5.625%, 9/1/2028 ............................................................. 1,000,000 NR 1,014,000
Ukiah, CA, Unified School District, Series 1997, 8/1/2010 (c) .................. 1,200,000 AAA 713,580
Vallejo Sanitation & Flood Control District, Solano County, CA, Certificates of
Participation, 5%, 7/1/2019 (c) .............................................. 2,500,000 AAA 2,591,800
Valley Health System, CA, Revenue Bonds, Refunding and Improvement Project:
Series 1996 A, 6.5%, 5/15/2015 ............................................... 385,000 BBB 419,823
Series 1996 A, 6.5%, 5/15/2025 ............................................... 5,075,000 BBB 5,517,337
Watsonville, CA, Community Hospital Revenue, Series 1996, 5.95%, 7/1/2007 ...... 1,135,000 A 1,297,010
West Covina, CA, Queen of the Valley Hospital, Certificate of Participation,
Hospital Revenue:
Series 1994, 5.7%, 8/15/2000 ................................................. 380,000 A 395,717
Series 1994, 5.8%, 8/15/2001 ................................................. 750,000 A 797,918
West Covina, CA, Redevelopment Agency Facility, Series 1996, 5.75%, 9/1/2009 ... 865,000 A 976,576
Westminster, CA, Redevelopment Agency, Tax Allocation Revenue, Community
Development, Project #1, Series A, 7.3%, 8/1/2021 ............................ 2,690,000 AAA 3,018,288
Whittier, CA, Presbyterian Intercommunity Hospital, Health Facilities Revenue:
6.25%, 6/1/2008 (c) .......................................................... 1,000,000 AAA 1,171,010
6.25%, 6/1/2010 (c) .......................................................... 1,250,000 AAA 1,485,663
Puerto Rico
Puerto Rico Commonwealth, General Obligation, 4.5%, 7/1/2023 ................... 1,000,000 A 941,560
Virgin Islands
Virgin Islands, General Obligation, Public Finance Authority, Mortgage Fund Loan
Notes, Series 1992 A, 7%, 10/1/2002 .......................................... 1,000,000 BBB 1,120,740
Virgin Islands, Special Tax Bonds, Hugo Bonds, 7.75%, 10/1/2006 ................ 1,470,000 SKI 1,616,089
Virgin Islands, Public Finance Revenue Bonds, 6%, 10/1/2006 .................... 3,720,000 NR 3,937,732
Virgin Islands Water and Power Authority Revenue bond, 5.3%, 7/1/2021 .......... 1,000,000 NR 1,017,430
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $307,792,314) 337,835,034
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $309,992,314) (a) 340,035,034
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 - Scudder California Tax Free Fund
<PAGE>
(a) The cost for federal income tax purposes was $309,992,314. At September
30, 1998, unrealized appreciation for all securities based on tax cost was
$30,042,720.
(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.
Securities rated by Scudder Kemper Investments, Inc. (SKI) and unrated
securities (NR) have been determined by the Adviser to be of comparable
quality to rated 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.
27 - Scudder California Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of September 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
Investments, at market (identified cost $309,992,314) ............... $ 340,035,034
Cash ................................................................ 135,356
Receivable for investments sold ..................................... 130,000
Interest receivable ................................................. 3,621,719
Receivable for Fund shares sold ..................................... 189,602
Other assets ........................................................ 5,861
----------------
Total assets ........................................................ 344,117,572
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Dividends payable ................................................... 450,049
Payable for Fund shares redeemed .................................... 5,000
Accrued management fee .............................................. 175,537
Other payables and accrued expenses ................................. 76,410
----------------
Total liabilities ................................................... 706,996
-------------------------------------------------------------------------------------------
Net assets, at market value $ 343,410,576
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments .......................... 30,042,720
Accumulated net realized loss ....................................... (5,575,924)
Paid-in capital ..................................................... 318,943,780
-------------------------------------------------------------------------------------------
Net assets, at market value $ 343,410,576
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($343,410,576 / 30,193,512 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ....................................................... $11.37
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 - Scudder California Tax Free Fund
<PAGE>
Statement of Operations
six months ended September 30, 1998 (Unaudited)
<TABLE>
<S> <C> <C>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
Income:
Interest .............................................................. $ 8,920,625
----------------
Expenses:
Management fee ........................................................ 1,010,483
Services to shareholders .............................................. 121,682
Custodian and accounting fees ......................................... 59,097
Trustees' fees and expenses ........................................... 15,404
Auditing .............................................................. 21,777
Reports to shareholders ............................................... 15,874
Legal ................................................................. 4,124
Registration fees ..................................................... 10,056
Other ................................................................. 4,869
----------------
1,263,366
-------------------------------------------------------------------------------------------
Net investment income 7,657,259
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ........................................................... 1,985,378
Futures ............................................................... 182,648
----------------
2,168,026
Net unrealized appreciation (depreciation) on investments during
the period .......................................................... 7,270,820
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 9,438,846
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 17,096,105
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29 - Scudder California Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Six Months
Ended
September 30, Year Ended
1998 March 31,
Increase (Decrease) in Net Assets (Unaudited) 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ............................................ $ 7,657,259 $ 14,707,556
Net realized gain (loss) from investment transactions ............ 2,168,026 1,470,400
Net unrealized appreciation (depreciation) on
investment transactions during the period ...................... 7,270,820 17,754,593
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ..................................................... 17,096,105 33,932,549
---------------- ----------------
Distributions to shareholders:
From net investment income ....................................... (7,657,259) (14,707,556)
---------------- ----------------
From net realized gains from investment transactions ............. -- (567,059)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ........................................ 28,011,786 57,885,567
Net asset value of shares issued to shareholders in
reinvestment of distributions .................................. 4,855,745 9,574,561
Cost of shares redeemed .......................................... (23,344,645) (50,245,259)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ................................................... 9,522,886 17,214,869
---------------- ----------------
Increase (decrease) in net assets ................................ 18,961,732 35,872,803
Net assets at beginning of period ................................ 324,448,844 288,576,041
---------------- ----------------
Net assets at end of period ...................................... $ 343,410,576 $ 324,448,844
---------------- ----------------
Other Information
- ----------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ........................ 29,339,439 27,774,183
---------------- ----------------
Shares sold ...................................................... 2,526,326 5,326,399
Shares issued to shareholders in reinvestment of
distributions .................................................. 436,974 880,019
Shares redeemed .................................................. (2,109,227) (4,641,162)
---------------- ----------------
Net increase (decrease) in Fund shares ........................... 854,073 1,565,256
---------------- ----------------
Shares outstanding at end of period .............................. 30,193,512 29,339,439
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30 - 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,
1998 Years Ended March 31,
(Unaudited) 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
----------------------------------------------------------------------------
Net asset value, beginning of period ................ $ 11.06 $ 10.39 $ 10.36 $ 10.07 $ 10.02 $ 11.05
----------------------------------------------------------------------------
Income from investment operations:
Net investment income ............................... .26 .52 .52 .51 .51 .53
Net realized and unrealized gain (loss) on
investment transactions ........................... .31 .69 .04 .29 .14 (.35)
----------------------------------------------------------------------------
Total from investment operations .................... .57 1.21 .56 .80 .65 .18
----------------------------------------------------------------------------
Less distributions:
From net investment income .......................... (.26) (.52) (.52) (.51) (.51) (.53)
From net realized gains on investment
transactions ...................................... -- (.02) (.01) -- (.09) (.63)
In excess of net realized gains ..................... -- -- -- -- -- (.05)
----------------------------------------------------------------------------
Total distributions ................................. (.26) (.54) (.53) (.51) (.60) (1.21)
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Net asset value, end of period ...................... $ 11.37 $ 11.06 $ 10.39 $ 10.36 $ 10.07 $ 10.02
----------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return (%) .................................... 5.22** 11.85 5.44 8.01 6.75 1.30
Ratios and Supplemental Data
Net assets, end of period ($ millions) .............. 343 324 289 293 294 325
Ratio of operating expenses to average daily
net assets (%) .................................... .77* .78 .78 .77 .80 .78
Ratio of net investment income to average daily
net assets (%) .................................... 4.66* 4.79 4.98 4.88 5.18 4.85
Portfolio turnover rate (%) ......................... 46.0* 21.5 70.8 49.2 87.3 126.5
</TABLE>
* Annualized
** Not annualized
31 - Scudder California Tax Free Fund
<PAGE>
Notes to Financial Statements (Unaudited)
A. Significant Accounting Policies
Scudder California Tax Free Money Fund ("Tax Free Money Fund"), a nondiversified
fund, and Scudder California Tax Free Fund ("Tax Free Fund"), a diversified
fund, are each a series of Scudder California Tax Free Trust (the "Trust") which
is organized as a Massachusetts business trust and registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company.
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Funds in the
preparation of their financial statements.
Security Valuation. Tax Free Money Fund values all portfolio securities
utilizing the amortized cost method permitted in accordance with Rule 2a-7 under
the 1940 Act and pursuant to which Tax Free Money Fund must adhere to certain
conditions. Under this method, which does not take into account unrealized gains
and losses on securities, an instrument is initially valued at its cost and
thereafter assumes a constant accretion/amortization to maturity of any
discount/premium.
Tax Free Fund's portfolio debt securities with remaining maturities greater than
sixty days are valued by pricing agents approved by the Officers of the Fund,
whose quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
Money market investments purchased with an original maturity of sixty days or
less are valued at amortized cost.
When-issued and Forward Delivery Securities. The Tax Free Fund may purchase
securities on a when-issued or forward delivery basis, for payment and delivery
at a later date. The price of such securities, which may be expressed in yield
terms, is fixed at the time the commitment to purchase is made, but delivery and
payment take place at a later time. At the time the 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. The Fund will establish a segregated account in
which it will maintain cash and liquid debt securities equal in value to
commitments for when-issued or forward delivery securities.
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 six months
ended September 30, 1998, the Tax Free Fund purchased interest rate futures to
manage the duration of the portfolio and 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
32 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
into a closing transaction, the Tax Free Fund will realize a gain or loss equal
to the difference between the value of the futures contract to sell and the
futures contract to buy. Futures contracts are valued at the most recent
settlement price.
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Tax Free Fund's ability to
close out a futures contract prior to the settlement date and that a change in
the value of a futures contract may not correlate exactly with changes in the
value of the securities or currencies hedged. When utilizing futures contracts
to hedge, the Tax Free Fund gives up the opportunity to profit from favorable
price movements in the hedged positions during the term of the contract.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Tax Free Fund if the option is exercised. During
the six months ended September 30, 1998, 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.
33 - 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, as amended, 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, 1998, 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 ($7,500), March 31, 2003 ($55,000),
March 31, 2004 ($18,000) and March 31, 2005 ($500), the respective expiration
dates, whichever occurs first.
As of March 31, 1998, the Tax Free Fund had a net tax basis capital loss
carryforward of approximately $5,500,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until March 31, 2001 ($5,100,000) and March 31, 2002 ($400,000), 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 their 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, 1998, purchases and sales of long-term
municipal securities aggregated $81,765,796 and $74,102,552, respectively, for
the Tax Free Fund.
The aggregate face value of futures contracts opened and closed during the six
months ended September 30, 1998 for the Tax Free Fund, was $140,903,918.
C. Related Parties
Under the Investment Management Agreements (each an "Agreement" and collectively
the "Agreements") with Scudder Kemper Investments, Inc. (the "Adviser"), 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
34 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
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. 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 these Agreements. For the six months
ended September 30, 1998, the fee for the Tax Free Fund pursuant to these
Agreements amounted to $1,010,483, of which $175,537 is unpaid at September 30,
1998. This was equivalent to an annualized effective rate of .62% of the Fund's
average daily net assets.
With respect to Tax Free Money Fund, the Adviser has agreed not to impose all or
a portion of its management fee until July 31, 1999 and during such period to
maintain the annualized expenses of Tax Free Money Fund at not more than .60% of
average daily net assets. For the six months ended September 30, 1998, the
Adviser did not impose a portion of its fee amounting to $65,230, and the
portion imposed amounted to $168,467, of which $16,030 is unpaid at September
30, 1998.
On September 7, 1998, Zurich Insurance Company ("Zurich"), majority owner of the
Adviser, entered into an agreement with B.A.T Industries p.l.c. ("B.A.T")
pursuant to which the financial services businesses of B.A.T were combined with
Zurich's businesses to form a new global insurance and financial services
company known as Zurich Financial Services. Upon consummation of the
transaction, each Fund's investment management agreement with Scudder Kemper was
deemed to have been assigned and, therefore, terminated. The Board of Trustees
of the Funds has approved new investment management agreements with Scudder
Kemper, which are substantially identical to the former investment management
agreements, except for the dates of execution and termination. The Board of
Trustees of the Funds will seek shareholder approval of the new investment
management agreements through a proxy solicitation that is currently scheduled
to conclude in mid-December.
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, 1998, $29,829 and $74,742 were charged by SSC to
Tax Free Money Fund and Tax Free Fund, of which $4,787 and $12,749 are unpaid at
September 30, 1998, respectively.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Funds. For the six months
ended September 30, 1998, SFAC imposed fees amounting to $15,000 and $34,275 of
which $2,500 and $5,865 are unpaid at September 30, 1998 for the Tax Free Money
Fund and Tax Free Fund, respectively.
Each Fund pays each Trustee not affiliated with the Adviser an annual retainer
allocated between the Funds, plus specified amounts for attended board and
committee meetings. For the six months ended September 30, 1998, Trustees' fees
and expenses aggregated $9,562 and $15,404 for Tax Free Money Fund and Tax Free
Fund, respectively.
35 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Officers and Trustees
Daniel Pierce*
President and Trustee
Henry P. Becton, Jr.
Trustee; President and
General Manager, WGBH Educational
Foundation
Dawn-Marie Driscoll
Trustee; President, Driscoll
Associates; Executive Fellow,
Center for Business Ethics,
Bentley College
Peter B. Freeman
Trustee; Corporate Director and
Trustee
George M. Lovejoy, Jr.
Trustee; President and Director,
Fifty Associates
Wesley W. Marple, Jr.
Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
Trustee; Managing Partner,
Technology Equity Partners
Jerard K. Hartman*
Vice President
Thomas W. Joseph*
Vice President
Jeremy L. Ragus*
Vice President
Rebecca L. Wilson*
Vice President
Thomas F. McDonough*
Vice President and Secretary
John R. Hebble*
Treasurer
Caroline Pearson*
Assistant Secretary
* Scudder Kemper Investments, 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--
Prime Reserve Shares*
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 Corporate Bond 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 Dividend & Growth Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
Scudder Real Estate Investment 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 Equity
- -------------
Worldwide
Scudder Global Fund
Scudder International Value Fund
Scudder International Growth and Income Fund
Scudder International Fund++
Scudder International Growth 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.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology Fund
Preferred Series
- ----------------
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small
Company Fund
Retirement Programs and Education Accounts
- --------------------------------------------------------------------------------
Retirement Programs
- -------------------
Traditional IRA
Roth IRA
SEP IRA
Keogh Plan
401(k), 403(b) Plans
Scudder Horizon Plan**+++ +++
(a variable annuity)
Education Accounts
- ------------------
Education IRA
UGMA/UTMA
Closed-End Funds#
- --------------------------------------------------------------------------------
The Argentina Fund, Inc.
The Brazil Fund, Inc.
The Korea Fund, Inc.
Montgomery Street Income Securities, Inc.
Scudder Global High Income Fund, Inc.
Scudder New Asia Fund, Inc.
Scudder New Europe Fund, Inc.
Scudder Spain and Portugal 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. ***Only the Scudder Shares of the Fund are part
of the Scudder Family of Funds. ++Only the International Shares of the Fund are
part of the Scudder Family of Funds. +++ +++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 Kemper Investments, Inc., are traded on the New York Stock Exchange and,
in some cases, on various other 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 money is Lets you purchase Scudder fund shares
electronically debited from your bank account monthly to electronically, avoiding potential mailing delays;
regularly purchase fund shares and "dollar cost average" money for each of your transactions is
-- buy more shares when the fund's price is lower and electronically debited from a previously designated bank
fewer when it's higher, which can reduce your average account.
purchase price over time.*
Automatic Dividend Transfer Payroll Deduction and Direct Deposit
The most timely, reliable, and convenient way to Have all or part of your paycheck -- even government
purchase shares -- use distributions from one Scudder checks -- invested in up to four Scudder funds at
fund to purchase shares in another, automatically one time.
(accounts with identical registrations or the same
social security or tax identification number).
* Dollar cost averaging involves continuous investment in securities regardless of price
fluctuations and does not assure a profit or protect against loss in declining markets.
Investors should consider their ability to continue such a plan through periods of low price
levels.
Around-the-clock electronic account service and information, including some transactions:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Automated Information Line: SAIL(TM) -- Scudder's Web Site -- www.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 previously designated.
Distributions Direct
Automatically deposits your fund distributions into the
bank account you designate within three business days
after each distribution is paid.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
38 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Mutual Funds and More -- Brokerage and Guidance Services:
- ------------------------------------------------------------------------------------------------------------------------------
Scudder Brokerage Services Scudder Portfolio Builder
Offers you access to a world of investments, A free service designed to help suggest ways investors like
including stocks, corporate bonds, Treasuries, plus you can diversify your portfolio among domestic and global,
over 8,000 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
800 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 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
</TABLE>
39 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
About the Fund's Adviser
Scudder Kemper Investments, Inc., is one of the largest and most experienced
investment management oganizations worldwide, managing more than $230 billion in
assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts. It is one of the ten largest mutual fund companies in the
United States.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 79
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Group. As a result, Zurich's subsidiary, Zurich Kemper Investments,
Inc., with 50 years of mutual fund and investment management experience, was
combined with Scudder. Headquartered in New York, Scudder Kemper Investments
offers a full range of investment counsel and asset management capabilities,
based on a combination of proprietary research and disciplined, long-term
investment strategies. With its global investment resources and perspective,
the firm seeks opportunities in markets throughout the world to meet the needs
of investors.
Scudder Kemper Investments, Inc., the global asset management firm, is a member
of the Zurich Group. The Zurich Group is an internationally recognized leader in
financial services, including property/casualty and life insurance, reinsurance,
and asset management.
Shares of the Funds are not insured or guaranteed by the U.S. Government.
Scudder California Tax Free Money Fund seeks to maintain a constant net asset
value of $1.00 per share but there can be no assurance that the stable net
asset value will be maintained.
This information must be preceded or accompanied by a current prospectus.
Portfolio changes should not be considered recommendations for action by
individual investors.
SCUDDER
[LOGO]
