Scudder
California
Tax Free Money Fund
Scudder
California
Tax Free Fund
Annual Report
March 31, 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.
A pure no-load(TM) fund 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
3/31/98: $71 million
- --------------------------------------------------------------------------------
o Scudder California Tax Free Money Fund offered a seven-day effective yield of
2.95% on March 31, 1998, equivalent to a 5.39% taxable yield for investors in
the top federal and state income tax brackets.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
7-Day Effective Yield
on March 31, 1998
BAR CHART DATA:
Scudder
California Taxable yield
Tax Free needed to equal
Money Fund the Fund's yield
-------------- -----------------
2.95% 5.39%
Table of Contents
4 Letter from the Fund's President 33 Notes to Financial Statements
7 Portfolio Management Discussion 38 Report of Independent Accountants
13 Glossary of Investment Terms 39 Tax Information
14 Investment Portfolio 40 Shareholder Meeting Results
17 Financial Statements 44 Officers and Trustees
20 Financial Highlights 45 Investment Products and Services
46 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
3/31/98: $324 million
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o Scudder California Tax Free Fund provided a 4.20% 30-day net annualized SEC
yield on March 31, 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 7.67%. The Fund posted a solid 11.85% total return for its most recent fiscal
year ended March 31, 1998.
THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART TITLE:
30-Day Net Annualized SEC Yield
on March 31, 1998
BAR CHART DATA:
Scudder Taxable yield
California needed to equal
Tax Free Fund the Fund's yield
------------- ----------------
4.20% 7.67%
Table of Contents
4 Letter from the Fund's President 33 Notes to Financial Statements
5 Performance Update 38 Report of Independent Accountants
6 Portfolio Summary 39 Tax Information
9 Portfolio Management Discussion 40 Shareholder Meeting Results
13 Glossary of Investment Terms 44 Officers and Trustees
21 Investment Portfolio 45 Investment Products and Services
29 Financial Statements 46 Scudder Solutions
32 Financial Highlights
3 - Scudder California Tax Free Fund
<PAGE>
Letter from the Funds' President
Dear Shareholders,
We are pleased to report to you concerning the performance of Scudder
California Tax Free Money Fund and Scudder California Tax Free Fund over their
most recent fiscal year ended March 31, 1998. Scudder California Tax Free Money
Fund posted a 5.39% tax equivalent yield based on the maximum federal and state
tax rates at the close of the period.
Scudder California Tax Free Fund posted a 4.20% 30-day net annualized SEC
yield as of March 31, equivalent to a taxable yield of 7.67% for investors in
the top California tax bracket. In addition, the Fund earned a solid total
return of 11.85% for the 12 months ended March 31. Please read the portfolio
management discussions beginning on page 7 for more information.
As of January 1, 1998, the Fund's investment adviser changed its name to
Scudder Kemper Investments, Inc., from Scudder, Stevens & Clark, Inc., pursuant
to the acquisition of a majority interest in Scudder, Stevens & Clark by Zurich
Insurance Company, and the combining of Scudder's business with that of Zurich
Kemper Investments, Inc. As of January 1, we also welcomed a new portfolio
management team for Scudder California Tax Free Money Fund: Frank J. Rachwalski,
Jr., Lead Portfolio Manager, and Jerri I. Cohen, Portfolio Manager, with a
combined 42 years of investment industry experience.
For those of you interested in new Scudder products, we recently introduced
three industry sector funds as a part of our Choice Series: Scudder Financial
Services Fund, which seeks long-term growth by investing in financial services
companies in the U.S. and abroad; Scudder Health Care Fund, which seeks
long-term growth from health care companies located around the world; and
Scudder Technology Fund, which pursues long-term growth by investing in
companies that develop, produce, or distribute technology. In addition, April 6,
1998, marked the debut of our newest entrant in the growth and income category:
Scudder Real Estate Investment Fund, investing in equity securities of companies
in the real estate industry. Please see page 45 for more information on Scudder
products and services.
As always, please call a Scudder Investor Information representative at
1-800-225-2470 if you have questions about your Fund. Page 46 provides more
information on how to contact Scudder. Thank you for choosing Scudder 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 March 31, 1998
- ----------------------------------------------------------------
Fund Index Comparisons
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Total Return
- --------------------------------------------
Period Ended Growth of Average
3/31/98 $10,000 Cumulative Annual
- --------------------------------------------
Scudder California Tax Free Fund
- --------------------------------------------
1 Year $ 11,185 11.85% 11.85%
5 Year $ 13,775 37.75% 6.61%
10 Year $ 22,731 127.31% 8.56%
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Lehman Brothers Municipal Bond Index
- --------------------------------------------
1 Year $ 11,073 10.73% 10.73%
5 Year $ 13,911 39.11% 6.82%
10 Year $ 22,289 122.89% 8.34%
- --------------------------------------------
- -----------------------------------------------------------------
Growth of a $10,000 Investment
- -----------------------------------------------------------------
A chart in the form of a line graph appears here,
illustrating the Growth of a $10,000 Investment.
The data points from the graph are as follows:
SCUDDER CALIFORNIA TAX FREE FUND
Year Amount
- -----------------------
'88 $10,000
'89 $10,980
'90 $11,926
'91 $12,944
'92 $14,334
'93 $16,502
'94 $16,716
'95 $17,844
'96 $19,274
'97 $20,322
'98 $22,731
LEHMAN BROTHERS MUNICIPAL BOND INDEX
Year Amount
- -----------------------
'88 $10,000
'89 $10,719
'90 $11,851
'91 $12,943
'92 $14,238
'93 $16,022
'94 $16,393
'95 $17,611
'96 $19,088
'97 $20,129
'98 $22,289
Yearly periods ended March 31
The unmanaged Lehman Brothers Municipal Bond Index is a market value weighted
measure of municipal bonds issued across the United States. Index issues have
a credit rating of at least Baa and a maturity of at least two years. Index
returns assume reinvestment of dividends and, unlike Fund returns, do not
reflect any fees or expenses.
- -----------------------------------------------------------------
Returns and Per Share Information
- -----------------------------------------------------------------
A chart in the form of a bar graph appears here,
illustrating the Fund Total Return (%) and Index Total
Return (%) with the exact data points listed in the table
below.
Yearly Periods Ended March 31
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998
----------------------------------------------------------------------------------------
NET ASSET VALUE... $ 10.26 $ 10.29 $ 10.41 $ 10.60 $ 11.05 $ 10.02 $ 10.07 $ 10.36 $ 10.39 $ 11.06
INCOME DIVIDENDS.. $ .68 $ .65 $ .63 $ .61 $ .59 $ .53 $ .51 $ .51 $ .52 $ .52
CAPITAL GAINS
AND OTHER
DISTRIBUTIONS..... $ -- $ .19 $ .09 $ .28 $ .49 $ .68 $ .09 $ -- $ .01 $ .02
FUND TOTAL
RETURN (%)........ 9.80 8.62 8.53 10.74 15.13 1.30 6.75 8.01 5.44 11.85
INDEX TOTAL
RETURN (%)........ 7.21 10.56 9.22 10.02 12.52 2.32 7.43 8.38 5.45 10.73
</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 March 31, 1998
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Diversification
- ---------------------------------------------------------------------------
Toll Revenue/Transportation 12%
Hospital/Health 12%
County General Obligation/
Lease 11%
Housing Finance Authority 10%
Other General Obligation/Lease 9%
Sales/Special Tax 9%
Pollution Control/Industrial
Development 6%
School District/Lease 5%
Revenue/Special Assessment 5%
Miscellaneous Municipal 21%
- --------------------------------------
100%
- --------------------------------------
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
The Fund invests in a broad
selection of California tax-free
bonds.
- --------------------------------------------------------------------------
Quality
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AAA* 51%
AA 6%
A 22%
BBB 12%
Not Rated 9%
- --------------------------------------
100%
- --------------------------------------
Weighted average quality: AA
*Includes Cash Equivalents
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
Overall portfolio quality remains
high, with over 75% of portfolio
securities rated A or better as of
March 31.
- --------------------------------------------------------------------------
Effective Maturity
- --------------------------------------------------------------------------
Less than 1 year 1%
1-5 years 14%
5-10 years 27%
10-15 years 31%
Greater than 15 years 27%
- --------------------------------------
100%
- --------------------------------------
Weighted average effective maturity: 11.8 years
A graph in the form of a pie chart appears here,
illustrating the exact data points in the above table.
We continue to focus on the
purchase of noncallable bonds
with maturities of 15 years or
less.
- -----------------------------------------------------------------------------
For more complete details about the Fund's investment portfolio,
see page 21.
6 - Scudder California Tax Free Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Money Fund
Dear Shareholders,
During Scudder California Tax Free Money Fund's most recent fiscal year,
interest rates of tax-exempt money fund instruments drifted downward in the face
of healthy demand for these securities, no action on interest rates by the
Federal Reserve, and a vibrant U.S. economy accompanied by low inflation. The
Fund's 7-day effective yield as of March 31 was 2.95%. For investors in the
highest combined state and federal income tax bracket, the Fund's yield equaled
a 5.39% compounded taxable yield, higher than the 5.03% average for taxable
money funds, according to IBC Financial Data, Inc., an independent firm that
tracks money fund performance. Our strategy during this period was to purchase
tax-exempt commercial paper -- which enables the buyer to select a specific
maturity date -- with three-, four-, and five-month maturities. We also
attempted to obtain attractive value by concentrating our purchases during
periods of seasonal market weakness.
With the State's economy continuing to grow, barring any downturn in the U.S.
economy caused by aftershocks from the Asian crisis, we believe the California
tax-free money market and the Fund should perform well over the coming months.
We will continue to seek to take advantage of seasonal market weakness, such as
in April, when last-minute taxpayers sell their securities and create a
7 - Scudder California Tax Free Money Fund
<PAGE>
temporary surge of supply that lasts into May. Our continuing goal is to provide
California Fund shareholders with a competitive double-tax-free yield by
searching for high-quality, short-term municipal securities while actively
managing the Fund's average maturity.
Sincerely,
Your Portfolio Management Team
/s/Frank J. Rachwalski, Jr. /s/Jerri I. Cohen
Frank J. Rachwalski, Jr. Jerri I. Cohen
Scudder California Tax Free Money Fund:
A Team Approach to Investing
Scudder California Tax Free Money Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals who each play an important
role in the Fund's management process. Team members work together to develop
investment strategies and select securities for the Fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders, and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits Fund investors
by bringing together many disciplines and leveraging our extensive resources.
Lead Portfolio Manager Frank J. Rachwalski, Jr. assumed responsibility for
setting the Fund's investment strategy and for overseeing the Fund's
day-to-day management in January, 1998. Mr. Rachwalski has been responsible
for the trading and portfolio management of money market funds since 1974.
Jerri I. Cohen, Portfolio Manager, joined the Fund's team in January 1998. Ms.
Cohen, who has been with the Adviser since 1981, has over 15 years of
experience in the financial industry, including five years in tax-exempt money
fund investing.
8 - Scudder California Tax Free Money Fund
<PAGE>
Portfolio Management Discussion
Scudder California Tax Free Fund
Dear Shareholders,
For its most recent fiscal year ended March 31, 1998, Scudder California Tax
Free Fund posted a solid total return as interest rates continued a slow and
steady decline against a backdrop of low inflation and healthy economic growth.
The Fund's 11.85% total return for the period consisted of a $0.67 increase in
net asset value to $11.06 per share, income distributions of $0.52 per share,
and a short-term capital gain distribution of $0.02 per share. This return
outpaced the 10.85% average of 104 similar funds tracked by Lipper over the
12-month period. In addition, the Fund ranked among the top one third in total
return among its peers for the one-, three-, five-, and ten-year periods ended
March 31, 1998.
California Update
California's economy has a full head of steam, and is leading the country in job
growth with its shift from defense and aerospace industries to a new reliance on
technology, multimedia, and trade. Unemployment is trending down, personal
income continues to increase, deficit borrowing has ceased, and the State is
beginning to replenish its thin reserves. During the 12-month period from
December 1996 to December 1997, the State added almost 480,000 jobs, the largest
increase in 13 years. This growth brought the State's unemployment rate down to
6.3% by the end of 1997, compared with the national average of 4.9%. In February
1998 the State's unemployment rate hit a seven-year low of 5.9%.
Scudder California Tax Free Fund:
Superior Performance Across Maturities
(Average annual returns for periods ended March 31, 1998)
----------------------------------------------------------------
Scudder Number
California Lipper of
Tax Free Average California
Fund Annual State Funds Percentile
Period Return Return Rank Tracked Rank
-----------------------------------------------------------------
1 Year 11.85% 10.85% 22 of 104 Top 21%
3 Years 8.40% 7.77% 22 of 85 Top 26%
5 Years 6.61% 6.31% 18 of 54 Top 33%
10 Years 8.56% 7.87% 5 of 30 Top 17%
Past performance does not guarantee future results.
9 - Scudder California Tax Free Fund
<PAGE>
International trade is a large part of the State's economy. California sells its
exports to diverse markets, although its largest trading partners are located in
Asia, which accounts for 54% of its exports. The recent Asian economic "flu" is
causing a decline in exports to Asia, but due to the large growth in sales to
Mexico and Europe, state officials believe the impact from Asian weakness will
be minimal. In 1997 the State's gross state product passed the $1 trillion mark,
and as a standalone economy, California ranks seventh in the world, ahead of
China and behind the United Kingdom. Overall, California is benefiting from a
strong economy and improved cash flow.
Steady Growth and
Low Inflation
The long-running U.S. economic scenario of moderate growth and low inflation
forges on. Asia, expected by many to export its way out of economic crisis, and
in doing so, derail U.S. growth, has so far increased exports only modestly. At
the same time, the U.S. bond market has benefited from Federal Reserve inaction
on interest rates, falling commodity prices, mixed economic statistics, and
portfolio rebalancing by investors who have acted to reduce the overweighting of
stocks in their portfolios. Moreover, the municipal bond market has enjoyed its
first significant increase in investor interest in four years. During the Fund's
most recent fiscal year, yields of 10-year Treasury bonds declined 1.3
percentage points and their prices rose 9.3%, while yields of comparable
municipal bonds declined almost three quarters of a percentage point and their
prices increased 5.2%.
THE PRINTED DOCUMENT CONTAINS A LINE CHART HERE
LINE CHART TITLE:
Municipal Yields Compared with Inflation March 31, 1995 - March 31, 1998
LINE CHART DATA:
-----------------------------------------------------
10-year
CPI municipal bonds
-----------------------------------------------------
3/95 2.81% 4.90%
2.73 4.65
2.90 5.00
1/96 2.95 5.15
2.99 5.00
3.04 4.85
2.50 5.10
1/97 2.23 4.75
2.08 4.50
1.84 4.60
1.60 4.20
1.40 4.30
3/98 1.40 4.50
(Chart indicates a 3.10% spread between the 10-year municipal bonds at 4.50%
(3/98) and the CPI at 1.40% (3/98).)
Municipal yields represented by 10-year, AAA-rated municipal bonds.
Inflation represented by CPI (Consumer Price Index).
Sources: Salomon Brothers; Datastream
- ----------
It's important to note that in the current environment of lower municipal bond
yields, "real" interest rates -- interest rates minus increases in the CPI, a
recognized barometer of inflation -- have rarely been higher. Real interest
rates depict the level of income bondholders actually earn, taking into account
the erosion in value of their principal from inflation. The chart above
illustrates the widening gap between yield levels and inflation since March
1995.
10 - Scudder California Tax Free Fund
<PAGE>
Focus on Intermediate Noncallable Bonds
As a means of locking in a substantial income stream for Scudder California Tax
Free Fund over time, we continue to focus on the purchase of noncallable bonds
with maturities of 15 years or less. As of March 31, over 70% of the Fund's
securities had maturities in this range. We also continue to look for
opportunities to add high yielding BBB-rated and non-rated bonds to the
portfolio. Higher yielding bonds, while carrying some additional credit risk,
generally exhibit less interest rate sensitivity than municipal bonds rated A or
above. The Fund held 21% of bonds in these two categories as of the end of
March. During the most recent fiscal year, the Fund benefited from credit
upgrades to "AAA" on San Joaquin toll road bonds as portions were refunded. In
addition, during its most recent fiscal year the Fund invested in a significant
new nonrated position for a wood recycling and fiberboard project, which carries
a high interest coupon and has already experienced significant price
appreciation. (For a summary of the Fund's quality, diversification, and
maturity structure, see page 6.)
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 toll revenue/transportation,
hospital/health care, and general obligation bonds. During the 12-month period,
the Fund benefited from an upgrade by Fitch Investors Service ratings agency of
California general obligation bonds from A+ to AA-.
The Fund seeks to provide investors with a competitive level of federal and
state tax-exempt income as well as the best possible total return performance.
Our 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.
Outlook
In the words of Federal Reserve Chairman Greenspan, the U.S. economy delivered
"exemplary performance" in 1997, with real GNP growth of 3.8%. We believe this
level of growth will be difficult to maintain in 1998 because of two current
drags on the economy -- burdensome consumer debt, and a high level of corporate
write-offs -- and one that still looms -- possible economic fallout from Asia's
troubles. Any slowdown from current levels of growth would provide a basis for a
sustained decline in interest rates and favorable bond market performance. At
the same time, we believe that the Fed will stand ready to raise interest rates
at the first sign of runaway growth.
11 - Scudder California Tax Free Fund
<PAGE>
We will continue our 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
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
Scudder California Tax
Free Fund:
A Team Approach to Investing
Scudder California Tax Free Fund is managed by a team of Scudder Kemper
Investments, Inc. (the "Adviser") professionals, who each play an important
role in the Fund's management process. Team members work together to develop
investment strategies and select securities for the Fund's portfolio. They are
supported by the Adviser's large staff of economists, research analysts,
traders and other investment specialists who work in our offices across the
United States and abroad. We believe our team approach benefits Fund investors
by bringing together many disciplines and leveraging our extensive resources.
Jeremy L. Ragus, Lead Portfolio Manager, has had responsibility for Scudder
California Tax Free Fund's day-to-day management since 1990. Mr. Ragus, who
joined the Adviser in 1990, has 16 years of experience in municipal investing
and research. Christopher J. Mier, Portfolio Manager, began managing the Fund
in 1998. Mr. Mier has been with the Adviser since 1986 and has over 20 years
of experience in municipal bonds.
12 - 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)
13 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Investment Portfolio as of March 31, 1998
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
Municipal Investments 100.0%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California
Anaheim, CA, Electric Utility Revenue, 3.4%, 7/13/98 ........................... 1,750,000 A1+ 1,750,000
Anaheim, CA, Housing Authority, Multi-Family Housing Revenue, Harbor Cliff
Project, Variable Rate Demand Note, 3.3%, 7/1/06* ............................ 400,000 MIG1 400,000
California Revenue Anticipation Note, 4.5%, 6/30/98 ............................ 1,000,000 MIG1 1,002,160
California Health Facilities Finance Authority:
Catholic Healthcare West, Series C, Variable Rate Demand Bonds,
3.3% 7/1/20* (c) .......................................................... 1,000,000 A1+ 1,000,000
Pooled Loan Program, Series 1985 B, Weekly Demand Note, 3.4%, 10/1/10* (c) ... 485,000 MIG1 485,000
California Pollution Control Finance Authority Revenue:
Colmac, Subject to AMT, Weekly Demand Note, 3.3%, 12/1/16* ................... 1,900,000 A1+ 1,900,000
Pacific Gas & Electric Company:
Series 1996D, 3.25%, 6/15/98 ................................................ 1,000,000 A1+ 1,000,000
Series 1997B, Weekly Demand Note, 3.75%, 11/1/26* ........................... 900,000 A1+ 900,000
Subject to AMT, Weekly Demand Note, 3.6%, 1/1/10* ........................... 1,500,000 MIG1 1,500,000
Solid Waste Disposal:
CR&R Inc. Project, Series 1995A, Weekly Demand Notes, 3.4%, 10/1/10* ........ 1,540,000 SKI 1,540,000
Western Waste Ind., Series 1994, Subject to AMT, Weekly Demand Note,
3.85%, 10/1/06* .......................................................... 1,300,000 MIG1 1,300,000
Southern California Edison, Series 1985C, 3.45%, 6/25/98 ..................... 1,000,000 P1 1,000,000
Chowchilla, CA, Unified High School District, Tax & Revenue, General Obligation
Notes, Series 1997, 4.25%, 6/30/98 ........................................... 1,300,000 SP1+ 1,301,170
Contra Costa County, CA, Cerrito Royale Project, Series 1987A, Weekly Demand
Note, 3.6%, 12/1/17* ......................................................... 1,400,000 MIG1 1,400,000
Eastern Municipal Water District, CA, Water & Sewer Revenues, Series 1993B,
Weekly Demand Notes, 3.3%, 7/1/20* (c) ....................................... 1,100,000 MIG1 1,100,000
Huntington Beach, CA, Multi-Family Housing Revenue, River Meadows Apartments,
Series B, Weekly Demand Bonds, 3.25%, 10/1/05* ............................... 800,000 A1+ 800,000
Irvine Ranch Water District, CA, Orange County, Series 1985 C, Variable
Rate Demand Bond, 3.8%, 10/1/10* ............................................. 800,000 MIG1 800,000
Kern County, CA, Board of Education, Tax and Revenue Anticipation Notes,
Series 1998, 4.5%, 7/7/98 .................................................... 2,000,000 SP1+ 2,003,061
Kern County, CA, Certificate of Participation, Public Facilities Project:
Series A, Variable Rate Demand Bonds, 3.3%, 8/1/06* .......................... 1,200,000 MIG1 1,200,000
Series D, Variable Rate Demand Bonds, 3.3%, 8/1/06* .......................... 1,600,000 MIG1 1,600,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
14 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Lancaster, CA, Redevelopment Agency, Multi-Family Housing Revenue, Westwood
Park Apartments, Variable Rate Demand Bonds, 3.3%, 12/1/07* .................. 500,000 MIG1 500,000
Los Angeles County Metropolitan Transportation Authority, Sales Tax Revenue,
Floating Rate Receipts, Series 1996, 3.7%, 7/1/17* ........................... 1,500,000 A1+ 1,500,000
Los Angeles County, CA, Certificate of Participation, County Museum of Arts,
Series 1985A, Variable Rate Demand Note, 3.25%, 11/1/05* ..................... 1,300,000 A1 1,300,000
Los Angeles County, CA, Tax and Revenue Anticipation Notes, Series 1997 A,
4.5%, 6/30/98 ................................................................ 2,200,000 SP1+ 2,203,600
Los Angeles, CA, Multi-Family Housing Revenue:
Grand Promenade Project, Series 1985, Variable Rate, 3.3%, 12/1/10* .......... 1,000,000 A1+ 1,000,000
Series K, Variable Rate Demand Bonds, 3.55%, 7/1/10* ......................... 3,100,000 A1+ 3,100,000
M-S-R Public Power Agency, San Juan Project Revenue:
Subordinate Lien, Series B, Weekly Demand Bonds, 3.35%, 7/1/22* .............. 1,000,000 A1+ 1,000,000
Series 1997G, 4.5%, 7/1/98 (c) ............................................... 1,650,000 AAA 1,654,297
Metropolitan Water District of Southern California, 3.2%, 5/14/98 .............. 1,000,000 A1+ 1,000,000
Oakland, CA, Unified School District Alameda County, Tax & Revenue Anticipation
Note, 4.25%, 10/28/98 ........................................................ 2,000,000 SP1+ 2,004,569
Ontario, CA, General Obligation, Tax and Revenue Anticipation Notes, Series 1997,
4.5%, 6/30/98 ................................................................ 1,000,000 SP1+ 1,001,400
Ontario, CA, Multi-Family Residential Mortgage Revenue (Park Centre Partners),
Variable Rate Demand Bonds, 3.3%, 8/1/07* .................................... 2,000,000 MIG1 2,000,000
Orange County, CA, Sanitation District, Series 1992 C, Daily Demand Note,
3.7%, 8/1/17* (c) ............................................................ 1,300,000 MIG1 1,300,000
San Bernadino County, CA, Certificates of Participation, County Center
Refinancing, Series 1996, Variable Rate Demand Note, 3.3%, 7/1/15* ........... 1,000,000 MIG1 1,000,000
San Bernadino County, CA, Multi-Family Housing Revenue:
Western Properties 1, Variable Rate Demand Bonds, 3.3%, 2/1/05* .............. 900,000 MIG1 900,000
Western Properties 2, Variable Rate Demand Bonds, 3.3%, 5/1/05* .............. 400,000 MIG1 400,000
Woodview Apartments Project, Variable Rate Demand Bonds, 3.45%, 4/1/07* ...... 1,100,000 MIG1 1,100,000
San Diego, CA, Multi-Family Housing Revenue, Lusk Mira Mesa Project, Issue E,
Variable Rate Demand Bond, 3.45%, 4/1/07* .................................... 1,900,000 MIG1 1,900,000
San Diego, CA, Airport, Subject to AMT, Series 1997A, 3.4%, 4/7/98 ............. 1,500,000 A1+ 1,500,000
San Diego County, CA, Tax & Revenue Anticipation Notes, 4.5%, 9/30/98 .......... 1,000,000 SP1+ 1,003,084
San Fransisco, CA, Airport, Subject to AMT, Series 1997, 3.55%, 5/6/98 ......... 1,000,000 A1+ 1,000,000
San Fransisco, CA, Airport, Subject to AMT, Series 1997, 3.4%, 5/7/98 .......... 1,000,000 A1+ 1,000,000
San Jose, CA, Clean Water Financing Sewer Revenue Bonds, Series 1995 B, Weekly
Demand Note, 3.25%, 11/15/11* (c) ............................................ 1,000,000 AAA 1,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
15 - Scudder California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Value ($)
Amount ($) (Unaudited) (Note A)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Jose, CA, Multi-Family Housing Revenue, Kimberly Woods Project, Variable
Rate Demand Bond, 3.3%, 11/1/08* ............................................. 1,600,000 MIG1 1,600,000
San Marcos, CA, Redevelopment Agency, Multi-Family Rental Housing Agency,
Variable Rate Demand Bonds, 3.8%, 6/1/05* .................................... 2,700,000 A1 2,700,000
Santa Barbara County, CA, Tax and Revenue, Anticipation Notes, Series 1997A,
4.5%, 10/1/98 ................................................................ 1,500,000 SP1+ 1,504,530
Santa Clara County, CA, Housing Authority, Fox Chase I Project, Weekly Demand
Note, 3.3%, 11/1/07* (c) ..................................................... 1,000,000 MIG1 1,000,000
Santa Clara County, CA, Tax and Revenue Anticiapation Note, Variable Rate Note,
Series 1987A, 4.2%, 6/1/15* .................................................. 1,200,000 MIG1 1,200,000
Santa Clara, CA, Electric Revenue:
Series B, Junior Lien, Variable Rate Demand Bond, 3.3%, 7/1/10* .............. 1,000,000 MIG1 1,000,000
Series C, Junior Lien, Variable Rate Demand Bond, 3.3%, 7/1/10* .............. 1,300,000 MIG1 1,300,000
Southern California Public Power Authority, Transmission Project, Series 1991,
Weekly Demand Note, 3.25%, 7/1/19* (c) ....................................... 1,300,000 A1+ 1,300,000
Puerto Rico
Puerto Rico Commonwealth Tax and Revenue Anticipation Notes, Series 1997 A,
4.5%, 7/30/98 ................................................................ 4,000,000 SP1+ 4,011,355
- ------------------------------------------------------------------------------------------------------------------------------
Total Municipal Investments (Cost $69,964,226) 69,964,226
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $69,964,226) (a) 69,964,226
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $69,964,226.
(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.
16 - Scudder California Tax Free Money Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1998
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at value (cost $69,964,226) ............................ $ 69,964,226
Receivable for investments sold ..................................... 700,316
Interest receivable ................................................. 641,373
Receivable for Fund shares sold ..................................... 60,708
Other assets ........................................................ 1,932
----------------
Total assets ........................................................ 71,368,555
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Dividends payable ................................................... 20,378
Payable for Fund shares redeemed .................................... 367,230
Accrued management fee .............................................. 23,874
Other payables and accrued expenses ................................. 410,472
----------------
Total liabilities ................................................... 821,954
-------------------------------------------------------------------------------------------
Net assets, at value $ 70,546,601
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized loss ....................................... (94,406)
Paid-in capital ..................................................... 70,641,007
-------------------------------------------------------------------------------------------
Net assets, at value $ 70,546,601
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($70,546,601 / 70,556,568 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.
17 - Scudder California Tax Free Money Fund
<PAGE>
Statement of Operations
year ended March 31, 1998
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ............................................................ $ 2,417,227
----------------
Expenses:
Management fee ...................................................... 342,520
Services to shareholders ............................................ 77,513
Custodian and accounting fees ....................................... 46,095
Trustees' fees and expenses ......................................... 16,064
Auditing ............................................................ 27,271
Reports to shareholders ............................................. 9,469
Legal ............................................................... 5,783
Registration fees ................................................... 3,588
Other ............................................................... 7,521
----------------
Total expenses before reductions .................................... 535,824
Expense reductions .................................................. (124,284)
----------------
Expenses, net ....................................................... 411,540
-------------------------------------------------------------------------------------------
Net investment income 2,005,687
-------------------------------------------------------------------------------------------
Realized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from investments ........................... 459
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 2,006,146
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder California Tax Free Money Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended March 31,
Increase (Decrease) in Net Assets 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................................ $ 2,005,687 $ 1,913,820
Net realized gain (loss) from investment transactions ........ 459 (373)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ................................................. 2,006,146 1,913,447
---------------- ----------------
Distributions to shareholders from net investment
income ..................................................... (2,005,687) (1,913,820)
---------------- ----------------
Fund share transactions at net asset value of
$1.00 per share:
Shares sold .................................................. 77,305,649 61,962,492
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 1,669,253 1,568,824
Shares redeemed .............................................. (77,124,440) (61,801,311)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions ............................................... 1,850,462 1,730,005
---------------- ----------------
Increase (decrease) in net assets ............................ 1,850,921 1,729,632
Net assets at beginning of period ............................ 68,695,680 66,966,048
---------------- ----------------
Net assets at end of period .................................. $ 70,546,601 $ 68,695,680
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - 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>
Years Ended March 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning ----------------------------------------------------------------------------------------
of period .................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
----------------------------------------------------------------------------------------
Net investment income ........... .029 .028 .032 .027 .019 .023 .035 .047 .052 .049
Less: Distributions from
net investment income ........ (.029) (.028) (.032) (.027) (.019) (.023) (.035) (.047) (.052) (.049)
Net asset value, end of ----------------------------------------------------------------------------------------
period ....................... $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) (a) ............ 2.98 2.87 3.28 2.72 1.92 2.35 3.54 4.79 5.35 5.04
Ratios and Supplemental Data
Net assets, end of period
($ millions) ................. 71 69 67 64 72 56 58 64 65 64
Ratio of operating expenses,
net to average daily net
assets (%) ................... .60 .60 .60 .60 .60 .60 .60 .65 .75 .67
Ratio of operating expenses
before expense reductions
to average daily net
assets (%) ................... .78 .79 .81 .84 .90 .86 .88 .92 .90 .84
Ratio of net investment
income to average daily
net assets (%) ............... 2.92 2.83 3.23 2.68 1.90 2.33 3.50 4.68 5.22 4.98
</TABLE>
(a) Total returns would have been lower had certain expenses not been reduced.
20 - Scudder California Tax Free Money Fund
<PAGE>
Investment Portfolio as of March 31, 1998
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
Short-Term Municipal Investments 0.5%
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California
Irvine Ranch Water District, CA, Orange County, Series 1985 C, Variable Rate
Demand Bond, 3.8%, 10/1/10* .................................................. 400,000 A1 400,000
Orange County, CA, Sanitation District, Series 1992 C, Daily
Demand Note, 3.7%, 8/1/17* ................................................... 1,100,000 MIG1 1,100,000
- ------------------------------------------------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $1,500,000) 1,500,000
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term Municipal Investments 99.5%
- ------------------------------------------------------------------------------------------------------------------------------
California
ABAG Finance Authority for Nonprofit Corporations, CA, Certificates of
Participation, 5.25%, 10/1/07 ................................................ 2,000,000 BBB 2,045,040
ABAG Financing Authority, CA, Stanford Health Systems, Certificates of
Participation, 6%, 11/1/07 (c) ............................................... 605,000 AAA 682,525
Anaheim County, CA, Convention Center Financing, Certificate of Participation,
Zero Coupon, 8/1/05 (c) ...................................................... 1,250,000 AAA 906,488
Anaheim, CA, Public Finance Authority, 5.25%, 2/1/18 (c) ....................... 2,000,000 AAA 2,021,260
Anaheim, CA, Public Financing Authority, Lease Revenue, Series 1997C, Zero
Coupon, 9/1/17 (c) ........................................................... 1,455,000 AAA 532,952
Anaheim, CA, Public Financing Authority, Lease Revenue Public
Improvements Project:
Series 1997A, 6%, 9/1/24 (c) ................................................ 3,500,000 AAA 3,993,080
Series 1997C, 6%, 9/1/10 (c) ................................................ 1,000,000 AAA 1,130,260
Series 1997C, 6%, 9/1/11 (c) ................................................ 4,570,000 AAA 5,170,727
Series 1997C, 6%, 9/1/14 (c) ................................................ 1,000,000 AAA 1,126,670
Series 1997C, 6%, 9/1/16 (c) ................................................ 1,000,000 AAA 1,127,170
Series 1997C, Zero Coupon, 9/1/18 (c) ....................................... 1,000,000 AAA 346,440
California Health Facilities Finance Authority Revenue, Capital Appreciation,
Kaiser, Series 1989A, Zero Coupon, 10/1/12 (c) ............................... 4,900,000 AAA 2,354,156
California Housing Finance Agency:
Home Mortgage Revenue:
Series F1, Subject to AMT, 6.2%, 8/1/05 (c) ................................. 840,000 AAA 890,921
Series F1, Subject to AMT, 6.3%, 8/1/06 (c) ................................. 1,310,000 AAA 1,405,420
Multi-Unit Rental Housing Revenue:
Series A, 7.3%, 8/1/99 ...................................................... 2,435,000 A 2,533,009
Series A, 7.35%, 8/1/00 ..................................................... 2,615,000 A 2,792,454
Series A, 7.4%, 8/1/01 ...................................................... 1,555,000 A 1,691,498
</TABLE>
The accompanying notes are an integral part of the financial statements.
21 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Series A, 7.45%, 8/1/02 ..................................................... 1,015,000 A 1,129,492
Series A, 7.6%, 8/1/06 ...................................................... 4,030,000 A 4,503,404
Series A, 7.65%, 8/1/07 ..................................................... 2,335,000 A 2,604,085
Series A, 7.7%, 8/1/09 ...................................................... 700,000 A 776,524
Series A, 7.75%, 8/1/16 ..................................................... 2,440,000 A 2,692,394
Series A, 7.8%, 8/1/23 ...................................................... 2,635,000 A 2,897,578
Series G, Subject to AMT, 5.7%, 2/1/07 (c) .................................. 500,000 AAA 529,470
Series G, Subject to AMT, 5.8%, 2/1/08 (c) .................................. 1,330,000 AAA 1,403,403
Series G, Subject to AMT, 5.9%, 2/1/09 (c) .................................. 200,000 AAA 207,982
Series II, 7.25%, 8/1/98 .................................................... 300,000 A 302,973
Series II, 7.3%, 8/1/99 ..................................................... 325,000 A 337,535
Series II, 7.3%, 8/1/00 ..................................................... 345,000 A 365,286
Series II, 7.3%, 8/1/01 ..................................................... 375,000 A 403,886
Series II, 7.35%, 8/1/02 .................................................... 400,000 A 435,852
Series II, 7.35%, 8/1/03 .................................................... 430,000 A 472,119
Series II, 7.35%, 8/1/04 .................................................... 460,000 A 510,388
Series II, 7.35%, 8/1/05 .................................................... 495,000 A 553,078
California Pollution Control Financing Authority:
Solid Waste Disposal Revenue, Canadian Fibre of Riverside PJ, Subject to AMT,
Series 1997A, 9%, 7/1/19 .................................................. 9,000,000 NR 9,525,960
Southern California Edison, Subject to AMT, Series A, 6.9%, 9/1/06 ........... 3,750,000 A 3,957,188
California Public Works Board, Department of Corrections:
Lease Based Revenue, Medera Prison, Series A-2, 7.4%, 9/1/10 (c) ............. 1,000,000 AAA 1,256,060
Series 1997D, 5.75%, 9/1/07 (c) .............................................. 3,500,000 AAA 3,869,460
California Public Works Board, Lease Revenue, Various State University Projects,
Series 1997A, 5.5%, 10/1/07 .................................................. 2,000,000 A 2,158,040
California Residence Efficiency Financing Authority, Certificate of
Participation, Capital Improvement Program:
Series 1997, 6%, 4/1/08 (c) ................................................. 1,335,000 AAA 1,497,122
Series 1997, 6%, 4/1/09 (c) ................................................. 1,420,000 AAA 1,596,648
Series 1997, 6%, 4/1/10 (c) ................................................. 1,500,000 AAA 1,690,530
Series 1997, 6%, 4/1/11 (c) ................................................. 1,590,000 AAA 1,794,347
California State Department of Water Resources, Central Valley Project Revenue:
Series 1997S, 5%, 12/1/22 .................................................... 5,000,000 AA 4,861,550
Series 1997S, 5%, 12/1/29 .................................................... 1,000,000 AA 967,530
</TABLE>
The accompanying notes are an integral part of the financial statements.
22 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
California Statewide Community Development Authority, Certificate of
Participation:
Lutheran Homes, 5.5%, 11/15/08 ............................................... 1,500,000 A 1,603,245
Lutheran Homes, Series 1993, 5.6%, 11/15/13 .................................. 4,750,000 A 4,955,343
Children's Hospital, Series 1993, 6%, 6/1/10 (c) ............................. 1,000,000 AAA 1,121,320
Children's Hospital, Series 1993, 6%, 6/1/08 (c) ............................. 1,700,000 AAA 1,894,344
Unihealth America, Series A, Zero Coupon, 10/1/05 (c) ........................ 1,450,000 AAA 1,036,243
Castaic Lake, CA, Water Agency, Certificate of Participation, Water System
Improvement Project, Series A, 7.25%, 8/1/07 (c) ............................. 1,000,000 AAA 1,205,920
Center, CA, Unified School District, Capital Appreciation, Series 1997C,
Zero Coupon, 9/1/14 (c) ...................................................... 2,240,000 AAA 975,229
Chino Basin, CA, Regional Financing Authority, Municipal Water District, Sewer
System, 5.9%, 8/1/11 (c) ..................................................... 1,290,000 AAA 1,446,064
Coronado, CA, Tax Anticipation Note, 6%, 9/1/07 (c) ............................ 1,150,000 AAA 1,292,451
Costa Mesa, CA, Public Financing Authority, Public Facilities Project,
Series 1993A, 5.25%, 10/1/18 ................................................. 4,500,000 A 4,460,985
Delmar, CA, Race Track Authority, Series 1996, 6%, 8/15/06 ..................... 2,000,000 NR 2,160,440
Dry Creek, CA, Joint Elementary School District, Capital Appreciation:
Series 1997A, Zero Coupon, 8/1/10 (c) ........................................ 1,120,000 AAA 622,451
Series 1997A, Zero Coupon, 8/1/11 (c) ........................................ 1,180,000 AAA 617,211
Series 1997A, Zero Coupon, 8/1/16 (c) ........................................ 555,000 AAA 216,161
Series 1997A, Zero Coupon, 8/1/19 (c) ........................................ 1,715,000 AAA 563,017
Series 1997A, Zero Coupon, 8/1/20 (c) ........................................ 1,330,000 AAA 414,415
Series 1997A, Zero Coupon, 8/1/21 (c) ........................................ 1,920,000 AAA 567,552
Series 1997A, Zero Coupon, 5/1/22 (c) ........................................ 1,385,000 AAA 393,395
Duarte, CA, Certificate of Participation, City of Hope Medical Center:
5.75%, 4/1/02 ................................................................ 3,525,000 BBB 3,688,595
5.8%, 4/1/03 ................................................................. 3,735,000 BBB 3,938,296
6%, 4/1/08 ................................................................... 3,750,000 BBB 3,962,400
Elk Grove, CA, Unified School District #1, Special Tax, Community Facilities,
6.5%, 12/1/08 (c) ............................................................ 1,000,000 AAA 1,169,730
Encinitas, CA, Series 1997A, 5%, 12/1/16 (c) ................................... 1,000,000 AAA 986,800
Foothill Eastern Transportation Corridor Agency, CA, Toll Road Revenue,
Senior Lien:
Series 1995A, Step-up Coupon, 0% to 1/1/05, 6.95% to 1/1/07 .................. 575,000 BBB 426,150
Series A, Step-up Coupon, 0% to 1/1/05, 7.1% to 1/1/11 ....................... 6,000,000 BBB 4,692,780
Series A, Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/13 ...................... 975,000 BBB 764,644
Series A, Step-up Coupon, 0% to 1/1/05, 7.15% to 1/1/14 ...................... 2,875,000 BBB 2,254,719
</TABLE>
The accompanying notes are an integral part of the financial statements.
23 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Healdsburg, CA, Unified School District, Capital Appreciation:
Series 1997, Zero Coupon, 7/15/11 (c) ........................................ 400,000 AAA 209,676
Series 1997, Zero Coupon, 7/15/12 (c) ........................................ 400,000 AAA 196,964
Series 1997, Zero Coupon, 7/15/13 (c) ........................................ 400,000 AAA 186,044
Series 1997, Zero Coupon, 7/15/14 (c) ........................................ 400,000 AAA 175,280
Inland Empire Solid Waste Financing Authority, California Landfill Improvement
Financing Project, Series 1996B, 6%, 8/1/06 (c) .............................. 1,000,000 AAA 1,103,940
La Cananda, CA, Unified School District, Capital Appreciation, Series 1995,
Zero Coupon, 8/1/18 (c) ...................................................... 2,000,000 AAA 695,900
Long Beach California Harbor, 6%, 5/15/17 (c) .................................. 2,770,000 AAA 3,082,872
Los Angeles County, CA, Certificate of Participation:
Capital Appreciation, Disney Parking Project:
Zero Coupon, 9/1/06 ......................................................... 2,500,000 A 1,630,925
Zero Coupon, 3/1/08 ......................................................... 2,780,000 BBB 1,664,469
Zero Coupon, 9/1/08 ......................................................... 4,865,000 BBB 2,838,436
Marina Del Ray:
Series 1993A, 5.75%, 7/1/98 ................................................. 1,000,000 NR 1,002,050
Series A, 6.25%, 7/1/03 ..................................................... 2,500,000 NR 2,693,875
Series A, 6.5%, 7/1/08 ...................................................... 2,500,000 NR 2,709,625
Los Angeles County, CA, Convention and Exhibition Center Authority Lease
Revenue, Series 1993A, 6.125%, 8/15/11 (c) ................................... 1,000,000 AAA 1,141,290
Los Angeles, CA, State Building Authority Lease Revenue, California Department,
General Services, Series 1993A, 5.6%, 5/1/08 ................................. 7,000,000 A 7,571,130
Metropolitan Water District, Southern California Waterworks Revenue,
Series 1996C, 5%, 7/1/37 ..................................................... 1,765,000 AA 1,697,471
Millbrae California Residential Facilities, Revenue Magnolia of Millbrae
Project, Series 1997A, 7.375%, 9/1/27 ........................................ 4,000,000 NR 4,122,720
Modesto, CA, Certificate of Participation, Community Project, Series A,
5.6%, 11/1/14 (c) ............................................................ 1,370,000 AAA 1,482,833
Modesto, CA, Wastewater Facilities Treatment Revenue, Series 1997,
6%, 11/1/11 (c) .............................................................. 1,255,000 AAA 1,421,438
Mojave Desert & Mountain Region, CA, Solid Waste Joint Powers Authority,
California Project Revenue, Subject to AMT, 7.875%, 6/1/20 ................... 2,350,000 BBB 2,712,417
Newport Mesa, CA, United School District Special Tax District Number 90-1,
Series 1996, 6.625%, 9/1/14 .................................................. 500,000 NR 515,355
Oakland, CA, Port Revenue, Subject to AMT, Series 1997G, 5.375%, 11/1/25 (c) ... 1,000,000 AAA 1,002,090
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Orange County, CA, Recovery Participation Certification, Series 1996A,
6%, 7/1/06 (c) ............................................................... 3,000,000 AAA 3,331,050
Orange County, CA, Recovery Note:
Series 1995A, 5.6%, 6/1/07 (c) ............................................... 4,430,000 AAA 4,799,373
Series 1995A, 6%, 6/1/08 (c) ................................................. 2,500,000 AAA 2,785,800
Orange County, CA, Local Transportation Authority, Sales Tax Revenue, Measure M,
4.3%, 2/15/01 (c) ............................................................ 5,000,000 AAA 5,014,650
Orange County, CA, Recovery, Certificates of Participation, Series 1996A,
6%, 7/1/08 (c) ............................................................... 1,000,000 AAA 1,123,760
Palmdale, CA, Civic Authority Revenue, Series 1994A, 6.6%, 9/1/34 .............. 3,375,000 A 3,712,871
Pomona, CA, Unified School District, General Obligation, ETM:
Series 1992B, 6.25%, 8/1/14 (c)** ............................................ 1,020,000 AAA 1,183,526
Series 1993D, 5.6%, 8/1/14 (c)** ............................................. 170,000 AAA 184,861
Series 1993D, 5.6%, 8/1/15 (c)** ............................................. 180,000 AAA 195,914
Series 1993D, 5.6%, 8/1/16 (c)** ............................................. 190,000 AAA 206,196
Series 1993D, 5.6%, 8/1/17 (c)** ............................................. 175,000 AAA 189,494
Series 1993D, 5.6%, 8/1/18 (c)** ............................................. 205,000 AAA 222,495
Port of Hueneme, CA, Certificate of Participation, Capital Improvement,
6%, 4/1/19 (c) ............................................................... 925,000 AAA 1,035,380
Richmond, CA, Joint Powers Finance Authority:
Series 1996, 5.875%, 9/1/06 .................................................. 500,000 BBB 540,070
Series 1996, 6.6%, 9/1/16 .................................................... 1,000,000 BBB 1,100,170
Riverside County, CA, Asset Leasing Corp., Leasehold Revenue Project,
Series 1997, Zero Coupon, 6/1/16 (c) ......................................... 1,000,000 AAA 392,840
Sacramento, CA, City Financing Authority Revenue:
Capital Appreciation, Tax Allocation, Series 1993B, Zero Coupon, 11/1/16 (c).. 2,685,000 AAA 1,032,409
Series 1993B, Zero Coupon, 11/1/06 (c) ....................................... 2,810,000 AAA 1,921,085
Sacramento, CA, Finance Authority Lease, Series 1993B, 5%, 11/1/14 ............. 5,200,000 AA 5,228,964
Sacramento, CA, Power Authority Cogeneration Project, Revenue Bonds,
Series 1995, 6.5%, 7/1/04 .................................................... 2,000,000 BBB 2,209,920
Saddleback Valley Unified School District, Public Financing Authority, Special
Tax Revenue:
Series 1997A, 6%, 9/1/10 (c) ................................................ 1,565,000 AAA 1,768,857
Series 1997A, 6%, 9/1/13 (c) ................................................ 1,000,000 AAA 1,127,290
Series 1997A, 6%, 9/1/14 (c) ................................................ 1,000,000 AAA 1,126,670
Series 1997A, 6%, 9/1/15 (c) ................................................ 1,000,000 AAA 1,127,830
</TABLE>
The accompanying notes are an integral part of the financial statements.
25 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
San Bernadino, CA, Certificate of Participation, Medical Center Financing
Project:
Refunding Revenue, Series 1994, 6%, 8/1/09 (c) ............................... 3,000,000 AAA 3,353,430
Refunding, Series 1994, 5.5%, 8/1/17 (c) ..................................... 3,965,000 AAA 4,188,348
San Francisco, CA, City and County Redevelopment Agency Residential Facility,
Coventry Park Project, Subject to AMT, Series 1996A, 8.5%, 12/1/26 ........... 2,000,000 NR 2,237,620
San Francisco, CA, Rapid Transit Distribution Sales Tax Revenue, 5.25%, 7/1/15.. 5,540,000 AA 5,634,789
San Francisco, CA, Redevelopment Financing Agency, Tax Allocation Revenue,
Series A, Zero Coupon, 8/1/03 (c) ............................................ 1,080,000 AAA 861,656
San Joaquin Hills, CA, Transportation Corridor Agency, Toll Road Revenue:
Capital Appreciation Refunding, Series 1997A, Zero Coupon, 1/15/10 (c) ....... 3,500,000 AAA 1,996,260
Capital Appreciation Refunding, Series 1997A, Zero Coupon, 1/15/12 (c) ....... 2,500,000 AAA 1,261,925
Junior Lien:
Series 1993, Zero Coupon, 1/1/02 ............................................ 515,000 NR 440,835
Series 1993, Zero Coupon, 1/1/04 ............................................ 1,000,000 BBB 896,470
Series 1993, Zero Coupon, 1/1/10 ............................................ 1,500,000 BBB 861,075
Zero Coupon, 1/1/06 ......................................................... 200,000 NR 141,660
Senior Lien:
Series 1993, Zero Coupon, 1/1/14 ............................................ 2,500,000 NR 1,146,750
Step-up Coupon, 0% to 1/1/02, 7.3% to 1/1/05 ................................ 2,500,000 BBB 2,293,125
Step-up Coupon, 0% to 1/1/02, 7.4% to 1/1/07 ................................ 6,000,000 BBB 5,689,380
Zero Coupon, 1/1/00 ......................................................... 1,500,000 BBB 1,398,840
Series 1997A, 1/15/03 (c) .................................................... 900,000 AAA 734,796
Series 1997A, 1/15/04 (c) .................................................... 400,000 AAA 312,148
Series 1997A, 1/15/05 (c) .................................................... 1,900,000 AAA 1,411,130
San Jose, CA, Financing Revenue, Community Facilities Project:
Zero Coupon, 11/15/03 ........................................................ 735,000 A 574,513
Zero Coupon, 11/15/04 ........................................................ 1,605,000 A 1,196,881
Zero Coupon, 11/15/05 ........................................................ 1,605,000 A 1,136,517
Zero Coupon, 11/15/06 ........................................................ 1,605,000 A 1,081,626
San Jose, CA, Unified School District, Santa Clara County, Capital Appreciation,
Series 1997A, Zero Coupon, 8/1/13 (c) ........................................ 2,445,000 AAA 1,134,651
San Mateo County, CA, Transportation District:
Series 1997A, 5.5%, 6/1/15 (c) ............................................... 2,500,000 AAA 2,672,600
Series 1997A, 5.5%, 6/1/16 (c) ............................................... 4,065,000 AAA 4,335,607
Santa Ana, CA, Financing Authority, Lease Revenue Bonds, Police Administration
and Holding Facility, Series 1994A, 6.25%, 7/1/24 (c) ........................ 2,000,000 AAA 2,352,240
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Santa Clara County, CA, Finance Authority, Lease Revenue, VMC Replacement
Project, 7.75%, 11/15/08 (c) ................................................. 3,250,000 AAA 4,156,133
Santa Cruz County, CA, Certificates of Participation, Capital Facilities
Project:
Series 1997, 5.5%, 9/1/16 (c) ................................................ 955,000 AAA 1,019,147
Series 1997, 5.5%, 9/1/17 (c) ................................................ 1,005,000 AAA 1,069,511
Series 1997, 5.5%, 9/1/18 (c) ................................................ 1,060,000 AAA 1,130,087
Series 1997, 5.6%, 9/1/19 (c) ................................................ 1,115,000 AAA 1,200,755
Series 1997, 5.6%, 9/1/20 (c) ................................................ 1,180,000 AAA 1,273,078
Series 1997, 5.65%, 9/1/24 (c) ............................................... 1,445,000 AAA 1,576,206
Series 1997, 5.65%, 9/1/25 (c) ............................................... 1,520,000 AAA 1,659,536
Series 1997, 5.65%, 9/1/26 (c) ............................................... 1,605,000 AAA 1,754,538
Santa Margarita/Dana Point, CA:
Improvement Districts 3, 3A, 4 and 4A, Series B, 7.25%, 8/1/05 (c) ........... 2,895,000 AAA 3,431,067
Improvement Districts 1-2-2A and 8, Series 1994A, 7.25%, 8/1/06 (c) .......... 465,000 AAA 558,739
Simi Valley, CA, Series 1998, 5.25%, 8/1/17 (c) ................................ 575,000 AAA 591,922
South Orange County, CA, Public Power Authority, Special Tax Revenue,
7%, 9/1/06 (c) ............................................................... 2,230,000 AAA 2,630,620
Southern California Public Power Authority:
Series 1989, 6.75%, 7/1/10 ................................................... 6,000,000 A 7,085,820
Transmission Project Revenue, Capital Appreciation, Zero Coupon, 7/1/15 ...... 2,000,000 AA 827,760
Ukiah, CA, Unified School District, Series 1997, Zero Coupon, 8/1/10 (c) ....... 1,200,000 AAA 666,912
University of California Medical Center, Revenue Bonds, Series 1996,
10%, 7/1/03 (c) .............................................................. 4,470,000 AAA 5,674,754
Vallejo Sanitation & Flood Control District, Solano County, CA, Certificates of
Participation, 5%, 7/1/19 (c) ................................................ 2,500,000 AAA 2,474,000
Valley Health System, CA, Revenue Bonds, Refunding and Improvement Project:
Series 1996 A, 6.5%, 5/15/15 ................................................. 385,000 BBB 416,258
Series 1996 A, 6.5%, 5/15/25 ................................................. 5,075,000 BBB 5,466,587
Watsonville, CA, Community Hospital Revenue, Series 1996, 5.95%, 7/1/07 ........ 1,135,000 A 1,244,811
West Covina, CA, Queen of the Valley Hospital, Certificate of Participation,
Hospital Revenue:
Series 1994, 5.7%, 8/15/00 .................................................. 380,000 A 393,243
Series 1994, 5.8%, 8/15/01 .................................................. 750,000 A 785,640
West Covina, CA, Redevelopment Agency Facility, Series 1996, 5.75%, 9/1/09 ..... 865,000 A 938,127
Westminster, CA, Redevelopment Agency, Tax Allocation Revenue, Community
Development, Project #1, Series A, 7.3%, 8/1/21 .............................. 2,690,000 AAA 3,010,485
</TABLE>
The accompanying notes are an integral part of the financial statements.
27 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Credit
Principal Rating (b) Market
Amount ($) (Unaudited) Value ($)
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Whittier, CA, Presbyterian Intercommunity Hospital, Health Facilities Revenue:
6.25%, 6/1/08 (c) ............................................................ 1,000,000 AAA 1,139,690
6.25%, 6/1/10 (c) ............................................................ 1,250,000 AAA 1,435,400
Puerto Rico
Puerto Rico Commonwealth, General Obligation, 4.5%, 7/1/23 ..................... 1,000,000 A 899,540
Virgin Islands
Virgin Islands, Special Tax Bonds, Hugo Bonds, 7.75%, 10/1/06 .................. 1,600,000 NR 1,779,712
Virgin Islands, General Obligation, Public Finance Authority, Mortgage Fund Loan
Notes, Series 1992 A, 7%, 10/1/02 ............................................ 1,000,000 BBB 1,099,540
- ------------------------------------------------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $296,860,719) 319,632,619
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $298,360,719) (a) 321,132,619
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $298,360,719. At March 31,
1998, net unrealized appreciation for all securities based on tax cost was
$22,771,900. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $22,930,358 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$158,458.
(b) All of the securities held have been determined to be of appropriate
credit quality as required by the Fund's investment objectives. Credit
ratings shown are assigned by either Standard & Poor's Rating Group,
Moody's Investors Service, Inc. or Fitch Investors Service, Inc. Unrated
securities (NR) have been determined by the Investment Adviser to be of
comparable quality to rated eligible securities.
(c) Bond is insured by one of these companies: AMBAC, FGIC, FSA, MBIA, or
MBIA/BIG.
* Floating rate and monthly, weekly, or daily demand notes are securities
whose yields vary with a designated market index or market rate, such as
the coupon-equivalent of the Treasury bill rate. Variable rate demand
notes are securities whose yields are periodically reset at levels that
are generally comparable to tax-exempt commercial paper. These securities
are payable on demand within seven calendar days and normally incorporate
an irrevocable letter of credit from a major bank. These notes are
carried, for purposes of calculating average weighted maturity, at the
longer of the period remaining until the next rate change or to the extent
of the demand period.
** ETM: Bonds bearing the description ETM (escrowed to maturity) are
collateralized by U.S. Treasury securities which are held in escrow by a
trustee and used to pay principal and interest on bonds so designated.
AMT: Alternative minimum tax
The accompanying notes are an integral part of the financial statements.
28 - Scudder California Tax Free Fund
<PAGE>
Financial Statements
Statement of Assets and Liabilities
as of March 31, 1998
<TABLE>
<CAPTION>
Assets
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investments, at market (identified cost $298,360,719) ............... $ 321,132,619
Cash ................................................................ 240,957
Interest receivable ................................................. 3,816,023
Receivable for Fund shares sold ..................................... 31,315
Other assets ........................................................ 5,997
----------------
Total assets ........................................................ 325,226,911
Liabilities
- ----------------------------------------------------------------------------------------------------------------------------
Dividends payable ................................................... 475,370
Payable for Fund shares redeemed .................................... 63,000
Accrued management fee .............................................. 165,624
Other payables and accrued expenses ................................. 74,073
----------------
Total liabilities ................................................... 778,067
-------------------------------------------------------------------------------------------
Net assets, at market value $ 324,448,844
-------------------------------------------------------------------------------------------
Net Assets
- ----------------------------------------------------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation on investments .......................... 22,771,900
Accumulated net realized loss ....................................... (7,743,950)
Paid-in capital ..................................................... 309,420,894
-------------------------------------------------------------------------------------------
Net assets, at market value $ 324,448,844
-------------------------------------------------------------------------------------------
Net Asset Value
- ----------------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($324,448,844 / 29,339,439 outstanding shares of beneficial
interest, $.01 par value, unlimited number of shares ----------------
authorized) ....................................................... $11.06
----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
29 - Scudder California Tax Free Fund
<PAGE>
Statement of Operations
year ended March 31, 1998
<TABLE>
<CAPTION>
Investment Income
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Income:
Interest ............................................................ $ 17,095,695
----------------
Expenses:
Management fee ...................................................... 1,892,742
Services to shareholders ............................................ 226,463
Custodian and accounting fees ....................................... 126,492
Trustees' fees and expenses ......................................... 23,015
Auditing ............................................................ 42,656
Reports to shareholders ............................................. 37,412
Legal ............................................................... 9,270
Registration fees ................................................... 9,944
Other ............................................................... 20,145
----------------
2,388,139
-------------------------------------------------------------------------------------------
Net investment income 14,707,556
-------------------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- ----------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) from:
Investments ......................................................... 1,518,012
Futures ............................................................. (23,587)
Options ............................................................. (24,025)
----------------
1,470,400
Net unrealized appreciation (depreciation) on investments
during the period ................................................. 17,754,593
-------------------------------------------------------------------------------------------
Net gain (loss) on investment transactions 19,224,993
-------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 33,932,549
-------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
30 - Scudder California Tax Free Fund
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Years Ended March 31,
Increase (Decrease) in Net Assets 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operations:
Net investment income ....................................... $ 14,707,556 $ 14,517,415
Net realized gain (loss) from investment transactions ....... 1,470,400 3,388,395
Net unrealized appreciation (depreciation) on
investment transactions during the period ................. 17,754,593 (2,601,367)
---------------- ----------------
Net increase (decrease) in net assets resulting from
operations ................................................ 33,932,549 15,304,443
---------------- ----------------
Distributions to shareholders:
From net investment income .................................. (14,707,556) (14,517,415)
---------------- ----------------
From net realized gains from investment transactions ........ (567,059) (140,246)
---------------- ----------------
Fund share transactions:
Proceeds from shares sold ................................... 57,885,567 42,826,716
Net asset value of shares issued to shareholders in
reinvestment of distributions ............................. 9,574,561 8,972,653
Cost of shares redeemed ..................................... (50,245,259) (56,494,954)
---------------- ----------------
Net increase (decrease) in net assets from Fund share
transactions .............................................. 17,214,869 (4,695,585)
---------------- ----------------
Increase (decrease) in net assets ........................... 35,872,803 (4,048,803)
Net assets at beginning of period ........................... 288,576,041 292,624,844
---------------- ----------------
Net assets at end of period ................................. $ 324,448,844 $ 288,576,041
---------------- ----------------
Other Information
- -----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ................... 27,774,183 28,232,177
---------------- ----------------
Shares sold ................................................. 5,326,399 4,110,618
Shares issued to shareholders in reinvestment of
distributions ............................................. 880,019 860,296
Shares redeemed ............................................. (4,641,162) (5,428,908)
---------------- ----------------
Net increase (decrease) in Fund shares ...................... 1,565,256 (457,994)
---------------- ----------------
Shares outstanding at end of period ......................... 29,339,439 27,774,183
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
31 - Scudder California Tax Free Fund
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements.
<TABLE>
<CAPTION>
Years Ended March 31,
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of ----------------------------------------------------------------------------------------
period .......................... $10.39 $10.36 $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26 $ 9.99
Income from investment operations: ----------------------------------------------------------------------------------------
Net investment income ............. .52 .52 .51 .51 .53 .59 .61 .63 .65 .68
Net realized and unrealized
gain (loss) on investment
transactions .................... .69 .04 .29 .14 (.35) .94 .47 .21 .22 .27
Total from investment ----------------------------------------------------------------------------------------
operations ...................... 1.21 .56 .80 .65 .18 1.53 1.08 .84 .87 .95
Less distributions: ----------------------------------------------------------------------------------------
From net investment income ........ (.52) (.52) (.51) (.51) (.53) (.59) (.61) (.63) (.65) (.68)
From net realized gains on
investment transactions ......... (.02) (.01) -- (.09) (.63) (.49) (.28) (.09) (.19) --
In excess of net realized gains ... -- -- -- -- (.05) -- -- -- -- --
----------------------------------------------------------------------------------------
Total distributions ............... (.54) (.53) (.51) (.60) (1.21) (1.08) (.89) (.72) (.84) (.68)
----------------------------------------------------------------------------------------
Net asset value, end of ----------------------------------------------------------------------------------------
period .......................... $11.06 $10.39 $10.36 $10.07 $10.02 $11.05 $10.60 $10.41 $10.29 $10.26
- ----------------------------------------------------------------------------------------------------------------------------
Total Return (%) .................. 11.85 5.44 8.01 6.75 1.30 15.13 10.74 8.53 8.62 9.80
Ratios and Supplemental Data
Net assets, end of period
($ millions) .................... 324 289 293 294 325 309 242 208 193 171
Ratio of operating expenses
to average daily net
assets (%) ...................... .78 .78 .77 .80 .78 .79 .81 .84 .83 .89
Ratio of net investment income
to average daily net
assets (%) ...................... 4.79 4.98 4.88 5.18 4.85 5.42 5.79 6.13 6.23 6.71
Portfolio turnover rate (%) ....... 21.5 70.8 49.2 87.3 126.5 208.6 143.0 170.6 70.4 158.9
</TABLE>
32 - Scudder California Tax Free Fund
<PAGE>
Notes to Financial Statements
A. Significant Accounting Policies
Scudder California Tax Free Money Fund ("Tax Free Money Fund"), a nondiversified
fund, and California Tax Free Fund ("Tax Free Fund"), a diversified fund, are
each a series of Scudder California Tax Free Trust (the "Trust") which is
organized as a Massachusetts business trust and registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company.
The Funds' financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the Funds in the
preparation of their financial statements.
Security Valuation. Tax Free Money Fund values all portfolio securities
utilizing the amortized cost method permitted in accordance with Rule 2a-7 under
the 1940 Act and pursuant to which Tax Free Money Fund must adhere to certain
conditions. Under this method, which does not take into account unrealized gains
and losses on securities, an instrument is initially valued at its cost and
thereafter assumes a constant accretion/amortization to maturity of any
discount/premium.
Tax Free Fund's portfolio debt securities with remaining maturities greater than
sixty days are valued by pricing agents approved by the Officers of the Fund,
which quotations reflect broker/dealer-supplied valuations and electronic data
processing techniques. If the pricing agents are unable to provide such
quotations, the most recent bid quotation supplied by a bona fide market maker
shall be used. All other debt securities are valued at their fair value as
determined in good faith by the Valuation Committee of the Board of Trustees.
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 year ended
March 31, 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 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.
33 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Certain risks may arise upon entering into futures contracts including the risk
that an illiquid secondary market will limit the Tax Free Fund's ability to
close out a futures contract prior to the settlement date and that a change in
the value of a futures contract may not correlate exactly with changes in the
value of the securities or currencies hedged. When utilizing futures contracts
to hedge, the Tax Free Fund gives up the opportunity to profit from favorable
price movements in the hedged positions during the term of the contract.
Options. An option contract is a contract in which the writer of the option
grants the buyer of the option the right to purchase from (call option), or sell
to (put option), the writer a designated instrument at a specified price within
a specified period of time. Certain options, including options on indices, will
require cash settlement by the Tax Free Fund if the option is exercised. During
the year ended March 31, 1998, the Tax Free Fund wrote call options on interest
rate futures as a hedge against potential adverse price movements in the value
of portfolio assets. In addition, during the period the Tax Free Fund purchased
call options on interest rate futures to manage the duration of the portfolio.
If the Tax Free Fund writes an option and the option expires unexercised, the
Tax Free Fund will realize income, in the form of a capital gain, to the extent
of the amount received for the option (the "premium"). If the Tax Free Fund
elects to close out the option it would recognize a gain or loss based on the
difference between the cost of closing the option and the initial premium
received. If the Tax Free Fund purchased an option and allows the option to
expire it would realize a loss to the extent of the premium paid. If the Tax
Free Fund elects to close out the option it would recognize a gain or loss equal
to the difference between the cost of acquiring the option and the amount
realized upon the sale of the option.
The gain or loss recognized by the Tax Free Fund upon the exercise of a written
call or purchased put option is adjusted for the amount of option premium. If a
written put or purchased call option is exercised the Tax Free Fund's cost basis
of the acquired security or currency would be the exercise price adjusted for
the amount of the option premium.
The liability representing the Tax Free Fund's obligation under an exchange
traded written option or investment in a purchased option is valued at the last
sale price or, in the absence of a sale, the mean between the closing bid and
asked price or at the most recent asked price (bid for purchased options) if no
bid and asked price are available. Over-the-counter written or purchased options
are valued using dealer supplied quotations.
When the Tax Free Fund writes a covered call option, the Tax Free Fund foregoes,
in exchange for the premium, the opportunity to profit during the option period
from an increase in the market value of the underlying security or currency
above the exercise price. When the Tax Free Fund writes a put option it accepts
the risk of a decline in the market value of the underlying security or currency
below the exercise price. Over-the-counter options have the risk of the
potential inability of counterparties to meet the terms of their contracts. The
Tax Free Fund's maximum exposure to purchased options is limited to the premium
initially paid. In addition, certain risks may arise upon entering into option
contracts including the risk that an illiquid secondary market will limit the
Tax Free Fund's ability to close out an option contract prior to the expiration
date and, that a change in the value of the option contract may not correlate
exactly with changes in the value of the securities or currencies hedged.
Amortization and Accretion. All premiums and original issue discounts are
amortized/accreted for both tax and financial reporting purposes.
Federal Income Taxes. The Funds' policy is to comply with the requirements of
the Internal Revenue Code of 1986, as amended, which are applicable to regulated
investment companies and to distribute all of their taxable and tax-exempt
income
34 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
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 year ended March 31, 1998, purchases and sales of long-term municipal
securities aggregated $84,680,278 and $64,713,794, respectively, for the Tax
Free Fund.
The aggregate face value of futures contracts opened and closed during the year
ended March 31, 1998 for the Tax Free Fund, was $25,050,462.
35 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Transactions in written call options on interest rate futures for the year ended
March 31, 1998 were as follows:
<TABLE>
<CAPTION>
Number of Contracts Premiums Received ($)
------------------- ---------------------
<S> <C> <C>
Outstanding at March 31, 1997 -- --
Contracts written 500 68,375
Contracts closed (500) (68,375)
=====================================================================================
Outstanding at March 31, 1998 -- --
====== =======
</TABLE>
C. Related Parties
Effective December 31, 1997, Scudder, Stevens & Clark, Inc. ("Scudder") and The
Zurich Insurance Company ("Zurich"), an international insurance and financial
services organization, formed a new global investment organization by combining
Scudder's business with that of Zurich's subsidiary, Zurich Kemper Investments,
Inc. As a result of the transaction, Scudder changed its name to Scudder Kemper
Investments, Inc. ("Scudder Kemper" or the "Adviser"). The transaction between
Scudder and Zurich resulted in the termination of the Fund's Investment
Management Agreement with Scudder. However, new Investment Management Agreements
(the "Management Agreements") between the Funds and Scudder Kemper were approved
by the Funds' Board of Trustees and by the Funds' Shareholders. The Management
Agreements, which are effective December 31, 1997, are the same in all material
respects as the corresponding previous Investment Management Agreements, except
that Scudder Kemper is the new investment adviser to the Funds.
Under the Management Agreements (each an "Agreement" and collectively the
"Agreements") with Scudder Kemper, each Fund agrees to pay the Adviser a fee
computed and accrued daily and paid monthly. The management fee payable under
the Agreements is equal to an annual rate of 0.50% of the average daily net
assets of Tax Free Money Fund, and 0.625% of the first $200,000,000 of the
average daily net assets and 0.60% of such net assets in excess of $200,000,000
for Tax Free Fund. 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 year ended
March 31, 1998, the fee for the Tax Free Fund pursuant to these Agreements
amounted to $1,892,742, which was equivalent to an annualized effective rate of
.62% of the Fund's average daily net assets.
With respect to Tax Free Money Fund, the Adviser has agreed not to impose all or
a portion of its management fee until July 31, 1998 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 year ended March 31, 1998, the Adviser did not
impose a portion of its fee amounting to $124,284, and the portion imposed
amounted to $218,236.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. For the
year ended March 31, 1998, $63,224 and $154,721 were charged by SSC to Tax Free
Money Fund and Tax Free Fund, of which $4,896 and $12,671 are unpaid at March
31, 1998, respectively.
36 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Funds. For the year ended
March 31, 1998, SFAC imposed fees amounting to $30,000 and $66,491 of which
$2,500 and $5,594 are unpaid at March 31, 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 year ended March 31, 1998, Trustees' fees and
expenses aggregated $16,064 and $23,015 for Tax Free Money Fund and Tax Free
Fund, respectively.
37 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Report of Independent Accountants
To the Trustees of Scudder California Tax Free Trust and the Shareholders of
Scudder California Tax Free Money Fund and Scudder California Tax Free Fund:
We have audited the accompanying statements of assets and liabilities of Scudder
California Tax Free Money Fund and Scudder California Tax Free Fund, including
the investment portfolios, as of March 31, 1998, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the financial highlights for
each of the ten years in the period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of March
31, 1998 by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Scudder California Tax Free Money Fund and Scudder California Tax Free Fund as
of March 31, 1998, the results of their operations for the year then ended, the
changes in their net assets for each of the two years in the period then ended,
and their financial highlights for each of the ten years in the period then
ended in conformity with generally accepted accounting principles.
Boston, Massachusetts COOPERS & LYBRAND L.L.P.
May 5, 1998
38 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Tax Information
Of the dividends paid by Scudder California Tax Free Money Fund and Scudder
California Tax Free Fund from net investment income for the year ended March 31,
1998, 100% constituted exempt interest dividends for regular federal income tax
and California State income tax purposes.
Please consult a tax adviser if you have any questions about federal or state
income tax laws, or on how to prepare your tax returns. If you have specific
questions about your Scudder Fund account, please call a Scudder Investor
Relations Representative at 1-800-225-5163.
39 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder California Tax Free
Money Fund (the "Fund") was held on October 24, 1997, at the office of Scudder
Kemper Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), Two
International Place, Boston, Massachusetts 02110. At the Meeting, as adjourned
and reconvened, the following matters were voted upon by the shareholders (the
resulting votes for each matter are presented below). With regard to certain
proposals, it was recommended that the Meeting be reconvened in order to provide
shareholders with an additional opportunity to return their proxies. The date of
the reconvened meeting at which the matters were decided is noted after the
proposed matter.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
41,339,564 1,150,085 2,067,210 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 42,822,799 1,734,060
Dawn-Marie Driscoll 42,822,799 1,734,060
Peter B. Freeman 42,601,714 1,955,146
George M. Lovejoy, Jr. 42,822,799 1,734,060
Wesley W. Marple, Jr. 42,822,799 1,734,060
Daniel Pierce 42,809,134 1,747,725
Kathryn L. Quirk 42,586,784 1,970,076
Jean C. Tempel 42,822,799 1,734,060
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
39,617,622 2,947,426 1,981,129 10,682
40 - Scudder California Tax Free Money Fund
<PAGE>
4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
41,344,284 2,212,520 1,876,425 0
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
<S> <C> <C> <C> <C>
5.1 Diversification 37,815,270 4,682,079 2,048,828 10,682
5.2 Borrowing 37,800,340 4,697,010 2,048,828 10,682
5.3 Senior securities 37,818,989 4,678,361 2,048,828 10,682
5.4 Concentration 37,805,324 4,692,025 2,048,828 10,682
5.5 Loans 37,818,989 4,678,361 2,048,828 10,682
5.6 Underwriting of securities 37,842,346 4,655,003 2,048,828 10,682
5.7 Investment in real estate 37,842,346 4,655,003 2,048,828 10,682
5.8 Purchase of physical 37,842,346 4,655,003 2,048,828 10,682
commodities
5.9 Investment in California 37,842,346 4,655,003 2,048,828 10,682
municipal securities
5.10 Tax diversification 37,818,989 4,678,361 2,048,828 10,682
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
42,345,708 731,389 1,479,762
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
41 - Scudder California Tax Free Money Fund
<PAGE>
Shareholder Meeting Results
A Special Meeting of Shareholders (the "Meeting") of Scudder California Tax Free
Fund (the "Fund") was held on October 24, 1997, at the office of Scudder Kemper
Investments, Inc. (formerly Scudder, Stevens & Clark, Inc.), Two International
Place, Boston, Massachusetts 02110. At the Meeting, as adjourned and reconvened,
the following matters were voted upon by the shareholders (the resulting votes
for each matter are presented below). With regard to certain proposals, it was
recommended that the Meeting be reconvened in order to provide shareholders with
an additional opportunity to return their proxies. The date of the reconvened
meeting at which the matters were decided is noted after the proposed matter.
1. To approve the new Investment Management Agreement between the Fund and
Scudder Kemper Investments, Inc.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
18,384,244 760,468 868,638 0
2. To elect Trustees.
Number of Votes:
----------------
Trustee For Withheld
------- --- --------
Henry P. Becton, Jr. 19,349,952 663,398
Dawn-Marie Driscoll 19,340,544 672,806
Peter B. Freeman 19,349,461 663,890
George M. Lovejoy, Jr. 19,354,536 658,814
Wesley W. Marple, Jr. 19,355,895 657,456
Daniel Pierce 19,355,419 657,932
Kathryn L. Quirk 19,347,931 665,419
Jean C. Tempel 19,342,987 670,364
3. To approve the Board's discretionary authority to convert the Fund to a
master/feeder fund structure through a sale or transfer of assets or
otherwise.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
17,039,498 1,524,095 1,309,423 140,334
42 - Scudder California Tax Free Fund
<PAGE>
4. To approve certain amendments to the Declaration of Trust. Sufficient
proxies had not been received by December 2, 1997 to approve the
amendments to the Declaration of Trust. Management has determined not to
continue to seek shareholder approval for this item.
Number of Votes:
----------------
For Against Abstain Broker Non-Votes*
--- ------- ------- -----------------
17,793,478 1,080,484 1,341,242 91,406
5. To approve the revision of certain fundamental investment policies.
<TABLE>
<CAPTION>
Number of Votes:
----------------
Broker
Fundamental Policies For Against Abstain Non-Votes*
-------------------- --- ------- ------- ----------
<S> <C> <C> <C> <C>
5.1 Diversification 16,644,299 1,750,379 1,478,339 140,334
5.2 Borrowing 16,629,143 1,762,912 1,480,961 140,334
5.3 Senior securities 16,670,640 1,724,991 1,477,385 140,334
5.4 Concentration 16,657,054 1,736,123 1,479,840 140,344
5.5 Loans 16,661,456 1,732,945 1,478,616 140,344
5.6 Underwriting of securities 16,658,789 1,733,859 1,480,369 140,344
5.7 Investment in real estate 16,663,123 1,727,464 1,482,429 140,344
5.8 Purchase of physical 16,673,628 1,725,574 1,473,815 140,344
commodities
5.9 Investment in California 16,653,090 1,743,370 1,476,557 140,344
municipal securities
</TABLE>
6. To ratify the selection of Coopers & Lybrand L.L.P. as the Fund's independent
accountants.
Number of Votes:
----------------
For Against Abstain
--- ------- -------
18,971,432 316,739 725,179
* Broker non-votes are proxies received by the Fund from brokers or nominees
when the broker or nominee neither has received instructions from the
beneficial owner or other persons entitled to vote nor has discretionary power
to vote on a particular matter.
43 - 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; Executive Fellow, Center
for Business Ethics; President,
Driscoll Associates
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
Olin Barrett*
Vice President
Donald C. Carleton*
Vice President
Jerard K. Hartman*
Vice President
John R. Hebble*
Assistant Treasurer
Thomas W. Joseph*
Vice President
Thomas F. McDonough*
Vice President, Secretary and
Treasurer
Caroline Pearson*
Assistant Secretary
Jeremy L. Ragus*
Vice President
Rebecca L. Wilson*
Vice President
* Scudder Kemper Investments, Inc.
44 - Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
<PAGE>
Investment Products and Services
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
Money Market
- ------------
Scudder U.S. Treasury Money Fund
Scudder Cash Investment Trust
Scudder Money Market Series --
Premium Shares*
Managed Shares*
Scudder Government Money Market Series --
Managed Shares*
Tax Free Money Market+
- ----------------------
Scudder Tax Free Money Fund
Scudder Tax Free Money Market Series--
Managed Shares*
Scudder California Tax Free Money Fund**
Scudder New York Tax Free Money Fund**
Tax Free+
- ---------
Scudder Limited Term Tax Free Fund
Scudder Medium Term Tax Free Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund
Scudder California Tax Free Fund**
Scudder Massachusetts Limited Term Tax Free Fund**
Scudder Massachusetts Tax Free Fund**
Scudder New York Tax Free Fund**
Scudder Ohio Tax Free Fund**
Scudder Pennsylvania Tax Free Fund**
U.S. Income
- -----------
Scudder Short Term Bond Fund
Scudder Zero Coupon 2000 Fund
Scudder GNMA Fund
Scudder Income Fund
Scudder High Yield Bond Fund
Global Income
- -------------
Scudder Global Bond Fund
Scudder International Bond Fund
Scudder Emerging Markets Income Fund
Asset Allocation
- ----------------
Scudder Pathway Conservative Portfolio
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio
Scudder Pathway International Portfolio
U.S. Growth and Income
- ----------------------
Scudder Balanced Fund
Scudder Growth and Income Fund
Scudder S&P 500 Index Fund
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 Growth
- -------------
Worldwide
Scudder Global Fund
Scudder International Growth and Income Fund
Scudder International Fund
Scudder Global Discovery Fund***
Scudder Emerging Markets Growth Fund
Scudder Gold Fund
Regional
Scudder Greater Europe Growth Fund
Scudder Pacific Opportunities Fund
Scudder Latin America Fund
The Japan Fund, Inc.
Industry Sector Funds
- ---------------------
Choice Series
Scudder Financial Services Fund
Scudder Health Care Fund
Scudder Technology 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. +++ +++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.
45 - 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 -- http://funds.scudder.com
1-800-343-2890
Scudder Electronic Account Services: Offering
Personalized account information, the ability to account information and transactions, interactive
exchange or redeem shares, and information on other worksheets, prospectuses and applications for all
Scudder funds and services via touchtone telephone. Scudder funds, plus your current asset allocation,
whenever you need them. Scudder's Site also
provides news about Scudder funds, retirement
planning information, and more.
Retirees and those who depend on investment proceeds for living expenses can enjoy these convenient,
timely, and reliable automated withdrawal programs:
- ------------------------------------------------------------------------------------------------------------------------------
Automatic Withdrawal Plan QuickSell
You designate the bank account, determine the schedule Provides speedy access to your money by
(as frequently as once a month) and amount of the electronically crediting your redemption proceeds
redemptions, and Scudder does the rest. to the bank account you 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
- ------------------------------------------------------------------------------------------------------------------------------
46 - 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
500 no-load funds from well-known companies--with no Personal Counsel from Scudder(SM)
transaction fees or commissions. Scudder
shareholders can take advantage of a Scudder Developed for investors who prefer the benefits of no-load
Brokerage account already reserved for them, with Scudder funds but want ongoing professional assistance in
no minimum investment. For information about managing a portfolio. Personal Counsel(SM) is a highly
Scudder Brokerage Services, call 1-800-700-0820. customized, fee-based asset management service for
individuals investing $100,000 or more.
Fund Folio funds held less than six months will be charged a fee for redemptions. You can buy
shares directly from the fund itself or its principal underwriter or distributor without
paying this fee. Scudder Brokerage Services, Inc., 42 Longwater Drive, Norwell, MA 02061.
Member SIPC.
Personal Counsel From Scudder(SM) and Personal Counsel(SM) are service marks of and represent a
program offered by Scudder Investor Services, Inc., Adviser.
For more information about these services, call a Scudder representative at 1-800-225-5163
- ------------------------------------------------------------------------------------------------------------------------------
Additional Information on How to Contact Scudder:
- ------------------------------------------------------------------------------------------------------------------------------
For existing account services and transactions Please address all written correspondence to
Scudder Investor Relations -- 1-800-225-5163 The Scudder Funds
P.O. Box 2291
For establishing 401(k) and 403(b) plans Boston, Massachusetts
Scudder Defined Contribution Services -- 02107-2291
1-800-323-6105
Or Stop by a Scudder Investor Center
For information about The Scudder Funds, including Many shareholders enjoy the personal, one-on-one service of
additional applications and prospectuses, or for the Scudder Investor Centers. Check for an Investor Center near
answers to investment questions you -- they can be found in the following cities:
Scudder Investor Relations -- 1-800-225-2470 Boca Raton Chicago San Francisco
[email protected] Boston New York
</TABLE>
47 - 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 $200 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
U.S.
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
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