[LOGO] SCUDDER
INVESTMENTS
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BOND/TAX FREE
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Scudder California Tax
Free Money Fund
Fund #087
Scudder California Tax
Free Fund
Fund #043
Semiannual Report
September 30, 1999
Scudder California Tax Free Money Fund seeks income that is exempt from
California personal and regular federal income taxes and is consistent with
maintaining a stable $1.00 share
price.
Scudder California Tax Free Fund seeks income that is exempt from California
personal and regular federal income taxes.
No-load funds with no commissions to buy, sell, or exchange shares.
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Contents
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6 Letter from the Funds' President
Scudder California Tax Free Money Fund
11 Portfolio Management Discussion
18 Investment Portfolio
22 Financial Statements
25 Financial Highlights
Scudder California Tax Free Fund
8 Performance Update
10 Portfolio Summary
13 Portfolio Management Discussion
26 Investment Portfolio
35 Financial Statements
38 Financial Highlights
17 Glossary of Investment Terms
39 Notes to Financial Statements
43 Officers and Trustees
44 Investment Products and Services
46 Scudder Solutions
3
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Scudder California Tax Free Money Fund
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ticker symbol SCAXX fund number 087
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Date of Inception: o Scudder California Tax Free Money
5/28/87 Fund offered a seven-day yield of
2.68% on September 30, 1999,
Total Net Assets as equivalent to a 4.89% taxable yield
of 9/30/99: for investors in the top federal
$70.3 million and state income tax brackets.
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7-Day Yield on September 30, 1999
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
2.68% 4.89%
Scudder Taxable Yield
California Needed to Equal
Tax Free the Fund's Yield
Money Fund
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4 - Scudder California Tax Free Money Fund
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Scudder California Tax Free Fund
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ticker symbol SCTFX fund number 043
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Date of Inception: o Scudder California Tax Free Fund provided a
7/22/83 4.38% 30-day net annualized SEC yield on
September 30, 1999. For shareholders subject
Total Net Assets as to the 45.22% maximum combined federal and
of 9/30/99: state income tax rate, the fund's yield was
$321.5 million equal to a taxable yield of 8.00%. In terms
of total return, the fund placed in the top
quartile of similar funds over 6-month, and
one-, three-, five-, and ten-year periods as
tracked by Lipper Analytical Services.^*
Please see page 13 for additional
information concerning the fund's rankings.
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30-Day Yield on September 30, 1999
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THE ORIGINAL DOCUMENT CONTAINS A BAR CHART HERE
BAR CHART DATA:
4.3% 8.00%
Scudder Taxable Yield
California Needed to Equal
Tax Free the Fund's Yield
Fund
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^* Lipper Analytical Services, Inc., is an independent analyst of investment
performance. Performance includes reinvestment of dividends and capital
gains.
5 - Scudder California Tax Free Fund
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Letter from the Funds' President
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Dear Shareholders,
Recent months have witnessed a nearly continuous rise in Treasury and municipal
bond rates across all maturity levels. A year ago, financial markets were in the
grip of a "flight to quality": Nervous investors poured their assets into
Treasury bonds to escape financial uncertainty in Asia, Latin America, and
Russia, driving 30-year Treasury bond rates below 5% for the first time in
recent memory. Following the U.S. Federal Reserve's three interest rates cuts
during the last quarter of 1998, however, the Fed, and some investors, worried
that too much liquidity may have been injected into the financial system, and
that inflation might once again pose a threat. Thus, investors, and the Fed,
have combined to gradually push rates up this year.
Despite a difficult environment for bonds, municipal bonds have held up well
compared to other high-quality fixed-income securities. Municipals have
benefited from significantly lower supply (20% less than 12 months ago) and the
relative attractiveness of municipal yields compared with Treasuries. And though
it posted a negative return of -2.60% for the six months ended September 30,
1999, Scudder California Tax Free Fund ranked in the top quartile of similar
funds for total return over the six-month period, as well as for one-, three-,
five-, and ten-year periods as tracked by Lipper Analytical Services. In
addition, as of September 30, 1999, Scudder California Tax Free Money Fund
posted a 4.89% tax-equivalent yield based on
6
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maximum state and federal tax rates. For more information about fund performance
as well as the market environment, strategy, and outlook for both funds, please
read the Portfolio Management Discussions that begin on pages 11 and 13.
It should be noted that Daniel Pierce retired in June of this year as President
of Scudder California Tax Free Fund and Scudder California Tax Free Money Fund,
at which time I assumed those roles and their responsibilities. We are fortunate
that Dan's longstanding affiliation with Scudder is ongoing, and that we will
continue to benefit from his counsel going forward. I am pleased to join both
funds' teams in this capacity, and look forward to serving your interests.
If you have any questions regarding Scudder California Tax Free Fund or Scudder
California Tax Free Money Fund, please call Investor Relations at 1-800-SCUDDER.
Or visit Scudder's Web site at www.scudder.com.
Sincerely,
/s/Lynn S. Birdsong
Lynn S. Birdsong
President,
Scudder California Tax Free Money Fund
Scudder California Tax Free Fund
7
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Performance Update
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September 30, 1999
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Growth of a $10,000 Investment
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND
INDEX TOTAL RETURN (%)
Lehman Brothers Scudder California
Municipal Bond Index* Tax Free Fund
'89 10000 10000
'90 10681 10476
'91 12089 11935
'92 13355 13274
'93 15056 15387
'94 14688 14599
'95 16332 16143
'96 17317 17221
'97 18883 18919
'98 20528 20680
'99 20384 20250
Yearly periods ended September 30
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Fund Index Comparison
Total Return
Growth of Average
Period ended 9/30/1999 $10,000 Cumulative Annual
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Scudder California Tax Free Fund
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1 year $ 9,792 -2.08% -2.08%
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5 year $ 13,870 38.70% 6.76%
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10 year $ 20,250 102.50% 7.31%
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Lehman Brothers Municipal Bond Index*
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1 year $ 9,930 -.70% -.70%
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5 year $ 13,878 38.78% 6.77%
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10 year $ 20,384 103.84% 7.38%
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* 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.
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.
8 - Scudder California Tax Free Fund
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Returns and Per Share Information
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THE PRINTED DOCUMENT CONTAINS A BAR CHART HERE
ILLUSTRATING THE FUND TOTAL RETURN (%) AND LEHMAN BROTHERS MUNICPAL BOND
INDEX TOTAL RETURN (%)
Scudder California Tax Free Fund Lehman Brothers Municipal Bond Index
1990 4.76 6.80
1991 13.93 13.19
1992 11.22 10.45
1993 15.92 12.74
1994 -5.12 -2.44
1995 10.57 11.18
1996 6.68 6.04
1997 9.86 8.76
1998 9.30 8.72
1999 -2.08 -0.70
Yearly periods ended September 30
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999
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Fund Total
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Return (%) 4.76 13.93 11.22 15.92 -5.12 10.57 6.68 9.86 9.30 -2.08
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Index Total
Return (%) 6.80 13.19 10.45 12.74 -2.44 11.18 6.04 8.76 8.72 -.70
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Net Asset
Value ($) 10.11 10.62 10.83 11.29 9.78 10.28 10.44 10.92 11.37 10.64
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Income
Dividends ($) .63 .63 .60 .56 .52 .50 .52 .52 .52 .50
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Capital Gains
Distributions .17 .22 .34 .60 .44 -- -- .01 .02 --
($)
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</TABLE>
9 - Scudder California Tax Free Fund
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Portfolio Summary
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September 30, 1999
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Diversification
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
County General Obligation/ The fund invests in a
Lease 12% broad selection of
Hospital/Health Revenue 9% California municipal
Other General Obligation/ bonds.
Lease 9%
Housing Finance Authority 9%
State General Obligation/
Lease 8%
School District/Lease 7%
Toll Revenue/Transportation 6%
Sales/Special Tax 6%
Electric Revenue 5%
Miscellaneous Municipal 29%
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100%
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Quality
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
AAA 63% Overall portfolio quality
AA 11% remains high, with over 85% of
A 14% portfolio securities rated A
BBB 4% or better as of September 30.
SKI** 8%
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100%
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Weighted average quality: AA
* Includes Cash Equivalents
** Scudder Kemper Investments (SKI) has determined these securities to be
of comparable quality to rated eligible securities.
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Effective Maturity
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A GRAPH IN THE FORM OF A PIE CHART APPEARS HERE, ILLUSTRATING THE EXACT DATA
POINTS IN THE TABLE BELOW.
Less than 1 year 3% In an environment of
1-5 years 14% rising interest rates,
5-8 years 18% our strategy was to
8-15 years 39% maintain a shorter
Greater than 15 years 26% effective maturity
- ------------------------------------ compared to most other
100% California municipal
- ------------------------------------ bond funds.
Weighted average effective
maturity: 11.1 years
For more complete details about the Fund's investment portfolio, see page
26. A quarterly Fund Summary and Portfolio Holdings are available upon
request.
10 - Scudder California Tax Free Fund
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Portfolio Management Discussion
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September 30, 1999
Scudder California Tax Free Money Fund
Dear Shareholders,
Scudder California Tax Free Money Fund maintained a conservative portfolio
strategy during the fund's most recent semiannual period ended September 30,
1999. The fund's 7-day yield as of September 30 was 2.68%. For investors in the
highest combined state and federal income tax bracket, the fund's yield was
equivalent to a 4.89% compounded yield, higher than the 4.74% average for
taxable money funds, according to IBC Financial Data, Inc., an independent firm
that tracks money fund performance.
During the period, the short-term yield curve returned to a positive slope,
indicating that the Federal Reserve has switched from an accommodative to a
restrictive monetary policy. Over the summer, it raised the Federal funds rate
two times to 5.25% as a preemptive strike against signs of modest inflationary
pressures. Our strategy over the period was to maintain a conservative stance
now in order to be able to take advantage of higher yields that we anticipate
will be available from securities maturing after year end.
The fund's average maturity was 27 days as of September 30, 1999, compared with
19 days six months earlier. The fund continues to invest in variable rate demand
notes -- which provide flexibility in the present low interest rate environment
- -- and tax-free commercial paper and tax-free notes -- both of which provide
some stability in yield. The fund also continues to emphasize high quality
issuers and guarantors.
Over the coming months, we will pursue a two-part strategy: First, we will seek
to take advantage of the yield premiums available from select longer-maturity
securities while maintaining a conservative average maturity. Second, by
maintaining a relatively short maturity, we will help to ensure that we can meet
the liquidity needs of our investors at year end and beyond.
11 - Scudder California Tax Free Money Fund
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Our continuing goal is to provide Scudder California Tax Free Money Fund
shareholders with a competitive double-tax-free yield by searching for
high-quality, short-term municipal securities while actively managing the fund's
average maturity. We appreciate your investment with us.
Sincerely,
Your Portfolio Management Team
/s/Frank J. Rachwalski, Jr. /s/Jerri I. Cohen
Frank J. Rachwalski, Jr. Jerri I. Cohen
/s/Elizabeth Meyer
Elizabeth Meyer
12 - Scudder California Tax Free Money Fund
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Portfolio Management Discussion
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September 30, 1999
Scudder California Tax Free Fund
Dear Shareholders,
During a difficult period for most fixed-income securities, Scudder California
Tax Free Fund posted a negative return but displayed strong competitive
performance. The fund's total return for its most recent semiannual period ended
September 30, 1999, was -2.60%, outpacing the -3.73% average return of 100
similar funds as tracked by Lipper Analytical Services, Inc. The fund's 30-day
net annualized SEC yield as of September 30 was 4.38%, equivalent to an 8.00%
taxable yield for California investors subject to the 45.22% combined federal
and state income tax rate.
The fund's total returns over one-, three-, five-, and ten-year periods
ended September 30, 1999, placed it in the top 25% of similar California
tax-free funds according to Lipper. Please see the accompanying table for
additional information concerning the fund's returns.
California Update
California's economy is exhibiting economic strength, and leading the country in
job growth. The shift in the State's employment composition from defense and
aerospace industries to technology, multimedia, and trade has led the State
through the current recovery. California's unemployment rate is trending down,
personal income
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Scudder California Tax Free Fund:
Consistent Top Quartile Performance
(Average annual returns for periods ended September 30, 1999)
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Scudder
California Fund
Tax Free Lipper Number of Percentile
Period Return Average Rank Funds Tracked Rank
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1 Year -2.08% -3.05% 23 of 98 Top 24%
3 Years 5.55% 4.67% 12 of 85 Top 14%
5 Years 6.76% 6.05% 14 of 66 Top 21%
10 Years 7.31% 6.64% 4 of 32 Top 13%
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Past performance does not guarantee future results.
13 - Scudder California Tax Free Fund
<PAGE>
continues to increase, deficit borrowing has ceased, and the State is making
progress in replenishing its thin reserves.
International trade is a strong part of the State's economy. The prolonged
economic turmoil in Asia led to a falloff in trade with this region. Recent
increases in trade with Europe and NAFTA countries have not completely offset
the decline in California's Asian trade, as overall exports decreased 6.9% as of
March 31, 1999, compared to 12 months before. However, preliminary reports from
the major shipping centers and semiconductor manufacturers indicate that trade
with Asia is reviving.
California is one of the largest issuers of municipal debt with $25 billion of
debt outstanding. The size of the State and its wealth levels lessen the impact
that debt of that magnitude could have. The State's debt per capita during its
1998 fiscal year was $761, 15% higher than the national average. The State's
cash flow position has improved dramatically in the last year. Improving
financial conditions allow the State to rely less on temporary cash flow relief;
this is evidenced by decreased borrowing in the note market. California is
benefiting from a strong economy that has led to improved finances. We will
continue to monitor the State's mounting infrastructure needs.
A Cautious Strategy
During the fund's most recent semiannual period, fixed income investors reacted
negatively to news of tightening U.S. labor markets, the worldwide economic
revival, a weakening dollar, and economic statistics that some worried could
presage a revival of inflation. Yields on 10-year Treasury bonds rose just over
one half of a percentage point and their prices declined 4.6% over the six-month
period, while municipal bond yields rose nearly the same amount as Treasury
yields, and their prices declined 4.5%. Our strategy in light of these market
conditions was to maintain a shorter portfolio duration compared to most other
California municipal bond funds.
14 - Scudder California Tax Free Fund
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Over the period, the fund's average effective maturity remained the same at 10.8
years.
During the six-month period, we maintained three key elements of our longer-term
strategy: First, we focused on premium "cushion" bonds -- high coupon bonds
trading at a premium to face value that can be redeemed prior to maturity. We
believe that the extra yield provided by cushion bonds adequately compensates
the fund for the call feature in the current environment. Second, we continued
the fund's strong emphasis on call protection. (Generally a bond is called in by
its issuer so that it can be refinanced at a lower prevailing rate.) Our
call-protection strategy provides a more reliable income stream for the fund
than would exist if the portfolio held a significant proportion of bonds that
could be called in before their stated maturities. Third, our emphasis on
purchasing premium bonds rather than par bonds (which can more easily decline to
a discount) helped the fund by avoiding "market discount," a provision that
subjects municipal bonds sold at a discount to taxation.
Overall portfolio quality remains high, with over 85% of portfolio
securities rated A or better at the close of the period. We continue to
invest in a broad selection of California tax-exempt issues, including
general obligation, hospital/health, and housing finance bonds.
Outlook
Because some worry that excess financial liquidity, high-flying consumer
spending, and worker shortages could spell renewed inflation, the Federal
Reserve, with the help of many bond market participants, is striving to cool the
burgeoning U.S. economy. The Fed has raised interest rates twice in recent
months, and warned of further increases in the near future. Meanwhile, market
rates, such as those for mortgages and corporate bonds, have risen even faster
than the Fed funds rate. Such rate increases, along with a volatile stock
market, could slow the U.S. economy in 2000.
15 - Scudder California Tax Free Fund
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In a slightly weaker economy, municipal bonds should look attractive. Though
they would be negatively affected by further interest rate increases in the
short run, municipals should continue to benefit from steady demand from
institutional purchasers. Three other factors favor municipal bonds: First,
municipals currently yield more than 80% of similar maturity Treasuries. Second,
strong state and city finances across the country have boosted the
creditworthiness of tax-exempt bonds, and third, the reduced supply of municipal
bonds lends important support to their prices. We believe Scudder California Tax
Free Fund remains an attractive investment option for investors seeking a high
level of income free from federal and state income taxes.
Sincerely,
/s/Eleanor R. Brennan /s/Matthew J. Caggiano
Eleanor R. Brennan Matthew J. Caggiano
16 - Scudder California Tax Free Fund
<PAGE>
Glossary of Investment Terms
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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 A municipal bond backed by the "full faith and credit"
Obligation (including the taxing and further borrowing power) of the
Bond 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 An interest-bearing debt security issued by a state or
Bond local government entity.
Net Asset The price per share of a mutual fund based on the sum of the
Value (NAV) market value of all the securities owned by the fund divided
by the number of outstanding shares.
Taxable The level of yield a fully taxable instrument would have to
Equivalent provide to equal that of a tax-free municipal bond on an
Yield after-tax basis.
30-Day The standard yield reference for bond funds, based on a
SEC Yield 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 The most common yardstick to measure the performance of a
Return 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.
(Source: Scudder Kemper Investments, Inc.; Barron's Dictionary of Finance
and Investment Terms)
17
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Investment Portfolio as of September 30, 1999 (Unaudited)
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<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
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Municipal Investments 100.0%
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<S> <C> <C>
California
Alhambra, CA, Redevelopment Agency, Multi-Family
Housing Revenue, Main St. Plaza Apartments, Series
1996, Weekly Demand Bond, 4.93%, 12/1/2028* ......... 1,000,000 1,000,000
California, School Cash Reserve Program Authority,
Series 1999 A, Revenue Note, 4%, 7/3/2000 (b) ....... 800,000 805,264
California General Obligation, Tax Exempt
Commercial Paper:
3.15%, 10/13/1999 ................................... 1,000,000 1,000,000
3.2%, 11/8/1999 ..................................... 1,500,000 1,500,000
3%, 11/16/1999 ...................................... 1,000,000 1,000,000
California Health Facilities Finance Authority:
Catholic Healthcare West:
Series 1996 B, Weekly Demand Bond, 3.4%,
7/1/2006* ........................................... 1,400,000 1,400,000
Series 1998 C, Weekly Demand Bond, 3.4%,
7/1/2020 (b)* ....................................... 2,000,000 2,000,000
Pooled Loan Program, Series 1985 B, Weekly Demand
Note, 3.6%, 10/1/2010 (b)* .......................... 385,000 385,000
California Pollution Control Finance Authority:
Solid Waste Disposal:
Western Waste Industries, Series 1994 A, AMT, Weekly
Demand Note, 3.6%, 10/1/2006* ....................... 1,200,000 1,200,000
CR&R Inc. Project, Series 1995 A, AMT, Weekly
Demand Bond, 3.4%, 10/1/2010* ....................... 1,430,000 1,430,000
Pacific Gas & Electric Company:
Series 1996 E, Daily Demand Note, 4%, 11/1/2026* .... 500,000 500,000
Series 1997 D, AMT, Weekly Demand Note, 3.4%,
1/1/2010* ........................................... 1,500,000 1,500,000
California State Economic Development Financing
Authority, California Independent System Project,
Revenue, Series C, 4%, 4/1/2008* .................... 200,000 200,000
Eastern Municipal Water District, CA, Water & Sewer
Revenues, Series 1993 B, Weekly Demand Note, 3.4%,
7/1/2020* ........................................... 2,100,000 2,100,000
Fontana, CA, Unified School District, Tax and Revenue
Anticipation Note, 3.5%, 7/7/2000 ................... 2,000,000 2,004,739
Irvine, CA, Improvement Bond Act 1915, Special
Assessment, Daily Demand Note, 3.5%, 9/2/2024* ...... 305,000 305,000
Irvine, CA, Ranch Water District:
Daily Demand Bond, 3.5%, 4/1/2033* .................. 200,000 200,000
Conservation District, Series A, 4%, 5/1/2009* ...... 300,000 300,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
18 - Scudder California Tax Free Money Fund
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<TABLE>
<CAPTION>
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Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Kern County, CA, Certificate of Participation, Public
Facilities Project:
Series 1986 A, Weekly Demand Bond, 3.4%,
8/1/2006* ................................................... 1,000,000 1,000,000
Series 1986 D, Weekly Demand Bond, 3.4%,
8/1/2006* ................................................... 1,400,000 1,400,000
Los Angeles County Metropolitan Transportation Authority,
Sales Tax Revenue, Weekly Demand Bond, Series 1996,
3.52%, 7/1/2017* ............................................ 1,500,000 1,500,000
Los Angeles County, CA, Asset Lease Revenue, Tax
Exempt Commercial Paper:
3%, 10/15/1999 .............................................. 2,000,000 2,000,000
3.1%, 10/14/1999 ............................................ 1,500,000 1,500,000
Los Angeles County, CA, Certificate of Participation:
Willowbrook Project, Variable Rate Demand Bonds,
3.8%, 11/1/2015* ............................................ 2,400,000 2,400,000
County Museum of Arts, Series 1985A, Weekly Demand
Note, 3.3%, 11/1/2005* ...................................... 1,200,000 1,200,000
Los Angeles, CA, Tax & Revenue Anticipation Note,
Series A, 4%, 6/30/2000 ..................................... 1,200,000 1,205,888
Los Angeles, CA, Multi-Family Housing Revenue, Series K,
Weekly Demand Bond, 3%, 7/1/2010* ........................... 3,100,000 3,100,000
M-S-R Public Power Agency, San Juan Project, Revenue
Bond, Subordinate Lien, Series B, Weekly Demand Bond,
3.3%, 7/1/2022* ............................................. 1,000,000 1,000,000
Oakland, CA, Joint Powers Financing Authority, Lease
Revenue, Weekly Demand Bond:
Series 1998 A-1, 3.3%, 8/1/2021* ............................ 1,800,000 1,800,000
Series 1998 A-2, 3.4%, 8/1/2021* ............................ 1,000,000 1,000,000
Orange County, CA, Certificate of Participation, Orange
County Sanitation Districts, Variable Rate Demand Note,
3.5%, 8/1/2015* ............................................. 185,000 185,000
Riverside County, CA, Certificate of Participation, Riverside
County Public Facilities, Series A, Weekly Demand Note,
3.2%, 12/1/2015* ............................................ 900,000 900,000
Sacramento, CA, Multi-Family Housing Revenue,
Smoketree Apartments Project, Series 1990 A, Weekly
Demand Bond, 3.25%, 4/15/2010* .............................. 1,000,000 1,000,000
Sacramento Municipal Utility District, CA, Tax Exempt
Commercial Paper:
3.2%, 10/7/1999 ............................................. 1,000,000 1,000,000
3.2%, 10/12/1999 ............................................ 1,000,000 1,000,000
San Bernadino County, CA, Certificates of Participation:
County Center Refinancing, Series 1996, Weekly
Demand Note, 3.25%, 7/1/2015* ............................... 1,000,000 1,000,000
</TABLE>
The accompanying notes are an integral part of the financial statements.
19 - California Tax Free Money Fund
<PAGE>
<TABLE>
<CAPTION>
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Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Medical Center Financing Project, Series 1998, Weekly
Demand Bond, 3.1%, 8/1/2026* .............................. 1,000,000 1,000,000
San Francisco, CA, Tax Exempt Commercial Paper, Series
1998 B, 3.25%, 11/9/1999 .................................. 2,000,000 2,000,000
San Francisco Airport, Tax Exempt Commercial Paper,
3.15%, 10/7/1999 .......................................... 1,500,000 1,500,000
San Jose, CA, Clean Water Financing Authority, Sewer
Revenue Bond, Series 1995 B, Weekly Demand Note,
3.2%, 11/15/2011* ......................................... 1,000,000 1,000,000
San Marcos, CA, Redevelopment Agency, Multi-Family
Rental Housing Revenue, Series 1985 A, Weekly Demand
Bond, 3.6%, 6/1/2005* ..................................... 2,700,000 2,700,000
Santa Clara County, CA, Multi-Family Housing Authority,
Fox Chase I Project, Weekly Demand Note, Series
1985 E, 3.4%, 11/1/2007 (b)* .............................. 1,000,000 1,000,000
Southern California Edison, Tax Exempt Commercial Paper,
Series 1985 D, 3.05%, 10/8/1999 ........................... 1,750,000 1,750,000
Southern California Metropolitan Water District, Tax Exempt
Commercial Paper:
Series B, 2.85%, 10/15/1999 ............................... 1,000,000 1,000,000
Series B, 3%, 10/20/1999 .................................. 1,000,000 1,000,000
Series B, 3.3%, 10/14/1999 ................................ 1,000,000 1,000,000
Southern California Pollution Control Revenue, Edison Co.,
Series 1986 A, Daily Demand Note, 4.05%, 2/28/2008* ....... 200,000 200,000
Southern California Public Power Authority, Transmission
Project, Series 1991, Weekly Demand Note, 3.2%,
7/1/2019* ................................................. 1,100,000 1,100,000
University of California Revenue Bond, Tax Exempt
Commercial Paper, Class A, 3%, 10/27/1999 ................. 2,000,000 2,000,000
Vallejo, CA, Industrial Development Authority Revenue,
Weekly Demand Bond, Series 1993 A, AMT, 3.4%,
12/1/2023* ................................................ 1,500,000 1,500,000
Ventura County, CA, Financial Authority Revenue Bond,
Weekly Demand Bond, 3.1%, 10/21/1999 ...................... 1,000,000 1,000,000
Puerto Rico
Puerto Rico Commonwealth, Highway & Transportation
Authority, Transportation Revenue, Series A, Weekly
Demand Bond, 3.45%, 7/1/2028* ............................. 2,000,000 2,000,000
Puerto Rico Development Bank, Tax Exempt
Commercial Paper:
2.9%, 10/13/1999 .......................................... 1,400,000 1,400,000
3.05%, 10/19/1999 ......................................... 1,000,000 1,000,000
3.25%, 10/19/1999 ......................................... 2,000,000 2,000,000
3.15%, 10/20/1999 ......................................... 1,000,000 1,000,000
- -------------------------------------------------------------------------------------
Total Investment Portfolio -- 100.0% (Cost $70,170,891) (a) 70,170,891
- -------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
20 - Scudder California Tax Free Money Fund
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(a) The cost for federal income tax purposes was $70,170,891.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty, 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 or line 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: Subject to alternative minimum tax
The accompanying notes are an integral part of the financial statements.
21 - Scudder California Tax Free Money Fund
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at value (identified cost $70,170,891) ........... $ 70,170,891
Interest receivable ........................................... 241,034
Receivable for Fund shares sold ............................... 92,545
Other assets .................................................. 1,260
------------
Total assets .................................................. 70,505,730
Liabilities
- --------------------------------------------------------------------------------
Due to custodian bank ......................................... 55,048
Dividends payable ............................................. 15,459
Payable for Fund shares redeemed .............................. 80,699
Accrued management fee ........................................ 41,777
Other payables and accrued expenses ........................... 42,446
------------
Total liabilities ............................................. 235,429
- --------------------------------------------------------------------------------
Net assets, at value $ 70,270,301
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Accumulated net realized gain (loss) .......................... (95,212)
Paid-in capital ............................................... 70,365,513
- --------------------------------------------------------------------------------
Net assets, at value $ 70,270,301
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($70,270,301 / 70,281,076 outstanding shares of beneficial --------------
interest, $.01 par value, unlimited number of shares authorized) $ 1.00
--------------
The accompanying notes are an integral part of the financial statements.
22 - Scudder California Tax Free Money Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Operations for the six months ended September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Investment Income (Loss)
- --------------------------------------------------------------------------------
Income:
Interest ...................................................... $ 1,127,850
-----------
Expenses:
Management fee ................................................ 189,012
Services to shareholders ...................................... 41,887
Custodian and accounting fees ................................. 21,362
Trustees' fees and expenses ................................... 9,516
Auditing ...................................................... 11,176
Reports to shareholders ....................................... 4,267
Legal ......................................................... 745
Registration fees ............................................. 7,111
Other ......................................................... 3,604
-----------
Total expenses before reductions .............................. 288,680
Expense reductions ............................................ (61,876)
-----------
Expenses, net ................................................. 226,804
- --------------------------------------------------------------------------------
Net investment income 901,046
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ 901,046
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.
23 - Scudder California Tax Free Money Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
September 30,
1999 Year Ended
Increase (Decrease) in Net Assets (Unaudited) March 31, 1999
- -----------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income ........................................ $ 901,046 $ 1,717,867
Net realized gain (loss) from investment
transactions ............................................... -- (806)
------------ ------------
Net increase (decrease) in net assets resulting
from operations ............................................ 901,046 1,717,061
------------ ------------
Distributions to shareholders from net investment
income ..................................................... (901,046) (1,717,867)
------------ ------------
Fund share transactions at net asset value of $1.00 per share:
Shares sold .................................................. 38,554,931 63,965,964
Net asset value of shares issued to shareholders
in reinvestment of distributions ........................... 793,447 1,496,686
Shares redeemed .............................................. (40,432,250) (64,654,272)
------------ ------------
Net increase (decrease) in net assets from Fund
share transactions ......................................... (1,083,872) 808,378
------------ ------------
Increase (decrease) in net assets ............................ (1,083,872) 807,572
Net assets at beginning of period ............................ 71,354,173 70,546,601
------------ ------------
Net assets at end of period .................................. $ 70,270,301 $ 71,354,173
------------ ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
24 - 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, 1999(a) 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------------------------------------------------
- --------------------------------------------------------------------------------
Net investment income .012 .025 .029 .028 .032 .027
- --------------------------------------------------------------------------------
Less: Distributions from net
investment income (.012) (.025) (.029) (.028) (.032) (.027)
- --------------------------------------------------------------------------------
Net asset value, end of period $1.000 $1.000 $1.000 $1.000 $1.000 $1.000
------------------------------------------------
- --------------------------------------------------------------------------------
Total Return (%) (b) 1.20** 2.52 2.98 2.87 3.28 2.72
- --------------------------------------------------------------------------------
Ratios and Supplemental Data
- --------------------------------------------------------------------------------
Net assets, end of period
($ millions) 70 71 71 69 67 64
- --------------------------------------------------------------------------------
Ratio of operating expenses,
net to average daily net
assets (%) .60* .60 .60 .60 .60 .60
- --------------------------------------------------------------------------------
Ratio of operating expenses
before expense reductions to
average daily net assets (%) .77* .79 .78 .79 .81 .84
- --------------------------------------------------------------------------------
Ratio of net investment income
to average daily net assets (%) 2.39* 2.48 2.92 2.83 3.23 2.68
- --------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended September 30, 1999 (Unaudited).
(b) Total returns would have been lower had certain expenses not been reduced.
* Annualized
** Not annualized
25 - Scudder California Tax Free Money Fund
<PAGE>
Investment Portfolio as of September 30, 1999 (Unaudited)
- --------------------------------- ----------------------------------------------
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
Short-Term Municipal Investments 3.3%
- ------------------------------------------------------------------------------------
California
<S> <C> <C>
California Pollution Control Financing Authority, Pacific
Gas & Electric Corp., Daily Demand Note, 4%,
11/1/2026* ................................................. 2,700,000 2,700,000
Irvine, CA, Ranch Water District, Series A, Daily Demand
Note, 3.95%, 11/15/2013* ................................... 2,000,000 2,000,000
Orange County, CA, Municipal Water District, Certificate of
Participation, Daily Demand Note, 3.45%, 8/15/2015* ........ 1,500,000 1,500,000
Orange County, CA, Sanitation District, Series 1992 C, Daily
Demand Note, 3.6%, 8/1/2017 (b)* ........................... 4,600,000 4,600,000
- ------------------------------------------------------------------------------------
Total Short-Term Municipal Investments (Cost $10,800,000) 10,800,000
- ------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------
Long-Term Municipal Investments 96.7%
- ------------------------------------------------------------------------------------
California
ABAG Finance Authority, CA:
Nonprofit Corporations, Certificate of Participation,
5.25%, 10/1/2007 ........................................... 1,740,000 1,743,950
Stanford Health Systems, Certificate of Participation, 6%,
11/1/2007 (b) .............................................. 605,000 664,629
Alameda County, CA, Water District Revenue, Series 1998,
4.625%, 6/1/2016 (b) ....................................... 2,450,000 2,176,090
Anaheim County, CA, Convention Center Financing,
Certificate of Participation, Zero Coupon, 8/1/2005 (b) .... 1,250,000 960,800
Anaheim, CA, Public Financing Authority:
5.25%, 2/1/2018 (b) ........................................ 2,000,000 1,924,680
Lease Revenue Public Improvements Project:
Series 1997A, 6%, 9/1/2024 (b) ............................. 3,500,000 3,676,995
Series 1997C, 6%, 9/1/2010 (b) ............................. 1,000,000 1,091,240
Series 1997C, 6%, 9/1/2011 (b) ............................. 4,570,000 4,980,706
Series 1997C, 6%, 9/1/2014 (b) ............................. 1,000,000 1,073,650
Series 1997C, 6%, 9/1/2016 (b) ............................. 1,000,000 1,062,520
Series 1997C, Zero Coupon, 9/1/2017 (b) .................... 1,455,000 527,772
Series 1997C, Zero Coupon, 9/1/2018 (b) .................... 1,000,000 339,640
California Educational Facilities Authority, Revenue Bond,
Santa Clara University, 5.25%, 9/1/2018 (b) ................ 230,000 220,929
California, General Obligation, 5.5%, 4/1/2010 (b) ......... 1,750,000 1,833,930
</TABLE>
The accompanying notes are an integral part of the financial statements.
26 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
Principal Market
Amount ($) Value ($)
- ----------------------------------------------------------------------------------
<S> <C> <C>
California Health Facilities, Financial Authority Revenue:
Capital Appreciation, Kaiser Permanente:
Series 1989A, Zero Coupon, 10/1/2010 (b) ................ 3,040,000 1,724,410
Series 1989A, Zero Coupon, 10/1/2012 (b) ................ 4,900,000 2,444,561
Series 1998A, 5.25%, 6/1/2012 (b) ....................... 2,000,000 1,996,180
Enloe Health Systems:
Series 1998A, 5.375%, 11/15/2013 (b) .................... 2,260,000 2,262,667
Series 1998A, 5%, 11/15/2028 (b) ........................ 1,000,000 913,610
California Housing Finance Agency:
Home Mortgage Revenue:
Series F1, AMT, 6.2%, 8/1/2005 (b) ...................... 840,000 869,618
Series F1, AMT, 6.3%, 8/1/2006 (b) ...................... 1,310,000 1,367,404
Series 1995 G, AMT, 5.7%, 2/1/2007 (b) .................. 500,000 514,005
Series 1995 G, AMT, 5.8%, 2/1/2008 (b) .................. 1,330,000 1,372,347
Series 1995 G, AMT, 5.9%, 2/1/2009 (b) .................. 200,000 206,806
Multi-Unit Rental Housing Revenue:
Series A, 7.35%, 8/1/2000 ............................... 2,615,000 2,673,315
Series A, 7.4%, 8/1/2001 ................................ 1,555,000 1,618,444
Series A, 7.45%, 8/1/2002 ............................... 1,015,000 1,078,793
Series A, 7.6%, 8/1/2006 ................................ 4,030,000 4,342,406
Series A, 7.65%, 8/1/2007 ............................... 2,335,000 2,512,623
Series A, 7.7%, 8/1/2009 ................................ 700,000 750,519
Series A, 7.75%, 8/1/2016 ............................... 2,440,000 2,609,946
Series A, 7.8%, 8/1/2023 ................................ 2,635,000 2,821,927
Series II, 7.3%, 8/1/2000 ............................... 345,000 351,558
Series II, 7.3%, 8/1/2001 ............................... 375,000 389,250
Series II, 7.35%, 8/1/2002 .............................. 400,000 420,752
Series II, 7.35%, 8/1/2003 .............................. 430,000 456,368
Series II, 7.35%, 8/1/2004 .............................. 460,000 493,244
Series II, 7.35%, 8/1/2005 .............................. 495,000 535,016
California Public Works Board, Department of Corrections,
Lease Based Revenue, Medera Prison, Series A-2, 7.4%,
9/1/2010 (b) ............................................ 1,000,000 1,203,390
California Residence Efficiency Financing Authority,
Certificates of Participation, Capital Improvement
Program:
Series 1997, 6%, 4/1/2008 (b) ........................... 1,335,000 1,452,573
Series 1997, 6%, 4/1/2009 (b) ........................... 1,420,000 1,545,414
Series 1997, 6%, 4/1/2010 (b) ........................... 1,500,000 1,632,915
Series 1997, 6%, 4/1/2011 (b) ........................... 1,590,000 1,729,268
</TABLE>
The accompanying notes are an integral part of the financial statements.
27 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
California State Public Works Board, Revenue Bond:
Department of Corrections, Series C, 5.25%,
11/1/2010 ................................................ 5,000,000 5,113,700
Department of Justice Building, Series A, 5.25%,
5/1/2011 ................................................. 3,000,000 3,049,380
California Community Colleges, Series A, 5.25%,
12/1/2013 ................................................ 1,000,000 988,120
California Statewide Community Development Authority:
Apartment Development Revenue Bond:
Series 1998A, 5.1%, 5/15/2025* ........................... 1,000,000 948,000
Series 1998A, 5.25%, 5/15/2025* .......................... 1,000,000 947,710
Certificates of Participation:
Children's Hospital, Series 1993, 6%, 6/1/2010 (b) ....... 1,000,000 1,083,550
Lutheran Homes:
Series 1993, 5.5%, 11/15/2008 ............................ 1,500,000 1,553,205
Series 1993, 5.6%, 11/15/2013 ............................ 4,750,000 4,809,898
Unihealth America, Series A, Zero Coupon,
10/1/2005 (b) ............................................ 1,450,000 1,106,176
Castaic Lake, CA, Water Agency, Certificate of
Participation, Water System Improvement Project,
Series 1994A, 7.25%, 8/1/2007 (b) ........................ 1,000,000 1,165,960
Center, CA, Unified School District, Capital Appreciation,
Series 1997C, Zero Coupon, 9/1/2014 (b) .................. 2,240,000 986,922
Central Valley, CA, School District, Financing Authority,
Capital Appreciation:
Zero Coupon, 2/1/2006 (b) ................................ 2,300,000 1,713,523
Zero Coupon, 8/1/2006 (b) ................................ 5,035,000 3,665,027
Zero Coupon, 2/1/2007 (b) ................................ 2,210,000 1,559,398
Zero Coupon, 8/1/2007 (b) ................................ 5,510,000 3,796,610
Chino Basin, CA, Regional Financing Authority, Municipal
Water District, Sewer System, Series 1994, 5.9%,
8/1/2011 (b) ............................................. 1,290,000 1,393,871
Clovis County, CA, Sewer Development Revenue,
Series 1998, 5.5%, 8/1/2019 (b) .......................... 1,795,000 1,769,296
Coronado, CA, Tax Anticipation Note, 6%, 9/1/2007 (b) .... 1,150,000
1,254,213
Delmar, CA, Race Track Authority, Series 1996, 6%,
8/15/2006 ................................................ 2,000,000 2,074,980
Dry Creek, CA, Joint Elementary School District,
Capital Appreciation:
Series 1997A, Zero Coupon, 8/1/2010 (b) .................. 1,120,000 645,546
Series 1997A, Zero Coupon, 8/1/2011 (b) .................. 1,180,000 637,519
Series 1997A, Zero Coupon, 8/1/2016 (b) .................. 555,000 215,801
Series 1997A, Zero Coupon, 8/1/2021 (b) .................. 1,920,000 539,366
Series 1997A, Zero Coupon, 5/1/2022 (b) .................. 1,385,000 371,651
</TABLE>
The accompanying notes are an integral part of the financial statements.
28 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Duarte, CA, Certificate of Participation:
City of Hope Medical Center:
Series 1993, 6%, 4/1/2008 ................................ 3,750,000 4,037,700
Series 1993, 5.75%, 4/1/2002 ............................. 3,525,000 3,667,974
Series 1999 A, 5.25%, 4/1/2024 ........................... 1,250,000 1,087,238
Elk Grove, CA, Unified School District #1, Special Tax,
Community Facilities, 6.5%, 12/1/2008 (b) ................ 1,000,000 1,127,990
Encinitas, CA, Certificate of Participation, Series 1997A,
5%, 12/1/2016 (b) ........................................ 1,000,000 944,830
Escondido County, CA, Unified School District, Capital
Appreciation, Zero Coupon, 11/1/2018 (b) ................. 4,605,000 1,549,214
Foothill Eastern Transportation Corridor Agency, CA, Toll
Road Revenue:
5.375%, 1/15/2015 (b) .................................... 1,250,000 1,241,525
5.75%, 1/15/2040 ......................................... 1,250,000 1,188,100
Senior Lien, Series 1995A, Step-up Coupon, 0% to
1/1/2005, 6.95% to 1/1/2007 .............................. 575,000 464,606
Senior Lien, Series 1995A, Step-up Coupon, 0% to
1/1/2005, 7.1% to 1/1/2011 ............................... 6,000,000 5,082,480
Senior Lien, Series A, Step-up Coupon, 0% to 1/1/2005,
7.15% to 1/1/2013 ........................................ 975,000 827,941
Senior Lien, Series A, Step-up Coupon, 0% to 1/1/2005,
7.15% to 1/1/2014 ........................................ 2,875,000 2,441,364
Zero Coupon, 1/15/2017 (b) ............................... 1,475,000 534,260
Zero Coupon, 1/15/2026 ................................... 1,250,000 667,813
Healdsburg, CA, Unified School District, Capital
Appreciation:
Series 1997, Zero Coupon, 7/15/2011 (b) .................. 400,000 216,608
Series 1997, Zero Coupon, 7/15/2012 (b) .................. 400,000 203,084
Series 1997, Zero Coupon, 7/15/2013 (b) .................. 400,000 190,032
Series 1997, Zero Coupon, 7/15/2014 (b) .................. 400,000 177,476
Inland Empire Solid Waste Financing Authority, California
Landfill Improvement Financing Project, AMT,
Series 1996B, 6%, 8/1/2006 (b) ........................... 1,000,000 1,074,580
Irvine, CA, Improvement Bond Act 1915, Special
Assessment, 6%, 9/2/2022 ................................. 250,000 242,720
Las Virgenes, CA, University School District, General
Obligation, Zero Coupon, 11/1/2016 (b) ................... 1,500,000 571,320
Los Angeles, Building Authority Lease Revenue, 5.5%,
10/1/2017 (b) ............................................ 1,571,056 1,576,208
Los Angeles, CA, Authority Lease Revenue, Department of
General Services, Series 1993A, 5.6%, 5/1/2008 ........... 7,000,000 7,340,754
Los Angeles, CA, University School District, 5.5%,
7/1/2012 (b) ............................................. 1,250,000 1,286,713
</TABLE>
The accompanying notes are an integral part of the financial statements.
29 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Los Angeles County, CA, Certificate of Participation:
Capital Appreciation, Disney Parking Project:
Zero Coupon, 9/1/2006 ...................................... 2,500,000 1,758,475
Zero Coupon, 3/1/2008 ...................................... 2,780,000 1,782,341
Zero Coupon, 9/1/2008 ...................................... 4,865,000 3,037,852
Marina Del Ray:
Series A, 6.25%, 7/1/2003 .................................. 2,060,000 2,122,068
Series A, 6.5%, 7/1/2008 ................................... 2,500,000 2,644,350
Los Angeles County, CA, Convention and Exhibition
Center Authority Lease Revenue, Series 1993A, 6.125%,
8/15/2011 (b) .............................................. 1,000,000 1,097,880
Merced, CA, High School District:
Capital Appreciation Bond, Series A, Zero Coupon,
8/1/2016 (b) ............................................... 2,140,000 826,682
General Obligation, Series A, Zero Coupon,
8/15/2015 (b) .............................................. 2,090,000 860,892
Midpeninsula Regional Open Space District, CA, Finance
Authority Revenue, Capital Appreciation, Zero Coupon,
9/1/2020 (b) ............................................... 1,190,000 350,455
Millbrae California Residential Facilities, Revenue Magnolia
of Millbrae Project, Series 1997A, AMT, 7.375%,
9/1/2027 ................................................... 4,000,000 4,097,520
Modesto, CA, Certificate of Participation, Community
Project, Series A, 5.6%, 11/1/2014 (b) ..................... 1,370,000 1,415,128
Modesto, CA, Wastewater Facilities Treatment Revenue,
Series 1997, AMT, 6%, 11/1/2011 (b) ........................ 1,255,000 1,368,941
Mojave Desert & Mountain Region, CA, Solid Waste Joint
Powers Authority, California Project Revenue, 7.875%,
6/1/2020 ................................................... 2,350,000 2,568,832
Oakland, CA, Port Revenue, AMT, Series 1997G, 5.375%,
11/1/2025 (b) .............................................. 1,000,000 936,790
Orange County, CA, Recovery Certificate of Participation:
Series 1995A, 5.6%, 6/1/2007 (b) ........................... 4,430,000 4,710,906
Series 1996A, 6%, 7/1/2006 (b) ............................. 3,000,000 3,257,490
Series 1996A, 6%, 7/1/2008 (b) ............................. 1,000,000 1,089,330
Pomona, CA, Unified School District, General
Obligation, ETM:
Series 1992B, 6.25%, 8/1/2014 (b)** ........................ 1,020,000 1,118,603
Series 1993D, 5.6%, 8/1/2014 (b)** ......................... 170,000 175,180
Series 1993D, 5.6%, 8/1/2015 (b)** ......................... 180,000 184,752
Series 1993D, 5.6%, 8/1/2016 (b)** ......................... 190,000 193,730
Series 1993D, 5.6%, 8/1/2017 (b)** ......................... 175,000 177,158
Series 1993D, 5.6%, 8/1/2018 (b)** ......................... 205,000 206,648
</TABLE>
The accompanying notes are an integral part of the financial statements.
30 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Port of Hueneme, CA, Certificate of Participation, Capital
Improvement, 6%, 4/1/2019 (b) .............................. 925,000 971,953
Richmond, CA, Joint Powers Finance Authority:
Series 1996, 5.875%, 9/1/2006 .............................. 500,000 523,590
Series 1996, 6.6%, 9/1/2016 ................................ 1,000,000 1,053,610
Riverside County, CA, Asset Leasing Corp., Leasehold
Revenue Project:
Series 1998, Zero Coupon, 6/1/2015 (b) ..................... 1,750,000 727,598
Series 1997, Zero Coupon, 6/1/2016 (b) ..................... 2,395,000 933,930
Rocklin, CA, Unified School District, Community Facilities:
Zero Coupon, 9/1/2019 (b) .................................. 1,675,000 532,148
Zero Coupon, 9/1/2020 (b) .................................. 1,415,000 420,963
Sacramento, CA, City Financing Authority, Revenue Bond,
Convention Center Hotel, Series A, 6.25%, 1/1/2030 ......... 4,000,000 3,798,600
Sacramento, CA, City Financing Authority Revenue, Capital
Appreciation, Tax Allocation, Series 1993B, Zero Coupon,
11/1/2016 (b) .............................................. 2,685,000 1,029,483
Sacramento, CA, Power Authority Cogeneration Project,
Series 1995, 6.5%, 7/1/2004 ................................ 2,000,000 2,146,280
Sacramento, CA, Finance Authority Lease, Series 1993B,
5%, 11/1/2014 .............................................. 5,200,000 4,961,164
Saddleback Valley, Unified School District, Public Financing
Authority, Special Tax Revenue:
Series A, 4.75%, 9/1/2020 (b) .............................. 3,215,000 2,815,890
Series 1997A, 6%, 9/1/2010 (b) ............................. 1,565,000 1,707,791
Series 1997A, 6%, 9/1/2013 (b) ............................. 1,000,000 1,079,530
Series 1997A, 6%, 9/1/2014 (b) ............................. 1,000,000 1,073,650
Series 1997A, 6%, 9/1/2015 (b) ............................. 1,000,000 1,069,020
San Bernadino, CA, Certificate of Participation, Medical
Center Financing Project:
Refunding, Series 1994, 5.5%, 8/1/2017 (b) ................. 3,965,000 3,969,163
Series 1994, 6%, 8/1/2009 (b) .............................. 3,000,000 3,242,730
San Bernardino County, CA, Certificate of Participation,
5.25%, 2/1/2015 (b) ........................................ 2,215,000 2,171,431
San Diego, CA, Water Utility Funding, Network System
Revenue:
5.375%, 8/1/2014 (b) ....................................... 1,000,000 1,001,960
5.375%, 8/1/2015 (b) ....................................... 2,000,000 1,990,360
San Francisco, CA, Bay Area Rapid Transit District Sales
Tax Revenue, 5.25%, 7/1/2016 ............................... 3,600,000 3,527,532
San Francisco, CA, City and County Educational Facilities,
Unified School District, Series B, 5.5%, 6/15/2011 ......... 1,500,000 1,547,685
</TABLE>
The accompanying notes are an integral part of the financial statements.
31 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
San Francisco, CA, City and County Redevelopment Agency
Residential Facility, Coventry Park Project, Series 1996A,
AMT, 8.5%, 12/1/2026 ..................................... 2,000,000 2,209,180
San Francisco, CA, Redevelopment Financing Agency,
Tax Allocation Revenue, Series A, Zero Coupon,
8/1/2003 (b) ............................................. 1,080,000 918,065
San Joaquin Hills, CA, Transportation Corridor Agency,
Toll Road Revenue:
Capital Appreciation Refunding, Series 1997A, Zero
Coupon, 1/15/2010 (b) .................................... 3,500,000 2,071,860
Junior Lien, ETM:
Series 1993, Zero Coupon, 1/1/2002** ..................... 515,000 469,067
Series 1993, Zero Coupon, 1/1/2006** ..................... 200,000 149,856
Series 1993, Zero Coupon, 1/1/2010** ..................... 1,500,000 887,925
Series 1993, Step-up Coupon, 0% to 1/1/2002, 7.3%
to 1/1/2004** ............................................ 1,000,000 950,820
Senior Lien, ETM:
Series 1993, Zero Coupon, 1/1/2014** ..................... 2,500,000 1,140,975
Series 1993, Zero Coupon, 1/1/2000 ....................... 1,500,000 1,486,590
Step-up Coupon, 0% to 1/1/2002, 7.4% to 1/1/2007** ....... 6,000,000 5,999,760
Step-up Coupon, 0% to 1/1/2002, 7.35% to
1/1/2005** ............................................... 2,500,000 2,422,425
Series 1997A, Zero Coupon, 1/15/2003 (b) ................. 900,000 782,640
Series 1997A, Zero Coupon, 1/15/2004 (b) ................. 400,000 331,848
Series 1997A, Zero Coupon, 1/15/2005 (b) ................. 1,900,000 1,495,927
Series A, Zero Coupon, 1/15/2012 (b) ..................... 2,500,000 1,300,225
San Jose, CA, Financing Revenue, Community
Facilities Project:
Series 1993B, Zero Coupon, 11/15/2003 .................... 735,000 612,725
Series 1993B, Zero Coupon, 11/15/2004 .................... 1,605,000 1,273,214
Series 1993B, Zero Coupon, 11/15/2005 .................... 1,605,000 1,203,927
Series 1993B, Zero Coupon, 11/15/2006 .................... 1,605,000 1,137,576
San Jose, CA, Unified School District, Santa Clara County,
Capital Appreciation, Series 1997A, Zero Coupon,
8/1/2013 (b) ............................................. 2,445,000 1,158,783
San Mateo, CA, Transportation District, Series 1997A,
5.5%, 6/1/2015 (b) ....................................... 2,250,000 2,285,325
Santa Ana, CA, Financing Authority, Lease Revenue Bonds,
Police Administration and Holding Facility, Series 1994A,
6.25%, 7/1/2024 (b) ...................................... 2,000,000 2,167,120
Santa Clara County, CA, Finance Authority, Lease Revenue,
VMC Replacement Project, 7.75%, 11/15/2008 (b) ........... 3,250,000 3,946,638
</TABLE>
The accompanying notes are an integral part of the financial statements.
32 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
====--------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ------------------------------------------------------------------------------------
<S> <C> <C>
Santa Cruz County, CA, Certificates of Participation, Capital
Facilities Project:
Series 1997, 5.5%, 9/1/2016 (b) ........................... 955,000 962,287
Series 1997, 5.5%, 9/1/2017 (b) ........................... 1,005,000 1,004,950
Series 1997, 5.5%, 9/1/2018 (b) ........................... 1,060,000 1,055,018
Series 1997, 5.6%, 9/1/2019 (b) ........................... 1,115,000 1,118,936
Series 1997, 5.6%, 9/1/2020 (b) ........................... 1,180,000 1,179,941
Series 1997, 5.65%, 9/1/2024 (b) .......................... 1,445,000 1,444,538
Series 1997, 5.65%, 9/1/2025 (b) .......................... 1,520,000 1,518,282
Series 1997, 5.65%, 9/1/2026 (b) .......................... 1,605,000 1,602,496
Santa Margarita/Dana Point, CA:
Improvement Districts 1-2-2A and 8, Series 1994A,
7.25%, 8/1/2006 (b) ....................................... 465,000 537,038
Improvement Districts 3, 3A, 4 and 4A, Series 1994B,
7.25%, 8/1/2005 (b) ....................................... 2,895,000 3,308,667
Simi Valley California Certificate of Participation,
Series 1998, 5.25%, 8/1/2017 (b) .......................... 575,000 557,480
South Orange County, CA, Public Power Authority, Special
Tax Revenue, 7%, 9/1/2006 (b) ............................. 2,230,000 2,546,838
Southern California Public Power Authority:
Series 1989, 6.75%, 7/1/2010 .............................. 6,000,000 6,816,360
Transmission Project Revenue, Capital Appreciation,
Zero Coupon, 7/1/2015 ..................................... 2,000,000 832,760
State of California, General Obligation:
4.375%, 10/1/2017 ......................................... 6,830,000 5,758,168
5.25%, 10/1/2012 .......................................... 5,000,000 5,056,400
Torrance, CA, Redevelopment Agency, Tax Allocation,
Sub Lien:
5.1%, 9/1/2008 ............................................ 495,000 475,304
5.2%, 9/1/2009 ............................................ 540,000 516,499
5.3%, 9/1/2010 ............................................ 605,000 578,961
5.4%, 9/1/2011 ............................................ 665,000 634,383
Ukiah, CA, Unified School District, Series 1997, Zero
Coupon, 8/1/2010 (b) ...................................... 1,200,000 691,656
Vallejo Sanitation & Flood Control District, Solano County,
CA, Certificate of Participation, 5%, 7/1/2019 (b) ........ 2,500,000 2,302,275
Washington TWP California Health Care, Revenue Bond,
5.125%, 7/1/2023 .......................................... 500,000 443,785
Watsonville, CA, Community Hospital Revenue,
Series 1996, 5.95%, 7/1/2007 .............................. 1,135,000 1,233,109
West Covina, CA, Redevelopment Agency Facility,
Series 1996, 5.75%, 9/1/2009 .............................. 865,000 902,143
</TABLE>
The accompanying notes are an integral part of the financial statements.
33 - Scudder California Tax Free Fund
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Principal Market
Amount ($) Value ($)
- ---------------------------------------------------------------------------------------
<S> <C> <C>
West Covina, CA, Queen of the Valley Hospital, Certificate
of Participation, Hospital Revenue:
Series 1994, 5.7%, 8/15/2000 .............................. 380,000 387,228
Series 1994, 5.8%, 8/15/2001 .............................. 750,000 775,665
Westminster, CA, Redevelopment Agency, Tax Allocation
Revenue, Community Development, Project #1, Series A,
Prerefunded 8/1/2001, 7.3%, 8/1/2021 (c) .................. 2,690,000 2,902,725
Whittier, CA, Presbyterian Intercommunity Hospital, Health
Facilities Revenue:
6.25%, 6/1/2008 (b) ....................................... 1,000,000 1,096,560
6.25%, 6/1/2010 (b) ....................................... 1,250,000 1,384,438
Puerto Rico
Puerto Rico Public Finance Corp., Series A, 5.375%,
6/1/2019 (b) .............................................. 2,000,000 1,945,660
Virgin Islands
Virgin Islands, Special Tax Bonds, Hugo Bonds,
Prerefunded 10/1/2001, 7.75%, 10/1/2006 (c) ............... 1,330,000 1,417,581
Virgin Islands, General Obligation, Public Finance
Authority, Mortgage Fund Loan Notes, ETM, Series
1992 A, 7%, 10/1/2002** ................................... 1,000,000 1,084,530
- ---------------------------------------------------------------------------------------
Total Long-Term Municipal Investments (Cost $304,923,074) 312,452,007
- ---------------------------------------------------------------------------------------
Total Investment Portfolio-- 100.0% (Cost $315,723,074) (a) 323,252,007
- ---------------------------------------------------------------------------------------
</TABLE>
(a) The cost for federal income tax purposes was $315,723,074. At September 30,
1999, net unrealized appreciation for all securities based on tax cost was
$7,528,933. This consisted of aggregate gross unrealized appreciation for
all securities in which there was an excess of market value over tax cost
of $11,811,160 and aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value of
$4,282,227.
(b) Bond is insured by one of these companies: AMBAC, Capital Guaranty, FGIC,
FSA, MBIA, or MBIA/BIG.
(c) Prerefunded: Bonds which are prerefunded are collateralized by U.S.
Treasury securities which are held in escrow and are used to pay principal
and interest on tax-exempt issues and to retire the bonds in full at the
earliest refunding date.
* 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: Subject to alternative minimum tax
The accompanying notes are an integral part of the financial statements.
34 - Scudder California Tax Free Fund
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities as of September 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Assets
- --------------------------------------------------------------------------------
Investments, at market (identified cost $315,723,074) ........ $ 323,252,007
Cash ......................................................... 122,142
Receivable for investments sold .............................. 300,000
Interest receivable .......................................... 3,604,830
Receivable for Fund shares sold .............................. 55,313
Other assets ................................................. 6,090
-------------
Total assets ................................................. 327,340,382
Liabilities
- --------------------------------------------------------------------------------
Dividends payable ............................................ 437,636
Payable for investments purchased ............................ 5,109,901
Payable for Fund shares redeemed ............................. 103,242
Accrued management fee ....................................... 168,348
Other payables and accrued expenses .......................... 69,012
-------------
Total liabilities ............................................ 5,888,139
- --------------------------------------------------------------------------------
Net assets, at market value $ 321,452,243
- --------------------------------------------------------------------------------
Net Assets
- --------------------------------------------------------------------------------
Net assets consist of:
Net unrealized appreciation (depreciation) on investments .... 7,528,933
Accumulated net realized gain (loss) ......................... (5,879,173)
Paid-in capital .............................................. 319,802,483
- --------------------------------------------------------------------------------
Net assets, at market value $ 321,452,243
- --------------------------------------------------------------------------------
Net Asset Value
- --------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share
($321,452,243 / 30,215,929 outstanding shares of beneficial -------------
interest, $.01 par value, unlimited number of shares authorized) $ 10.64
-------------
The accompanying notes are an integral part of the financial statements.
35 - Scudder California Tax Free Fund
<PAGE>
- -------------------------------------------------------------------------------
Statement of Operations for the six months ended September 30, 1999 (Unaudited)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Investment Income (Loss)
- -------------------------------------------------------------------------------
Income:
<S> <C>
Interest ....................................................... $ 8,994,082
------------
Expenses:
Management fee ................................................. 1,029,168
Services to shareholders ....................................... 111,947
Custodian and accounting fees .................................. 50,718
Trustees' fees and expenses .................................... 13,446
Auditing ....................................................... 23,665
Reports to shareholders ........................................ 15,164
Legal .......................................................... 6,691
Registration fees .............................................. 5,021
Other .......................................................... 11,680
------------
1,267,500
- -------------------------------------------------------------------------------
Net investment income 7,726,582
- -------------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment transactions
- -------------------------------------------------------------------------------
Net realized gain (loss) from investments ...................... (1,261,811)
Net unrealized appreciation (depreciation) on investments during
the period ................................................... (15,606,427)
- -------------------------------------------------------------------------------
Net gain (loss) on investment transactions (16,868,238)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (9,141,656)
- -------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
36 - Scudder California Tax Free Fund
<PAGE>
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months
Ended
September 30,
1999 Year Ended
Increase (Decrease) in Net Assets (Unaudited) March 31, 1999
- ------------------------------------------------------------------------------------
<S> <C> <C>
Operations:
Net investment income ........................... $ 7,726,582 $ 15,243,751
Net realized gain (loss) from investment
transactions .................................. (1,261,811) 3,308,849
Net unrealized appreciation (depreciation) on
investment transactions during the period ..... (15,606,427) 363,460
------------- -------------
Net increase (decrease) in net assets resulting
from operations ............................... (9,141,656) 18,916,060
------------- -------------
Distributions to shareholders from net investment
income ........................................ (7,726,582) (15,243,751)
------------- -------------
Fund share transactions:
Proceeds from shares sold ....................... 37,905,387 60,022,937
Net asset value of shares issued to shareholders
in reinvestment of distributions .............. 4,957,946 9,780,792
Cost of shares redeemed ......................... (44,801,544) (57,666,190)
------------- -------------
Net increase (decrease) in net assets from Fund
share transactions ............................ (1,938,211) 12,137,539
------------- -------------
Increase (decrease) in net assets ............... (18,806,449) 15,809,848
Net assets at beginning of period ............... 340,258,692 324,448,844
------------- -------------
Net assets at end of period ..................... $ 321,452,243 $ 340,258,692
------------- -------------
Other Information
- ------------------------------------------------------------------------------------
Increase (decrease) in Fund shares
Shares outstanding at beginning of period ....... 30,428,525 29,339,439
------------- -------------
Shares sold ..................................... 3,459,475 5,371,062
Shares issued to shareholders in reinvestment of
distributions ................................. 457,109 874,961
Shares redeemed ................................. (4,129,180) (5,156,937)
------------- -------------
Net increase (decrease) in Fund shares .......... (212,596) 1,089,086
------------- -------------
Shares outstanding at end of period ............. 30,215,929 30,428,525
------------- -------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
37 - 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, 1999(a) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $11.18 $11.06 $10.39 $10.36 $10.07 $10.02
-------------------------------------------------
- ---------------------------------------------------------------------------------
Income from investment
operations:
- ---------------------------------------------------------------------------------
Net investment income .25 .51 .52 .52 .51 .51
- ---------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investment
transactions (.54) .12 .69 .04 .29 .14
-------------------------------------------------
- ---------------------------------------------------------------------------------
Total from investment
operations (.29) .63 1.21 .56 .80 .65
- ---------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------
From net investment income (.25) (.51) (.52) (.52) (.51) (.51)
- --------------------------------------------------------------------------------
From net realized gains on
investment transactions -- -- (.02) (.01) -- (.09)
-------------------------------------------------
- ---------------------------------------------------------------------------------
Total distributions (.25) (.51) (.54) (.53) (.51) (.60)
- ---------------------------------------------------------------------------------
Net asset value, end of period $10.64 $11.18 $11.06 $10.39 $10.36 $10.07
-------------------------------------------------
- ---------------------------------------------------------------------------------
Total Return (%) (2.60)** 5.78 11.85 5.44 8.01 6.75
- ---------------------------------------------------------------------------------
Ratios and Supplemental Data
- ---------------------------------------------------------------------------------
Net assets, end of period
($ millions) 321 340 324 289 293 294
- ---------------------------------------------------------------------------------
Ratio of operating expenses to
average daily net assets (%) .76* .76 .78 .78 .77 .80
- ---------------------------------------------------------------------------------
Ratio of net investment income
to average daily net assets (%) 4.62* 4.55 4.79 4.98 4.88 5.18
- ---------------------------------------------------------------------------------
Portfolio turnover rate (%) 30.6* 40.6 21.5 70.8 49.2 87.3
- ---------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended September 30, 1999 (Unaudited).
* Annualized
** Not annualized
38 - Scudder California Tax Free Fund
<PAGE>
Notes to Financial Statements
- --------------------------------------------------------------------------------
September 30, 1999 (Unaudited)
A. Significant Accounting Policies
Scudder California Tax Free Money Fund ("Tax Free Money Fund"), a
non-diversified fund, and Scudder California Tax Free Fund ("Tax Free Fund"), a
diversified fund, are each a series of Scudder California Tax Free Trust (the
"Trust") which is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end management investment company organized
as a Massachusetts business trust.
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
or 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 purchased with an original maturity
greater than sixty days are valued by pricing agents approved by the officers of
the Fund, whose quotations reflect broker/dealer-supplied valuations and
electronic data processing techniques. If the pricing agents are unable to
provide such quotations, the most recent bid quotation supplied by a bona fide
market maker shall be used. Money market instruments purchased with an original
maturity of sixty days or less are valued at amortized cost. All other
securities are valued at their fair value as determined in good faith by the
Valuation Committee of the Board of Trustees.
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, as amended, which are applicable to regulated
investment companies and to distribute all of its taxable and tax-exempt income
to its shareholders. Accordingly, the Funds paid no federal income taxes and no
federal income tax provision was required.
As of March 31, 1999, the Tax Free Money Fund had a net tax basis capital loss
carryforward of approximately $95,300, which may be applied against
39
<PAGE>
any realized net taxable capital gains of each succeeding year until fully
utilized or March 31, 2000 ($13,600), March 31, 2002 ($7,500), March 31, 2003
($55,200), March 31, 2004 ($17,800), March 31, 2005 ($400) and March 31, 2007
($800), the respective expiration dates, whichever occurs first.
As of March 31, 1999, the Tax Free Fund had a net tax basis capital loss
carryforward of approximately $2,400,000, which may be applied against any
realized net taxable capital gains of each succeeding year until fully utilized
or until March 31, 2003 ($2,000,000) and March 31, 2004 ($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 a daily dividend and is distributed to shareholders monthly. Net
realized gains from investment transactions, in excess of available capital loss
carryforwards, would be taxable to the Fund if not distributed, and, therefore,
will be distributed to shareholders at least annually.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with federal tax regulations
which may differ from generally accepted accounting principles. As a result, net
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from distributions during such
period. Accordingly, the Fund may periodically make reclassifications among
certain of its capital accounts without impacting the net asset value of the
Fund.
Investment Transactions and Investment Income. Investment transactions are
accounted for on the trade date. Interest income is recorded on the accrual
basis. Realized gains and losses from investment transactions are recorded on an
identified cost basis.
Expenses. Expenses arising in connection with a specific Fund are allocated to
that Fund. Other Trust expenses are allocated between the Funds in proportion to
their relative net assets.
B. Purchases and Sales of Securities
During the six months ended September 30, 1999, purchases and sales of long-term
municipal securities aggregated $49,893,454 and $57,633,960, respectively, for
the Tax Free Fund.
40
<PAGE>
C. Related Parties
Under the Investment Management Agreements (each an "Agreement" and collectively
the "Agreements") with Scudder Kemper Investments, Inc. (the "Adviser"), the
Adviser directs the investments of the Funds in accordance with their investment
objectives, policies and restrictions. The Adviser determines the securities,
instruments, and other contracts relating to investments to be purchased, sold
or entered into by the Funds. In addition to portfolio management services, the
Adviser provides certain administrative services in accordance with the
Agreements. 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, computed and
accrued daily and payable monthly. 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, 2000 and during such period to maintain the annualized expenses of Tax
Free Money Fund at not more than 0.60% of average daily net assets. For the six
months ended September 30, 1999, the Adviser did not impose a portion of its fee
amounting to $61,876, and the portion imposed amounted to $127,136, of which
$41,777 is unpaid at September 30, 1999.
For the six months ended September 30, 1999, the fee for the Tax Free Fund
pursuant to these Agreements amounted to $1,029,168, of which $168,348 is unpaid
at September 30, 1999. This was equivalent to an annual effective rate of 0.61%
of the Fund's average daily net assets.
Scudder Service Corporation ("SSC"), a subsidiary of the Adviser, is the
transfer, dividend-paying and shareholder service agent for the Funds. For the
six months ended September 30, 1999, the amount charged to the Funds by SSC
aggregated $27,370 for the Tax Free Money Fund and $70,856 for the Tax Free
Fund, of which $4,523 and $11,670, respectively, are unpaid at September 30,
1999.
Scudder Fund Accounting Corporation ("SFAC"), a subsidiary of the Adviser, is
responsible for determining the daily net asset value per share and maintaining
the portfolio and general accounting records for the Funds. For the six months
ended September 30, 1999, the amount charged to the Funds by SFAC aggregated
$15,000 for the Tax Free Money Fund and $34,458 for the Tax Free Fund, of which
$2,500 and $5,683, respectively, are unpaid at September 30, 1999.
41
<PAGE>
Each Fund pays each Trustee not affiliated with the Adviser an annual retainer
allocated between the Funds, plus specified amounts for attended board and
committee meetings. For the six months ended September 30, 1999, Trustees' fees
and expenses aggregated $9,516 for the Tax Free Money Fund and $13,446 for Tax
Free Fund.
D. Lines of Credit
The Funds and several Scudder Funds (the "Participants") share in a $850 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Funds may
borrow up to a maximum of 33 percent of their net assets under the agreement.
42
<PAGE>
Officers and Trustees
- --------------------------------------------------------------------------------
Lynn S. Birdsong* Eleanor R. Brennan*
o President and Trustee o Vice President
Henry P. Becton, Jr. Ann M. McCreary*
o Trustee; President and General o Vice President
Manager, WGBH Educational Foundation
Rebecca L. Wilson*
Dawn-Marie Driscoll o Vice President
o Trustee; President, Driscoll
Associates; Executive Fellow, John Millette*
Center for Business Ethics, Bentley o Vice President and Secretary
College
John R. Hebble*
Peter B. Freeman o Treasurer
o Trustee; Corporate Director and
Trustee Caroline Pearson*
o Assistant Secretary
George M. Lovejoy, Jr.
o Trustee; President and Director, * Scudder Kemper Investments, Inc.
Fifty Associates
Wesley W. Marple, Jr.
o Trustee; Professor of Business
Administration, Northeastern
University, College of Business
Administration
Kathryn L. Quirk*
o Trustee, Vice President and
Assistant Secretary
Jean C. Tempel
o Trustee; Venture Partner, Internet
Capital Group
43
<PAGE>
Investment Products and Services
- --------------------------------------------------------------------------------
1-800-SCUDDER www.scudder.com
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
The Scudder Family of Funds+++
- --------------------------------------------------------------------------------
<S> <C>
Money Market U.S. Growth and Income
Scudder U.S. Treasury Money Fund Scudder Balanced Fund
Scudder Cash Investment Trust Scudder Dividend & Growth Fund
Scudder Money Market Series -- Scudder Growth and Income Fund
Prime Reserve Shares* Scudder Select 500 Fund
Premium Shares* Scudder S&P 500 Index Fund
Managed Shares* Scudder Real Estate Investment Fund
Scudder Government Money Market
Series -- Managed Shares* U.S. Growth
Value
Tax Free Money Market+ Scudder Large Company Value Fund
Scudder Tax Free Money Fund Scudder Value Fund***
Scudder Tax Free Money Market Scudder Small Company Value Fund
Series -- Managed Shares* Scudder Micro Cap Fund
Scudder California Tax Free Money Fund** Growth
Scudder New York Tax Free Money Fund** Scudder Classic Growth Fund***
Scudder Large Company Growth Fund
Tax Free+ Scudder Select 1000 Growth Fund
Scudder Limited Term Tax Free Fund Scudder Development Fund
Scudder Medium Term Tax Free Fund Scudder 21st Century Growth Fund
Scudder Managed Municipal Bonds
Scudder High Yield Tax Free Fund Global Equity
Scudder California Tax Free Fund** Worldwide
Scudder Massachusetts Limited Term Scudder Global Fund
Tax Free Fund** Scudder International Value Fund
Scudder Massachusetts Tax Free Fund** Scudder International Growth and
Scudder New York Tax Free Fund** Income Fund
Scudder Ohio Tax Free Fund** Scudder International Fund++
Scudder International Growth Fund
U.S. Income Scudder Global Discovery Fund***
Scudder Short Term Bond Fund Scudder Emerging Markets Growth Fund
Scudder GNMA Fund Scudder Gold Fund
Scudder Income Fund Regional
Scudder Corporate Bond Fund Scudder Greater Europe Growth Fund
Scudder High Yield Bond Fund Scudder Pacific Opportunities Fund
Scudder Latin America Fund
Global Income The Japan Fund, Inc.
Scudder Global Bond Fund
Scudder International Bond Fund Industry Sector Funds
Scudder Emerging Markets Income Fund Choice Series
Scudder Financial Services Fund
Asset Allocation Scudder Heath Care Fund
Scudder Pathway Conservative Portfolio Scudder Technology Fund
Scudder Pathway Balanced Portfolio
Scudder Pathway Growth Portfolio Preferred Series
Scudder Tax Managed Growth Fund
Scudder Tax Managed Small Company Fund
</TABLE>
44
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1-800-SCUDDER www.scudder.com
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Retirement Programs and Education Accounts
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Retirement Programs Education Accounts
Traditional IRA Education IRA
Roth IRA UGMA/UTMA
SEP-IRA
Keogh Plan
401(k), 403(b) Plans
Variable Annuities
Scudder Horizon Plan**+++ +++
Scudder Horizon Advantage**+++ +++ +++
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Closed-End Funds#
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<S> <C>
The Argentina Fund, Inc. Scudder Global High Income Fund, Inc.
The Brazil Fund, Inc. Scudder New Asia Fund, Inc.
The Korea Fund, Inc. Scudder New Europe Fund, Inc.
Montgomery Street Income Securities, Inc.
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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 or classes thereof may
not be available for purchase or exchange.
+ A portion of the income from the tax-free funds may be subject to
federal, state, and local taxes.
* A class of shares of the fund.
** Not available in all states.
*** Only the Scudder Shares of the fund are part of the Scudder Family
of Funds.
++ Only the International Shares of the fund are part of the Scudder
Family of Funds.
+++ +++ A no-load variable annuity contract provided by Charter National
Life Insurance Company and its affiliate, offered by Scudder's
insurance agencies, 1-800-225-2470.
+++ +++ +++ A no-load variable annuity contract issued by Glenbrook Life and
Annuity Company and underwritten by Allstate Financial Services,
Inc., sold 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.
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Scudder Solutions
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1-800-SCUDDER www.scudder.com
Convenient Automatic Investment Plan
ways to invest,
quickly and A convenient investment program in which money is
reliably electronically debited from your bank account monthly to
regularly purchase fund shares and "dollar cost average" --
buy more shares when the fund's price is lower and fewer
when it's higher, which can reduce your average purchase
price over time.*
Automatic Dividend Transfer
The most timely, reliable, and convenient way to purchase
shares -- use distributions from one Scudder fund to
purchase shares in another, automatically (accounts with
identical registrations or the same social security or tax
identification number).
QuickBuy
Lets you purchase Scudder fund shares electronically,
avoiding potential mailing delays; money for each of your
transactions is electronically debited from a previously
designated bank account.
Payroll Deduction and Direct Deposit
Have all or part of your paycheck -- even government checks
-- invested in up to four Scudder funds at one time.
* 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- Scudder Automated Information Line: SAIL(TM) --
clock electronic 1-800-343-2890
account
service and Personalized account information, the ability to exchange
information, or redeem shares, and information on other Scudder funds
including some and services via touchtone telephone.
transactions
Scudder's Web Site -- www.scudder.com
Personal Investment Organizer: Offering account information
and transactions, interactive worksheets, prospectuses and
applications for all Scudder funds, plus your current asset
allocation, whenever your need them. Scudder's site also
provides news about Scudder funds, retirement planning
information, and more.
46
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1-800-SCUDDER www.scudder.com
Retirees and Automatic Withdrawal Plan
those who depend
on investment You designate the bank account, determine the schedule (as
proceeds for frequently as once a month) and amount of the redemptions,
living expenses and Scudder does the rest.
can enjoy these
convenient, Distributions Direct
timely, and
reliable Automatically deposits your fund distributions into the
automated bank account you designate within three business days after
withdrawal each distribution is paid.
programs
QuickSell
Provides speedy access to your money by electronically
crediting your redemption proceeds to the bank account you
previously designated.
For more Call a Scudder representative at
information about 1-800-SCUDDER
these services
Or visit our Web site at
www.scudder.com
Please address The Scudder Funds
all written PO Box 2291
correspondence Boston, Massachusetts
to 02107-2291
47
<PAGE>
About the Fund's Adviser
SCUDDER
INVESTMENTS(SM)
[LOGO]
PO Box 2291
Boston, MA 02107-2291
1-800-SCUDDER
www.scudder.com
A member of the [LOGO] Zurich Financial Services Group
Scudder Kemper Investments, Inc. is one of the largest and most experienced
investment management organizations worldwide, managing more than $280 billion
in assets globally for mutual fund investors, retirement and pension plans,
institutional and corporate clients, insurance companies, and private family and
individual accounts.
Scudder Kemper Investments has a rich heritage of innovation, integrity, and
client-focused service. In 1997, Scudder, Stevens & Clark, Inc., founded 80
years ago as one of the nation's first investment counsel organizations, joined
the Zurich Financial Services 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 Financial Services Group. The Zurich Financial Services 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.
