<PAGE> 1
1
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
DEAR SHAREHOLDERS:
- --------------------------------------------------------------------------------
We are pleased to provide you with the Tax-Exempt California Money
Market Fund annual report for the year ended
September 30, 1995.
Your Fund's management greatly appreciates your decision to invest in Tax-Exempt
California Money Market Fund. During the past year, the fund registered solid
performance and achieved its objective of providing maximum current income that
is exempt from federal and State of California income taxes while maintaining
stability of principal.
ECONOMIC REVIEW AND OUTLOOK
The momentum of the 1994 economic expansion has continued on into 1995, as
evidenced by growth in personal income, consumer spending, construction spending
and hiring during the year ended September 30, 1995.
It was over a year ago that the Federal Reserve Board initiated a series of rate
hikes intended to slow economic growth and keep inflation in check. While other
markets reacted negatively to the rising rate environment, it had a positive
effect on the short-term money markets. Tax-Exempt California Money Market Fund
took advantage of rising interest rates by investing in high quality, short-term
money market instruments which are exempt from federal and State of California
income taxes.
Looking ahead, we anticipate the economy will grow at a moderate pace with some
signs of acceleration. Inflation should not become a problem, and we anticipate
an extended period of interest rate stability. While investments in other
markets may remain volatile, money market funds such as Tax-Exempt California
Money Market Fund should offer the opportunity for attractive yields and should
continue to be an excellent place to invest your money.
Your Fund's management thanks you for the vote of confidence you have shown
through your investment and continues its dedication to performance.
We look forward to serving your investment needs for years to come.
Sincerely,
Frank J. Rachwalski
Frank J. Rachwalski
Vice President and Portfolio Manager
October 12, 1995
Frank Rachwalski is Senior Vice President of Kemper Financial Services, Inc. and
Vice President and Portfolio Manager of Tax-Exempt California Money Market Fund.
Mr. Rachwalski holds a B.B.A. and a M.B.A. degree from Loyola University.
PORTFOLIO RESULTS
For the year ended September 30, 1995, the Tax-Exempt California Money Market
Fund had a net annualized yield of 3.18% and a tax-equivalent yield of 5.57%.*
An investment in the Fund is neither insured nor guaranteed by the U.S.
Government, and there can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
STATISTICAL NOTE
The Fund's net annualized yield for the year ended September 30, 1995, is the
annualized sum of the daily dividend rates for the period. Yields are historical
and may not represent future yields, which will fluctuate.
*The tax-equivalent yield is based upon the Fund's yield and a 42.9% combined
Federal and State of California marginal income tax rate. Income from the
Tax-Exempt California Money Market Fund may be subject to local taxes.
<PAGE> 2
2
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
September 30, 1995
(Value in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
<S> <C>
(A)VARIABLE RATE DEMAND SECURITIES
Anaheim
Police Facilities Refinancing Project
4.00% $ 1,800
- ----------------------------------------------------------
Auburn
Union School District
4.50% 3,625
- ----------------------------------------------------------
Chula Vista
Multifamily Housing Refunding Revenue
4.30% 1,300
- ----------------------------------------------------------
Costa Mesa
Performing Arts Center
4.35% 3,955
- ----------------------------------------------------------
Eastern Municipal Water District
Water and Sewer Revenue
4.20% 4,000
- ----------------------------------------------------------
Fremont
Fire Stations Financing Project
4.35% 3,800
- ----------------------------------------------------------
Health Facilities Financing Authority
Catholic Healthcare West
4.15% 4,000
Pooled Loan Program
4.10% 1,010
Scripps Memorial Hospitals
4.10% 1,480
- ----------------------------------------------------------
Irvine
East Investment Company Revenue
4.20% 1,810
Public Facilities and Infrastructure Authority
4.40% 3,600
Ranch Water District
4.80% 2,100
- ----------------------------------------------------------
Kern County
Community College District
4.50% 4,500
- ----------------------------------------------------------
Lancaster
Redevelopment Agency
4.40% 2,000
- ----------------------------------------------------------
Midway
School District
4.20% 1,660
- ----------------------------------------------------------
<CAPTION>
Value
<S> <C>
Monterey County
Peninsula Water Management District
4.05% $ 4,500
Regional Waste Management Authority
4.35% 2,000
- ----------------------------------------------------------
Palm Springs
Community Redevelopment Agency
4.00% 4,630
- ----------------------------------------------------------
Pollution Control Financing Authority
3.70% 2,500
- ----------------------------------------------------------
Riverside County
Industrial Development Authority
4.20% 1,300
- ----------------------------------------------------------
Roseville
Finance Authority
4.20% 1,950
- ----------------------------------------------------------
Sacramento County
Multifamily Housing Revenue
Briarwood Apartments
4.35% 2,800
River Oaks Apartments
4.35% 1,500
Stone Creek Apartments
4.40% 4,700
- ----------------------------------------------------------
San Bernardino
Multifamily Housing Revenue
4.60% 1,500
- ----------------------------------------------------------
San Diego
Housing Authority
La Cima Apartments
4.25% 1,000
Lusk Mira Mesa Apartments
3.75% 3,300
Paseo Point Apartments
4.00% 2,600
- ----------------------------------------------------------
Santa Ana
School District
4.45% 3,000
- ----------------------------------------------------------
Ventura County
Triunfo Sanitation District
4.30% 2,500
- ----------------------------------------------------------
TOTAL VARIABLE RATE DEMAND
SECURITIES--76.4%
(average maturity: 5 days) 80,420
- ----------------------------------------------------------
</TABLE>
<PAGE> 3
3
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
<S> <C>
OTHER SECURITIES
California
Health Facilities Financing Authority
3.50%, 2/1/96 $ 980
Pollution Control Financing Authority
3.70%-3.80%, 11/7/95-11/14/95 11,000
Public Capital Improvements Financing Authority
3.80%, 12/15/95 4,500
- ----------------------------------------------------------
Los Angeles County
Transportation Commission
3.60%-3.65%, 11/14/95-12/15/95 4,235
- ----------------------------------------------------------
Orange County
Municipal Water District
3.95%, 10/23/95 3,000
- ----------------------------------------------------------
<CAPTION>
Value
<S> <C>
TOTAL OTHER SECURITIES--22.5%
(average maturity: 53 days) $ 23,715
- ----------------------------------------------------------
TOTAL INVESTMENTS--98.9%
(average maturity: 16 days) 104,135
- ----------------------------------------------------------
CASH AND OTHER ASSETS, LESS LIABILITIES--1.1% 1,157
- ----------------------------------------------------------
NET ASSETS--100% $ 105,292
- ----------------------------------------------------------
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate demand securities described in Note (a). For each security, cost
(for financial reporting and federal income tax purposes) and carrying value are
the same. Likewise, carrying value approximates principal amount.
(a) Variable rate demand securities are payable within five business days and
are backed by credit support agreements from banks or insurance
institutions. The rates shown are the current rates at September 30, 1995.
See accompanying Notes to Financial Statements.
<PAGE> 4
4
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
THE BOARD OF TRUSTEES AND SHAREHOLDERS
TAX-EXEMPT CALIFORNIA MONEY MARKET FUND
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Tax-Exempt California Money Market Fund as of
September 30, 1995, and the related statements of operations for the year then
ended and changes in net assets for each of the two years in the period then
ended, and the financial highlights for each of the fiscal periods since 1991.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of investments owned as of
September 30, 1995 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Tax-Exempt California Money Market Fund at September 30, 1995, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended and the financial highlights for each
of the fiscal periods since 1991, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 14, 1995
<PAGE> 5
5
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
(in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------
Investments, at amortized cost $ 104,135
- ----------------------------------------------------------
Cash 1,013
- ----------------------------------------------------------
Receivable for:
Interest 396
- ----------------------------------------------------------
Securities sold 80
- ----------------------------------------------------------
Shares of the Fund sold 10
- ----------------------------------------------------------
Total assets 105,634
- ----------------------------------------------------------
LIABILITIES AND NET ASSETS
- ----------------------------------------------------------
Payable for:
Dividends 145
- ----------------------------------------------------------
Shares of the Fund redeemed 54
- ----------------------------------------------------------
Management fee 20
- ----------------------------------------------------------
Distribution fee 29
- ----------------------------------------------------------
Custodian and transfer agent fees
and related expenses 17
- ----------------------------------------------------------
Other 77
- ----------------------------------------------------------
Total liabilities 342
- ----------------------------------------------------------
Net assets applicable to
shares outstanding $ 105,292
==========================================================
THE PRICING OF SHARES
- ----------------------------------------------------------
Shares outstanding, no par value 105,292
- ----------------------------------------------------------
Net asset value and
redemption price per share $1.00
==========================================================
</TABLE>
See accompanying Notes to Financial Statements.
STATEMENT OF OPERATIONS
Year ended September 30, 1995
(in thousands)
- ----------------------------------------------------------
<TABLE>
<S> <C>
INTEREST INCOME $3,851
- ----------------------------------------------------------
EXPENSES:
Management fee 217
- ----------------------------------------------------------
Distribution fee 325
- ----------------------------------------------------------
Custodian and transfer agent
fees and related expenses 108
- ----------------------------------------------------------
Professional fees 34
- ----------------------------------------------------------
Reports to shareholders 16
- ----------------------------------------------------------
Registration costs 3
- ----------------------------------------------------------
Trustees' fees and other 33
- ----------------------------------------------------------
Total expenses 736
- ----------------------------------------------------------
Net investment income $3,115
==========================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1995 and 1994
(in thousands)
- ----------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
-------- -------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,115 2,180
- ----------------------------------------------------------
Dividends to shareholders from
net investment income (3,115) (2,180)
- ----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 382,622 415,933
- ----------------------------------------------------------
Shares issued in reinvestment
of dividends 3,065 2,158
- ----------------------------------------------------------
385,687 418,091
Less shares redeemed 381,543 439,503
- ----------------------------------------------------------
Net increase (decrease) from capital
share transactions and total
increase (decrease) in net assets 4,144 (21,412)
- ----------------------------------------------------------
NET ASSETS:
Beginning of year 101,148 122,560
- ----------------------------------------------------------
End of year $105,292 101,148
==========================================================
</TABLE>
<PAGE> 6
6
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. DESCRIPTION OF THE FUND
Tax-Exempt California Money Market Fund is an open-end management investment
company organized as a business trust under the laws of Massachusetts.
2. SIGNIFICANT ACCOUNTING POLICIES
INVESTMENT VALUATION
Investments are stated at amortized cost, which approximates market value. In
the event that a deviation of 1/2 of 1% or more exists between the Fund's $1.00
per share net asset value, calculated at amortized cost, and the net asset value
calculated by reference to market-based values, or if there is any other
deviation that the Board of Trustees believes would result in a material
dilution to shareholders or purchasers, the Board of Trustees will promptly
consider what action should be initiated.
INVESTMENT TRANSACTIONS AND INTEREST INCOME
Investment transactions are accounted for on the trade date (date the order to
buy or sell is executed). Interest income is recorded on the accrual basis and
includes amortization of premium on investments.
FUND SHARE VALUATION AND DIVIDENDS TO SHAREHOLDERS
Fund shares are sold and redeemed on a continuous basis at net asset value. On
each day that the New York Stock Exchange is open for trading, the Fund
determines its net asset value per share at 11:00 a.m. and 3:00 p.m. Chicago
time by dividing the total value of the Fund's investments and other assets,
less liabilities, by the number of Fund shares outstanding. The Fund declares a
daily dividend, equal to its net investment income for that day, payable
monthly. Net investment income consists of all interest income, plus (minus) all
realized gains (losses) on portfolio securities, minus all expenses of the Fund.
FEDERAL INCOME TAXES
The Fund has complied with the special provisions of the Internal Revenue Code
available to investment companies and therefore no federal income tax provision
is required.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The Fund has a management agreement with Kemper Financial Services, Inc. (KFS)
and pays a management fee at an annual rate of .22% of the first $500 million of
average daily net assets declining gradually to .15% of average daily net assets
in excess of $3 billion. During the year ended September 30, 1995, the Fund
incurred a management fee of $217,000.
DISTRIBUTION AGREEMENT
The Fund also has a distribution, administration and underwriting agreement with
Kemper Distributors Inc. (KDI). For distribution services, the Fund pays KDI an
annual fee of .33% of average daily net assets of the Fund. KDI has related
service agreements with various firms to provide cash management and other
services for Fund shareholders. Under these agreements, KDI pays such firms at
an annual rate ranging from .15% to .33% of the average daily net assets of
those accounts that they maintain and service. During the year ended September
30, 1995, the Fund incurred a distribution services fee of $325,000, of which
KDI, pursuant to the related service agreements, remitted $324,000 to various
firms, including $247,000 paid to dealers affiliated with KDI.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's transfer agent, Kemper Service
Company (KSvC) is the shareholder service agent of the Fund. For the year ended
September 30, 1995, the transfer agent remitted shareholder services fees to
KSvC of $60,000.
<PAGE> 7
7
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EVEREN Clearing Corp. (ECC), formerly Kemper Clearing Corp., was an affiliate of
KFS until September 13, 1995. Pursuant to an agreement with KSvC, ECC performs
bookkeeping, data processing and shareholder services for ECC clients who are
Fund shareholders. For the year ended September 30, 1995, ECC earned $40,000
from KSvC for account maintenance fees.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of KFS.
During the year ended September 30, 1995, the Fund made no direct payments to
its officers and incurred trustees' fees of $12,000 to independent trustees.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year ended September 30,
1995 1994 1993 1992 1991
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .03 .02 .02 .02 .04
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (%): 3.23 1.97 1.88 2.64 4.02
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (%):
Expenses .75 .71 .69 .69 .66
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 3.16 1.94 1.87 2.62 3.99
- ---------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA:
Net assets at end of year (in thousands) $105,292 101,148 122,560 128,822 150,522
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
FEDERAL TAX STATUS OF 1995 DIVIDENDS
All of the dividends constitute tax-exempt interest which is not taxable for
federal or State of California income tax purposes.
<PAGE> 8
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
ANNUAL REPORT
SEPTEMBER 30, 1995
This report is not to be distributed unless preceded or
accompanied by a prospectus.
Tax-Exempt California Money Market Fund.
INVESTMENT MANAGER
KEMPER FINANCIAL SERVICES, INC.
PRINCIPAL UNDERWRITER
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street, Chicago, IL 60603
1005530 10/95 (LOGO) printed on recycled paper
