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Tax-Exempt California Money Market Fund 1
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DEAR SHAREHOLDERS:
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We are pleased to submit to you the Tax-Exempt California Money Market Fund
semiannual report for the six months ended March 31, 1996. During the past six
months, the Fund registered solid performance. Please take a moment to review
the Portfolio results.
ECONOMIC REVIEW AND OUTLOOK
Recent developments in the U.S. economy and statements by Federal Reserve Board
chairman Alan Greenspan have indicated that interest rates are not headed any
lower. We feel that the economy's growth path, while moderate, has become more
stable than at the beginning of the year. The trend for inflation in the near
future appears to remain subdued.
Your Fund has continued to meet its investment objective by owning high quality
investments that provide stability of principal, especially during periods of
market uncertainty, and competitive money market dividends that are exempt from
Federal and State of California income taxes.
We look forward to meeting the challenges which the economy and investment
markets may present in the months ahead. As always, we are dedicated to
providing our shareholders with solid investment results.
Thank you for your investment in the Tax-Exempt California Money Market Fund. We
look forward to continuing to serve your investment needs in the years to come.
PORTFOLIO RESULTS
For the six months ended March 31, 1996, the Tax-Exempt California Money Market
Fund had a net annualized yield of 2.98% and a tax-equivalent yield of 5.22%.
NOTES
An investment in the Fund is neither insured or 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.
The Fund's net annualized yield for the six month period ended March 31, 1996 is
the annualized sum of the daily dividend rates for the period. The tax-
equivalent yield is based upon the Fund's yield and a combined Federal and State
of California marginal income tax rate of 42.9%. These yields are historical and
do not represent future yields, which will fluctuate. Income may be subject to
local taxes, and for some investors, the alternative minimum tax.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period of the report, as stated above. The manager's
views are subject to change at any time, based on market and other conditions.
Sincerely,
Frank J. Rachwalski
Vice President and Portfolio Manager
April 8, 1996
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Tax-Exempt California Money Market Fund 2
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PORTFOLIO OF INVESTMENTS
March 31, 1996
(Value in thousands)
<TABLE>
<CAPTION>
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Value
<S> <C>
(A)VARIABLE RATE DEMAND SECURITIES
State of California
Health Facilities Financing Authority
3.55% $ 3,000
Pollution Control Financing Authority
3.20% 2,500
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Auburn
Union School District
3.60% 3,625
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Costa Mesa
Performing Arts Center
3.20% 8,550
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Fremont
Fire Stations Financing Project
3.45% 4,800
Multifamily Housing Revenue
3.85% 3,000
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Irvine
East Investment Company Revenue
3.30% 1,780
Public Facilities and Infrastructure Authority
3.40% 3,500
Ranch Water District
3.47% 2,100
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Kern County
Community College District
3.65% 4,500
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Lancaster
Redevelopment Agency
3.35% 1,000
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Los Angeles
Housing Authority
3.45% 3,500
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Midway
School District
3.30% 1,615
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Monterey County
Peninsula Water Management District
3.40% 4,500
Regional Waste Management Authority
3.45% 2,000
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Orange County
Apartment Development Revenue
3.85% $ 3,000
Irvine Coast Assessment District
4.00% 1,000
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Palm Springs
Community Redevelopment Agency
3.25% 3,630
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Riverside County
Industrial Development Authority
3.30% 1,300
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Roseville
Finance Authority
3.10% 1,950
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Sacramento County
Multifamily Housing Revenue
3.45% 8,600
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San Bernardino
Multifamily Housing Revenue
3.75% 1,500
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San Diego
Housing Authority
3.40% 2,600
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Santa Ana
School District
3.35% 3,000
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Southeast Resource
Recovery Facilities Authority
3.25% 1,000
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Ventura County
Triunfo Sanitation District
3.30% 2,400
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TOTAL VARIABLE RATE DEMAND
SECURITIES--76.5%
(average maturity: 4 days) 79,950
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</TABLE>
<PAGE> 3
3
Tax-Exempt California Money Market Fund
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<TABLE>
<CAPTION>
Value
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<S> <C>
OTHER SECURITIES
State of California
Pollution Control Financing Authority
3.15%-3.20%, 4/9/96-5/14/96 $ 7,000
Public Capital Improvements Financing Authority
3.40%, 6/17/96 4,500
Revenue Anticipation Warrants
3.40%, 4/25/96 431
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Irvine
Assessment District
3.45%, 4/9/96 2,000
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Los Angeles County
Transportation Commission
3.05%, 4/10/96 1,000
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Riverside County
Transportation Commission
3.30%-3.40%, 5/13/96-7/24/96 5,000
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San Diego County
Rincon Del Diablo Municipal Water District
3.75%, 5/1/96 2,150
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Puerto Rico
Pollution Control Facilities Financing Authority
3.25%, 5/9/96 2,000
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TOTAL OTHER SECURITIES--23.1%
(average maturity: 45 days) 24,081
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TOTAL INVESTMENTS--99.6%
(average maturity: 13 days) 104,031
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CASH AND OTHER ASSETS,
LESS LIABILITIES--.4% 381
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NET ASSETS--100% $104,412
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</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
Interest rates represent annualized yield to date of maturity, except for
variable rate 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 March 31, 1996.
See accompanying Notes to Financial Statements.
<PAGE> 4
Tax-Exempt California Money Market Fund 4
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STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
(in thousands)
<TABLE>
<S> <C>
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ASSETS
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Investments, at amortized cost $104,031
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Cash 270
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Receivable for:
Interest 347
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Securities sold 30
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Total assets 104,678
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LIABILITIES AND NET ASSETS
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Payable for:
Dividends 103
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Management fee 18
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Distribution services fee 27
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Custodian and transfer agent fees
and related expenses 19
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Other 99
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Total liabilities 266
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Net assets applicable to
shares outstanding $104,412
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THE PRICING OF SHARES
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Shares outstanding 104,412
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Net asset value and
redemption price per share $1.00
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</TABLE>
STATEMENT OF OPERATIONS
Six months ended March 31, 1996
(in thousands)
<TABLE>
<S> <C>
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INTEREST INCOME $1,899
EXPENSES:
Management fee 112
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Distribution services fee 168
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Custodian and transfer agent
fees and related expenses 53
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Professional fees 17
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Reports to shareholders 10
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Registration costs 2
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Trustees' fees and other 15
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Total expenses 377
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Net investment income $1,522
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended March 31, 1996 and
year ended September 30, 1995
(in thousands)
<TABLE>
<CAPTION>
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1996 1995
-------- -------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,522 3,115
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Dividends to shareholders from
net investment income (1,522) (3,115)
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CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 159,093 382,622
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Shares issued in reinvestment
of dividends 1,562 3,065
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160,655 385,687
Less shares redeemed 161,535 381,543
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Net increase (decrease) from capital
share
transactions and total increase
(decrease) in net assets (880) 4,144
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NET ASSETS:
Beginning of period 105,292 101,148
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End of period $104,412 105,292
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</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 5
Tax-Exempt California Money Market Fund 5
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NOTES TO FINANCIAL STATEMENTS
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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 for the
six months ended March 31, 1996.
3. TRANSACTIONS WITH AFFILIATES MANAGEMENT AGREEMENT
The Fund has a management agreement with
Zurich Kemper Investments, Inc. (ZKI)
(formerly known as Kemper Financial
Services, Inc.) and pays a management fee
at an annual rate of .22% of the first $500
million of average daily net assets
declining to .15% of average daily net
assets in excess of $3 billion. During the
six months ended March 31, 1996, the Fund
incurred a management fee of $112,000.
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 six months ended
March 31, 1996, the Fund incurred a
distribution services fee of $168,000, of
which KDI, pursuant to the related service
agreements, remitted $168,000 to various
firms.
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. Under the agreement,
KSvC received shareholder services fees
<PAGE> 6
Tax-Exempt California Money Market Fund 6
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of $28,000 for the six months ended
March 31, 1996.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund
are also officers or directors of ZKI.
During the six months ended March 31, 1996,
the Fund made no direct payments to its
officers and incurred trustees' fees of
$6,000 to independent trustees.
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
Six months
ended
March 31, Year ended September 30,
1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period $1.00 1.00 1.00 1.00 1.00
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Net investment income and dividends declared .01 .03 .02 .02 .02
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Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
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TOTAL RETURN 1.51%(a) 3.23 1.97 1.88 2.64
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RATIOS TO AVERAGE NET ASSETS
Expenses .73% .75 .71 .69 .69
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Net investment income 2.95% 3.16 1.94 1.87 2.62
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SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $104,412 105,292 101,148 122,560 128,822
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</TABLE>
(a) Not annualized.
<PAGE> 7
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
SEMIANNUAL
REPORT
March 31, 1996
Principal Underwriter:
KEMPER DISTRIBUTORS, INC.
120 South LaSalle Street
Chicago, IL 60603
This report is not to be distributed unless preceded or
accompanied by a prospectus.
1013850 4/96 (RECYCLED LOGO) PRINTED ON RECYCLED PAPER
