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Tax-Exempt California Money Market Fund
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DEAR SHAREHOLDERS:
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We are pleased to provide you with the Tax-Exempt California Money Market Fund
annual report for the year ended September 30, 1997.
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 and
competitive money market dividends that are exempt from Federal and State of
California income taxes.
ECONOMIC REVIEW AND OUTLOOK
The economy has been growing at a much faster rate than expected. Available data
continues to suggest that spending remains strong and economic growth will
exceed a 3% level throughout the fourth quarter. Despite this robust pace, there
have been few inflationary pressures. Accordingly, the Fed has left interest
rates untouched since March of this year. Looking forward, we anticipate that
rates will resume an upward bias given the continuing momentum of the economy.
Under these conditions, 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 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 14, 1997
Frank Rachwalski is Vice President of Zurich Kemper Investments, Inc. and Vice
President and Portfolio Manager of Tax-Exempt California Money Market Fund. Mr.
Rachwalski holds B.B.A. and M.B.A. degrees from Loyola University.
PORTFOLIO RESULTS
For the year ended September 30, 1997, the Tax-Exempt California Money Market
Fund had a net yield of 2.87% and a tax-equivalent yield of 5.03%.
NOTES
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.
The fund's net yield for the year ended September 30, 1997, is the 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 combined Federal
and State of California marginal income tax rate of 42.9%. 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.
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Tax-Exempt California Money Market Fund
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PORTFOLIO OF INVESTMENTS
September 30, 1997
(Value in thousands)
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<TABLE>
<CAPTION>
Value
<S> <C>
(A)VARIABLE RATE DEMAND SECURITIES
State of California
Health Facilities Financing Authority
3.90% $ 5,000
Pollution Control Financing Authority
Occidental Geothermal, Inc. Project
3.45% 1,400
Pacific Gas and Electric Co.
4.00% 4,500
Southeast Resource Recovery Facilities
4.20% 5,000
Southern California Public Power Authority
3.95% 3,700
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Alameda-Contra Costa
Schools Financing Authority
3.90% 2,170
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Anaheim
Public Improvement Corp.
3.95% 1,400
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Auburn
Union School District
4.10% 1,400
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Fremont
Public Financing Authority
4.05% 1,500
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Irvine
Assessment District
3.80% 10,400
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Kern County
Community College District
4.60% 1,600
Public Facilities Project
3.90% 900
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Los Angeles
Multifamily Housing Revenue
4.00% 1,500
Pension Obligation Bonds
3.95% 1,500
Transportation Commission
3.95% 3,700
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</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
Monterey County
Peninsula Water Management District
3.80% $ 1,500
Regional Waste Management Authority
4.10% 1,780
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Orange County
Foothill/Eastern Transportation Corridor Agency
3.94% 8,200
Multifamily Housing Revenue
3.95% 1,400
Water District
3.70% 3,500
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Palm Springs
Community Redevelopment Agency
4.05% 1,400
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Riverside County
Eastern Municipal Water District
4.00% 5,000
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Sacramento County
Administrative Center & Courthouse Project
3.85% 2,500
Multifamily Housing Revenue
Briarwood Apartments
4.10% 1,400
Stone Creek Apartments
4.00% 1,500
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San Bernardino
Multifamily Housing Revenue
4.15% 1,400
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Santa Ana
School District
3.90% 1,400
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Santa Clara County
Hospital Facilities Authority
3.40% 2,200
Transit District
3.80% 5,000
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Ventura County
Triunfo Sanitation District
4.10% 1,400
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</TABLE>
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Tax-Exempt California Money Market Fund
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<TABLE>
<CAPTION>
Value
<S> <C>
Woodland
Multifamily Mortgage Revenue
3.95% $ 2,020
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TOTAL VARIABLE RATE DEMAND
SECURITIES--74.4%
(average maturity: 5 days) 87,270
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OTHER SECURITIES
State of California
Pollution Control Financing Authority
3.70%-3.75%, 10/10/97-12/10/97 9,500
Public Capital Improvements Financing Authority
3.80%, 12/15/97 1,500
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Los Angeles
Capital Asset Lease Corp.
3.75%-3.80%, 12/9/97-12/11/97 6,000
Wastewater System Revenue
3.50%, 11/10/97 1,500
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Orange County
Transportation Authority
3.80%, 11/7/97 5,000
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</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
Sacramento
Municipal Utility District
3.65%-3.70%, 11/14/97-12/16/97 $ 5,344
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Puerto Rico
Government Development Bank
3.60%, 11/12/97 1,500
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TOTAL OTHER SECURITIES--25.8%
(average maturity: 52 days) 30,344
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TOTAL INVESTMENTS--100.2%
(average maturity: 17 days) 117,614
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LIABILITIES, LESS
OTHER ASSETS--(.2%) (182)
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NET ASSETS--100% $117,432
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</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, 1997.
See accompanying Notes to Financial Statements.
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Tax-Exempt California Money Market Fund
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REPORT OF INDEPENDENT AUDITORS
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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, 1997, 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 1993.
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, 1997 by correspondence with the custodian and brokers. 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, 1997, 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 1993, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1997
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Tax-Exempt California Money Market Fund
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<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES STATEMENT OF OPERATIONS
September 30, 1997 Year ended September 30, 1997
(in thousands) (in thousands)
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ASSETS
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Investments, at amortized cost $117,614
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Receivable for:
Interest 396
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Securities sold 400
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Total assets 118,410
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LIABILITIES AND NET ASSETS
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Cash overdraft 799
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Payable for:
Dividends 12
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Fund shares redeemed 69
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Management fee 15
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Distribution services fee 22
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Custodian and transfer agent fees
and related expenses 4
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Trustees' fees and other 57
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Total liabilities 978
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Net assets applicable to
shares outstanding $117,432
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THE PRICING OF SHARES
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Shares outstanding 117,432
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Net asset value and
redemption price per share $1.00
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</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<S> <C>
INTEREST INCOME $2,052
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EXPENSES:
Management fee 127
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Distribution services fee 190
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Custodian and transfer agent
fees and related expenses 57
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Professional fees 23
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Reports to shareholders 19
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Trustees' fees and other 35
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Total expenses 451
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Net investment income $1,601
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</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Years ended September 30, 1997 and 1996
(in thousands)
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<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,601 3,047
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Dividends to shareholders from
net investment income (1,601) (3,047)
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CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 282,125 370,566
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Shares issued in reinvestment
of dividends 1,583 3,038
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283,708 373,604
Shares redeemed (285,160) (360,012)
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Net increase (decrease) from capital
share transactions and total increase
(decrease) in net assets (1,452) 13,592
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NET ASSETS:
Beginning of period 118,884 105,292
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End of period $ 117,432 118,884
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</TABLE>
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Tax-Exempt California Money Market Fund
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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., 3:00 p.m. and 8:00 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 Zurich Kemper Investments, Inc. (ZKI)
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 year ended September 30, 1997, the Fund incurred a
management fee of $127,000.
DISTRIBUTION AGREEMENT
The Fund also has an administration, shareholder services and distribution
agreement with Zurich Kemper Distributors Inc. (ZKDI). For distribution
services, the Fund pays ZKDI an annual fee of .33% of average daily net assets
of the Fund. ZKDI has related service agreements with various firms to provide
cash management and other services for Fund shareholders. Under these
agreements, ZKDI 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, 1997, the Fund incurred a distribution
services fee of $190,000, of which ZKDI, pursuant to the related service
agreements, remitted $182,000 to various firms.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's transfer agent, Zurich Kemper
Service Company (ZKSvC) is the shareholder service agent of the Fund. Under the
agreement, ZKSvC received
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Tax-Exempt California Money Market Fund
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shareholder services fees of $21,000 for the year ended September 30, 1997.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of ZKI.
During the year ended September 30, 1997, the Fund made no payments to its
officers and incurred trustees' fees of $15,000 to independent trustees.
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------------
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
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PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of year $1.00 1.00 1.00 1.00 1.00
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Net investment income and dividends declared .03 .03 .03 .02 .02
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Net asset value, end of year $1.00 1.00 1.00 1.00 1.00
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TOTAL RETURN 2.91% 2.93 3.23 1.97 1.88
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RATIOS TO AVERAGE NET ASSETS
Expenses .78% .72 .75 .71 .69
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Net investment income 2.78% 2.88 3.16 1.94 1.87
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SUPPLEMENTAL DATA
Net assets at end of year (in thousands) $117,432 118,884 105,292 101,148 122,560
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</TABLE>
FEDERAL TAX STATUS OF 1997 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, 1997
INVESTMENT MANAGER:
ZURICH KEMPER INVESTMENTS, INC.
PRINCIPAL UNDERWRITER:
ZURICH KEMPER DISTRIBUTORS, INC.
222 S. Riverside Plaza, Chicago, IL 60606
www.kemper.com
This report is not to be distributed unless preceded
or accompanied by a prospectus.
TEC-2 1039180 10/97 (LOGO)printed on recycled paper
