<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
semiannual report for the six-month period ended March 31, 1997.
Your fund's management greatly appreciates your decision to invest in Tax-Exempt
California Money Market Fund. During the past six months, 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 economic recovery is continuing, and based on recent statistics, its
momentum appears to be strengthening. Labor markets have firmed, consumer
confidence is high and quarterly measures of the Gross Domestic Product are
above trend for a non-inflationary expansion. In fact, the Federal Reserve
System tightened monetary conditions in March for the first time since February
1995. Looking forward, we anticipate uninterrupted, moderate economic growth,
coupled with subdued but rising inflationary pressures. In this context, we
expect upward interest rate trends.
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
April 3, 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 six months ended March 31, 1997, the Tax-Exempt California Money Market
Fund had a net annualized yield of 2.75% and a tax-equivalent yield of 4.82%.
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 annualized yield for the six months ended March 31, 1997, 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 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.
<PAGE> 2
2
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
March 31, 1997
(Value in thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
<S> <C>
(A)VARIABLE RATE DEMAND SECURITIES
State of California
Pollution Control Financing Authority
Occidental Geothermal, Inc. Project
3.25% $ 1,400
Pacific Gas and Electric Company
3.60% 2,000
Statewide Communities Development Authority
3.70% 700
- -----------------------------------------------------------
Auburn
Union School District
3.50% 1,400
- -----------------------------------------------------------
Costa Mesa
Performing Arts Center
2.90% 1,400
- -----------------------------------------------------------
Fremont
Public Financing Authority
3.40% 1,500
- -----------------------------------------------------------
Kern County
Community College District
3.95% 1,400
- -----------------------------------------------------------
Los Angeles
Multifamily Housing Revenue
3.40% 1,500
- -----------------------------------------------------------
Monterey County
Peninsula Water Management District
3.20% 1,500
Regional Waste Management Authority
3.45% 1,400
- -----------------------------------------------------------
Orange County
Multifamily Housing Revenue
3.20% 1,400
Sanitation District
3.74% 2,500
- -----------------------------------------------------------
Palm Springs
Community Redevelopment Agency
3.10% 1,400
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
Sacramento County
Multifamily Housing Revenue
Briarwood Apartments
3.45% $ 1,400
Stone Creek Apartments
3.40% 1,500
- -----------------------------------------------------------
San Bernardino
Multifamily Housing Revenue
3.55% 1,400
- -----------------------------------------------------------
Santa Ana
School District
3.30% 1,400
- -----------------------------------------------------------
Ventura County
Triunfo Sanitation District
3.45% 1,400
- -----------------------------------------------------------
TOTAL VARIABLE RATE DEMAND
SECURITIES--72.5%
(average maturity: 5 days) 26,600
- -----------------------------------------------------------
OTHER SECURITIES
State of California
Pollution Control Financing Authority
3.00%-3.45%, 4/1/97-5/13/97 3,000
Public Capital Improvements Financing Authority
3.55%, 6/15/97 1,500
Revenue Anticipation Warrants
3.97%, 6/30/97 3,004
- -----------------------------------------------------------
Los Angeles
Wastewater System Revenue
3.45%, 5/9/97 1,000
- -----------------------------------------------------------
</TABLE>
<PAGE> 3
3
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Value
<S> <C>
San Diego County
Teeter Obligation Notes
3.50%, 5/12/97 $ 1,440
- -----------------------------------------------------------
TOTAL OTHER SECURITIES--27.1%
(average maturity: 55 days) 9,944
- -----------------------------------------------------------
TOTAL INVESTMENTS--99.6%
(average maturity: 18 days) 36,544
- -----------------------------------------------------------
CASH AND OTHER ASSETS,
LESS LIABILITIES--.4% 148
- -----------------------------------------------------------
NET ASSETS--100% $36,692
- -----------------------------------------------------------
</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, 1997.
See accompanying Notes to Financial Statements.
<PAGE> 4
4
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1997
(in thousands)
- -----------------------------------------------------------------------------------------------------
ASSETS
- ----------------------------------------------------------
Investments, at amortized cost $36,544
- ----------------------------------------------------------
Cash 6
- ----------------------------------------------------------
Receivable for:
Interest 175
- ----------------------------------------------------------
Securities sold 100
- ----------------------------------------------------------
Total assets 36,825
- ----------------------------------------------------------
LIABILITIES AND NET ASSETS
- ----------------------------------------------------------
Payable for:
Dividends 36
- ----------------------------------------------------------
Management fee 7
- ----------------------------------------------------------
Distribution services fee 10
- ----------------------------------------------------------
Custodian and transfer agent fees
and related expenses 3
- ----------------------------------------------------------
Trustees' fees and other 77
- ----------------------------------------------------------
Total liabilities 133
- ----------------------------------------------------------
Net assets applicable to
shares outstanding $36,692
- ----------------------------------------------------------
THE PRICING OF SHARES
- ----------------------------------------------------------
Shares outstanding 36,692
- ----------------------------------------------------------
Net asset value and
redemption price per share $1.00
- ----------------------------------------------------------
</TABLE>
See accompanying Notes to Financial Statements.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
Six months ended March 31, 1997
(in thousands)
<S> <C>
INTEREST INCOME $1,222
- ----------------------------------------------------------
EXPENSES:
Management fee 78
- ----------------------------------------------------------
Distribution services fee 117
- ----------------------------------------------------------
Custodian and transfer agent
fees and related expenses 28
- ----------------------------------------------------------
Professional fees 11
- ----------------------------------------------------------
Reports to shareholders 7
- ----------------------------------------------------------
Trustees' fees and other 9
- ----------------------------------------------------------
Total expenses 250
- ----------------------------------------------------------
Net investment income $ 972
- ----------------------------------------------------------
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended March 31, 1997 and
year ended September 30, 1996
(in thousands)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
--------- --------
<S> <C> <C>
OPERATIONS:
Net investment income $ 972 3,047
- -----------------------------------------------------------
Dividends to shareholders from
net investment income (972) (3,047)
- -----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 116,543 370,566
- -----------------------------------------------------------
Shares issued in reinvestment
of dividends 903 3,038
- -----------------------------------------------------------
117,446 373,604
Shares redeemed (199,638) (360,012)
- -----------------------------------------------------------
Net increase (decrease) from capital
share transactions and total increase
(decrease) in net assets (82,192) 13,592
- -----------------------------------------------------------
NET ASSETS:
Beginning of period 118,884 105,292
- -----------------------------------------------------------
End of period $ 36,692 118,884
- -----------------------------------------------------------
</TABLE>
<PAGE> 5
5
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 for the six months ended March 31, 1997.
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 six months ended March 31, 1997, the Fund incurred a
management fee of $78,000.
DISTRIBUTION AGREEMENT
The Fund also has an administration, shareholder services and distribution
agreement with Zurich Kemper Distributors Inc. (ZKDI) (formerly known as Kemper
Distributors, Inc.). 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 six months ended March 31, 1997, the
Fund incurred a distribution services fee of $117,000, of which ZKDI, pursuant
to the related service agreements, remitted $109,000 to various firms.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's transfer agent, Zurich Kemper
Service Company (ZKSvC) (formerly known as Kemper Service Company) is the
shareholder service agent of the
<PAGE> 6
6
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Fund. Under the agreement, ZKSvC received shareholder services fees of $14,000
for the six months ended March 31, 1997.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of ZKI.
During the six months ended March 31, 1997, the Fund made no payments to its
officers and incurred trustees' fees of $7,000 to independent trustees.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six months
ended
March 31, Year ended September 30,
1997 1996 1995 1994 1993
<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
- -------------------------------------------------------------------------------------------------------------------
Net investment income and dividends declared .01 .03 .03 .02 .02
- -------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- -------------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 1.38% 2.93 3.23 1.97 1.88
- -------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .71% .72 .75 .71 .69
- -------------------------------------------------------------------------------------------------------------------
Net investment income 2.75% 2.88 3.16 1.94 1.87
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $36,692 118,884 105,292 101,148 122,560
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 7
Tax-Exempt
California
Money Market
Fund
Semiannual
Report
March 31, 1997
This report is not to be distributed unless preceded
or accompanied by a prospectus.
PRINCIPAL UNDERWRITER
ZURICH KEMPER DISTRIBUTORS, INC.
222 South Riverside Plaza, Chicago, IL 60606
www.Kemper.com
1031440 4/97 (LOGO)printed on recycled paper
