<PAGE> 1
1
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
semiannual report for the six month period ended March 31, 1998.
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
Strong economic indicators prove that the U.S. economy's growth is still
surprisingly robust. Inflation has disappeared from the economy for the second
time in three months in March and is down for the first quarter of 1998;
consumer spending is high, unemployment is low and GDP growth continues to
remain strong with an outlook of at least a 3.5% growth rate this quarter.
Inflation is expected to accelerate later this year, but still be relatively
moderate.
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.
PORTFOLIO RESULTS
For the six months ended March 31, 1998, the Tax-Exempt California Money Market
Fund had a net annualized yield of 2.72% and a tax-equivalent yield of 4.76%.
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, 1998, 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.
Sincerely,
/s/ Frank J. Rachwalski
Frank J. Rachwalski
Vice President and Portfolio Manager
May 18, 1998
Frank Rachwalski is a Managing Director of Scudder 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.
<PAGE> 2
2
Tax-Exempt California Money Market Fund
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PORTFOLIO OF INVESTMENTS
March 31, 1998 (unaudited)
(Value in thousands)
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<TABLE>
<CAPTION>
Value
(A)VARIABLE RATE DEMAND SECURITIES
<S> <C>
State of California
Economic Development Authority
4.20% $ 3,000
Health Facilities Financing Authority
3.30% 5,000
Pollution Control Financing Authority
Occidental Geothermal, Inc. Project
3.25% 1,400
Pacific Gas and Electric Co.
3.75% 10,800
Solid Waste Disposal
3.50% 5,000
Southeast Resource Recovery Facilities
4.30% 5,000
Southern California Public Power Authority
3.25% 3,700
Statewide Communities Development Authority
4.00% 2,900
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Alameda-Contra Costa
Schools Financing Authority
3.40% 2,170
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Anaheim
Public Improvement Corp.
3.25% 1,400
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Fremont
Building and Equipment Financing Project
4.20% 2,000
Public Financing Authority
4.20% 1,500
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Hayward
Multifamily Housing Revenue
3.60% 2,000
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Irvine
Assessment District
3.67% 9,200
Industrial Development Revenue
4.05% 5,000
Ranch Water District
3.80% 4,600
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
Kern County
Public Facilities Project
3.30% $ 900
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Los Angeles
Multifamily Housing Revenue
4.05% 1,500
Pension Obligation Bonds
3.25% 3,000
Transportation Commission
3.25% 3,700
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Monterey County
Peninsula Water Management District
3.90% 1,500
Regional Waste Management Authority
4.30% 1,780
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Orange County
Foothill/Eastern Transportation Corridor Agency
3.30% 3,200
Sanitation District
3.77% 8,400
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Palm Springs
Community Redevelopment Agency
3.50% 1,400
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Riverside County
Eastern Municipal Water District
3.30% 5,000
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Sacramento County
Administrative Center & Courthouse Project
3.35% 2,500
Multifamily Housing Revenue
Briarwood Apartments
4.30% 5,500
Smoketree Apartments
3.25% 1,750
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San Bernardino
Multifamily Housing Revenue
4.05% 1,350
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Santa Ana
School District
3.35% 1,400
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</TABLE>
<PAGE> 3
3
Tax-Exempt California Money Market Fund
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<TABLE>
<CAPTION>
Value
<S> <C>
Santa Clara County
Hospital Facilities Authority
3.40% $ 2,200
Transit District
4.20% 2,000
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Simi Valley
Multifamily Housing Revenue
4.40% 4,000
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Ventura County
Triunfo Sanitation District
3.50% 1,400
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Woodland
Multifamily Mortgage Revenue
3.25% 3,020
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Puerto Rico
Highway and Transportation Authority
3.20% 1,800
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TOTAL VARIABLE RATE DEMAND
SECURITIES--83.7%
(average maturity: 5 days) 121,970
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OTHER SECURITIES
State of California
Department of Water
3.40%, 5/7/98 1,300
Pollution Control Financing Authority
3.05%-3.55%, 4/3/98-6/24/98 7,300
Public Capital Improvements Financing Authority
3.60%, 6/15/98 1,500
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</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
Los Angeles
Capital Asset Lease Corp.
3.10%-3.20%, 5/8/98-5/14/98 $ 6,000
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Orange County
Transportation Authority
3.50%, 6/22/98 5,000
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Sacramento
Municipal Utility District
3.50%, 5/11/98 1,500
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San Joaquin County
Transportation Authority
3.10%, 5/6/98 2,000
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TOTAL OTHER SECURITIES--16.9%
(average maturity: 49 days) 24,600
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TOTAL INVESTMENTS--100.6%
(average maturity: 13 days) 146,570
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LIABILITIES, LESS
OTHER ASSETS--(.6%) (876)
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NET ASSETS--100% $145,694
===========================================================
</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, 1998.
See accompanying Notes to Financial Statements.
<PAGE> 4
4
Tax-Exempt California Money Market Fund
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STATEMENT OF ASSETS AND LIABILITIES
March 31, 1998 (unaudited)
(in thousands)
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<TABLE>
<S> <C>
ASSETS
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Investments, at amortized cost $146,570
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Interest receivable 433
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Total assets 147,003
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LIABILITIES AND NET ASSETS
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Cash overdraft 1,176
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Payable for:
Dividends 23
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Management fee 28
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Distribution services fee 41
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Custodian and transfer agent fees
and related expenses 2
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Trustees' fees 39
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Total liabilities 1,309
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Net assets applicable to
shares outstanding $145,694
==========================================================
THE PRICING OF SHARES
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Shares outstanding 145,694
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Net asset value and
redemption price per share $1.00
==========================================================
</TABLE>
STATEMENT OF OPERATIONS
Six Months ended March 31, 1998 (unaudited)
(in thousands)
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<TABLE>
<S> <C>
INTEREST INCOME $2,170
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EXPENSES:
Management fee 140
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Distribution services fee 210
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Custodian and transfer agent
fees and related expenses 69
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Professional fees 12
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Reports to shareholders 15
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Trustees' fees and other 12
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Total expenses 458
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Net investment income $1,712
==========================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
Six months ended March 31, 1998 (unaudited)
and year ended September 30, 1997
(in thousands)
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<TABLE>
<CAPTION>
1998 1997
--------- --------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,712 1,601
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Dividends to shareholders from
net investment income (1,712) (1,601)
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CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 371,127 282,125
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Shares issued in reinvestment
of dividends 1,666 1,583
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372,793 283,708
Shares redeemed (344,531) (285,160)
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Net increase (decrease) from capital
share transactions and total increase
(decrease) in net assets 28,262 (1,452)
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NET ASSETS:
Beginning of period 117,432 118,884
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End of period $ 145,694 117,432
===========================================================
</TABLE>
See accompanying Notes to Financial Statements.
<PAGE> 5
5
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 for the six months ended March 31, 1998.
3. TRANSACTIONS WITH AFFILIATES
INVESTMENT MANAGER COMBINATION. Effective December 31, 1997, Zurich Insurance
Company, the parent of Zurich Kemper Investments, Inc. (ZKI), acquired a
majority interest in Scudder, Stevens & Clark, Inc. (Scudder), another major
investment manager. As a result of this transaction, the operations of ZKI were
combined with Scudder to form a new global investment organization named Scudder
Kemper Investments, Inc. (Scudder Kemper). The transaction resulted in the
termination of the Fund's investment management agreement with ZKI, however, a
new investment management agreement between the Fund and Scudder Kemper was
approved by the Fund's Board of Trustees and by the Fund's shareholders. The new
management agreement, which was effective December 31, 1997, is the same in all
material respects as the previous management agreement, except that Scudder
Kemper is the new investment adviser to the Fund. In addition, the names of the
Fund's principal underwriter and shareholder service agent were changed to
Kemper Distributors, Inc. (KDI) and Kemper Service Company (KSvC), respectively.
MANAGEMENT AGREEMENT
The Fund has a management agreement with Scudder Kemper 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, 1998, the Fund incurred a management fee
of $140,000.
<PAGE> 6
6
Tax-Exempt California Money Market Fund
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DISTRIBUTION AGREEMENT
The Fund also has an administration, shareholder services and distribution
agreement with 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, 1998, the Fund
incurred a distribution services fee of $210,000, all of which KDI, pursuant to
the related service agreements, remitted to various firms.
SHAREHOLDER SERVICES AGREEMENT
Pursuant to a services agreement with the Fund's transfer agent, KSvC is the
shareholder service agent of the Fund. Under the agreement, KSvC received
shareholder services fees of $66,000 for the six months ended March 31, 1998.
OFFICERS AND TRUSTEES
Certain officers or trustees of the Fund are also officers or directors of
Scudder Kemper. During the six months ended March 31, 1998, the Fund made no
payments to its officers and incurred trustees' fees of $11,000 to independent
trustees.
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
Six months
ended
March 31, Year ended September 30,
1998 ----------------------------------------
(unaudited) 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------
<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 .01 .03 .03 .03 .02
- --------------------------------------------------------------------------------------------------------------------
Less dividends declared .01 .03 .03 .03 .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 (NOT ANNUALIZED) 1.36% 2.91 2.93 3.23 1.97
- --------------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .72% .78 .72 .75 .71
- --------------------------------------------------------------------------------------------------------------------
Net investment income 2.69% 2.78 2.88 3.16 1.94
- --------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $145,694 117,432 118,884 105,292 101,148
====================================================================================================================
</TABLE>
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7
Tax-Exempt California Money Market Fund
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SPECIAL SHAREHOLDERS' MEETING
On December 3, 1997, a special shareholders' meeting was held and adjourned as
necessary. Tax-Exempt California Money Market Fund shareholders were asked to
vote on six separate issues: election of nine members to the Board of Trustees,
ratification of Ernst & Young LLP as independent auditors, approval of new
investment management agreement with Scudder Kemper Investments, Inc., approval
of new rule 12b-1 distribution plan with Zurich Kemper Distributors, Inc.,
approval of changes in investment policies and approval of an amendment to the
Agreement and Declaration of Trust. The results are as follows:
ITEM 1: ELECTION OF THE BOARD OF TRUSTEES
<TABLE>
<CAPTION>
AFFIRMATIVE WITHHELD
- ----------------------------------------------------
<S> <C> <C>
DAVID W. BELIN 35,028,281 969,586
LEWIS A. BURNHAM 35,034,183 963,684
DONALD L. DUNAWAY 35,034,199 963,668
ROBERT B. HOFFMAN 35,034,183 963,684
DONALD R. JONES 35,034,199 963,668
SHIRLEY D. PETERSON 35,034,183 963,684
DANIEL PIERCE 35,029,748 968,119
WILLIAM P. SOMMERS 35,034,199 963,668
EDMOND D. VILLANI 35,029,764 968,103
</TABLE>
ITEM 2: SELECTION OF ERNST & YOUNG LLP AS INDEPENDENT AUDITORS
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
- ---------------------------------
<S> <C> <C>
35,247,990 284,515 465,363
</TABLE>
ITEM 3: NEW INVESTMENT MANAGEMENT AGREEMENT
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
- ---------------------------------
<S> <C> <C>
33,874,847 1,270,590 852,431
</TABLE>
ITEM 4: NEW RULE 12B-1 DISTRIBUTION PLAN
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
- -----------------------------------
<S> <C> <C>
33,113,476 1,788,085 1,096,306
</TABLE>
ITEM 5: APPROVE CHANGES IN INVESTMENT POLICIES
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
- -----------------------------------
<S> <C> <C>
17,953,912 2,320,893 1,623,840
</TABLE>
ITEM 6: APPROVE AN AMENDMENT TO THE AGREEMENT AND DECLARATION OF TRUST
<TABLE>
<CAPTION>
AFFIRMATIVE AGAINST ABSTAIN
- ---------------------------------------------
<S> <C> <C>
18,306,354 1,922,545 1,669,746
</TABLE>
<PAGE> 8
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
SEMIANNUAL
REPORT
March 31, 1998
PRINCIPAL UNDERWRITER:
KEMPER DISTRIBUTORS, INC.
222 S. Riverside Plaza, Chicago, IL 60606
This report is not to be distributed unless preceded
or accompanied by a Tax-Exempt California Money Market Fund prospectus.
TEC-3 1047160 4/98 (RECYCLE LOGO) printed on recycled paper
