<PAGE> 1
DEAR SHAREHOLDER:
We appreciate your decision to invest in the Tax-Exempt California Money Market
Fund. To provide you with an update of holdings and financial highlights, on the
following pages you'll find the Fund's annual report for the year ended
September 30, 1999.
Briefly, for the past year the Fund's portfolio 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 past year was one of rapid changes. Early in the year the Federal Reserve
Board of Governors (the Fed) eased monetary conditions because of the potential
for problems in Latin America and Russia, which in turn, dampened U.S. consumer
confidence. This measure was so successful in restoring confidence to volatile
capital markets, particularly the stock market, that toward the end of the
fiscal year the Fed took measures to tighten monetary conditions. This was due
to concerns the economy was growing at too rapid of a pace and inflation would
start emerging because of tight labor markets. Meanwhile, a number of foreign
economies rebounded, especially Japan and Europe. These factors translated into
increased worldwide growth and capital demand, and helped build the expectation
that the Gross Domestic Product should remain strong with at least 4% growth. As
a result, the Fed seems content on managing interest rates for the remainder of
this year and seems interested in maintaining orderly, functioning financial
markets. We anticipate a relatively good pace of economic growth continuing into
the new year.
Considering this information, we plan to take a relatively defensive approach to
the Tax-Exempt California Money Market Fund's average maturity, although we will
look for attractive opportunities to extend maturities, and enhance performance.
Rest assured that the Fund's management is dedicated to achieving the Fund's
objective. Given the conditions stated above and our strategy, the Tax-Exempt
California Money Market Fund offers a high degree of stability, and should
continue to be an excellent place for you to invest your money.
Thank you again for your investment in the Tax-Exempt California Money Market
Fund. We look forward to serving your investment needs for years to come.
/s/ Frank J. Rachwalski
FRANK J. RACHWALSKI
FUND VICE PRESIDENT AND LEAD PORTFOLIO MANAGER
November 15, 1999
Frank Rachwalski is a Managing Director of Scudder Kemper Investments, Inc. and
is Vice President and Lead Portfolio Manager of Tax-Exempt California Money
Market Fund. Mr. Rachwalski holds B.B.A. and M.B.A. degrees from Loyola
University.
FUND RESULTS
For the 12-month period ended September 30, 1999
Net Annualized Yield 2.14%
Equivalent Taxable Yield 3.75%
NOTES
The Fund's net yield is the sum of the daily dividend rates for the period, then
annualized. Yields are historical, may fluctuate, and do not guarantee future
performance.
The equivalent taxable yield allows you to compare the Fund with the performance
of taxable money market funds. It 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.
Like all money market funds, an investment in this fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the Fund seeks to preserve your investment at $1.00 per share,
it is possible to lose money.
The views expressed in this report reflect those of the portfolio manager only
through the end of the period stated above. The manager's views are subject to
change at any time, based on market and other conditions.
1
<PAGE> 2
PORTFOLIO OF INVESTMENTS
Tax-Exempt California Money Market Fund
September 30, 1999
(Value in thousands)
<TABLE>
<CAPTION>
Value
(A)VARIABLE RATE DEMAND SECURITIES
<S> <C>
State of California
Eastern Municipal Water District
3.40% $ 9,000
Economic Development Financing Authority
California Independent Systems Project
4.00% 1,600
Volk Enterprises, Inc. Project
3.45% 1,700
Health Facilities Financing Authority
Catholic Healthcare Revenue
3.40% 7,300
Scripps Memorial Hospital
3.10% 3,500
Sutter Health Revenue
3.50% 9,800
Pollution Control Financing Authority
Browning Ferris Industries
3.40% 5,000
Occidental Geothermal, Inc. Project
3.20% 1,400
Pacific Gas and Electric Co.
3.70% 11,300
Pacific Gas and Electric Co.
3.75% 10,900
Southern California Edison
4.05% 15,200
Western Waste Industries
3.60% 1,800
Public Capital Improvements Financing Authority
3.35% 1,500
Southern California Public Power Authority
3.20% 6,800
Statewide Communities Development Authority
Leveche, LLC Project
4.30% 3,670
Multifamily Housing Revenue
3.35% 8,000
- -----------------------------------------------------------
Alameda-Contra Costa
Schools Financing Authority
3.55% 1,730
- -----------------------------------------------------------
Alhambra
Multifamily Housing Revenue
4.93% 2,200
- -----------------------------------------------------------
Anaheim
Public Improvement Corp.
3.20% 1,200
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
Berkeley
YMCA of Berkeley
3.45% $ 5,910
- -----------------------------------------------------------
Chula Vista
Multifamily Housing Revenue
3.40% 2,000
- -----------------------------------------------------------
Hayward
Multifamily Housing Revenue
3.50% 2,000
- -----------------------------------------------------------
Irvine
Assessment District
Improvement Bonds, District No 97-17
3.50% 1,150
Improvement Bonds, District No 85-7-I
3.30% 5,200
Improvement Bonds, District No 94-15
3.50% 1,200
Improvement Bonds, District No 87-8
3.50% 1,500
Ranch Water District
4.00% 6,800
- -----------------------------------------------------------
Kern County
Public Facilities Project
3.40% 800
- -----------------------------------------------------------
Los Angeles County
Community Development Commission
3.38% 1,000
Industrial Development Authority
3.60% 1,500
Multifamily Housing Revenue
3.00% 11,240
Pension Obligation Bonds
3.20% 8,000
Transportation Commission
3.20% 3,700
- -----------------------------------------------------------
Oakland County
Financing Authority Lease Revenue
3.30% 4,900
Financing Authority Lease Revenue
3.40% 5,200
- -----------------------------------------------------------
</TABLE>
2
<PAGE> 3
Tax-Exempt California Money Market Fund
<TABLE>
<CAPTION>
Value
<S> <C>
Orange County
Sanitation Districts
3.50% $ 5,000
Water District
3.45% 1,000
- -----------------------------------------------------------
Riverside County
Public Facilities Project
3.20% 1,300
- -----------------------------------------------------------
Roseville
Hospital Lease Revenue
3.45% 3,850
- -----------------------------------------------------------
Sacramento County
Administrative Center & Courthouse Project
3.55% 2,355
Multifamily Housing Revenue
3.25% 1,750
- -----------------------------------------------------------
San Bernardino County
County Center Refinancing Project
3.25% 3,600
Medical Center Financing Project
3.10% 10,000
- -----------------------------------------------------------
San Jose
Multifamily Housing Revenue
3.45% 4,000
- -----------------------------------------------------------
San Marcos
Multifamily Housing Revenue
3.60% 6,900
- -----------------------------------------------------------
Santa Ana
School District
3.30% 1,300
- -----------------------------------------------------------
Santa Clara County
Hospital Facilities Authority
3.20% 3,100
Multifamily Housing Revenue
3.40% 4,800
- -----------------------------------------------------------
Simi Valley
Multifamily Housing Revenue
3.55% 4,000
- -----------------------------------------------------------
Vallejo
Industrial Development Authority
3.40% 2,900
- -----------------------------------------------------------
Ventura County
Triunfo Sanitation District
3.70% 2,190
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Value
<S> <C>
West Basin
Water District
3.15% 4,500
- -----------------------------------------------------------
Woodland
Multifamily Mortgage Revenue
3.25% $ 4,620
- -----------------------------------------------------------
Puerto Rico
Government Development Bank
3.10% 2,300
Highway and Transportation Authority
3.45% 5,800
- -----------------------------------------------------------
TOTAL VARIABLE RATE DEMAND
SECURITIES -- 60.0%
(average maturity: 6 days) 240,965
- -----------------------------------------------------------
OTHER SECURITIES
State of California
General Obligation
3.00%-3.25%, 10/13/99-11/16/99 21,500
Metropolitan Water Authority
2.85%-3.30%, 10/12/99-11/10/99 16,500
Pollution Control Financing Authority
3.05%-3.25%, 10/8/99-10/19/99 6,500
School Cash Reserve Program Authority
4.00%, 07/03/00 3,221
University of California Regents
3.00%, 10/27/99 8,000
- -----------------------------------------------------------
Fontana
School District
3.50%, 07/07/00 8,019
- -----------------------------------------------------------
Los Angeles County
Capital Asset Lease Corp.
3.00%-3.20%, 10/14/99-11/08/99 15,000
Transportation Commission
4.00%, 6/30/00 5,527
- -----------------------------------------------------------
Sacramento County
Municipal Utility District
3.20%, 10/07/99-10/12/99 7,400
- -----------------------------------------------------------
San Francisco
Airport
3.15%, 10/07/99 3,065
Bay Area Rapid Transit
3.15%-3.25%, 10/6/99-11/09/99 12,100
Public Utilities
3.00%-3.25%, 10/12/99-11/9/99 11,000
- -----------------------------------------------------------
</TABLE>
3
<PAGE> 4
Tax-Exempt California Money Market Fund
<TABLE>
<CAPTION>
Value
<S> <C>
Puerto Rico
Government Development Bank
2.90%-3.40%, 10/13/99-2/16/00 $ 24,607
- -----------------------------------------------------------
Ventura
Financing Authority Lease Revenue
2.85%-3.10%, 10/15/99-11/5/99 18,500
- -----------------------------------------------------------
TOTAL OTHER SECURITIES--40.0%
(average maturity: 54 days) 160,939
- -----------------------------------------------------------
TOTAL INVESTMENTS--100%
(average maturity: 25 days) 401,904
- -----------------------------------------------------------
</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 September 30, 1999.
See accompanying Notes to Financial Statements.
4
<PAGE> 5
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
September 30, 1999
(in thousands)
- ----------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
- ----------------------------------------------------------
Investments, at amortized cost $401,904
- ----------------------------------------------------------
Receivable for:
Investments sold 150
- ----------------------------------------------------------
Interest 1,255
- ----------------------------------------------------------
Fund shares sold 8,416
- ----------------------------------------------------------
Other assets 8
- ----------------------------------------------------------
Total assets 411,733
- ----------------------------------------------------------
LIABILITIES AND NET ASSETS
- ----------------------------------------------------------
Due to custodian bank 4,112
- ----------------------------------------------------------
Payable for:
Dividends 28
- ----------------------------------------------------------
Fund shares redeemed 4,763
- ----------------------------------------------------------
Management fee 75
- ----------------------------------------------------------
Distribution services fee 85
- ----------------------------------------------------------
Custodian and transfer agent fees
and related expenses 130
- ----------------------------------------------------------
Trustees' fees and other 108
- ----------------------------------------------------------
Total liabilities 9,301
- ----------------------------------------------------------
Net assets, applicable to
shares outstanding $402,432
- ----------------------------------------------------------
THE PRICING OF SHARES
- ----------------------------------------------------------
Shares outstanding 402,432
- ----------------------------------------------------------
Net asset value and
redemption price per share $1.00
- ----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
STATEMENT OF OPERATIONS
Year ended September 30, 1999
(in thousands)
- ----------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
- ----------------------------------------------------------
Interest income $8,113
- ----------------------------------------------------------
EXPENSES:
Management fee 625
- ----------------------------------------------------------
Distribution services fee 921
- ----------------------------------------------------------
Custodian and transfer agent fees and related
expenses 394
- ----------------------------------------------------------
Professional fees 34
- ----------------------------------------------------------
Reports to shareholders 57
- ----------------------------------------------------------
Trustees' fees and other 74
- ----------------------------------------------------------
Total expenses 2,105
- ----------------------------------------------------------
Net investment income $6,008
- ----------------------------------------------------------
</TABLE>
STATEMENTS OF CHANGES IN NET ASSETS
Years ended September 30, 1999 and 1998
(in thousands)
- ---------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
----------- --------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,008 3,745
- -----------------------------------------------------------
Dividends to shareholders from
net investment income (6,008) (3,745)
- -----------------------------------------------------------
CAPITAL SHARE TRANSACTIONS (DOLLAR
AMOUNTS AND NUMBER OF SHARES
ARE THE SAME):
Shares sold 2,001,802 807,819
- -----------------------------------------------------------
Shares issued in reinvestment
of dividends 6,031 3,616
- -----------------------------------------------------------
Shares redeemed (1,770,338) (763,930)
- -----------------------------------------------------------
Net increase (decrease) from
capital share transactions and
total increase (decrease) in net
assets 237,495 47,505
- -----------------------------------------------------------
NET ASSETS:
Beginning of year 164,937 117,432
- -----------------------------------------------------------
End of year $ 402,432 164,937
- -----------------------------------------------------------
</TABLE>
5
<PAGE> 6
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE FUND
Tax-Exempt California Money Market Fund is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end, diversified
management investment company organized as a Massachusetts business trust.
The fund's financial statements are prepared in accordance with generally
accepted accounting principles which require the use of management estimates.
The policies described below are followed consistently by the fund in the
preparation of its financial statements.
2. SIGNIFICANT ACCOUNTING POLICIES
SECURITY VALUATION
The fund values all portfolio securities utilizing the amortized cost method
permitted in accordance with Rule 2a-7 under the 1940 Act and pursuant to which
the fund must adhere to certain conditions. Under this method, which does not
take into account unrealized gains or losses on securities, an instrument is
initially valued at its cost and thereafter assumes a constant
accretion/amortization to maturity of any discount/premium.
FEDERAL INCOME TAXES
The fund's policy is to comply with the requirements of the Internal Revenue
Code, as amended, which are applicable to regulated investment companies and to
distribute all of its tax exempt income to its shareholders. Accordingly, the
fund paid no federal income taxes and no federal tax provision was required.
DISTRIBUTION OF INCOME AND GAINS
All of the net investment income of the fund is declared as a daily dividend and
is distributed to shareholders monthly. Net investment income includes all
realized gains (losses) on portfolio securities.
INVESTMENT TRANSACTIONS AND INVESTMENT INCOME
Investment transactions are accounted for on the trade date. Interest income is
recorded on the accrual basis. Realized gains and losses from investment
transactions are recorded on an identified cost basis. All discount and premiums
are accepted amortized for both tax and financial reporting purposes.
3. TRANSACTIONS WITH AFFILIATES
MANAGEMENT AGREEMENT
The fund has a management agreement with Scudder Kemper Investments, Inc.
(Scudder Kemper) and pays a monthly investment management fee of 1/12 of the
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, 1999, the fund incurred a management fee of
$625,000.
DISTRIBUTION AGREEMENT
The fund has an administration, shareholder services and distribution 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, 1999, the fund incurred a distribution services fee of $921,000.
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
6
<PAGE> 7
7
Tax-Exempt California Money Market Fund
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agreement, KSvC received shareholder services fees of $309,000 for the year
ended September 30, 1999.
OFFICERS AND TRUSTEES
Certain officers or trustees of the fund are also officers or directors of
Scudder Kemper. During the year ended September 30, 1999, the fund made no
payments to its officers and incurred trustees' fees of $16,000 to independent
trustees.
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year ended September 30,
----------------------------------------------------
1999 1998 1997 1996 1995
<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 .02 .03 .03 .03 .03
- -----------------------------------------------------------------------------------------------------------------
Less dividends declared .02 .03 .03 .03 .03
- -----------------------------------------------------------------------------------------------------------------
Net asset value, end of period $1.00 1.00 1.00 1.00 1.00
- -----------------------------------------------------------------------------------------------------------------
TOTAL RETURN (NOT ANNUALIZED) 2.15% 2.71 2.91 2.93 3.23
- -----------------------------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS (ANNUALIZED)
Expenses .75% .74 .78 .72 .75
- -----------------------------------------------------------------------------------------------------------------
Net investment income 2.14% 2.66 2.78 2.88 3.16
- -----------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets at end of period (in thousands) $402,432 164,937 117,432 118,884 105,292
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE> 8
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, 1999, 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 1995. 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, 1999 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, 1999, 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 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Chicago, Illinois
November 18, 1999
8
<PAGE> 9
TAX-EXEMPT
CALIFORNIA
MONEY MARKET
FUND
ANNUAL
REPORT
SEPTEMBER 30, 1999
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.
TECA-2 510340 11/99 (LOGO)printed on recycled paper
