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 semiannual report for the six months
ended March 31, 2000.
Briefly, for the past six months 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.
Fund Results
As of March 31, 2000
- ------------------------------------------------------
7-Day Average
Annualized as of
Net Yield March 31, 2000
- ------------------------------------------------------
Net Six-Month Yield 2.38% 2.45%
- ------------------------------------------------------
Equivalent Taxable Yield 4.17% 4.30%
- ------------------------------------------------------
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
Vice President and Lead Portfolio Manager
May 3, 2000
Frank Rachwalski is a Managing Director of Scudder Kemper Investments, Inc. and
is Vice President and Lead Portfolio Manager of all Scudder Kemper Money Funds.
Mr. Rachwalski holds B.B.A. and M.B.A. degrees from Loyola University.
Notes
The Fund's net yield is the annualized sum of the daily dividend rates for the
period. Yields are historical, may fluctuate, and do not guarantee future
performance.
The equivalent taxable yield allows you to compare with the performance of
taxable money market funds. It is based on 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 the 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>
Portfolio of Investments at March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------
Variable Rate Demand Securities -- 63.7%*
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
California Eastern Municipal Water & Sewer
Revenue, 3.15% $ 9,000,000 $ 9,000,000
- ---------------------------------------------------------------------------------------------------------------------
California Economic Development Financing
Authority, ISO Corp. Project, 3.30% 13,025,000 13,025,000
- ---------------------------------------------------------------------------------------------------------------------
California Economic Development Financing
Authority, Volk Enterprises Inc. Project, 3.20% 1,700,000 1,700,000
- ---------------------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority,
Catholic Healthcare Revenue, 3.15% 1,000,000 1,000,000
- ---------------------------------------------------------------------------------------------------------------------
California Health Facilities Financing Authority,
Scripps Memorial Hospital, 3.15% 8,500,000 8,500,000
- ---------------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Pollution Control Revenue,
Pacific Gas & Electric Project, 3.35%-3.75% 68,850,000 68,850,000
- ---------------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Pollution Control Revenue, Occidental
Geothermal, Inc. Project, 3.65% 1,400,000 1,400,000
- ---------------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Pollution Control Revenue, Southern California
Edison, 3.70% 30,800,000 30,800,000
- ---------------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Solid Waste Disposal Revenue,
Browning Ferris Industries, 3.30% 5,000,000 5,000,000
- ---------------------------------------------------------------------------------------------------------------------
California Pollution Control Financing Authority,
Solid Waste Disposal Revenue,
Western Waste Inc., 3.55% 1,800,000 1,800,000
- ---------------------------------------------------------------------------------------------------------------------
California Statewide Communities Development
Corporation, Levecke, LLC Project, 3.70% 3,670,000 3,670,000
- ---------------------------------------------------------------------------------------------------------------------
California Statewide Communities Development
Authority, Multifamily Housing Revenue,
One Park Place, 3.25% 16,000,000 16,000,000
- ---------------------------------------------------------------------------------------------------------------------
California Statewide Communities Development
Authority, Plaza Club Apartments, 3.35% 5,000,000 5,000,000
- ---------------------------------------------------------------------------------------------------------------------
Anaheim Housing Authority, 3.30% 7,000,000 7,000,000
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------
Anaheim Public Improvement Corp., 3.15% $ 1,200,000 $ 1,200,000
- ---------------------------------------------------------------------------------------------------------------------
Berkeley, YMCA of Berkeley, 3.25% 5,910,000 5,910,000
- ---------------------------------------------------------------------------------------------------------------------
Chula Vista, Multifamily Housing
Revenue, 3.15% 2,000,000 2,000,000
- ---------------------------------------------------------------------------------------------------------------------
Hayward, Multifamily Housing
Revenue, 3.25% 2,000,000 2,000,000
- ---------------------------------------------------------------------------------------------------------------------
Hemet, Multifamily Housing
Revenue, 3.15% 8,050,000 8,050,000
- ---------------------------------------------------------------------------------------------------------------------
Irvine, Assessment District
Improvement Bonds, 3.40% 30,652,000 30,652,000
- ---------------------------------------------------------------------------------------------------------------------
Irvine, Ranch Water District, 3.40-3.60% 18,100,000 18,100,000
- ---------------------------------------------------------------------------------------------------------------------
Kern County, Public Facilities Project, 3.15% 800,000 800,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County,
Community Development Commission,
Willowbrook Project, 3.15% 2,500,000 2,500,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles Department of Water and Power
Electric Plant Revenue, 3.20%-3.30% 20,000,000 20,000,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County, Industrial Development
Revenue, Tulip Corporation Project, 3.60% 1,500,000 1,500,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County, Multifamily Housing
Revenue, 3.15%-3.25% 30,640,000 30,640,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County,
Pension Obligations, 3.15% 8,000,000 8,000,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County,
Transportation Commission and Sales Tax,
Revenue, 3.15% 3,700,000 3,700,000
- ---------------------------------------------------------------------------------------------------------------------
Oakland County, Financing Authority Lease
Revenue, 3.15%-3.30% 12,900,000 12,900,000
- ---------------------------------------------------------------------------------------------------------------------
Orange County, Assessment District,
Improvement Bonds, 3.45% 10,000,000 10,000,000
- ---------------------------------------------------------------------------------------------------------------------
Orange County,
Sanitation Districts, 3.40%-3.50% 15,400,000 15,400,000
- ---------------------------------------------------------------------------------------------------------------------
Orange County, Water District, 3.45% 7,700,000 7,700,000
- ---------------------------------------------------------------------------------------------------------------------
Orange County, Apartment Development Revenue,
Capistrano Pointe A, 3.25% 4,500,000 4,500,000
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------
Orange County, Apartment Development Revenue,
Trabuco Highlands, 3.25% $ 13,300,000 $ 13,300,000
- ---------------------------------------------------------------------------------------------------------------------
Riverside County,
Public Facilities Project, 3.30% 2,200,000 2,200,000
- ---------------------------------------------------------------------------------------------------------------------
Sacramento County, Administrative Center
& Courthouse Project, 3.30% 2,355,000 2,355,000
- ---------------------------------------------------------------------------------------------------------------------
Sacramento County, Multifamily Housing
Revenue, 3.20% 2,750,000 2,750,000
- ---------------------------------------------------------------------------------------------------------------------
San Bernardino County, Medical Center
Financing Project, 3.15%-3.20% 16,200,000 16,200,000
- ---------------------------------------------------------------------------------------------------------------------
San Jose, Multifamily Housing Revenue,
3.20%-3.35% 14,600,000 14,600,000
- ---------------------------------------------------------------------------------------------------------------------
Santa Ana, School District, 3.30% 1,300,000 1,300,000
- ---------------------------------------------------------------------------------------------------------------------
Santa Clara County, Hospital Facilities Authority
Revenue, 3.30% 3,100,000 3,100,000
- ---------------------------------------------------------------------------------------------------------------------
Santa Clara County, Multifamily Housing
Revenue, 3.15% 4,800,000 4,800,000
- ---------------------------------------------------------------------------------------------------------------------
Simi Valley, Multifamily Housing Revenue,
3.30% 4,000,000 4,000,000
- ---------------------------------------------------------------------------------------------------------------------
Southern California Public Power
Authority, Palo Verde Project, 3.15% 7,000,000 7,000,000
- ---------------------------------------------------------------------------------------------------------------------
Southern California Public Power
Transmission Project Revenue, 3.15% 5,900,000 5,900,000
- ---------------------------------------------------------------------------------------------------------------------
Stanislaus, Solid Waste Facilities,
Ogden Martin Systems Project, 3.25% 10,000,000 10,000,000
- ---------------------------------------------------------------------------------------------------------------------
Triunto County,
Sanitation District Revenue, 3.35% 2,190,000 2,190,000
- ---------------------------------------------------------------------------------------------------------------------
Vallejo, Industrial Development Authority,
3.35% 2,900,000 2,900,000
- ---------------------------------------------------------------------------------------------------------------------
West Basin, Water District Revenue, 3.10% 4,500,000 4,500,000
- ---------------------------------------------------------------------------------------------------------------------
Puerto Rico, Government
Development Bank, 3.15% 4,000,000 4,000,000
- ---------------------------------------------------------------------------------------------------------------------
Puerto Rico, Highway
and Transportation Authority, 3.25% 9,500,000 9,500,000
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------
Puerto Rico Industrial Tourist Educational
Medicine and Environmental Control Facilities,
3.45% $ 2,500,000 $ 2,500,000
- ---------------------------------------------------------------------------------------------------------------------
Total Variable Rate Demand Securities (Cost $471,392,000) 471,392,000
- ---------------------------------------------------------------------------------------------------------------------
Other Securities -- 36.3%
- ------------------------------------------------------------------------------------------------------------------------
California Metropolitan Water Authority,
2.55%-3.60%, 4/6/2000-4/13/2000 27,700,000 27,700,000
- ---------------------------------------------------------------------------------------------------------------------
California Public Capital Improvements Financing
Authority Revenue, 3.70%, 6/15/2000 1,500,000 1,500,000
- ---------------------------------------------------------------------------------------------------------------------
California School Cash Reserve Program
Authority, 3.11%, 7/3/2000 3,200,000 3,207,095
- ---------------------------------------------------------------------------------------------------------------------
California State General Obligation Bond,
2.65%-3.35%, 4/10/2000-5/15/2000 30,700,000 30,700,000
- ---------------------------------------------------------------------------------------------------------------------
California, University of California Regents,
3.25%-3.40%, 5/08/2000-5/11/2000 35,021,000 35,021,000
- ---------------------------------------------------------------------------------------------------------------------
Fontana School District 99, 3.18%, 7/7/2000 8,000,000 8,006,567
- ---------------------------------------------------------------------------------------------------------------------
Guam Power Authority, 3.45%, 5/11/2000 3,000,000 3,000,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County, Capital Asset Lease
Revenue, 2.55%-3.30%, 4/6/2000-4/12/2000 18,700,000 18,700,000
- ---------------------------------------------------------------------------------------------------------------------
Los Angeles County, Transportation Commission,
3.32%, 6/30/2000 5,500,000 5,508,896
- ---------------------------------------------------------------------------------------------------------------------
Sacramento County, Municipal Utility District,
2.60%-3.40%, 4/7/2000-5/9/2000 15,437,000 15,437,000
- ---------------------------------------------------------------------------------------------------------------------
San Diego Water Authority, 3.60%, 4/10/2000 1,500,000 1,500,000
- ---------------------------------------------------------------------------------------------------------------------
San Francisco County, Airport,
3.00%-3.45%, 5/9/2000-5/12/2000 26,130,000 26,130,000
- ---------------------------------------------------------------------------------------------------------------------
San Francisco County, Bay Area Rapid Transit,
2.55%-3.30%, 4/11/00-5/15/2000 14,600,000 14,600,000
- ---------------------------------------------------------------------------------------------------------------------
San Francisco County, Public Utilities,
3.30%, 4/13/2000 8,000,000 8,000,000
- ---------------------------------------------------------------------------------------------------------------------
Ventura County, Financing Authority Lease,
2.55%-3.30%, 4/6/2000-4/11/2000 13,700,000 13,700,000
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
Principal
Amount Value
- ---------------------------------------------------------------------------------------------------------------------
Puerto Rico, Government Development
Bank, 3.05%-3.65%, 4/5/2000-5/9/2000 $ 55,660,000 $ 55,660,000
- ---------------------------------------------------------------------------------------------------------------------
Total Other Securities (Cost $268,370,558) 268,370,558
- ---------------------------------------------------------------------------------------------------------------------
Total Investment Portfolio -- 100% (Cost: $739,762,558) (a) $ 739,762,558
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Interest rates represent annualized yield to date of maturity, except
for variable rate securities described below.
(a) Cost for federal income tax purposes was $739,762,558.
* Variable rate demand securities are securities whose yields are reset
at market levels. These securities are shown at their current rate as
of March 31, 2000, and are payable within five business days.
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
Financial Statements
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
as of March 31, 2000 (Unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Assets
- -----------------------------------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (cost $739,762,558) $ 739,762,558
- ---------------------------------------------------------------------------------------------------------------------
Cash 5,492,091
- ---------------------------------------------------------------------------------------------------------------------
Receivable for investments sold 2,450,000
- ---------------------------------------------------------------------------------------------------------------------
Interest receivable 2,679,196
- ---------------------------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 22,419,269
- ---------------------------------------------------------------------------------------------------------------------
Other assets 4,000
- ---------------------------------------------------------------------------------------------------------------------
Total assets 772,807,114
- ---------------------------------------------------------------------------------------------------------------------
Liabilities
- ---------------------------------------------------------------------------------------------------------------------
Dividends payable 51,373
- ---------------------------------------------------------------------------------------------------------------------
Payable for Fund shares redeemed 25,438,334
- ---------------------------------------------------------------------------------------------------------------------
Accrued management fee 149,930
- ---------------------------------------------------------------------------------------------------------------------
Other accrued expenses and payables 463,156
- ---------------------------------------------------------------------------------------------------------------------
Total liabilities 26,102,793
- ---------------------------------------------------------------------------------------------------------------------
Net assets, at value $ 746,704,321
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value
- ---------------------------------------------------------------------------------------------------------------------
Net Asset Value, offering and redemption price per share ($746,704,321 /
746,704,321 outstanding shares of beneficial interest, $.01 par value, unlimited
number of shares authorized) $ 1.00
- ---------------------------------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Statement of Operations
- --------------------------------------------------------------------------------
Six Months Ended March 31, 2000 (Unaudited)
- -----------------------------------------------------------------------------------------------------------------------
Investment Income
- -----------------------------------------------------------------------------------------------------------------------
Interest $ 8,272,344
- ---------------------------------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------------------------------------
Management fee 467,266
- ---------------------------------------------------------------------------------------------------------------------
Services to shareholders 418,128
- ---------------------------------------------------------------------------------------------------------------------
Custodian and accounting fees 10,066
- ---------------------------------------------------------------------------------------------------------------------
Distribution services fee 780,591
- ---------------------------------------------------------------------------------------------------------------------
Auditing 28,784
- ---------------------------------------------------------------------------------------------------------------------
Legal 2,928
- ---------------------------------------------------------------------------------------------------------------------
Trustees' fees and expenses 10,065
- ---------------------------------------------------------------------------------------------------------------------
Reports to shareholders 23,000
- ---------------------------------------------------------------------------------------------------------------------
Registration fees 62,068
- ---------------------------------------------------------------------------------------------------------------------
Other 99,119
- ---------------------------------------------------------------------------------------------------------------------
Total expenses, before expense reductions 1,902,015
- ---------------------------------------------------------------------------------------------------------------------
Expense reductions (5,707)
- ---------------------------------------------------------------------------------------------------------------------
Total expenses, after expense reductions 1,896,308
- ---------------------------------------------------------------------------------------------------------------------
Net investment income 6,376,036
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 6,376,036
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
7
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Statements of Changes in Net Assets
- ---------------------------------------------------------------------------------------------------------------------
Six Months
Ended Year Ended
March 31, 2000 September 30,
(Unaudited) 1999
- ---------------------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets
- ------------------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net investment income $ 6,376,036 $ 6,007,976
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,376,036 6,007,976
- ---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders from net investment income (6,376,036) (6,007,976)
- ---------------------------------------------------------------------------------------------------------------------
Fund share transactions at net asset value of $1.00 per share:
- ------------------------------------------------------------------------------------------------------------------------
Proceeds from shares sold 2,075,068,853 2,001,802,434
- ---------------------------------------------------------------------------------------------------------------------
Reinvestment of distributions 6,358,910 6,030,649
- ---------------------------------------------------------------------------------------------------------------------
Cost of shares redeemed (1,737,154,955)(1,770,338,570)
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from Fund share transactions 344,272,808 237,494,513
- ---------------------------------------------------------------------------------------------------------------------
Net assets at beginning of period 402,431,513 164,937,000
- ---------------------------------------------------------------------------------------------------------------------
Net assets at end of period $ 746,704,321 $ 402,431,513
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
8
<PAGE>
Financial Highlights
The following table includes selected data for a share outstanding throughout
each period and other performance information derived from the financial
statements and market price data.
<TABLE>
<CAPTION>
Year ended September 30, 2000(a) 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 1.00 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Net investment income .01 .02 .03 .03 .03 .03
- ---------------------------------------------------------------------------------------------------------------------
Less distributions from net
investment income (.01) (.02) (.03) (.03) (.03) (.03)
- ---------------------------------------------------------------------------------------------------------------------
Net asset value, end of period 1.00 1.00 1.00 1.00 1.00 1.00
- ---------------------------------------------------------------------------------------------------------------------
Total Return (%) 1.20(b)** 2.15 2.71 2.91 2.93 3.23
- ---------------------------------------------------------------------------------------------------------------------
Ratios to Average Net Assets and Supplemental Data
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
($ millions) 747 402 165 117 119 105
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses before expense
reductions (%) .71%* .75 .74 .78 .72 .75
- ---------------------------------------------------------------------------------------------------------------------
Ratio of expenses after expense
reductions (%) .70%* .75 .74 .78 .72 .75
- ---------------------------------------------------------------------------------------------------------------------
Ratio of net investment
income (%) 2.38%* 2.14 2.66 2.78 2.88 3.16
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) For the six months ended March 31, 2000 (Unaudited).
(b) Total return would have been lower had certain expesnes not been
reduced.
* Annualized
** Not annualized
9
<PAGE>
Notes to Financial Statements
1. Significant Accounting Policies
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.
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.
2. 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 six months ended March 31, 2000, the Fund incurred a
management fee of $467,266.
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 six
months ended March 31, 2000, the Fund incurred a distribution services fee of
$780,591.
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 of
$275,600 for the six months ended March 31, 2000.
10
<PAGE>
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,
2000, the Fund made no payments to its officers and incurred trustees' fees of
$10,065 to independent trustees.
3. Expense Off-Set Arrangements
The Fund has entered into an arrangement with its custodian and transfer agent
whereby credits realized as a result of uninvested cash balances were used to
reduce a portion of the Fund's expenses. During the six months ended March 31,
2000, the Fund's custodian and transfer agent fees were reduced by $1,432 and
$4,275, respectively.
4. Line of Credit
The Fund and several Kemper Funds (the "Participants") share in a $750 million
revolving credit facility for temporary or emergency purposes, including the
meeting of redemption requests that otherwise might require the untimely
disposition of securities. The Participants are charged an annual commitment fee
which is allocated pro rata among each of the Participants. Interest is
calculated based on the market rates at the time of the borrowing. The Fund may
borrow up to a maximum of 33 percent of its net assets under the agreement.
11
<PAGE>
SEMIANNUAL REPORT
- --------------------------------------------------------------------------------
Tax-Exempt
California
Money Market
Fund
March 31, 2000
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.
