<PAGE> 1
PUTNAM
CALIFORNIA
INTERMEDIATE
TAX EXEMPT
FUND
ANNUAL Report
September 30, 1994
[LOGO]
BOSTON * LONDON * TOKYO
<PAGE> 2
PERFORMANCE HIGHLIGHTS
* "Partisans say the long-term case for buying munis and muni funds is
becoming stronger. Even as tax shelters have fallen by the wayside,
federal tax rates have climbed. And that's not including the states,
which are expected to raise taxes as budget deficits increase."--
"Bad Timing?" BARRONS, October 10, 1994.
* Performance should always be considered in light of a fund's investment
strategy. Putnam California Intermediate Tax Exempt Fund is designed for
investors seeking high current income free from federal and California
income taxes, consistent with capital preservation.
<TABLE>
FISCAL 1994 RESULTS AT A GLANCE
-----------------------------------------------------------------------
<CAPTION>
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
.......................................................................
<S> <C> <C> <C> <C>
(change in value during
period plus reinvested
distributions)
Life of fund (since 6/1/94) -0.09% -3.38% -0.42% -3.36%
</TABLE>
<TABLE>
<CAPTION>
SHARE VALUE: NAV POP NAV
.......................................................................
<S> <C> <C> <C>
6/1/94 $8.50 $8.79 $8.50
9/30/94 8.35 8.63 8.34
</TABLE>
<TABLE>
<CAPTION>
CAPITAL GAINS [FN 1]
LONG- SHORT-
DISTRIBUTIONS NO. INCOME TERM TERM TOTAL
.......................................................................
<S> <C> <C> <C> <C> <C>
Class A 4 $0.142683 -- -- $0.142683
Class B 4 $0.124772 -- -- $0.124772
</TABLE>
<TABLE>
<CAPTION>
CURRENT RETURN: NAV POP NAV
.......................................................................
<S> <C> <C> <C>
End of period
Current dividend rate [FN 2] 5.21% 5.04% 4.51%
Taxable equivalent [FN 3] 9.69 9.38 8.39
Current 30-day SEC yield [FN 4] 5.43 5.03 5.46
Taxable equivalent [FN 3] 10.10 9.36 10.16
<FN>
Performance data represent past results. For performance compared to
benchmarks indexes, see page 8. POP assumes 3.25% maximum sales charge.
CDSC assumes 3% maximum contingent deferred sales charge. Performance
data reflect an expense limitation in effect during the period. Without
the limitation, results would have been lower. 1 Capital gains are
taxable for federal and, in most cases, state tax purposes. For some
investors, investment income may also be subject to the federal
alternative minimum tax. Investment income may be subject to state and
local taxes. 2 Income portion of most recent distribution, annualized
and divided by NAV or POP at end of period. 3 Assumes maximum combined
46.24% federal and state tax rate. Results for investors subject to
lower tax rates would not be as advantageous. 4 Based only on investment
income, calculated using SEC guidelines.
</TABLE>
2
<PAGE> 3
FROM THE CHAIRMAN
DEAR SHAREHOLDER:
IT'S HARD TO IMAGINE A MORE CHALLENGING MARKET IN
WHICH TO INTRODUCE PUTNAM CALIFORNIA INTERMEDIATE TAX EXEMPT
FUND. AT THE SAME TIME, GIVEN THE LONG-TERM POSITIVE PROSPECTS
PUTNAM MANAGEMENT SEES FOR TAX-EXEMPT INVESTING, THERE WERE NO
COMPELLING REASONS FOR DELAY.
MUNICIPAL BOND INVESTORS HAVE EXPERIENCED MORE THAN
THEIR SHARE OF FRUSTRATION OVER THE PAST SEVERAL MONTHS AS THE
FIXED-INCOME MARKETS ENDURE A PROLONGED PERIOD OF VOLATILITY.
YOUR FUND'S PERFORMANCE DURING THE FOUR MONTHS ENDED SEPTEMBER
30, 1994, REFLECTS THIS UNSETTLED ENVIRONMENT.
EVEN AS YOUR FUND COMPLETES ITS ABBREVIATED INITIAL
FISCAL PERIOD, SIGNS OF ENCOURAGEMENT ARE BEGINNING TO APPEAR
FOR INVESTORS IN TAX-EXEMPT SECURITIES. IN THE REPORT THAT
FOLLOWS, FUND MANAGER THOMAS GOGGINS DISCUSSES THE CHALLENGES
AND OPPORTUNITIES OF BECOMING FULLY INVESTED IN A RISING
INTEREST RATE ENVIRONMENT. THE INTERMEDIATE TAX-EXEMPT BONDS
THAT MAKE UP YOUR FUND'S PORTFOLIO ARE EXPECTED TO PLAY A
PIVOTAL ROLE IN REDUCING THE PRICE VOLATILITY THAT NATURALLY
ACCOMPANIES SUCH A MARKET.
RESPECTFULLY YOURS,
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
NOVEMBER 11, 1994
3
<PAGE> 4
REPORT FROM THE FUND MANAGER
THOMAS GOGGINS
Favorable economic and supply/demand trends were not enough
to offset the dampening effect of persistent interest rate
increases on bond prices. As a result, Putnam California
Intermediate Tax Exempt Fund's total return performance from its
inception on June 1, 1994, through September 30, 1994, was
-0.09% and -0.42% at net asset value for class A and class B
shares, respectively. This performance, which reflects general
market trends, was exacerbated to some extent by the fund's
relative youth and the fact that it was becoming fully invested
as prices continued to decline.
It is important to point out, however, that the fund is
fulfilling its primary objective of providing attractive
monthly tax-free income. To bring home the tax advantages of a
fund investment, consider this: to keep pace with the fund's
5.21% dividend rate for class A shares at net asset value,
shareholders who pay the maximum 46.24% combined federal and
state tax rate would have had to receive 9.69% from an
equivalent taxable investment. Most investors in lower brackets
would also enjoy tax benefits, though not to the same extent.
* INTERMEDIATE BONDS OFFER ADVANTAGES IN RISING RATE MARKET
The period between the fund's late-spring inception and the close
of the fiscal year has been a challenging time in the financial
markets -- but one ripe with opportunities. Thus, even though the
performance you'll see discussed in this initial annual report
may seem somewhat disappointing, there is reason to be optimistic
about the fund's long-term potential, especially in light of
current interest rate trends.
The price sensitivity of a fund to changes in interest rates is a
function of several factors, including the average maturity of the
fund's securities. The longer the maturity, the higher the
volatility; the shorter the maturity, the lower the volatility.
4
<PAGE> 5
Though it may not always be the case, intermediate bonds,
which have 1- to 10-year maturity horizons, have historically
provided attractive income and greater relative price
stability than long-term bonds after taxes (see chart). In
fact, in today's municipal bond market, intermediate bonds are
yielding 80% of long-term municipal bonds -- with half the
volatility. While this strategy limits gains in market rallies,
it has the ability to cushion declines in rising interest rate
markets.
* INFLATION FEARS FUEL RATE INCREASES
Interest rates rarely move smoothly and this has certainly been
the case this summer. Continued signs of an expanding economy
perpetuated the bond market's nervousness about inflation. The
Federal Reserve Board raised short-term interest rates again in
June, which sparked a greater-than-expected level of fluctuation
in bond prices. This, in turn, resulted in a significant increase
in yields. The bellwether 30-year Treasury bond was yielding 7.82%
by the end of the period, a significant rise from its 25-year low
of 5.79% in October 1993.
BOND PRICE CHANGES 1991-1994
20%
+++++ Intermediate Muni Bond Index annualized return 7.95%
===== Long-term Muni Bond Index annualized return 8.87%
----- Long-term Treasury Bond Index annualized return
after taxes 6.40%
10%
[LINE GRAPH DEPICTING BOND PRICE CHANGES]
0%
-10%
12/31/90 9/30/91 9/30/92 9/30/93 9/30/94
* Graph shows quarterly price changes for the Lehman
Brothers 7-year and Long-Term (22+ years) Municipal Bond
Indexes and the Lehman Brothers Long-term Treasury Bond
Index over the four years ended September 30, 1994, and
annualized total returns over the same period. The
annualized return for the Treasury index before taxes was
10.28%; after-tax return assumes the maximum 39.6%
federal income tax rate. This illustration is not
intended to reflect actual fund performance, which will
vary.
5
<PAGE> 6
Municipal bonds have not been immune to the price depreciation
that naturally follows interest rate increases. However, the
news is not all bad. Investors, preoccupied with short-term
losses and inflationary fears, may well overlook sound
buying opportunities. With the aid of our extensive in-house
research capabilities, we're able to identify and capture
promising securities at attractive prices. And, of course,
there is an obvious benefit of rising interest rates: the fund's
income stream can directly benefit from the purchase of new bonds
carrying higher coupons than have been available in recent months.
* INVESTING FOR DOUBLE-TAX-FREE INCOME AND DIVERSITY
In the months following its inception, the fund became fully
invested, concentrating primarily on higher-quality
investment-grade tax-exempt municipal bonds. At fiscal year's
end, fund holdings had an average quality rating of AA. The
fund's ability to invest in tax-free securities from around the
Golden State has contributed to the portfolio's overall
diversity and could help soften the impact of an economic
downturn in any single geographic location within the state.
The fund is invested across several sectors of your
state's municipal market. More than 25% of the portfolio is
invested in limited-tax general obligation bonds. These bonds
are backed by a limited taxing power of the issuing state,
county, city, or town, and are often used to fund civic
improvements. For example, your fund holds Pleasanton bonds that
are creating public improvements for a business park. Businesses
located within the park, which will directly benefit from the
project, will be assessed a limited tax. In a sense a user's
fee, this tax will be applied toward the payment of principal
and interest on these municipal bonds.
* OUTLOOK: TIGHTENING SUPPLY AMID FURTHER MARKET VOLATILITY
While the market's turbulence has initially dampened the
performance of this fledgling fund, it may well contribute to
stronger results in the months ahead. We have been taking
6
<PAGE> 7
TOP 10 HOLDINGS (9/30/94)
---------------------------------------------------------------
Los Angeles Waste Water System revenue bonds
...............................................................
California Health Facilities Financial Authority revenue bonds
...............................................................
California State revenue anticipation warrants
...............................................................
Pleasanton, Joint Powers Financing Authority revenue bonds
...............................................................
Los Angeles County certification of participation
...............................................................
Southern California Public Power Authority revenue bonds
...............................................................
Orange County certification of participation
...............................................................
Campbell Housing Facility revenue bonds
...............................................................
Fresno certification of participation
...............................................................
California Housing Finance Agency revenue bonds
---------------------------------------------------------------
These holdings represent 44.94% of the fund's assets. Portfolio
holdings are subject to change.
advantage of today's lower bond prices to increase the size of
selected existing positions.
Rising interest rates have had a sobering effect on the
refinancing phenomenon, reducing supply from one of the largest
sources of new issues. As a result, gross issuance of
tax-exempt bonds is running more than 40% below 1993 levels.
In the face of steady investor demand, shrinking supply could
further enhance the value of the bonds in the portfolio, and thus,
the fund's net asset value.
In the current market environment, our hands-on approach will be
critical to the successful identification of potentially rewarding
investment opportunities as they arise. In spite of the bond
market volatility amid speculation about future interest rate
increases, we believe your fund's methodically structured
portfolio will continue to deliver attractive levels of tax-free
income in the coming months and beyond.
The views expressed throughout the report are exclusively those of
Putnam Management. They are not meant as investment advice. While
we viewed favorably the issues discussed here as of 9/30/94, there
is no assurance the fund will continue to hold them in the future.
7
<PAGE> 8
PERFORMANCE SUMMARY
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's
shares changed over time, assuming you held the shares through the
entire period and reinvested all distributions back into the fund.
Going forward, we will be showing you total return in two ways:
on a cumulative long-term basis and on average how the fund might
have grown each year over varying periods. Since your fund has
only been in operation since June, we show only cumulative
results in this report. For comparative purposes, we show how the
fund performed relative to appropriate indexes and benchmarks.
<TABLE>
TOTAL RETURN FOR the PERIOD ENDED 9/30/94
<CAPTION>
LEHMAN BROS.
CLASS A CLASS B MUNICIPAL
NAV POP NAV CDSC BOND INDEX CPI
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Life of class -0.09% -3.38% -0.42% -3.36% 0.07% 1.29%
---------------------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes payable on
reinvested distributions. Total return results reflect an expense limitation in effect
during the period. Without the limitation, results would have been lower. The fund
began operations on June 1, 1994, offering class A and class B shares. Performance
data represent past results and will differ for each share class. Investment returns
and principal value will fluctuate so an investor's shares, when sold, may be worth
more or less than their original cost.
</TABLE>
8
<PAGE> 9
* TERMS AND DEFINITIONS
CLASS A shares are generally subject to an initial sales charge.
CLASS B shares may be subject to a sales charge upon redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets,
minus any liabilities, divided by the number of outstanding
shares, not including any initial or contingent deferred sales
charge.
PUBLIC OFFERING PRICE (POP) is the price of a mutual fund share
plus the maximum sales charge levied at the time of purchase. POP
performance figures shown here assume the maximum 3.25% sales
charge.
CONTINGENT DEFERRED SALES CHARGE (CDSC) is a charge applied at
the time of the redemption of class B shares and assumes
redemption at the end of the period. Your fund's CDSC declines
from a 3% maximum during the first year to 1% during the third
year. After the fourth year, the CDSC no longer applies.
* COMPARATIVE BENCHMARKS
LEHMAN BROTHERS MUNICIPAL BOND INDEX is an unmanaged list of
long-term fixed-rate investment-grade tax-exempt bonds
representative of the municipal bond market. The index does not
take into account brokerage commissions or other costs, may
include bonds different from those in the fund, and may pose
different risks than the fund.
CONSUMER PRICE INDEX (CPI) is a commonly used measure of
inflation; it does not represent an investment return.
9
<PAGE> 10
LIFE CYCLE INVESTING
As we move through life, our investment needs change. As these
needs change, so does the way we allocate our assets. Here are
some basic rules for setting up and maintaining an investment
program and some examples of how assets might be allocated.
* DETERMINE YOUR INVESTMENT OBJECTIVES.
Objectives may include a new home, college education expenses, or
retirement.
* EVALUATE YOUR RISK TOLERANCE.
Generally, risk tolerance is higher for younger investors with
longer timelines and lower for older investors who may depend on
their investment for current income.
* ALLOCATE YOUR INVESTABLE SAVINGS.
Your investment advisor will help you determine how much of your
investable dollars should be allocated to each investment category.
* CHOOSE THE APPROPRIATE PUTNAM FUNDS.
Using Putnam's free exchange privilege, you can adjust your own
Putnam portfolio of funds as your financial needs change --
without a service fee.*
Look at the facing page for some ways you can allocate your
assets, then turn the page to see how the Putnam Family of Funds
can help you make your choices.
* Putnam reserves the right to change or terminate the exchange
privilege. In some cases, a sales charge may apply. See
prospectus for details.
10
<PAGE> 11
FOUR WAYS TO ALLOCATE ASSETS
Your investment advisor can help you determine your objectives,
evaluate your risk tolerance, and develop a long-term financial
plan. These sample portfolios can help you diversify your
portfolio within the Putnam Family of Funds. These illustrations
are not intended as investment choice.
----------------------------------------------------------------
SEEKING MAXIMUM GROWTH
RISK TOLERANCE: 40% - 50% Growth
Generally [PIE CHART]
Investors with 30% - 40% Growth and Income
a higer risk
tolerance (often 5% - 20% Income or tax-free income
in their 20s and
early 30s.)
----------------------------------------------------------------
SEEKING GROWTH AND SOME INCOME
RISK TOLERANCE: 30% - 40% Growth
Generally [PIE CHART]
investors with a 40% - 50% Growth and Income
high to moderate
risk tolerance 10% - 30% Income or Tax-free Income
(often in their
late 30s and
early 40s.)
----------------------------------------------------------------
SEEKING INCOME AND SOME GROWTH WITH PROTECTION AGAINST INFLATION
RISK TOLERANCE: 10% - 20% Growth
Generally [PIE CHART]
investors with a 30% - 40% Growth and Income
moderate risk
tolerance 25% - 60% Income or Tax-free Income
(often in their
late 40s and 50s.)
----------------------------------------------------------------
SEEKING HIGH CURRENT INCOME AND PROTECTION AGAINST INFLATION
RISK TOLERANCE: 5% - 10% Growth
Generally [PIE CHART]
investors with a 20% - 30% Growth and Income
moderate to low
risk tolerance 40% - 70% Income or Tax-free Income
(often over 60
and retired.)
11
<PAGE> 12
THE PUTNAM FUND SELECTOR [TM]
The Putnam Fund Selector shows the many opportunities for
investors within every investment strategy. All investors should
first accumulate a base of conservative, cash-equivalent
investments. Then, with the help of your investment advisor,
diversify your portfolio by investing in the Putnam Family of
Funds.
Risk/Reward
PUTNAM
GROWTH
FUNDS
----------------
PUTNAM GROWTH
AND INCOME FUNDS
--------------------------
PUTNAM INCOME OR
TAX-FREE FUNDS
--------------------------------------
MOST CONSERVATIVE INVESTMENTS
--------------------------------------------------
12
<PAGE> 13
<TABLE>
<S> <C>
PUTNAM GROWTH FUNDS PUTNAM TAX-FREE FUNDS
Asia Pacific Growth Fund Intermediate Tax Exempt Fund
Diversified Equity Trust Municipal Income Fund
Europe Growth Fund Tax Exempt Income Fund
Global Growth Fund Tax-Free High Yield Fund
Health Sciences Trust Tax-Free Insured Fund
Investors Fund STATE TAX-FREE INCOME FUNDS+:
Natural Resources Fund* Arizona, California, Florida, Massachusetts,
New Opportunities Fund Michigan, Minnesota, New Jersey,
OTC Emerging Growth Fund New York, Ohio, and Pennsylvania
Overseas Growth Fund
Vista Fund LIFESTAGE [SM] FUNDS
Voyager Fund Putnam Asset Allocation Funds -- three
investment portfolios that spread
PUTNAM GROWTH AND your money across a variety of stocks, bonds,
INCOME FUNDS and money market investments to help maximize
Convertible Income-Growth Trust your return and reduce your risk.
Dividend Growth Fund
Equity Income Fund The three portfolios:
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income Putnam Asset Allocation:
Managed Income Trust Balanced Portfolio
Utilities Growth and Income Fund
Putnam Asset Allocation:
PUTNAM INCOME FUNDS Conservative Portfolio
Adjustable Rate U.S. Government Fund
American Government Income Fund Putnam Asset Allocation:
Balanced Government Fund Growth Portfolio
Corporate Asset Trust
Diversified Income Trust MOST CONSERVATIVE INVESTMENTS ++
Federal Income Trust PUTNAM MONEY MARKET FUNDS:
Global Governmental Income Trust
High Yield Advantage Fund Money Market Fund *
High Yield Trust Tax Exempt Money Market Fund
Income Fund California Tax Exempt Money Market Fund
U.S. Government Income Trust New York Tax Exempt Money Market Fund
CDS AND SAVINGS ACCOUNTS **
* Formerly Energy-Resources Trust.
# Formerly Daily Dividend Trust.
+ Not available in all states.
++ Relative to above.
** Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be
insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured
up to certain limits.
Please call your financial advisor or Putnam to obtain a
prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Read it
carefully before you invest or send money.
</TABLE>
13
<PAGE> 14
REPORT OF INDEPENDENT ACCOUNTANTS
for the period ended September 30, 1994
To the Trustees and Shareholders of
Putnam California Intermediate Tax Exempt Fund
In our opinion, the accompanying statement of assets and
liabilities, including the portfolio of investments owned
(except for bond ratings), and the related statements of
operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the
financial position of Putnam California Intermediate Tax Exempt
Fund (the "fund") at September 30, 1994, and the results of its
operations, the changes in its net assets and the financial
highlights for the period indicated, in conformity with
generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit
of these financial statements in accordance with generally
accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant
estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit,
which included confirmation of investment owned at September 30,
1994 by correspondence with the custodian and brokers, provides
a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 14, 1994
14
<PAGE> 15
<TABLE>
PORTFOLIO OF INVESTMENTS OWNED
September 30, 1994
<CAPTION>
MUNICIPAL BONDS AND NOTES (112.6%)(a)
PRINCIPAL AMOUNT RATINGS (b) VALUE
CALIFORNIA (112.6%)
-------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$210,000 CA Ed. Fac. Auth. Rev. Bonds (Pooled College
& U. Fings.), Ser. B, 5.8s, 6/1/02 Baa $ 204,225
CA Hlth. Fac. Fin. Auth. Rev. Bonds
100,000 (Scripps Research Institute), Ser. A, 5.8s, 7/1/04 A 98,000
350,000 (Catholic Hlth. Fac.), Ser. B, American Muni. Bond
Assurance Corp., (AMBAC), 5s, 7/1/06 AAA 318,935
280,000 CA Hlth. Facs. Fin. Auth. Variable Rate Demand
Notes (VRDN) (St. Joseph Hlth. Syst.),
Ser. A, 3.5s, 7/1/13 VMG1 280,000
CA Hsg. Fin. Agcy. Rev. Bonds
200,000 Ser. E-1, 5.8s, 2/1/04(c) AA 198,250
115,000 Ser. E-1, 5.7s, 8/1/03(c) AA 113,275
100,000 CA Poll. Control Fing. Auth. (VRDN)
(Shell Oil Co. Project), Ser. A, 3.5s, 10/1/08 VMG1 100,000
CA State Pub. Wks. Brd. Rev. Bonds
105,000 (Dept. of Corr., Calapatria State Prison),
Ser. A, 6 1/4s, 9/1/05 A 105,919
160,000 (Dept. of Corr., Del Norte), Ser. C, 4 3/4s,
12/1/05 A 140,200
100,000 CA State General Obligation (G.O.) Bonds
(New Prison & Cnty. Jail), Ser. C,D,E, 8 3/4s,
5/1/04 A 120,500
400,000 CA State Rev. Anticipation Warrants (RAW),
Ser. C, 5 3/4s, 4/25/96 MIG1 405,250
200,000 CA Statewide Cmtys. Dev. Auth., Certif. of
Participation (Children's Hosp.), Municipal Bonds
Insurance Association (MBIA), 6s, 6/1/07 AAA 198,250
100,000 CA Statewide Cmtys. Dev. Corp., Certif. of
Participation (Utd. Westn. Med. Ctrs.),
CA Hlth. Fac. Constr. Loan Program, 6.2s, 12/1/01 A 101,625
350,000 Campbell, Hsg. Fac. Rev. Bonds
(San Tomas Garden Project), Federal
Housing Auth. (FHA), 5 3/4s, 10/20/04(c) AAA 347,813
200,000 Central Valley, Fing. Auth. Rev. Bonds
(Carson Ice-Cogeneration Project), 5.8s, 7/1/04 BBB 193,750
100,000 East Bay, Muni. Util. Dist. Wtr. Syst. Rev. Bonds,
MBIA, 4 3/4s, 6/1/03 AAA 93,375
100,000 Fairfield, Pub. Fing. Auth. Rev. Bonds
(Fairfield Redev. Project), Ser. C, Capital
Guarantee Insurance Corp. (CGIC), 5.1s, 8/1/06 AAA 91,875
200,000 Foothill Transit Zone, Certif. of Participation,
Ser A, 5.35s, 5/1/03 Baa 187,000
320,000 Fresno, Certif. of Participation (Unified Sch.
Dist.), 7 1/4s, 3/1/07(d) A 332,400
175,000 Imperial Cnty., Loc. Trans. Auth. Rev. Bonds,
5 3/8s, 5/1/02 Baa 166,250
100,000 Kings River, Consv. Dist. Rev. Bonds
(Pine Flat Pwr.), Ser. D, 6s, 1/1/07(c) AA 100,250
</TABLE>
15
<PAGE> 16
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (112.6%)(a)
PRINCIPAL AMOUNT RATINGS (b) VALUE
<S> <C> <C> <C>
$100,000 Liberty High Sch. Dist. Bonds, Ser. A, CGIC,
6s, 8/1/06 AAA $ 101,125
50,000 Los Angeles Cnty., Cap. Asset Leasing Rev.
Bonds, AMBAC, 5 7/8s, 12/1/05 AAA 50,000
370,000 Los Angeles Cnty., Certif. of Participation
(Marina Del Rey), Ser. A, 6 1/4s, 7/1/03 BBB/P 365,375
150,000 Los Angeles, Mtge. Rev. Bonds, Ser. II-E,
MBIA, 5 1/4s, 7/1/05 AAA 141,563
Los Angeles, Waste Water Syst. Rev. Bonds
500,000 Ser. A, MBIA, 5.55s, 6/1/06 AAA 485,625
100,000 Ser. A, MBIA, 5 1/2s, 6/1/05 AAA 97,625
100,000 Los Angeles, Certif. of Participation
(Real Property Acq. Program), 5 3/4s, 8/1/04 A 97,750
170,000 Mountain View, Sch. Dist. Cmnty. Facs., Ser. A,
CGIC, 7.2s, 10/1/05 AAA 186,363
Northn. CA Pwr. Agcy.
200,000 (Geothermal Project No. 3), Ser. A, CGIC,
5 1/2s, 7/1/05 A 193,000
100,000 (Geothermal Project No. 3), Ser. A, 6 1/2s, 7/1/03 AAA 103,250
250,000 Orange Cnty., Dev. Agcy. Rev. Bonds
(Santa Ana Height Project), 5.8s, 9/1/03 BBB 243,438
320,000 Orange Cnty., Certif. of Participation, Orange
Cnty. Pub. Fac. Corp. (Solid Waste Management),
7 7/8s, 12/1/07 A 349,200
300,000 Orange Cnty., Impt. Brd. Act of 1915, VRDN
(Irvine Coast Assmnt. Dist. No. 88-1), 3.4s, 9/2/18 VMIG1 300,000
400,000 Pleasanton, Joint Pwrs. Fing. Auth. Rev. Bonds,
Ser. A, 5.8s, 9/2/02 Baa 393,000
San Francisco, Port Comm. Rev. Bonds
100,000 5.8s, 7/1/07 BBB 97,000
100,000 5 1/2s, 7/1/04 BBB 97,500
135,000 San Joaquin Cnty., Certif. of Participation
(Solid Waste Syst. Fac. Project), 5 5/8s, 4/1/03 A 131,288
San Jose, Fing. Auth. Rev. Bonds
100,000 Ser. A, 5.4s, 9/2/03 A 97,000
100,000 Sonoma Cnty., Certif. of Participation, 5.7s, 8/1/02 A 99,000
Southn. CA Pub. Pwr. Auth. Rev. Bonds
150,000 (Palo Verde Project), Ser. A, 6.7s, 7/1/02 AA 157,125
100,000 (Multi-Projects), 6 7/8s, 7/1/03 A 106,500
100,000 (San Juan Unit No. 3 Project), Ser. A, MBIA,
5 1/4s, 1/1/06 AAA 94,375
250,000 Stanislaus, Solid Waste Fac., Certif. of
Participation (Ogden Martin Syst. Inc. Project),
7 1/2s, 1/1/05 BBB 262,500
100,000 U. of CA Rev. Bonds (Multi-Purpose Projects),
Ser. B, MBIA, 4.6s, 9/1/05 AAA 88,000
------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $8,279,584) (e) $8,234,744
------------------------------------------------------------------------------------------
</TABLE>
16
<PAGE> 17
NOTES
-----------------------------------------------------------------------
(a) Percentages indicated are based on total net assets of $7,315,563, which
correspond to a net asset value for Class A and Class B shares of $8.35
and $8.34, respectively.
(b) The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at September 30, 1994 for the securities
listed. Ratings are generally ascribed to securities at the time of
issuance. While the agencies may from time to time revise such ratings,
they undertake no obligation to do so, and the ratings do not necessarily
represent what the agencies would ascribe to these securities at
September 30, 1994. Securities rated by Putnam are indicated by "/P" and
are not publicly rated. Ratings are not covered by the Report of
Independent Accountants.
(c) This security has been purchased on a "when-issued" basis, that is, the
Fund has agreed to take delivery of and make payment for such security
beyond the settlement time of five business days after the trade date and
subsequent to the date of this report. The purchase price and interest
rate of such security is fixed at the trade date, although the Fund does
not earn any interest on such security until the settlement date. As of
September 30, 1994 the Fund held "when-issued" securities having a value
of $759,588 or 10.38% of net assets.
(d) A portion of this security was pledged to cover margin requirements for
future contracts at September 30, 1994. The market value segregated with the
custodian for transactions in future contracts was $25,969.
(e) The aggregate identified cost for federal income tax purposes is
$8,279,584, resulting in gross unrealized appreciation and depreciation of
$12,440 and $57,280, respectively, or net depreciation of $44,840.
The rates shown on Variable Rate Demand Notes (VRDN) are the current
interest rates at September 30, 1994, which are subject to change based on
the terms of the securities.
<TABLE>
The Fund had the following industry group concentrations greater than 10% on
September 30, 1994 (as a percentage of net assets):
<S> <C>
Municipal/Utilities 39.1%
Hospitals 13.6%
Education 12.5%
Multi Family Housing 10.9%
</TABLE>
<TABLE>
The Fund had the following insurance concentrations greater than 10% at
September 30, 1994 (as a percentage of net assets):
<S> <C>
MBIA 16.4%
</TABLE>
<TABLE>
FUTURES CONTRACTS OUTSTANDING at September 30, 1994
Total Aggregate Expiration Unrealized
Value Face Value Date Appreciation
<S> <C> <C> <C> <C>
US Treasury
Bond Futures
(Sell) $296,813 $298,125 Dec/94 $1,312
</TABLE>
17
<PAGE> 18
<TABLE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1994
ASSETS
------------------------------------------------------------------------------------------
<S> <C>
Investments in securities, at value (identified cost $8,279,584) (Note 1) $8,234,744
------------------------------------------------------------------------------------------
Cash 3,420
------------------------------------------------------------------------------------------
Interest receivables 113,348
------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 234,854
------------------------------------------------------------------------------------------
Receivable from Manager (Note 3) 9,220
------------------------------------------------------------------------------------------
TOTAL ASSETS 8,595,586
------------------------------------------------------------------------------------------
LIABILITIES
------------------------------------------------------------------------------------------
Payable for securities purchased 1,263,178
------------------------------------------------------------------------------------------
Distributions payable to shareholders 7,420
------------------------------------------------------------------------------------------
Payable for administrative services (Note 3) 51
------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 3) 77
------------------------------------------------------------------------------------------
Payable for distribution fees (Note 3) 2,081
------------------------------------------------------------------------------------------
Other accrued expenses 6,841
------------------------------------------------------------------------------------------
Payable for variation margin on open futures contracts 375
------------------------------------------------------------------------------------------
TOTAL LIABILITIES 1,280,023
------------------------------------------------------------------------------------------
NET ASSETS $7,315,563
------------------------------------------------------------------------------------------
REPRESENTED BY
------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 2 and 5) $7,382,610
------------------------------------------------------------------------------------------
Distributions in excess of net investment income (281)
------------------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions and future contracts (23,238)
------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and future contracts (43,528)
------------------------------------------------------------------------------------------
TOTAL - REPRESENTING NET ASSETS APPLICABLE TO CAPITAL SHARES OUTSTANDING $7,315,563
------------------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
------------------------------------------------------------------------------------------
Net unit value and redemption price per class A shares
($5,796,485 divided by 694,519 shares) $ 8.35
------------------------------------------------------------------------------------------
Offering price per class A share (100/96.75 of $8.35)* $ 8.63
------------------------------------------------------------------------------------------
Net asset value and offering price per class B shares
($1,519,078 divided by 182,096 shares) $ 8.34
------------------------------------------------------------------------------------------
<FN>
* On single retail sales of less than $100,000. On sales of $100,000 or more and on group
sales the offering price is reduced.
+ Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
</TABLE>
18
<PAGE> 19
<TABLE>
STATEMENT OF OPERATIONS
<CAPTION>
FOR THE PERIOD JUNE 1, 1994
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30
1994
---------------------------------------------------------------------------------
<S> <C>
TAX EXEMPT INTEREST INCOME $ 60,726
---------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------
Compensation of Manager (Note 3) 7,129
---------------------------------------------------------------------------------
Compensation of Trustees (Note 3) 377
---------------------------------------------------------------------------------
Auditing 4,178
---------------------------------------------------------------------------------
Reports to shareholders 196
---------------------------------------------------------------------------------
Administrative services (Note 3) 51
---------------------------------------------------------------------------------
Distribution fees#class A (Note 3) 1,405
---------------------------------------------------------------------------------
Distribution fees#class B (Note 3) 1,418
---------------------------------------------------------------------------------
Registration fees 2,361
---------------------------------------------------------------------------------
Other expenses 29
---------------------------------------------------------------------------------
Fees waived and absorbed by Manager (Note 3) (16,410)
---------------------------------------------------------------------------------
TOTAL EXPENSES 734
---------------------------------------------------------------------------------
NET INVESTMENT INCOME 59,992
---------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 4) (34,689)
---------------------------------------------------------------------------------
Net realized gain on futures contracts (Notes 1 and 4) 11,451
---------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures
contracts (43,528)
---------------------------------------------------------------------------------
NET LOSS ON INVESTMENT TRANSACTIONS (66,766)
---------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (6,774)
---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
19
<PAGE> 20
<TABLE>
STATEMENT OF CHANGES IN NET ASSETS
<CAPTION>
FOR THE PERIOD JUNE 1, 1994
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30
1994
---------------------------------------------------------------------------------
<S> <C>
DECREASE IN NET ASSETS
---------------------------------------------------------------------------------
Operations:
---------------------------------------------------------------------------------
Net investment income $ 59,992
---------------------------------------------------------------------------------
Net realized loss on investments (34,689)
---------------------------------------------------------------------------------
Net realized gain on futures contracts 11,451
---------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures contracts (43,528)
---------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (6,774)
---------------------------------------------------------------------------------
Distributions to shareholders:
---------------------------------------------------------------------------------
From net investment income
Class A (52,147)
Class B (8,126)
---------------------------------------------------------------------------------
Increase from capital share transactions (NOTE 5) 7,380,610
---------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 7,313,563
---------------------------------------------------------------------------------
NET ASSETS
Beginning of the period (NOTE 2) 2,000
End of period (including distributions in excess of net
investment income of $281) $7,315,563
---------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial
statements.
20
<PAGE> 21
<TABLE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
<CAPTION>
FOR THE PERIOD JUNE 1, 1994
(COMMENCEMENT OF OPERATIONS)
TO SEPTEMBER 30, 1994
CLASS A CLASS B
<S> <C> <C>
Net asset value, beginning of period $8.50 $8.50
Investment operations
Net investment income (a) 0.14 0.12
Net realized and unrealized gain (loss)
on investments (0.15) (0.16)
Total from investment operations (0.01) (0.04)
Less distributions:
From net investment income (0.14) (0.12)
Total distributions (0.14) (0.12)
Net asset value, end of period $8.35 $8.34
Total investment return at net asset
value (%) (b) (0.09) (c) (0.42) (c)
Net assets, end of period (in thousands) $5,797 $1,519
Ratio of expenses to average
net assets (%) (a) (c) 0.00% 0.12%
Ratio of net investment income to
average net assets (%) (a) (c) 1.75% 1.39%
Portfolio turnover (%) (c) 73.18% 73.18%
<FN>
(a) Reflects a limitation and voluntary absorption of expenses incurred by the fund.
As a result of this limitation, expenses for the period ended September 30, 1994,
reflects a reduction of $0.04 and $0.05 for class A and class B, respectively.
Without these limitations, results would have been lower.
(b) Total investment return assumes dividend reinvestment and does not reflect the
effect of sales charges.
(c) Not annualized.
</TABLE>
21
<PAGE> 22
NOTES TO FINANCIAL STATEMENTS
September 30, 1994
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended,
as a non-diversified, open-end management investment company. The fund seeks
as high a level of current income exempt from federal income tax and
California personal income tax as Putnam Investment Management, Inc., the
Trust's investment manager ("Putnam Management"), a wholly-owned subsidiary
of Putnam Investment, Inc., believes is consistent with preservation of
capital by investing primarily in a portfolio of intermediate-term California
tax exempt securities.
The fund offers both class A and class B shares. Class A shares are sold with
a maximum front-end sales charge of 3.25%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class
A shares, and may be subject to a contingent deferred sales charge if those
shares are redeemed within four years of purchase. Expenses of the fund are
borne pro-rated by the holders of both classes of shares, except that each
class bears expenses unique to that class (including the distribution fees
applicable to such class). Each votes as a class only with respect to its own
distribution plan or other matters on which a class vote is required by law
or determined to be necessary by the Trustees. Shares of each class would
receive their pro-rata share of the net assets of the fund if the fund were
liquidated. In addition, the Trustees declare separate dividends on each
class of shares.
The following is a summary of significant accounting policies followed by the
fund in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles.
A) SECURITY VALUATION Tax-exempt bonds and notes are stated on the basis of
valuations provided by a pricing service, approved by the Trustees, which
uses information with respect to transactions in bonds, quotations from bond
dealers, market transactions in comparable securities and various
relationships between securities in determining value.
B) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME Security 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.
C) FUTURES A futures contract is an agreement between two parties to buy and
sell a security at a set price on a future date. Upon entering into such a
contract, the fund is required to pledge to the broker an amount of cash or
tax-exempt securities equal to the minimum "initial margin" requirements of
the exchange. Pursuant to the contract, the fund agrees to receive from or
pay to the broker an amount of cash equal to the daily fluctuation in value
of the contract. Such receipts or payments are known as "variation margin,"
and are recorded by the fund as unrealized gains or losses. When the contract
is closed, the fund records a realized gain or loss equal to the difference
between the value of the contract at the time it was opened and the value at t
he time it was closed. The
22
<PAGE> 23
potential risk to the fund is that the change in value of the underlying
securities may not correspond to the change in value of the futures contracts.
D) FEDERAL TAXES It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code of 1986 applicable to regulated investment companies.
It is also the intention of the fund to distribute an amount sufficient to
avoid imposition of any excise tax under Section 4982 of the Internal Revenue
Code of 1986. Therefore, no provision has been made for federal taxes on
income, capital gains or unrealized appreciation of securities held and
excise tax on income and capital gains.
E) DISTRIBUTIONS TO SHAREHOLDERS Income dividends are recorded daily by the
fund and are distributed to the shareholders monthly. Capital gains
distributions, if any, are recorded on the ex-dividend date and paid annually.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles. The differences include treatment of
unrealized gains of future contracts and post-October losses. Reclassifications
are made to the Fund's capital accounts to reflect income and gain available
for distribution and gains available for distribution (or available capital
loss carryovers) under income tax regulations.
F) AMORTIZATION OF BOND PREMIUM AND DISCOUNT Any premium resulting from the
purchase of securities in excess of maturity value is amortized on a
yield-to-maturity basis.
NOTE 2
INITIAL CAPITALIZATION AND
OFFERING OF SHARES
The fund was established as a Massachusetts business trust under the laws of
the Commonwealth of Massachusetts on April 13, 1994. During the period April
13, 1994 to May 31, 1994, the fund had no operations other than those related
to organizational matters, including the initial contributions of $1,000 for
118 class A shares and $1,000 for 117 class B shares issued to Putnam Mutual
Funds Corp. on May 23, 1994.
NOTE 3
MANAGEMENT FEE, ADMINISTRATIVE
SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory
services is paid quarterly based on the average net assets of the fund for
the quarter. Such fee is based on the following annual rates: 0.6% of the
first $500 million of average net assets, 0.5% of the next $500 million,
0.45% of the next $500 million and 0.4% of any amount over $1.5 billion,
subject to reduction in any year to the extent of certain brokerage
commissions and fees (less expenses) received by affiliates of the Manager on
the fund's portfolio transactions. The Manager has voluntarily agreed to
reduce its compensation (and, to the extent necessary, absorb other expenses
of the Fund) until the net assets of the Fund exceed $100,000,000, to the
extent that expenses of the Fund (exclusive of brokerage, interest, taxes,
deferred organizational and extraordinary expenses, and payments under
the Fund's Distribution Plans) exceed an annual rate of 0.80% of the Fund's
average net assets. For the period from commencement of operations to
September 21, 1994 the Manager voluntarily agreed to reimburse the Fund for
100% of its expenses. The limitation was
23
<PAGE> 24
accomplished by a reduction of the compensation payable under the management
contract to the Manager and, to the extent necessary, by the Manager's
assumption of additional Fund expenses. As a result of this limitation, the
expenses for the period ended September 30, 1994 was reduced by $16,410.
The fund also reimburses the Manager for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees. For the period ended
September 30, 1994, the fund paid $51 for these services.
Trustees of the fund receive an annual Trustee's fee of $100 and an additional
fee for each Trustees' meeting attended. Trustees who are not interested
persons of the Manager and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings.
Custodial functions are being provided to the fund by Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees have been offset by credits allowed
by PFTC. Such credits have amounted to $4,352.
The fund has adopted separate distribution plans with respect to its class A and
class B shares (the "Class A Plan" and "Class B Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the plans is to
compensate Putnam Mutual Funds Corp. for services provided and expenses
incurred by it in distributing fund shares. The Class A Plan provides for
payments by the fund to Putnam Mutual Funds Corp., a wholly owned subsidiary of
Putnam Investments, Inc. at an annual rate of up to 0.35% of the fund's average
net assets attributable to class A shares. Currently, the Trustees have limited
payments to 0.15% of such assets. For the period ended September 30, 1994, the
fund paid $1,405 in distribution fees for class A shares.
For the period ended September 30, 1994, Putnam Mutual Funds Corp. Inc.,
acting as underwriter, received net commissions of $3,205 from the sale of
class A shares of the fund.
A deferred sales charge of up to 1.00% is assessed on certain redemptions of
class A shares purchased as part of an investment of $1 million or more. For
the period ended September 30, 1994, Putnam Mutual Funds Corp. Inc., acting
as underwriter, did not receive any commissions on such redemptions.
The Class B Plan provides for payments by the fund to Putnam Mutual Funds
Corp. at an annual rate of up to 1.00% of the fund's average net assets
attributable to class B shares. Currently the Trustees have limited payments
under the Plan to 0.75% of such assets. For the period ended September 30,
1994, the fund paid Putnam Mutual Funds Corp. distribution fees of $1,418 for
class B shares.
Putnam Mutual Funds Corp. also receives the proceeds of the contingent
deferred sales charges levied on class B share redemptions within four years
of purchase. The charge is based on declining rates, which begin at 3% of the
net asset value of the redeemed shares. Putnam Mutual Funds Corp. has
received contingent deferred sales charges of $1,822 from such redemptions
during the period ended September 30, 1994.
24
<PAGE> 25
NOTE 4
PURCHASES AND SALES OF SECURITIES
During the period ended September 30, 1994, purchases and sales of investment
securities other than short-term investments aggregated $10,755,271 and
$3,120,536, respectively. Purchases and sales of short-term municipal
obligations aggregated $1,330,000, and $650,000, respectively. In determining
the net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
<TABLE>
The following is a summary of futures contracts activity during the period
ended September 30, 1994.
<CAPTION>
SALES OF FUTURES CONTRACTS
- --------------------------------------------------
NUMBER OF AGGREGATE
CONTRACTS FACE VALUE
- --------------------------------------------------
<S> <C> <C>
Contracts opened 14 $1,400,625
- --------------------------------------------------
Contracts closed (11) (1,102,500)
- --------------------------------------------------
OPEN AT END OF PERIOD 3 $298,125
- --------------------------------------------------
</TABLE>
NOTE 5
CAPITAL SHARES
<TABLE>
At September 30, 1994 there was an unlimited number of shares of beneficial
interest authorized divided into two classes of shares, class A and class B
capital stock. Transactions in capital shares were as follows:
<CAPTION>
FOR THE PERIOD JUNE 1, 1994
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 1994
- ------------------------------------------------
CLASS A SHARES AMOUNT
- ------------------------------------------------
<S> <C> <C>
Shares sold 736,864 $6,206,518
- ------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,334 44,864
- ------------------------------------------------
742,198 6,251,382
- ------------------------------------------------
Shares repurchased 47,797 400,117
- ------------------------------------------------
NET INCREASE 694,401 $5,851,265
- ------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
FOR THE PERIOD JUNE 1, 1994
(COMMENCEMENT OF
OPERATIONS) TO
SEPTEMBER 30, 1994
- ------------------------------------------------
CLASS B SHARES AMOUNT
- ------------------------------------------------
<S> <C> <C>
Shares sold 217,739 $1,830,683
- ------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 312 2,615
- ------------------------------------------------
218,051 1,833,288
- ------------------------------------------------
Shares repurchased 36,072 303,953
- ------------------------------------------------
NET INCREASE 181,979 $1,529,345
- ------------------------------------------------
</TABLE>
- ------------------------------------------------
FEDERAL TAX INFORMATION
The fund has designated all dividends paid during the fiscal year as
exempt-interest dividends. Thus, 100% of the fund's distributions are exempt
from federal income tax. The form 1099 you will receive in January 1995 will
tell you the tax status of any distributions paid to your account in calendar
year 1994.
25
<PAGE> 26
OUR COMMITMENT TO QUALITY SERVICES
* CHOOSE AWARD-WINNING SERVICE.
Putnam Investor Services has won the DALBAR Quality Tested
Service Seal every year since the award's 1990 inception. DALBAR,
an independent research firm, ran more than 10,000 tests of 38
shareholder service components. In every category, Putnam
outperformed the industry standard.
* HELP YOUR INVESTMENT GROW.
Set up a systemic program for investing with as little as $25 a
month from a Putnam fund or from your checking or savings account.*
* SWITCH FUNDS EASILY.
You can move money from one account to another with the same class
of shares without a service charge. (This privilege is subject to
change or termination.)
* ACCESS YOUR MONEY QUICKLY.
You can get checks sent regularly or redeem shares any business
day at the then-current net asset value, which may be more or
less than their original cost.
For details about any of these or other services, contact your
financial advisor or call the toll-free number shown below and
speak with a helpful Putnam representative.
* To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number:
1-800-225-1581.
*Regular investing, of course, does not guarantee a profit or
protect against a loss in a declining market. Investors should
consider their ability to continue purchasing shares during
periods of low price levels.
26
<PAGE> 27
FUND INFORMATION
<TABLE>
<S> <C>
INVESTMENT MANAGER OFFICERS
Putnam Investment Management, Inc.
One Post Office Square George Putnam
Boston, MA 02109 President
MARKETING SERVICES Charles E. Porter
Putnam Mutual Funds Corp. Executive Vice President
One Post Office Square
Boston, MA 02109 Patricia C. Flaherty
Senior Vice President
CUSTODIAN
Putnam Fiduciary Trust Company Lawrence J. Lasser
Vice President
LEGAL COUNSEL
Ropes & Gray Gordon H. Silver
Vice President
INDEPENDENT
ACCOUNTANTS Gary N. Coburn
Price Waterhouse LLP Vice President
TRUSTEES James E. Erickson
George Putnam, Chairman Vice President
William F. Pounds, Vice Chairman
Jameson Adkins Baxter Thomas Goggins
Hans H. Estin Vice President and Fund Manager
John A. Hill
Elizabeth T. Kennan William N. Shiebler
Lawrence J. Lasser Vice President
Robert E. Patterson
Donald S. Perkins John R. Verani
George Putnam, III Vice President
A.J.C. Smith
W. Nicholas Thorndike Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of
shareholders of Putnam California
Intermediate Tax Exempt Fund.
It may also be used as sales literature
when preceded or accompanied by the
current prospectus, which gives details
of sales charges, investment objectives,
and operating policies of the fund, and
the most recent copy of Putnam's
Quarterly Performance Summary.
For more information, or to request
a prospectus, call toll free:
1-800-225-1581.
</TABLE>
27
<PAGE> 28
-----------------
PUTNAM INVESTMENTS Bulk Rate
U.S. Postage
THE PUTNAM FUNDS PAID
One Post Office Square Putnam
Boston, Massachusetts 02109 Investments
-----------------
