PUTNAM
CALIFORNIA
TAX EXEMPT
INCOME FUND
[Artwork]
ANNUAL REPORT
September 30, 1995
[Putnam Logo]
Boston * London * Tokyo
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PERFORMANCE HIGHLIGHTS
"[Putnam California Tax Exempt Income Fund's] distributed yield always ranks
quite attractively against its peers. Furthermore, that yield cushion has kept
the fund's volatility in line with the group norm. [Fund Manager William]
Reeves' approach . . . works in more ways than just enhancing yield: The fund's
annual returns have never dipped into the group's bottom half."
-- Morningstar Mutual Funds, July 21, 1995
FISCAL 1995 AT A GLANCE
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CLASS A CLASS B CLASS M
TOTAL RETURN: NAV POP NAV CDSC NAV POP
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(change in value during period
plus reinvested distributions)
12 months ended 9/30/95 10.07% 4.88% 9.47% 4.47% 6.56% 3.13%
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CLASS A CLASS B CLASS M
SHARE VALUE: NAV POP NAV NAV POP
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9/30/94 $8.09 $8.49 $8.08 -- --
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2/14/95 (inception of
class M shares) -- -- -- $8.13 $8.40
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9/30/95 8.37 8.79 8.37 8.36 8.64
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LONG-TERM
DISTRIBUTIONS: NO. INCOME CAPITAL GAINS(1) TOTAL
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Class A 13 $0.479051 $0.025 $0.504051
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Class B 13 0.423624 0.025 0.448624
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Class M 8 0.296110 -- 0.296110
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CLASS A CLASS B CLASS M
CURRENT RETURN NAV POP NAV NAV POP
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(End of period)
Current dividend rate(2) 5.67% 5.40% 5.01% 5.34% 5.17%
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Taxable equivalent(3) 10.55 10.04 9.32 9.93 9.62
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Current 30-day SEC yield(4) 5.40 5.14 4.65 4.95 4.78
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Taxable equivalent(3) 10.04 9.56 8.65 9.21 8.89
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Performance data represent past results. For performance over longer periods,
see pages 8 and 9. POP assumes 4.75% maximum sales charge for class A and 3.25%
for class M shares. CDSC assumes 5% maximum contingent deferred sales charge.
The fund began offering class M shares on 2/14/95. (1) Capital gains are taxable
for federal and, in most cases, state tax purposes. For some investors, invest-
ment income may also be subject to the federal alternative minimum tax. Invest-
ment 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 46.24% combined federal and state tax rate. Results for in-
vestors subject to lower tax rates would not be as advantageous. (4) Based on
investment income, calculated using SEC guidelines.
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FROM THE CHAIRMAN [Photograph of George Putnam]
* (C) Karsh, Ottawa
DEAR SHAREHOLDER:
WITH PLENTY TO BE POSITIVE ABOUT, TAX-EXEMPT INVESTORS ARE FINALLY
PUTTING THEIR
SUMMER FEARS BEHIND THEM. A FEW MONTHS AGO, FLAT-TAX PROPOSALS
WERE FLOATED IN
THE PRE-ELECTION WIND. THE MERE TALK OF SUCH A TAX, WHICH WOULD END
THE BENEFI-
CIAL TREATMENT NOW ACCORDED MUNICIPAL BONDS, WAS ENOUGH TO SEND
THE MARKET INTO
DECLINE.
INTEREST RATES ARE STILL MODERATE, INFLATION REMAINS LOW, AND THE
ECONOMY SEEMS
TO HAVE SLOWED TO A MORE COMFORTABLE PACE, ALL FACTORS THAT
GLADDEN FIXED-INCOME
INVESTORS' HEARTS. MUNICIPAL-BOND INVESTORS HAVE BEEN FURTHER
BLESSED WITH
YIELDS CLOSE TO 90% OF THOSE OF TAXABLE BONDS AND A FAVORABLE RATIO
OF SUPPLY
TO DEMAND.
AS PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND'S FISCAL YEAR ENDED ON
SEPTEMBER 30,
1995, THE MUNICIPAL-BOND MARKET WAS SHOWING NEW SIGNS OF STRENGTH,
POISED FOR
WHAT COULD BE ANOTHER POSITIVE PERIOD OF ADVANCE. IN THE REPORT
THAT FOLLOWS,
FUND MANAGER WILLIAM REEVES REVIEWS PERFORMANCE AND PROSPECTS
FOR THE YEAR
AHEAD.
RESPECTFULLY YOURS,
GEORGE PUTNAM
CHAIRMAN OF THE TRUSTEES
NOVEMBER 15, 1995
* (C) Copyright
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REPORT FROM THE FUND MANAGER
WILLIAM H. REEVES
So far, 1995 has been an excellent year for municipal-bond investors -- so long
as they didn't compare themselves to anyone else. For example, over just the
first nine months of the year, the 229 funds in the Lipper Analytical Services
municipal-debt category produced an average 11.60% total return. Last year, the-
se results would have been a fantasy; in any good year they would be satisfying.
But in high-flying 1995, they almost paled by comparison with the returns in
other markets.
The reason: tax-reform rhetoric. While uneasy investors reacted to the perceived
effects of a flat tax and not to any hard facts, their uncertainty depressed
demand for tax-free bonds and dampened the strong rally early on in the second
quarter.
Putnam California Tax Exempt Income Fund's performance at the end of September
reflected this subdued mood of the municipal-bond market. Fortunately, our con-
siderable experience in managing tough markets served us well over the past year
- -- and helped keep your fund ahead of most others in its category.
HOW YOUR FUND PERFORMED
In many ways, managing a tax-exempt fund this year was like being "all dressed
up with no place to go." The climate has been ideal for bonds: interest rates
declining, inflation low, and the economy on a slow simmer. We had a well-posi-
tioned fund and a high-quality portfolio, and, three months into the calendar
year, we had already generated an 8% total return at net asset value. Instead of
continuing this pace, however, we were forced to slow down, starting in April,
when the market's strong underlying fundamentals proved unable to overcome the
effect of tax-reform fears.
These challenges notwithstanding, we produced excellent returns on a relative
basis. For the fiscal year ended September 30, 1995, your fund's total return
was 10.07% at net asset value for class A shares, which placed us among the top
third of all 92 California municipal-debt funds tracked by Lipper Analytical
Services.*
* Lipper Analytical Services is an independent research firm whose rankings va-
ry over time and do not include the effects of sales charges. For the periods
ended 9/30/95, the fund's class A shares were ranked 29 out of 92 funds for
one year, 20 out of 57 funds for three years, 14 of 46 funds for five years,
and 4 of 20 funds for 10 years. Class B shares were ranked 47 of 92 funds for
one year. Past performance is not indicative of future results.
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Your fund also offers class B and class M shares, whose performance, while di-
fferent from the performance of class A shares, was in the same range.
POSITIONING FOR A FAVORABLE MUNICIPAL MARKET
Throughout 1995, your fund has been structured to take advantage of declining
interest rates. However, we have also sought to recapture some of the gains that
slipped away because of flat-tax emotions. As always, we concentrate on earning
high tax-free income, while trying to get a fair share of price appreciation if
interest rates decline. Our overall focus is consistently on top-quality bonds
with solid income, but on occasion we choose to take advantage of opportunities
in lower-tier credits to help enhance the fund's returns.
For example, we acquired bonds issued by the Foothill/Eastern Transportation
Corridor Agency, a toll-road authority in southern California. These bonds,
which were rated Baa by Moody's Investors Service, Inc., were issued for future
extension of the toll-road system in southern California. We also bought unrated
bonds that were issued to support construction of the upscale Thousand Oaks Sho-
pping Center in southern California. (Putnam has assigned these bonds an inter-
nal rating of BB.)
[Pie Chart - Page 5]
PORTFOLIO QUALITY OVERVIEW 9/30/95
AAA ............................... 56/6%
VMIGI (short-term investments) .... 3.0%
B ................................. 0.4%
Ba/BB ............................. 6.0%
BBB ............................... 12.3%
A ................................. 11.6%
AA ................................ 10.1%
Based on market value as of 9/30/95. Holdings will vary over time.
Reflects Stan-
dard & Poor's (R)* rating terminology and includes securities rated by Putnam.
Investment grade securities are those rated BBB or higher by Standard & Poor's
or Baa or higher by Moody's investors Service (R)*, Inc.
* (R) Registered mark
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These lower-rated holdings are a relatively small portion of the portfolio, se-
lected to enable the fund to lock in high income and potential price apprecia-
tion through improving credit quality. By far, high-quality securities, such as
essential-purpose revenue bonds and general obligation bonds, are the most sig-
nificant part of the portfolio. They are diversified across many different types
of industries.
Another strategy we employ to help increase returns is buying inverse floaters.
Like all other derivative products, these securities require careful handling
but can offer attractive benefits when used appropriately. We have had excellent
results managing inverse floaters in all types of market conditions. In the cu-
rrent environment with relatively low short-term interest rates, they can help
to increase your fund's yield and also provide appreciation potential if long-
term rates begin to decline. At the end of the fiscal year, inverse floaters
represented about 10% of net assets.
When interest rates decline, bond issuers rush to refinance their debt. To
shield the portfolio from early bond redemptions, call protection is always
built into the fund. We primarily buy noncallable discounted long-term bonds.
This strategy helps us maintain high current income even during big waves of
refinancing.
This combination of active investment management and extensive credit research
has proved essential to your fund's superior long-term performance through both
good times and bad. In fact, since the fund began operations in 1984, its return
has always scored either in Morningstar's top or second quartiles, never lower.*
BULLISH OUTLOOK
We believe that slow economic growth, benign inflation, and increasing investor
confidence in a balanced-budget agreement from Washington bode exceedingly well
for the bond markets. In California, economic woes are by no means over, but a
vast improvement is under way. Even the ripples from the Orange County crisis
have smoothed out. In fact, Orange County's situation has had virtually no im-
pact on the fund.
The issuance of municipal bonds has been down some 37% in California, more than
in other parts of the country. At the same time, the demand has increased becau-
se of the state's improving budget and economic situation. We believe California
municipal
* Morningstar Mutual Funds, 7/21/95.
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[Bar Chart - Page 7]
TOP INDUSTRY SECTORS*
Utilities 19.5%
Water/Sewer 18.6%
Hospitals/Health care 12.1%
Highways 7.3%
Education 5.3%
* Base on net assets as of 9/30/95. Holdings will vary over time.
bonds have the potential to outperform the rest of the market over the next se-
veral months.
The long end of the municipal-bond yield curve is approaching irresistible le-
vels. For example, some uninsured 30-year tax-exempt bonds are yielding only 10%
less than Treasuries, according to The Wall Street Journal (September 6, 1995).
We think these high long-term yields will soon begin attracting more of the mo-
ney now sitting on the sidelines.
The high volume of bond calls is expected to continue through 1996, further li-
miting supply. Moreover, some buyers, nervous about the path of the stock mar-
ket, are looking to diversify into municipals. This pent-up demand has the po-
tential to create a substantial imbalance between supply and demand in the tax-
free market and strong support for prices.
On balance, all the ingredients for a rally are present: stable interest rates,
high yields, shrinking supply, and the potential for swelling demand. We fully
anticipate that valuations will begin inching up soon. For this reason, we be-
lieve now is an excellent time to buy municipal bonds.
The views expressed in this report are exclusively those of Putnam Management
and are not meant as investment advice. Although the described holdings were
viewed favorably as of 9/30/95, there is no guarantee the fund will continue
to hold these securities in the future.
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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, assum-
ing you held the shares through the entire period and reinvested all distribu-
tions back into the fund. We show 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.
Performance should always be considered in light of a fund's investment strate-
gy. Putnam California Tax Exempt Income Fund is designed for investors seeking
high current income free from federal and California income taxes, consistent
with capital preservation.
TOTAL RETURN FOR PERIODS ENDED 9/30/95
CLASS A CLASS B CLASS M
NAV POP NAV CDSC NAV POP
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1 year 10.07% 4.88% 9.47% 4.47% -- --
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5 years 50.06 43.00 -- -- -- --
Annual average 8.46 7.42 -- -- -- --
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10 years 140.57 129.20 -- -- -- --
Annual average 9.18 8.65 -- -- -- --
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Life of class B -- -- 15.95 11.95 -- --
Annual average -- -- 5.55 4.21 -- --
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Life of class M -- -- -- -- 6.56% 3.13%
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 7/31/95
LEHMAN BROS. CONSUMER
MUNICIPAL BOND INDEX PRICE INDEX
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1 year 11.18% 2.54%
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5 years 52.88 15.45
Annual average 8.86 2.91
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10 years 151.21 41.46
Annual average 9.65 3.53
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Life of class B 20.11 7.96
Annual average 6.92 2.84
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Life of class M 9.66 1.93
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Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions or, for class A shares, distribution fees prior to
implementation of the class A distribution plan in 1990. Effective 4/29/83, the
fund began offering shares now known as class A shares. Effective 1/4/93, the
fund began offering class B shares. Effective 2/14/95, the fund began offering
class M shares. Performance data represent past results and will differ for each
share class. Investment returns and net asset value will fluctuate so an inves-
tor's shares, when sold, may be worth more or less than their original cost.
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[Line Chart - Page 9]
GROWTH OF A $10,000 INVESTMENT
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FUND'S CLASS A LEHMAN BROS. MUNICIPAL
SHARES AT POP BOND INDEX CONSUMER PRICE INDEX
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1985 $ 9525 $ 10000 $ 10000
1986 11563 12465 10175
1987 11387 12530 10619
1988 13175 14156 11062
1989 14444 15385 11542
1990 15275 16431 12253
1991 17216 18598 12669
1992 18997 20542 13047
1993 21587 23159 13398
1994 20824 22594 13795
1995 $ 22913 $ 25121 $ 14146
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Past performance is no assurance of future results. A $10,000 investment in the
fund's class B shares at inception on 1/4/93 would have been valued at $11,595
on 9/30/95 ($11,195 with a redemption at the end of the period). A $10,000 in-
vestment in the fund's class M shares at inception on 2/14/95 would have been
valued at $10,656 at net asset value on 9/30/95 ($10,313 at public offering pri-
ce).
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.
CLASS M SHARES have a lower initial sales charge and a higher 12b-1 fee than
class A shares and no sales charge on redemption.
NET ASSET VALUE (NAV) is the value of all your fund's assets, minus any liabi-
lities, 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 4.75% sales charge for class A shares and 3.25% for class M
shares.
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 5% maximum during the first year to 1% during
the sixth year. After the sixth 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 mar-
ket. 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.
<PAGE>
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund Capital Appreciation Fund*
Diversified Equity Trust Europe Growth Fund
Global Growth Fund Health Sciences Trust
International New Opportunities Fund Investors Fund
Natural Resources Trust New Opportunities Fund
OTC Emerging Growth Fund Overseas Growth Fund
Vista Fund Voyager Fund
Voyager Fund II
PUTNAM GROWTH AND INCOME FUNDS
Balanced Retirement Fund Convertible Income-Growth Trust
Equity Income Fund The George Putnam Fund of Boston
The Putnam Fund for Growth and Income Growth and Income Fund II
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund American Government Income Fund
Diversified Income Trust Federal Income Trust
Global Governmental Income Trust High Yield Advantage Fund
High Yield Trust Income Fund
Intermediate U.S. Government Income Fund Preferred Income Fund
U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Intermediate Tax Exempt Fund Municipal Income Fund
Tax Exempt Income Fund Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds +
Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE INVESTMENTS *+
PUTNAM MONEY MARKET FUNDS:
California Tax Exempt Money Market Fund +
Money Market Fund
New York Tax Exempt Money Market Fund +
Tax Exempt Money Market Fund
CDs AND SAVINGS ACCOUNTS ^
* Temporarily closed to new investors.
+ 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 agen-
cies. Savings accounts may also be insured up to certain limits.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain a
prospectus for any Putnam fund. It contains more complete information, in-
cluding charges and expenses. Read it carefully before you invest or send
money.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
For the year ended September 30, 1995
To the Trustees and Shareholders of
Putnam California Tax Exempt Income 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 highli-
ghts present fairly, in all material respects, the financial position of Putnam
California Tax Exempt Income Fund (the "fund") at September 30, 1995, and the
results of its operations, the changes in its net assets, and the financial
highlights for the periods indicated, in conformity with generally accepted
accounting principles. These financial statements and financial highlights (he-
reafter referred to as "financial statements") are the responsibility of the
fund's management; our responsibility is to express an opinion on these finan-
cial statements based on our audits. We conducted our audits of these financial
statements in accordance with generally accepted auditing standards, which re-
quire that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit in-
cludes examining, on a test basis, evidence supporting the amounts and disclosu-
res 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 audits, which included confirmation
of investments owned at September 30, 1995 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 13, 1995
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
September 30, 1995
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
BIGI -- Bond Investors Guaranty Insurance
COP -- Certificate of Participation
FB -- Floating Rate Bonds
FGIC -- Federal Guaranty Insurance Corporation
FNMA Coll. -- Federal National Mortgage Association Collateralized
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Rate Bonds
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (98.9%)*
PRINCIPAL AMOUNT RATINGS** VALUE
CALIFORNIA (98.9%)
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$32,000,000 Anaheim, COP, MBIA, 6.2s, 7/16/23 AAA $ 32,840,000
40,000,000 Anaheim, Pub. Fing. Auth. Rev. Bonds,
MBIA, 6.45s, 12/28/18 AAA 42,250,000
1,900,000 Anaheim, VRDN (Police Facs.
Refinancing Project), AMBAC, 3.6s, 8/1/08 VMIGI 1,900,000
Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates
Med. Ctr.), Ser. A
34,575,000 6.55s, 12/1/22 Baa 33,926,707
8,500,000 6 1/2s, 12/1/11 BBB 8,457,500
10,000,000 Beverly Hills, COP (Civic Ctr. Impt.),
6 3/4s, 6/1/19 AA 10,275,000
4,500,000 Buena Park, Cmnty. Redev. Agcy. Tax
Alloc. Rev. Bonds (Central Bus. Dist.),
FGIC, 8.9s, 11/1/15 AAA 4,606,875
CA Edl. Fac. Auth. Rev. Bonds
7,030,000 (Pomona College), 8 1/8s, 1/1/17 AAA 7,513,313
15,745,000 (U. of Southern CA Project), Ser. B,
6 3/4s, 10/1/15 AA 16,571,613
CA Hlth. Fac. Auth. Rev. Bonds
2,340,000 (Summit Med. Ctr.), Ser. 85A, 9s, 5/1/15 Ba 2,378,025
11,445,000 (Valley Presbyterian Hosp. Project),
Ser. A, 9s, 5/1/12 BB 11,445,000
10,000,000 (Mercy Hlth. Syst.), Ser. C, MBIA,
7 1/4s, 7/1/15 AAA 11,175,000
CA Hlth. Fac. Fin. Auth. Rev. Bonds
2,000,000 (Summit Med. Ctr.), Ser. A, 7.6s, 5/1/15 Ba 1,957,500
12,335,000 (Summit Med. Ctr.), Ser. B, 7.6s, 5/1/15 Ba 12,072,881
9,000,000 (Cedar Knoll), Ser. B, 7 1/2s, 8/1/20 A 9,641,250
8,330,000 (Summit Med. Ctr.), Ser. B, 7 1/2s, 5/1/09 Ba 8,111,338
21,000,000 (Catholic), Ser. B, AMBAC, 5s, 7/1/21 AAA 18,033,750
CA Hlth. Fac. Fin. Auth. VRDN
1,900,000 (St. Francis Memorial Hosp.), Ser. B,
4.65s, 11/1/19 VMIGI 1,900,000
4,300,000 (Sutter Hlth.), Ser. A, 4.3s, 3/1/20 VMIGI 4,300,000
4,180,000 (St. Joseph Hlth. Syst.), Ser. A, 4.3s,
7/1/13 VMIGI 4,180,000
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
$24,000,000 CA Hlth. Fac. Fing. Auth. Rev. Bonds,
AMBAC, 5.293s, 7/1/17 AAA $ 22,020,000
35,385,000 CA Hlth. Facs. Fing. Auth. Stepped-Coupon
IFB, Ser. B, MBIA, 4 5/8s (5s, 1/2/99)
7/1/14++ AAA 30,652,256
CA Hsg. Fin. Agcy. Home Mtge. Rev. Bonds
5,550,000 Ser. C, 8.3s, 8/1/19 AA 5,778,938
4,705,000 Ser. A, 7 3/4s, 8/1/17 AA 4,928,488
29,600,000 CA Hsg. Fin. Auth. IFB, 6.456s, 8/1/23 AA 30,377,000
2,820,000 CA Hsg. Fin. Agcy. Rev. Bonds (Home
Mtge.), Ser. D, 7 7/8s, 8/1/31 AA 2,989,200
12,500,000 CA Poll. Control Fin. Auth. Rev. Bonds
(Pacific Gas & Elec. Co.), Ser. A, 8.2s,
12/1/18 A 13,406,250
11,990,000 CA Poll. Control Fin. Auth. Solid Waste
Disposal Rev. Bonds (Keller Canyon
Landfill Co. Project), 6 7/8s, 11/1/27 A 12,469,600
CA Poll. Control Fin. Auth. VRDN
11,100,000 (Southern CA Edison Project), Ser. A,
4.35s, 2/28/08 VMIGI 11,100,000
2,400,000 (Shell Oil Co. Project), Ser. C, 4.3s,
11/1/00 VMIGI 2,400,000
14,300,000 (Southern CA Edison Project), Ser. C,
4.2s, 2/28/08 VMIGI 14,300,000
4,500,000 (Shell Oil Co. Project), Ser. B, 3.75s,
10/1/11 VMIGI 4,500,000
1,200,000 (Shell Oil Co. Project), Ser. A, 3.75s,
10/1/07 VMIGI 1,200,000
2,800,000 (Southern CA Edison Project), Ser. B,
2.3s, 2/28/08 VMIGI 2,800,000
40,655,000 CA Pub. Cap. Impt. Fin. Auth. Rev. Bonds
(Pooled Project, Jt. Pwrs. Agcy.), Ser. B,
BIGI, 8.1s, 3/1/18 AAA 44,212,313
6,500,000 CA Special Dist. Fin. Auth. COP, Ser. A,
8 1/2s, 7/1/18 Baa 7,020,000
CA State Dept. Wtr. Resources Rev.
Bonds (Central Valley Project)
26,620,000 Ser. H, 8s, 12/1/16 AAA 27,185,675
48,400,000 6.93s, 12/1/12 (acquired 7/17/95,
cost $51,499,014)*+ AA 55,357,500
CA State G.O. Bonds
16,545,000 AMBAC, 5 1/2s, 4/1/11 AAA 16,234,781
7,030,000 MBIA, 5 1/2s, 4/1/09 AAA 7,038,788
25,460,000 MBIA, 5s, 11/1/22 AAA 22,086,550
10,445,000 FGIC, 5s, 11/1/22 AAA 9,061,038
8,070,000 FGIC, 4 3/4s, 9/1/23 AAA 6,677,925
20,800,000 Ser. 33, MBIA, zero %, 10/1/11 AAA 8,164,000
60,000,000 Ser. 27, MBIA, zero %, 9/1/11 AAA 23,700,000
37,100,000 CA State FB, 7.756s, 9/1/12 (acquired
10/27/92, cost $35,987,000)*+ A 41,644,750
CA State Pub. Works Board Lease
Rev. Bonds
20,690,000 (U. of CA Project), Ser. A, 7s, 9/1/15 AAA 23,431,425
28,000,000 Ser. A, MBIA, 6 1/2s, 9/1/17 AAA 30,100,000
59,000,000 6.48s, 9/1/19 A 65,121,250
9,050,000 (Dept. of Corrections-Del Norte),
Ser. C, MBIA, 5 1/8s, 12/1/08 AAA 8,869,000
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
$ 7,000,000 (Dept. of Corrections-Madera State
Prison), Ser. E, 5 1/2s, 6/1/19 A $ 6,308,750
24,000,000 (Dept. of Corrections-State Prisons)
Ser. A, 7s, 9/1/09 AAA 27,180,000
14,610,000 (Dept. of Corrections-State Prisons)
Ser. D, 5 3/8s, 6/1/12 A 13,495,988
9,000,000 (Dept. of Corrections-State Prisons)
Ser. D, MBIA, 5 3/8s, 6/1/12 AAA 8,516,250
8,000,000 (Dept. of Corrections-State Prisons)
Ser. D, MBIA, 5 1/4s, 6/1/08 AAA 7,900,000
33,500,000 (Dept. of Corrections-State Prisons)
Ser. A, AMBAC, 5s, 12/1/19 AAA 29,898,750
18,000,000 CA State U. IFB, AMBAC, 9.602s, 11/1/21
(acquired 3/2/92, cost $19,013,580)*+ AAA 20,835,000
CA Statewide Cmntys. Dev. Auth. COP
20,000,000 (Insured Hlth. Facs.) Ser. A, AMBAC,
5 3/4s, 10/1/25 AAA 19,075,000
10,000,000 (Childrens Hosp.), MBIA, 4 3/4s, 6/1/21 AAA 8,212,500
15,500,000 CA Statewide Cmntys. Dev. Auth.
VRDN (Sutter Hlth. Obligation
Group), AMBAC, 3.65s, 7/1/15 VMIG1 15,500,000
14,000,000 Castaic Lake, Wtr. Agcy. COP (Wtr. Syst.
Impt. Project), MBIA, 7 1/8s, 8/1/16 AAA 15,907,500
5,000,000 Central Valley, Fin. Auth. Rev. Bonds
(Carson Ice-Cogeneration Project), 6.2s,
7/1/20 BBB 4,881,250
16,000,000 Chino Basin, Regl. Fin. Auth. Rev Bonds,
AMBAC, 5 3/4s, 8/1/22 AAA 15,140,000
Commerce, Redev. Agcy. Rev. Bonds
(Project No. 1), Ser. 91-A
8,845,000 7 1/4s, 8/1/21 BBB 9,121,406
68,280,000 zero %, 8/1/21 BBB 10,583,400
35,000,000 Contra Costa, Home Mtge. Fin. Auth. Rev.
Bonds, MBIA, zero %, 9/1/17 AAA 7,831,250
5,000,000 Contra Costa, Trans. Auth. Sales Tax
VRDN, Ser. A, 3.35s, 3/1/09 VMIGI 5,000,000
34,915,000 Contra Costa, Wtr. Dist. Rev. Bonds,
Ser. G, MBIA, 5s, 10/1/26 AAA 30,070,544
10,000,000 Corona, COP (Vista Hosp. Syst.), Ser. B,
9 1/2s, 7/1/20 BB/P 10,537,500
12,400,000 Culver City, Redev. Fin. Auth. Rev. Bonds,
AMBAC, 5s, 11/1/23 AAA 10,741,500
Duarte, COP (City of Hope Med. Ctr.)
21,000,000 6 1/4s, 4/1/23 Baa 19,818,750
15,000,000 6 1/8s, 4/1/13 Baa 14,287,500
14,000,000 East Bay, Muni. Util. Dist. Rev. Bonds
(Special Dist. No. 1), Ser. E, FGIC,
5s, 4/1/15 AAA 12,565,000
10,725,000 El Camino, Hosp. Dist. Rev. Bonds, Ser. A,
AMBAC, 6 1/4s, 8/15/17 AAA 10,845,656
Foothill/Eastern Trans. Corr. Agcy. Rev.
Bonds (CA Toll Roads), Ser. A
47,500,000 6 1/2s, 1/1/32 Baa 47,143,750
66,875,000 6s, 1/1/34 Baa 62,026,563
9,960,000 5s, 1/1/35 Baa 7,818,600
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
$11,140,000 Fresno, Unified Sch. Dist. COP, 7 1/4s,
3/1/07 A $ 12,086,900
18,145,000 Hawaiian Gardens Agcy. Rev. Bonds
(Redev. Agcy. Project), 6.35s, 12/1/33 BBB 16,285,138
Irvine Ranch, Wtr. Dist. Jt. Pwr. Agcy.
Rev. Bonds
23,000,000 (Issue II), 8.2s, 8/15/08 A 24,811,250
56,000,000 (Issue II), FNMA Coll., 8 1/4s, 8/15/23 A 60,200,000
25,010,000 (Issue I), 7 7/8s, 2/15/23 A 26,354,288
6,000,000 Local Govt. Fin. Joint Pwr. Auth. Rev.
Bonds (Anaheim Redev. Agcy.), Ser. A,
8.2s, 9/1/15 A 6,750,000
10,120,000 Loma Linda, Hosp. Rev. Bonds (Loma
Linda U. Med. Ctr. Project), Ser. A, 6s,
12/1/23 BBB 8,804,400
2,200,000 Los Angeles Cnty., Cmnty. VRDN
3.95s, 11/1/15 VMIG1 2,200,000
24,340,000 Los Angeles Cnty., Hlth. Fac. Auth. Lease
Rev. Bonds (Olive View Med. Ctr.),
7 1/2s, 3/1/08 A 26,621,875
1,300,000 Los Angeles Cnty., Hsg. Auth. Multi-Fam.
Hsg. VRDN (Malibu Meadows II Project),
Ser. B, 4 1/4s, 12/1/15 VMIG1 1,300,000
Los Angeles Cnty., Metro. Trans. Auth.
Sales Tax Rev. Bonds
21,000,000 Ser. 2B, AMBAC, 5 1/4s, 7/1/23 AAA 18,900,000
16,600,000 Ser. 2A, MBIA, 5s, 7/1/25 AAA 14,379,750
34,000,000 Ser A, FGIC, 5s, 7/1/21 AAA 29,622,500
16,400,000 Los Angeles Cnty., Metro. Trans. Auth.
Sales Tax VRDN, Ser. 2A, MBIA, 4s,
7/1/20 VMIG1 16,400,000
13,565,000 Los Angeles Cnty., Trans. Commn. Sales
Tax Rev. Bonds, Ser. A, 8s, 7/1/16 AAA 14,718,025
2,000,000 Los Angeles Cnty., Trans. Commn. Sales
Tax VRDN, Ser. A, FGIC, 4.05s, 7/1/12 VMIGI 2,000,000
26,235,000 Los Angeles Cnty., Pension Obligation
COP Ltd. Stepped-Coupon, Ser. A, zero %
(6.9s, 6/30/96), 6/30/08++ BBB 25,972,650
9,500,000 Los Angeles Cnty., Pub. Works Fin. Auth.
Lease Rev. Bonds (Multi-Cap. Fac.
Project 4), MBIA, 4 3/4s, 12/1/10 AAA 8,550,000
13,000,000 Los Angeles Cnty., Sanitation Dist. Fin.
Auth. Rev. Bonds (Capital Projects),
Ser. A, MBIA, 5s, 10/1/23 AAA 11,261,250
Los Angeles, Convention & Exhibition
Ctr. Auth. COP
37,465,000 9s, 12/1/20 AAA 49,687,956
20,595,000 Ser. A, MBIA, 5 1/8s, 8/15/13 AAA 18,870,169
29,100,000 Los Angeles, Convention & Exhibition
Ctr. Auth. Lease IFB, COP, 6.953s,
8/15/18 (acquired 9/15/94, cost
$21,610,242)*+ AAA 24,516,750
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
Los Angeles, Dept. Wtr. & Pwr. Elec.
Plant Rev. Bonds
$51,200,000 Issue 2, 6.8s, 6/1/31 AA $ 57,408,000
38,205,000 Issue 2, 6 3/4s, 12/15/29 AA 41,882,231
6,000,000 Ser. 91-2, 6.331s, 6/1/31 AA 6,787,500
25,000,000 Issue 2, FGIC, 5.4s, 11/15/31 AAA 22,812,500
17,760,000 (2nd Issue Elec. Plant), MBIA, 5 1/4s,
11/15/26 AAA 15,917,400
11,000,000 Los Angeles, Dept. of Wtr. & Pwr.
Waterworks Rev. Bonds, 7s, 2/15/22 AA 12,003,750
25,000,000 Los Angeles, Harbor Dept. Rev. Bonds,
7.6s, 10/1/18 AAA 27,437,500
Los Angeles, State Bldg. Auth. Lease Rev.
Bonds (State Dept. General Svcs.), Ser. A
27,250,000 7 1/2s, 3/1/11 AAA 29,804,688
21,530,000 5 5/8s, 5/1/11 A 20,130,550
Los Angeles, Wastewater Syst. IFB
34,700,000 7.834s, 6/1/19 (acquired 11/18/94,
cost $33,460,631)*+ AAA 37,259,125
20,105,000 Ser. A, 7s, 2/1/20 AAA 22,517,600
Los Angeles, Wastewater Syst. Rev. Bonds
17,150,000 Ser. B, 7.15s, 6/1/20 A 19,443,813
50,000,000 Ser. 91-5, AMBAC, 6.519s, 6/1/21 AAA 55,687,500
17,600,000 Ser. D, FGIC, 5 3/8s, 11/1/08 AAA 17,578,000
15,100,000 Ser. D, FGIC, 5 3/8s, 11/1/07 AAA 15,194,375
20,000,000 Metro Wtr. Dist. IFB
(Southern CA Waterworks), 7.112s,
8/10/18 AA 19,325,000
Metro Wtr. Dist. Rev. Bonds
8,600,000 (Southern CA Waterworks), 5.95s,
8/5/22 AA 8,632,250
8,780,000 Ser. A, FGIC, 5 3/4s, 7/1/21 AAA 8,505,625
15,330,000 5 1/2s, 7/1/19 AA 14,314,388
67,490,000 Modesto, Irrigation Dist. Fin. Auth. Rev.
Bonds (Geysers Pwr. Project), MBIA,
zero %, 10/1/15 AAA 6,028,207
16,600,000 Mount Diablo, Hosp. Dist. Rev. Bonds,
Ser. A, AMBAC, 5s, 12/1/13 AAA 15,375,750
Northern CA Pwr. Agcy. Multi. Cap. Fac.
Rev. Bonds
19,000,000 MBIA, 8.564s, 8/1/25 AAA 19,807,500
16,900,000 MBIA, 8.564s, 8/15/17 AAA 17,766,125
17,000,000 (Hydro. Elec. Project No. 1), Ser. B1,
8s, 7/1/24 AAA 18,657,500
5,000,000 Northern CA Trans. Rev. Bonds (CA-OR
Trans. Project), Ser. A, MBIA, 5.3s, 5/1/10 AAA 4,856,250
14,800,000 Oakland, Redev. Agcy. Rev. Bonds, MBIA,
5.95s, 9/1/19 AAA 14,726,000
Orange Cnty., COP
4,180,000 (Orange Cnty., Solid Waste
Management), 7 7/8s, 12/1/07,
(acquired various dates from 12/08/88
to 12/20/88 cost $4,166,350)*+ BBB 4,221,800
25,000,000 (Juvenile Justice Ctr. Fac.), AMBAC, 6s,
6/1/17 AAA 24,281,250
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
$15,000,000 Orange Cnty., Dev. Agcy. Tax Alloc. Rev.
Bonds (Santa Ana Heights Project),
6 1/8s, 9/1/23 Baa $ 13,087,500
10,000,000 Orange Cnty., Pub. Fac. Corp. COP (Solid
Waste Management), 7 7/8s, 12/1/13 BBB 10,100,000
19,830,000 Orange Cnty., Wtr. Dist. COP, Ser. A,
5s, 8/15/18 AA 16,905,075
12,840,000 Oxnard, Redev. Agcy. Tax Alloc. Rev.
Bonds (Cent. City Revitalization), Ser. A,
6 1/2s, 9/1/16 BBB 12,519,000
22,850,000 Palm Desert, Fin. Auth. Tax Alloc. IFB,
MBIA, 7 5/8s, 4/1/22 AAA 24,135,313
24,855,000 Pasadena, VRDN (Index Cap.
Certif.), AMBAC, 5.35s, 2/1/14 VMIGI 23,581,181
Pleasanton, Jt. Pwr. Fin. Auth. Rev. Bonds,
Ser. B
6,035,000 6 3/4s, 9/2/17 BBB/P 5,929,388
8,710,000 6.6s, 9/2/08 BBB/P 8,622,900
4,900,000 6 1/2s, 9/2/02 BBB/P 4,942,875
9,965,000 6 1/8s, 9/2/04 BBB/P 9,977,456
7,095,000 Rancho, Redev. Agcy. Tax Alloc. Rev.
Bonds (Rancho Redev. Project), MBIA,
6 3/4s, 9/1/20 AAA 7,848,844
44,000,000 Rancho, Wtr. Dist. Fin. Auth. Rev. Bonds,
AMBAC, 6.427s, 8/17/21 AAA 49,335,000
20,800,000 Redding, Elec. Syst. COP, MBIA, 6.368s,
7/1/22 AAA 22,100,000
4,940,000 Richmond, Jt. Pwr. Fin. Auth. Rev. Bonds
(Impt. Dists. 851 & 853), Ser. B, 8 1/2s,
9/2/19 BBB/P 5,094,375
24,495,000 Riverside Cnty., Asset Leasing Corp. Rev.
Bonds (Riverside Cnty. Hosp. Project),
Ser. A, 6 1/4s, 6/1/19 A 24,525,619
12,700,000 Riverside, Rev. Bonds (Kaiser Permanente),
Ser. A, 9s, 12/1/15 AA 13,033,375
17,000,000 Sacramento, Cogeneration Auth. Rev.
Bonds (Procter & Gamble Co. Project),
6 1/2s, 7/1/21 BBB 17,127,500
2,000,000 Sacramento Cnty., Multi-Fam. Hsg. VRDN,
4.35s, 9/15/07 VMIGI 2,000,000
10,000,000 Sacramento Cnty., COP (Sacramento
Main Detention), MBIA, 5 1/2s, 6/1/10 AAA 9,912,500
16,610,000 Sacramento Cnty., Hsg. Auth. Multi-Fam.
Rev. Bonds, Ser. 85-2, FNMA Coll.,
zero %, 11/1/97 AAA 14,118,500
14,355,000 Sacramento Cnty., Sanitation Dist. Fin.
Auth. Rev. Bonds, MBIA, 4 3/4s, 12/1/23 AAA 11,860,819
25,000,000 Sacramento, Muni. Util. Dist. Elec. IFB,
FGIC, 8.311s, 8/15/18 AAA 26,343,750
Sacramento, Muni. Util. Dist. Elec.
Rev. Bonds
25,900,000 Ser. R, 7 1/8s, 2/1/13 AAA 27,454,000
17,000,000 Ser. E, MBIA, 5 3/4s, 5/15/22 AAA 16,468,750
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
Sacramento, Muni. Util. Dist. Elec. Rev. Bonds
$34,835,000 Ser. V, 7 7/8s, 8/15/16 AAA $ 38,928,113
5,930,000 Ser. V, 7 1/2s, 8/15/18 AAA 6,463,700
9,500,000 Ser. A, MBIA, 6 1/4s, 8/15/10 AAA 10,176,875
5,000,000 Santa Ana, Cmnty. Redev. Agcy. Tax
Alloc. Rev. Bonds, Ser. B, 6 3/4s, 9/1/19 BBB 4,943,750
14,615,000 San Bernardino, Hosp. Rev. Bonds (San
Bernardino Cmnty. Hosp.), 7 7/8s, 12/1/19 B 13,518,875
11,525,000 Santa Clara Cnty., COP Cap. Project
No. 1), 8s, 10/1/16 AAA 12,216,500
17,800,000 Santa Clara, Wtr. Dist. COP, IFB, FGIC,
7.97s, 8/1/15 AAA 17,088,000
San Diego Cnty., COP,
10,200,000 IFB, MBIA, 8.967s, 11/18/19 AAA 10,786,500
8,850,000 MBIA (Vista Detention Fac. Expansion
Project), 7 7/8s, 4/1/07 AAA 9,502,688
15,800,000 AMBAC, 5 1/4s, 9/1/06 AAA 16,491,250
San Diego Cnty., Wtr. Auth. Rev. IFB,
COP, Ser. 91-B
17,500,000 MBIA, 8.42s, 4/8/21 AAA 18,528,125
28,350,000 MBIA, 8.02s, 4/21/11 AAA 32,460,750
11,000,000 San Diego, Regl. Bldg. Auth. Lease Rev.
Bonds, MBIA, 6.9s, 5/1/23 AAA 11,110,000
14,100,000 San Diego, Regl. Bldg. Auth. Stepped-
Coupon Rev. Bonds, MBIA, 6.85s (5.65s,
5/2/98), 5/1/13++ AAA 14,293,875
San Diego, Swr. Rev. Bonds, Ser. A
12,000,000 AMBAC, 5 1/4s, 5/15/20 AAA 10,935,000
11,550,000 AMBAC, 5s, 5/15/23 AAA 10,019,625
15,005,000 San Diego, Single-Fam. Mtge. Rev. Bonds,
Ser. A, zero %, 8/1/16 A 2,100,700
San Joaquin Hills, Trans. Corridor Agcy.
Toll Rd. Rev. Bonds
77,825,000 (Senior Lien), 6 3/4s, 1/1/32 BB/P 78,603,250
32,375,000 5s, 1/1/33 BB/P 25,576,250
13,000,000 San Jose, COP (Convention Ctr. Project),
7 7/8s, 9/1/10 AAA 13,731,250
San Jose, Redev. Agcy. Tax Alloc.
Rev. Bonds
12,700,000 (Merged Area Redev. Project), MBIA,
5s, 8/1/20 AAA 11,080,750
29,100,000 (Redev. Project), MBIA, 4 3/4s, 8/1/24 AAA 24,007,500
20,000,000 San Mateo Cnty., Jt. Pwr. Fin. Auth Lease I
FB, FSA, 7.97s, 7/15/29 AAA 18,200,000
3,000,000 Santa Rosa, Kaiser Permanente Rev.
Bonds, Ser. A, 9s, 12/1/15 AA 3,078,750
45,200,000 South Orange Cnty., Pub. Fin. Auth. Spl.
Tax IFB, FGIC, 5 1/2s, 8/15/15 AAA 42,996,500
Southern CA Pub. Pwr. Auth. Rev. Bonds
20,000,000 (Transmission Project), Ser. B, 7 3/8s,
7/1/21 AA 20,950,000
18,535,000 (Palo Verde Project), Ser. B, 7 1/8s,
7/1/15 AAA 19,345,906
17,995,000 (Transmission Project), Ser. B, 7s,
7/1/22 AA 18,849,763
11,800,000 (Palo Verde Project), Ser. A, 6 7/8s,
7/1/15 AAA 12,301,500
<PAGE>
MUNICIPAL BONDS AND NOTES (Continued)
PRINCIPAL AMOUNT RATINGS** VALUE
Southern CAPub. Pwr. Auth. Rev. Bonds
$11,200,000 (Transmission Project), Ser. B, MBIA,
5 1/2s, 7/1/23 AAA $ 10,458,000
13,635,000 (Mead Adelanto Project), Ser. A,
AMBAC, 5s, 7/1/17 AAA 12,084,019
5,500,000 (Palo Verde Project), Ser. A, AMBAC
5s, 7/1/15 AAA 4,901,875
20,540,000 (Pwr. Project), Ser. A, AMBAC, 5s,
7/1/15 AAA 18,306,275
29,050,000 (Mead Adelanto Project), Ser. A,
AMBAC, 4 7/8s, 7/1/20 AAA 24,728,813
9,150,000 Stanislaus, Solid Waste Fac. COP (Ogden
Martin Syst. Inc. Project), 7 1/2s, 1/1/05 BBB 9,767,625
16,520,000 Stanislaus, Waste & Energy Fing. Agcy.
Rev. Bonds (Ogden Martin Syst. Inc.
Project), 7 5/8s, 1/1/10 BBB 17,697,050
Thousand Oaks, Cmnty. Fac. Dist. Spl.
Tax Rev. Bonds (No. 94-1)
18,775,000 6 7/8s, 9/1/24 BB/P 18,587,250
33,515,000 zero %, 9/1/14 BB/P 8,294,963
8,500,000 Turlock, Hlth. Fac. COP (Emanuel Med.
Ctr. Inc.), 5 3/4s, 10/15/23 BBB 6,916,875
29,700,000 U. of CA IFB, MBIA, 10.309s, 9/1/16
(acquired 8/12/92, cost $33,601,600)*+ AAA 38,869,875
U. of CA Rev. Bonds
36,147,000 (USCD Med. Ctr. Satellite Med. Fac.),
7.9s, 12/1/19 Baa 38,722,474
54,500,000 (UCSD Med. Ctr. Satellite Med. Fac.),
7.9s, 12/1/96 AAA 57,020,625
6,000,000 (Multi-Purpose Projects), Ser. A,
6 7/8s, 9/1/16 A 6,885,000
16,240,000 (Multi-Purpose Projects), Ser. C,
AMBAC, 5 1/8s, 9/1/09 AAA 15,590,400
10,000,000 (Multi-Purpose Projects), Ser. C,
AMBAC, 5.1s, 9/1/08 AAA 9,687,500
11,500,000 (Multi-Purpose Projects), Ser. B, MBIA,
5s, 9/1/16 AAA 10,220,625
10,000,000 (Multi-Purpose Projects), Ser. C,
AMBAC, 5s, 9/1/11 AAA 9,237,500
13,000,000 (Multi-Purpose Projects), Ser. C,
AMBAC, 4 7/8s, 9/1/19 AAA 11,098,750
8,000,000 (Multi-Purpose Projects), Ser. C,
AMBAC, 4 3/4s, 9/1/16 AAA 6,780,000
10,320,000 (Multi-Purpose Projects), Ser. B, MBIA,
4 3/4s, 9/1/14 AAA 8,836,500
36,945,000 Valley Hlth. Syst. COP, 6 7/8s, 5/15/23 BB/P 35,190,113
Washington Township, Hosp. Dist.
Rev. Bonds
13,430,000 5 1/2s, 7/1/18 A 12,103,788
6,070,000 5 1/4s, 7/1/23 A 5,189,850
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS (cost $3,322,736,425)*** $3,550,745,174
- -------------------------------------------------------------------------------
<PAGE>
NOTES
* Percentages indicated are based on net assets of $3,588,752,097, which co-
rrespond to a net asset value per class A, class B and class M shares of
$8.37, $8.37 and $8.36, respectively.
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at September 30, 1995 for the securities lis-
ted. 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, 1995. Secu-
rities rated by Putnam are indicated by "/P" and are not publicly rated. Ra-
tings are not covered by the Report of independent accountants.
++ The interest rate and date shown parenthetically represent the next interest
rate to be paid and the date the fund will begin receiving this rate.
*+ Restricted as to public resale. At the date of acquisition, these securities
were valued at cost. There were no outstanding unrestricted securities of
the same class as those held. The total market value of the restricted secu-
rities owned at September 30, 1995 was $222,704,800 or 6.2% of net assets.
*** The aggregate identified cost for federal income tax purposes is
$3,338,754,157, resulting in gross unrealized appreciation and depreciation
of $239,634,425, and $27,643,408, respectively, or net unrealized apprecia-
tion of $211,991,017.
The rates shown on IF and IFB, which are securities paying variable interest
rates that vary inversely to changes in the market interest rates, FB, Va-
riable Rate COP and VRDN are the current interest rates at September 30,
1995, which are subject to change based on the terms of the security.
The fund had the following industry group concentrations greater than 10%
at September 30, 1995 (as a percentage of net assets):
Utilities 19.5%
Water & Sewerage 18.6
Hospitals/Health Care 12.1
The fund had the following insurance concentrations greater than 10% at
September 30, 1995 (as a percentage of net assets):
MBIA 20.8%
AMBAC 14.4
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1995
ASSETS
- -------------------------------------------------------------------------------
Investments in securities, at value
- -------------------------------------------------------------------------------
(identified cost $3,322,736,425) (Note 1) $3,550,745,174
- -------------------------------------------------------------------------------
Cash 101,248
- -------------------------------------------------------------------------------
Interest and other receivables 51,923,216
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,468,498
- -------------------------------------------------------------------------------
TOTAL ASSETS 3,607,238,136
LIABILITIES
- -------------------------------------------------------------------------------
Distributions payable to shareholders 9,259,481
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,274,501
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 3,901,719
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 11,892
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 3,552
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,887,099
- -------------------------------------------------------------------------------
Other accrued expenses 147,795
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 18,486,039
- -------------------------------------------------------------------------------
NET ASSETS $3,588,752,097
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,416,235,629
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (Note 1) (1,100,798)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions (Note 1) (54,391,483)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments 228,008,749
- -------------------------------------------------------------------------------
TOTAL -- REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $3,588,752,097
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($3,168,276,423 divided by 378,321,219 shares) $8.37
- -------------------------------------------------------------------------------
Offering price per share (100/95.25 of $8.37)* $8.79
- -------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($416,367,327 divided by 49,768,052 shares)+ $8.37
- -------------------------------------------------------------------------------
Net asset value and redemption price of class M shares
($4,108,347 divided by 491,213 shares)+ $8.36
- -------------------------------------------------------------------------------
Offering price per share (100/96.75 of $8.36)** $8.64
- -------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and
on group sales the offering price is reduced.
** On single retail sales of less than $50,000. On sales of $50,000 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.
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Year ended September 30, 1995
TAX EXEMPT INTEREST INCOME: $230,215,897
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 15,817,546
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,408,741
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 81,004
- -------------------------------------------------------------------------------
Auditing 101,242
- -------------------------------------------------------------------------------
Legal 131,931
- -------------------------------------------------------------------------------
Postage 254,281
- -------------------------------------------------------------------------------
Reports to shareholders 76,982
- -------------------------------------------------------------------------------
Administrative services (Note 2) 51,342
- -------------------------------------------------------------------------------
Distribution fees
Class A (Note 2) 6,284,039
Class B (Note 2) 3,170,121
Class M (Note 2) 6,750
- -------------------------------------------------------------------------------
OTHER 121,128
- -------------------------------------------------------------------------------
TOTAL EXPENSES 28,505,107
- -------------------------------------------------------------------------------
FEES PAID INDIRECTLY (NOTE 2) (1,715,341)
- -------------------------------------------------------------------------------
NET EXPENSES 26,789,766
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 203,426,131
- -------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (29,837,386)
- -------------------------------------------------------------------------------
Net realized loss on written options (3,012,126)
- -------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (5,438,373)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments during the year 168,915,384
- -------------------------------------------------------------------------------
NET GAIN ON INVESTMENT TRANSACTIONS 130,627,499
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
$334,053,630
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
Year ended September 30
1995 1994
- -------------------------------------------------------------------------------
DECREASE IN NET ASSETS
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $ 203,426,131 $ 218,383,852
- -------------------------------------------------------------------------------
Net realized gain (loss) on investments (38,287,885) 15,252,213
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments 168,915,384 (378,040,878)
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 334,053,630 (144,404,813)
- -------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income:
Class A (184,479,625) (202,657,624)
Class B (19,276,314) (15,701,799)
Class M (71,454) --
- -------------------------------------------------------------------------------
In excess of net investment income:
Class A (468,211) --
Class B (48,923) --
Class M (181) --
- -------------------------------------------------------------------------------
From net on investments:
Class A -- (10,629,107)
Class B -- (794,743)
- -------------------------------------------------------------------------------
In excess of net realized gain on investments:
Class A (9,709,514) --
Class B (1,080,394) --
- -------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (140,544,390) 174,727,426
- -------------------------------------------------------------------------------
TOTAL DECREASE IN NET ASSETS (21,625,376) (199,460,660)
- -------------------------------------------------------------------------------
NET ASSETS
- -------------------------------------------------------------------------------
Beginning of year 3,610,377,473 3,809,838,133
- -------------------------------------------------------------------------------
END OF YEAR (including distributions in excess
of net investment income of $1,100,798 and
$583,482, respectively) $3,588,752,097 $3,610,377,473
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
FOR THE PERIOD FOR THE PERIOD
FEBRUARY 14, 1995 JANUARY 4, 1993
(COMMENCEMENT (COMMENCEMENT
OF OPERATIONS) TO OF OPERATIONS) TO
SEPTEMBER 30 YEAR ENDED SEPTEMBER 30 SEPTEMBER
30
1995 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------------
CLASS M CLASS B
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $8.13 $8.08 $8.91 $8.37
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
Net investment income .29 .42 .45 .32
- -----------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .24 .32 (.81) .55
- -----------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .53 .74 (.36) .87
- -----------------------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.30)* (.42)* (.45) (.33)
- -----------------------------------------------------------------------------------------------------------------
From net realized gain or loss
on investments -- -- (.02) --
- -----------------------------------------------------------------------------------------------------------------
In excess of net realized gain or
loss on investments -- (.03) -- --
- -----------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.30) (.45) (.47) (.33)
- -----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.36 $8.37 $8.08 $8.91
- -----------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (a) 6.56(b) 9.47 (4.15) 10.51(b)
- -----------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD
(in thousands) $4,108 $416,367 $349,609 $209,657
- -----------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%) (c) .69(b) 1.39 1.32 1.00(b)
- -----------------------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (%) 3.52(b) 5.17 5.16 3.68(b)
- -----------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 47.73 47.73 21.06 22.95
- -----------------------------------------------------------------------------------------------------------------
<FN>
* Distributions in excess of net investment income amounted to less than $0.01 per share for
each class.
(a) Total investment return assumes dividend reinvestment and does not reflect the effect of sales
charges.
(b) Not annualized.
(c) The ratio of expenses to average net assets for the year ended September 30, 1995 includes
amounts paid through brokerage
service and expense offset arrangements. Prior period ratios exclude these amounts. See Note
2.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS (Continued)
(For a share outstanding throughout the period)
YEAR ENDED SEPTEMBER 30
1995 1994 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------
- ----
CLASS A
- ------------------------------------------------------------------------------------------------------------------
- ----
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF PERIOD $8.09 $8.92 $8.39 $8.11 $7.70
- ------------------------------------------------------------------------------------------------------------------
- ----
INVESTMENT OPERATIONS
Net investment income .48 .50 .53 .54 .54
- ------------------------------------------------------------------------------------------------------------------
- ----
Net realized and unrealized
gain (loss) on investments .31 (.81) .57 .27 .41
- ------------------------------------------------------------------------------------------------------------------
- ----
TOTAL FROM INVESTMENT OPERATIONS .79 (.31) 1.10 .81
.95
- ------------------------------------------------------------------------------------------------------------------
- ----
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (.48)* (.50) (.53) (.53) (.54)
- ------------------------------------------------------------------------------------------------------------------
- ----
From net realized gain or loss
on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
- ----
In excess of net realized gain or
loss on investments (.03) (.02) (.04) -- --
- ------------------------------------------------------------------------------------------------------------------
- ----
TOTAL DISTRIBUTIONS (.51) (.52) (.57) (.53) (.54)
- ------------------------------------------------------------------------------------------------------------------
- ----
NET ASSET VALUE, END OF PERIOD $8.37 $8.09 $8.92 $8.39
$8.11
- ------------------------------------------------------------------------------------------------------------------
- ----
TOTAL INVESTMENT RETURN AT
NET ASSET VALUE (%) (a) 10.07 (3.53) 13.63 10.34 12.71
- ------------------------------------------------------------------------------------------------------------------
- ----
NET ASSETS, END OF PERIOD
(in thousands) $3,168,277 $3,260,769 $3,600,182 $2,854,165
$2,295,154
- ------------------------------------------------------------------------------------------------------------------
- ----
Ratio of expenses to
average net assets (%) (c) .74 .68 .69 .60 .56
- ------------------------------------------------------------------------------------------------------------------
- ----
Ratio of net investment
income to average net
assets (%) 5.86 5.86 6.16 6.53 6.79
- ------------------------------------------------------------------------------------------------------------------
- ----
Portfolio turnover (%) 47.73 21.06 22.95 31.25 35.76
- ------------------------------------------------------------------------------------------------------------------
- ----
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
September 30, 1995
NOTE 1
SIGNIFICANT ACCOUNTING POLICIES
The fund is registered under the Investment Company Act of 1940, as amended, as
a 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. ("Putnam Management"), the
fund's Manager, a wholly-owned subsidiary of Putnam Investments, Inc., believes
is consistent with preservation of capital by investing primarily in a diversi-
fied portfolio of longer-term California tax exempt securities.
The fund offers class A, class B and class M shares. The fund commenced its pu-
blic offering of class M shares on February 1, 1995. Class A shares are sold
with a maximum front-end sales charge of 4.75%. Class B shares do not pay a
front-end sales charge, but pay a higher ongoing distribution fee than class A
shares, and are subject to a contingent deferred sales charge, if those shares
are redeemed within six years of purchase. Class M shares are sold with a maxi-
mum front-end sales charge of 3.25% and pay an ongoing distribution fee that is
lower than class B shares and higher than class A shares. Expenses of the fund
are borne pro-rata by the shareholders of both class of shares. Each class bears
expenses unique to that class (including the distribution fees applicable to
such class), and 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 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 de-
clare separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently fo-
llowed 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 va-
luations provided by a pricing service, approved by the Trustees, which uses in-
formation with respect to transactions in bonds, quotations from bond dealers,
market transactions in comparable securities and various relationships between
securities in determining value. The fair value of restricted securities is de-
termined by the Manager following procedures approved by the Trustees, and such
valuations and procedures are reviewed periodically by the Trustees.
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 AND OPTIONS CONTRACTS The fund may use futures and options contracts
to hedge against changes in the values of securities the fund owns or expects
to purchase. The fund may also write options on securities it owns or in which
it may invest to increase its current returns.
The potential risk to the fund is that the change in value of futures and op-
tions contracts may not correspond to the change in value of hedged instruments.
In addition, losses may
<PAGE>
arise from changes in the value of the underlying instruments, if there is an
illiquid secondary market for the contracts or if the counter party to the con-
tract is unable to perform.
Futures contracts are valued at the quoted daily settlement prices established
by the exchange on which they trade. Exchange traded options are valued at the
last sale price, or if no sales are reported, the last bid price for purchased
options and the last ask price for written options. Options traded over-the-
counter are valued using prices supplied by dealers.
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 In-
ternal Revenue Code 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. Therefo-
re, no provision has been made for federal taxes on income, capital gains or un-
realized appreciation of securities held and for excise tax on income and capi-
tal gains.
At September 30, 1995, the fund had a capital loss carryover of approximately
$17,511,000 available to offset future net capital gain, if any, which will ex-
pire on September 30, 2003.
E) DISTRIBUTIONS TO SHAREHOLDERS Income dividends are recorded daily by the fund
and are distributed 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. These differences include treatment of market discount
and realized gains and losses on futures contracts. Reclassifications are made
to the fund's capital accounts to reflect income and gains available for distri-
bution (or available capital loss carryovers) under income tax regulations.
For the year ended September 30, 1995, the fund reclassified $401,261 to decrea-
se distributions in excess of net investment income and $228,703 to decrease
paid-in capital, with an increase to accumulated net realized losses of
$172,558. The calculation of net investment income per share in the financial
highlights table excludes these adjustments.
F) AMORTIZATION OF BOND PREMIUM AND ACCRETION OF BOND DISCOUNT Any
premium re-
sulting from the purchase of securities is amortized using the effective yield
method for bonds issued after September 27, 1985 and on a straight-line basis
for bonds issued prior thereto. The premium in excess of the call price, if any,
is amortized to the call date; thereafter, the remaining excess premium is amor-
tized to maturity. Discount on zero-coupon bonds, original issue discount bonds
and stepped-coupon bonds is accreted according to the effective yield method.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Management for management and investment advisory servi-
ces is paid quarterly based on the average net assets of the fund for the quar-
ter. Such fee is based on the following annual rates: 0.60% of the first $500
million of average net assets, 0.50% of the next $500 million, 0.45% of the next
$500 million and 0.40% of any amount over $1.5 billion, subject, under current
law, to reduction in any year to the extent that expenses (exclusive of broke-
rage, interest and taxes) of the fund exceed 2.5% of the first $30 million of
average net assets, 2.0% of the next $70 million and 1.5% of any excess over
$100 million and by the amount
<PAGE>
of certain brokerage commissions and fees (less expenses) received by affiliates
of the Manager on the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related expenses
of certain officers of the fund and their staff who provide administrative ser-
vices to the fund. The aggregate amount of all such reimbursements is determined
annually by the Trustees.
Trustees of the fund receive an annual Trustee's fee of $4,370 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.
During the year ended September 30, 1995, the fund adopted a Trustee Fee Defe-
rral Plan (the "Plan") which allows the Trustees to defer the receipt of all or
a portion of Trustees Fees payable on or after July 1, 1995. The deferred fees
remain in the fund and are invested in the fund or in other Putnam funds until
distribution in accordance with the Plan.
Custodial functions for the fund are provided by Putnam Fiduciary Trust Company
(PFTC), a wholly-owned subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
For the year ended September 30, 1995, fund expenses were reduced by $1,715,341
under expense offset arrangements with PFTC and brokerage service arrangements.
Investor servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the assets uti-
lized in connection with the offset arrangements in an income-producing asset if
it had not entered into such arrangements.
The fund has adopted distribution plans (the "Plans") with respect to its class
A, class B and class M shares pursuant to Rule 12b-1 under the Investment Compa-
ny Act of 1940. The purpose of the Plans is to compensate Putnam Mutual Funds
Corp., a wholly-owned subsidiary of Putnam Investments, Inc., for services pro-
vided and expenses incurred by it in distributing shares of the fund. The Plans
provide for payments by the fund to Putnam Mutual Funds Corp. at an annual rate
up to 0.35%, 1.00%, and 1.00% of the average net assets attributable to class A,
class B and class M shares, respectively. The Trustees have approved payment by
the fund at an annual rate of 0.20%, 0.85% and 0.50% of the average net assets
attributable to class A, class B and class M shares, respectively.
For the year ended September 30, 1995, Putnam Mutual Funds Corp., acting as un-
derwriter, received net commissions of $342,059 and $1,781 from the sale of
class A and class M shares, respectively. There was $984,761 in contingent de-
ferred sales charges from redemptions of class B shares. A deferred sales charge
of up to 1% is assessed on certain redemptions of class A shares. For the year
ended September 30, 1995, Putnam Mutual Funds Corp., acting as underwriter re-
ceived $91,127 on class A redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the year ended September 30, 1995, purchases and sales of investment se-
curities other than short-term investments aggregated $1,981,778,994 and
$2,168,304,698, respectively. Purchases and sales of short-term municipal obli-
gations aggregated $349,064,954 and $293,210,000, respectively. In determining
the net gain or loss on securities sold, the cost of securities has been deter-
mined on the identified cost basis.
<PAGE>
Written option transactions during the year are summarized as follows:
CONTRACT PREMIUMS
AMOUNTS RECEIVED
- -------------------------------------------------------------------------------
Options opened 248,300,128 $4,870,993
Options closed/expired (248,300,128) (4,870,993)
- -------------------------------------------------------------------------------
Written options outstanding at end of year -- $ --
- -------------------------------------------------------------------------------
NOTE 4
CAPITAL SHARES
At September 30, 1995, there was an unlimited number of shares of beneficial in-
terest authorized divided into three classes, class A, class B and class M capi-
tal stock. Transactions in capital shares were as follows:
YEAR ENDED
SEPTEMBER 30, 1995
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 31,289,840 $254,653,620
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 11,787,749 95,613,214
- -------------------------------------------------------------------------------
43,077,589 350,266,834
- -------------------------------------------------------------------------------
Shares repurchased (68,020,804) (548,457,685)
- -------------------------------------------------------------------------------
NET DECREASE (24,943,215) $(198,190,851)
- -------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30, 1994
CLASS A SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 50,232,378 $429,526,389
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 12,323,950 104,369,611
- -------------------------------------------------------------------------------
62,556,328 533,896,000
- -------------------------------------------------------------------------------
Shares repurchased (62,848,187) (529,518,577)
- -------------------------------------------------------------------------------
NET DECREASE (291,859) $ (4,377,423)
- -------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30, 1995
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 12,641,962 $103,048,175
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 1,307,429 10,602,896
- -------------------------------------------------------------------------------
13,949,391 113,651,071
- -------------------------------------------------------------------------------
Shares repurchased (7,476,020) (60,088,079)
- -------------------------------------------------------------------------------
NET INCREASE 6,473,371 $53,562,992
- -------------------------------------------------------------------------------
YEAR ENDED
SEPTEMBER 30, 1994
CLASS B SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 23,546,598 $201,688,777
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 1,055,352 8,884,795
- -------------------------------------------------------------------------------
24,601,950 210,573,572
- -------------------------------------------------------------------------------
Shares repurchased (4,825,694) (40,223,569)
- -------------------------------------------------------------------------------
NET INCREASE 19,776,256 $170,350,003
- -------------------------------------------------------------------------------
FOR THE PERIOD
FEBRUARY 14, 1995
(COMMENCEMENT
OF OPERATIONS) TO
SEPTEMBER 30, 1995
CLASS M SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 561,261 $4,670,838
- -------------------------------------------------------------------------------
Shares issued in connection with
reinvestment of distributions 4,845 40,336
- -------------------------------------------------------------------------------
566,106 4,711,174
- -------------------------------------------------------------------------------
Shares repurchased (74,893) (627,705)
- -------------------------------------------------------------------------------
NET INCREASE 491,213 $4,083,469
- -------------------------------------------------------------------------------
<PAGE>
FEDERAL TAX INFORMATION
The fund has designated all distributions paid from net investment income paid
during the fiscal year as exempt-interest dividends. Thus, 100% of these distri-
butions are exempt from federal income tax. For residents of the state of Cali-
fornia, 100% of the fund's distributions from net investment income are also
exempt from California personal income tax.
Pursuant to Section 852 of the Internal Revenue Code, the fund hereby designates
$0.025 per share (or if different, the amount necessary to offset net capital
gain earned by the fund) for classes A and B as capital gain dividends for its
taxable year ended September 30, 1995.
The Form 1099 you receive in January 1996 will show the tax status of all dis-
tributions paid to your account in calendar 1995.
<PAGE>
FUND INFORMATION
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman William F. Pounds, Vice Chairman
Jameson Adkins Baxter Hans H. Estin
John A. Hill Elizabeth T. Kennan
Lawrence J. Lasser Robert E. Patterson
Donald S. Perkins George Putnam, III
Eli Shapiro A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam Charles E. Porter
President Executive Vice President
Patricia C. Flaherty Lawrence J. Lasser
Senior Vice President Vice President
Gordon H. Silver Gary N. Coburn
Vice President Vice President
James E. Erickson William H. Reeves
Vice President Vice President and Fund Manager
William N. Shiebler John R. Verani
Vice President Vice President
Paul M. O'Neil John D. Hughes
Vice President Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam California Tax
Exempt Income 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.
SHARES OF MUTUAL FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR
ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT INSURED BY THE
FEDERAL DEPOSIT
INSURANCE CORPORATION (FDIC), THE FEDERAL RESERVE BOARD, OR ANY
OTHER AGENCY,
AND INVOLVE RISK, INCLUDING THE POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
<PAGE>
<PAGE>
---------------
PUTNAM INVESTMENTS Bulk Rate
U.S. Postage
THE PUTNAM FUNDS PAID
One Post Office Square Putnam
Boston, Massachusetts 02109 Investments
---------------
20984-027/337/677 11/95
<PAGE>
<PAGE>
APPENDIX TO FORM N-30D FILINGS TO DESCRIBE DIFFERENCES BETWEEN
PRINTED AND
EDGAR-FILED TEXTS:
(1) Boldface typeface is displayed with capital letters, italic typeface is
displayed in normal type.
(2) Because the printed page breaks are not reflected, certain tabular and
columnar headings and symbols are displayed differently in this filing.
(3) Bullet points and similar graphic signals are omitted.
(4) Page numbering has been omitted.
(5) The trademark symbol has been replaced by (TM).
(6) The copyright symbol has been replaced by (C).
(7) The registered mark symbol has been replaced by (R).
(8) The dagger symbol has been replaced by +
(9) The double dagger symbol has been replaced by ++
(10) The triple dagger symbol has been replaced by +++
(11) The section symbol has been replaced by ^
(12) The double section symbol has been replaced by ^^
(13) The trile section symbol has been replaced by ^^^
(14) The dagger on dagger symbol has been replaced by *+
