PUTNAM
CALIFORNIA
INTERMEDIATE
TAX EXEMPT
FUND
[GRAPHIC OMITTED: art work]
SEMIANNUAL REPORT
March 31, 1995
[LOGO: BOSTON - LONDON - TOKYO]
<PAGE>
PERFORMANCE HIGHLIGHTS
o "The best-performing funds in the first quarter were muni funds. . . . In
addition to the improved interest-rate outlook, municipal bonds are
benefiting from a shrinkage of available supply."
-- The Wall Street Journal, "Mutual Funds Quarterly Review," March 5, 1995
o 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.
SEMIANNUAL RESULTS AT A GLANCE
CLASS A CLASS B
TOTAL RETURN: NAV POP NAV CDSC
- -------------------------------------------------------------------
(change in value during
period plus reinvested
distributions)
6 months ended 3/31/95 0.89% -2.39% 0.68% -2.27%
CLASS A CLASS B
SHARE VALUE: NAV POP NAV
- -------------------------------------------------------------------
9/30/94 $8.35 $8.63 $8.34
3/31/95 8.20 8.48 8.20
CAPITAL
DISTRIBUTIONS: NO. INCOME GAINS<F1> TOTAL
- -------------------------------------------------------------------
Class A 6 $0.217485 -- $0.217485
Class B 6 0.191630 -- 0.191630
CLASS A CLASS B
CURRENT RETURN: NAV POP NAV
- -------------------------------------------------------------------
End of period
Current dividend rate<F2> 5.32% 5.15% 4.66%
Taxable equivalent<F3> 9.90 9.58 8.67
Current 30-day SEC yield<F4> 5.18 5.01 4.50
Taxable equivalent<F3> 9.64 9.32 8.37
Without expense limitation 4.06 3.92 3.38
Taxable equivalent<F4> 7.55 7.29 6.29
Performance data represent past results and reflect an expense limitation in
effect during the period. Without the limitation, results would have been lower.
For performance over longer periods, see pages 8 and 9. POP assumes 3.25%
maximum sales charge. CDSC assumes 3% maximum contingent deferred sales charge.
<F1>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. <F2>Income portion of most recent distribution, annualized and
divided by NAV or POP at end of period. <F3>Assumes maximum combined 46.24%
federal and California state tax rate. Results for investors subject to lower
tax rates would not be as advantageous. <F4>Based only on investment income,
calculated using SEC guidelines.
<PAGE>
FROM THE CHAIRMAN
[GRAPHIC OMITTED:
photo of
George Putnam]
(C) Karsh, Ottawa
Dear Shareholder:
The early months of Putnam California Intermediate Tax Exempt Fund's current
fiscal year represented a turbulent period for Golden State municipal-bond
investors, most notably marked by the troubles in Orange County. January brought
a perceptibly brighter mood, and a market rise that significantly buoyed your
fund's results.
It is gratifying, therefore, to be able to report positive results for the six
months ended March 31, 1995. Thanks to your fund's broad diversification and
high-quality portfolio, shareholders were spared significant damage in the
aftermath of the Orange County bankruptcy.
As your fund moves into the second half of fiscal 1995, it will be guided by a
new fund manager. William H. Reeves is no stranger to California. Before joining
Putnam in 1986, he was a vice president and registered principal at Crocker
National Bank in San Francisco. Bill also manages other Putnam California
tax-free funds. As he writes in the following report, Bill believes prospects
for municipal bonds are now much improved over a few months ago.
Respectfully yours,
/s/ George Putnam
George Putnam
Chairman of the Trustees
May 17, 1995
<PAGE>
REPORT FROM THE FUND MANAGER
WILLIAM H. REEVES
What a difference a few months can make. With Putnam California Intermediate
Tax Exempt Fund's total return for class A rising more than 4.7% and class B
shares rising more than 4.6% in the first three months of 1995, the
semiannual period is closing on a much higher note than it began. Municipal
bonds have recouped more than 50% of their losses since hitting market lows
last November. Stabilizing interest rates, low inflation, and positive
supply/demand dynamics have contributed to this strong turnaround.
Indeed, as the Bond Fund Report noted in its March 24, 1995, issue, "The
comeback is most pronounced in the California municipal funds . . . Booming
state revenue growth and a stabilization in interest rates are two bullish
developments for municipalities."
o A CONSERVATIVE INVESTMENT STRATEGY
The fund's total return for the six months ended March 31, 1995, was 0.89%
for class A shares and 0.68% for class B shares, at net asset value. This
total return performance should be considered in light of the fund's
conservative investment strategy, which places a premium on attractive
tax-free income and relative stability of principal. The fund's primary
investment vehicle--intermediate bonds whose maturities range between 6 and
10 years--have, historically, provided slightly lower returns than
longer-term bonds, along with greater relative price stability. In fact, in
today's municipal-bond market, intermediate bonds are yielding 80% of
long-term municipal bonds overall--with half the price volatility.
Rounding out this performance is the fund's yield profile, which provides
some heartening news. Taxable equivalent yields are now at double-digit
levels and represent excellent values--particularly for investors in such
high-tax states as California. In fact, your fund's 5.32% current dividend
rate for class A shares at net asset value would translate into a current
return of 9.90% for a taxable investment, assuming the maximum combined
<PAGE>
46.24% federal and California state tax rate. Most investors in lower
brackets would also enjoy tax advantages, though not necessarily to the same
extent.
o TAX-LOSS SELLING, ORANGE COUNTY CONCERNS DEPRESS PRICES
As the end of a tax year approaches, individual and institutional investors
typically employ several strategies to reduce the impact of taxes. So,
beginning in October and November of 1994, many investors sold municipal
bonds with the intent of using the capital losses to offset taxable profits
in other sectors. This tax-loss selling thwarted a brief rally in early
October and only led to further pressures on municipal-bond prices.
In early December, as municipals were enjoying a short rally, the financial
woes of Orange County shook the market. The immediate drop in value of
county-related bonds was only the beginning of the fallout from the $2
billion in losses sustained by the county's investment fund. Your fund's
Orange County holdings are minimal, and consist of revenue bonds whose income
depends solely on the individual project, not on Orange County. The fund's
broad diversification and extremely high credit quality played a major role
in minimizing the impact of this event. While the incident raised concerns
among investors across the country, the Orange County scare only postponed an
inevitable rally in the tax-free market, which began in earnest early in
calendar 1995.
o POSITIONING FOR AN IMPROVING MUNICIPAL MARKET
The Federal Reserve Board continued its tight stance on U.S. monetary policy
during the period. In November, the Fed's most
[GRAPHIC OMITTED: pie chart "CREDIT QUALITY COMPOSITION 3/31/95" showing:
AAA 23.56%; AA 19.16%; A 32.25%; BBB 25.03%; with caption of:
Based on portfolio market value as of 3/31/95 and will vary over time.
Based on Standard and Poor's ratings. While the fund has the flexibility to
invest in higher-yielding, lower-rated bonds, generally at least 75% of the
portfolio will be investment grade. Investment-grade securities are those
rated BBB or higher by Standard & Poor's, Baa or higher by Moody's
Investors Service, Inc.]
<PAGE>
aggressive increase in short-term interest rates -- three-quarters of a
percentage point -- was aimed at slowing the economy and heading off the
threat of inflation. This sharp rate increase helped calm inflation fears
considerably. Growing investor confidence is confirmed by the fact that the
Fed's widely expected rate increase in February -- the seventh in 12 months
-- barely caused a ripple in the bond markets.
With all signs suggesting that the municipal-bond market was oversold and
poised to recover in the last quarter of 1994, we took several steps early in
the period to help ensure that the fund would be an active participant in a
rally. We moved the fund to a fully invested posture by adding a selection of
high-quality bonds with attractive income potential. Further reflecting our
growing optimism, we lengthened the fund's duration by extending the average
maturity slightly and increasing the position of deep discount bonds--bonds
selling at prices well below what we perceive as their fair market value.
While yields on shorter-term bonds tend to fluctuate more than those on
longer-term bonds, longer-term bond prices typically react more sharply to
rate swings. Consequently, with a current average maturity of approximately
10 years and an average duration of around 5.7 years, your fund may not
appreciate as significantly as longer-term municipal bond funds during market
rallies. However, it does offer the built-in tendency to cushion market
declines in a rising interest rate environment, as it demonstrated in 1994.
o POSITIVE ECONOMIC AND MARKET FUNDAMENTALS SEEN FOR 1995
While the months ahead are not likely to sustain the healthy pace of the last
three months of the period, there are several reasons to be cautiously
optimistic about your fund's performance. The most dramatic rise in interest
rates appears to be behind us. With rates stabilizing, the fund will remain
positioned most effectively to capitalize on market rallies. Secondly, low
inflation and moderate economic growth foster a generally benign environment
for bonds. Thirdly, moderately strong demand chasing a low supply of tax-free
securities may help to create a natural price support. Other factors, of
course, can also influence prices.
<PAGE>
[GRAPHIC OMITTED: bar chart "TOP 5 SECTORS (3/31/95)*" showing:
Utilities 17.18%; Housing 14.07%; Water and Sewer 8.01%; Hospitals 5.37%;
Solid waste 3.21%; with footnote of:
*As a percentage of net assets on 3/31/95. Holdings will vary over time.]
Having weathered one of the worst bond markets on record, all signs suggest that
municipal bonds, like all fixed-income investments, are back on track. Clearly,
investors who sat tight and remained committed to their longer-term goals are
well positioned to benefit from an improving tax-free market.
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 3/31/95, there is no guarantee the fund will continue to
hold these securities in the future.
<PAGE>
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. 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. For comparative purposes, we show how the fund
performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 3/31/95
LEHMAN BROS.
CLASS A CLASS B MUNICIPAL
NAV POP NAV CDSC BOND INDEX CPI
- --------------------------------------------------------------------------------
6 months 0.89% -2.39% 0.68% -2.27% 5.54% 1.34%
- --------------------------------------------------------------------------------
Life of class 0.80 -2.53 0.26 -2.63 5.61 2.64
- --------------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes payable
on reinvested distributions. 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.
<PAGE>
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 a 1% during
the fourth 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.
<PAGE>
PORTFOLIO OF INVESTMENTS OWNED
March 31, 1995 (Unaudited)
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (95.6%)<F1>
PRINCIPAL AMOUNT RATINGS<F2> VALUE
CALIFORNIA (91.3%)
- ------------------------------------------------------------------------------------------
<C> <S> <C> <C>
$ 305,000 CA State Public Wks. Brd. Rev. Bonds
(Dept. of Corr. Calipatria State Prison), Ser. A,
6 1/4s, 9/1/05 A $ 314,531
500,000 CA State Rev. Anticipation Bonds
7s, 10/1/05 A 556,875
CA Statewide Cmtys. Dev. Auth., Certif. of Part. (COP)
240,000 6 3/4s, 12/1/04 A 255,000
400,000 (United Western Med. Ctrs.), 6 1/2s, 12/1/04 A 412,000
Central Valley Fing. Auth. Rev. Bonds
(Carson Ice-Cogeneration Project)
200,000 5.8s, 7/1/04 BBB 196,000
100,000 5.7s, 7/1/03 BBB 97,750
320,000 Fresno, COP (Unified Sch. Dist.), 7 1/4s, 3/1/07<F3> A 338,800
250,000 Kings Cnty., Waste Mgmt. Auth. Rev. Bonds
(Solid Waste), 6.6s, 10/1/04 BBB 258,436
470,000 Los Angeles Cnty., Certif. of Participation
(Marina Del Rey), Ser. A, 6 1/4s, 7/1/03 BBB/P 470,000
405,000 Los Angeles, Multi.-Fam. Rev. Bonds
(Mahal Apts.), Ser. A, Government National Mortgage
Assn., Coll., 6 1/4s, 8/20/04 AAA 421,706
500,000 Northn. CA Pwr. Agency
(Geothermal Project No. 3), Ser. A, 5.6s, 7/1/06 A 490,000
250,000 Orange Cnty. Dev. Agcy. Rev. Bonds
(Santa Ana Height Project), 5.8s, 9/1/03 BBB 235,313
300,000 Oro Loma San. Dist. Swr. Rev. Bonds, Ser. A,
American Municipal Bond Assurance Corp. (AMBAC),
8.55s, 10/1/06 AAA 356,250
325,000 San Diego Multi.-Fam. Hsg. Auth. Rev. Bonds (Hillside
Hsg. Project), Ser. A, Federal National Mortgage Assn.
Coll., 5.7s, 1/1/05 AAA 324,594
San Francisco, City and Cnty. Rev. Bonds
250,000 (Street Impt. Project), Ser. B, 6 1/2s, 6/15/03 AA 260,938
250,000 (Public Schools Fac. Impt. Project), Ser. A, 7.6s, 9/1/06 AA 268,438
300,000 Santa Clara Cnty., Fin. Auth. Lease Rev. Bonds
(VMC Facs. Replacement Project), Ser. A, AMBAC,
7 1/2s, 11/15/04 AAA 346,875
<PAGE>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS<F2> VALUE
CALIFORNIA (continued)
- ------------------------------------------------------------------------------------------
$ 250,000 Southn. CA Rapid Transit, COP
(Workers Comp. Fund), Municipal Bond Insurance
Assn., 7 1/2s, 7/1/05 AAA $ 280,000
500,000 Southn. CA Pub. Pwr. Auth. Rev. Bonds
(Transmission Project), Ser. A, 7.3s, 7/1/08 AA 534,375
235,000 Stanislaus, Solid Waste Fac., COP
(Ogden Martin Syst. Inc. Project), 7 1/2s, 1/1/05 BBB 246,163
370,000 U. of CA COP
(UCLA Ctr. Chiller/Cogen Project), 5s, 11/1/04 AA 342,250
----------
$7,006,294
PUERTO RICO (4.3%)
- ------------------------------------------------------------------------------------------
300,000 Cmnwlth. of Puerto Rico, Urban Renewal & Hsg. Corp.
Rev. Bonds, 7 7/8s, 10/1/04 Baa 333,750
----------
TOTAL INVESTMENTS (cost $7,134,449)<F4> $7,340,044
- ------------------------------------------------------------------------------------------
<PAGE>
<FN>
<F1> Percentages indicated are based on total net assets of $7,674,341, which
correspond to a net asset value for class A and class B shares of $8.20 and
$8.20, respectively.
<F2> The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at March 31, 1995 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 those securities at March 31, 1995. Securities
rated by Putnam are indicated by "/P" and are not publically traded.
<F3> A portion of this security was pledged to cover margin requirements for
future contracts at March 31, 1995. The market value segregated with the
custodian transactions in future contracts was $74,113.
<F4> The aggregate identified cost on a tax basis is $7,134,449, resulting in
appreciation and depreciation of $221,181 and $15,586, respectively, or net
appreciation of $205,595.
</FN>
<CAPTION>
The Fund had the following industry group concentrations greater than 10% on
March 31, 1995 (as a percentage of net assets):
Utilities 17.2%
Housing 14.1
U.S. TREASURY BOND FUTURES OUTSTANDING at March 31, 1995
AGGREGATE EXPIRATION UNREALIZED
TOTAL VALUE FACE VALUE DATE DEPRECIATION
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. Treasury Note
Futures (Sell) $1,039,062 $1,034,156 June/95 $(4,906)
</TABLE>
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1995 (Unaudited)
ASSETS
- -------------------------------------------------------------------------------
Investments in securities at value
(identified cost $7,134,449) (Note 1) $7,340,044
- -------------------------------------------------------------------------------
Cash 453,449
- -------------------------------------------------------------------------------
Interest receivables 133,807
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 56,018
- -------------------------------------------------------------------------------
Receivable from Manager (Note 2) 57,610
- -------------------------------------------------------------------------------
Unamortized organization expenses (Note 1) 12,071
- -------------------------------------------------------------------------------
Receivable for variation margin on futures contracts 2,500
- -------------------------------------------------------------------------------
TOTAL ASSETS 8,055,499
- -------------------------------------------------------------------------------
LIABILITIES
- -------------------------------------------------------------------------------
Payable for securities purchased 325,926
- -------------------------------------------------------------------------------
Distributions payable to shareholders 13,876
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 10
- -------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 52
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 3,747
- -------------------------------------------------------------------------------
Other accrued expenses 37,547
- -------------------------------------------------------------------------------
TOTAL LIABILITIES 381,158
- -------------------------------------------------------------------------------
NET ASSETS $7,674,341
- -------------------------------------------------------------------------------
REPRESENTED BY
- -------------------------------------------------------------------------------
Paid-in capital $7,871,063
- -------------------------------------------------------------------------------
Distributions in excess of net investment income (3,363)
- -------------------------------------------------------------------------------
Accumulated net realized loss on investment transactions and futures (394,048)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures contracts 200,689
- -------------------------------------------------------------------------------
TOTAL--REPRESENTING NET ASSETS APPLICABLE TO
CAPITAL SHARES OUTSTANDING $7,674,341
- -------------------------------------------------------------------------------
COMPUTATION OF NET ASSET VALUE AND OFFERING PRICE
- -------------------------------------------------------------------------------
Net asset value and redemption price of class A shares
($4,285,313 divided by 522,698 shares) $8.20
- -------------------------------------------------------------------------------
Offering price per class A share (100/96.75 of $8.20)* $8.48
- -------------------------------------------------------------------------------
Net asset value and offering price of class B shares
($3,389,028 divided by 413,327 shares)+ $8.20
- -------------------------------------------------------------------------------
* 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.
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF OPERATIONS
Six months ended March 31, 1995 (Unaudited)
- -------------------------------------------------------------------------------
Tax exempt interest income $ 213,666
- -------------------------------------------------------------------------------
EXPENSES:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 21,559
- -------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 702
- -------------------------------------------------------------------------------
Postage fees 828
- -------------------------------------------------------------------------------
Auditing fees 34,545
- -------------------------------------------------------------------------------
Report to shareholders 26,003
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,313
- -------------------------------------------------------------------------------
Amortization of organization expenses (Note 1) 1,008
- -------------------------------------------------------------------------------
Distribution fees--Class A (Note 2) 3,804
- -------------------------------------------------------------------------------
Distribution fees--Class B (Note 2) 8,435
- -------------------------------------------------------------------------------
Other expenses 13,862
- -------------------------------------------------------------------------------
Fees waived by Manager (Note 2) (79,897)
- -------------------------------------------------------------------------------
TOTAL EXPENSES 33,162
- -------------------------------------------------------------------------------
NET INVESTMENT INCOME 180,504
- -------------------------------------------------------------------------------
Net realized loss on investments (Notes 1 and 3) (305,564)
- -------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (65,246)
- -------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures
contracts during the period 244,217
- -------------------------------------------------------------------------------
NET LOSS ON INVESTMENT TRANSACTIONS (126,593)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 53,911
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
FOR THE PERIOD
JUNE 1, 1994
SIX MONTHS (COMMENCEMENT
ENDED OF OPERATIONS) TO
MARCH 31 SEPTEMBER 30
1995* 1994
- ------------------------------------------------------------------------------------------
<C> <C> <C>
INCREASE IN NET ASSETS
- ------------------------------------------------------------------------------------------
Operations:
- ------------------------------------------------------------------------------------------
Net investment income $ 180,504 $ 59,992
- ------------------------------------------------------------------------------------------
Net realized loss on investments and futures contracts (370,810) (23,238)
- ------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investments and futures contracts 244,217 (43,528)
- ------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS 53,911 (6,774)
- ------------------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
- ------------------------------------------------------------------------------------------
Net investment income
- ------------------------------------------------------------------------------------------
Class A (132,231) (52,147)
- ------------------------------------------------------------------------------------------
Class B (51,355) (8,126)
- ------------------------------------------------------------------------------------------
Increase from capital share transactions (Note 4) 488,453 7,380,610
- ------------------------------------------------------------------------------------------
TOTAL INCREASE IN NET ASSETS 358,778 7,313,563
- ------------------------------------------------------------------------------------------
NET ASSETS
- ------------------------------------------------------------------------------------------
Beginning of period 7,315,563 2,000
- ------------------------------------------------------------------------------------------
END OF PERIOD (including distributions in
excess of net investment income of
$3,363 and $281, respectively) $7,674,341 $7,315,563
- ------------------------------------------------------------------------------------------
*Unaudited
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the year)
<TABLE>
<CAPTION>
FOR THE PERIOD FOR THE PERIOD
JUNE 1, 1994 JUNE 1, 1994
SIX MONTHS (COMMENCEMENT OF SIX MONTHS (COMMENCEMENT OF
ENDED OPERATIONS) TO ENDED OPERATIONS) TO
MARCH 31 SEPTEMBER 30 MARCH 31 SEPTEMBER 30
1995<F1> 1994 1995<F1> 1994
- ----------------------------------------------------------------------------------------------------------------------
CLASS A CLASS B
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $8.35 $8.50 $8.34 $8.50
- ----------------------------------------------------------------------------------------------------------------------
INVESTMENT OPERATIONS
- ----------------------------------------------------------------------------------------------------------------------
Net investment income <F2> .20 .14 .19 .12
- ----------------------------------------------------------------------------------------------------------------------
Net realized and unrealized loss
on investments (.13) (.15) (.14) (.16)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL FROM INVESTMENT OPERATIONS .07 (.01) .05 (.04)
- ----------------------------------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (.22) (.14) (.19) (.12)
- ----------------------------------------------------------------------------------------------------------------------
TOTAL DISTRIBUTIONS (.22) (.14) (.19) (.12)
- ----------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, END OF PERIOD $8.20 $8.35 $8.20 $8.34
- ----------------------------------------------------------------------------------------------------------------------
TOTAL INVESTMENT RETURN AT NET
ASSET VALUE (%) <F3><F4> .89<F4> (.09)<F4> .68<F4> (.42)<F4>
- ----------------------------------------------------------------------------------------------------------------------
NET ASSETS, END OF PERIOD (in thousands) $4,285 $5,797 $3,389 $1,519
- ----------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%) <F2><F4> 0.37 -- 0.67 0.12
- ----------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) <F2><F4> 2.62 1.75 2.26 1.39
- ----------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) <F4> 111.76 73.18 111.76 73.18
- ----------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Unaudited.
<F2> Reflects a limitation and voluntary absorption of expenses incurred by the
fund. As a result of the limitation, net investment income for the period
ended September 30, 1994, reflects a reduction of $0.04 and $0.05 for class
A and class B, respectively. Net investment income for the six months ended
March 31, 1995 reflects a reduction of $0.09 and $0.07 for class A and
class B, respectively. Without the limitation results would have been
lower. (See Note 2)
<F3> Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
<F4> Not annualized.
</FN>
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
March 31, 1995 (Unaudited)
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 Investments,
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-rata
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 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. The fair value of restricted securities is
determined by the Manager following procedures approved 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 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 the time it was closed.
The 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 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 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 futures
contracts and post-October losses. Reclassifications are made to the fund's
capital accounts to reflect income 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. Discount on zero-coupon bonds is accreted according to
the effective yield method.
G UNAMORTIZED ORGANIZATION EXPENSES Expenses incurred by the fund in connection
with its organization, its registration with the Securities and Exchange
Commission and with various states, and the initial public offering of its
shares aggregated $13,079. These expenses are being amortized on a straight-line
basis over a five-year period.
NOTE 2
MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS
Compensation of Putnam Investment 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.
Until June 1, 1995, the Manager has voluntarily agreed to reduce its
compensation (and, to the extent necessary, absorb other expenses of the fund),
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 0.65% of the fund's average
net assets. The limitation was accomplished by a reduction of the compensation
payable under the management contract to the Manager.
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. 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 reported in the Statement of operations
for the six months ended March 31, 1995 have been reduced by credits allowed by
PFTC.
The fund has adopted distribution plans (the "Plans") with respect to its class
A shares and class B shares pursuant to Rule 12b-1 under the Investment Company
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
provided and expenses incurred by it in distributing shares of the fund. The
plans provide for payments by the fund to Putnam Mutual Fund Corp. at an annual
rate up to 0.35% and 1.00% of the average net assets attributable to class A and
class B, respectively. The Trustees have approved payment by the fund at an
annual rate of 0.15% and 0.75% of the average net assets attributable to class A
and class B shares respectively.
For the six months ended March 31, 1995, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $1,223 from the sale of class A shares
and $1,861 in contingent deferred 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 purchased as part of an investment of $1 million or more. For
the six months ended March 31, 1995, Putnam Mutual Funds Corp., acting as
underwriter received no monies on class A redemptions.
NOTE 3
PURCHASES AND SALES OF SECURITIES
During the six months ended March 31, 1995, purchases and sales of investment
securities other than short-term investments aggregated $8,155,601 and
$9,300,736 respectively. There were no purchases or sales of U.S. government
obligations during the six months ended March 31, 1995. In determining the net
gain or loss on securities sold, the cost of securities has been determined on
the identified cost basis.
The following is a summary of futures contracts activity during the six months
ended March 31, 1995.
Sales of Futures Contacts
-------------------------
Number of Aggregate
Contracts Face Value
Contracts opened 65 $6,512,875
Contracts closed (55) (5,478,719)
Open at end of period 10 $1,034,156
<PAGE>
NOTE 4
CAPITAL SHARES
At March 31, 1995 there was an unlimited number of shares of beneficial interest
authorized divided into two classes of shares, class A and class B capital
shares. Transactions in capital shares were as follows:
JUNE 1 (COMMENCEMENT OF
SIX MONTHS ENDED MARCH 31 OPERATIONS) TO SEPTEMBER 30
1995 1994
- -------------------------------------------------------------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 439,775 $ 3,523,342 736,864 $6,206,518
Shares issued in
connection with
reinvestment of
distributions 10,649 85,852 5,334 44,864
- -------------------------------------------------------------------------------
450,424 3,609,194 742,198 6,251,382
Shares repurchased (622,245) (4,986,658) (47,797) (400,117)
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) (171,821) $(1,377,464) 694,401 $5,851,265
- -------------------------------------------------------------------------------
JUNE 1 (COMMENCEMENT OF
SIX MONTHS ENDED MARCH 31 OPERATIONS) TO SEPTEMBER 30
1995 1994
- -------------------------------------------------------------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
- -------------------------------------------------------------------------------
Shares sold 296,196 $ 2,392,046 217,739 $1,830,683
Shares issued in
connection with
reinvestment of
distributions 2,535 20,433 312 2,615
- -------------------------------------------------------------------------------
298,731 2,412,479 218,051 1,833,298
Shares repurchased (67,500) (546,562) (36,072) (303,953)
- -------------------------------------------------------------------------------
NET INCREASE 231,231 $ 1,865,917 181,979 $1,529,345
- -------------------------------------------------------------------------------
<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
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
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
James E. Erickson
Vice President
William H. Reeves
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
<PAGE>
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.
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 PRINCIPAL AMOUNT INVESTED.
<PAGE>
[LOGO: PUTNAM INVESTMENTS]
THE PUTNAM FUNDS
One Post Office Square
Boston, Massachusetts 02109
------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
------------
943/944-17783
