Putnam
California
Tax Exempt
Income Fund
ANNUAL REPORT
September 30, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "Shareholders have little reason to doubt [Fund Manager William]
Reeves's ability to navigate whatever the market throws at him. He
has headed the fund for 10 years and has produced a solid package of
competitive yield and total returns."
-- Morningstar Mutual Funds, September 13, 1996
* Morningstar awarded Putnam California Tax Exempt Income Fund's class A
shares five out of a possible five stars for the overall risk-adjusted
performance as of September 30, 1996 (based on the average annual
returns for the 3-, 5-, and 10-year periods). Of the 1,013 tax-free
funds tracked over this period, 10% achieved five stars.*
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
13 Portfolio holdings
21 Financial statements
*Morningstar, Inc., a mutual fund research firm, rates a fund relative
to other funds with similar investment objectives based on the fund's
3-, 5-, and 10-year average annual returns (with fee adjustments) in
excess of 90-day Treasury bill returns and a risk factor that reflects
performance below 90-day Treasury bill returns. The 1-year rating is
calculated using the same methodology, but it is not a component of the
overall rating. Ratings are updated monthly. For the 3-year period,
there were 1,013 funds in the municipal bond category and the fund
received 4 stars. For the 5-year period, there were 561 funds in the
category and the fund received 4 stars. For the 10-year period, there
were 221 funds in the category and the fund received 5 stars.
Performance of other share classes will vary. Past performance is not
indicative of future results.
From the Chairman
[PHOTO OF GEORGE PUTNAM OMITTED]
(copyright) Karsh, Ottawa
Dear Shareholder:
The flat-tax anxiety that gripped the municipal bond market as Putnam
California Tax Exempt Income Fund began fiscal 1996 seems like ancient
history today. As with so many other historical events, however, the
effects linger. In this case, the residual consequence has had some
positive implications. When the rest of the bond market took a rather
steep drop last February, municipal bond prices barely wavered, although
they are still mildly erratic.
Overall, Fund Manager William Reeves believes positive forces at work in
the municipal bond market outweigh the negatives. Demand is strong,
especially relative to fairly modest supply. The economy, interest
rates, and inflation remain generally favorable. In sum, after a year
full of challenges, the outlook for a better year ahead appears
positive.
In the report that follows, Bill tells you how all of this relates to
the performance of your fund in fiscal 1996 and what he sees as the
prospects for the fiscal year just under way.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
November 20, 1996
Report from the Fund Manager
William H. Reeves
Fixed-income investors were buffeted by tides of change over the 12
months ended September 30, 1996, Putnam California Tax Exempt Income
Fund's most recent fiscal year. Expectations of stronger economic growth
and its possible effects on future inflation caused last year's bond
market rally to reverse course sharply early in calendar 1996. As the
economy and interest-rate environment shifted gears over the ensuing
months, the fixed-income market endured significant twists and turns.
Investors' forecasts underwent one re-evaluation after another, and bond
prices responded with several abrupt changes in direction. Nevertheless,
your fund provided competitive results over the period.
The fund's class A shares returned 6.81%, class B shares returned 5.99%,
and class M shares returned 6.48%, all at net asset value, during fiscal
1996. In all cases, results were ahead of the 6.04% return measured by
the Lehman Brothers Municipal Bond Index. Results at public offering
price were 1.71%, 0.99%, and 3.03% for class A, class B, and class M
shares, respectively. Additional performance information can be found on
pages 8 and 9.
* YEAR MARKED BY UNCERTAINTY OVER ECONOMY, INTEREST RATES
Municipal bond investors have certainly weathered a full range of
interest-rate climates over the past year. An expectation of slow
economic growth and minimal inflation drove rates to near-historic lows
throughout most of 1995. They reversed course in March 1996, when
reports of stronger-than-expected growth in employment stimulated
investors' concerns about robust economic activity and future inflation.
Interest rates rose and volatility increased as investors awaited data
that would clarify longer-term economic trends.
In our view, this pattern of market volatility is likely to continue
over the next several months, although we expect it to be confined
within a rather narrow trading range. We are monitoring early signs of
pressure in wage inflation, but we still expect inflation to remain mild
overall. We believe this climate of moderate economic growth and low
inflation will provide improved stability for municipal bonds. Most of
the portfolio's total return going forward is likely to come from coupon
income rather than from price appreciation.
Although fluctuating interest rates affected all fixed-income
investments during the period, municipal bonds were cushioned by a more
favorable supply and demand relationship. California tax-exempts were
further buoyed by the improving status of the state's economy. The
state's rate of economic growth, fueled by positive momentum in the
biotechnology, entertainment, and aerospace sectors, currently is among
the best in the nation. Finally, most of the financial issues that
plagued Orange County have been resolved. Overall, the state's progress
has made its tax-exempt securities attractive investment opportunities,
thus luring back many former investors and attracting new ones. Demand
for the state's debt has been solid and the resulting price support has
enabled California bonds to outperform those in many other sectors of
the municipal bond market.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS*]
Water and sewerage 20.1%
Utilities 19.7%
Health care 12.1%
Transportation 11.8%
Education 7.3%
Footnote reads:
*Based on net assets as of 9/30/96. Holdings will vary over time.
* QUALITY AND BALANCE ARE KEYS TO PORTFOLIO STRATEGY
Our approach to your fund's portfolio is to maintain a balance of
attractive income, price stability, and solid total return potential. We
continue to emphasize bonds with ratings of Aaa and Aa to enhance
capital preservation. These high-quality securities typically provide
greater price stability in a fluctuating interest-rate environment.
Furthermore, during fiscal 1996, yields on lower-rated bonds had fallen
to levels that we did not believe compensated investors appropriately
for the additional risk. The higher-rated bonds, in our view,
represented better investment value.
We improved total return by gauging value and repositioning assets
accordingly. Bonds trade in relationship to each other based on various
credit and quantitative characteristics. We determined which bonds we
believed would provide optimum value both on their own merit and
relative to alternative investments. We then monitored their trading
patterns and took advantage of timely opportunities. We invested in
those bonds we believed to be attractively valued and sold those we
judged to be overvalued.
For the most part, your fund has been invested in high-quality liquid
bonds with 20- to 30-year maturities. During the year, we found value in
many essential-purpose revenue bonds. As their name suggests, these
securities are issued to provide services such as water and sewer that
are deemed necessary to a community. Such securities often provide
higher yields than those of comparable quality issued for other
purposes.
We had also lengthened the fund's duration in preparation for the
declining interest-rate environment that prevailed in the early months
of fiscal 1996. Duration is the principal measure of interest-rate
sensitivity for a given portfolio of bonds. The longer the duration, the
more sensitive a portfolio is to a given change in rates. When rates are
falling, as was the case early in the period, bond prices rise. Thus a
relatively long duration enables the fund to capture a greater portion
of that price appreciation. We later shortened the fund's duration
modestly when interest rates began to rise.
[GRAPHIC PIE CHART OMITTED: CREDIT QUALITY OVERVIEW*]
A -- 8.8%
Aa -- 8.1%
Aaa -- 63.2%
Short term -- 4.0%
B -- 0.3%
Ba -- 1.2%
Baa -- 14.4%
Footnote reads:
*As a percentage of market value as of 9/30/96. A bond rated Baa or
higher is considered investment grade. All ratings reflect Moody's
descriptions, unless noted otherwise; percentages may include unrated
bonds considered by Putnam Management to be of comparable quality.
Ratings will vary over time.
* OUTLOOK REFLECTS STRENGTH OF STATE'S ECONOMY
Our outlook for the California tax-exempt market is favorable. We expect
the rebound in the state's economy to continue and the political and
fiscal situations that caused upheaval in the past to remain stable or
to improve. We also believe the supply and demand balance will remain
positive. Many existing bonds are due to be called away or mature, which
will reduce the supply of bonds available to investors. New issuance is
expected to be met with steady demand as California's improving
investment climate attracts an increasing number of investors.
The direction of the stock market and short-term interest rates could
also influence demand for municipal bonds. Some investors question the
sustainability of the stock market's recent strength without undergoing
a temporary correction. Should such a correction occur, we believe
demand for municipal bonds would increase substantially. Lower short-
term interest rates could also stimulate demand.
On balance, we expect the environment for municipal bonds to exhibit
more stability than it has in the past year, although it could
experience periods of short-term choppiness as investors react to
stimuli such as the release of economic reports and their assessment of
November election results. Given the current and projected economic
environment, we believe your fund is well positioned to respond
positively to unfolding events in the fiscal year ahead.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 9/30/96, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. 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.
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 in the fund.
TOTAL RETURN FOR PERIODS ENDED 9/30/96
Class A Class B Class M
(inception date) (4/29/83) (1/4/93) (2/14/95)
NAV POP NAV CDSC NAV POP
- -----------------------------------------------------------------------
1 year 6.81% 1.71% 5.99% 0.99% 6.48% 3.03%
- -----------------------------------------------------------------------
5 years 42.20 35.52 -- -- -- --
Annual average 7.30 6.27 -- -- -- --
- -----------------------------------------------------------------------
10 years 111.72 101.64 -- -- -- --
Annual average 7.79 7.26 -- -- -- --
- -----------------------------------------------------------------------
Life of class -- -- 22.89 19.89 13.46 9.81
Annual average -- -- 5.67 4.97 8.05 5.91
- -----------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/96
Lehman Bros. Consumer
Municipal Bond Index Price Index
- -----------------------------------------------------------------------
1 year 6.04% 3.00%
- -----------------------------------------------------------------------
5 years 43.28 15.02
Annual average 7.46 2.84
- -----------------------------------------------------------------------
10 years 113.78 43.19
Annual average 7.89 3.66
- -----------------------------------------------------------------------
Life of class B 27.41 11.20
Annual average 6.68 2.88
- -----------------------------------------------------------------------
Life of class M 16.30 4.99
Annual average 9.50 3.03
- -----------------------------------------------------------------------
Performance data represent past results, do not reflect future
performance, and will differ for each share class. They do not take into
account any adjustment for taxes payable on reinvested distributions.
Investment returns and net asset value will fluctuate so that an
investor's shares, when sold, may be worth more or less than their
original cost. POP assumes 4.75% maximum sales charge for class A shares
and 3.25% for class M shares. CDSC for class B shares assumes the
applicable sales charge, with the maximum being 5%.
[GRAPHIC WORM CHART OMITTED: GROWTH OF A $10,000 INVESTMENT]
Cumulative total return of a $10,000 investment since 9/30/86
Starting value (Ending Value)
$9,525 Fund's class A shares at POP $20,164
$10,000 Lehman Bros. Municipal Bond Index $21,378
$10,000 Consumer Price Index $14,319
(plot points for 10-year total return mountain chart)
Lehman Bros.
Date/year Fund at POP Muni Bond Index CPI
- --------- ---------- --------------- ------
9/30/86 $9,525 $10,000 $10,000
9/30/87 9,379 10,052 10,436
9/30/88 10,851 11,357 10,871
9/30/89 11,897 12,343 11,343
9/30/90 12,581 13,182 12,042
9/30/91 14,180 14,920 12,450
9/30/92 15,647 16,480 12,822
9/30/93 17,780 18,580 13,167
9/30/94 17,151 18,131 13,557
9/30/95 18,878 20,160 13,902
9/30/06 20,164 21,378 14,319
Footnote reads:
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 $12,289 on 9/30/96 ($11,989 with a redemption at the end of the period).
A $10,000 investment in the fund's class M shares at inception on 2/14/95
would have been valued at $11,346 at net asset value on 9/30/96, $10,981 at
public offering price.
PRICE AND DISTRIBUTION INFORMATION
12 months ended 9/30/96
Class A Class B Class M
- -----------------------------------------------------------------------
Distributions (number) 12 12 12
- -----------------------------------------------------------------------
Income1 $0.469418 $0.413321 $0.441809
- -----------------------------------------------------------------------
Total $0.469418 $0.413321 $0.441809
- -----------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------
9/30/95 $8.37 $8.79 $8.37 $8.36 $8.64
- -----------------------------------------------------------------------
9/30/96 8.46 8.88 8.45 8.45 8.73
- -----------------------------------------------------------------------
Current return
- -----------------------------------------------------------------------
End of period
- -----------------------------------------------------------------------
Current dividend
rate2 5.47% 5.21% 4.82% 5.15% 4.98%
- -----------------------------------------------------------------------
Taxable equivalent3 10.17 9.69 8.97 9.58 9.26
- -----------------------------------------------------------------------
Current 30-day SEC
yield4 5.18 4.93 4.51 4.87 4.71
- -----------------------------------------------------------------------
Taxable equivalent3 9.64 9.17 8.39 9.06 8.76
- -----------------------------------------------------------------------
1 For some investors, investment income may also be subject to the
federal alternative minimum tax.
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 investors subject to lower tax rates would not be as advantageous.
4 Based only on investment income, calculated using SEC guidelines.
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
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 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 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. Securities in the
fund do not match those in the indexes and performance of the fund will
differ. It is not possible to invest directly in an index.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Global Natural Resources Fund *
Health Sciences Trust
International Growth Fund +
International New Opportunities Fund
Investors Fund
New Opportunities Fund
OTC Emerging 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
International Growth and Income Fund
New Value Fund
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Diversified Income Trust II
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
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds (double dagger)
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
LIFESTAGESM 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:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS [SECTION MARK]
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 ++
* Formerly Natural Resources Fund
+ Formerly Overseas Growth Fund
(double dagger) Not available in all states.
[SECTION MARK] Relative to above.
** An investment in a money market fund is neither insured
nor guaranteed by the U.S. government. These funds are
managed to maintain a price of $1.00 per share, although
there is no assurance that this price will be maintained
in the future.
++ Not offered by Putnam Investments. Certificates of
deposit offer a fixed rate of return and may be insured
up to certain limits by federal/state agencies. Savings
accounts may also be insured up to certain limits. Please
call your financial advisor or Putnam at 1-800-225-1581
to obtain a prospectus for any Putnam fund. It contains
more complete information, including charges and
expenses. Please read it carefully before you invest or
send money.
Report of independent accountants
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 highlights present fairly, in all material respects,
the financial position of Putnam California Tax Exempt Income Fund (the
"fund") at September 30, 1996, 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 (hereafter referred
to as "financial statements") are the responsibility of the fund's
management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of
these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits, which included
confirmation of investments owned at September 30, 1996 by
correspondence with the custodian and brokers and the application of
alternative auditing procedures where confirmations from brokers were
not received, provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Boston, Massachusetts
November 12, 1996
<TABLE>
<CAPTION>
Portfolio of investments owned
September 30, 1996
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
FNMA Coll. -- Federal National Mortgage Association Collateralized
FRB -- Floating Rate Bonds
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Rate Bonds
IF COP -- Inverse Floating Rate Certificate of Participation
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
RAN -- Revenue Anticipation Notes
VRDN -- Variable Rate Demand Notes
<S> <C> <C> <C> <C>
MUNICIPAL BONDS AND NOTES (97.1%) *
PRINCIPAL AMOUNT RATINGS** VALUE
California (97.0%)
- ---------------------------------------------------------------------------------------------------------------------------
$16,000,000 Anaheim, IF COP, MBIA, 8.532s, 7/16/23 Aaa $17,080,000
24,000,000 Anaheim, Pub. Fing. Auth. IFB, MBIA, 9.110s, 12/28/18 Aaa 27,210,000
30,275,000 Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates Med. Ctr.), Ser. A, 6.55s, 12/1/22 Baa 30,464,219
10,000,000 Beverly Hills, COP (Civic Ctr. Impt.), 6 3/4s, 6/1/19 AA 10,562,500
CA Edl. Fac. Auth. Rev. Bonds
7,030,000 (Pomona College), 8 1/8s, 1/1/17 AAA 7,246,032
15,745,000 (U. of Southern CA), Ser. B, 6 3/4s, 10/1/15 Aa 16,532,250
CA Hlth. Fac. Auth. Rev. Bonds
2,340,000 (Summit Med. Ctr.), Ser. 85A, 9s, 5/1/15 BBB 2,363,728
11,135,000 (Valley Presbyterian Hosp.), Ser. A, 9s, 5/1/12 BB 11,143,685
2,000,000 (Summit Med. Ctr.), Ser. A, 7.6s, 5/1/15 BBB 2,195,000
12,335,000 (Summit Med. Ctr.), Ser. B, 7.6s, 5/1/15 BBB 13,537,663
9,000,000 (CedarKnoll), Ser. B, 7 1/2s, 8/1/20 A 9,708,750
7,975,000 (Summit Med. Ctr.), Ser. B, 7 1/2s, 5/1/09 BBB 8,732,625
10,000,000 (Mercy Hlth. Syst.), Ser. C, MBIA, 7 1/4s, 7/1/15 # Aaa 10,925,000
24,000,000 (Catholic Healthcare West), Ser. B, AMBAC, 5.293s, 7/1/17 Aaa 22,950,000
21,000,000 (Catholic Healthcare West), Ser. A, AMBAC, 5s, 7/1/21 Aaa 18,900,000
1,000,000 CA Hlth. Fac. Auth. VRDN (Sutter Hlth.), Ser. A, 3.8s, 3/1/20 VMIG1 1,000,000
35,385,000 CA Hlth. Facs. Fin. Auth. IFB, Ser. B, MBIA, stepped-coupon, 4.625s,
(5s, 1/1/99), 7/1/14 ++ Aaa 31,227,263
14,800,000 CA Housing Fin. Agcy. IFB, FHA Insd., 8.856s, 8/1/23 Aa 15,762,000
12,500,000 CA Poll. Control Fin. Auth. Rev. Bonds (Pacific Gas & Elec. Co.),
Ser. A, 8.2s, 12/1/18 A 13,032,750
2,400,000 CA Poll. Control Fin. Auth. VRDN (Shell Oil Co.), Ser. C, 3 3/4s, 11/1/00 VMIG1 2,400,000
40,005,000 CA Pub. Cap. Impt. Fin. Auth. Rev. Bonds (Pooled Project, Jt. Pwrs. Agcy.),
Ser. B, MBIA, 8.1s, 3/1/18 Aaa 42,355,294
6,500,000 CA Special Dist. Fin. Auth. COP, Ser. A, 8 1/2s, 7/1/18 Baa 6,881,875
74,200,000 CA State FRB, 6.119s, 9/1/12 A 79,301,250
CA State G.O. Bonds
16,545,000 AMBAC, 5 1/2s, 4/1/11 Aaa 16,586,363
7,030,000 MBIA, 5 1/2s, 4/1/09 Aaa 7,153,025
10,445,000 FGIC, 5s, 11/1/22 Aaa 9,374,388
25,460,000 MBIA, 5s, 11/1/22 Aaa 22,850,350
8,070,000 FGIC, 4 3/4s, 9/1/23 Aaa 6,909,938
60,000,000 Ser. 27, MBIA, zero%, 9/1/11 Aaa 25,875,000
20,800,000 Ser. 33, MBIA, zero%, 10/1/11 Aaa 8,918,000
25,500,000 CA State Rev. Bonds, FGIC, 8s, 11/1/07 Aaa 31,173,750
CA State Dept. Wtr. Resources Rev. Bonds (Central Valley )
48,400,000 6.93s, 12/1/12 Aa 54,813,000
25,000,000 Ser. O, MBIA, 4 3/4s, 12/1/29 Aaa 21,281,250
CA State Pub. Wks. Board Rev. Bonds
24,000,000 (Dept. of Corrections-State Prison), Ser. A, 7s, 9/1/09 Aaa 26,610,000
20,690,000 (U. of CA), Ser. A, 7s, 9/1/15 Aaa 22,940,038
6,000,000 (CA Cmnty. College), Ser. B, AMBAC, 5 5/8s, 3/1/19 Aaa 5,910,000
28,000,000 (Dept. of Corrections-Calipatria State Prison), Ser. A, MBIA, 6 1/2s,
9/1/17 Aaa 31,045,000
59,000,000 (Dept. of Corrections), Ser. A, 6.43s, 9/1/19 A 64,752,500
5,000,000 (Dept. of Corrections-State Prison), Ser. B, MBIA, 5 3/8s, 12/1/19 Aaa 4,756,250
33,500,000 (Dept. of Corrections-State Prison), Ser. A, AMBAC, 5s, 12/1/19 Aaa 30,652,500
18,000,000 CA State U. IFB, AMBAC, 10.019s, 11/1/21 (acquired 3/2/92, cost $19,013,580)
(double dagger) Aaa 21,150,000
10,000,000 CA Statewide Cmntys. Dev. Auth. COP (Childrens Hosp.), MBIA, 4 3/4s, 6/1/21 Aaa 8,625,000
14,000,000 Castaic Lake, Wtr. Agcy. COP (Wtr. Syst. Impt.), MBIA, 7 1/8s, 8/1/16 Aaa 15,575,000
32,000,000 Chino Basin, Regl. Fin. Auth. Rev. Bonds, AMBAC, 5 3/4s, 8/1/22 Aaa 31,960,000
Commerce Redev. Agcy. Rev. Bonds (Project No. 1), Ser. 91-A
8,845,000 7 1/4s, 8/1/21 BBB 9,187,744
68,280,000 zero%, 8/1/21 BBB 11,351,550
10,000,000 Concord, Redev. Agcy. Tax Alloc. Rev. Bonds (Central Concord Redev.),
AMBAC, 5 1/4s, 7/1/19 Aaa 9,362,500
35,000,000 Contra Costa, Home Mtge. Fin. Auth. Rev. Bonds, MBIA, zero%, 9/1/17 Aaa 8,925,000
Contra Costa, Wtr. Dist. Rev. Bonds, Ser. G, MBIA
36,915,000 5s, 10/1/26 Aaa 33,408,075
36,500,000 5s, 10/1/24 Aaa 33,123,750
10,000,000 Corona, COP (Vista Hosp. Syst.), Ser. B, 9 1/2s, 7/1/20 B/P 10,500,000
12,400,000 Culver City, Redev. Fin. Auth. Rev. Bonds, AMBAC, 5s, 11/1/23 Aaa 11,113,500
15,000,000 Duarte, COP (City of Hope Med. Ctr.), 6 1/8s, 4/1/13 Baa 14,831,250
East Bay, Mun. Util. Dist. Rev. Bonds, FGIC
23,850,000 (Wastewater Treatment ), 4 3/4s, 6/1/21 Aaa 20,689,875
16,915,000 (Water Systems ), 4 3/4s, 6/1/22 Aaa 14,673,763
10,725,000 El Camino, Hosp. Dist. Rev. Bonds, Ser. A, AMBAC, 6 1/4s, 8/15/17 Aaa 11,019,938
Foothill/Eastern Trans. Corridor Agcy. Rev. Bonds
34,150,000 (CA Toll Roads), Ser. A, 6 1/2s, 1/1/32 Baa 34,662,250
58,875,000 (CA Toll Roads), Ser. A, 6s, 1/1/34 Baa 57,182,344
31,945,000 (CA Toll Roads), Ser. A, 5s, 1/1/35 Baa 26,554,281
8,000,000 Fresno, Swr. Rev. Bonds, Ser. A, MBIA, 4 3/4s, 9/1/26 Aaa 6,850,000
11,460,000 Fresno, Unified Sch. Dist. COP, 7 1/4s, 3/1/07 A 12,391,125
18,145,000 Hawaian Gardens, Redev. Agcy. Rev. Bonds (Project No. 1), 6.35s, 12/1/33 BBB 17,487,244
200,000 Indio, Multi-Fam. VRDN (Western Fed. Sav. & Loan Assoc.), 3.850s, 6/1/05 A 200,000
Irvine Ranch, Wtr. Dist. Jt. Pwr. Agcy. Rev. Bonds
56,000,000 (Issue II), FNMA Coll., 8 1/4s, 8/15/23 A 59,640,000
23,000,000 (Issue II), 8.2s, 8/15/08 A 24,495,000
25,010,000 (Issue I), 7 7/8s, 2/15/23 A 26,104,188
6,000,000 Local Govt. Fin. Joint Pwr. Auth. Rev. Bonds (Anaheim Redev. Agcy.),
Ser. A, 8.2s, 9/1/15 A 6,555,000
4,120,000 Loma Linda, Hosp. Rev. Bonds (Loma Linda U. Med. Ctr.), Ser. A, 6s, 12/1/23 Baa 3,975,800
21,530,000 Los Angeles, Bldg. Auth. Rev. Bonds (CA Dept. Gen. Svcs.), Ser. A, MBIA,
5 5/8s, 5/1/11 AAA 21,772,213
6,075,000 Los Angeles, Cmnty. Redev. Agcy. Multi-Fam. VRDN, (Promenade Tower),
3.6s, 4/1/09 Aa 6,075,000
700,000 Los Angeles, Cmnty. VRDN, 3.7s, 11/1/15 A 700,000
37,465,000 Los Angeles, Convention & Exhibition Ctr. Auth. COP, 9s, 12/1/20 Aaa 48,517,175
29,100,000 Los Angeles, Convention & Exhibition Ctr. Auth. IFB, 7.111s, 8/15/18
(acquired 9/15/94, cost $21,610,242) (double dagger) Aaa 26,262,750
6,000,000 Los Angeles, Dept. of Wtr. & Pwr. (Elec. Plant), Ser. 91-2, 6.331s, 6/1/31 Aa 6,682,500
Los Angeles, Dept. of Wtr. & Pwr. Rev. Bonds
7,775,000 7.4s, 9/1/25 Aa 8,503,906
9,305,000 7 3/8s, 2/1/29 Aa 10,061,031
11,000,000 (Waterworks), 7s, 2/15/22 Aa 11,811,250
51,200,000 (Electric Plant), Issue II, 6.8s, 6/1/31 Aa 56,384,000
38,205,000 (Electric Plant), Issue II, 6 3/4s, 12/15/29 Aaa 41,356,913
25,000,000 (Electric Plant), Issue II, FGIC, 5.4s, 11/15/31 Aaa 23,468,750
17,760,000 (Electric Plant), Issue II, MBIA, 5 1/4s, 11/15/26 Aaa 16,361,400
6,300,000 MBIA, 4 3/4s, 10/15/20 Aaa 5,441,625
25,000,000 Los Angeles, Harbor Dept. Rev. Bonds, 7.6s, 10/1/18 AAA 30,312,500
27,250,000 Los Angeles, State Bldg. Auth. Lease Rev. Bonds (State Dept. General Svcs.),
Ser. A, 7 1/2s, 3/1/11 AAA 29,089,375
34,700,000 Los Angeles, Wastewtr. Syst. IFB, 8.810s, 6/1/19 (acquired 11/18/94, cost
$33,460,631) (double dagger) AAA 38,300,125
Los Angeles, Wastewtr. Syst. Rev. Bonds
17,150,000 Ser. B, 7.15s, 6/1/20 Aaa 19,015,063
20,105,000 Ser. A, 7s, 2/1/20 Aaa 22,065,238
50,000,000 Ser. 91-5, AMBAC, 6.519s, 6/1/21 Aaa 54,250,000
15,000,000 Los Angeles Cnty., Dept. Wtr. & Elec. Pwr. Auth. Rev. Bonds, Ser. A, MBIA,
7 1/4s, 9/15/30 Aa 16,612,500
24,340,000 Los Angeles Cnty., Hlth. Fac. Auth. Lease Rev. Bonds (Olive View Med. Ctr.),
7 1/2s, 3/1/08 Aaa 25,952,525
Los Angeles Cnty., Metro. Trans. Auth. Sales Tax Rev. Bonds
28,470,000 Ser. B, AMBAC, 5 1/4s, 7/1/23 Aaa 26,512,688
12,150,000 Ser. A (2nd Ser.), AMBAC, 5s, 7/1/25 Aaa 10,935,000
100,000,000 Ser. A, FGIC, 5s, 7/1/21 Aaa 90,000,000
26,235,000 Los Angeles Cnty., Pension Authority COP, Ser. A, 6.9s, 6/30/08 AAA 29,711,138
15,235,000 Los Angeles Cnty., Pub. Wks. Fin. Auth. Rev. Bonds, Ser. A, MBIA, 5 3/4s,
9/1/07 Aaa 15,787,269
13,565,000 Los Angeles Cnty., Trans. Comm. Sales Tax Rev. Bonds, Ser. A, 8s, 7/1/16 Aaa 14,262,512
8,750,000 Los Angeles Cnty., Trans. Comm. Sales Tax VRDN, Ser. A, FGIC, 3.7s, 7/1/12
(Bayerische Vereinsbank) VMIG1 8,750,000
Los Angeles Cnty., Sanitation Dist. Fin. Auth. Rev. Bonds (Capital Projects)
10,610,000 MBIA, 5 1/4s, 10/1/19 Aaa 9,920,350
13,000,000 Ser. A, MBIA, 5s, 10/1/23 Aaa 11,570,000
20,000,000 Metro. Wtr. Dist. IFB (Southern CA Waterwks.), 7.282s, 8/10/18 Aa 19,975,000
Metro Wtr. Dist. Rev. Bonds (Southern CA Waterwks.)
22,600,000 5.95s, 8/5/22 Aa 22,684,750
8,780,000 Ser. A, FGIC, 5 3/4s, 7/1/21 Aaa 8,834,875
15,000,000 Ser. B, MBIA, 4 3/4s, 7/1/21 Aaa 13,012,500
600,000 Moorpark, Multi-Fam. VRDN (LeClub Apartments), Ser. A, 3.7s, 11/1/15 VMIG1 600,000
16,600,000 Mount Diablo, Hosp. Dist. Rev. Bonds, Ser. A, AMBAC, 5s, 12/1/13 Aaa 15,085,250
Northern CA Pwr. Agcy. Multi. Cap. Fac. IFB, MBIA
9,500,000 9.091s, 9/2/25 Aaa 10,651,875
8,450,000 9.091s, 8/15/17 Aaa 9,474,563
17,000,000 Northern CA Pwr. Agcy. Pub. Rev. Bonds (Hydro. Elec. Project No. 1), Ser.
B-1, MBIA, 8s, 7/1/24 AAA 18,126,250
400,000 Oakland, VRDN (Cap. Equip.), 4.1s, 12/1/15 VMIG1 400,000
10,000,000 Oakland, Pwr. Fin. Auth. Rev. Bonds, AMBAC, 5 3/4s, 8/1/21 Aaa 9,987,500
14,800,000 Oakland, Redev. Agcy. Rev. Bonds, MBIA, 5.95s, 9/1/19 Aaa 14,966,500
Orange Cnty., Pub. Fac. Corp. COP (Solid Waste Management)
10,000,000 7 7/8s, 12/1/13 Baa 10,537,500
4,180,000 7 7/8s, 12/1/07 Baa 4,404,675
15,000,000 Orange Cnty., Dev. Agcy. Tax Alloc. Rev. Bonds (Santa Ana Heights),
6 1/8s, 9/1/23 BBB 14,475,000
19,830,000 Orange Cnty., Wtr. Dist. COP, Ser. A, 5s, 8/15/18 Aa 17,376,038
12,840,000 Oxnard, Redev. Agcy. Tax Alloc. Rev. Bonds (Cent. City Revitalization),
Ser. A, 6 1/2s, 9/1/16 BBB 12,823,950
Palm Desert, Fin. Auth.Tax Alloc. IFB, MBIA
22,850,000 8.855s, 4/1/22 Aaa 24,363,813
18,000,000 6.368s, 4/1/22 Aaa 18,652,500
200,000 Palm Springs, Cmnty. Redev. Agcy. VRDN (Headquarters Hotel 7), 3.75s, 12/1/14 A 200,000
21,720,000 Palo Alto, School Dist. Rev. Bonds, Ser. B., 5 3/8s, 8/1/21 Aa 20,959,800
24,855,000 Pasadena, Variable Rate COP (Index Cap. Certif.), AMBAC, 3.43s, 2/1/14 Aaa 22,773,394
Pleasanton, Jt. Pwr. Fing. Auth. Rev. Bonds, Ser. B
5,850,000 6 3/4s, 9/2/17 BBB/P 5,915,813
8,915,000 6.6s, 9/2/08 BBB/P 9,071,013
4,775,000 6 1/2s, 9/2/04 BBB/P 4,912,281
9,725,000 6 1/8s, 9/2/02 BBB/P 9,870,875
7,095,000 Rancho, Redev. Agcy. Tax Alloc. Rev. Bonds (Rancho Redev.), MBIA,
6 3/4s, 9/1/20 Aaa 7,698,075
44,000,000 Rancho Cucamonga, Wtr. Dist. Fin. Auth. Rev. Bonds, AMBAC, 6.427s, 8/17/21 Aaa 48,235,000
20,800,000 Redding, Elec. Syst. COP Rev. Bonds, MBIA, 6.368s, 7/1/22 Aaa 22,516,000
4,870,000 Richmond, Jt. Pwr. Fing. Auth. Rev. Bonds (Impt. Dists. 851 & 853), Ser. B,
8 1/2s, 9/2/19 BBB/P 5,023,210
16,610,000 Sacramento Cnty., Hsg. Auth. Multi-Fam. Rev. Bonds, Ser. 85-2, (Issue II),
FNMA Coll., zero%, 11/1/97 Aaa 15,253,960
14,355,000 Sacramento Cnty., Santn. Dist. Fin. Auth. Rev. Bonds, MBIA, 4 3/4s, 12/1/23 Aaa 12,291,469
25,000,000 Sacramento, Muni. Util. Dist. Elec. IFB, FGIC, 8.818s, 8/15/18 Aaa 27,375,000
Sacramento, Muni. Util. Dist. Elec. Rev. Bonds
34,835,000 Ser. V, 7 7/8s, 8/15/16 Aaa 37,883,063
5,930,000 Ser. V, 7 1/2s, 8/15/18 Aaa 6,300,625
25,900,000 Ser. R, 7 1/8s, 2/1/13 Aaa 26,712,742
9,500,000 Ser. A, MBIA, 6 1/4s, 8/15/10 Aaa 10,224,375
6,000,000 San Bernadino, Jt. Pwr. Fing. Auth. Rev. Bonds (Dept. of Trans. Lease),
Ser. A, 5 1/2s, 12/1/20 A 5,692,500
20,000,000 San Bernardino Cnty., COP (Med. Ctr. Fin. ), MBIA, 5s, 8/1/28 Aaa 17,525,000
San Diego Cnty., COP
8,850,000 (Vista Detention Fac. Expn. ), 7 7/8s, 4/1/07 Aaa 9,207,629
15,800,000 5 1/4s, 9/1/06 Aaa 15,780,250
10,200,000 San Diego Cnty., IF COP, MBIA, 8.846s, 11/18/19 Aaa 11,283,750
10,000,000 San Diego Cnty., Regl. Trans. Comm. Sales Tax Rev. Bonds, Ser. A, AMBAC, 5s,
4/1/08 Aaa 9,737,500
San Diego Cnty., Wtr. Auth. IF COP, Ser. 91-B, MBIA
17,500,000 8.73s, 4/8/21 Aaa 19,096,875
28,350,000 8.73s, 4/21/11 Aaa 32,531,625
300,000 San Diego, Hsg. Auth. Multi-Fam. Hsg. VRDN (Paseo Apartments), Ser. A,
3.85s, 8/1/15 Aa 300,000
29,350,000 San Diego, Pub. Facs. Fin. Auth. Swr. Rev. Bonds, FGIC, 5s, 5/15/25 Aaa 26,415,000
San Diego, Regl. Bldg. Auth. Rev. Bonds, MBIA, stepped-coupon
11,000,000 6.9s (5.65s, 5/2/98), 5/1/23 ++ Aaa 11,151,250
14,100,000 6.85s (5.65s, 5/2/98), 5/1/13 ++ Aaa 14,241,000
10,890,000 San Diego, Single Fam. Mtge. Rev. Bonds, Ser. A, zero%, 8/1/16 A 1,647,113
San Diego, Swr. Rev. Bonds, Ser. A, AMBAC
12,000,000 5 1/4s, 5/15/20 Aaa 11,190,000
11,520,000 5s, 5/15/23 Aaa 10,339,200
San Joaquin, Hills Trans. Corridor Agcy. Toll Rd. Rev. Bonds
77,825,000 (Sr. Lien), 6 3/4s, 1/1/32 BBB 80,159,750
34,125,000 5s, 1/1/33 BBB 28,494,375
San Jose, Redev. Agcy. Tax Alloc. Rev. Bonds (Merged Area Redev.), MBIA
19,150,000 5s, 8/1/20 Aaa 17,378,625
29,100,000 4 3/4s, 8/1/24 Aaa 25,062,375
8,545,000 4 3/4s, 8/1/22 Aaa 7,391,425
40,000,000 San Mateo Cnty., Jt. Pwr. Fin. Auth. Rev. Bonds, FSA, 5 3/4s, 7/15/29 Aaa 39,650,000
11,525,000 Santa Clara Cnty., COP (Cap. Project No. 1), 8s, 10/1/16 AAA 11,755,500
35,600,000 Santa Clara Cnty., Wtr. Dist. COP, FGIC, 5 3/4s, 2/1/15 Aaa 35,822,500
45,200,000 South Orange Cnty., Pub. Fing. Auth. Rev. Bonds, FGIC, 5 1/2s, 8/15/15 Aaa 43,844,000
Southern CA Pub. Pwr. Auth. Rev. Bonds
11,200,000 (Transmission), Ser. B, MBIA, 5 1/2s, 7/1/23 Aaa 11,200,000
13,635,000 (Mead Adelanto), Ser. A, AMBAC, 5s, 7/1/17 Aaa 12,458,981
26,690,000 (Pwr.), Ser. A, AMBAC, 5s, 7/1/15 Aaa 24,387,988
42,690,000 (Mead Adelanto), Ser. A, AMBAC, 4 7/8s, 7/1/20 Aaa 37,834,013
30,000,000 Southern CA Pub. Pwr. Auth. VRDN (Transmission), AMBAC, 3.7s, 7/1/19 VMIG1 30,000,000
Stanislaus, Solid Waste Fac. COP (Ogden Martin Syst. Inc.)
10,000,000 7 5/8s, 1/1/10 BBB 10,662,500
6,720,000 7 1/2s, 1/1/05 BBB 7,148,400
Thousand Oaks, Cmnty. Fac. Dist. Special Tax Rev. Bonds (No. 94-1)
21,775,000 6 7/8s, 9/1/24 BB/P 22,156,063
33,515,000 zero%, 9/1/14 BB/P 9,886,925
8,500,000 Turlock, Hlth. Fac. COP (Emanuel Med. Ctr. Inc.), 5 3/4s, 10/15/23 BBB 7,341,875
29,700,000 U. of CA IFB, MBIA, 9.818s, 9/1/16(acquired 8/12/92, cost $33,601,600)
(double dagger) Aaa 37,087,875
U. of CA Rev. Bonds (Multi-Purpose Projects)
11,500,000 Ser. B, MBIA, 5s, 9/1/16 Aaa 10,536,875
13,000,000 Ser. C, AMBAC, 4 7/8s, 9/1/19 Aaa 11,472,500
8,000,000 Ser. C, AMBAC, 4 3/4s, 9/1/16 Aaa 7,010,000
U. of CA Rev. Bonds (UC Davis Med. Ctr.), AMBAC
46,995,000 5 3/4s, 7/1/24 Aaa 46,936,256
22,285,000 5 3/4s, 7/1/20 Aaa 22,368,569
U. of CA Rev. Bonds (UCSD Med. Ctr. Satellite Med. Fac.)
36,147,000 7.9s, 12/1/19 BBB/P 39,400,230
54,500,000 7.9s, 12/1/96 Aaa 54,889,130
600,000 Upland, Multi-Fam. Hsg. Auth. VRDN (Village Green), 3.45s, 9/1/10 Aa 600,000
36,945,000 Valley Hlth. Syst. COP, 6 7/8s, 5/15/23 BBB 37,591,538
Washington Township, Hosp. Dist. Rev. Bonds
13,430,000 5 1/2s, 7/1/18 A 12,305,223
6,070,000 5 1/4s, 7/1/23 A 5,280,900
1,000,000 Western Riverside, Wastewtr. Auth. VRDN, 3.8s, 4/1/28 Aa 1,000,000
500,000 Woodland, Mult-Fam. Hsg. Auth. VRDN, 3.7s, 7/15/18 AAA 500,000
--------------
3,556,554,526
Puerto Rico (0.1%)
- ---------------------------------------------------------------------------------------------------------------------------
5,000,000 Cmnwlth. of Puerto Rico G.O. Bonds MBIA, 5 1/2s, 7/1/01 Aaa 5,200,000
--------------
Total Municipal Bonds and Notes (cost $3,331,157,269) 3,561,754,526
MUNICIPAL COMMERCIAL PAPER (2.9%) *
PRINCIPAL AMOUNT RATINGS** VALUE
- ---------------------------------------------------------------------------------------------------------------------------
$98,000,000 CA State RAN, Ser. A, 4 1/2s, 6/30/97 SP1+ $98,503,720
9,500,000 San Bernadino Cnty., RAN, 4 1/2s, 6/30/97 SP1+ 9,544,175
--------------
Total Municipal Commercial Paper (cost $ 107,916,327) $108,047,895
- ---------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $ 3,439,073,596) *** $3,669,802,421
- ---------------------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,669,339,762.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings
available at September 30, 1996 for the securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such ratings, they undertake no
obligation to do so, and the ratings do not necessarily represent what the agencies would ascribe to
these securities at September 30, 1996. Securities rated by Putnam are indicated by "/P" and are not
publicly rated. Ratings are not covered by the report of independent accountants.
*** The aggregate identified cost on a tax basis is
$3,448,802,124, resulting in gross unrealized appreciation and
depreciation of $233,484,223 and $12,483,926, respectively,
or net unrealized ap(de)preciation of $221,000,297.
++ The interest rate and date shown parenthetically represent
the new interest rate to be paid and the date the fund will
begin receiving interest at this rate.
(double dagger) Restricted, excluding 144A securities, as to public resale.
The total market value of restricted securities held at
September 30, 1996 was $122,800,750 or 3.3% of net assets.
# A portion of this security was pledged and segregated
with the custodian to cover margin requirements for
futures contracts at September 30, 1996, The market value
of segregated securites with the custodian for
transactions on futures contracts is $731,975 or less than
0.1% of net assets.
The rates shown on IFB, IF COP and variable rate COP, which are securities paying
interest rates that vary inversely to changes in the market interest
rates, FRB's and VRDN's are the current interest rates at September 30, 1996,
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, 1996 (as a percentage of net assets).
Water & Sewer 20.1%
Municipal Utilities 19.7%
Health care 12.1%
Transportation 11.8%
The fund had the following insurance concentrations greater
than 10% at September 30, 1996 (as a percentage of net assets).
MBIA 21.4%
AMBAC 16.1%
- --------------------------------------------------------------------------------------------
<CAPTION>
Futures Contracts Outstanding at September 30, 1996
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Dec 96 Muni Index
Futures (Buy) $46,144,687 $46,248,125 9-Dec $(103,438)
Dec 96 20 Year
U.S. Treasury Bonds
Futures (Buy) 49,134,375 49,160,156 9-Dec (25,781)
- --------------------------------------------------------------------------------------------
$(129,219)
- --------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
September 30, 1996
<S> <C>
Assets
Investments in securities, at value (identified cost $3,439,073,596) (Note 1) $3,669,802,421
- ----------------------------------------------------------------------------------------------------------------------
Cash 1,786,673
- ----------------------------------------------------------------------------------------------------------------------
Interest and other receivables 51,582,189
- ----------------------------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,806,827
- ----------------------------------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 10,285
- ----------------------------------------------------------------------------------------------------------------------
Total assets 3,727,988,395
Liabilities
- ----------------------------------------------------------------------------------------------------------------------
Distributions payable to shareholders 9,070,466
- ----------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 27,575,351
- ----------------------------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 15,446,736
- ----------------------------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,108,588
- ----------------------------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 128,875
- ----------------------------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 9,151
- ----------------------------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 9,735
- ----------------------------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,941,868
- ----------------------------------------------------------------------------------------------------------------------
Payable for variation margin 61,681
- ----------------------------------------------------------------------------------------------------------------------
Other accrued expenses 296,182
- ----------------------------------------------------------------------------------------------------------------------
Total liabilities 58,648,633
- ----------------------------------------------------------------------------------------------------------------------
Net assets $3,669,339,762
Represented by
- ----------------------------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1, 4 and 5) $3,462,672,960
- ----------------------------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 725,102
- ----------------------------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (24,657,906)
- ----------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments (Note 5) 230,599,606
- ----------------------------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital shares outstanding $3,669,339,762
Computation of net asset value and offering price
- ----------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share ($3,149,796,803 divided by 372,260,671 shares)* $8.46
- ----------------------------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.46) $8.88
- ----------------------------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share ($510,393,769 divided by 60,380,372 shares)** $8.45
- ----------------------------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share ($9,149,190 divided by 1,082,149 shares)* $8.45
- ----------------------------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.45) $8.73
- ----------------------------------------------------------------------------------------------------------------------
* 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.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Year ended September 30, 1996
<S> <C>
Tax exempt interest income: $229,747,544
- ---------------------------------------------------------------------------------------------
Expenses:
- ---------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 16,367,611
- ---------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 2,496,367
- ---------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 79,540
- ---------------------------------------------------------------------------------------------
Administrative services (Note 2) 39,517
- ---------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 6,381,441
- ---------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 3,958,142
- ---------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 30,333
- ---------------------------------------------------------------------------------------------
Reports to shareholders 100,619
- ---------------------------------------------------------------------------------------------
Registration fees 1,750
- ---------------------------------------------------------------------------------------------
Auditing 84,369
- ---------------------------------------------------------------------------------------------
Legal 144,824
- ---------------------------------------------------------------------------------------------
Postage 425,840
- ---------------------------------------------------------------------------------------------
Other 5,436
- ---------------------------------------------------------------------------------------------
Total expenses 30,115,789
- ---------------------------------------------------------------------------------------------
Expense reduction (Note 2) (2,289,076)
- ---------------------------------------------------------------------------------------------
Net expenses 27,826,713
- ---------------------------------------------------------------------------------------------
Net investment income 201,920,831
- ---------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 33,651,335
- ---------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Notes 1 and 3) (2,031,477)
- ---------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and futures during the year 2,237,252
- ---------------------------------------------------------------------------------------------
Net gain on investments 33,857,110
- ---------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $235,777,941
- ---------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Year ended Year ended
September 30 September 30
1996 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------------
Net investment income $201,920,831 $203,426,131
- ---------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments 31,619,858 (38,287,885)
- ---------------------------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 2,237,252 168,915,384
- ---------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 235,777,941 334,053,630
- ---------------------------------------------------------------------------------------------------------------------
Distributions to shareholders
- ---------------------------------------------------------------------------------------------------------------------
From net investment income:
Class A (176,564,618) (184,479,625)
- ---------------------------------------------------------------------------------------------------------------------
Class B (22,679,219) (19,276,314)
- ---------------------------------------------------------------------------------------------------------------------
Class M (313,339) (71,454)
- ---------------------------------------------------------------------------------------------------------------------
In excess of net investment income:
- ---------------------------------------------------------------------------------------------------------------------
Class A -- (468,211)
- ---------------------------------------------------------------------------------------------------------------------
Class B -- (48,923)
- ---------------------------------------------------------------------------------------------------------------------
Class M -- (181)
- ---------------------------------------------------------------------------------------------------------------------
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) 44,366,900 (140,544,390)
- ---------------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 80,587,665 (21,625,376)
- ---------------------------------------------------------------------------------------------------------------------
Net Assets
- ---------------------------------------------------------------------------------------------------------------------
Beginning of year 3,588,752,097 3,610,377,473
- ---------------------------------------------------------------------------------------------------------------------
End of year (including undistributed net investment income of $725,102
and distributions in excess of net investment income of $1,100,798, respectively $3,669,339,762 $3,588,752,097
- ---------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
For the Period
February 14, 1995
(commencement
Year ended of operations) to Year ended
September 30 September 30 September 30
-------------------------------------------------------
1996 1995 1996
-------------------------------------------------------
Class M
-------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.36 $8.13 $8.37
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .45 .29 .42
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .08 .24 .07
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .53 .53 .49
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.44) (.30)** (.41)
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain or loss on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain or loss on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.44) (.30) (.41)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.45 $8.36 $8.45
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 6.48 6.56* 5.99
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $9,149 $4,108 $510,394
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.04 .69* 1.39
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.24 3.52* 4.94
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.47 47.73 29.47
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
For the Period
January 4, 1993
(commencement
of operations) to
Year ended September 30 September 30
-------------------------------------------------------
1995 1994 1993
-------------------------------------------------------
Class B
-------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.08 $8.91 $8.37
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .42 .45 .32
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .32 (.81) .55
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .74 (.36) .87
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.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 (.45) (.47) (.33)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.37 $8.08 $8.91
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 9.47 (4.15) 10.51*
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $416,367 $349,609 $209,657
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) 1.39 1.32 1.00*
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.17 5.16 3.68*
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 47.73 21.06 22.95
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended September 30
-------------------------------------------------------
1996 1995 1994
-------------------------------------------------------
Class A
-------------------------------------------------------
<S> <C> <C> <C>
Net asset value, beginning of period $8.37 $8.09 $8.92
- ---------------------------------------------------------------------------------------------------------------------------
Investment operations
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income .47 .48 .50
- ---------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .09 .31 (.81)
- ---------------------------------------------------------------------------------------------------------------------------
Total from investment operations .56 .79 (.31)
- ---------------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------------------
From net investment income (.47) (.48)** (.50)
- ---------------------------------------------------------------------------------------------------------------------------
From net realized gain or loss on investments -- -- --
- ---------------------------------------------------------------------------------------------------------------------------
In excess of net realized gain or loss on investments -- (.03) (.02)
- ---------------------------------------------------------------------------------------------------------------------------
Total distributions (.47) (.51) (.52)
- ---------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.46 $8.37 $8.09
- ---------------------------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 6.81 10.07 (3.53)
- ---------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,149,797 $3,168,277 $3,260,769
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .74 .74 .68
- ---------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 5.60 5.86 5.86
- ---------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 29.47 47.73 21.06
- ---------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Financial highlights (continued)
(For a share outstanding throughout the period)
Year ended September 30
----------------------------------
1993 1992
----------------------------------
Class A
----------------------------------
<S> <C> <C>
Net asset value, beginning of period $8.39 $8.11
- ------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------
Net investment income .53 .54
- ------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments .57 .27
- ------------------------------------------------------------------------------------------------------
Total from investment operations 1.10 .81
- ------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ------------------------------------------------------------------------------------------------------
From net investment income (.53) (.53)
- ------------------------------------------------------------------------------------------------------
From net realized gain or loss on investments -- --
- ------------------------------------------------------------------------------------------------------
In excess of net realized gain or loss on investments (.04) --
- ------------------------------------------------------------------------------------------------------
Total distributions (.57) (.53)
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $8.92 $8.39
- ------------------------------------------------------------------------------------------------------
Total investment return at net asset value (%)(a) 13.63 10.34
- ------------------------------------------------------------------------------------------------------
Net assets, end of period (in thousands) $3,600,182 $2,854,165
- ------------------------------------------------------------------------------------------------------
Ratio of expenses to average net assets (%)(b) .69 .60
- ------------------------------------------------------------------------------------------------------
Ratio of net investment income to average net assets (%) 6.16 6.53
- ------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 22.95 31.25
- ------------------------------------------------------------------------------------------------------
* Not annualized.
** 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) The ratio of expenses to average net assets for the periods ended September 30,
1995 and thereafter, includes amounts paid through expense offset
arrangements. Prior period ratios exclude these amounts. (Note 2).
</TABLE>
Notes to financial statements
September 30, 1996
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 diversified
portfolio of longer-term California tax exempt securities.
The fund offers class A, class B and class M shares. Class A shares are
sold with a maximum front-end sales charge of 4.75%. Class B shares,
which convert to class A shares after approximately eight years, 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 maximum 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 holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
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
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with generally accepted accounting principles and requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities. Actual results could differ from those
estimates.
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 Putnam Management
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 options contracts may not correspond to the change in value of the
hedged instruments. In addition, losses may arise from changes in the
value of the underlying instruments, if there is an illiquid secondary
market for the contracts, or if the counterparty to the contract 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 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 on securities held and for excise tax on income and capital
gains.
E) Distributions to shareholders Income dividends are recorded daily by
the fund and are distributed monthly. Capital gain 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
realized and unrealized gains and losses on certain futures contracts,
utilization of capital loss carryover, losses on wash sale transactions
and market discount. 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. For the
year ended September 30, 1996, the fund reclassified $537,755 to
decrease undistributed net investment income and $2,424,036 to increase
paid-in-capital, with an increase to accumulated net realized loss on
investments of $1,886,281. 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 resulting from the purchase of securities in excess of maturity
value is amortized on a yield-to-maturity basis. The premium in excess
of the call price, if any, is amortized to the call date; thereafter,
the remaining excess premium is amortized to maturity.
Discounts on zero coupon bonds, original issue and stepped-coupon bonds
are 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 services is paid quarterly based on the average net assets of
the fund. 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 by
the amount of certain brokerage commissions and fees (less expenses)
received by affiliates of Putnam Management 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 services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets 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, 1996, fund expenses were reduced by
$2,289,076 under expense offset arrangements with PFTC. Investor
servicing and custodian fees reported in the Statement of operations
exclude these credits. The fund could have invested a portion of the
assets utilized in connection with the expense offset arrangements in an
income producing asset if it had not entered into such arrangements.
Trustees of the fund receive an annual Trustees fee of $3,980 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral 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 certain Putnam funds until distribution in
accordance with the Plan.
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 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 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, 1996, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $376,757 and $5,189 from the
sale of class A and class M shares, respectively and $1,032,965 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. For the year ended September 30, 1996, Putnam Mutual
Funds Corp., acting as underwriter received $32,314 on class A
redemptions.
Note 3
Purchase and sales of securities
During the year ended September 30, 1996, purchases and sales of
investment securities other than short-term investments aggregated
$1,089,182,549 and $958,487,362, respectively. Purchases and sales of
short-term municipal obligations aggregated $457,844,520 and
$519,773,440, respectively. In determining the net gain or loss on
securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At September 30, 1996, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended
September 30, 1996
- ----------------------------------------------------
Class A Shares Amount
- ----------------------------------------------------
Shares sold 50,772,082 $429,970,384
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,044,390 85,217,229
- ----------------------------------------------------
Shares issued in
connection with
the merger of
Putnam California
Intermediate Tax
Exempt Fund 647,033 5,467,429
- ----------------------------------------------------
61,463,505 520,655,042
Shares
repurchased (67,524,053) (571,318,861)
- ----------------------------------------------------
Net decrease (6,060,548) $ (50,663,819)
- ----------------------------------------------------
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, 1996
- ----------------------------------------------------
Class B Shares Amount
- ----------------------------------------------------
Shares sold 16,422,370 $139,117,687
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,417,502 12,003,753
- ----------------------------------------------------
Shares issued in
connection with
the merger of
Putnam California
Intermediate Tax
Exempt Fund 449,999 3,797,994
- ----------------------------------------------------
18,289,871 154,919,434
Shares
repurchased (7,677,551) (64,914,177)
- ----------------------------------------------------
Net increase 10,612,320 $90,005,257
- ----------------------------------------------------
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, 1996
- ----------------------------------------------------
Class M Shares Amount
- ----------------------------------------------------
Shares sold 1,194,539 $10,194,808
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 24,130 203,830
- ----------------------------------------------------
1,218,669 10,398,638
Shares
repurchased (627,733) (5,373,176)
- ----------------------------------------------------
Net increase 590,936 $5,025,462
- ----------------------------------------------------
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
- ----------------------------------------------------
Note 5
Acquisition of Putnam California Intermediate Tax Exempt Fund
On March 11, 1996, the fund issued 647,033 and 449,999 of class A and
class B shares, respectively, to shareholders of Putnam California
Intermediate Tax Exempt Fund (the "Intermediate Fund") to acquire the
Intermediate Fund's net assets in a tax-free exchange approved by the
shareholders. The net assets of the fund and Intermediate Fund on March
8, 1996, valuation date, were $3,655,538,393 and $9,265,423,
respectively. On March 8, 1996, the Intermediate Fund had unrealized
appreciation of $353,605.
The aggregate net assets of the fund immediately following the
acquisition were $3,664,803,816.
Federal tax information
(Unaudited)
The fund has designated all 100% paid from net investment income paid
during the fiscal year as tax exempt for federal income tax purposes.
The Form 1099 you receive in January 1997 will show the tax status of
all distributions paid to your account in calendar 1996.
Results of September 5, 1996 shareholder meeting
(Unaudited)
A meeting of shareholders of the fund was held on September 5, 1996. At
the meeting, each of the nominees for Trustees was elected, as follows:
Votes
Votes for withheld
----------- ---------
Jameson Adkins Baxter 284,262,196 4,396,597
Hans H. Estin 284,130,208 4,528,585
John A. Hill 284,213,660 4,445,133
R.J. Jackson 284,150,044 4,508,749
Elizabeth T. Kennan 284,198,600 4,460,193
Lawrence J. Lasser 284,161,250 4,497,543
Robert E. Patterson 284,248,632 4,410,161
Donald S. Perkins 284,172,064 4,486,729
William F. Pounds 284,192,552 4,466,241
George Putnam 284,142,341 4,516,452
George Putnam, III 284,114,568 4,544,225
Eli. Shapiro 283,778,379 4,880,413
A.J.C. Smith 284,167,401 4,491,392
W. Nicholas Thorndike 284,164,780 4,494,013
A proposal to ratify Price Waterhouse LLP as auditors for the fund was
approved as follows: 278,104,714 votes for, and 2,488,816 votes against,
with 8,065,264 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to diversification of investments was approved as follows:
238,263,821 votes for, and 14,674,535 votes against, with 35,621,437
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in the securities of a single issuer was approved
as follows: 234,856,000 votes for, and 16,660,337 votes against, with
37,142,457 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to making loans through purchases of debt obligations,
repurchase agreements and securities loans was approved as follows:
229,895,015 votes for, and 22,405,943 votes against, with 36,357,836
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in real estate was approved as follows:
231,740,167 votes for, and 20,703,162 votes against, with 36,215,464
abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to investments in commodities or commodity contracts was
approved as follows: 230,430,432 votes for, and 21,826,985 votes
against, with 36,401,376 abstentions and broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to senior securities was approved as follows: 237,768,382 votes
for, and 14,060,528 votes against, with 36,829,883 abstentions and
broker non-votes.
A proposal to amend the fund's fundamental investment restriction with
respect to concentration of its assets was approved as follows:
237,446,007 votes for, and 13,923,062 votes against, with 37,289,723
abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in securities of issuers in which management
of the fund or Putnam Investment Management, Inc. owns securities was
approved as follows: 231,165,970 votes for, and 20,053,830 votes
against, with 37,438,994 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to margin transactions was approved as follows: 226,215,152
votes for, and 24,679,408 votes against, with 37,764,233 abstentions and
broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to short sales was approved as follows: 226,334,989 votes
for, and 24,658,882 votes against, with 37,664,922 abstentions and
broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
which limits the fund's ability to pledge assets was approved as
follows: 226,379,069 votes for, and 24,170,292 votes against, with
38,109,432 abstentions and broker non-votes.
A proposal to eliminate the fund's fundamental investment restriction
with respect to investments in restricted securities was approved as
follows: 227,101,690 votes for, and 23,321,166 votes against, with
38,235,938 abstentions and broker non-votes.
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
Ronald J. Jackson
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
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
James E. Erickson
Vice President
Blake E. Anderson
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
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam Money
Market 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.
You can also learn more at Putnam Investments' website:
http://www.putnaminv.com.
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.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- ----------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- ----------------
28369-027/337/677 11/96
