Putnam
California
Tax Exempt
Income Fund
SEMIANNUAL REPORT
March 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "[T]he fund has been one of the most consistently strong California
muni bond funds around. . . . In fact, the fund has beaten the California
muni group's average return in most calendar years and currently sports a
yield 60 basis points higher than the norm."
-- Morningstar Mutual Funds, March 14, 1997
* "In a rising interest-rate environment, an emphasis on a more defensive,
high-quality portfolio should help cushion the fund's net asset value from
unnecessary volatility. Income (not price appreciation) will be the driving
force behind performance."
-- William H. Reeves, Fund Manager
Putnam California Tax Exempt
Income Fund
CONTENTS
4 Report from Putnam Management
8 Fund performance summary
11 Portfolio holdings
19 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
(copyright) Karsh, Ottawa
Dear Shareholder:
The Federal Reserve Board's increase in the federal funds rate just before the
midpoint of Putnam California Tax Exempt Income Fund's fiscal year was hardly
a surprise to your fund's management team. Fund Manager William Reeves had
already positioned the portfolio defensively in response to the unsettled
market environment that had prevailed during much of the period.
Besides taking the defensive actions that he explains in the following
management report, Bill has been seeking investments in industry sectors
likely to benefit from a strong economy. As a result, he believes the
portfolio is positioned not only to weather continued market volatility but
also to benefit from what, in his view, will be sustained strong demand for
municipal bonds.
In his report, Bill also reviews your fund's performance during the first half
of fiscal 1997 and presents his views on prospects for the remainder of the
year.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 21, 1997
Report from the Fund Manager
William H. Reeves
Although the changing interest rate climate meant a reversal of fortune for
the bond market in general during the six months ended March 31, 1997, the
tax-free sector met a gentler fate. After months of concern over the pace of
economic growth, the Federal Reserve Board finally raised short-term interest
rates in late March, sparking a substantial decline in most sectors of the
U.S. bond market. Renewed demand and a positive economic outlook within the
state, however, helped Putnam California Tax Exempt Income Fund post a
relatively favorable performance for the period.
While the fund's total return of 1.86% at net asset value for class A shares
for the semiannual period exceeded its Lipper California municipal debt
universe's average of 1.78%, these results did fall somewhat short of its
comparative benchmark; the broad-based Lehman Municipal Bond Index returned
2.31%. The fund's return for class A shares at public offering price was
- -2.96%; results for class B and class M shares and performance details for
longer periods can be found on page 8.
Higher interest rates influenced the fund's yield and after-tax comparisons
positively. An investment taxed at 45.22%, the combined maximum federal and
state tax rate, would have had to provide a current return of 9.69% to equal
the fund's 5.31% current dividend rate at net asset value for class A shares
on March 31, 1997. (Of course, taxpayers in lower brackets would benefit to a
lesser degree.)
* SEEKING PRICE PROTECTION AND INCOME IN RISING INTEREST-RATE ENVIRONMENT
Interest rates began moving upward early in the period, driven by bond
investors' concerns about inflation, the Federal Reserve Board's warnings
about the pace of economic growth, and finally, the Fed's quarter-point
increase in the federal funds rate on March 25. Reflecting the bond market's
nervousness, the yield on the bellwether 30-year Treasury bond climbed from
6.92% on September 30, 1996, to 7.10% on March 31, 1997. In this climate,
preserving net asset value and maximizing the fund's income potential became
our two most important priorities.
We attempted to cushion the sensitivity of the fund's price to higher interest
rates by decreasing the portfolio's duration to 7.3 years. Duration is a
measure of the portfolio's maturity structure and reflects the price
sensitivity of its holdings to changes in interest rates. A shorter duration
can help preserve portfolio value as interest rates rise. A longer duration
can mean a more volatile net asset value if rates change but also is more
likely to cause prices to appreciate substantially if rates decline.
We achieved the lower duration by selling longer-maturity discount bonds and
adding premium bonds and shorter-maturity bonds to the portfolio. Discount
bonds -- those selling at prices below par value -- are attractive for their
significant appreciation potential when interest rates are falling. In the
current rising-rate environment, however, they can experience greater price
volatility than premium bonds. Premium bonds -- those selling at prices above
par value -- carry higher coupons than current market rates and tend to be
more stable in price. Shorter-maturity bonds also add an element of price
stability, since they typically fall less in price than longer-term issues in
response to a given rise in interest rates.
[GRAPHIC HORIZONTAL BAR CHART OMITTED: TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Water and sewerage 19.6%
Utilities 17.6%
Health care 10.4%
Transportation 10.1%
Education 5.1%
Footnote reads:
* Based on net assets as of 3/31/97. Holdings will vary over time.
* PORTFOLIO DEFINED BY QUALITY
With more than 72% of its securities rated A or better, the fund continues to
be a quality-driven portfolio. Furthermore, more than 56% of the holdings were
rated in the highest quality category, Aaa. For many of these issues, timely
payment of principal and interest is insured by major municipal bond insurance
companies, contributing to the bonds' high ratings.
As always, we focused first on the fund's objective -- to provide shareholders
with attractive levels of tax-free income. While our overall focus is
consistently on top-quality bonds, we may selectively take advantage of
opportunities in lower-tier investment-grade credits to help enhance the
fund's returns. A combination of active management and extensive credit
research will help pinpoint securities that we believe offer the best
combination of current income, credit quality, and appreciation potential.
Essential-service bonds -- from areas such as water and sewer, utilities, and
transportation -- comprise the fund's top industry sectors. These bonds are
self-funding; that is, user fees paid for the services become the sources of
the bonds' payments to investors. Since the issuers have the ability to set
user fees, income from these bonds is relatively stable; thus they carry lower
risk of default than other types of municipal bonds. Securities issued by the
California State Water Authority and Foothills Eastern Transportation Corridor
Agency are examples of essential-service bonds included in your fund's
portfolio at the end of the period. While these holdings, along with others
discussed in this report, were viewed favorably at the end of the period, all
are subject to review and adjustment in accordance with the fund's investment
strategy and may vary in the future.
* POSITIVE DEVELOPMENTS COULD BRIGHTEN CAUTIOUS OUTLOOK
In the second half of the fund's fiscal year, inflation is likely to be more
of a concern for consumers, policymakers, and the financial markets. Signs of
rising wage growth suggest that the economy is running short of skilled labor.
A tighter labor market, in our view, would create enough concern about the
future of inflation for the Fed to raise interest rates again this year.
[GRAPHIC PIE CHART OMITTED: CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
A 4.1%
Aa 11.3%
Aaa 56.9%
B 0.3%
Ba 4.6%
Baa 9.5%
Short-term 13.3%
Footnote reads:
* As a percentage of market value as of 3/31/97. 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.
Two developments, however, are positively influencing our outlook for
California's municipal bonds. In a rising interest-rate market, the number of
refunded bonds coming to market tends to slow. This source of new municipal
bonds typically represents about 25% to 30% of the total supply in any given
year. If rates continue to rise and this significant source of supply
evaporates, an imbalance could emerge that favorably impacts bond prices.
Secondly, with one of the most diverse economies in the nation, California is
enjoying an economic resurgence. Fueled by the high-technology, entertainment,
and construction sectors, job growth has increased significantly, pushing the
unemployment rate to its lowest level in seven years. The state's finances are
improving, and the budget is in a surplus. We believe the same industry
diversity that led to such a robust recovery should also moderate the negative
effects of future economic downturns.
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 3/31/97, 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.
TOTAL RETURN FOR PERIODS ENDED 3/31/97
Class A Class B Class M
(inception date) (4/29/83) (1/4/93) (2/14/95)
NAV POP NAV CDSC NAV POP
- --------------------------------------------------------------------------
6 months 1.86% -2.96% 1.53% -3.41% 1.71% -1.55%
- --------------------------------------------------------------------------
1 year 5.35 0.35 4.67 -0.30 5.02 1.64
- --------------------------------------------------------------------------
5 years 40.02 33.45 -- -- -- --
Annual average 6.96 5.94 -- -- -- --
- --------------------------------------------------------------------------
10 years 101.34 91.84 -- -- -- --
Annual average 7.25 6.73 -- -- -- --
- --------------------------------------------------------------------------
Life of class -- -- 24.78 22.78 15.39 11.68
Annual average -- -- 5.36 4.96 6.95 5.32
- --------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/97
Lehman Bros. Consumer
Municipal Bond Price
Index Index
- ------------------------------------------------------------------------------
6 months 2.31% 1.39%
- ------------------------------------------------------------------------------
1 year 5.47 2.76
- ------------------------------------------------------------------------------
5 years 41.42 14.86
Annual average 7.18 2.81
- ------------------------------------------------------------------------------
10 years 106.42 42.73
Annual average 7.52 3.62
- ------------------------------------------------------------------------------
Life of class B 30.35 12.76
Annual average 6.44 2.87
- ------------------------------------------------------------------------------
Life of class M 15.62 6.45
Annual average 7.21 2.98
- ------------------------------------------------------------------------------
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 principal 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%.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/97
Class A Class B Class M
- -----------------------------------------------------------------------------
Distributions (number) 6 6 6
- -----------------------------------------------------------------------------
Income $0.227814 $0.199873 $0.214653
- -----------------------------------------------------------------------------
Capital gains1
- -----------------------------------------------------------------------------
Long-term 0.021000 0.021000 0.021000
- -----------------------------------------------------------------------------
Total $0.248814 $0.220873 $0.235653
- -----------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- -----------------------------------------------------------------------------
9/30/96 $8.46 $8.88 $8.45 $8.45 $8.73
- -----------------------------------------------------------------------------
3/31/97 8.37 8.79 8.36 8.36 8.64
- -----------------------------------------------------------------------------
Current return (end of period)
- -----------------------------------------------------------------------------
Current dividend rate2 5.31% 5.05% 4.65% 5.00% 4.83%
- -----------------------------------------------------------------------------
Taxable equivalent3 9.69 9.22 8.49 9.13 8.82
- -----------------------------------------------------------------------------
Current 30-day SEC yield4 5.00 4.76 4.34 4.71 4.55
- -----------------------------------------------------------------------------
Taxable equivalent3 9.13 8.69 7.92 8.60 8.31
- -----------------------------------------------------------------------------
1Capital gains, if any, 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.
2Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3Assumes maximum 45.22% combined federal and state tax rate. Results for
investors subject to lower tax rates would not be as advantageous.
4Based only on investment income, calculated using SEC guidelines.
TERMS AND DEFINITIONS
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.
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.
<TABLE>
<CAPTION>
Portfolio of investments owned
March 31, 1997 (Unaudited)
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
FRB - 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
VR COP - Variable Rate Certificate of Participation
VRDN - Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (96.8%) *
PRINCIPAL AMOUNT RATINGS** VALUE
<S> <C> <C> <C>
California (96.5%)
- ------------------------------------------------------------------------------------------------------------
$ 16,000,000 Anaheim, IF COP, MBIA, 8.87s, 7/16/23 Aaa $ 16,940,000
2,800,000 Anaheim, Hsg. Auth. VRDN (Harbor Cliff),
Ser. 85A, 3.2s, 7/1/06 VMIG1 2,800,000
24,000,000 Anaheim, Pub. Fin. Auth. IFB, MBIA, 9.417s,
12/28/18 Aaa 26,850,000
30,275,000 Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates
Med. Ctr.), Ser. A, 6.55s, 12/1/22 Baa 30,842,656
10,000,000 Beverly Hills, COP (Civic Ctr. Impt.),
6 3/4s, 6/1/19 AA 10,487,500
15,745,000 CA Edl. Fac. Auth. Rev. Bonds
(U. of Southern CA), Ser. B, 6 3/4s, 10/1/15 Aa 16,610,975
4,275,000 CA Edl. Fac. Auth. VRDN (Stanford U.),
Ser. L, 3s, 10/1/16 VMIG1 4,275,000
CA Hlth. Fac. Auth. Rev. Bonds
11,135,000 (Valley Presbyterian Hosp.), Ser. A, 9s, 5/1/12 BB 11,144,465
9,000,000 (CedarKnoll), Ser. B, 7 1/2s, 8/1/20 A 9,663,750
7,975,000 (Summit Med. Ctr.), Ser. B, 7 1/2s, 5/1/09 BBB 8,613,000
10,000,000 (Mercy Hlth. Syst.), Ser. C, MBIA, 7 1/4s, 7/1/15 Aaa 10,775,000
21,000,000 (Catholic Healthcare West.), Ser. A,
AMBAC, 5s, 7/1/21 Aaa 18,453,750
3,900,000 CA Hlth. Fac. Auth. VRDN (Sutter Hlth.),
Ser. A, 3.7s, 3/1/20 VMIG1 3,900,000
35,385,000 CA Hlth. Fac. Fin. Auth. IFB, Ser. B, MBIA,
stepped-coupon, 4.643s, (5s, 1/1/99),
7/1/14 ++ Aaa 30,961,875
CA Hlth. Fac. Fin. Auth. Rev. Bonds
(Summit Med. Ctr.)
2,000,000 Ser. A, 7.6s, 5/1/15 BBB 2,162,500
12,335,000 Ser. B, 7.6s, 5/1/15 BBB 13,337,219
14,600,000 CA Housing Fin. Agcy. IFB, FHA Insd.,
9.621s, 8/1/23 Aa 15,366,500
CA Poll. Cntrl. Fin. Auth. Rev. Bonds
12,500,000 (Pacific Gas & Elec. Co.), Ser. A, 8.2s, 12/1/18 A 12,819,375
2,000,000 (Pacific Gas & Elec. Co.), 3 3/4s, 2/1/16 A 2,000,000
CA Poll. Cntrl. Fin. Auth. VRDN
19,000,000 (Shell Martinez Refining), Ser. A, 3.55s, 10/1/31 VMIG1 19,000,000
7,200,000 (Pacific Gas & Elec. Co.), Ser. F, 3.75s, 11/1/26 A-1 7,200,000
11,600,000 (Southern CA Edison), Ser. A, 3.55s, 2/28/08 VMIG1 11,600,000
9,900,000 (Shell Oil Co.), Ser. B, 3.65s, 10/1/11 VMIG1 9,900,000
1,400,000 CA Poll. Control Fin. Auth. IFB (Southern
CA Edison), Ser. D, 3.55s, 2/28/08 VMIG1 1,400,000
39,295,000 CA Pub. Cap. Impt. Fin. Auth. Rev. Bonds
(Pooled Project, Jt. Pwrs. Agcy.), Ser. B,
MBIA, 8.1s, 3/1/18 Aaa 41,080,172
6,500,000 CA Special Dist. Fin. Auth. COP, Ser. A,
8 1/2s, 7/1/18 Baa 6,857,500
74,200,000 CA State FRB, 6.119s, 9/1/12 AA 78,652,000
CA State G.O. Bonds
5,850,000 MBIA, 6.3s, 9/1/08 Aaa 6,427,687
16,545,000 AMBAC, 5 1/2s, 4/1/11 AAA 16,524,319
10,445,000 FGIC, 5s, 11/1/22 Aaa 9,152,431
25,460,000 MBIA, 5s, 11/1/22 Aaa 22,309,325
20,800,000 Ser. 33, MBIA, zero%, 10/1/11 Aaa 9,230,000
60,000,000 Ser. 27, MBIA, zero%, 9/1/11 Aaa 26,700,000
25,500,000 CA State Rev. Bonds, FGIC, 8s, 11/1/07 Aaa 31,237,500
CA State Dept. Wtr. Resources Rev. Bonds
(Central Valley)
48,400,000 6.93s, 12/1/13 Aa 54,389,500
25,000,000 Ser. O, MBIA, 4 3/4s, 12/1/29 Aaa 20,687,500
2,000,000 CA State Econ. Dev. Fin. Auth. Indl. VRDN
(Volk Enterprises), 2.95s, 6/1/21 A-1 2,000,000
CA State Pub. Wks. Board. Lease Rev. Bonds
20,690,000 (U. of CA), Ser. A, 7s, 9/1/15 AAA 22,629,688
28,000,000 (Dept. of Corrections-Calipatria State Prison),
Ser. A, MBIA, 6 1/2s, 9/1/17 Aaa 30,695,000
CA State Pub. Wks. Board. Rev. Bonds
24,000,000 (Dept. of Corrections-State Prisons),
Ser. A, 7s, 9/1/09 AAA 26,250,000
59,000,000 (Dept. of Corrections), Ser. A, 6.48s, 9/1/19 AAA 64,015,000
33,500,000 (Dept. of Corrections-State Prison),
Ser. A, AMBAC, 5s, 12/1/19 Aaa 30,317,500
18,000,000 CA State U. IFB, AMBAC, 10.16s, 11/1/21
(acquired 3/2/92, cost $19,013,580) [DBL. DAGGER] Aaa 21,127,500
10,000,000 CA Statewde Cmnty. Dev. Auth. COP
(Childrens Hosp.), MBIA, 4 3/4s, 6/1/21 Aaa 8,362,500
CA Statewide Cmnty. Dev. Auth. VRDN
15,100,000 (Northern CA Retired Officers), 3.55s, 6/1/26 VMIG1 15,100,000
100,000 (Barton Memiorial Hosp.), 3.25s, 12/1/09 VMIG1 100,000
625,000 (Delancey St. Foundation), 3.15s, 3/1/03 VMIG1 625,000
14,000,000 Castaic Lake, Wtr. Agcy. COP (Wtr. Syst. Impt.),
MBIA, 7 1/8s, 8/1/16 Aaa 15,347,500
1,100,000 Chico, Multi-Fam. Hsg. Auth. VRDN
(Ceres Plaza), Ser. A, 3.2s, 5/1/13 VMIG1 1,100,000
32,000,000 Chino Basin, Regl. Fin. Auth. Rev. Bonds,
AMBAC, 5 3/4s, 8/1/22 Aaa 31,360,000
5,700,000 Chula Vista, Indl. Dev. Auth. VRDN
(San Diego Gas & Elec.), Ser. B, 3.5s, 12/1/21 A-1 5,700,000
Commerce Redev. Agcy. Rev. Bonds
(Project No. 1) Ser. 91-A
8,845,000 7 1/4s, 8/1/21 BBB 9,220,913
68,280,000 zero %, 8/1/21 BBB 11,692,950
10,000,000 Concord, Redev. Agcy. Tax Alloc. Rev. Bonds
(Central Concord Redev.), AMBAC, 5
1/4s, 7/1/19 Aaa 9,200,000
Contra Costa Wtr. Dist. Rev. Bonds, Ser. G, MBIA
36,915,000 5s, 10/1/26 Aaa 32,300,625
41,500,000 5s, 10/1/24 Aaa 36,468,125
35,000,000 Contra Costa, Home Mtge. Fin. Auth. Rev.
Bonds, MBIA, 9/1/17 Aaa 9,100,000
10,000,000 Corona, COP (Vista Hosp. Syst.),
Ser. B, 9 1/2s, 7/1/20 B 10,525,000
2,900,000 Costa Mesa, VR COP (Orange Cnty. Preforming),
2.9s, 12/1/14 A-1 2,900,000
15,000,000 Duarte, COP (City of Hope Med. Ctr.),
6 1/8s, 4/1/13 Baa 14,868,750
23,850,000 East Bay, Muni. Util. Dist. Rev. Bonds
(Wastewater Treatment), FGIC, 4 3/4s, 6/1/21 Aaa 20,212,875
10,725,000 El Camino, Hosp. Dist. Rev. Bonds,
Ser. A, AMBAC, 6 1/4s, 8/15/17 Aaa 10,952,906
Foothill/Eastern Trans. Corridor Agcy. Rev. Bonds
34,150,000 (CA Toll Roads), Ser. A, 6 1/2s, 1/1/32 Baa 34,875,688
38,875,000 (CA Toll Roads), Ser. A, 6s, 1/1/34 Baa 37,222,813
31,945,000 (CA Toll Roads), Ser. A, 5s, 1/1/35 Baa 25,995,244
11,460,000 Fresno, Unified Sch. Dist. COP, 7 1/4s, 3/1/07 A 12,362,475
1,555,000 Independent Cities Lease Fin. Auth. VRDN
(Pooled), 3.2s, 6/1/98 A-1 1,555,000
2,000,000 Indio, Multi-Fam. VRDN (Carreon),
Ser. A, 3.35s, 8/1/26 A-1 2,000,000
13,715,000 Irvine CA Imp. VRDN (Dist. No. 89-10),
3.7s, 9/2/15 VMIG1 13,715,000
6,100,000 Irvine Ranch, Wtr. Dist. Adjustable Rate Rev. Bonds
(Cons. Bonds), Ser. B 3.55s, 10/1/09 AAA 6,100,000
Irvine Ranch, Wtr. Dist. VRDN
10,900,000 (Dist. Nos. 140-240-105-250) 3.7s, 4/1/33 VMIG1 10,900,000
7,000,000 (Dist. Nos. 105-250-290), 3.7s, 8/1/16 VMIG1 7,000,000
1,300,000 (Cons. Bonds), 3.7s, 10/1/00 A-1 1,300,000
4,900,000 (Cons. Impt. Dists.), Ser. B, 3.55s, 6/1/15 VMIG1 4,900,000
5,700,000 (Cons. Bonds), 3.55s, 10/1/10 A-1 5,700,000
23,450,000 Ser. A, 3.55s, 5/1/09 VMIG1 23,450,000
2,700,000 (Cons. Bonds), Ser. B, 3.55s, 10/1/04 A-1 2,700,000
1,100,000 (Cons. Bonds) Ser. B, 3.55s, 10/1/99 A-1 1,100,000
21,800,000 2.83s, 1/1/21 VMIG1 21,800,000
Irvine Ranch, Wtr. Dist. Jt. Pwr. Agcy. Rev. Bonds
56,000,000 (Issue II), FNMA, 8 1/4s, 8/15/23 A 58,660,000
23,000,000 (Issue II), 8.2s, 8/15/08 A 24,092,500
25,010,000 (Issue I), 7 7/8s, 2/15/23 A 25,700,276
1,620,000 Irvine, VRDN (Irvine East Co.), 3.2s, 12/1/05 Aa 1,620,000
4,000,000 Lancaster, Redev. Agcy. VRDN
(Woodcreek Garden Apts), 3.4s, 10/1/07 VMIG1 4,000,000
6,000,000 Local Govt. Fin. Joint Pwr. Auth. Rev. Bonds
(Anaheim Redev. Agcy.), Ser. A, 8.2s, 9/1/15 AAA 6,450,000
21,530,000 Los Angeles, Bldg. Auth. Rev. Bonds
(CA Dept. Gen Svcs.), Ser. A, MBIA,
5 5/8s, 5/1/11 AAA 21,906,775
200,000 Los Angeles, Cmnty. Dev. VRDN,
(Willowbrook) 3.3s, 11/1/15 A 200,000
7,675,000 Los Angeles, Cmnty. Redev. Agcy. Multi-Fam.
VRDN (Promenade Towers), 3.2s, 4/1/09 VMIG1 7,675,000
37,465,000 Los Angeles, Convention & Exhibition Ctr.
Auth. COP, 9s, 12/1/20 Aaa 47,814,706
29,100,000 Los Angeles, Convention & Exhibition Ctr.
Auth. IFB, 7.298s, 8/15/18 (acquired 9/15/94,
cost $21,610,242) [DBL. DAGGER] Aaa 25,462,500
Los Angeles, Dept. of Wtr. & Pwr. Rev. Bonds
9,305,000 7 3/8s, 2/1/29 Aa 9,921,456
11,000,000 (Waterworks), 7s, 2/15/22 Aa 11,673,750
51,200,000 (Electric Plant), Issue II, 6.8s, 6/1/31 Aa 55,936,000
38,205,000 (Electric Plant), Issue II, 6 3/4s, 12/15/29 Aa 40,879,350
25,000,000 (Electric Plant), Issue II, FGIC, 5.4s, 11/15/31 Aaa 23,000,000
17,760,000 (Electric Plant), Issue II, MBIA, 5 1/4s, 11/15/26 Aaa 15,917,400
25,000,000 Los Angeles, Harbor Dept. Rev. Bonds,
7.6s, 10/1/18 AAA 30,281,250
1,400,000 Los Angeles, Multi-Fam. VRDN (Hsg. Loans),
Ser. B, 3.35s, 12/1/26 A-1 1,400,000
27,250,000 Los Angeles, State Bldg. Auth. Lease Rev. Bonds
(State Dept. General Svcs.),
Ser. A, 7 1/2s, 3/1/11 AAA 28,674,630
34,700,000 Los Angeles, Wastewtr. Syst. IFB, 8.682s, 6/1/19
(acquired 11/18/94, cost $33,460,631) [DBL. DAGGER] AAA 37,953,125
Los Angeles, Wastewtr. Syst. Rev. Bonds
17,150,000 Ser. B, 7.15s, 6/1/20 Aaa 18,757,813
20,105,000 Ser. A, 7s, 2/1/20 Aaa 21,763,663
50,000,000 Ser. 91-5, AMBAC, 6.519s, 6/1/21 Aaa 53,500,000
7,775,000 Los Angeles, Wtr Dept. & Pwr. Rev. Bonds,
7.4s, 9/1/25 Aa 8,397,000
13,565,000 Los Angeles Cnty., Trans. Comm. Sales Tax
Rev. Bonds, Ser. A, 8s, 7/1/16 Aaa 13,971,543
15,000,000 Los Angeles Cnty., Dept. Wtr. & Elec. Pwr.
Auth. Rev. Bonds, Ser. A, MBIA, 7 1/4s, 9/15/30 Aa 16,462,500
24,340,000 Los Angeles Cnty., Hlth. Fac. Auth. Lease
Rev. Bonds (Olive View Med. Ctr.),
7 1/2s, 3/1/08 Aaa 25,601,299
Los Angeles Cnty., Metro. Trans. Auth.
Sales Tax Rev. Bonds
28,470,000 Ser. B, AMBAC, 5 1/4s, 7/1/23 Aaa 25,836,525
12,150,000 Ser. A (2nd Ser.), AMBAC, 5s, 7/1/25 Aaa 10,661,625
100,000,000 Ser. A, FGIC, 5s, 7/1/21 Aaa 87,375,000
26,235,000 Los Angeles Cnty., Pension Authority COP,
Ser. A, 6/30/08 AAA 29,875,106
15,235,000 Los Angeles Cnty., Pub. Wks. Fin. Auth. Rev.
Bonds, Ser. A, MBIA, 5 3/4s, 9/1/07 Aaa 15,844,400
Los Angeles Cnty., Sanitation Dist. Fin. Auth.
Rev. Bonds (Capital Projects)
14,865,000 MBIA, 5 1/4s, 10/1/19 Aaa 13,489,988
13,000,000 Ser. A, MBIA, 5s, 10/1/23 Aaa 11,293,750
20,000,000 Metropolitan Wtr. Dist. IFB
(Southern CA Waterwks.), 7.551s, 8/10/18 Aa 20,000,000
Metropolitan Wtr. Dist. Rev. Bonds
22,600,000 (Southern California Waterwks.), 5.95s, 8/5/22 Aa 22,402,250
25,000,000 Ser. C, 5s, 7/1/27 Aaa 21,812,500
15,000,000 (Southern CA Waterwks.),
Ser. B, MBIA, 4 3/4s, 7/1/21 Aaa 12,712,500
2,000,000 Moorpark, Multi-Fam. VRDN
(LeClub Apartments), Ser. A, 3.25s, 11/1/15 A-1 2,000,000
16,600,000 Mount Diablo Hosp. Dist. Rev. Bonds,
Ser. A, AMBAC, 5s, 12/1/13 Aaa 14,836,250
24,000,000 M-S-R Pub. Pwr. Agcy. VRDN
(Forniasan Juan Proj.), Ser. D, MBIA,
3.3s, 07/01/18 VMIG1 24,000,000
Northern CA Pwr. Agcy. Multi. Cap. Fac. IFB
8,450,000 MBIA, 9.233s, 8/15/17 Aaa 9,379,500
9,500,000 MBIA, 9.233s, 9/2/25 Aaa 10,545,000
17,000,000 Northern CA Pwr. Agcy. Pub. Pwr. Rev. Bonds
(Hydro. Elec. Project No. 1),
Ser. B-1, MBIA, 8s, 7/1/24 AAA 17,828,750
14,800,000 Oakland, Redev. Agcy. Rev. Bonds,
MBIA, 5.95s, 9/1/19 Aaa 14,892,500
12,000,000 Orange Cnty. VRDN, AMBAC, 3.2s, 8/1/13 VMIG1 12,000,000
Orange Cnty., Arpt. Dev. VRDN
1,400,000 (Yorba Linda), Ser. D, 3.25s, 4/1/06 VMIG1 1,400,000
300,000 (Vintage Woods), Ser. E, 3 1/2s, 11/1/08 VMIG1 300,000
3,000,000 (Villa Marguerite Arpt.), Ser. A, 3.3s, 3/1/23 VMIG1 3,000,000
390,000 Orange Cnty., Hsg. Auth. Dev. VRDN
(Village Niguel), Ser. AA, 3 1/2s, 12/1/08 VMIG1 390,000
20,257,000 Orange Cnty., Impt. VRDN
(Assmt. Dist No. 88-1), 3.8s, 9/2/18 VMIG1 20,257,000
Orange Cnty., Pub. Fac. Corp. COP
(Solid Waste Management)
10,000,000 7 7/8s, 12/1/13 BBB 10,462,500
4,180,000 7 7/8s, 12/1/07 BBB 4,373,325
Orange Cnty., Sanitation Dist. VR COP
30,260,000 (Nos. 1-3, 5-7, 11, 13 & 14) 3.7s, 8/1/15 VMIG1 30,260,000
1,500,000 (Nos. 1-3, 5-7 & 11), AMBAC, 3.7s, 8/1/16 VMIG1 1,500,000
16,900,000 (Nos. 1-2-3-6-7 & 11), Ser. C, FGIC, 3.8s, 8/1/17 VMIG1 16,900,000
19,830,000 Orange Cnty,. Wtr. Dist. COP, Ser. A, 5s, 8/15/18 Aa 17,326,463
3,000,000 Otay Wtr. Dist.Cfts. Partn. VRDN
(Capital Projs.), 3.3s, 9/1/26 VMIG1 3,000,000
12,840,000 Oxnard, Redev. Agcy. Tax Alloc. Rev. Bonds
(Cent. City Revitalization), Ser. A, 6 1/2s, 9/1/16 BBB 12,775,800
Palm Desert, Fin. Auth. Tax Alloc. IFB
22,850,000 MBIA, 8.955s, 4/1/22 Aaa 24,363,813
18,000,000 MBIA, 6.368s, 4/1/22 Aaa 18,472,500
Palm Springs Cmnty. Redev. Agcy. VRDN
200,000 (Headquarters Hotel 7) 3.1s, 12/1/14 A-1 200,000
1,900,000 (Headquarters Hotel 10), 3.1s, 12/1/14 A-1 1,900,000
21,720,000 Palo Alto, School Dist. Rev. Bonds,
Ser. B., 5 3/8s, 8/1/21 Aa 20,525,400
24,855,000 Pasadena VR COP
(Index Cap. Certif.), AMBAC, 3.43s, 2/1/14 Aaa 22,431,638
2,000,000 Pasadena, VR COP (Rose Bowl Impt.), 3.2s, 12/1/16 VMIG1 2,000,000
Pleasanton, Jt. Pwr. Fin. Auth. Rev. Bonds, Ser. B
5,790,000 6 3/4s, 9/2/17 BBB/P 5,840,663
8,860,000 6.6s, 9/2/08 BBB/P 9,003,975
4,740,000 6 1/2s, 9/2/04 BBB/P 4,864,425
9,655,000 6 1/8s, 9/2/02 BBB/P 9,751,550
44,000,000 Rancho Cucamonga, Wtr. Dist. Fin. Auth. Rev.
Bonds, AMBAC, 6.427s, 8/17/21 Aaa 47,685,000
7,095,000 Rancho, Redev. Agcy. Tax Alloc. Rev. Bonds
(Rancho Redev.), MBIA, 6 3/4s, 9/1/20 Aaa 7,609,388
20,800,000 Redding Elec. Syst. COP, MBIA, 6.368s, 7/1/22 Aaa 22,100,000
3,405,000 Richmond, Jt. Pwr. Fin. Auth. Rev. Bonds
(Impt. Dists. 851 & 853), Ser. B, 8 1/2s, 9/2/19 BBB/P 3,512,121
25,000 Riverside Cnty., Hsg. Auth. Multi-Fam.
3.3s, 8/1/25 A-1 25,000
1,500,000 Sacramento Cnty., VR COP, 3s, 6/1/20 Aaa 1,500,000
14,355,000 Sacramento Cnty., Santn. Dist. Fin. Auth. Rev.
Bonds, MBIA, 4 3/4s, 12/1/23 Aaa 11,986,425
1,495,000 Sacramento, Multi-Fam. Hsg. VRDN
(Smoketree-A), 3.2s, 4/15/10 A-1 1,495,000
16,610,000 Sacramento Cnty., Hsg. Auth. Multi-Fam. Rev.
Bonds, Ser. 85-2 (Issue II), FNMA Coll., 11/1/97 AAA 15,868,696
25,000,000 Sacramento, Muni. Util. Dist. Elec. IFB, FGIC,
8.668s, 8/15/18 Aaa 27,031,250
Sacramento, Muni. Util. Dist. Elec. Rev. Bonds
34,835,000 Ser. V, 7 7/8s, 8/15/16 Aaa 37,316,994
5,930,000 Ser. V, 7 1/2s, 8/15/18 Aaa 6,211,675
12,000,000 Ser. A, MBIA, 6 1/4s, 8/15/10 Aaa 12,960,000
1,380,000 San Bernadino Cnty., Multi-Fam. VRDN
(Woodview Apts.), 3.35s, 4/1/07 VMIG1 1,380,000
500,000 San Bernardino Cnty. VRDN, 3.3s, 7/1/15 VMIG1 500,000
10,000,000 San Bernardino Cnty., COP (Med. Ctr. Fin.),
MBIA, 5s, 8/1/28 Aaa 8,600,000
San Diego, Regl. Bldg. Auth. Rev. Bonds,
MBIA, stepped-coupon
11,000,000 6.9s, (5.65s, 5/2/09), 5/1/23 ++ Aaa 11,000,000
14,100,000 6.85s, (5.65, 5/2/98), 5/1/13 ++ Aaa 14,100,000
9,915,000 San Diego, Single Fam. Mtge. Rev. Bonds,
Ser. A, 8/1/16 A 1,574,006
11,520,000 San Diego, Swr. Rev. Bonds, Ser. A, AMBAC,
5s, 5/15/23 Aaa 10,080,000
29,350,000 San Diego, Pub. Fac. Fin. Auth. Swr. Rev. Bonds,
FGIC, 5s, 5/15/25 Aaa 25,754,625
10,200,000 San Diego Cnty., IF COP, MBIA, 8.196s,
11/18/19 Aaa 11,156,250
15,800,000 San Diego Cnty., COP, AMBAC, 5 1/4s, 9/1/06 Aaa 15,721,000
San Diego Cnty., Wtr. Auth. IF COP, Ser. 91-B
17,500,000 MBIA, 8.02s, 4/8/21 Aaa 18,768,750
28,350,000 MBIA, 8.02s, 4/21/11 Aaa 32,886,000
San Joaquin Hills, Trans. Corridor Agcy. Toll
Rd. Rev. Bonds
77,825,000 Sr. Lien, 6 3/4s, 1/1/32 BB/P 80,938,000
34,125,000 5s, 1/1/33 BB/P 28,281,094
900,000 San Jose, Multi-Fam. Hsg. VRDN
(Kimberly Woods Apts), 3.2s, 11/1/08 VMIG1 900,000
San Jose, Redev. Agcy. Tax Alloc. Rev. Bonds
19,150,000 (Merged Area Redev.), MBIA, 5s, 8/1/20 Aaa 16,971,688
29,100,000 (Merged Area Redev), MBIA, 4 3/4s, 8/1/24 Aaa 24,080,250
20,200,000 San Jose, Redev. Agcy. VRDN (Merged Area
Redev.), Ser. B, 3 1/4s, 7/1/26 A-1 20,200,000
40,000,000 San Mateo Cnty., Jt. Pwr. Fin. Auth. Rev. Bonds,
FSA, 5 3/4s, 7/15/29 Aaa 38,850,000
4,100,000 Santa Ana, Hlth. Fac. VRDN (Multi Modal-Town
& Country), 3.75s, 10/1/20 A-1 4,100,000
4,600,000 Santa Ana, U. School Dist. VR COP, 3.3s, 7/1/15 VMIG1 4,600,000
2,000,000 Santa Clara Cnty., Hsg. Auth. VRDN
(Foxchase Apt.), FGIC, 3.55s, 11/1/07 VMIG1 2,000,000
35,600,000 Santa Clara Wtr. Dist. COP, FGIC, 5 3/4s, 2/1/15 Aaa 35,555,500
45,200,000 South Orange Cnty., Pub. Fing. Auth. Rev.
Bond, FGIC, 5 1/2s, 8/15/15 Aaa 43,448,500
Southern CA Pub. Pwr. Auth. Rev. Bonds
13,635,000 (Mead Adelanto), Ser. A, AMBAC, 5s, 7/1/17 Aaa 12,271,500
26,690,000 (Palo Verde), Ser. A, AMBAC, 5s, 7/1/15 Aaa 24,287,900
42,690,000 (Mead Adelanto), Ser. A, AMBAC, 4 7/8s,
7/1/20 Aaa 36,446,588
25,300,000 Southern CA Pub. Pwr. Auth. VRDN
(Transmission), AMBAC, 3.2s, 7/1/19 VMIG1 25,300,000
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%, 9/1/2014 BB/P 10,222,075
29,700,000 U. of CA IFB, MBIA, 10.309s, 9/1/16
(acquired 8/12/92, cost $33,601,600) [DBL. DAGGER] Aaa 36,345,368
U. of CA Rev. Bonds
41,147,000 (UCSD Med. Ctr. Satellite Med. Fac.),
7.9s, 12/1/19 BBB 44,233,025
11,500,000 (Multi-Purpose), Ser. B, MBIA, 5s, 9/1/16 Aaa 10,306,875
13,000,000 (Multi-Purpose), Ser. C, 4 7/8s, 9/1/19 Aaa 11,131,250
1,900,000 Vallejo Hsg. Multi-Fam. VRDN,
Ser. A, 3.2s, 5/15/22 A-1 1,900,000
10,000,000 Vallejo, COP (Marine World Foundation),
7.2s, 2/1/26 BB/P 10,187,500
36,945,000 Valley Hlth. Syst. COP, 6 7/8s, 5/15/23 BBB 38,053,350
1,600,000 Vista, Multi-Fam. Hsg. VRDN
(Var-Ref-A-Rmkt-1/1/95), 3.3s, 5/1/25 A-1 1,600,000
6,300,000 Western Riverside, Wastewtr. Auth. VRDN,
3.7s, 4/1/28 A-1 6,300,000
1,800,000 Woodland Mult-Fam. Hsg. Auth. VRDN,
3.2s, 7/15/18 A-1 1,800,000
--------------
3,470,245,489
Puerto Rico (0.3%)
- ------------------------------------------------------------------------------------------------------------
$ 9,000,000 Cmnwlth. of PR, Govt. Dev. Bank IFB, 3.1s, 12/1/15 VMIG1 $ 9,000,000
1,400,000 Cmnwlth. of PR, Hwy. & Trans. Auth. VRDN,
Ser. X, 3.1s, 7/1/99 VMIG1 1,400,000
--------------
10,400,000
--------------
Total Municipal Bonds and Notes (cost $3,304,458,700) $ 3,480,645,489
MUNICIPAL COMMERCIAL PAPER (2.0%)*
PRINCIPAL AMOUNT RATINGS** VALUE
- ------------------------------------------------------------------------------------------------------------
$ 8,000,000 CA State G.O. Bonds RAN, Ser. C-4, 3 1/2s,
6/30/97 SP1+ $ 8,000,000
54,500,000 CA State RAN, Ser. A, 4 1/2s, 6/30/97 SP1+ 54,586,655
9,500,000 San Bernardino Cnty., RAN, 4 1/2s, 6/30/97
(Toronto Dominion Bank LOC) SP1+ 9,514,155
--------------
Total Municipal Commercial Paper (cost $72,083,501) $ 72,100,810
- ------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,376,542,201) *** $ 3,552,746,299
- ------------------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $3,595,561,007
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings
available at March 31, 1997 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 March 31, 1997. Securities rated by
Putnam are indicated by "/P" and are not publicly rated.
*** The aggregate identified cost on a tax basis is $3,386,270,729, resulting in gross unrealized
appreciation and depreciation of $196,347,594 and $29,872,024, respectively, or net unrealized
appreciation of $166,475,570.
++ 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.
[DBL. DAGGER] Restricted, excluding 144A securities, as to public resale. The total market value of restricted
securities held at March 31, 1997 was $120,888,493 or 3.4% of net assets.
The rates shown on IFB and IF COP, which are securities paying interest rates that vary inversely
to changes in the market interest rates, and VRDNs are the current interest rates at March 31, 1997.
The fund had the following industry group concentration greater than 10% at March 31, 1997 (as a
percentage of net assets):
Water and sewerage 19.6%
Utilities 17.6
Hospitals/health care 10.4
Transportation 10.1
The fund had the following insurance concentrations greater than 10% at March 31, 1997 (as a
percentage of net assets):
MBIA 22.5%
AMBAC 13.9
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,376,542,201) (Note 1) $ 3,552,746,299
- ---------------------------------------------------------------------------------------------------
Cash 1,917,014
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 47,079,694
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,097,072
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 9,157,000
- ---------------------------------------------------------------------------------------------------
Receivable from Manager (Note 2) 10,285
- ---------------------------------------------------------------------------------------------------
Total assets 3,615,007,364
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 8,606,902
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 4,367,196
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,054,556
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 242,250
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 32,692
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 8,961
- ---------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,944,162
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 189,638
- ---------------------------------------------------------------------------------------------------
Total liabilities 19,446,357
- ---------------------------------------------------------------------------------------------------
Net assets $ 3,595,561,007
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $ 3,429,482,262
- ---------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 96,423
- ---------------------------------------------------------------------------------------------------
Distributions in excess of gains on investments (Note 1) (10,221,776)
- ---------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 176,204,098
- ---------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $ 3,595,561,007
Computation of net asset value and offering price
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,047,853,290 divided by 364,278,984 shares) $8.37
- ---------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.37)* $8.79
- ---------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($535,561,877 divided by 64,073,974 shares)** $8.36
- ---------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($12,145,840 divided by 1,452,987 shares) $8.36
- ---------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.36)* $8.64
- ---------------------------------------------------------------------------------------------------
* 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
Six months ended March 31, 1997 (Unaudited)
<S> <C>
Tax exempt interest income: $ 110,850,386
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,225,039
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,157,194
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 65,555
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 17,467
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,133,454
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,237,969
- --------------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 27,503
- --------------------------------------------------------------------------------------------------
Reports to shareholders 71,167
- --------------------------------------------------------------------------------------------------
Registration fees 100
- --------------------------------------------------------------------------------------------------
Auditing 32,537
- --------------------------------------------------------------------------------------------------
Legal 60,763
- --------------------------------------------------------------------------------------------------
Postage 91,699
- --------------------------------------------------------------------------------------------------
Other 83,335
- --------------------------------------------------------------------------------------------------
Total expenses 15,203,782
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (530,804)
- --------------------------------------------------------------------------------------------------
Net expenses 14,672,978
- --------------------------------------------------------------------------------------------------
Net investment income 96,177,408
- --------------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 16,742,363
- --------------------------------------------------------------------------------------------------
Net realized gain on futures contracts (Note 1) 6,808,470
- --------------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the period (54,395,508)
- --------------------------------------------------------------------------------------------------
Net loss on investments (30,844,675)
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 65,332,733
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
1997* 1996
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ----------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------
Net investment income $ 96,177,408 $ 201,920,831
- ----------------------------------------------------------------------------------------------------------
Net realized gain on investments 23,550,833 31,619,858
- ----------------------------------------------------------------------------------------------------------
Net unrealized appreciation
(depreciation) of investments (54,395,508) 2,237,252
- ----------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 65,332,733 235,777,941
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------
From net investment income
Class A (84,132,007) (176,564,618)
- ----------------------------------------------------------------------------------------------------------
Class B (12,395,843) (22,679,219)
- ----------------------------------------------------------------------------------------------------------
Class M (278,237) (313,339)
- ----------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (7,788,953) --
- ----------------------------------------------------------------------------------------------------------
Class B (1,298,602) --
- ----------------------------------------------------------------------------------------------------------
Class M (27,148) --
- ----------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions
(Note 4) (33,190,698) 44,366,900
- ----------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (73,778,755) 80,587,665
Net assets
- ----------------------------------------------------------------------------------------------------------
Beginning of period 3,669,339,762 3,588,752,097
- ----------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $96,423 and
$725,102, respectively) $ 3,595,561,007 $ 3,669,339,762
- ----------------------------------------------------------------------------------------------------------
* Unaudited.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS A
- ------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share March 31
operating performance (Unaudited) Year ended September 30
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.46 $ 8.37 $ 8.09 $ 8.92 $ 8.39 $ 8.11
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .23 .47 .48 .50 .53 .54
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) .09 .31 (.81) .57 .27
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .16 .56 .79 (.31) 1.10 .81
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.23) (.47) (.48)** (.50) (.53) (.53)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain
or loss on investments (.02) -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain or loss on investments -- -- (.03) (.02) (.04) --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (.47) (.51) (.52) (.57) (.53)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 8.37 $ 8.46 $ 8.37 $ 8.09 $ 8.92 $8.39
- ------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 1.86* 6.81 10.07 (3.53) 13.63 10.34
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,047,853 $3,149,797 $3,168,277 $3,260,769 $3,600,182 $2,854,165
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .37* .74 .74 .68 .69 .60
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.66* 5.60 5.86 5.86 6.16 6.53
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 4.45* 29.47 47.73 21.06 22.95 31.25
- ------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Jan. 4, 1993+
operating performance (Unaudited) Year ended Sept. 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 8.45 $ 8.37 $ 8.08 $ 8.91 $ 8.37
- ------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income .20 .42 .42 .45 .32
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) .07 .32 (.81) .55
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .13 .49 .74 (.36) .87
- ------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.41) (.42)** (.45) (.33)
- ------------------------------------------------------------------------------------------------------------------------------
From net realized gain
or loss on investments (.02) -- -- (.02) --
- ------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain or loss on investments -- -- (.03) -- --
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions (.22) (.41) (.45) (.47) (.33)
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 8.36 $ 8.45 $ 8.37 $ 8.08 $ 8.91
- ------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 1.53* 5.99 9.47 (4.15) 10.51*
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $535,562 $510,394 $416,367 $349,609 $209,657
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .69* 1.39 1.39 1.32 1.00*
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.33* 4.94 5.17 5.16 3.68*
- ------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 4.45* 29.47 47.73 21.06 22.95
- ------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- --------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Year ended Feb. 14, 1995+
operating performance (Unaudited) Sept. 30 to Sept. 30
- --------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net asset value,
beginning of period $ 8.45 $ 8.36 $ 8.13
- --------------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------------
Net investment income .21 .45 .29
- --------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.07) .08 .24
- --------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .14 .53 .53
- --------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- --------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.44) (.30)**
- --------------------------------------------------------------------------------------------------------------------------------
From net realized gain
or loss on investments (.02) -- --
- --------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain or loss on investments -- -- --
- --------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.44) (.30)
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $ 8.36 $ 8.45 $ 8.36
- --------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(a) 1.71* 6.48 6.56*
- --------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $12,146 $9,149 $4,108
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .52* 1.04 .69*
- --------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.50* 5.24 3.52*
- --------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 4.45* 29.47 47.73
- --------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* 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
March 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam California Tax Exempt Income Fund (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 at least 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. 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 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, 0.40% of the next $5 billion, 0.375% of the next $5 billion, 0.355%
of the next $5 billion, 0.34% of the next $5 billion, and 0.33% of any excess
thereafter. Prior to January 20, 1997, Putnam Management was paid at a rate of
0.40% of any amount over $1.5 billion.
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 six months ended March 31, 1997, fund expenses were reduced by
$530,804 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 $2,720 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 has 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 an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
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 six months ended March 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter received net commissions of $144,308 and $2,040 from the sale of
class A and class M shares, respectively and $550,339 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 six
months ended March 31, 1997, Putnam Mutual Funds Corp., acting as underwriter
received $12,626 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1997, purchases and sales of investment
securities other than short-term investments aggregated $151,543,203 and
$527,515,287, respectively. There were no purchases and sales of U.S.
government obligations. 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 March 31, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class A Shares Amount
- ------------------------------------------------------------
Shares sold 25,602,756 $218,144,346
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,310,728 45,242,519
- ------------------------------------------------------------
30,913,484 263,386,865
Shares
repurchased (38,895,171) (331,176,029)
- ------------------------------------------------------------
Net decrease (7,981,687) $(67,789,164)
- ------------------------------------------------------------
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)
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class B Shares Amount
- ------------------------------------------------------------
Shares sold 6,973,664 $59,344,371
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 890,420 7,575,723
- ------------------------------------------------------------
7,864,084 66,920,094
Shares
repurchased (4,170,482) (35,477,410)
- ------------------------------------------------------------
Net increase 3,693,602 $31,442,684
- ------------------------------------------------------------
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
- ------------------------------------------------------------
Six months ended
March 31, 1997
- ------------------------------------------------------------
Class M Shares Amount
- ------------------------------------------------------------
Shares sold 469,920 $ 3,997,669
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 24,598 209,288
- ------------------------------------------------------------
494,518 4,206,957
Shares
repurchased (123,680) (1,051,175)
- ------------------------------------------------------------
Net increase 370,838 $ 3,155,782
- ------------------------------------------------------------
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
- ------------------------------------------------------------
WELCOME TO
www.putnaminv.com
Now you can get up-to-date information about your funds, learn more
about investing and retirement planning, and access market news and an
economic outlook from Putnam experts -- with just a few clicks of the
mouse!
VISIT PUTNAM'S NEW SITE ON THE WORLD WIDE WEB TO FIND OUT:
* the benefits of investing with Putnam
* Putnam's money management philosophy
* daily fund pricing and long-term fund performance
* how to tell if your retirement savings plan is on track
* how quickly money can accumulate in a tax-deferred investment
You can also read Dr. Robert Goodman's economic commentary and Putnam's
Capital Markets Forum outlook, search for a particular Putnam fund by
name or objective . . . and much more.
The site can be accessed through any of the major online services
(America Online, CompuServe, Prodigy) that offer web access. Of course,
you can also access it via Netscape and an independent Internet service
provider.
New features will be added to the site on an ongoing basis. So, visit us
at http://www.putnaminv.com -- often!
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
Ronald J. Jackson
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
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
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
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam California Tax
Exempt Income Fund. It may also be used as sales literature when preceded or
accompanied by the current prospectus, which gives details of sales charges,
investment objectives, and operating policies of the fund, and the most recent
copy of Putnam's Quarterly Performance Summary. For more information, or to
request a prospectus, call toll free: 1-800-225-1581. 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 principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
- --------------------
32901-027/337/677 5/97
