Putnam
California
Tax Exempt
Income Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-99
[LOGO: BOSTON * LONDON * TOKYO]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Municipal bonds have enjoyed a period of relative calm as most of the
world's other securities markets continue to experience varying degrees of
volatility. Popular with U.S. investors because their income escapes
federal taxes, these bonds have also been beneficiaries of an environment
that considerably narrowed the gap between their yields and the yields on
taxable U.S. Treasury bonds. The gap has widened in recent weeks to a more
traditional 90% of Treasury bond yields, but the disparity still provides
a significant advantage on a taxable-equivalent basis, especially for
taxpayers in the higher tax brackets.
In this environment, I am pleased to report that Putnam California Tax
Exempt Income Fund delivered competitive results during the semiannual
period that ended on March 31, 1999. It is encouraging also to note that
your fund's management team believes continued heavy demand for municipals
in a strong economy with low inflation augurs well as the fund enters the
second half of fiscal 1999. In the following report, Fund Manager Leslie
J. Burke reviews performance during the fiscal period just ended and takes
a look at prospects for fiscal 1999's remaining months.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 19, 1999
Report from the Fund Manager
Leslie J. Burke
There is good reason for California municipal bond investors to smile. In
a financial world in which volatility has become the norm, the municipal
bond market has unquestionably been one of the calmest markets. Among the
biggest benefits of a quiet market environment is the relative stability
of your fund's net asset value. This low price volatility was complimented
by a competitive total return. For the six months ended March 31, 1999,
Putnam California Tax Exempt Income Fund's class A shares generated a
total return of 1.26% at net asset value (-3.52% at public offering
price). Results for class B and class M shares, as well as performance
details for longer periods, can be found on page 6.
Total return for six months ended 3/31/99
Class A Class B Class M
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------
1.26% -3.52% 0.93% -3.99% 0.99% -2.31%
- ------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods begins on page 6.
* BOND SUPPLY TAPERS, MANAGEMENT FOCUSES ON PORTFOLIO STRUCTURE
As expected, with the slight rise in yields, the new supply of municipal
bonds has tapered off both on a national level and in California. The
calendar of new California issues shows about 20% fewer bonds coming to
market in comparison to year-earlier levels. On the demand side, cash flow
into California municipal bonds has increased, a by-product of a volatile
stock market and investors' need to rebalance their portfolios. The
ensuing supply/demand relationship is positive for municipal bonds.
We have focused heavily on portfolio structure since the start of the
fiscal year and we continue to concentrate maturities toward the
intermediate and long end of the yield curve, a range that falls primarily
between 7 and 12 years. These relatively neutral maturities should perform
well in a stable interest-rate environment.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Water and sewer 21.7%
Utilities 13.3%
Health care 11.5%
Transportation 11.4%
Education 4.7%
Footnote reads:
*Based on net assets as of 3/31/99. Holdings will vary over time.
The fund had also held a heavy concentration of 5% coupon bonds that were
at or near a dollar price of par or $100. Since a bond price usually
begins to lose upward price momentum as it approaches par, these bonds did
not offer opportunities for appreciation in a potentially stronger market.
Consequently, we began to sell par bonds and purchase higher- and
lower-coupon bonds selling at discounts or premiums. Through these coupon
alterations, we can create opportunities for price appreciation without
investing in longer-term bonds and thereby increasing the fund's
interest-rate risk.
For some time now we have allocated about 10% of the portfolio to
California general obligation bonds. During this time, the state has
enjoyed several credit upgrades from all three rating agencies. Since we
believe that these bonds may be at or near full potential in terms of
price appreciation, we have begun to redeploy some of these assets into
other areas with greater performance potential.
* WIDER CREDIT SPREADS CREATE INCOME OPPORTUNITIES
Although they lagged the credit spread widening of the taxable markets
last fall, municipal quality spreads also widened late in 1998. Lower
quality spreads widened to the point of justifying the selective use of
lower-rated higher-yielding bonds to increase the fund's income. Several
such higher-yielding issues have come from the tax-backed sector in which
the bond is backed by the revenues from residential and commercial
property taxes. The health-care sector has also provided some
opportunities especially since the overall sector has experienced the
negative spillover effects of the highly publicized Philadelphia Graduate
Hospital default.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
BB -- 3.2%
BBB/Baa -- 10.9%
A -- 5.1%
AA/Aa -- 17.6%
VMIGI/A-1+ -- 0.3%
AAA/Aaa -- 62.9%
Footnote reads:
*As a percentage of market value as of 3/31/99. A bond rated BBB/Baa or
higher is considered investment grade. Percentages may include unrated
bonds considered by Putnam Management to be of comparable quality. Ratings
will vary over time.
"The credit quality of municipal bond issuers is the highest it has been
in a decade."
- -- Tax Angles, April 1999
Such negative spillover effects in certain sectors are one reason why we
have always considered security selection and credit analysis critical
elements of the fund's investment strategy. Opportunity comes from
choosing bonds correctly, not from overall sector performance. Security
and credit research becomes even more important when we invest in bonds
that carry ratings below investment grade, which many health-care sector
bonds do, because they can add significantly to the fund's income.
* FUND BENEFITS FROM REFUNDINGS
One example of an issue that has performed well is the Duarte Hospital
certificates of obligation issued by the City of Hope Medical Center. The
Duarte Hospital is a high-end cancer hospital specializing in bone marrow
transplants. These bonds were refunded during this reporting period and
their rating was upgraded resulting in substantial price appreciation. In
a refunding, the issuer floats a second bond at a lower interest rate to
pay off an older bond at its first call date. Proceeds from the new bond
are invested in an escrow of U.S. Treasury securities that have the
highest credit rating possible.
Q:Why is low inflation good for the bond market?
A:Inflation has always received a bad rap from investors. After positive
economic news about job growth, rising wages, or increasing housing starts
- -- all harbingers of inflation -- prices in the bond market usually fall.
As a general rule, steep rises in economic growth lead to higher
inflation, which raises the costs of goods and services. Over the long
term, inflation erodes a bond's fixed value. This explains why the bond
market tends to react negatively to reports of stronger economic growth.
The stable, low inflation rates of the past few years, however, have been
favorable for bonds and the value of your investment. While inflation
fears arise often and affect the markets in the short term, current
economic indicators do not substantiate higher inflation. Ultimately, low
inflation means more money in a bond investor's pocket.
Another refunding that took place over the period was that of the San
Mateo County Power Authority revenue bonds. Since these bonds were FSA
insured and Aaa rated to begin with, price appreciation was primarily the
result of the new earlier maturity -- the first call date on the older
bonds -- that occurred as a result of the refunding.
The fund continues to hold the San Joaquin Hills Toll Road revenue bonds,
which have performed well because of successful marketing of an attractive
alternative route. The Eastern Foothill Transportation Corridor revenue
bonds also continue to provide the fund with attractive income. This toll
road opened 14 months ahead of schedule, which provided the issuer with
that much extra in toll revenues -- always a favorable beginning. Later
this spring, we expect that the Eastern Foothill bonds will be prerefunded
and are looking forward to the potential rewards from such a move.
* DIVERSIFIED ECONOMY, NO CLEAR EVIDENCE OF INFLATION
California has undeniably felt the effects of Asia's and Mexico's economic
problems. But there are elements of the highly diversified California
economy that have helped offset these problems, such as the strong demand
for computer services, new home construction, and sales of household
durable goods (furniture, appliances, and floor and window coverings). We
do have a small but growing concern about the concentration of
technology-related industries in California. With the high valuations and
abundance of stock options driving many individual incomes and spending
habits, there may be repercussions in the economy down the road.
With inflation remaining low despite strong economic growth and low
unemployment, a new awareness is emerging: strong growth does not
necessarily translate into higher prices or inflation. Since upward
pressure on inflation is quite negative for bonds, this new insight is
positive news for the California bond market.
With inflation in the United States ranging from 0% to 2% over the past 12
months, depending on the measure used, investors have not yet realized
that real rates of return are actually quite attractive. Accustomed to
higher rates of inflation hovering in the 3% to 4% range, investors need
to reset their expectations about what constitutes a good rate of return.
Simply put, a yield of 5% with 1% inflation is better than a 6% yield with
3% inflation. It is always important to evaluate the effects of inflation
- -- in this case, positive effects -- as you review your fund's
performance.
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 3/31/99, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
This section provides information about your fund's performance, which
should always be considered in light of its 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 3/31/99
Class A Class B Class M
(inception date) (4/23/83) (1/4/93) (2/14/95)
NAV POP NAV CDSC NAV POP
- ------------------------------------------------------------------------------
6 months 1.26% -3.52% 0.93% -3.99% 0.99% -2.31%
- ------------------------------------------------------------------------------
1 year 5.40 0.35 4.72 -0.28 4.96 1.59
- ------------------------------------------------------------------------------
5 years 41.07 34.37 36.55 34.55 38.51 33.98
Annual average 7.12 6.09 6.43 6.11 6.73 6.02
- ------------------------------------------------------------------------------
10 years 112.07 102.01 96.32 96.32 103.65 97.02
Annual average 7.81 7.28 6.98 6.98 7.37 7.02
- ------------------------------------------------------------------------------
Life of fund 268.96 251.43 224.71 224.71 243.89 232.69
Annual average 8.55 8.21 7.68 7.68 8.07 7.84
- ------------------------------------------------------------------------------
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/99
Lehman Brothers Municipal Consumer
Bond Index price index
- ------------------------------------------------------------------------------
6 months 1.49% 0.98%
- ------------------------------------------------------------------------------
1 year 6.20 1.73
- ------------------------------------------------------------------------------
5 years 44.43 12.09
Annual average 7.63 2.31
- ------------------------------------------------------------------------------
10 years 120.84 34.91
Annual average 8.25 3.04
- ------------------------------------------------------------------------------
Life of fund 288.92 67.34
Annual average 8.91 3.29
- ------------------------------------------------------------------------------
Past performance is no assurance of future results. More recent returns
may be more or less than those shown. Returns for class A and class M
shares reflect the current maximum initial sales charges of 4.75% and
3.25% respectively. Class B share returns for the 1-, 5-, and 10-year and
life-of-fund periods reflect the applicable contingent deferred sales
charge (CDSC), which is 5% in the first year, declines to 1% in the sixth
year, and is eliminated thereafter. Returns shown for class B and class M
shares for periods prior to their inception are derived from the
historical performance of class A shares, adjusted to reflect both the
initial sales charge or CDSC if any, currently applicable to each class
and in the case of class B and class M shares, the higher operating
expenses applicable to such shares. All returns assume reinvestment of
distributions at NAV. Investment return and principal value will fluctuate
so that an investor's shares when redeemed may be worth more or less than
their original cost.
PRICE AND DISTRIBUTION INFORMATION 6 MONTHS ENDED 3/31/99
Class A Class B Class M
- --------------------------------------------------------------------------
Distributions (number) 6 6 6
- --------------------------------------------------------------------------
Income $0.213218 $0.184437 $0.199819
- --------------------------------------------------------------------------
Capital gains1
Long-term 0.040100 0.040100 0.040100
- --------------------------------------------------------------------------
Short-term 0.006900 0.006900 0.006900
- --------------------------------------------------------------------------
Total $0.260218 $0.231437 $0.246819
- --------------------------------------------------------------------------
Share value: NAV POP NAV NAV POP
- --------------------------------------------------------------------------
9/30/98 $8.89 $9.33 $8.88 $8.88 $9.18
- --------------------------------------------------------------------------
3/31/99 8.74 9.18 8.73 8.72 9.01
- --------------------------------------------------------------------------
Current return (end of period)
- ---------------------------------------------------------------------------
Current dividend rate2 4.85% 4.62% 4.21% 4.59% 4.44%
- ---------------------------------------------------------------------------
Taxable equivalent3 8.85 8.43 7.69 8.38 8.11
- ---------------------------------------------------------------------------
Current 30-day SEC yield4 4.11 3.91 3.46 3.82 3.70
- ---------------------------------------------------------------------------
Taxable equivalent3 7.50 7.14 6.32 6.97 6.75
- ---------------------------------------------------------------------------
1 Capital 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.
2 Income portion of most recent distribution, annualized and divided by
NAV or POP at end of period.
3 Assumes maximum 45.22% 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
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 4.75% maximum 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.
A guide to the financial statements
These sections of the report constitute the fund's financial
statements.
The fund's portfolio lists all the fund's investments and their values as
of the last day of the reporting period. Holdings are organized by asset
type and industry sector, country, or state to show areas of concentration
and diversification.
Statement of Assets and Liabilities shows how the fund's net assets and
share price is determined. All investment and non-investment assets are
added together. Any unpaid expenses and other liabilities are subtracted
from this total. The result is divided by the number of shares to
determine the net asset value per share, which is calculated separately
for each class of shares.
Statement of Operations shows the fund's net investment gain or loss for
the reporting period. This is determined by adding up all the fund's
earnings -- from dividends and interest income -- and subtracting its
operating expenses. This statement also lists any net gain or loss the
fund realized on the sales of its holdings and -- for holdings that remain
in the portfolio -- any change in unrealized gains or losses over the
period.
Statement of changes in Net Assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number of
the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed here
may not match the amounts listed in the Statement of Operations because
the distributions are determined on a tax basis and may be paid in a
different period from the one in which they were earned.
Financial Highlights provide an overview of the fund's investment results,
per-share distributions, expense ratios, net investment income ratios and
portfolio turnover in one summary table. A separate table is provided for
each share class, reflecting the five most recent reporting periods. In a
semiannual report, the highlight table also includes the current reporting
period.
The fund's portfolio
March 31, 1999 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FHA Insd. -- Federal Housing Administration Insured
FRB -- Floating Rate Bond
FSA -- Financial Security Assurance
G.O. Bonds -- General Obligation Bonds
IFB -- Inverse Floating Rate Bonds
IF COP -- Inverse Floating Rate Certificate of Participation
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (99.7%) (a)
PRINCIPAL AMOUNT RATINGS(RAT) VALUE
<S> <C> <C> <C>
California (97.7%)
- --------------------------------------------------------------------------------------------------------------------------
Alameda, Corridor Trans. Auth. Rev. Bonds, Ser. A
$ 9,500,000 5 1/4s, 10/1/21 Aaa $ 9,713,750
10,195,000 5 1/8s, 10/1/14 Aaa 10,653,775
16,000,000 Anaheim, IF COP, MBIA, 8.77s, 7/16/23 Aaa 20,040,000
24,000,000 Anaheim, Pub. Fin. Auth. IFB, MBIA, 9.07s, 12/28/18 Aaa 31,380,000
10,000,000 Anaheim, Pub. Fin. Auth. Rev. Bonds
(Pub. Improvements), Ser. A, FSA, 5s, 3/1/37 Aaa 9,837,500
30,275,000 Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates
Med. Ctr.), Ser. A, 6.55s, 12/1/22 A+ 33,832,313
10,000,000 Beverly Hills, COP (Civic Ctr. Impt.), 6 3/4s, 6/1/19 Aa3 10,256,600
Brentwood, Infrastructure Auth. Rev. Bonds, Ser. 94-1
6,000,000 5 5/8s, 9/2/29 BB/P 5,835,000
2,500,000 5.6s, 9/2/19 BB/P 2,456,250
CA Edl. Fac. Auth. Rev. Bonds (U. of Southern CA)
15,745,000 Ser. B, 6 3/4s, 10/1/15 AA 16,345,042
20,000,000 Ser. C, 5 1/8s, 10/1/28 AA 20,075,000
CA Hlth. Fac. Auth. Rev. Bonds
2,000,000 (Summit Med. Ctr.), Ser. A, 7.6s, 5/1/15 Baa3 2,046,300
12,335,000 (Summit Med. Ctr.), Ser. B, 7.6s, 5/1/15 Baa3 12,620,555
9,000,000 (CedarKnoll), Ser. B, 7 1/2s, 8/1/20 A+ 9,663,750
7,175,000 (Summit Med. Ctr.), Ser. B, 7 1/2s, 5/1/09 Baa3 7,340,599
10,000,000 (Mercy Hlth. Syst.), Ser. C, MBIA, 7 1/4s, 7/1/15 (SEG) AAA 10,265,000
21,000,000 (Catholic Healthcare West.), Ser. A, AMBAC,
5s, 7/1/21 Aaa 20,711,250
35,385,000 CA Hlth. Fac. Fin. Auth. IFB, Ser. B, MBIA, 5s, 7/1/14 AAA 35,385,000
12,500,000 CA Hlth. Fac. Fin. Auth. Rev. Bonds
(INSD-Sutter Hlth.), Ser. A, 5.35s, 8/15/28 Aaa 12,812,500
14,250,000 CA Housing Fin. Agcy. IFB, FHA Insd., 9.621s, 8/1/23 Aa2 16,458,750
10,290,000 CA Poll. Control Fin. Auth. Solid Waste Disp.
Rev. Bonds (Keller Canyon Landfill Co.),
6 7/8s, 11/1/27 A- 10,855,950
37,685,000 CA Pub. Cap. Impt. Fin. Auth. Rev. Bonds
(Jt. Pwrs. Agcy.), Ser. B, MBIA, 8.1s, 3/1/18 Aaa 38,373,505
CA State G.O. Bonds
10,000,000 AMBAC, 6 1/2s, 9/1/06 Aaa 11,650,000
24,365,000 6s, 2/1/10 Aa3 27,684,731
16,365,000 6s, 10/1/08 aa3 18,676,556
14,700,000 6s, 2/1/08 Aa3 16,647,750
16,545,000 AMBAC, 5 1/2s, 4/1/11 Aaa 18,178,819
9,000,000 5 1/2s, 10/1/07 Aa3 9,933,750
10,000,000 (Veterans), Ser. BH, 5.4s, 12/1/14 Aa3 10,337,500
10,000,000 (Veterans), Ser. BH, 5.35s, 12/1/13 Aa3 10,337,500
10,000,000 (Veterans), Ser. BH, 5 1/4s, 12/1/12 Aaa 10,362,500
14,545,000 5s, 2/1/14 Aa3 14,890,444
20,800,000 Ser. 33, MBIA, zero % 10/1/11 Aa3 11,856,000
60,000,000 Ser. 27, MBIA, zero % 9/1/11 Aa3 34,275,000
37,100,000 CA State G.O. FRB, 8.751s, 9/1/12
(acquired 7/11/96, cost $36,543,500) (RES) Aa3 49,574,875
25,500,000 CA State Rev. Bonds, FGIC, 8s, 11/1/07 Aaa 31,556,250
CA State Dept. Wtr. Res. Rev. Bonds
13,500,000 (Central Valley), 5s, 12/1/29 Aa2 13,331,250
25,000,000 Ser. O, MBIA, 4 3/4s, 12/1/29 Aaa 23,750,000
24,200,000 CA State Dept. Wtr. Res. IFB (Central Valley),
10.27s, 12/1/12 (acquired 11/27/92,
cost $25,593,859) (RES) Aa2 36,027,750
CA State Pub. Wks. Board Lease Rev. Bonds, Ser. A
20,690,000 (U. of CA), 7s, 9/1/15 (acquired 10/25/90,
cost $19,948,242) (RES) Aaa 22,164,163
24,000,000 (Dept. of Corrections-State Prisons), 7s, 9/1/09 Aaa 25,710,000
28,000,000 (Dept. of Corrections-State Prisons), MBIA,
6 1/2s, 9/1/17 Aaa 34,020,000
59,000,000 (Dept. of Corrections-State Prisons), 6.43s, 9/1/19 A+ 64,015,000
10,105,000 AMBAC, 5.8s, 1/1/13 Aaa 11,115,500
7,205,000 (CA Cmnty. Colleges), 5 1/2s, 12/1/09 A1 7,916,494
6,000,000 (Regents U. CA), 5 1/4s, 12/1/09 AA3 6,517,500
6,000,000 (Regents U. CA), 5 1/4s, 12/1/07 AA3 6,525,000
33,500,000 (Dept. of Corrections-State Prisons), AMBAC,
5s, 12/1/19 Aaa 33,835,000
6,555,000 (Libr. & Courts Annex), 5s, 5/1/18 A1 6,538,613
18,000,000 CA State U. IFB, AMBAC, 10.3s, 11/1/21
(acquired 3/2/92, cost $19,013,580) (RES) Aaa 20,745,000
CA Statewide Cmnty. Dev. Auth. COP
15,000,000 (The Internext Group), 5 3/8s, 4/1/30 BBB 14,681,250
10,000,000 (Childrens Hosp.), MBIA, 4 3/4s, 6/1/21 Aaa 9,487,500
500,000 CA Statewide Cmnty. Dev. Auth. VRDN
(Barton Memorial Hosp.), 2.85s, 12/1/09 VMIG1 500,000
CA Statewide Cmntys. Dev. Auth. Apt. Dev.
Rev. Bonds (Irvine Apt. Cmntys.)
12,500,000 Ser. A-4, 5 1/4s, 5/15/25 (acquired various dates
from 5/28/98 to 6/25/98, cost $14,505,368) (RES) Baa2 12,781,250
20,000,000 Ser. A-3, 5.1s, 5/15/25 (acquired 5/28/98,
cost $20,000,000) (RES) Baa2 20,550,000
5,000,000 Ser. A, 5.05s, 5/15/25 (acquired 5/28/98,
cost $5,000,000) (RES) Baa2 5,118,750
30,000,000 Ser. A-2, 4.9s, 5/15/25 (acquired 5/28/98,
cost $30,000,000) (RES) Baa2 30,712,500
14,000,000 Castaic Lake, Wtr. Agcy. COP (Wtr. Syst. Impt.),
MBIA, 7 1/8s, 8/1/16 Aaa 14,980,000
32,000,000 Chino Basin, Regl. Fin. Auth. Rev. Bonds, AMBAC,
5 3/4s, 8/1/22 Aaa 34,160,000
Commerce Redev. Agcy. Rev. Bonds (No. 1), Ser. 91-A
8,845,000 7 1/4s, 8/1/21 BBB- 9,442,038
68,280,000 zero % 8/1/21 BBB- 20,227,950
Contra Costa, Wtr. Dist. Rev. Bonds, Ser. G, MBIA
36,915,000 5s, 10/1/26 Aaa 36,499,706
41,500,000 5s, 10/1/24 Aaa 41,085,000
35,000,000 Contra Costa, Home Mtge. Fin. Auth. Rev. Bonds,
MBIA, zero %, 9/1/17 Aaa 13,037,500
12,000,000 Contra Costa Cnty., COP (Merrrithew
Memorial Hosp.), MBIA, 5 3/8s, 11/1/17 Aaa 12,480,000
10,000,000 Corona, COP (Vista Hosp. Syst.), Ser. B,
9 1/2s, 7/1/20 (acquired 10/23/92,
cost $10,000,000) (RES) B-/P 10,200,000
19,000,000 Delano, COP (Delano Regl. Med. Ctr.), 5.6s, 1/1/26 BBB- 19,023,750
Duarte, COP
15,000,000 (City of Hope Med. Ctr.), 6 1/8s, 4/1/13 Baa2 16,650,000
15,000,000 Ser. A, 5 1/4s, 4/1/31 BBB+ 14,587,500
7,500,000 Ser. A, 5 1/4s, 4/1/24 BBB+ 7,359,375
17,000,000 East Bay, Muni. Util. Rev. Bonds, MBIA, 4 3/4s, 6/1/28 Aaa 16,171,250
23,850,000 East Bay, Muni. Util. Dist. Rev. Bonds
(Wastewater Treatment), FGIC, 4 3/4s, 6/1/21 Aaa 22,925,813
10,725,000 El Camino, Hosp. Dist. Rev. Bonds, Ser. A, AMBAC,
6 1/4s, 8/15/17 Aaa 12,266,719
Foothill/Eastern Trans. Corridor Agcy. Rev. Bonds
(CA Toll Roads), Ser. A
34,150,000 6 1/2s, 1/1/32 BBB- 38,119,938
38,875,000 6s, 1/1/34 BBB- 42,325,156
31,945,000 5s, 1/1/35 BBB- 30,467,544
11,460,000 Fresno, Unified School Dist. COP, 7 1/4s, 3/1/07 A3 12,333,825
10,510,000 Kern, High School Dist. G. O., Ser. 14, MBIA, 9.184s,
2/1/13 (acquired 6/29/98, cost $14,071,159) (RES) Aaa 13,860,063
2,000,000 Kings Cnty., Multi-Fam. Hsg. VRDN (Edgewater
Isle Apts), Ser. A, 2.7s, 6/1/07 VMIG1 2,000,000
15,000,000 Los Angeles Cnty., Dept. Wtr. & Elec. Pwr. Auth.
Rev. Bonds, Ser. A, MBIA, 7 1/4s, 9/15/30 Aa3 16,031,250
Los Angeles Cnty., Metropolitan Trans. Auth.
Sales Tax Rev. Rev. Bonds, Ser. A
12,150,000 (2nd Ser.), AMBAC, 5s, 7/1/25 Aaa 12,013,313
6,765,000 (1st Tier-Prop A), FSA, 5s, 7/1/15 Aaa 6,908,756
Los Angeles Cnty., Pub. Wks. Fin. Auth. Rev. Bonds,
Ser. A,
15,235,000 MBIA, 5 3/4s, 9/1/07 Aaa 17,253,638
7,000,000 AMBAC, 5 1/2s, 10/1/10 Aaa 7,647,500
8,000,000 AMBAC, 5 1/2s, 10/1/09 Aaa 8,830,000
9,000,000 AMBAC, 5 1/2s, 10/1/08 Aaa 10,012,500
13,000,000 Los Angeles Cnty., Sanitation Dist. Fin. Auth.
Rev. Bonds, Ser. A, MBIA, 5s, 10/1/23 Aaa 12,870,000
21,530,000 Los Angeles, Bldg. Auth. Rev. Bonds (CA Dept.
Gen Svcs.), Ser. A, MBIA, 5 5/8s, 5/1/11 Aaa 23,925,213
600,000 Los Angeles, Cmnty. Redev. Agcy. Multi-Fam. VRDN
(Promenade Towers), 2.95s, 4/1/09 VMIG1 600,000
37,465,000 Los Angeles, Convention & Exhibition Ctr. Auth.
Lease, COP, 9s, 12/1/20 Aaa 48,610,838
19,300,000 Los Angeles, Convention & Exhibition Ctr. Auth.
Lease, IFB, MBIA, 7.07s, 8/15/18
(acquired 9/15/94, cost $21,610,242) (RES) Aaa 20,096,125
Los Angeles, Dept. of Wtr. & Pwr. Rev. Bonds
7,775,000 7.4s, 9/1/25 Aa3 8,067,340
5,605,000 (Waterworks), 7s, 2/15/22 Aa3 5,795,010
51,200,000 (Electric Plant), Ser. Issue II, 6.8s, 6/1/31 Aa3 55,232,000
38,205,000 (Electric Plant), Ser. Issue II, 6 3/4s, 12/15/29 Aa3 39,816,487
25,000,000 Los Angeles, Harbor Dept. Rev. Bonds, 7.6s, 10/1/18 AAA 32,062,500
15,715,000 Los Angeles, Metro. Trans. Auth. Sales Tax
Rev. Bonds, Ser. A, AMBAC, 5 1/2s, 7/1/08 Aaa 17,345,431
26,235,000 Los Angeles, Pension Auth. COP, Ser. A, MBIA,
6.9s, 6/30/08 Aaa 31,777,144
Los Angeles, U. School Dist. G. O. Bonds, Ser. B, FGIC
6,380,000 5 3/8s, 7/1/14 Aaa 6,770,775
7,455,000 5 3/8s, 7/1/13 Aaa 7,939,575
2,500,000 5 3/8s, 7/1/12 Aaa 2,678,125
8,785,000 5 3/8s, 7/1/11 Aaa 9,465,838
34,700,000 Los Angeles, Wastewater Syst. IFB, 9.3s, 6/1/19 Aaa 41,596,625
Los Angeles, Wastewater Syst. Rev. Bonds
17,150,000 Ser. B, 7.15s, 6/1/20 AAA 18,243,313
20,105,000 Ser. A, 7s, 2/1/20 Aaa 21,150,862
50,000,000 Ser. 91-5, AMBAC, 6.519s, 6/1/21 Aaa 51,253,000
15,000,000 Ser. G, MBIA, 5s, 6/1/28 Aaa 14,812,500
Metropolitan Wtr. Dist G. O. Bonds, Ser. A
2,500,000 5 1/4s, 3/1/13 Aaa 2,640,625
4,000,000 5 1/4s, 3/1/14 Aaa 4,210,000
20,000,000 Metropolitan Wtr. Dist. IFB (Southern CA
Waterwks.), 7.96s, 8/10/18 Aa2 24,300,000
Metropolitan Wtr. Dist. Rev Bonds
22,600,000 (Southern CA Waterwks.), 5.95s, 8/5/22 Aa2 24,492,750
10,000,000 Ser. A, 5 1/2s, 7/1/10 Aa2 10,925,000
26,255,000 (Southern CA Waterwks.), Ser. C, 5s, 7/1/27 Aa2 25,926,813
51,445,000 Ser. A., 5s, 7/1/26 Aa2 50,866,244
15,425,000 Ser. A., 5s, 7/1/37 Aa2 15,193,625
15,000,000 (Southern CA Waterwks.), Ser. B, MBIA,
4 3/4s, 7/1/21 Aaa 14,418,750
8,275,000 Modesto, Dist. Fin. Auth. Rev. Bonds, Ser. A, MBIA,
5 3/4s, 10/1/10 Aaa 9,226,625
10,350,000 Modesto, Irr Dist. Fin. Auth. Rev. Bonds (Domestic
Wtr. Project), Ser. D, AMBAC, 4 3/4s, 9/1/22 Aaa 9,923,063
16,600,000 Mount Diablo, Hosp. Dist. Rev. Bonds, Ser. A,
AMBAC, 5s, 12/1/13 Aaa 17,118,750
Northern CA Pwr. Agcy. Pub. Pwr. Rev. Bonds,
(Geothermal), Ser. A
3,925,000 AMBAC, 5.8s, 7/1/09 AAA 4,425,438
7,720,000 AMBAC, 5.8s, 7/1/09 Aaa 8,685,000
5,780,000 (Hydroelectric), MBIA, 5 1/4s, 7/1/12 AAA 6,126,800
5,440,000 (Hydroelectric), MBIA, 5 1/4s, 7/1/11 AAA 5,800,400
Northern CA Pwr. Agcy. Multi. Cap. IFB, MBIA
4,945,000 9.76s, 8/1/25 Aaa 5,934,000
6,265,000 Prerefunded, 6.54s, 8/1/25 Aaa 7,643,300
Northern CA Pwr. Agcy. Multi. Cap. Fac.
Rev. Bonds IFB
4,770,000 9.877s, 8/1/17 Aaa 5,724,000
3,620,000 Prerefunded, 9.877s, 8/1/17 Aaa 4,416,400
Oakland CA, Bldg., Auth. Rev. Bonds, AMBAC
6,540,000 5 1/2s, 4/1/13 Aaa 7,071,375
6,295,000 5 1/2s, 4/1/12 Aaa 6,845,813
14,800,000 Oakland, Redev. Agcy. Rev. Bonds, MBIA,
5.95s, 9/1/19 Aaa 15,688,000
Orange Cnty., COP, Ser. A, MBIA
14,520,000 6s, 7/1/26 Aaa 16,135,350
25,285,000 6s, 7/1/07 Aaa 28,540,444
1,900,000 Orange Cnty., Hsg. Auth. Dev. Rev. Bonds VRDN
(Village Niguel), Ser. AA, 2.55s, 12/1/08 VMIG1 1,900,000
Orange Cnty., Local Trans. Auth. Rev. Bonds,
Ser. A, MBIA
5,000,000 5 1/2s, 2/15/09 Aaa 5,506,250
8,000,000 5 1/2s, 2/15/08 Aaa 8,810,000
7,845,000 5 1/2s, 2/15/07 Aaa 8,609,888
Orange Cnty., Trans. Auth. Sales Tax Rev. Bonds, Ser. A
11,445,000 5.7s, 2/15/11 Aaa 12,775,481
11,700,000 5.7s, 2/15/10 Aaa 13,060,125
13,960,000 5.7s, 2/15/09 Aaa 15,600,300
8,210,000 5.7s, 2/15/08 Aaa 9,154,150
16,830,000 Orange Cnty., Wtr. Dist. COP, Ser. A, 5s, 8/15/18 AA 16,787,925
12,840,000 Oxnard, Redev. Agcy. Tax Alloc. Rev. Bonds
(Cent. City Revitalization), Ser. A, 6 1/2s, 9/1/16 BBB 13,835,100
31,850,000 Palm Desert, Fin. Auth. Tax Alloc. IFB, MBIA,
7 5/8s, 4/1/22 Aaa 37,543,188
24,855,000 Pasadena, Cap. Impt. IF COP, AMBAC, 3.43s, 2/1/14 Aaa 27,154,088
Pleasanton, Jt. Pwr. Fin. Auth. Rev. Bonds, Ser. B
5,420,000 6 3/4s, 9/2/17 BBB/P 5,826,500
8,365,000 6.6s, 9/2/08 BBB/P 9,013,288
4,520,000 6 1/2s, 9/2/04 BBB/P 4,943,750
7,545,000 6 1/8s, 9/2/02 BBB/P 7,969,406
44,000,000 Rancho Cucamonga, Wtr. Dist. Fin. Auth. Rev. Bonds,
AMBAC, 6.427s, 8/17/21 Aaa 47,575,000
7,095,000 Rancho, Redev. Agcy. Tax Alloc. Rev. Bonds
(Rancho Redev.), MBIA, 6 3/4s, 9/1/20 Aaa 7,344,957
10,400,000 Redding, Elec. Syst. Rev. Bonds, MBIA, 9.32s,
IFB, 7/8/22 Aaa 13,936,000
8,000,000 Redlands, Redev. Agcy. Tax Allocation Bonds, Ser. A,
MBIA, 4 3/4s, 8/1/21 Aaa 7,690,000
12,725,000 Sacramento City Fin. Auth. Lease Rev. Bonds, Ser. A,
AMBAC, 5 3/8s, 11/1/14 Aaa 13,838,438
27,000,000 Sacramento, Muni. Util. Dist. Elec. IFB, FGIC,
9 3/8s, 8/15/18 Aaa 31,860,000
12,000,000 Sacramento, Muni. Util. Dist. Elec. Rev. Bonds, Ser. A,
MBIA, 6 1/4s, 8/15/10 Aaa 13,965,000
5,000,000 Sacramento, Special Tax Bonds (Northern
Natomas Cmnty. Fac.), Ser. 4-A, 5.7s, 9/1/23 BB/P 5,012,500
San Diego Cnty., COP, AMBAC
15,800,000 5 1/4s, 9/1/06 Aaa 17,064,000
10,000,000 (Downtown Courthouse), AMBAC,
4 1/2s, 5/1/23 Aaa 9,225,000
21,400,000 San Diego Cnty., IF COP, MBIA, 6.363s, 11/18/19 Aaa 22,684,000
San Diego Cnty., Wtr. Auth., COP, Ser. A
5,000,000 5 3/4s, 5/1/11 Aa3 5,593,750
9,500,000 5 1/4s, 5/1/07 Aa3 10,283,750
12,000,000 FGIC, 5s, 5/1/14 Aaa 12,240,000
25,000,000 FGIC, 4 3/4s, 5/1/28 Aaa 23,593,750
San Diego Cnty., Wtr. Auth. IF COP
20,000,000 Ser. 91-B, MBIA, 9.02s, 4/8/21 Aaa 26,350,000
28,350,000 Ser. B, MBIA, 9.02s, 4/21/11 Aaa 37,953,563
2,525,000 San Diego, Single Fam. Mtge. Rev. Bonds,
zero %, 8/1/16 A3 482,906
47,420,000 San Diego, Conv. Ctr. Expansion Fing Auth. Lease
Rev. Bonds, Ser. A, 4 3/4s, 4/1/28 Aaa 45,108,275
15,350,000 San Diego, Pub. Fac. Fin. Auth. Swr. Rev. Bonds,
FGIC, 5s, 5/15/25 Aaa 15,177,313
San Diego, Regl. Bldg. Auth. Lease COP, MBIA
11,000,000 6.9s, 5/1/23 Aaa 11,646,250
14,100,000 6.85s, 5/1/13 Aaa 15,157,500
San Francisco, City & Cnty. G.O. Bonds, Ser. 1, FGIC
32,300,000 5 3/4s, 6/15/07 Aaa 36,135,625
30,470,000 5 3/4s, 6/15/06 Aaa 33,897,875
10,000,000 San Francisco, Rapid Transit Dist. Sales Tax
Rev. Bonds, 5 1/2s, 7/1/09 Aa3 11,075,000
San Francisco, City & Cnty. Arpt. Comm. Intl. Arpt.
Rev. Bonds, Ser. 22, AMBAC
3,670,000 5 1/4s, 5/1/13 Aaa 3,844,325
3,490,000 5 1/4s, 5/1/12 Aaa 3,677,588
3,315,000 5 1/4s, 5/1/11 Aaa 3,513,900
2,000,000 San Francisco, City & Cnty. Redev. Agy. Multi-Fam.
VRDN (Fillmore Ctr.), Ser. A-1, 2 1/2s, 12/1/17 A-1+ 2,000,000
10,000,000 San Francisco, State Bldg. Auth. Lease Rev. Bonds
(San Francisco Civic Ctr. Complex), Ser. A,
AMBAC, 5 1/4s, 12/1/21 Aaa 10,158,200
San Joaquin Hills, Trans. Corridor Agcy. Toll Rd.
Rev. Bonds
34,125,000 5s, 1/1/33 Baa3 32,632,031
77,825,000 Sr. Lien, 6 3/4s, 1/1/32 Aaa 87,650,406
10,000,000 Ser. A, MBIA, 5 1/4s, 1/15/30 Aaa 10,162,500
29,100,000 San Jose, Redev. Agcy. Tax Alloc. Rev. Bonds
(Merged Area Redev), MBIA, 4 3/4s, 8/1/24 Aaa 27,681,375
San Marcos, Pub. Fac. Auth. Rev. Bonds
2,000,000 5.8s, 9/1/27 BB-/P 2,017,500
1,635,000 5.8s, 9/1/18 BB-/P 1,665,656
3,000,000 5 1/2s, 9/1/10 BB-/P 3,026,250
40,000,000 San Mateo Cnty., Jt. Pwr. Fin. Auth. Rev. Bonds, FSA,
5 3/4s, 7/15/29 Aaa 42,500,000
35,600,000 Santa Clara, Wtr. Dist. Rev. Bonds, FGIC,
5 3/4s, 2/1/15 Aaa 38,003,000
7,525,000 Sierra View, Health Care Dist. Rev. Bonds,
5.4s, 7/1/22 BBB- 7,365,094
2,400,000 Simi Valley, Multi-Fam Hsg. VRDN, Ser. A, 2.8s, 7/1/23 VMIG1 2,400,000
45,200,000 South Orange Cnty., Pub. Fin. Auth. Rev. Bonds,
FGIC, 5 1/2s, 8/15/15 Aaa 47,968,500
Southern CA Pub. Pwr. Auth. Rev. Bonds
5,465,000 (Southern transmission), Ser. A, MBIA,
5 1/4s, 7/1/11 Aaa 5,840,719
42,690,000 (Mead Adelanto), Ser. A, AMBAC, 4 7/8s, 7/1/20 Aaa 41,836,200
3,000,000 Stockton, Cmnty. Fac. Dist. Tax. Rev. Bonds
(Mello Roos-Weston Ranch), Ser. A, 5.8s, 9/1/14 BB-/P 3,063,750
1,800,000 Stockton, Multi-Fam. Hsg. VRDN (Mariners
Pointe Assoc.), Ser. A, 2 3/4s, 9/1/18 A-1+ 1,800,000
Thousand Oaks, Cmnty. Fac. Dist. Special Tax
Rev. Bonds (No. 94-1)
21,775,000 6 7/8s, 9/1/24 (acquired various dates from
3/2/95 to 5/20/96, cost $20,683,570) (RES) B/P 23,272,031
33,515,000 zero % 9/1/14 (acquired 3/2/95,
cost $10,190,212) (RES) B/P 12,777,594
39,727,000 U. of CA Rev. Bonds (UCSD Med. Ctr. Satellite
Med. Fac.), 7.9s, 12/1/19 A-/P 41,380,835
59,400,000 U. of CA Hosp. IFB, 6.744s, 9/1/16 Aaa 66,676,500
10,195,000 U. of CA Hosp. Med. Center Rev. Bonds, AMBAC,
5.7s, 7/1/11 Aaa 11,125,294
10,000,000 Vallejo, COP (Marine World Foundation),
7.2s, 2/1/26 BB+/P 10,962,500
700,000 Vallejo, Hsg. Auth. VRDN, 2 3/4s, 1/1/08 VMIG1 700,000
36,945,000 Valley Hlth. Syst. COP, 6 7/8s, 5/15/23 BB+/P 39,531,150
5,385,000 Valley Hlth. Syst. Hosp. Rev. Bonds, Ser. A,
6 1/2s, 5/15/15 BBB- 5,775,413
--------------
3,614,638,136
Puerto Rico (2.0%)
- --------------------------------------------------------------------------------------------------------------------------
Commonwealth of PR, G.O. Bonds
9,010,000 MBIA, 5 3/4s, 7/1/11 Aaa 10,091,200
8,600,000 (Pub. Impt.), 5s, 7/1/05 Baa1 9,040,750
10,000,000 Commonwealth of PR, Infrastructure Fin. Auth.
Rev. Bonds, Ser. A, AMBAC, 5 1/2s, 7/1/08 AAA 10,975,000
Commonwealth of PR, Pub. Impt G.O. Bonds, FSA
8,500,000 5 1/2s, 7/1/11 AAA 9,328,750
5,000,000 5 1/2s, 7/1/10 AAA 5,493,750
7,215,000 5 1/2s, 7/1/09 AAA 7,918,463
PR Elec. Pwr. Auth. Rev. Bonds
10,000,000 Ser. CC, MBIA, 5 1/2s, 7/1/08 AAA 10,975,000
10,000,000 Ser. AA, MBIA, 5 3/8s, 7/1/27 AAA 10,325,000
--------------
74,147,913
- --------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $3,333,961,700) (b) $3,688,786,049
- --------------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,698,576,694.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available at
March 31, 1999 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, 1999. Securities rated
by Putnam are indicated by "/P" and are not publicly rated.
(b) The aggregate identified cost on a tax basis is $3,336,094,500, resulting in gross unrealized appreciation and
depreciation of $354,849,276 and $2,157,727, respectively, or net unrealized appreciation of $352,691,549.
(RES) Restricted, excluding 144A securities, as to public resale. The total market value of restricted securities
held at March 31, 1999 was $277,880,101 or 7.5% of net assets.
(SEG) A portion of this security was pledged and segregated with the custodian to cover margin requirements for
futures contracts at March 31, 1999.
The rates shown on FRB are the current interest rates shown at March 31, 1999, which are subject to change
based on the terms of the security.
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 VRDN's are the current interest rates at March 31, 1999.
The fund had the following industry group concentrations greater than 10% at March 31, 1999 (as a percentage
of net assets):
Water and sewerage 21.7%
Utilities 13.3
Health care 11.5
Transportation 11.4
The fund had the following insurance concentrations greater than 10% at March 31, 1999 (as a percentage of net assets):
MBIA 25.3%
AMBAC 14.2
- -------------------------------------------------------------------------------
Futures Contracts Outstanding at March 31, 1999 (Unaudited)
Aggregate Face Expiration Unrealized
Total Value Value Date Depreciation
- -------------------------------------------------------------------------------
Muni Bond
Index (Short) $109,751,250 $109,498,259 Jun-99 $(252,991)
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1999 (Unaudited)
<S> <C>
Assets
- -----------------------------------------------------------------------------------------------
Investments in securities, at value
(identified cost $3,333,961,700) (Note 1) $3,688,786,049
- -----------------------------------------------------------------------------------------------
Interest and other receivables 47,356,458
- -----------------------------------------------------------------------------------------------
Receivable for securities sold 30,959,324
- -----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 4,490,209
- -----------------------------------------------------------------------------------------------
Receivable for variation margin 416,250
- -----------------------------------------------------------------------------------------------
Total assets 3,772,008,290
Liabilities
- -----------------------------------------------------------------------------------------------
Payable for subcustodian (Note 2) 369,963
- -----------------------------------------------------------------------------------------------
Distributions payable to shareholders 8,388,908
- -----------------------------------------------------------------------------------------------
Payable for securities purchased 50,898,825
- -----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 7,253,153
- -----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,088,367
- -----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 292,649
- -----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 38,863
- -----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 7,393
- -----------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,994,353
- -----------------------------------------------------------------------------------------------
Other accrued expenses 99,122
- -----------------------------------------------------------------------------------------------
Total liabilities 73,431,596
- -----------------------------------------------------------------------------------------------
Net assets $3,698,576,694
Represented by
- -----------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $3,372,270,095
- -----------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 7,465,397
- -----------------------------------------------------------------------------------------------
Distributions in excess of net realized gains on investments (Note 1) (35,730,156)
- -----------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 354,571,358
- -----------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,698,576,694
Computation of net asset value and offering price
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($3,015,234,937 divided by 345,048,103 shares) $8.74
- -----------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.74)* $9.18
- -----------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($663,752,072 divided by 76,046,864 shares)** $8.73
- -----------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($19,589,685 divided by 2,246,560 shares) $8.72
- -----------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.72)*** $9.01
- -----------------------------------------------------------------------------------------------
* On single retail sales of less than $25,000. On sales of $25,000 or more and on group
sales, the offering price is reduced.
** Redemption price per share is equal to net asset value less any applicable contingent
deferred sales charge.
*** 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.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 1999 (Unaudited)
<S> <C>
Tax exempt interest income: $101,496,316
- -----------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 8,272,356
- -----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,834,442
- -----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 17,325
- -----------------------------------------------------------------------------------------------
Administrative services (Note 2) 14,378
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 3,032,744
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 2,762,828
- -----------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 42,337
- -----------------------------------------------------------------------------------------------
Reports to shareholders 38,283
- -----------------------------------------------------------------------------------------------
Registration fees 9,311
- -----------------------------------------------------------------------------------------------
Auditing 34,051
- -----------------------------------------------------------------------------------------------
Legal 44,103
- -----------------------------------------------------------------------------------------------
Postage 60,565
- -----------------------------------------------------------------------------------------------
Other 262,394
- -----------------------------------------------------------------------------------------------
Total expenses 16,425,117
- -----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (142,937)
- -----------------------------------------------------------------------------------------------
Net expenses 16,282,180
- -----------------------------------------------------------------------------------------------
Net investment income 85,214,136
- -----------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 5,753,032
- -----------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (2,126,270)
- -----------------------------------------------------------------------------------------------
Net unrealized depreciation of investments and futures during the period (44,543,553)
- -----------------------------------------------------------------------------------------------
Net loss on investments (40,916,791)
- -----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 44,297,345
- -----------------------------------------------------------------------------------------------
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
1999* 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- ---------------------------------------------------------------------------------------------------------------
Operations:
- ---------------------------------------------------------------------------------------------------------------
Net investment income $ 85,214,136 $ 182,145,593
- ---------------------------------------------------------------------------------------------------------------
Net realized gain on investments 3,626,762 9,253,987
- ---------------------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (44,543,553) 80,739,975
- ---------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 44,297,345 272,139,555
- ---------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ---------------------------------------------------------------------------------------------------------------
From net investment income
Class A (73,452,579) (151,806,061)
- ---------------------------------------------------------------------------------------------------------------
Class B (13,619,374) (25,903,310)
- ---------------------------------------------------------------------------------------------------------------
Class M (400,668) (631,945)
- ---------------------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A (16,229,723) (14,439,035)
- ---------------------------------------------------------------------------------------------------------------
Class B (3,456,456) (2,752,005)
- ---------------------------------------------------------------------------------------------------------------
Class M (84,929) (60,933)
- ---------------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 31,673,531 (21,698,752)
- ---------------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets (31,272,853) 54,847,514
Net assets
- ---------------------------------------------------------------------------------------------------------------
Beginning of period 3,729,849,547 3,675,002,033
- ---------------------------------------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $7,465,397
and $9,723,882, respectively) $3,698,576,694 $3,729,849,547
- ---------------------------------------------------------------------------------------------------------------
* 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
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.89 $8.71 $8.46 $8.37 $8.09 $8.92
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .21 .44(c) .44 .47 .48 .50
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.10) .21 .28 .09 .31 (.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .11 .65 .72 .56 .79 (.31)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.21) (.43) (.45) (.47) (.48)** (.50)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.05) (.04) (.02) -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.03) (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.26) (.47) (.47) (.47) (.51) (.52)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.74 $8.89 $8.71 $8.46 $8.37 $8.09
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.26* 7.75 8.71 6.81 10.07 (3.53)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $3,015,235 $3,073,178 $3,087,795 $3,149,797 $3,168,277 $3,260,769
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .39* .77 .74 .74 .74 .68
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.35* 5.06 5.20 5.60 5.86 5.86
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 6.39* 30.88 23.51 29.47 47.73 21.06
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during the
period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS B
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended
Per-share March 31
operating performance (Unaudited) Year ended September 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.88 $8.70 $8.45 $8.37 $8.08 $8.91
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .18 .39(c) .39 .42 .42 .45
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.10) .21 .27 .07 .32 (.81)
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .08 .60 .66 .49 .74 (.36)
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.18) (.38) (.39) (.41) (.42)** (.45)
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.05) (.04) (.02) -- -- (.02)
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- (.03) --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.23) (.42) (.41) (.41) (.45) (.47)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.73 $8.88 $8.70 $8.45 $8.37 $8.08
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 0.93* 7.05 8.02 5.99 9.47 (4.15)
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $663,752 $641,686 $573,309 $510,394 $416,367 $349,609
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .71* 1.42 1.39 1.39 1.39 1.32
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.03* 4.41 4.54 4.94 5.17 5.16
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 6.39* 30.88 23.51 29.47 47.73 21.06
- ------------------------------------------------------------------------------------------------------------------------------------
+ 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 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
CLASS M
- ------------------------------------------------------------------------------------------------------------------------------------
Six months
ended For the period
Per-share March 31 Feb. 14, 1995+
operating performance (Unaudited) Year ended September 30 to Sept. 30
- ------------------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.88 $8.70 $8.45 $8.36 $8.13
- ------------------------------------------------------------------------------------------------------------------------------------
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income .19 .41(c) .42 .45 .29
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments (.10) .22 .27 .08 .24
- ------------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .09 .63 .69 .53 .53
- ------------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ------------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.20) (.41) (.42) (.44) (.30)**
- ------------------------------------------------------------------------------------------------------------------------------------
From net realized gain
on investments (.05) (.04) (.02) -- --
- ------------------------------------------------------------------------------------------------------------------------------------
In excess of net realized
gain on investments -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions (.25) (.45) (.44) (.44) (.30)
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.72 $8.88 $8.70 $8.45 $8.36
- ------------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 0.99* 7.43 8.39 6.48 6.56*
- ------------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $19,590 $14,986 $13,898 $9,149 $4,108
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .54* 1.07 1.04 1.04 .69*
- ------------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 2.21* 4.76 4.92 5.24 3.52*
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio turnover (%) 6.39* 30.88 23.51 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 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).
(c) Per share net investment income has been determined on the basis of the weighted average number of shares outstanding during
the period.
</TABLE>
Notes to financial statements
March 31, 1999 (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. When the contract is closed, the fund records a realized gain or
loss equal to the difference between the value of the contract at the time
it was opened and the value at the time it was closed. Realized gains and
losses on purchased options are included in realized gains and losses on
investment securities.
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) Line of credit The fund has entered into a committed line of credit
with certain banks. This line of credit agreement includes restrictions
that the fund maintain an asset coverage ratio of at least 300% and
borrowings must not exceed prospectus limitations. For the six months
ended March 31, 1999, the fund had no borrowings against the line of
credit.
E) 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, as amended. Therefore, no provision has been made
for federal taxes on income, capital gains or unrealized appreciation on
securities held nor for excise tax on income and capital gains.
F) 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.
G) 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
and original issue discount are accreted according to the
yield-to-maturity basis.
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% thereafter.
As part of the subcustodian contract between the subcustodian bank and by
Putnam Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments,
Inc., the subcustodian bank has a lien on the securities of the fund to
the extent permitted by the fund's investment restrictions to cover any
advances made by the subcustodian bank for the settlement of securities
purchased by the fund. At March 31, 1999, the payable to the subcustodian
bank represents the amount due for cash advance for the settlement of a
security purchased.
The fund reimburses Putnam Management an allocated amount 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 PFTC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended March 31, 1999, fund expenses were reduced by
$142,937 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.
Each Trustee of the fund receives an annual Trustee fee, of which $1,850
has been allocated to the fund, 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 "Deferral 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
Deferral 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 to 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, 1999, Putnam Mutual Funds Corp., acting
as underwriter received net commissions of $128,204 and $2,437 from the
sale of class A and class M shares, respectively and $482,980 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, 1999, Putnam Mutual
Funds Corp., acting as underwriter received $9,216 on class A redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1999, purchases and sales of
investment securities other than U.S. government obligations and
short-term investments aggregated $293,145,643 and $234,487,533,
respectively. Purchases and sales of short-term municipal obligations
aggregated $185,345,000 and $198,695,000, 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 March 31, 1999, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were as follows:
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 16,934,977 $149,233,389
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 5,182,828 45,615,095
- -----------------------------------------------------------------------------
22,117,805 194,848,484
Shares
repurchased (22,843,418) (201,329,128)
- -----------------------------------------------------------------------------
Net decrease (725,613) $ (6,480,644)
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class A Shares Amount
- -----------------------------------------------------------------------------
Shares sold 27,255,104 $238,598,726
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,363,957 82,108,906
- -----------------------------------------------------------------------------
36,619,061 320,707,632
Shares
repurchased (45,556,769) (398,786,047)
- -----------------------------------------------------------------------------
Net decrease (8,937,708) $(78,078,415)
- -----------------------------------------------------------------------------
Six months ended March 31,1999
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 7,255,134 $63,879,993
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,136,804 9,994,039
- -----------------------------------------------------------------------------
8,391,938 73,874,032
Shares
repurchased (4,611,464) (40,601,129)
- -----------------------------------------------------------------------------
Net increase 3,780,474 $33,272,903
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class B Shares Amount
- -----------------------------------------------------------------------------
Shares sold 13,991,389 $122,518,926
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,829,737 16,028,898
- -----------------------------------------------------------------------------
15,821,126 138,547,824
Shares
repurchased (9,479,611) (82,954,732)
- -----------------------------------------------------------------------------
Net increase 6,341,515 $ 55,593,092
- -----------------------------------------------------------------------------
Six months ended March 31, 1999
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 5,831,009 $51,164,295
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 38,770 340,808
- -----------------------------------------------------------------------------
5,869,779 51,505,103
Shares
repurchased (5,310,737) (46,623,831)
- -----------------------------------------------------------------------------
Net increase 559,042 $ 4,881,272
- -----------------------------------------------------------------------------
Year ended September 30, 1998
- -----------------------------------------------------------------------------
Class M Shares Amount
- -----------------------------------------------------------------------------
Shares sold 640,409 $5,607,163
- -----------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 57,444 503,211
- -----------------------------------------------------------------------------
697,853 6,110,374
Shares
repurchased (608,320) (5,323,803)
- -----------------------------------------------------------------------------
Net increase 89,533 $ 786,571
- -----------------------------------------------------------------------------
Fund information
WEB SITE
www.putnaminv.com
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
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
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
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Jerome J. Jacobs
Vice President
Leslie J. Burke
Vice President and Fund Manager
Richard A. Monaghan
Vice President
John R. Verani
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' Web site:
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.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
For account balances, economic forecasts, and the latest on Putnam funds,
visit
www.putnaminv.com.
- ---------------------
BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
- ---------------------
SA045-51852 027/337/677 5/99
