Putnam
California
Tax Exempt
Income Fund
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9-30-00
[SCALE LOGO OMITTED]
FROM THE TRUSTEES
[GRAPHIC OMITTED: PHOTO OF JOHN A. HILL AND GEORGE PUTNAM III]
Dear Shareholder:
It is a pleasure to greet you in our new roles as Chairman of the
Trustees and President of the Funds. As you know, both of us have been
members of the Board of Trustees for a number of years -- years during
which the global securities markets, the mutual fund industry, and
Putnam itself have experienced tremendous growth and change.
As we look to the future, we are certain that the changes will be
breathtaking in their scope. What will not change is the Trustees'
dedication to serving the best interests of our shareholders.
We welcome the challenges that lie ahead and are confident that Putnam
and your Board will continue to face those challenges successfully as
they have for more than 60 years. We look forward to helping you meet
your financial objectives for many years to come.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 15, 2000
REPORT FROM FUND MANAGEMENT
David E. Hamlin
The fixed-income markets came full circle in the course of Putnam
California Tax Exempt Income Fund's fiscal year, which ended September
30, 2000. Twelve months ago, interest rates were on the rise as the
world waited nervously for the Y2K issue to pass into history and the
Federal Reserve Board continued its program of raising interest rates.
As the new year began without disruptions, yields on long-term bonds
(including municipals) began a decline, influenced by the U.S.
government's program of buying back long-term Treasury bonds. A
byproduct of this program was an inverted yield curve in some
fixed-income sectors, where yields on long bonds slipped below yields on
short-term paper, reversing typical market patterns. As the fund's
fiscal year drew to a close, yields on long- and short-term rates were
returning to more typical patterns.
Total return for 12 months ended 9/30/00
Class A Class B Class C Class M
NAV POP NAV CDSC NAV CDSC NAV POP
-----------------------------------------------------------------------
6.71% 1.65% 6.02% 1.02% 5.97% 4.97% 6.25% 2.76%
-----------------------------------------------------------------------
Past performance is not indicative of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* PORTFOLIO DURATION SEES LITTLE CHANGE
Although the yield curve in the municipal market did not become
inverted, it traced roughly the same course as other fixed-income
markets: yields on long-term bonds rose sharply and then began to drift
downward. By the end of September, the spread (or difference) between
long- and short-term rates was almost the same as it was 12 months
earlier. This round trip for interest rates gave us opportunities to
lock in higher rates, although we moved gradually, reflecting our
cautious outlook.
[GRAPHIC OMITTED: horizontal bar chart TOP INDUSTRY SECTORS]
TOP INDUSTRY SECTORS*
Water and
sewer 24.6%
Transportation 14.8%
Health care 9.7%
Utilities 7.6%
Education 5.0%
Footnote reads:
*Based on net assets as of 9/30/00. Holdings will vary over time.
The fund began its fiscal year with an average portfolio duration of
about 8.4 years, moved out to a little over 8.5 years at midyear, and
returned to 8.4 years by the end of September. Duration measures a
bond's price sensitivity to changing interest rates. When our outlook
for bond prices is bullish, we shift to a longer duration to allow the
fund to benefit from rising bond prices. We regard a duration of 8.4 or
8.5 years as neutral, a position we believed was justified by our
forecast for a gradual shift to lower interest rates and slower economic
growth.
As the yield curve grew steeper, we concluded that it made sense to
redeploy assets to bonds with more distant maturity dates in an effort
to lock in high yields and participate in the price recovery. Our
efforts were especially advantageous in California as many residents
made wealthy by the "dot com" effect started moving money out of the
equity market and into municipal bonds, seeking relative safety,
diversification, and a tax shelter. Since individuals tend to have
shorter-term goals than mutual funds, they also tend to purchase bonds
maturing in the 2- to 10-year range. This gave us a ready market for
shorter-term securities and freed up capital to invest in bonds maturing
in 20 to 30 or more years.
* UNRATED SECURITIES, PUERTO RICO BONDS ADD VALUE, HELP DIVERSIFY PORTFOLIO
Credit spreads, the difference in yield between high- and low-quality
bonds, have also been shifting. The spread was at its narrowest for
this cycle in 1998, and it has been widening gradually ever since. The
overall quality of the portfolio is high and your fund benefited from
rising prices in the top-rated sector during much of the year. However,
we have been increasing the portion of assets in unrated securities
because we see a great deal of opportunity ahead in this sector. While
top- quality municipal issuers continue to dominate the portfolio, we
believe the shift will ultimately benefit fund shareholders.
[GRAPHIC OMITTED: pie chart CREDIT QUALITY OVERVIEW]
CREDIT QUALITY OVERVIEW*
Aaa/AAA -- 69.8%
Aa/AA -- 10.2%
A -- 5.0%
Baa/BBB -- 10.1%
Ba/BB -- 3.2%
B -- 1.7%
Footnote reads:
*As a percentage of market value as of 9/30/00. 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 fund is permitted to invest up to 25% of assets in securities rated
below investment grade, which gives us ample latitude to diversify
credit quality. However, we do not purchase securities rated below our
internal rating of BB-. Every security in your fund's portfolio is rated
and continually monitored by Putnam's own fixed-income research
department. We believe we have an unusual depth of talent on the
analytical side. We not only work hard investigating potential
securities for purchase, we also maintain a close watch on existing
holdings.
We recently added several Puerto Rico bonds because they combined high
quality and attractive tax-free yields. We purchased University of
Puerto Rico bonds with a coupon of 5 3/8%, maturing in 2030, and Puerto
Rico Highway Authority bonds, with a coupon of 5 7/8%, maturing in 2035.
Both of these issues are insured by Municipal Bond Investors Assurance
(MBIA), a company that insures municipal issues in order to mitigate
credit risk. While this holding, along with others discussed in this
report, was 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.
"This year bond funds are actually beating many stock funds, while also
offering a much smoother ride . . . Bond funds have bounced on the
perception that the U.S. economy has slowed and that the Federal Reserve
is done raising interest rates for the rest of the year."
-- The Wall Street Journal, 10/9/00
We also recently purchased Puerto Rico Commonwealth Infrastructure
Finance Authority bonds, with a coupon of 5 1/2%, maturing in 2040. In
addition to a long maturity and an attractive yield, this uninsured bond
is AAA/Aaa rated on its own strength. It is backed by U.S. Treasury
securities, an unusual opportunity that came about when Puerto Rico sold
its nationalized telephone company to a private operator. The government
used the proceeds of more than $1 billion to purchase the U.S.
Treasuries that back the debt. In turn, the proceeds of the bond issue
are used to finance water and sewer improvement projects. Another of our
Puerto Rico purchases, Puerto Rico Industrial Environmental Control
Facilities, was issued to finance a high-tech coal-fired power plant.
These bonds, rated Baa2 by Moody's, are not insured and have a coupon of
6 5/8%, maturing in 2026.
* HOSPITALS, LAND-SECURED DEBT STILL ATTRACTIVE
Supply in the California municipal market is off approximately 20% this
year from last year, based on levels of new issues, demand is robust,
and the fiscal health of the state remains excellent. Even lower-rated
sectors such as health care are gaining strength. As credit spreads
narrowed earlier this year, we invested in promising hospital issues
such as San Diego's Burnham Institute. We also continue to seek
opportunities in land-secured debt. Analysts call such securities dirt
issues because they are often backed by undeveloped land, where
construction is still in the planning stages or just getting started.
During the second half of the fiscal year we added to the land-secured
position we began building in the first half. Purchases included Tustin,
California, Unified School District Special Tax Community Facilities
bonds, which were backed by a special tax to make community
improvements. After careful analysis and a personal visit by one of our
analysts, we purchased these unrated bonds that offered a coupon of 6
3/8%, maturing in 2035. Irvine, California Improvement Assessment
District bonds were a similar transaction that we bought at 6 3/8%,
maturing in 2022.
* MARKET TURNAROUNDS HAPPEN FAST
This year, bond investors have been reminded of one of the basic
principles of investing: When a turnaround occurs in the financial
markets, it usually happens so quickly that unless you are already
positioned in the comeback sector, you will be too late to benefit
fully. Municipal bond investors have already experienced the beginning
of a recovery; for most of the past six months, falling interest rates
have raised prices on municipal bonds. To date this has been most
evident in the AAA/Aaa sector, while lower rated securities have lagged.
We believe that, as long as lower rated investments are carefully
diversified, investors will be rewarded with high current dividends and
(eventually) with price appreciation.
After months of raising rates to slow the economy, the Federal Reserve
Board left rates unchanged at its October meeting and we believe it will
maintain a neutral bias, especially if the equity markets remain
volatile. Consequently, we expect gradually improving bond performance
to become visible in all sectors of the municipal market.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 9/30/00, 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 as
high a level of current income exempt from federal and California income
tax as is consistent with preservation of principal.
TOTAL RETURN FOR PERIODS ENDED 9/30/00
Class A Class B Class C Class M
(inception dates) (4/29/83) (1/4/93) (7/26/99) (2/14/95)
NAV POP NAV CDSC NAV CDSC NAV POP
------------------------------------------------------------------------------
1 year 6.71% 1.65% 6.02% 1.02% 5.97% 4.97% 6.25% 2.76%
------------------------------------------------------------------------------
5 years 30.66 24.42 26.49 24.50 25.57 25.57 28.70 24.52
Annual average 5.49 4.47 4.81 4.48 4.66 4.66 5.18 4.48
------------------------------------------------------------------------------
10 years 96.07 86.85 82.34 82.34 80.94 80.94 89.04 82.99
Annual average 6.97 6.45 6.19 6.19 6.11 6.11 6.57 6.23
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Life of fund
Annual average 7.97 7.67 7.13 7.13 7.11 7.11 7.52 7.31
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/00
Lehman Brothers Municipal Consumer
Bond Index price index
---------------------------------------------------------------------
1 year 6.18% 3.46%
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5 years 32.52 13.32
Annual average 5.79 2.53
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10 years 102.67 30.82
Annual average 7.32 2.72
---------------------------------------------------------------------
Life of fund
Annual average 8.34 3.30
---------------------------------------------------------------------
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,
if available, 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. For class C
shares, returns for periods prior to their inception are derived from
the historical performance of class A shares, adjusted to reflect both
the CDSC currently applicable to class C shares, which is 1% for the
first year and is eliminated thereafter, and the higher operating
expenses applicable to class C 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. Performance data reflect an expense
limitation currently or previously in effect, without which total
returns would have been lower.
[GRAPHIC OMITTED: worm chart GROWTH OF A $10,000 INVESTMENT]
GROWTH OF A $10,000 INVESTMENT
Cumulative total return of a $10,000 investment since 9/30/90
Lehman Brothers
Fund's class A Municipal Bond Consumer price
Date shares at POP Index index
9/30/90 9,530 10,000 10,000
9/30/91 10,741 11,318 10,339
9/30/92 11,852 12,501 10,648
9/30/93 13,468 14,095 10,934
9/30/94 12,992 13,754 11,258
9/30/95 14,300 15,293 11,545
9/30/96 15,274 16,217 11,891
9/30/97 16,606 17,682 12,155
9/30/98 17,892 19,223 12,329
9/30/99 17,511 19,087 12,645
9/30/00 $18,685 $20,267 $13,082
Footnote reads:
Past performance is no assurance of future results. At the end of the
same time period, a $10,000 investment in the fund's class B and class C
shares would have been valued at $18,234 and $18,094, respectively, and
no contingent deferred sales charges would apply; a $10,000 investment
in the fund's class M shares would have been valued at $18,904 ($18,299
at public offering price). See first page of performance summary section
for performance calculation method.
PRICE AND DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/00
Class A Class B Class C Class M
------------------------------------------------------------------------------
Distributions
(number) 12 12 12 12
------------------------------------------------------------------------------
Income $0.431193 $0.377658 $0.365901 $0.405663
------------------------------------------------------------------------------
Capital gains 1 -- -- -- --
------------------------------------------------------------------------------
Total $0.431193 $0.377658 $0.365901 $0.405663
------------------------------------------------------------------------------
Share value: NAV POP NAV NAV NAV POP
------------------------------------------------------------------------------
9/30/99 $8.25 $8.66 $8.24 $8.26 $8.24 $8.52
------------------------------------------------------------------------------
9/30/00 8.35 8.77 8.34 8.37 8.33 8.61
------------------------------------------------------------------------------
Current return (end of period)
------------------------------------------------------------------------------
Current
dividend
rate 2 5.05% 4.81% 4.40% 4.24% 4.77% 4.61%
------------------------------------------------------------------------------
Taxable
equivalent 3 9.22 8.78 8.03 7.74 8.71 8.42
------------------------------------------------------------------------------
Current
30-day SEC
yield 4 4.56 4.34 3.91 3.74 4.28 4.14
------------------------------------------------------------------------------
Taxable
equivalent 3 8.32 7.92 7.14 6.83 7.81 7.56
------------------------------------------------------------------------------
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 C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
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 or C shares and assumes redemption at the
end of the period. Your fund's class B 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. The CDSC for class C shares is 1% for one
year after purchase.
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 assumes reinvestment of all
distributions and interest payments and does not take into account
brokerage fees or taxes. Securities in the fund do not match those in
the index 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, preceded by the Report of independent
accountants, 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 are determined. All investment and noninvestment 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. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred 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 sources 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, reflecting the five
most recent reporting periods. In a semiannual report, the highlight
table also includes the current reporting period. For open-end funds, a
separate table is provided for each share class.
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Trustees and Shareholders
Putnam California Tax Exempt Income Fund
We have audited the accompanying statement of assets and liabilities of
Putnam California Tax Exempt Income Fund, including the fund's
portfolio, as of September 30, 2000, the related statement of operations
for the year then ended, and the statements of changes in net assets and
financial highlights for each of the years or periods in the two-year
period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial
highlights based on our audits. The financial highlights for each of the
years in the three-year period ended September 30, 1998 were audited by
other auditors whose report dated November 11, 1998 expressed an
unqualified opinion on those financial highlights.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that
we plan and perform our audit to obtain reasonable assurance about
whether the financial statements and financial highlights are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as
of September 30, 2000 by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights
referred to above present fairly, in all material respects, the
financial position of Putnam California Tax Exempt Income Fund as of
September 30, 2000, the results of its operations, changes in its net
assets and financial highlights for each of the years or periods
described above, in conformity with accounting principles generally
accepted in the United States of America.
KPMG LLP
Boston, Massachusetts
November 6, 2000
<TABLE>
<CAPTION>
THE FUND'S PORTFOLIO
September 30, 2000
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 Bonds
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
MUNICIPAL BONDS AND NOTES (99.8%) (a)
PRINCIPAL AMOUNT RATING (RAT) VALUE
<S> <C> <C> <C>
California (96.2%)
-------------------------------------------------------------------------------------------------------------------
Alameda, Corridor Trans. Auth. Rev. Bonds, Ser. A
$ 9,500,000 5 1/4s, 10/1/21 Aaa $ 9,321,875
10,195,000 5 1/8s, 10/1/14 Aaa 10,360,669
21,425,000 4 3/4s, 10/1/25 Aaa 18,961,125
16,000,000 Anaheim, IF COP, MBIA, 8.12s, 7/16/23 Aaa 17,440,000
24,000,000 Anaheim, Pub. Fin. Auth. IFB, MBIA, 8.37s,
12/28/18 Aaa 27,570,000
Anaheim, Pub. Fin. Auth. Lease Rev. Bonds
(Pub. Impts.),
10,000,000 Ser. A, FSA, 5s, 3/1/37 Aaa 9,075,000
16,080,000 Ser. C, FSA, zero %, 3/1/37 AAA 1,929,600
12,485,000 Ser. C, FSA, zero %, 9/1/34 AAA 1,732,294
30,275,000 Berkeley, Hlth. Fac. Rev. Bonds (Alta Bates
Med. Ctr.), Ser. A, 6.55s, 12/1/22 A2 32,280,719
Brentwood, Infrastructure Auth. Rev.
Bonds, Ser. 94-1
11,230,000 5 5/8s, 9/2/29 BB/P 10,022,775
2,485,000 5.6s, 9/2/19 BB/P 2,298,625
20,000,000 CA Edl. Fac. Auth. Rev. Bonds
(U. of Southern CA), Ser. C, 5 1/8s, 10/1/28 Aa2 18,950,000
CA Hlth. Fac. Auth. Rev. Bonds
12,500,000 (INSD-Sutter Hlth.), Ser. A, 5.35s, 8/15/28 Aaa 12,078,125
21,000,000 (Catholic Healthcare West.), Ser. A,
AMBAC, 5s, 7/1/21 Aaa 19,661,250
35,385,000 CA Hlth. Fac. Fin. Auth. IFB, Ser. B, MBIA,
5s, 7/1/14 AAA 35,296,538
14,150,000 CA Housing Fin. Agcy. IFB, FHA Insd.,
8.351s, 8/1/23 Aa2 15,122,813
10,290,000 CA Poll. Control Fin. Auth. Solid Waste Disp.
Rev. Bonds (Keller Canyon Landfill Co.),
6 7/8s, 11/1/27 B1 10,122,788
36,775,000 CA Pub. Cap. Impt. Fin. Auth. Rev. Bonds
(Jt. Pwrs. Agcy.), Ser. B, MBIA, 8.1s, 3/1/18 Aaa 37,068,097
24,200,000 CA State Dept. Wtr. Resources IFB
(Central Valley), 9.299s, 12/1/12
(acquired 10/23/97, cost 25,632,450) (RES) Aa2 33,910,250
25,000,000 CA State Dept. Wtr. Resources Rev. Bonds,
Ser. O, MBIA, 4 3/4s, 12/1/29 Aaa 22,031,250
CA State G.O. Bonds
37,100,000 FRB, 7.661s, 9/1/12 (acquired 7/11/96,
cost 36,543,500) (RES) A1 47,534,375
24,365,000 6s, 2/1/10 AA 27,014,694
16,365,000 6s, 10/1/08 AA 18,103,781
16,545,000 AMBAC, 5 1/2s, 4/1/11 AAA 17,744,513
10,000,000 (Veterans), Ser. BH, 5.4s, 12/1/14 AA 10,175,000
10,000,000 (Veterans), Ser. BH, 5.35s, 12/1/13 AA 10,212,500
10,000,000 (Veterans), Ser. BH, 5 1/4s, 12/1/12 Aaa 10,237,500
10,000,000 4 3/4s, 2/1/29 AAA 8,775,000
20,800,000 Ser. 33, MBIA, zero %, 10/1/11 AAA 12,116,000
60,000,000 Ser. 27, MBIA, zero %, 9/1/11 AAA 35,100,000
CA State Pub. Wks. Board Lease Rev. Bonds
28,000,000 (Dept. of Corrections-State Prisons), Ser. A,
MBIA, 6 1/2s, 9/1/17 Aaa 32,480,000
59,000,000 (Dept. of Corrections-State Prisons), Ser. A,
6.43s, 9/1/19 Aaa 61,246,720
10,105,000 Ser. A, AMBAC, 5.8s, 1/1/13 (SEG) Aaa 10,761,825
7,205,000 (CA Cmnty. Colleges), Ser. A, 5 1/2s, 12/1/09 A+ 7,736,369
33,500,000 (Dept. of Corrections-State Prisons), Ser. A,
AMBAC, 5s, 12/1/19 Aaa 32,453,125
6,555,000 (Libr. & Courts Annex), Ser. A, 5s, 5/1/18 AA- 6,268,219
25,500,000 CA State Rev. Bonds, FGIC, 8s, 11/1/07 Aaa 29,835,000
CA Statewide Cmnty. Dev. Auth. COP
15,000,000 (The Internext Group), 5 3/8s, 4/1/30 BBB 12,843,750
10,000,000 (Childrens Hosp.), MBIA, 4 3/4s, 6/1/21 Aaa 9,037,500
CA Statewide Cmntys. Dev. Auth. Apt. Dev.
Rev. Bonds (Irvine Apt. Cmntys.)
12,500,000 Ser. A-4, 5 1/4s, 5/15/25 Baa2 12,218,750
20,000,000 Ser. A-3, 5.1s, 5/15/25 Baa2 19,550,000
5,000,000 CA Statewide Cmnty. Dev. Auth. Multi-Fam.
Rev. Bonds (Equity Res. Hsg.), Ser. B,
5.2s, 12/1/29 A3 4,962,500
CA Statewide Cmnty. Dev. Auth. Rev. Bonds
17,580,000 (United Airlines, Inc.), 5 5/8s, 10/1/34 Baa3 15,843,975
6,000,000 (Archstone/ Pelican Hsg.), 5.3s, 6/1/29 Baa1 5,977,500
CA Statewide Cmnty. Dev. Auth. Special Tax
Rev. Bond
1,765,000 (Cmnty. Fac. Dist. No. 1-Zone 3),
7 5/8s, 9/1/30 BB-/P 1,802,506
1,750,000 (Cmnty. Fac. Dist. No. 1-Zone 1A),
7 1/2s, 9/1/30 BB-/P 1,785,000
2,320,000 (Cmnty. Fac. Dist. No. 1-Zone 1C),
7 1/4s, 9/1/30 BB-/P 2,357,700
1,750,000 (Cmnty. Fac. Dist. No. 1-Zone 1B), zero %,
9/1/20 BB-/P 352,188
8,000,000 Capistrano, U. School Dist. Cmnty. Fac. Special
Tax Bonds (Ladera), 5 3/4s, 9/1/29 BB/P 7,570,000
9,000,000 Central CA Joint Pwr.Hlth. Fin. Auth. COP
(Cnty. Hosp. Central CA), 6s, 2/1/30 Baa1 8,853,750
32,000,000 Chino Basin, Regl. Fin. Auth. Rev. Bonds,
AMBAC, 5 3/4s, 8/1/22 Aaa 32,240,000
4,425,000 Chula Vista Special Tax Bonds (Cmnty. Facs.
Dist. No. 97-3), 6.05s, 9/1/29 BB+/P 4,336,500
Commerce Redev. Agcy. Rev. Bonds (No. 1),
Ser. 91-A
8,845,000 7 1/4s, 8/1/21 BBB- 9,253,904
68,280,000 zero %, 8/1/21 BBB- 18,435,600
12,000,000 Contra Costa Cnty., COP (Merrrithew
Memorial Hosp.), MBIA, 5 3/8s, 11/1/17 Aaa 12,120,000
35,000,000 Contra Costa, Home Mtge. Fin. Auth. Rev. Bonds,
MBIA, zero %, 9/1/17 Aaa 13,825,000
Contra Costa, Wtr. Dist. Rev. Bonds, Ser. G, MBIA
36,915,000 5s, 10/1/26 Aaa 34,238,663
41,500,000 5s, 10/1/24 Aaa 38,750,625
10,000,000 Corona, COP (Vista Hosp. Syst.), Ser. B, 9 1/2s,
7/1/20 (acquired 10/23/92, cost 10,000,000)
(In default) (RES) (NON) B-\P 4,750,000
19,000,000 Delano, COP (Delano Regl. Med. Ctr.),
5.6s, 1/1/26 BBB- 15,603,750
Duarte, COP, Ser. A
15,000,000 5 1/4s, 4/1/31 Baa2 12,731,250
7,500,000 5 1/4s, 4/1/24 Baa2 6,487,500
23,850,000 East Bay, Muni. Util. Dist. Rev. Bonds
(Wastewater Treatment), FGIC, 4 3/4s, 6/1/21 Aaa 21,673,688
21,000,000 East Bay, Muni. Util. Rev. Bonds, MBIA,
4 3/4s, 6/1/28 Aaa 18,558,750
10,725,000 El Camino, Hosp. Dist. Rev. Bonds, Ser. A,
AMBAC, 6 1/4s, 8/15/17 Aaa 10,912,366
Foothill/Eastern Trans. Corridor Agcy. Rev.
Bonds (CA Toll Roads)
34,150,000 6 1/2s, 1/1/32 AAA 38,162,625
38,875,000 6s, 1/1/34 AAA 42,422,344
19,000,000 5 3/4s, 1/15/40 Baa3 18,406,250
7,850,000 MBIA, 5 1/2s, 1/15/09 Aaa 8,428,938
8,945,000 MBIA, 5 1/2s, 1/15/08 Aaa 9,559,969
5,000,000 MBIA, 5 3/8s, 1/15/14 Aaa 5,187,500
11,460,000 Fresno, Unified Sch. Dist. COP, 7 1/4s, 3/1/07 A3 11,820,532
Irvine Impt. Special Assmnt. Bonds
1,200,000 (Assmt. Dist. No. 97-16), 6 3/8s, 9/2/22 BBB-/P 1,224,000
2,750,000 (Assmt. Dist. No. 97-17), 6s, 9/2/23 BBB+/P 2,715,625
1,000,000 (Assmt. Dist. No. 94-13), 6s, 9/2/22 BBB/P 987,500
2,000,000 (Assmt. Dist. No. 94-13), 5 7/8s, 9/2/17 BBB/P 1,985,000
5,000,000 (Assmt. Dist. No. 97-17), 5 7/8s, 9/2/17 BBB+/P 5,025,000
10,510,000 Kern, High School Dist. G.O. Bonds, Ser. 14,
MBIA, 9.184s, 2/1/13 (acquired 6/29/98,
cost 14,124,599) (RES) Aaa 12,775,220
14,180,000 Lake Elsinore, Pub. Fin. Auth. Tax. Alloc.,
Ser. C, 6.7s, 10/1/33 BB+/P 14,676,300
21,530,000 Los Angeles, Bldg. Auth. Rev. Bonds
(CA Dept. Gen Svcs.), Ser. A, MBIA,
5 5/8s, 5/1/11 Aaa 23,360,050
Los Angeles Cnty., CA Pub. Wks. Fin. Auth.
Rev Bonds, Ser. A, AMBAC
7,000,000 5 1/2s, 10/1/10 Aaa 7,455,000
8,000,000 5 1/2s, 10/1/09 Aaa 8,570,000
9,000,000 5 1/2s, 10/1/08 Aaa 9,663,750
8,000,000 Los Angeles Cnty., COP (Disney Parking Project),
AMBAC, 4 3/4s, 3/1/23 AAA 7,130,000
8,000,000 Los Angeles Cnty., Metro. Trans. Auth. Rev. Bonds,
Ser. B, FSA, 4 3/4s, 7/1/28 Aaa 7,010,000
Los Angeles Cnty., Metro. Trans. Auth. Sales
Tax Rev. Bonds
12,150,000 Ser. A (2nd Ser.), AMBAC, 5s, 7/1/25 Aaa 11,299,500
6,765,000 (1st Tier-Prop A), Ser. A, FSA, 5s, 7/1/15 Aaa 6,739,631
15,235,000 Los Angeles Cnty., Pub. Wks. Fin. Auth. Rev.
Bonds, Ser. A, MBIA, 5 3/4s, 9/1/07 Aaa 16,510,931
13,000,000 Los Angeles Cnty., Sanitation Dist. Fin. Auth. Rev.
Bonds (Capital), Ser. A, MBIA, 5s, 10/1/23 Aaa 12,171,250
Los Angeles, Convention & Exhibition Ctr.
Auth. Lease
37,465,000 COP, 9s, 12/1/20 Aaa 45,473,144
19,300,000 IFB, MBIA, 7.101s, 8/15/18 (acquired 9/15/94,
cost 14,332,566) (RES) Aaa 19,468,875
Los Angeles, Dept. of Wtr. & Pwr. Rev. Bonds
5,605,000 (Waterworks), 7s, 2/15/22 Aa3 5,654,716
16,200,000 (Electric Plant), Ser. Issue II, 6.8s, 6/1/31 Aa3 16,780,446
25,000,000 Los Angeles, Harbor Dept. Rev. Bonds, 7.6s,
10/1/18 AAA 31,593,750
26,235,000 Los Angeles, Pension Auth. COP, Ser. A, MBIA,
6.9s, 6/30/08 Aaa 30,432,600
Los Angeles, Uni. School Dist. G.O. Bonds,
Ser. B, FGIC
6,380,000 5 3/8s, 7/1/14 Aaa 6,595,325
7,455,000 5 3/8s, 7/1/13 Aaa 7,762,519
5,500,000 5 3/8s, 7/1/12 Aaa 5,768,125
8,785,000 5 3/8s, 7/1/11 Aaa 9,268,175
34,700,000 Los Angeles, Wastewater Syst. IFB, 8s, 6/1/19
(acquired 12/4/97, cost 34,083,081) (RES) Aaa 38,517,000
Metropolitan Wtr. Dist G.O. Bonds, Ser. A
2,500,000 5 1/4s, 3/1/13 Aaa 2,584,375
4,000,000 5 1/4s, 3/1/14 Aaa 4,105,000
20,000,000 Metropolitan Wtr. Dist. IFB
(Southern CA Waterwks.), 6.785s, 8/10/18 Aa2 21,825,000
Metropolitan Wtr. Dist. Rev. Bonds
22,600,000 (Southern CA Waterwks.), 5.95s, 8/5/22 Aa2 23,673,500
10,000,000 Ser. A, 5 1/2s, 7/1/10 Aa 10,662,500
26,255,000 (Southern CA Waterwks.), Ser. C, 5s, 7/1/27 Aa 24,088,963
33,445,000 Ser. A., 5s, 7/1/26 Aa 30,727,594
15,000,000 (Southern CA Waterwks.), Ser. B, MBIA,
4 3/4s, 7/1/21 Aaa 13,631,250
10,350,000 Modesto, Irr. Dist. Fin. Auth. Rev. Bonds
(Domestic Wtr. Project), Ser. D, AMBAC,
4 3/4s, 9/1/22 Aaa 9,315,000
16,600,000 Mount Diablo, Hosp. Dist. Rev. Bonds, Ser. A,
AMBAC, 5s, 12/1/13 Aaa 16,413,250
Northern CA Pwr. Agcy. Multi. Cap. Fac. Rev.
Bonds IFB
4,945,000 MBIA, 8.941s, 8/1/25 Aaa 5,365,325
6,265,000 MBIA, 8.941s, 8/1/25, Prerefunded Aaa 6,961,981
4,770,000 9.192s, 8/1/17 Aaa 5,175,450
3,620,000 9.192s, 8/1/17, Prerefunded Aaa 4,040,825
Northern CA Pwr. Agcy. Pub. Pwr. Rev. Bonds,
Ser. A, AMBAC
3,925,000 5.8s, 7/1/09, Prerefunded AAA 4,302,781
7,720,000 5.8s, 7/1/09 Aaa 8,482,350
Northern CA Pwr. Agcy. Rev. Bonds
(Hydroelectric), Ser. A, MBIA
5,780,000 5 1/4s, 7/1/12 AAA 6,011,200
5,440,000 5 1/4s, 7/1/11 AAA 5,698,400
Oakland CA, Bldg., Auth. Rev. Bonds, AMBAC
6,540,000 5 1/2s, 4/1/13 Aaa 6,858,825
6,295,000 5 1/2s, 4/1/12 Aaa 6,641,225
14,800,000 Oakland, Redev. Agcy. Rev. Bonds, MBIA,
5.95s, 9/1/19 Aaa 15,022,000
Orange Cnty., COP, Ser. A, MBIA
14,520,000 6s, 7/1/26 Aaa 14,991,900
25,285,000 6s, 7/1/07 Aaa 27,718,681
5,000,000 Orange Cnty., Local Trans. Auth. Rev. Bonds,
Ser. A, MBIA, 5 1/2s, 2/15/09 Aaa 5,368,750
Orange Cnty., Local Trans. Auth. Sales Tax
Rev. Bonds, Ser. A
11,445,000 5.7s, 2/15/11 Aaa 12,475,050
11,700,000 5.7s, 2/15/10 Aaa 12,738,375
13,960,000 5.7s, 2/15/09 Aaa 15,181,500
8,210,000 5.7s, 2/15/08 Aaa 8,887,325
16,830,000 Orange Cnty., Wtr. Dist. COP, Ser. A, 5s, 8/15/18 Aa 16,261,988
12,840,000 Oxnard, Redev. Agcy. Tax Alloc. Rev. Bonds
(Cent. City Revitalization), Ser. A, 6 1/2s, 9/1/16 BBB 13,385,700
31,850,000 Palm Desert, Fin. Auth. Tax Alloc. IFB,
MBIA, 9.105s, 4/1/22 Aaa 34,517,438
24,855,000 Pasadena, Cap. Impt. IF COP, AMBAC,
5.35s, 2/1/14 Aaa 26,439,506
Pleasanton, Jt. Pwr. Fin. Auth. Rev. Bonds, Ser. B
5,395,000 6 3/4s, 9/2/17 BBB/P 5,651,263
8,315,000 6.6s, 9/2/08 BBB/P 8,730,750
4,505,000 6 1/2s, 9/2/04 BBB/P 4,724,619
3,960,000 6 1/8s, 9/2/02 BBB/P 4,049,100
30,000,000 Rancho Cucamonga, Wtr. Dist. Fin. Auth. Rev.
Bonds, AMBAC, 6.427s, 8/17/21 Aaa 31,214,400
10,400,000 Redding, Elec. Syst. Rev. Bonds, MBIA,
10.018s, 7/8/22 Aaa 12,363,000
4,250,000 Riverside Cnty., Pub. Fin. Auth. COP, 5.8s, 5/15/29 BBB- 3,702,813
11,790,000 Riverside Cnty., Pub. Fin. Auth. Impt. Special
Assmt. Bonds (Rancho Village), Ser. B,
6 1/4s, 9/2/13 BBB 11,922,638
11,200,000 Roseville, Cmnty. Facs. Dist. 1 Special Tax,
5 3/4s, 9/1/23 BB+ 10,584,000
12,725,000 Sacramento City Fin. Auth. Lease Rev. Bonds,
Ser. A, AMBAC, 5 3/8s, 11/1/14 Aaa 13,408,969
22,750,000 Sacramento Cnty., COP (Pub. Facs. Project),
AMBAC, 4 3/4s, 10/1/27 AAA 20,162,188
7,500,000 Sacramento Cnty., Sanitation Dist. Rev. Bonds,
Ser. A, 5 7/8s, 12/1/27 AA 7,668,750
27,000,000 Sacramento, Muni. Util. Dist. Elec. IFB, FGIC,
8.564s, 8/15/18 Aaa 28,991,250
12,000,000 Sacramento, Muni. Util. Dist. Elec. Rev. Bonds,
Ser. A, MBIA, 6 1/4s, 8/15/10 Aaa 13,575,000
5,000,000 Sacramento, Special Tax Bonds (Northern
Natomas Cmnty. Fac.), Ser. 4-A, 5.7s, 9/1/23 BB/P 4,725,000
San Diego Cnty., COP
4,000,000 (Burnham Institute), 6 1/4s, 9/1/29 Ba3 4,060,000
15,800,000 AMBAC, 5 1/4s, 9/1/06 Aaa 16,471,500
10,000,000 (Downtown Courthouse), AMBAC, 4 1/2s,
5/1/23 Aaa 8,600,000
21,400,000 San Diego Cnty., IF COP, MBIA, 7.321s, 11/18/19 Aaa 21,992,980
12,000,000 San Diego Cnty., Wtr. Auth. Rev. COP, Ser. A,
FGIC, 5s, 5/1/14 Aaa 12,060,000
5,000,000 San Diego Cnty., Wtr. Auth. COP, Ser. A,
5 3/4s, 5/1/11 Aa3 5,462,500
San Diego Cnty., Wtr. Auth. IF COP
20,000,000 Ser. 91-B, MBIA, 8.02s, 4/8/21 Aaa 24,200,000
28,350,000 Ser. B, MBIA, 8.02s, 4/21/11 Aaa 36,252,563
10,000,000 San Diego, Conv. Ctr. Expansion Fing Auth.
Lease Rev. Bonds, Ser. A, 4 3/4s, 4/1/28 Aaa 8,775,000
15,350,000 San Diego, Pub. Fac. Fin. Auth. Swr. Rev. Bonds,
FGIC, 5s, 5/15/25 Aaa 14,275,500
San Diego, Regl. Bldg. Auth. Lease COP, MBIA
8,425,000 6.9s, 5/1/23 Aaa 9,130,594
7,250,000 6.85s, 5/1/13 Aaa 7,639,688
20,500,000 San Diego, Wtr. Util. Rev. Bonds, FGIC,
4 3/4s, 8/1/28 Aaa 17,963,125
San Francisco, City & Cnty. Arpt. Comm. Intl.
Arpt. Rev. Bonds, Ser. 22, AMBAC
3,670,000 5 1/4s, 5/1/13 Aaa 3,734,225
3,490,000 5 1/4s, 5/1/12 Aaa 3,564,163
3,315,000 5 1/4s, 5/1/11 AAA 3,410,306
15,000,000 San Francisco, City & Cnty. Arpt. Rev. Bonds,
FSA, 4 3/4s, 5/1/29 AAA 13,237,500
16,600,000 San Francisco, City & Cnty. G.O. Bonds, Ser. 1,
FGIC, 5 3/4s, 6/15/07 Aaa 17,948,750
10,000,000 San Francisco, Rapid Transit Dist. Sales Tax Rev.
Bonds, 5 1/2s, 7/1/09 Aa3 10,750,000
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 9,837,500
San Joaquin Cnty., COP (General Hosp.)
5,790,000 5 1/4s, 9/1/14 Aaa 5,898,563
5,040,000 5 1/4s, 9/1/13 Aaa 5,172,300
5,250,000 5 1/4s, 9/1/12 Aaa 5,460,000
San Joaquin Hills, Trans. Corridor Agcy. Toll Rd.
Rev. Bonds, Ser. A
77,825,000 Sr. Lien, 6 3/4s, 1/1/32 Aaa 83,467,313
10,000,000 MBIA, 5 1/4s, 1/15/30 Aaa 9,625,000
34,125,000 5s, 1/1/33 Baa3 29,646,094
25,000,000 MBIA, zero %, /15/32 AAA 4,031,250
21,625,000 MBIA, zero %, 1/15/23 AAA 5,973,906
29,100,000 San Jose, Redev. Agcy. Tax Alloc. Rev. Bonds
(Merged Area Redev), MBIA, 4 3/4s, 8/1/24 Aaa 25,680,750
San Marcos, Pub. Fac. Auth. Rev. Bonds
3,000,000 5.8s, 9/1/27 BB/P 2,850,000
1,635,000 5.8s, 9/1/18 BB/P 1,598,213
3,000,000 5 1/2s, 9/1/10 BB/P 3,015,000
40,000,000 San Mateo Cnty., Jt. Pwr. Fin. Auth. Rev. Bonds,
FSA, 5 3/4s, 7/15/29 Aaa 42,550,000
5,000,000 Santa Ana, COP (City Hall Expansion), FSA,
4.7s, 1/1/28 Aaa 4,343,750
35,600,000 Santa Clara, Wtr. Dist. Rev. Bonds, FGIC,
5 3/4s, 2/1/15 Aaa 36,846,000
7,525,000 Sierra View, Health Care Dist. Rev. Bonds,
5.4s, 7/1/22 BBB- 6,085,844
45,200,000 South Orange Cnty., Pub. Fin. Auth. Rev. Bonds,
FGIC, 5 1/2s, 8/15/15 Aaa 45,652,000
Southern CA Pub. Pwr. Auth. Rev. Bonds
5,465,000 (Southern transmission), Ser. A, MBIA,
5 1/4s, 7/1/11 Aaa 5,724,588
42,690,000 (Mead Adelanto), Ser. A, AMBAC,
4 7/8s, 7/1/20 Aaa 39,915,150
3,000,000 Stockton, Cmnty. Fac. Dist. Spl. Tax. Rev. Bonds
(Mello Roos-Weston Ranch), Ser. A,
5.8s, 9/1/14 BB+/P 2,996,250
11,450,000 Sunnyvale, Special Tax, 6 3/4s, 8/1/02 BB+/P 11,550,188
Thousand Oaks, Cmnty. Fac. Dist. Special Tax
Rev. Bonds (No. 94-1)
21,775,000 6 7/8s, 9/1/24 B/P 22,809,313
32,305,000 zero %, 9/1/14 B/P 12,962,381
4,000,000 Tustin, Unified School Dist. Special Tax Bonds
(Cmnty. Facs. Dist. No. 97-1), 6 3/8s, 9/1/35 BBB+/P 4,040,000
10,195,000 U. of CA Hosp. Med. Center Rev. Bonds,
AMBAC, 5.7s, 7/1/11 Aaa 10,819,444
38,932,000 U. of CA Rev. Bonds (UCSD Med. Ctr. Satellite
Med. Fac.), 7.9s, 12/1/19 A-/P 39,039,842
10,000,000 Vallejo, COP (Marine World Foundation),
7.2s, 2/1/26 BB+/P 10,737,500
36,300,000 Valley Hlth. Syst. COP, 6 7/8s, 5/15/23 BBB- 35,755,500
6,385,000 Valley Hlth. Syst. Hosp. Rev. Bonds, Ser. A,
6 1/2s, 5/15/15 BBB- 6,193,450
--------------
2,951,534,949
Puerto Rico (3.6%)
-------------------------------------------------------------------------------------------------------------------
9,010,000 Cmnwlth. of PR, G.O. Bonds, MBIA, 5 3/4s, 7/1/11 A 9,843,425
8,500,000 Cmnwlth. of PR, Hwy. & Trans. Auth. Rev. Bonds,
Ser. B, MBIA, 5 7/8s, 7/1/35 AAA 8,786,875
9,000,000 Cmnwlth. of PR, Infrastructure Fin. Auth. Rev.
Bonds, Ser. A, AMBAC, 5 1/2s, 7/1/08 Aaa 9,585,000
Cmnwlth. of PR, Pub. Impt. G.O. Bonds, FSA
8,500,000 5 1/2s, 7/1/11 AAA 9,116,250
5,000,000 5 1/2s, 7/1/10 AAA 5,368,750
7,215,000 5 1/2s, 7/1/09 AAA 7,729,069
10,000,000 PR Elec. Pwr. Auth. Rev. Bonds, Ser. CC, MBIA,
5 1/2s, 7/1/08 Aaa 10,650,000
8,000,000 PR Indl. Tourist Edl. Med. & Env. Control Facs. Rev.
Bonds (Cogen Facs.--AES PR Project),
6 5/8s, 6/1/26 Baa2 8,360,000
30,000,000 PR Infrastructure Fin. Auth. Special Rev. Bond,
Ser. A, 5 1/2s, 10/1/40 AAA 29,475,000
10,000,000 U. of PR Rev. Bonds, Ser. O, MBIA, 5 3/8s, 6/1/30 AAA 9,650,000
--------------
108,564,369
-------------------------------------------------------------------------------------------------------------------
Total Investments (cost $2,887,616,056) (b) $3,060,099,318
-------------------------------------------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $3,066,746,965.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at September 30, 2000 for the
securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings do not
necessarily represent what the agencies would ascribe to these
securities at September 30, 2000. Securities rated by Putnam are
indicated by "/P" and are not publicly rated. Ratings are not covered by
the Report of independent accountants.
(b) The aggregate identified cost on a tax basis is $2,889,394,091
resulting in gross unrealized appreciation and depreciation of
$207,224,234 and $36,519,007, respectively, or net unrealized
appreciation of $170,705,227.
(NON) Non-income-producing security.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at September 30, 2000
was $156,955,720 or 5.1% of net assets.
(SEG) A portion of this security was pledged and segregated with the
custodian to cover margin requirements for futures contracts at
September 30, 2000.
The rates shown on Floating Rate Bonds (FRB) are the current
interest rates shown at September 30, 2000, 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, are the
current interest rates at September 30, 2000.
The fund had the following industry group concentrations greater
than 10% at September 30, 2000 (as a percentage of net assets):
Water and sewer 24.6%
Transportation 14.8
The fund had the following insurance concentrations greater than
10% at September 30, 2000 (as a percentage of net assets):
MBIA 27.9%
AMBAC 13.6
------------------------------------------------------------------------------
Futures Contracts Outstanding at September 30, 2000
Aggregate Face Expiration Unrealized
Total Value Value Date Appreciation
------------------------------------------------------------------------------
Muni Bond Index
(Short) $129,880,125 $131,241,750 Dec-00 $1,361,625
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2000
<S> <C>
Assets
------------------------------------------------------------------------------------------------
Investments in securities, at value (identified cost 2,887,616,056) (Note 1) $ 3,060,099,318
------------------------------------------------------------------------------------------------
Interest and other receivables 41,483,847
------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 3,643,862
------------------------------------------------------------------------------------------------
Receivable for securities sold 15,878,484
------------------------------------------------------------------------------------------------
Total assets 3,121,105,511
Liabilities
------------------------------------------------------------------------------------------------
Payable to subcustodian (Note 2) 8,936,984
------------------------------------------------------------------------------------------------
Payable for variation margin 124,406
------------------------------------------------------------------------------------------------
Distributions payable to shareholders 6,808,226
------------------------------------------------------------------------------------------------
Payable for securities purchased 29,381,700
------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 3,361,701
------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 3,559,400
------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 362,189
------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 59,038
------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 6,728
------------------------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 1,659,545
------------------------------------------------------------------------------------------------
Other accrued expenses 98,629
------------------------------------------------------------------------------------------------
Total liabilities 54,358,546
------------------------------------------------------------------------------------------------
Net assets $3,066,746,965
Represented by
------------------------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $2,914,559,555
------------------------------------------------------------------------------------------------
Undistributed net investment income (Note 1) 4,447,817
------------------------------------------------------------------------------------------------
Accumulated net realized loss on investments (Note 1) (26,105,294)
------------------------------------------------------------------------------------------------
Net unrealized appreciation of investments 173,844,887
------------------------------------------------------------------------------------------------
Total -- Representing net assets applicable to
capital shares outstanding $3,066,746,965
Computation of net asset value and offering price
------------------------------------------------------------------------------------------------
Net asset value and redemption price per class A share
($2,514,181,485 divided by 301,006,810 shares) $8.35
------------------------------------------------------------------------------------------------
Offering price per class A share (100/95.25 of $8.35)* $8.77
------------------------------------------------------------------------------------------------
Net asset value and offering price per class B share
($535,160,414 divided by 64,160,080 shares)** $8.34
------------------------------------------------------------------------------------------------
Net asset value and offering price per class C share
($5,510,055 divided by 658,176 shares)** $8.37
------------------------------------------------------------------------------------------------
Net asset value and redemption price per class M share
($11,895,011 divided by 1,427,939 shares) $8.33
------------------------------------------------------------------------------------------------
Offering price per class M share (100/96.75 of $8.33)*** $8.61
------------------------------------------------------------------------------------------------
* 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
Year ended September 30, 2000
<S> <C>
Tax exempt interest income: $188,030,665
-------------------------------------------------------------------------------------------
Expenses:
-------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 14,277,547
-------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 1,857,970
-------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 60,489
-------------------------------------------------------------------------------------------
Administrative services (Note 2) 27,591
-------------------------------------------------------------------------------------------
Distribution fees -- Class A (Note 2) 5,113,546
-------------------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 4,736,072
-------------------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 32,203
-------------------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 73,564
-------------------------------------------------------------------------------------------
Other 598,365
-------------------------------------------------------------------------------------------
Total expenses 26,777,347
-------------------------------------------------------------------------------------------
Expense reduction (Note 2) (532,892)
-------------------------------------------------------------------------------------------
Net expenses 26,244,455
-------------------------------------------------------------------------------------------
Net investment income 161,786,210
-------------------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 7,278,971
-------------------------------------------------------------------------------------------
Net realized loss on futures contracts (Note 1) (3,849,781)
-------------------------------------------------------------------------------------------
Net unrealized appreciation of investments and
futures contracts during the year 28,833,971
-------------------------------------------------------------------------------------------
Net gain on investments 32,263,161
-------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $194,049,371
-------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
STATEMENT OF CHANGES IN NET ASSETS
Year ended September 30
---------------------------------
2000 1999
--------------------------------------------------------------------------------------------------
<S> <C> <C>
Decrease in net assets
--------------------------------------------------------------------------------------------------
Operations:
--------------------------------------------------------------------------------------------------
Net investment income $ 161,786,210 $ 171,706,496
--------------------------------------------------------------------------------------------------
Net realized gain on investments 3,429,190 9,290,056
--------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 28,833,971 (254,103,995)
--------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 194,049,371 (73,107,443)
--------------------------------------------------------------------------------------------------
Distributions to shareholders:
--------------------------------------------------------------------------------------------------
From net investment income
Class A (135,249,532) (145,190,669)
--------------------------------------------------------------------------------------------------
Class B (25,845,250) (27,516,818)
--------------------------------------------------------------------------------------------------
Class C (139,135) (2,056)
--------------------------------------------------------------------------------------------------
Class M (738,049) (810,742)
--------------------------------------------------------------------------------------------------
From net realized gain on investments
Class A -- (16,229,723)
--------------------------------------------------------------------------------------------------
Class B -- (3,456,456)
--------------------------------------------------------------------------------------------------
Class M -- (84,929)
--------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (352,736,215) (76,044,936)
--------------------------------------------------------------------------------------------------
Total decrease in net assets (320,658,810) (342,443,772)
Net assets
--------------------------------------------------------------------------------------------------
Beginning of year 3,387,405,775 3,729,849,547
--------------------------------------------------------------------------------------------------
End of year (including undistributed net investment
income of $4,447,817 and $4,129,933, respectively) $3,066,746,965 $3,387,405,775
--------------------------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.25 $8.89 $8.71 $8.46 $8.37
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .43 .42(c) .44(c) .44 .47
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .10 (.59) .21 .28 .09
-----------------------------------------------------------------------------------------------------
Total from
investment operations .53 (.17) .65 .72 .56
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.43) (.42) (.43) (.45) (.47)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.05) (.04) (.02) --
-----------------------------------------------------------------------------------------------------
Total distributions (.43) (.47) (.47) (.47) (.47)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.35 $8.25 $8.89 $8.71 $8.46
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 6.71 (2.01) 7.75 8.71 6.81
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $2,514,181 $2,754,624 $3,073,178 $3,087,795 $3,149,797
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .74 .77 .77 .74 .74
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 5.29 4.85 5.06 5.20 5.60
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 13.44 13.91 30.88 23.51 29.47
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.24 $8.88 $8.70 $8.45 $8.37
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .38 .36(c) .39(c) .39 .42
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .10 (.58) .21 .27 .07
-----------------------------------------------------------------------------------------------------
Total from
investment operations .48 (.22) .60 .66 .49
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.38) (.37) (.38) (.39) (.41)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.05) (.04) (.02) --
-----------------------------------------------------------------------------------------------------
Total distributions (.38) (.42) (.42) (.41) (.41)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.34 $8.24 $8.88 $8.70 $8.45
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 6.02 (2.65) 7.05 8.02 5.99
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $535,160 $616,446 $641,686 $573,309 $510,394
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.39 1.42 1.42 1.39 1.39
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.64 4.21 4.41 4.54 4.94
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 13.44 13.91 30.88 23.51 29.47
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS C
--------------------------------------------------------------
For the period
Per-share Year ended July 26, 1999+
operating performance Sept. 30 to Sept. 30
--------------------------------------------------------------
2000 1999
--------------------------------------------------------------
Net asset value,
beginning of period $8.26 $8.47
--------------------------------------------------------------
Investment operations
--------------------------------------------------------------
Net investment income .37 .04(c)
--------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .11 (.18)
--------------------------------------------------------------
Total from
investment operations .48 (.14)
--------------------------------------------------------------
Less distributions:
--------------------------------------------------------------
From net
investment income (.37) (.07)
--------------------------------------------------------------
From net realized gain
on investments -- --
--------------------------------------------------------------
Total distributions (.37) (.07)
--------------------------------------------------------------
Net asset value,
end of period $8.37 $8.26
--------------------------------------------------------------
Ratios and supplemental data
--------------------------------------------------------------
Total return at
net asset value (%)(a) 5.97 (1.70)*
--------------------------------------------------------------
Net assets, end of period
(in thousands) $5,510 $1,018
--------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.54 .29*
--------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.43 .81*
--------------------------------------------------------------
Portfolio turnover (%) 13.44 13.91
--------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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>
<CAPTION>
FINANCIAL HIGHLIGHTS
(For a share outstanding throughout the period)
CLASS M
-----------------------------------------------------------------------------------------------------
Per-share
operating performance Year ended September 30
-----------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
-----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $8.24 $8.88 $8.70 $8.45 $8.36
-----------------------------------------------------------------------------------------------------
Investment operations
-----------------------------------------------------------------------------------------------------
Net investment income .41 .38(c) .41(c) .42 .45
-----------------------------------------------------------------------------------------------------
Net realized and unrealized
gain (loss) on investments .09 (.57) .22 .27 .08
-----------------------------------------------------------------------------------------------------
Total from
investment operations .50 (.19) .63 .69 .53
-----------------------------------------------------------------------------------------------------
Less distributions:
-----------------------------------------------------------------------------------------------------
From net
investment income (.41) (.40) (.41) (.42) (.44)
-----------------------------------------------------------------------------------------------------
From net realized gain
on investments -- (.05) (.04) (.02) --
-----------------------------------------------------------------------------------------------------
Total distributions (.41) (.45) (.45) (.44) (.44)
-----------------------------------------------------------------------------------------------------
Net asset value,
end of period $8.33 $8.24 $8.88 $8.70 $8.45
-----------------------------------------------------------------------------------------------------
Ratios and supplemental data
-----------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 6.25 (2.31) 7.43 8.39 6.48
-----------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $11,895 $15,318 $14,986 $13,898 $9,149
-----------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.04 1.07 1.07 1.04 1.04
-----------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 4.98 4.56 4.76 4.92 5.24
-----------------------------------------------------------------------------------------------------
Portfolio turnover (%) 13.44 13.91 30.88 23.51 29.47
-----------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (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
September 30, 2000
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, class C, 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 C shares have a higher ongoing distribution fee than
class B shares and have a one-year 1.00% contingent deferred sales
charge and do not convert to Class A shares. Class M shares are sold
with a maximum front end sales charge of 3.25% and pay an ongoing
distribution fee that is higher than class A shares but lower than class
B and class C 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 that 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 of the financial statements and the reported
amounts of increases and decreases in net assets from operations during
the reporting period. 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.
Restricted securities are stated at fair value following procedures
approved by the Trustees. 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). Gains or losses on securities sold are determined
on the identified cost basis. 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 year ended
September 30, 2000, 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 paid 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. These differences include temporary and
permanent differences of defaulted bond interest, unrealized gains and
losses on certain futures contracts, market discount, straddle loss
deferrals and book accretion/amortization adjustment. Reclassifications
are made to the fund's capital accounts to reflect income and gains
available for distribution (or available capital loss carryovers) under
income tax regulations. For the year ended September 30, 2000, the fund
reclassified $503,640 to increase undistributed net investment income
and $940,334 to decrease paid-in-capital, with a decrease to accumulated
net realized losses of $436,694. The calculation of net investment
income per share in the highlights table excludes these adjustments.
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 bonds 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, at the lesser of (i) an annual rate of 0.50% of the average
net asset value of the fund or (ii) the following annual rates expressed
as a percentage of the fund's average net assets: 0.60% of the first
$500 million, 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.
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 Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor
Services, a division of PFTC.
For the year ended September 30, 2000, fund expenses were reduced by
$532,892 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 $2,354
has been allocated to the fund, and an additional fee for each Trustees
meeting attended. 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
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 a 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, class C 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 Retail Management, Inc., 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 Retail Management, Inc. at an annual rate up to
0.35%, 1.00%, 1.00% and 1.00% of the average net assets attributable to
class A, class B, class C and class M shares, respectively. The Trustees
have approved payment by the fund at an annual rate of 0.20%, 0.85%,
1.00% and 0.50% of the average net assets attributable to class A, class
B, class C and class M shares, respectively.
For the year ended September 30, 2000, Putnam Retail Management, Inc.,
acting as underwriter received net commissions of $111,228 and $481 from
the sale of class A and class M shares, respectively, and received
$1,257,680 and $1,422 in contingent deferred sales charges from
redemptions of class B and class C shares, respectively. A deferred
sales charge of up to 1% is assessed on certain redemptions of class A
shares. For the year ended September 30, 2000, Putnam Retail Management,
Inc., acting as underwriter received $87,631 on class A redemptions.
Note 3
Purchases and sales of securities
During the year ended September 30, 2000, cost of purchases and proceeds
from sales of investment securities other than short-term investments
aggregated $197,633,958 and $516,750,245, respectively. Purchases and
sales of short-term municipal obligations aggregated $218,400,000 and
$221,600,000, respectively.
Note 4
Capital shares
At September 30, 2000, there was an unlimited number of shares of
beneficial interest authorized. Transactions in capital shares were as
follows:
Year ended September 30, 2000
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 24,099,022 $ 195,604,690
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 8,055,818 65,614,335
---------------------------------------------------------------------------
32,154,840 261,219,025
Shares
repurchased (65,000,667) (528,509,561)
---------------------------------------------------------------------------
Net decrease (32,845,827) $(267,290,536)
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class A Shares Amount
---------------------------------------------------------------------------
Shares sold 34,043,617 $ 294,035,932
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 9,287,889 80,283,664
---------------------------------------------------------------------------
43,331,506 374,319,596
Shares
repurchased (55,252,585) (475,786,481)
---------------------------------------------------------------------------
Net decrease (11,921,079) $(101,466,885)
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 5,553,511 $ 45,229,054
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 1,747,831 14,213,780
---------------------------------------------------------------------------
7,301,342 59,442,834
Shares
repurchased (17,930,101) (145,393,832)
---------------------------------------------------------------------------
Net decrease (10,628,759) $(85,950,998)
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class B Shares Amount
---------------------------------------------------------------------------
Shares sold 12,340,402 $107,145,509
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 2,050,990 17,706,479
---------------------------------------------------------------------------
14,391,392 124,851,988
Shares
repurchased (11,868,943) (101,944,941)
---------------------------------------------------------------------------
Net increase 2,522,449 $ 22,907,047
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 574,831 $4,693,299
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 10,218 83,920
---------------------------------------------------------------------------
585,049 4,777,219
Shares
repurchased (50,040) (409,655)
---------------------------------------------------------------------------
Net increase 535,009 $4,367,564
---------------------------------------------------------------------------
For the period July 26, 1999
(commencement of operations) to
September 30, 1999
---------------------------------------------------------------------------
Class C Shares Amount
---------------------------------------------------------------------------
Shares sold 123,087 $1,018,164
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 198 1,636
---------------------------------------------------------------------------
123,285 1,019,800
Shares
repurchased (118) (979)
---------------------------------------------------------------------------
Net increase 123,167 $1,018,821
---------------------------------------------------------------------------
Year ended September 30, 2000
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 10,706,465 $86,854,349
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 70,118 569,903
---------------------------------------------------------------------------
10,776,583 87,424,252
Shares
repurchased (11,207,400) (91,286,497)
---------------------------------------------------------------------------
Net decrease (430,817) $(3,862,245)
---------------------------------------------------------------------------
Year ended September 30, 1999
---------------------------------------------------------------------------
Class M Shares Amount
---------------------------------------------------------------------------
Shares sold 15,730,155 $134,521,486
---------------------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 71,587 617,194
---------------------------------------------------------------------------
15,801,742 135,138,680
Shares
repurchased (15,630,504) (133,642,599)
---------------------------------------------------------------------------
Net increase 171,238 $ 1,496,081
---------------------------------------------------------------------------
FEDERAL TAX INFORMATION
(Unaudited)
Pursuant to Section 852 of the Internal Revenue Code, as amended, the
Fund hereby designates $70,934 as capital gain, for its taxable year
ended September 30, 2000.
The fund has designated 99.79% of dividends paid from net investment
income during the fiscal year as tax exempt for Federal income tax
purposes.
The Form 1099 you receive in January 2001 will show the tax status of
all distributions paid to your account in calendar 2000.
FUND INFORMATION
WEB SITE
www.putnaminvestments.com
INVESTMENT MANAGER
Putnam Investment Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Retail Management, Inc.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT ACCOUNTANTS
KPMG LLP
TRUSTEES
John A. Hill, 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
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam, III
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
David E. Hamlin
Vice President and fund manager
Richard A. Monaghan
Vice President
Richard G. Leibovitch
Vice President
John R. Verani
Vice President
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
and Putnam's Quarterly Ranking 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.putnaminvestments.com.
Not FDIC Insured, May Lose Value, No Bank Guarantee
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
---------------------
PRST STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
---------------------
For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminvestments.com
AN045-65467 027/337/677 11/00
