Putnam
California
Tax Exempt
Money Market
Fund
SEMIANNUAL REPORT
March 31, 1996
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "The fund is positioned to take advantage of the increased economic
activity within California and should benefit from the abundance of
investment opportunities created by the state's positive economic
outlook."
-- Lindsey C. Strong, Manager
Putnam California Tax Exempt Money Market Fund
* "Additionally, given that 1996 is an election year, the popularity of
tax deductions, and complexity of implementing any substantial
changes to the tax codes help make the outlook for the muni market
optimistic."
-- The Value Line Mutual Fund Survey, March 19, 1996
CONTENTS
4 Report from Putnam Management
7 Fund performance summary
9 Portfolio holdings
11 Financial statements
[GRAPHIC OMMITTED: photo of George Putnam]
(copyright) Karsh, Ottawa
From the Chairman
Dear Shareholder:
For most of the first half of Putnam California Tax Exempt Money Market
Fund's current fiscal year, the six months ended March 31, 1996, bonds
enjoyed one of the most vibrant markets in recent memory, only to turn
abruptly downward toward the end of the period. The bond market was
reacting to concern over a pickup in inflation resulting from economic
overheating.
Fund Manager Lindsey C. Strong, foreseeing the potential for such
volatility, had earlier shifted your fund's portfolio to shorter
maturities. This move gave the fund a considerable advantage over many
other funds. With the portfolio concentrated, as always, in high-quality
issues, Lindsey believes share price and income stream should be
preserved in a market environment that may remain somewhat unsettled
over the next few months.
She provides a full discussion of your fund's performance and outlook in
the report that follows.
Respectfully yours,
/S/George Putnam
George Putnam
Chairman of the Trustees
May 15, 1996
Report from the Fund Manager
Lindsey C. Strong
For the six months ended March 31, 1996, Putnam California Tax Exempt
Money Market Fund continued to provide a competitive total return, while
emphasizing capital preservation and maintaining a stable $1.00 share
price. Throughout the period, we continued to emphasize the fund's
conservative investment strategy, which emphasizes short-term
instruments of the highest quality in its pursuit of current income.
* PORTFOLIO MATURITY ADJUSTED IN RESPONSE TO SHIFTING ECONOMY
During the semiannual period, the economic environment in which your
fund was managed shifted from one of slow economic growth and declining
interest rates to one of stronger growth and uncertainty about the
direction of interest rates. Since tax-exempt money market funds mainly
invest in short-term municipal securities, their yields rise and fall
with the short-term interest rates controlled by the Federal Reserve
Board. The slow-growth, low-inflation environment that persisted
throughout 1995 prompted the Fed to trim short-term interest rates by
one quarter of a percentage point in December 1995 and again in January
1996. In this declining interest rate environment, our strategy
emphasized extending the fund's average maturity in order to lock in
higher yields.
Early in 1996, however, stronger-than-expected economic growth began to
raise concerns that inflation might rise faster than anticipated. These
concerns were fueled by February employment gain figures that were twice
what analysts had forecast. March employment statistics were also
robust. While the Fed took no action in February or March, many analysts
believe the strong economic news makes additional rate declines unlikely
in the near future. Because of the uncertainty of this investment
climate, we adopted a more neutral strategy. We began to reduce the
fund's average maturity so we would be in a position to take advantage
of incrementally higher yields, should interest rates begin to rise.
* CALIFORNIA MUNICIPAL BOND PICTURE IS IMPROVING
The Golden State's economy has gained additional strength during the
last six months. Key indicators point to an enhanced business climate
that, in turn, is likely to mean increased investment opportunity and a
positive outlook for the remainder of 1996. Since Orange County filed
for protection from its creditors in 1994 after a county-run investment
fund depreciated significantly, the investment environment within
California has improved dramatically. With more new businesses
flourishing, the employment rate rising steadily, and residential
construction accelerating, the state's municipal bonds have become
increasingly attractive to investors.
* QUALITY STANDARDS MAINTAINED DURING SEASONAL SUPPLY Swings
The supply of municipal securities fluctuates broadly throughout the
year. Nevertheless, we were able to find securities that measured up to
our strict standards for high quality and liquidity. We primarily
invested in variable rate demand notes (VRDNs) and municipal commercial
paper issued by the state of California. Variable rate demand notes are
instruments that can be redeemed on short notice. They pay a variable
interest rate that resets at daily, weekly, or monthly intervals. They
are helpful in managing the fund's average maturity and liquidity.
Commercial paper is a security issued by a municipality to finance
capital or operating needs.
Currently, up to 67% of your fund's investments are insured or backed by
bank letters of credit. The insurance and letters of credit guarantee
that the short-term debt (money market instruments) in which your fund
invests will be paid within a certain period of time. These features add
a significant measure of quality assurance, making many of our holdings
among the highest quality securities available. We intend to maintain
the portfolio's high percentage of insured and bank-backed securities
going forward and may even expand it, should appropriate investment
opportunities arise.
* OUR OUTLOOK
We are cautiously optimistic in our outlook for interest rates and
prospects for the national and California economies. Rising long-term
interest rates, a weak bond market, and strong employment data suggest
that more robust economic growth and possibly higher inflation lie
ahead. We believe short-term interest rates could remain at current
levels or move upward. Given this projected environment, we plan to
maintain the fund's average maturity at a neutral level. This should
keep the fund sufficiently flexible to take advantage of buying
opportunities that may arise, while protecting its double tax-free
income stream.
The views expressed throughout the report are exclusively those of
Putnam Management and are not meant as investment advice. Although the
described holdings were viewed favorably as of 3/31/96, there is no
guarantee the fund will continue to hold these securities in the future.
High income investors may be subject to the alternative minimum tax.
Income may be subject to state and local taxes. Capital gains, if any,
are taxable for federal, and in, most cases, state purposes.
PERFORMANCE COMPARISONS (3/31/96)
Current After-tax
return return
- ----------------------------------------------------------------------
Passbook savings account 2.00% 1.08%
- ----------------------------------------------------------------------
Taxable money market fund 7-day yield 4.79 2.58
- ----------------------------------------------------------------------
3-month certificate of deposit (as of 3/31/96) 4.04 2.17
- ----------------------------------------------------------------------
Putnam California Tax Exempt
Money Market Fund (7-day yield) 2.51 2.51
- ----------------------------------------------------------------------
The net asset value of money market mutual funds is uninsured and
designed to be fixed, while distributions vary daily. The principal
value on passbook savings and bank CDs is generally insured up to
certain limits by state and federal agencies. CDs, unlike stocks which
incur more risk, offer a fixed rate of return. Unlike money market
funds, early withdrawals from bank CDs may be subject to substantial
penalties. Investment returns will fluctuate. After-tax return assumes a
combined 46.24% federal and state tax rate. Sources: Bank of Boston
(passbook savings), IBC/Donaghue's Money Fund Report (taxable money
market fund 7-day yield), Bank Rate Monitor (3-month CDs).
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam California Tax Exempt Money Market Fund is designed for
investors seeking current income free from federal and California
personal income taxes, consistent with capital preservation, stable
principal, and liquidity.
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares
changed over time, assuming you held the shares through the entire
period and reinvested all distributions in the fund. We show total
return in two ways: on a cumulative long-term basis and on average how
the fund might have grown each year over varying periods.
TOTAL RETURN FOR PERIODS ENDED 3/31/96
Lipper California
Tax Exempt Consumer
Fund shares Money Market Price
at NAV Average Index
- ---------------------------------------------------------------
6 months 1.37% 1.52% 1.63%
- ---------------------------------------------------------------
1 year 2.83 3.19 2.84
- ---------------------------------------------------------------
5 years* 13.14 14.79 15.33
Annual average* 2.50 2.80 2.89
- ---------------------------------------------------------------
Life of fund
(10/26/87)* 34.38 36.44 35.04
Annual average* 3.57 3.76 3.63
- ---------------------------------------------------------------
Performance data represent past results and should not be taken as an
assurance of future performance. *Performance data reflect an expense
limitation previously in effect. Without the expense limitation, total
returns would have been lower. Investment returns will fluctuate. An
investment in the fund is neither insured nor guaranteed by the U.S.
government. There can be no assurance that the fund will be able to
maintain a stable net asset value of $1.00 per share.
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund assets, minus any
liabilities, divided by the number of outstanding shares.
COMPARATIVE BENCHMARKS
Lipper California Tax Exempt Money Market Fund Average is an arithmetic
average of the total return of all tax-exempt money market mutual funds
tracked by Lipper Analytical Services. Lipper is an independent rating
organization for the mutual fund industry. Lipper rankings vary for
other periods. The fund's holdings do not match those in the Lipper
Average.
Consumer Price Index (CPI) is a commonly used measure of inflation; it
does not represent an investment return.
<TABLE>
<CAPTION>
Portfolio of investments owned
March 31, 1996 (Unaudited)
Key to Abbreviations
COP -- Certificates of Participation
FGIC -- Federal Guaranty Insurance Company
LOC -- Letter of Credit
RAW -- Revenue Anticipation Warrants
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (85.2%)*
PRINCIPAL AMOUNT RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$1,400,000 Alameda Cnty. Trans. Auth. Sales Tax Rev. Bonds,
FGIC 4 1/2s, 5/1/96 AAA $1,400,953
1,500,000 CA Hlth. Fac. Fin. Auth. VRDN (Sutter Hlth.), Ser. A,
3.55s, 3/1/20 (Morgan Guaranty Trust Co. (LOC)) VMIG1 1,500,000
1,500,000 CA Hsg. Fin. Auth. VRDN (Home Mtge), Ser. E,
3.5s, 8/1/27 VMIG1 1,500,000
500,000 CA RAW, FGIC Ser. C, 5.75s, 4/25/96 AAA 500,778
1,350,000 CA Poll. Ctrl. Fing. Auth. VRDN (Chevron USA Inc.
Project), 4s, 11/15/01 AA 1,350,718
1,600,000 CA Poll. Ctrl. Fing. Auth. VRDN (Shell Oil Co.
Project), 3.5s, 11/1/2000 VMIG1 1,600,000
3,000,000 CA Pub. Cap. Impts. Fing. Auth. VRDN Ser. C, 3.4s,
6/1/28 (Nat'l. Westminister Bk. USA (LOC)) VMIG1 3,000,000
1,610,000 Indio, CA Multi-Fam. Rev. Bonds (Western Federal
Savings & Loan Assn. Project), Ser. A, 3.15s, 6/1/05
(Wells Fargo & Co. (LOC)) A-1 1,610,000
1,500,000 Los Angeles Cnty. Cmnty. COP, (Willowbrook
Project), 3.2s 11/1/15 (Wells Fargo & Co. (LOC)) A-I 1,500,000
1,900,000 Oakland VRDN (Cap. Equip. Project), 3.5s, 12/1/15
(Nat'l. Westminister Bk. PLC (LOC)) P-I 1,900,000
Palm Springs Cnty., Redev. Agcy. COP
(Headquarters Hotel)
200,000 Ser. 10, 3.25s, 12/1/14 (Citibank (LOC)) A-I+ 200,000
1,900,000 Ser. 7, 3.25s, 12/1/14 (Citibank (LOC)) A-I+ 1,900,000
2,000,000 Pomona, Redev. Agcy. Multi-Fam. VRDN (Bauer
Group Apt.), 4.15s, 12/1/07 VMIG1 2,000,000
1,525,000 Riverside Cnty., Hsg. Auth. Multi-Fam. VRDN
(Mtn. View Apts.), Ser. A 2.95s, 8/1/25 (Federal
Home Loan Bank, SF (LOC)) A-I+ 1,525,000
1,495,000 Sacramento Cnty., Multi-Fam. Hsg. VRDN
(Smoketree), Ser. A, 3.15s, 4/15/10 A-I+ 1,495,000
2,000,000 San Diego, Cmnty. Regl. Trans. Comm. Sales Tax
Rev. Bonds FGIC, Ser. A, 4.75s, 4/1/96 AAA 2,000,040
1,700,000 San Diego, Hsg. Auth. Multi-Fam. Hsg. VRDN
(Paseo Apartments), Ser. A, 3.5s, 8/1/15
(Bk. of Toyko (LOC)) VMIG1 1,700,000
1,700,000 Santa Clara Cnty., Hsg. Auth. Multi-Fam. Hsg. VRDN
(Foxchase Apt.) FGIC 3.25s, 11/1/07 VMIG1 1,700,000
1,400,000 Stockton, Multi-Fam. Hsg. VRDN (Mariners Pointe
Assoc.), Ser. A, 2.9s, 9/1/18 (Bank of America (LOC)) A-I+ 1,400,000
1,900,000 Woodland, Multi-Fam. Mtge VRDN (Crossroads),
Ser. A, 3.15s, 8/1/18 A-I+ 1,900,000
-----------
Total Municipal Bonds and Notes (cost $31,682,489) $31,682,489
MUNICIPAL COMMERCIAL PAPER (12.9%)*
PRINCIPAL AMOUNT RATINGS** VALUE
- -------------------------------------------------------------------------------------------------------
$1,600,000 CA Poll. Control VRDN (Pacific Gas & Elec. Co.),
3.10s, 4/8/96 (Morgan Guaranty (LOC)) A-I+ $1,600,000
1,400,000 Los Angeles Cnty., Metropolitan Trans. Auth. Sales
Tax, 3.10s, 4/8/96 (National Westminister
ABN Amro, Canadian Imperial Bank of Canada,
Bank of CA, Banque Nationale de Paris
(LOC)) P-I 1,400,000
1,800,000 Sacramento Muni. Utility Dist., 3.15s, 8/22/96
(Bayerische LandesBank Girozentrale (LOC)) P-I 1,800,000
-----------
Total Municipal Commercial Paper (cost $4,800,000) $4,800,000
- -------------------------------------------------------------------------------------------------------
Total Investments (cost $36,482,489)*** $36,482,489
- -------------------------------------------------------------------------------------------------------
* Percentages are based on total net assets of $37,183,763.
** The Moody's or Standard & Poor's ratings indicated are believed to be the most recent ratings available
at March 31, 1996, for the securities listed. Ratings are generally ascribed to securities at the time
of issuance. While the agencies may from time to time revise such ratings, they undertake no obligation
to do so, and the ratings do not necessarily represent what the agencies would ascribe to these securities
at March 31, 1996.
Moody's Investors Service, Inc. and Standard & Poor's are the leading independent rating agencies for debt
securities. Moody's uses the designation Moody's Investment Grade, or "MIG", for most short-term municipal
obligations, adding a "V" ("VMIG") for bonds with a demand or variable feature; the designation "P" is used
for tax exempt commercial paper. Standard & Poor's uses "SP" for notes maturing in three years or less, "A"
for bonds with a demand or variable feature.
Moody's Investor Service, Inc.
MIG1/VMIG1 = Best quality, strong protection of cash flow, superior liquidity and brand access to refinancing
MIG2/VMIG2 = High quality; ample protection of cash flow, liquidity support and ability to refinance
AAA = Strong capacity to pay interest and repay principal and differs from the higher rated issues only
in a small degree
P-1= Superior capacity for repayment
P-2= Strong capacity for repayment
Standard & Poor's
SP-1= Overwhelming safety characteristics
SP-2= Strong capacity to repay principal and interest
A-1+= Overwhelming degree of credit protection
A-1= Strong degree of safety
A-2= Considered strong but lacks solid strength for timely repayment
*** The aggregate identified cost on a tax basis is the same.
The rates shown on VRDN are the current interest rates at March 31, 1996 which are subject to change based on
the terms of the security.
The fund had the following industry group concentrations greater than 10% on March 31, 1996 (as a percentage of
net assets).
Housing 39.9%
Transportation 12.9
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1996 (Unaudited)
<S> <C>
Assets
- ------------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $36,482,489
- ------------------------------------------------------------------------------------
Cash 374,849
- ------------------------------------------------------------------------------------
Interest and other receivables 211,547
- ------------------------------------------------------------------------------------
Receivable for shares of the fund sold 323,564
- ------------------------------------------------------------------------------------
Receivable for securities sold 100,175
- ------------------------------------------------------------------------------------
Total assets 37,492,624
Liabilities
- ------------------------------------------------------------------------------------
Distributions payable to shareholders 68,136
- ------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 181,752
- ------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 39,011
- ------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 94
- ------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,109
- ------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 96
- ------------------------------------------------------------------------------------
Other accrued expenses 18,663
- ------------------------------------------------------------------------------------
Total liabilities 308,861
- ------------------------------------------------------------------------------------
Net assets $37,183,763
Represented by
- ------------------------------------------------------------------------------------
Paid-in-capital (Note 4) $37,183,763
- ------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($37,183,763 divided by 37,183,763 shares) $1.00
- ------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 1996 (Unaudited)
<S> <C>
Tax exempt interest income $615,146
- ------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 79,737
- ------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 29,711
- ------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 2,756
- ------------------------------------------------------------------------------------
Administrative services (Note 2) 2,144
- ------------------------------------------------------------------------------------
Reports to shareholders 2,080
- ------------------------------------------------------------------------------------
Auditing 9,932
- ------------------------------------------------------------------------------------
Legal 328
- ------------------------------------------------------------------------------------
Postage 554
- ------------------------------------------------------------------------------------
Registration fees 5,122
- ------------------------------------------------------------------------------------
Other 541
- ------------------------------------------------------------------------------------
Total expenses 132,905
- ------------------------------------------------------------------------------------
Expense reduction (Note 2) (34,980)
- ------------------------------------------------------------------------------------
Net expenses 97,925
- ------------------------------------------------------------------------------------
Net investment income 517,221
- ------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $517,221
- ------------------------------------------------------------------------------------
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
1996* 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase (decrease) in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $517,221 $1,340,960
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 517,221 1,340,960
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders :
- -------------------------------------------------------------------------------------------------------
From net investment income (517,221) (1,340,960)
- -------------------------------------------------------------------------------------------------------
Increase (decrease) from capital share transactions (Note 4) 2,044,120 (9,659,129)
- -------------------------------------------------------------------------------------------------------
Total increase (decrease) in net assets 2,044,120 (9,659,129)
- -------------------------------------------------------------------------------------------------------
Net Assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 35,139,643 44,798,772
- -------------------------------------------------------------------------------------------------------
End of period $37,183,763 $35,139,643
- -------------------------------------------------------------------------------------------------------
* Unaudited
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Financial highlights
(For a share outstanding throughout the period)
Six months Year ended Year ended
ended March 31 September 30 September 30
- --------------------------------------------------------------------------------------------------------------------
1996* 1995 1994 1993 1992 1991
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net investment income $0.0136 $0.0288 $0.0192 $0.0175 $0.0262(a) $0.0407(a)
- --------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain
on investments -- -- -- -- 0.0001 --
- --------------------------------------------------------------------------------------------------------------------
Total from investment operations $0.0136 $0.0288 $0.0192 $0.0175 $0.0263 $0.0407
- --------------------------------------------------------------------------------------------------------------------
Total distributions ($0.0136) ($0.0288) ($0.0192) ($0.0175) ($0.0263) ($0.0407)
- --------------------------------------------------------------------------------------------------------------------
Total investment return at
net asset value (%)(b) 1.37(d) 2.92 1.94 1.77 2.67 4.15
- --------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $37,184 $35,140 $44,799 $45,364 $58,858 $69,184
- --------------------------------------------------------------------------------------------------------------------
Ratio of expenses to average
net assets (%)(c) .38(d) 1.00 .67 .89 .85(a) .80(a)
- --------------------------------------------------------------------------------------------------------------------
Ratio of net investment income to
average net assets (%) 1.46(d) 2.84 1.84 1.78 2.70(a) 4.03(a)
- --------------------------------------------------------------------------------------------------------------------
* Unaudited.
(a) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses of the fund
for the years ended September 30, 1992 and 1991 reflect per share reductions of $0.0026 and $0.0033, respectively.
(b) Total investment return assumes dividend reinvestment and does not reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the period ended September 30, 1995 and thereafter, includes
amounts paid through expense offset and broker service arrangements. Prior period ratios exclude these amounts.
(See Note 2).
(d) Not annualized.
</TABLE>
Notes to financial statements
March 31, 1996 (Unaudited)
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as
amended, as a diversified, open-end management investment company. The
fund seeks as high a level of current income exempt from federal income
tax and California personal income tax as is consistent with
preservation of capital, maintenance of liquidity and stability of
principal by investing primarily in a diversified portfolio of short-
term California tax-exempt securities.
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 The valuation of the fund's portfolio instruments
is determined by means of the amortized cost method as set forth in Rule
2a-7 under the Investment Company Act of 1940. The amortized cost of an
instrument is determined by valuing it at cost originally and thereafter
amortizing any discount or premium from its face value at a constant
rate until maturity.
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).
C) Federal taxes It is the policy of the fund to distribute all of its
income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986. Therefore, no provision has
been made for federal income, and excise taxes on income and capital
gains.
D) Interest income and distributions to shareholders Interest is
recorded on the accrual basis. Income dividends (and distributions of
realized gains, if any) are recorded daily by the fund and are
distributed monthly to the shareholders. 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.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Invesment Management, Inc. ("Putnam Management"),
the fund's Manager, a wholly-owned subsidiary of Putnam Investments,
Inc., for managment 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: 0.45% of the first $500 million of average net
assets, 0.35% of the next $500 million, 0.30% of the next $500 million,
and 0.25% of any amount over $1.5 billion, subject under current law, to
reduction in any year by the amount of certain brokerage commissions and
fees (less expenses) received by affiliates of Putnam Management on the
fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Trustees of the fund receive an annual Trustees fee of $380 and an
additional fee for each Trustee's meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of
the Trustees receive additional fees for attendance at certain committee
meetings.
The fund adopted a Trustee Fee Deferral Plan (the "Plan") which allows
the Trustees to defer the receipt of all or a portion of Trustees Fees
payable on or after July 1, 1995. The deferred fees remain in the fund
and are invested in the fund or in other Putnam funds until distribution
in accordance with the Plan.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by
Putnam Investor Services, a division of PFTC.
For the six months ended March 31, 1996 fund expenses were reduced by
$34,980 under expense offset arrangements with PFTC and brokerage
service arrangements. Investor servicing and custodian fees reported in
the Statement of operations exclude these credits. The fund could have
invested the assets utilized in connection with the expense offset
arrangements in an income producing asset if it had not entered into
such arrangements.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule
12b-1 under the Investment Company Act of 1940. The purpose of the Plan
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 Trustees have approved
payment by the fund to Putnam Mutual Funds Corp. at an annual rate of up
to 0.35% of the fund's average net assets. Currently, no payments are
being made under the plan.
Putnam Mutual Funds Corp., acting as the underwriter, receives proceeds
from contingent deferred sales charges. These charges apply only to
certain shares that have been exchanged from other Putnam Funds. Putnam
Mutual Funds Corp. received no monies in contingent deferred sales
charges from such redemptions for the six months ended March 31, 1996.
Note 3
Purchase and sales securities
During the six months ended March 31, 1996, purchases and sales
(including maturities) of investment securities (all short-term
obligations) aggregated $45,325,889 and $44,240,000, 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, 1996, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares at a constant net
asset value of $1.00 per share were as follows:
Six months ended Year ended
March 31 September 30
1996 1995
- ----------------------------------------------------
Shares sold 53,748,919 114,301,007
- ----------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 461,662 1,230,354
- ----------------------------------------------------
54,210,581 115,531,361
Shares
repurchased (52,166,461) (125,190,490)
- ----------------------------------------------------
Net increase
(decrease) 2,044,120 (9,659,129)
- ----------------------------------------------------
Our commitment to quality service
* CHOOSE AWARD-WINNING SERVICE
Putnam Investor Services has won the DALBAR Quality Tested Service Seal
for the past six years. In 1995, over 146,000 tests of 56 shareholder
service components demonstrated that Putnam outperformed the industry
standard in every category.
* HELP YOUR INVESTMENT GROW
Set up a systematic program for investing with as little as $25 a month
from a Putnam money market fund or from your checking or savings
account.*
* SWITCH FUNDS EASILY
You can move money from one account to another with the same class of
shares without a service charge. (This privilege is subject to change or
termination.)
* ACCESS YOUR MONEY QUICKLY
You can get checks sent regularly or redeem shares any business day at
the then-current net asset value, which may be more or less than the
original cost of the shares.
For details about any of these or other services, contact your financial
advisor or call the toll-free number shown below and speak with a
helpful Putnam representative.
To make an additional investment in this or any other Putnam fund,
contact your financial advisor or call our toll-free number: 1-800-225-
1581.
* Regular investing of course, does not guarantee a profit or protect
against a loss in a declining market.
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
Eli Shapiro
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William F. McGue
Vice President
Blake E. Anderson
Vice President
Lindsey C. Strong
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam California
Tax Exempt Money Market Fund. It may also be used as sales literature
when preceded or accompanied by the current prospectus, which gives
details of sales charges, investment objectives, and operating policies
of the fund, and the most recent copy of Putnam's Quarterly Performance
Summary. For more information or to request a prospectus, call toll-
free: 1-800-225-1581.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution, are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board
or any other agency, and involve risk, including the possible loss of
the principal amount invested.
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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24536-064 5/96
