Putnam
California
Tax Exempt
Money Market
Fund
SEMIANNUAL REPORT
March 31, 1997
[LOGO: BOSTON * LONDON * TOKYO]
Fund highlights
* "[D]espite the obvious love affair individual investors have had
with mutual funds the past few years, they've also been steadily
allocating cash to money market funds, one of the most conservative
and most 'liquid' -- or easy to enter and exit -- investments
available. By next month, these assets could top $1 trillion, up
from $300 billion only four years ago."
-- The Wall Street Journal, April 3, l997
CONTENTS
4 Report from Putnam Management
7 Fund performance summary
9 Portfolio holdings
12 Financial statements
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[copyright] Karsh, Ottawa
Dear Shareholder:
Prolonged anticipation of a Federal Reserve Board increase in short-term
interest rates provided most of the challenges for Fund Manager Lindsey
Strong throughout the first half of Putnam California Tax Exempt Money
Market Fund's fiscal year. Thus, when the Fed finally did raise rates by
a quarter point near the end of the period, she had already positioned
the portfolio appropriately.
Lindsey also maintained the fund's conservative strategy of investing in
high-quality short-term investments. As a result, she was able to deliver
another period of competitive performance while maintaining a stable net
asset value. In the following report, Lindsey discusses in detail the driving
forces behind your fund's performance during the first half of fiscal 1997
and her outlook for the fiscal year's second half.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 14, 1997
Report from the Fund Manager
Lindsey C. Strong
Putnam California Tax Exempt Money Market Fund began fiscal 1997 in an
economic environment marked by solid growth, relatively moderate
interest rates, and fairly low inflationary expectations. In fact,
throughout the period's entire first half -- the six months ended March
31, 1997 -- an economic environment prevailed in which momentum toward
higher interest rates was building. During the first three months of
calendar l997, however, the indicators that measure the strength of the
economy pointed to a rate of growth that some financial professionals
believed could trigger a significant rise in inflation -- and the
Federal Reserve Board responded accordingly.
Your fund's conservative investment strategy, which emphasizes superior
quality short-term tax-exempt instruments and the pursuit of current
income, served it well in this environment. The fund once again provided
a competitive total return while continuing to focus on capital
preservation and maintaining a stable $1.00 share price.
* THE FED'S PREEMPTIVE STRIKE
After leaving interest rates alone for more than two years, the Federal
Reserve Board raised short-term interest rates by a quarter of a
percentage point on March 25, l997, explaining the move as a "preemptive
strike" against inflation. The Fed's action came on the heels of a host
of data that indicated a still robust economy. Personal income and
consumer spending rose sharply, new home sales were up, and the
unemployment rate had declined to 5.2%, its lowest level in eight years.
These positive trends were accompanied by growing concern about the
prospect of higher inflation down the road. It was this worry that
prompted the Fed's action, since rising interest rates usually have the
effect of slowing economic growth and thus can be expected to help keep
inflation under control.
* CALIFORNIA'S ECONOMY CONTINUES TO IMPROVE
California has made huge strides in getting its financial house in
order. Only recently burdened by large deficits, the state not only has
balanced its budget but even boasts a surplus. California's economy,
furthermore, continues to grow stronger. In the past 14 months, job
growth rose 3.3%. Unemployment stands at 6.5%, its lowest level in
almost seven years. While the healthy California economy has created
more confidence in the overall credit quality of its debt, we still put
extra effort into identifying only the highest quality investments for
your fund.
Because we anticipated the Fed's move on interest rates correctly, we
took a more defensive approach in managing the fund. We concentrated on
maximizing income while maintaining high quality. Since we wanted the
fund to be able to take full advantage of any rise in interest rates, we
shortened the portfolio's average maturity, thus affording an earlier
opportunity to purchase newer higher-yielding securities. By using this
strategy, we have avoided locking the portfolio into lower-yielding
investments, should interest rates continue to rise.
* SEEKING ATTRACTIVELY VALUED HIGH-QUALITY SECURITIES
We continued to invest in traditional tax-exempt money market securities
of the highest quality. These include variable rate demand notes (VRDNs)
and municipal commercial paper from large top-quality issuers.
As many investors across the board became more cautious during the first
three months of l997, we saw an increase in the amount of money flowing
into your fund. As the new money came in, we were able to take advantage
of a steady supply of attractively priced California tax-exempt
securities. Since superior portfolio quality is one of your fund's most
important attributes, our strict standards for investing in any
security, as always, remain intact.
Currently the majority 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. These features provide an
added measure of quality assurance even to those issues rated in the
highest categories by nationally recognized rating services, making many
of the fund's holdings among the highest quality available.
PERFORMANCE COMPARISONS (3/31/97)
Current After-tax
return* return
- ------------------------------------------------------------------------
Passbook savings account 2.01% 1.10%
- ------------------------------------------------------------------------
Taxable money market fund 7-day yield 5.08 2.78
- ------------------------------------------------------------------------
3-month certificate of deposit 4.03 2.21
- ------------------------------------------------------------------------
Putnam California Tax Exempt
Money Market Fund (7-day yield) 2.49 2.49
- ------------------------------------------------------------------------
The net asset value of money market mutual funds is uninsured and
designed to be fixed, while distributions vary daily. Investment returns
will fluctuate. The principal value of passbook savings and bank CDs is
generally insured up to certain limits by state and federal agencies.
Unlike stocks, which incur more risk, CDs offer a fixed rate of return.
Unlike money market funds, bank CDs may be subject to substantial
penalties for early withdrawals. After-tax return assumes a 45.22%
maximum combined federal and state income tax rate.
*Sources: Bank of Boston (passbook savings), Bank Rate Monitor (3-month
Cds), IBC/Donaghue's Money Fund Report (taxable money market fund 7-day
yield).
* OUTLOOK: FURTHER RATE INCREASES POSSIBLE
In the months ahead, we will be carefully monitoring developments in the
California and national economies. We are optimistic that the diverse
California economy will continue to expand and that its growth will not
be held back by rising interest rates. On the national level, we believe
the Fed may take further preemptive moves against inflation with further
increases in short-term rates, should inflation again show signs of
rising.
Should this type of environment persist, we would continue to focus on
capturing the highest possible yields for the fund while maintaining the
portfolio's traditional high quality. To this end, we would anticipate
keeping the average maturity relatively short.
The views expressed here are exclusively those of Putnam Management.
They are not meant as investment advice. Although the described holdings
were viewed favorably as of 3/31/97, there is no guarantee the fund will
continue to hold these securities in the future.
Performance summary
Performance should always be considered in light of a fund's investment
strategy. Putnam California Tax Exempt Money Market Fund is designed for
investors seeking a high level of current income exempt from federal and
state income tax, 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.
COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 3/31/97
Lipper
California
Tax Exempt Consumer
Fund shares Money Market Price
at NAV Fund Average Index
- ------------------------------------------------------------------------
6 months 1.39% 1.42% 1.39%
- ------------------------------------------------------------------------
1 year 2.76 2.86 2.76
- ------------------------------------------------------------------------
5 years 12.52 13.91 14.86
Annual average 2.39 2.64 2.81
- ------------------------------------------------------------------------
Life of fund (10/26/87) 38.08 37.56 38.77
Annual average 3.48 3.44 3.54
- ------------------------------------------------------------------------
Fund performance data do not take into account any adjustment for taxes
payable on reinvested distributions. Performance data represent past
results and are not indicative of future returns. 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. The fund's holdings do not match those in the Lipper Average.
PRICE AND DISTRIBUTION INFORMATION
6 months ended 3/31/97
- ------------------------------------------------------------------------
Distributions (number) 6
- ------------------------------------------------------------------------
Income $0.013779
- ------------------------------------------------------------------------
Total $0.013779
- ------------------------------------------------------------------------
Current return (end of period)
- ------------------------------------------------------------------------
Current 7-day yield1 2.49%
- ------------------------------------------------------------------------
Taxable equivalent2 4.55
- ------------------------------------------------------------------------
Current 30-day yield1 2.53
- ------------------------------------------------------------------------
Taxable equivalent2 4.62
- ------------------------------------------------------------------------
1 The 7-day and 30-day yields are the two most common gauges for
measuring money market mutual fund performance.
2 Assumes maximum 45.22% combined federal and state tax rate. Results
for investors subject to lower tax rates would not be as advantageous.
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.
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.
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares.
COMPARATIVE BENCHMARKS
Lipper California Tax Exempt Money Market Fund Average, used for
performance comparison purposes, is an arithmetic average of the total
return of all California 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. 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.
Portfolio of investments owned
March 31, 1997 (Unaudited)
<TABLE>
<CAPTION>
Key to Abbreviations
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
G.O. Bonds -- General Obligation Bonds
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
RAN -- Revenue Anticipation Notes
TRAN -- Tax Revenue Anticipation Notes
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (89.3%) *
PRINCIPAL AMOUNT RATINGS** VALUE
<S> <C> <C> <C>
California (84.0%)
- ----------------------------------------------------------------------------------------------------
$ 2,000,000 Alameda Cnty. Trans. Auth. Sales Tax Rev. Bonds,
AMBAC 3 3/4s, 7/01/97 Aaa $ 2,002,345
2,200,000 CA Hlth. Fac. Fin. Auth. VRDN (Sutter Hlth.),
Ser. A, 3.7s, 3/01/20 (Morgan Guaranty
Trust Co. LOC) VMIG1 2,200,000
1,350,000 CA Poll. Ctrl Fing. Auth. VRDN (Chevron
USA Inc.), 3.9s 11/15/01 Aa2 1,350,000
2,200,000 CA Poll. Ctrl Fing. Auth. VRDN (Southern
California Edison), Ser. C, 3.55s, 2/28/08 VMIG1 2,200,000
3,000,000 CA Pub. Cap. Impts. Fing. Auth. VRDN
(Pooled Project, Jt. Pwrs. Agcy.),
Ser. C, 3.8s, 6/01/28
(Nat'l Westminster LOC) VMIG1 3,000,000
1,500,000 CA State RAN, Ser. A, 4 1/2s, 6/30/97 MIG1 1,501,906
2,300,000 CA Statewide Cmnty. Dev. Auth. COP VRDN
(Northern CA Retired Officers), 3.55s,
6/01/26 (Dresdner Bank A.G. LOC) VMIG1 2,300,000
1,570,000 Indio, Multi-Fam. VRDN (Western Fed.
Sav. & Loan Assoc.), 3.35s, 6/01/05
(Wells Fargo & Co. LOC) A-1 1,570,000
2,200,000 Irvine, Ranch Wtr. Dist. G.O., VRDN 3.7s,
4/01/33(Bank of America LOC) VMIG1 2,200,000
2,000,000 Los Angeles Cnty., VRDN (Willowbrook Proj.),
3.3s, 11/01/15 (Wells Fargo & Co. LOC) A-1 2,000,000
1,885,000 Oakland, COP VRDN (Cap. Equip.), 3.65s,
12/01/15 (Nat'l Westminister Bank LOC) VMIG1 1,885,000
1,600,000 Orange Cnty, Hsg. Auth. Apt. Dev. VRDN,
3 1/2s, 12/01/08 (Bank of America LOC) VMIG1 1,600,000
800,000 Orange Cnty, Apt. Dev. VRDN, 3 1/2s,
11/01/08 (Bank of Tokyo Mistsubishi LOC) VMIG1 800,000
1,500,000 Riverside Cnty., Hsg. Auth. Multi-Fam., VRDN,
3.3s, 8/01/25 (Federal Home Loan Bank,
Redland Federal S&L LOC) A-1+ 1,500,000
2,000,000 San Bernardino Cnty., COP VRDN, 3.3s,
7/01/15 (Canadian Imperial Bank of
Commerce LOC) VMIG1 2,000,000
1,500,000 San Bernardino Cnty., G.O. TRAN, 4 1/2s,
6/30/97 (Toronto Dominion Bank,Landesbank
Hessen LOC) MIG1 1,500,511
2,000,000 San Diego, Hsg. Auth. Mulit-Fam. Hsg.
VRDN 3.35s, 6/01/05 ( Swiss Bank LOC) A-1+ 2,000,000
1,700,000 San Diego, Hsg. Auth. Multi-Fam. Hsg. VRDN
(Paseo Point Apt.), Ser. A, 3.4s, 8/01/15
(Bank of Tokyo LOC) VMIG1 1,700,000
1,400,000 Santa Ana, Hlth. Fac. VRDN (Multi Modal-Town
& Country) 3 3/4s, 10/01/20 A+ 1,400,000
1,400,000 Stockton Multi-Fam. Hsg. VRDN (Mariners
Pointe Assoc.), Ser. A, 3.4s, 9/01/18
(Bank of America LOC) A-1+ 1,400,000
2,000,000 Upland Multi-Fam. Hsg. Auth. VRDN (Village
Green), 3.3s, 9/01/10 (Bank of Tokyo LOC) VMIG1 2,000,000
2,200,000 Western Riverside, Wastewater Auth. VRDN,
3.7s, 4/01/28 (National Westminster
Bank LOC) VMIG1 2,200,000
--------------
40,309,762
Puerto Rico (5.3%)
- ----------------------------------------------------------------------------------------------------
2,045,000 Puerto Rico Commonwealth, G.O.Bonds,
MBIA 7 1/8s, 7/01/97 Aaa 2,102,075
435,000 Puerto Rico Elec. Pwr. Auth. Pwr. Rev. Bonds,
Ser. K, 9 3/8s, 7/01/97 Aaa 449,818
--------------
2,551,893
--------------
Total Municipal Bonds and Notes
(cost $42,861,655) $ 42,861,655
MUNICIPAL COMMERCIAL PAPER (14.6%) *
PRINCIPAL AMOUNT RATINGS** VALUE
- ----------------------------------------------------------------------------------------------------
$ 1,500,000 California Poll. Ctrl. Fin. Auth. Mcp, 3.45s, 7/16/97
( Union Bank of Switzerland LOC) P-1 $ 1,500,000
2,000,000 California G.O. Mcp, 3.45s, 4/4/97 P-1 2,000,000
2,000,000 Los Angeles Wastewater Auth., Mcp, 3.4s, 4/4/97
(Union Bank of Switzerland LOC) P-1 2,000,000
1,500,000 Sacramento Muni. Util. Dist. Auth.,Mcp, 3.35s,
4/4/97(Bayerische-Landes Bank LOC) P-1 1,500,000
--------------
Total Municipal Commercial Paper
(cost $7,000,000) $ 7,000,000
- ----------------------------------------------------------------------------------------------------
Total Investments (cost $49,861,655) *** $ 49,861,655
- ----------------------------------------------------------------------------------------------------
* Percentages indicated are based on net assets of $48,012,407.
** The Moody's or Standard & Poor's ratings indicated are believed
to be the most recent ratings available at March 31,1997 for the
securities listed. Ratings are generally ascribed to securities at the
time of issuance. While the agencies may from time to time revise such
ratings, they undertake no obligation to do so, and the ratings do not
necessarily represent what the agencies would ascribe to these
securities at March 31, 1997.
Moody's Investor Service, Inc. and Standard & Poor's Corp. are
the leading independent rating agencies for debt securities. Moody's
uses the designation "Moody's Investment Guide," 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 and 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.
MIGI/VMIGI = Best quality; strong protection of cash flows, superior
liquidity and broad access to refinancing
MIG2/VMIG2 = High quality; ample protection of cash flows, liquidity
support and ability to refinance
AAA = Extremely strong capacity to pay interest and repay principal
AA = Strong capacity to pay interest and repay principal and differs
From the higher rated issues only in a small degree
Aa2/P-1 = Superior capacity for repayment
P-2 = Strong capacity for repayment
Standard & Poor's Corp.
SP-1 = Overwhelming safety characteristics
SP-2 = Strong capacity to pay interest and repay principal
A-1+ = Overwhelming degree of credit and 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 shown at
March 31,1997 which are subject to change based on the terms of the
security.
The fund had the following industry group concentration greater
than 10% at March 31, 1997 (as a percentage of net assets):
Housing 33.3%
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 1997 (Unaudited)
<S> <C>
Assets
- ---------------------------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $49,861,655
- ---------------------------------------------------------------------------------------------------
Cash 64,698
- ---------------------------------------------------------------------------------------------------
Interest and other receivables 365,734
- ---------------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 56,768
- ---------------------------------------------------------------------------------------------------
Receivable for securities sold 100,000
- ---------------------------------------------------------------------------------------------------
Total assets 50,448,855
Liabilities
- ---------------------------------------------------------------------------------------------------
Distributions payable to shareholders 78,813
- ---------------------------------------------------------------------------------------------------
Payable for securities purchased 2,138,907
- ---------------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 116,143
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 43,285
- ---------------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 7,859
- ---------------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 3,347
- ---------------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 1,008
- ---------------------------------------------------------------------------------------------------
Other accrued expenses 47,086
- ---------------------------------------------------------------------------------------------------
Total liabilities 2,436,448
- ---------------------------------------------------------------------------------------------------
Net assets 48,012,407
Represented by
- ---------------------------------------------------------------------------------------------------
Paid-in capital (Note 4) $48,012,407
- ---------------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($48,012,407 divided by 48,012,407 shares) $1.00
- ---------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31,1997 (Unaudited)
<S> <C>
Tax exempt interest income $644,781
- --------------------------------------------------------------------------------------------------
Expenses:
- --------------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 86,188
- --------------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 44,598
- --------------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 5,905
- --------------------------------------------------------------------------------------------------
Administrative services (Note 2) 1,945
- --------------------------------------------------------------------------------------------------
Reports to shareholders 6,105
- --------------------------------------------------------------------------------------------------
Registration fees 2,620
- --------------------------------------------------------------------------------------------------
Auditing 10,040
- --------------------------------------------------------------------------------------------------
Legal 8,964
- --------------------------------------------------------------------------------------------------
Postage 1,386
- --------------------------------------------------------------------------------------------------
Other 5,090
- --------------------------------------------------------------------------------------------------
Total expenses 172,841
- --------------------------------------------------------------------------------------------------
Expense reduction (Note 2) (46,746)
- --------------------------------------------------------------------------------------------------
Net expenses 126,095
- --------------------------------------------------------------------------------------------------
Net investment income 518,686
- --------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $518,686
- --------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
1997* 1996
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- ----------------------------------------------------------------------------------------------------------------------
Operations:
- ----------------------------------------------------------------------------------------------------------------------
Net investment income $ 518,686 $ 941,879
- ----------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 518,686 941,879
- ----------------------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- ----------------------------------------------------------------------------------------------------------------------
From net investment income (518,686) (941,879)
Increase from capital share transactions (Note 4) 4,084,990 8,787,774
- ----------------------------------------------------------------------------------------------------------------------
Total increase in net assets 4,084,990 8,787,774
Net assets
- ----------------------------------------------------------------------------------------------------------------------
Beginning of period 43,927,417 35,139,643
- ----------------------------------------------------------------------------------------------------------------------
End of period $48,012,407 $43,927,417
- ----------------------------------------------------------------------------------------------------------------------
* 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
ended
Per-share March 31
operating performance (Unaudited) Year ended September 30
- ------------------------------------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Investment operations
- ------------------------------------------------------------------------------------------------------------------------------
Net investment income $0.0138 $0.0270 $0.0288 $0.0192 $0.0175 $0.0262 (a)
- ------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain on investments -- -- -- -- -- 0.0001
- ------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations $0.0138 $0.0270 $0.0288 $0.0192 $0.0175 $0.0263
- ------------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.0138) $(0.0270) $(0.0288) $(0.0192) $(0.0175) $(0.0263)
- ------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ------------------------------------------------------------------------------------------------------------------------------
Total investment return
at net asset value (%)(b) 1.39 2.74 2.92 1.94 1.77 2.67
- ------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $48,012 $43,927 $35,140 $44,799 $45,364 $58,858
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(c) .45 .93 1.00 .67 .89 .85 (a)
- ------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.35 2.73 2.84 1.84 1.78 2.70 (a)
- ------------------------------------------------------------------------------------------------------------------------------
(a) Reflects an expense limitation in effect during the period. As a result of such limitation, expenses
of the fund for the year ended September 30, 1992 reflect a per share reduction of $.0026.
(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 year ended September 30, 1995
and thereafter includes amounts paid through expense offset arrangements.
Prior Period ratios exclude these amounts. (Note 2)
</TABLE>
Notes to financial statements
March 31, 1997 (Unaudited)
Note 1
Significant accounting policies
Putnam California Tax Exempt Money Market 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 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 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 taxes on income,
capital gains or unrealized appreciation on securities held nor for excise tax
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.
Note 2
Management fee, administrative services and other transactions
Compensation of Putnam Investment Management, Inc. ("Putnam Management"), the
fund's Manager, a wholly-owned subsidiary of Putnam Investment, Inc., for
management and investment advisory services is paid quarterly based on the
average net assets of the fund. Such fee is based on the following annual
rates: 0.45% 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 the next $5
billion, 0.225% of the next $5 billion, 0.205% of the next $5 billion, 0.19%
of the next $5 billion, and 0.18% of any excess thereafter. Prior to January
20, 1997, any amount over $1.5 billion was based on 0.25%.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
Custodial functions for the fund's assets are provided by Putnam Fiduciary
Trust Company (PFTC), a wholly-owned subsidiary of Putnam Investments, Inc.
Investor servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
For the six months ended March 31, 1997, fund expenses were reduced by $46,746
under expense offset arrangements with PFTC. Investor servicing and custodian
fees reported in the Statement of operations exclude these credits. The fund
could have invested a portion of the assets utilized in connection with the
expense offset arrangements in an income producing asset if it had not entered
into such arrangements.
Trustees of the fund receive an annual Trustees fee of $170 and an additional
fee for each Trustee's meeting attended. Trustees who are not interested
persons of Putnam Management and who serve on committees of the Trustees
receive additional fees for attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Plan") which allows the
Trustees to defer the receipt of all or a portion of Trustees Fees payable on
or after July 1, 1995. The deferred fees remain in the fund and are invested
in certain Putnam funds until distribution in accordance with the Plan.
The fund has adopted an unfunded noncontributory defined benefit pension plan
(the "Pension Plan") covering all Trustees of the fund who have served as
Trustee for at least five years. Benefits under the Pension Plan are equal to
50% of the Trustee's average total retainer and meeting fees for the three
years preceding retirement. Pension expense for the fund is included in
Compensation of trustees in the Statement of operations. Accrued pension
liability is included in Payable for compensation of Trustees in the Statement
of assets and liabilities.
The fund has adopted 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 Plan provides for 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.
For the six months ended March 31, 1997, Putnam Mutual Funds Corp., acting as
underwriter receives proceeds from contingent deferred sales charges. These
charges apply to certain shares that have been exchanged from other Putnam
funds. Putnam Mutual Funds received no monies in contingent deferred sales
charges from such redemptions.
Note 3
Purchase and sales of securities
During the six months ended March 31, 1997, purchases and sales (including
maturities) of investment securities (all short-term obligations) aggregated
$189,166,623 and $170,855,000, 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, 1997, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares were at a constant net
value of $1.00 per share were as follows:
Six months ended Year ended
March 31 September 30
1997 1996
- ------------------------------------------------------------
Shares sold 81,343,659 98,400,833
- ------------------------------------------------------------
Shares issued in
connection with
reinvestment of
distributions 476,277 874,218
- ------------------------------------------------------------
81,819,936 99,275,051
Shares
repurchased (77,734,946) (90,487,277)
- ------------------------------------------------------------
Net increase 4,084,990 8,787,774
- ------------------------------------------------------------
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Ronald J. Jackson
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William J. Curtin
Vice President
William F. McGue
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. You
can also learn more at Putnam Investments' website: http://www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution, are not insured by the Federal Deposit
Insurance Corporation (FDIC), the Federal Reserve Board or any other agency,
and involve risk, including the possible loss of principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
- --------------------
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
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32895-064 5/97
