Putnam
California
Tax Exempt
Money Market Fund
SEMIANNUAL REPORT ON PERFORMANCE AND OUTLOOK
3-31-00
[SCALE LOGO OMITTED]
From the Chairman
[GRAPHIC OMITTED: PHOTO OF GEORGE PUTNAM]
[COPYRIGHT] Karsh, Ottawa
Dear Shareholder:
The past six months have represented a relatively positive period for
tax-exempt money market investors. Yields on these securities have
become unusually attractive, especially relative to yields on
longer-term municipal securities. Although the municipal market has not
experienced the inverted yield curve of the Treasury market, in which
yields on short-term securities are outpacing those on longer-term
issues, the municipal market yield curve is flatter than usual. This
configuration means that municipal bond investors are not being paid to
take on the greater interest-rate risk associated with longer-term
instruments.
In this environment, it is not surprising that demand for municipal
money market investments has risen considerably. As of March 31, 2000,
this demand was up nationally approximately 10% from the same time last
year. Meanwhile, supply has been somewhat lower as municipalities flush
with income tax revenues have less need of additional financing. In this
climate, mutual funds like Putnam California Tax Exempt Money Market
Fund continue to attract new assets.
Total return for 6 months ended 3/31/00
NAV
- --------------------------------------------------------------------
1.25%
- --------------------------------------------------------------------
Past performance is no indication of future results. Performance
information for longer periods and explanation of performance
calculation methods begin on page 6.
* ECONOMIC STRENGTH KEEPS YIELDS LOW, PRICES STRONG
Over the past nine months, the Federal Reserve Board raised short-term
interest rates five times, essentially taking back its three
interest-rate decreases of the fall of 1998 and then some. The Fed's
goal is to slow the rampaging national economy, which grew an estimated
7.1% during the fourth quarter of 1999 and is still going strong.
Although the Fed appears poised for another rate increase or two in the
months ahead, it may finally be nearing the end of this tightening
cycle. Inflation remains stable and the national economy does appear to
be slowing a bit.
In the national municipal money market, the Fed's moves are having some
effect as issuers price in expectations for upcoming interest-rate
increases. The California market, however, is not responding in the same
way. Here economic growth is even stronger than it is nationally and
with so many high-technology, Internet-related companies located in
California, the state has a disproportionate number of high-net-worth
individuals. The result is a municipal money market with relatively high
prices and somewhat lower yields along with a dearth of appropriate
longer-term tax-exempt issues.
Although the yields on California municipal money market securities
remain lower than those on national issues, these yields did rise in
step with the Fed's interest-rate increases over the period. In this
environment, your fund's manager, Brian S. Torpey, continued to use
duration management as a key tool for managing the fund.
To capture the highest available money market rates, Brian endeavored to
keep the portfolio duration as long as possible. Unfortunately,
California's robust economy made this strategy a bit challenging and
Brian was compelled to keep the portfolio's average maturity at 45 days
over the semiannual period, slightly shorter than the market average.
Even so, the fund was able to accrue solid income, and Brian anticipates
additional buying opportunities early in the fiscal year's second half,
when yields have the potential to go higher as investors withdraw money
from the municipal money market to pay their tax bills.
As long as the economy continues to grow, the Fed remains poised to
continue tightening interest rates over the next several months. Should
inflation threaten to accelerate, the board might raise rates even more
dramatically. In any case, Brian plans to continue to pursue the
conservative strategies that have served shareholders well thus far.
Tax-exempt money market funds such as this one will remain attractive
for investors seeking a combination of liquidity, superior quality, and
relative stability.
* UPCOMING TRANSITION
This is my last letter to you and other Putnam California Tax Exempt
Money Market Fund shareholders. After more than 30 years as Chairman of
the Trustees and President of the Putnam Funds, the time has come for me
to step aside. In June, John Hill will become Chairman. John is
currently an independent Trustee and has served on the Board for the
past 14 years. In addition, my son, George Putnam, III, will take on the
role of President. I am confident that the leadership of the funds will
be in exceptionally strong hands. I will become Chairman Emeritus,
remain a shareholder, and stay in close touch with the funds.
Respectfully yours,
/S/GEORGE PUTNAM
George Putnam
Chairman of the Trustees
May 17, 2000
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 3/31/00, there is no guarantee the fund will
continue to hold these securities in the future. An investment in the
fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the fund seeks to
preserve your investment at $1.00 per share, it is possible to lose
money by investing in the fund.
PERFORMANCE COMPARISONS (3/31/00)
Current After-tax
return* return
- ------------------------------------------------------------------------
Passbook savings account 1.09% 0.60%
- ------------------------------------------------------------------------
Taxable money market fund 7-day yield 5.53 3.03
- ------------------------------------------------------------------------
3-month certificate of deposit 4.24 2.32
- ------------------------------------------------------------------------
Putnam California Tax Exempt Money Market Fund
(7-day yield) 2.47 2.47
- ------------------------------------------------------------------------
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 on passbook savings and on 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 combined
45.22% maximum federal and state income tax rate.
*Sources: BankBoston (passbook savings), Bank Rate Monitor (3-month CDs),
IBC/Donaghue's Money Fund Report (taxable money market fund compound
7-day yield).
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 Money Market Fund is designed for investors
seeking 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 availability of principal.
<TABLE>
<CAPTION>
TOTAL RETURN FOR PERIODS ENDED 3/31/00
Lipper
Merrill Lynch California
91-Day Tax Exempt Consumer
Fund shares Treasury Money Market price
at NAV Bill Index Fund Average index
<S> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------
6 months 1.25% 2.66% 1.30% 2.03%
- -------------------------------------------------------------------------------------------
1 year 2.40 5.20 2.54 3.69
- -------------------------------------------------------------------------------------------
5 years 14.11 29.63 15.09 13.15
Annual average 2.68 5.33 2.85 2.50
- -------------------------------------------------------------------------------------------
10 years 31.73 66.34 34.76 33.02
Annual average 2.79 5.22 3.03 2.89
- -------------------------------------------------------------------------------------------
Life of fund (since 10/26/87) 49.13 99.95 52.32 48.48
Annual average 3.27 5.74 3.44 3.23
- -------------------------------------------------------------------------------------------
Fund shares
Current return (end of period) at NAV
- -------------------------------------------------------------------------------------------
Current 7-day yield 1 2.47%
- -------------------------------------------------------------------------------------------
Taxable equivalent 2 4.51
- -------------------------------------------------------------------------------------------
Current 30-day yield 1 2.45
- -------------------------------------------------------------------------------------------
Taxable equivalent 2 4.47
- -------------------------------------------------------------------------------------------
1 The 7-day and 30-day yields are the two most common gauges for
measuring money market mutual fund performance.
2 Assumes 45.22% combined state and federal income 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.
Past performance is no assurance of future results and more recent
returns may be more or less than those shown. Fund performance data do
not take into account any adjustment for taxes payable on reinvested
distributions. Investment returns will fluctuate. An investment in the
fund is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. Although the fund seeks to
preserve your investment at $1.00 per share, it is possible to lose
money by investing in the fund. The fund's holdings do not match those
in the Merrill Lynch index or the Lipper average. Yield data more
closely reflect the current earnings of the fund.
</TABLE>
DISTRIBUTION INFORMATION 6 MONTHS ENDED 3/31/00
- ------------------------------------------------------------------------
Distributions (number) 6
- ------------------------------------------------------------------------
Income $0.012422
- ------------------------------------------------------------------------
Total $0.012422
- ------------------------------------------------------------------------
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
The Merrill Lynch 91-Day Treasury Bill Index is an unmanaged index that
seeks to measure the performance of U.S. Treasury bills currently
available in the marketplace.
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, Inc. 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.
A guide to the financial statements
These sections of the report constitute the fund's financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price 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.
<TABLE>
<CAPTION>
The fund's portfolio
March 31, 2000 (Unaudited)
KEY TO ABBREVIATIONS
AMBAC -- AMBAC Indemnity Corporation
COP -- Certificate of Participation
FGIC -- Financial Guaranty Insurance Company
FRB -- Floating Rate Bonds
LOC -- Letter of Credit
MBIA -- Municipal Bond Investors Assurance Corporation
VRDN -- Variable Rate Demand Notes
MUNICIPAL BONDS AND NOTES (97.9%) (a)
PRINCIPAL AMOUNT RATING (RAT) VALUE
<S> <C> <C>
California (97.9%)
- ----------------------------------------------------------------------------------------------------------------------------
$ 1,205,000 CA Poll. Cntrl. Fin. Auth. Rev. Bonds VRDN
(Southdown, Inc.), 3 1/4s, 2/15/13 VMIG1 $ 1,205,000
1,350,000 CA Poll. Cntrl. Fin. Auth. Rev. Bonds
(Chevron USA, Inc.), FRB, 4s, 11/15/01 VMIG1 1,351,154
2,000,000 CA Poll. Cntrl. Fin. Auth. Rev. Bonds
(Sierra Pacific Indl. Project), FRB, 3 1/4s, 2/1/13
(Bank of America LOC) VMIG1 2,000,000
3,000,000 CA Pub. Cap. Impt. Fin. Auth. Rev. Bonds VRDN
(Pooled Project), Ser. C, 3.7s, 6/1/28
(National Westminster Bank LOC) VMIG1 3,000,000
1,150,000 CA State Pub. Wks. Board Lease Rev. Bonds (Dept.
of Corrections State Prison), Ser. A, 7s, 9/1/04 Aaa 1,187,739
500,000 CA State Pub. Wks. Rev. Bonds (CA State U.
Library), Ser. A, 6 1/4s, 9/1/16 Aaa 515,464
250,000 CA State Wtr. Dept. Res. Rev. Bonds, Ser. H,
6.9s, 12/1/25 Aaa 255,264
400,000 CA Statewide Cmnty. Dev. Auth. VRDN
(Barton Memiorial Hosp.), 3.3s, 12/1/09 VMIG1 400,000
450,000 East Bay, CA Muni. Util. Dist. Wtr. Sys. Rev. Bonds,
FGIC, 6s, 6/1/00 Aaa 452,078
750,000 Los Angeles Cnty., COP (Correctional Facs.),
MBIA, 6 1/2s, 9/1/13 Aaa 774,045
Los Angeles Cnty. Cmnty. Redev. Agcy. VRDN
275,000 (Alpha Partnership), 4 1/4s, 12/1/13 A-1+ 275,000
200,000 (Southeast Partnership), 4 1/4s, 12/1/13 A-1+ 200,000
2,000,000 Los Angeles Cnty., Cmnty. Redev. Agcy. Multi-Fam.
VRDN (Promenade Towers), 3.05s, 4/1/09
(Barclays Bank LOC) VMIG1 2,000,000
2,000,000 Los Angeles Cnty., School Dist. COP VRDN
(Belmont Learning Complex), Ser. A,
3.2s, 12/1/17 VMIG1 2,000,000
1,425,000 Northern CA Transmission Rev. Bonds
(Ore Transportation), Ser. A, MBIA, 7s, 5/1/24 Aaa 1,450,702
2,000,000 San Francisco, City & Cnty. Redev. Agy. Multi-Fam.
Rev. Bonds VRDN (HSG. Fillmore Ctr.), Ser. A-1,
3.15s, 12/1/17 (Citibank N.A. LOC) A-1+ 2,000,000
Southern CA Pub. Pwr. Auth. Rev. Bonds
350,000 Ser. R, 9 5/8s, 7/1/15 Aaa 358,847
600,000 7s, 7/1/09, Prerefunded Aaa 617,086
2,400,000 Three Valleys, Muni. Wtr. Dist. COP VRDN,
3 1/4s, 11/1/14 VMIG1 2,400,000
1,000,000 Vallejo City, School Dist. COP (Capital Impt.
Fin. Project), Ser. E, FRB, 3.6s, 7/1/25
(Beyerische Hypo LOC) VMIG1 1,000,000
2,000,000 Westminster, COP (Civic Ctr.), Ser. B., AMBAC,
FRB, 3.3s, 6/1/24 A-1 2,000,000
1,500,000 Yucaipa-Calimesa, Joint School Dist. Notes,
4s, 6/30/00 VMIG1 1,502,162
- ----------------------------------------------------------------------------------------------------------------------------
Total Investments (cost $26,944,541) (b) $ 26,944,541
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Percentages indicated are based on net assets of $27,536,574.
(RAT) The Moody's or Standard & Poor's ratings indicated are believed to
be the most recent ratings available at March 31, 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 March 31, 2000. Securities rated by Putnam are indicated
by "/P" and are not publicly rated.
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 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.
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
P-1 = Superior capacity for repayment
P-2 = Strong capacity for repayment
Standard & Poor's Corp.
SP-1+ = Very strong capacity to pay principal and interest
SP-1 = Strong capacity to pay principal and interest
SP-2 = Satisfactory capacity to pay principal and interest
A-1+ = Extremely strong degree of safety
A-1 = Strong degree of safety
A-2 = Satisfactory capacity for timely repayment
(b) The aggregate identified cost on a tax basis is the same.
The rates shown on FRB and VRDN are the current interest rates
shown at March 31, 2000, which are subject to change based on the terms
of the security.
The fund had the following industry group concentrations greater
than 10% at March 31, 2000 (as a percentage of net assets):
Financial 23.5%
Pollution control 16.6
Water and sewer 14.8
Education 13.8
Housing 11.6
Utilities 10.9
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of assets and liabilities
March 31, 2000 (Unaudited)
<S> <C>
Assets
- ----------------------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $26,944,541
- ----------------------------------------------------------------------------------------------
Cash 591,946
- ----------------------------------------------------------------------------------------------
Interest and other receivables 226,790
- ----------------------------------------------------------------------------------------------
Receivable for shares of the fund sold 62,554
- ----------------------------------------------------------------------------------------------
Total assets 27,825,831
Liabilities
- ----------------------------------------------------------------------------------------------
Distributions payable to shareholders 51,058
- ----------------------------------------------------------------------------------------------
Payable for shares of the fund repurchased 174,193
- ----------------------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 41,859
- ----------------------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 52
- ----------------------------------------------------------------------------------------------
Payable for compensation of Trustees (Note 2) 5,426
- ----------------------------------------------------------------------------------------------
Payable for administrative services (Note 2) 828
- ----------------------------------------------------------------------------------------------
Other accrued expenses 15,841
- ----------------------------------------------------------------------------------------------
Total liabilities 289,257
- ----------------------------------------------------------------------------------------------
Net assets $27,536,574
Represented by
- ----------------------------------------------------------------------------------------------
Paid-in capital (Note 4) $27,536,574
- ----------------------------------------------------------------------------------------------
Net asset value, offering and redemption price per share
($27,536,574 divided by 27,536,574 shares) $1.00
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of operations
Six months ended March 31, 2000 (Unaudited)
<S> <C>
Tax exempt interest income $605,738
- ----------------------------------------------------------------------------------------------
Expenses:
- ----------------------------------------------------------------------------------------------
Compensation of Manager (Note 2) 87,128
- ----------------------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 31,652
- ----------------------------------------------------------------------------------------------
Compensation of Trustees (Note 2) 3,129
- ----------------------------------------------------------------------------------------------
Administrative services (Note 2) 1,684
- ----------------------------------------------------------------------------------------------
Reports to shareholders 3,462
- ----------------------------------------------------------------------------------------------
Registration fees 1,750
- ----------------------------------------------------------------------------------------------
Auditing 11,637
- ----------------------------------------------------------------------------------------------
Legal 3,737
- ----------------------------------------------------------------------------------------------
Postage 5,498
- ----------------------------------------------------------------------------------------------
Other 6,299
- ----------------------------------------------------------------------------------------------
Total expenses 155,976
- ----------------------------------------------------------------------------------------------
Expense reduction (Note 2) (25,940)
- ----------------------------------------------------------------------------------------------
Net expenses 130,036
- ----------------------------------------------------------------------------------------------
Net investment income 475,702
- ----------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations $475,702
- ----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
Statement of changes in net assets
Six months ended Year ended
March 31 September 30
2000* 1999
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Increase in net assets
- -------------------------------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------------------------------
Net investment income $ 475,702 $ 897,215
- -------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 475,702 897,215
- -------------------------------------------------------------------------------------------------------
Distributions to shareholders:
- -------------------------------------------------------------------------------------------------------
From net investment income (475,702) (897,215)
- -------------------------------------------------------------------------------------------------------
Decrease from capital share transactions (Note 4) (1,738,329) (188,656)
- -------------------------------------------------------------------------------------------------------
Total decrease in net assets (1,738,329) (188,656)
Net assets
- -------------------------------------------------------------------------------------------------------
Beginning of period 29,274,903 29,463,559
- -------------------------------------------------------------------------------------------------------
End of period $27,536,574 $29,274,903
- -------------------------------------------------------------------------------------------------------
* Unaudited
</TABLE>
The accompanying notes are an integral part of these financial statements.
<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
- --------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Investment operations
- --------------------------------------------------------------------------------------------------------------------------
Net investment income $0.0124 $0.0220 $0.0281 $0.0283 $0.0270 $0.0288
- --------------------------------------------------------------------------------------------------------------------------
Total from
investment operations $0.0124 $0.0220 $0.0281 $0.0283 $0.0270 $0.0288
- --------------------------------------------------------------------------------------------------------------------------
Total distributions $(0.0124) $(0.0220) $(0.0281) $(0.0283) $(0.0270) $(0.0288)
- --------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00
- --------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- --------------------------------------------------------------------------------------------------------------------------
Total return at
net asset value (%)(a) 1.25* 2.22 2.85 2.87 2.74 2.92
- --------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) 27,537 $29,275 $29,464 $45,606 $43,927 $35,140
- --------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .40* .73 .75 .85 .93 1.00
- --------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) 1.23* 2.26 2.89 2.80 2.73 2.84
- --------------------------------------------------------------------------------------------------------------------------
* 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).
</TABLE>
Notes to financial statements
March 31, 2000 (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 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 The valuation of the funds' 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, 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.
D) Interest income and distributions to shareholders Interest is
recorded on the accrual basis. Income dividends are recorded daily by
the fund and are paid monthly to the shareholders.
E) Amortization of bonds premium Premiums and discounts from purchases
of short-term investments are amortized/accreted using the straight line
method.
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
Investments, 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, 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% 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 six months ended March 31, 2000, fund expenses were reduced by
$25,940 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 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 $300
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 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, 2000, Putnam Mutual Funds Corp.,
acting as underwriter receives proceeds from contingent deferred sales
charges that 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, 2000, cost of purchases and
proceeds from sales (including maturities) of investment securities (all
short-term obligations) aggregated $84,073,371 and $85,950,000,
respectively.
Note 4
Capital shares
At March 31, 2000, 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
2000 1999
- ---------------------------------------------------------------------------
Shares sold 56,533,246 126,819,223
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Shares issued in
connection with
reinvestment of
distributions 441,847 810,925
- ---------------------------------------------------------------------------
56,975,093 127,630,148
Shares
repurchased (58,713,422) (127,818,804)
- ---------------------------------------------------------------------------
Net decrease (1,738,329) (188,656)
- ---------------------------------------------------------------------------
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete information,
including charges and expenses. Please read it carefully before you
invest or send money.
GROWTH FUNDS
Asia Pacific Growth Fund
Capital Appreciation Fund
Capital Opportunities Fund
Europe Growth Fund
Global Equity Fund
Global Growth Fund
Global Natural Resources Fund
Growth Opportunities Fund
Health Sciences Trust
International Growth Fund
International New Opportunities Fund
Investors Fund
New Century Growth Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Research Fund
Tax Smart Equity Fund
Vista Fund
Voyager Fund
Voyager Fund II
GROWTH AND INCOME FUNDS
Balanced Retirement Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
Global Growth and Income Fund
The Putnam Fund for Growth and Income
Growth and Income Fund II
International Growth and Income Fund
New Value Fund
Small Cap Value Fund
Utilities Growth and Income Fund
INCOME FUNDS
American Government Income Fund
Diversified Income Trust
Global Governmental Income Trust
High Yield Advantage Fund [DBL. DAGGER]
High Yield Trust [DBL. DAGGER]
High Yield Trust II
Income Fund
Intermediate U.S. Government Income Fund
Money Market Fund**
Preferred Income Fund
Strategic Income Fund*
U.S. Government Income Trust
TAX-FREE INCOME FUNDS
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund**
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds [SECTION MARK]
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New
Jersey, New York, Ohio and Pennsylvania
State tax-free money market funds [SECTION MARK]**
California, New York
ASSET ALLOCATION FUNDS
Putnam Asset Allocation Funds--three investment portfolios that spread
your money across a variety of stocks, bonds, and money market
investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Formerly Putnam Diversified Income Trust II
[DBL. DAGGER] Closed to new investors. Some exceptions may apply. Contact
Putnam for details.
[SECTION MARK] Not available in all states.
** An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the funds seek to
preserve your investment at $1.00 per share, it is
possible to lose money by investing in the fund.
Check your account balances and current performance at www.putnaminv.com.
Fund information
WEB SITE
www.putnaminv.com
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
John A. Hill, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
Lawrence J. Lasser
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
John D. Hughes
Senior Vice President and Treasurer
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Ian C. Ferguson
Vice President
Brett C. Browchuk
Vice President
Stephen Oristaglio
Vice President
Jerome J. Jacobs
Vice President
Brian S. Torpey
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 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' Web site: www.putnaminv.com.
Shares of mutual funds are not deposits or obligations of, or guaranteed
or endorsed by, any financial institution; are not insured by the
Federal Deposit Insurance Corporation (FDIC), the Federal Reserve Board,
or any other agency; and involve risk, including the possible loss of
the principal amount invested.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
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BULK RATE
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
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For account balances, economic forecasts, and the latest on Putnam funds, visit
www.putnaminv.com
SA055-60368 064 5/00
