As filed with the Securities and Exchange Commission on
January 30, 1997
- -----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM N-1A
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 19 / X /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
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Amendment No. 20 / X /
(Check appropriate box or boxes) ----
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PUTNAM CALIFORNIA TAX EXEMPT Registration No. 2-81011
INCOME TRUST 811-3630
(Exact name of registrant as specified in charter)
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 12 / X /
and ----
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REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY / X /
ACT OF 1940 ----
----
Amendment No. 12 / X /
(Check appropriate box or boxes) ----
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PUTNAM CALIFORNIA TAX EXEMPT Registration No. 33-17211
MONEY MARKET FUND 811-5333
(Exact name of registrant as specified in charter)
One Post Office Square, Boston, Massachusetts 02109
(Address of principal executive offices)
Registrants' Telephone Number, including Area Code
(617) 292-1000
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It is proposed that this filing will become effective
(check appropriate box)
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/ / immediately upon filing pursuant to paragraph (b)
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/ X / on January 30 , 1996 pursuant to paragraph (b)
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/ / 60 days after filing pursuant to paragraph (a)(1)
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/ / on (date) pursuant to paragraph (a)(1)
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/ / 75 days after filing pursuant to paragraph (a)(2)
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/ / on (date) pursuant to paragraph (a)(2) of rule 485.
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If appropriate, check the following box:
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/ / this post-effective amendment designates a new
---- effective date for a previously filed post-
effective amendment.
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JOHN R. VERANI, Vice President
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
(Name and address of agent for service)
---------------
Copy to:
JOHN W. GERSTMAYR, Esquire
ROPES & GRAY
One International Place
Boston, Massachusetts 02110
Each Registrant has registered an indefinite number or
amount of securities under the Securities Act of 1933 pursuant to
Rule 24f-2. Rule 24f-2 notices for Putnam California Tax Exempt
Income Trust and Putnam California Tax Exempt Money Market
Fund for the fiscal year ended September 30, 1996 were
filed on November 26, 1996 .
<TABLE>
<CAPTION>
PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------
- ---
- ---------------------
- -----------------------------------------------------------------
- ---------------
- ---------
Proposed
Proposed
maximum
maximum
Amount offering
aggregate Amount of
Title of securities being price per
offering registration
being registered registered unit*
price** fee
- -----------------------------------------------------------------
- ---------------
- ---------
<C> <C> <C>
<C>
<C>
Shares of Beneficial
Interest 23,801,992 shs. $8.90
$330,000 $100.00
- -----------------------------------------------------------------
- ---------------
- ---------
- -----------------------------------------------------------------
- ---------------
- ---------
* Based on offering price per share on January 15,
1997 .
**
Calculated
pursuant to
Rule 24e-2
under the
Investment
Company Act
of 1940.
The
total amount
of
securities
redeemed or
repurchased
during the
Registrant's
previous
fiscal year
was
75,829,33
7
shares,
52,064,42
3 of
which have
been used
for
reductions
pursuant to
Rule 24e-
2(a) or Rule
24f-2(c)
under said
Act in the
current
fiscal year,
and
23,764,91
4 of
which are
being used
for such
reduction
in
this
Amendment.
</TABLE>
<TABLE>
<CAPTION>
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
CALCULATION OF REGISTRATION FEE
- -----------------------------------------------------------------
- ---
- ---------------------
- -----------------------------------------------------------------
- ---------------
- ---------
Proposed
Proposed
maximum
maximum
Amount offering
aggregate Amount of
Title of securities being price per
offering registration
being registered registered unit
price* fee
- -----------------------------------------------------------------
- ---------------
- ---------
<C> <C> <C>
<C>
<C>
Shares of Beneficial
Interest 4,411,365 shs. $1.00
$330,000 $100.00
- -----------------------------------------------------------------
- ---------------
- ---------
- -----------------------------------------------------------------
- ---------------
- ---------
* Calculated pursuant to Rule 24e-2 under the
Investment Company Act
of 1940.
The total amount of securities redeemed or repurchased
during the
Registrant's
previous fiscal year was 90,487,277 shares,
86,405,912 of
which have been used
for reductions pursuant to Rule 24e-2(a) or Rule 24f-2(c)
under said Act
in the
current fiscal year, and 4,081,365 of which are
being used for
such reduction
in this Amendment.
</TABLE>
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
CROSS REFERENCE SHEET
(as required by Rule 481(a))
Part A
N-1A Item No. Location
1. Cover Page Cover page
2. Synopsis Expenses summary
3. Condensed Financial Information Financial highlights;
How performance is
shown
4. General Description of Registrant Objectives; How the
funds pursue their
objectives;
Organization and
history
5. Management of the Fund Expenses summary;
How the funds are
managed; About Putnam
Investments, Inc.
5A. Management's Discussion of Fund
Performance (Contained in the
annual reports of the
Registrants)
6. Capital Stock and Other Securities Cover page;
Organization and
history; How the
funds make
distributions to
shareholders; tax
information
7. Purchase of Securities Being Offered How to buy shares;
Distribution plans;
How to sell shares;
How to exchange
shares; How a
fund values its
shares
8. Redemption or Repurchase How to buy shares;
How to sell shares;
How to exchange
shares; Organization
and history
9. Pending Legal Proceedings Not applicable
Part B
N-1A Item No. Location
10. Cover Page Cover page
11. Table of Contents Cover page
12. General Information and History Organization and
history (Part A)
13. Investment Objectives
and Policies How
the funds pursue
their objectives
(Part A); Investment
restrictions;
Miscellaneous
investment practices
14. Management of the
Registrant
Management
(Trustees;
Trustee fees;
Officers); Additional
officers
15. Control Persons and Principal Management (Trustees;
Holders of Securities Officers); Charges
and expenses (Share
ownership)
16. Investment Advisory and Other Organization
and
Services History (Part A);
Management
(Trustees;
Officers; The
management contract;
Principal
underwriter; Investor
servicing agent and
custodian); Charges
and expenses;
Distribution plans;
Independent
accountants and
financial statements
17. Brokerage Allocation
Management (Portfolio
transactions);
Charges and expenses
18. Capital Stock and Other Securities Organization and
history (Part A); How
a fund makes
distributions to
shareholders; tax
information (Part A);
Suspension of
redemptions
19. Purchase, Redemption, and Pricing How to buy shares
of Securities Being Offered (Part A); How to sell
shares (Part A); How
to exchange shares
(Part A); How to buy
shares; Determination
of net asset value;
Suspension of
redemptions
20. Tax Status How a fund
makes
distributions to
shareholders; tax
information (Part A);
Taxes
21.
Underwriters
Management
(Principal
underwriter); Charges
and expenses
22. Calculation of Performance Data How performance is
shown (Part A);
Investment
performance; Standard
performance measures
23. Financial Statements Independent
accountants and
financial statements
Part C
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
JANUARY 30, 1997
Putnam California Tax Exempt Income Fund
Class A, B and M shares
Putnam California Tax Exempt Money Market Fund
INVESTMENT STRATEGY: TAX-FREE
This prospectus explains concisely what you should know before
investing in Putnam California Tax Exempt Income Fund (the
"Income Fund") or Putnam California Tax Exempt Money Market Fund
(the "Money Market Fund") (collectively, the "funds").
Please read it carefully and keep it for future reference. You
can find more detailed information in the January 30, 1997
statement of additional information (the "SAI"), as amended from
time to time. For a free copy of the SAI or other information,
call Putnam Investor Services at 1-800-225-1581. The SAI has
been filed with the Securities and Exchange Commission and is
incorporated into this prospectus by reference.
An investment in the Money Market Fund is neither insured nor
guaranteed by the U.S. government. There can be no assurance
that the Money Market Fund will be able to maintain a stable net
asset value of $1.00 per share.
The Money Market Fund may invest a significant percentage of
its assets in the securities of a single issuer, and an
investment in the fund may therefore be riskier than an
investment in other types of money market funds.
The funds invest primarily in portfolios of California tax-
exempt securities, which may include securities of issuers other
than California and its political subdivisions.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
SHARES OF THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
GUARANTEED OR ENDORSED BY, ANY FINANCIAL INSTITUTION, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER AGENCY, AND INVOLVE RISK, INCLUDING
THE POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
BOSTON * LONDON * TOKYO
ABOUT THE FUNDS
Expenses summary
..............................................................
...
This section describes the sales charges, management fees, and
annual operating expenses that apply to various classes
of a fund's shares. Use it to help you estimate the
impact of transaction costs on your investment over time.
Financial highlights
..............................................................
...
Study this table to see, among other things, how a fund performed
each year for the past 10 years or since it began investment
operations if it has been in operation for less than 10 years.
Objectives
..............................................................
...
Read this section to make sure a fund's objectives are consistent
with your own.
How the funds pursue their objectives
..............................................................
...
This section explains in detail how a fund seeks its investment
objectives.
Risk factors. All investments entail some risk. Read
this section to make sure you understand the risks that
are associated with an investment in a fund.
How performance is shown
..............................................................
...
This section describes and defines the measures used to assess
fund performance. All data are based on past
investment results and do not predict future performance.
How the funds are managed
..............................................................
...
Consult this section for information about a fund's management,
allocation of its expenses, and how purchases and sales of
securities are made .
Organization and history
..............................................................
...
In this section, you will learn when a fund was introduced, how
it is organized, how it may offer shares, and who its Trustees
are.
ABOUT YOUR INVESTMENT
Alternative sales arrangements (Income Fund only)
..............................................................
...
Read this section for descriptions of the classes of shares this
prospectus offers and for points you should consider when making
your choice.
How to buy shares
..............................................................
...
This section describes the ways you may purchase shares and tells
you the minimum amounts required to open various types of
accounts. It explains how sales charges are determined and how
you may become eligible for reduced sales charges on each class
of shares.
Distribution plans
..............................................................
...
This section tells you what distribution fees are charged against
each class of shares.
How to sell shares
..............................................................
...
In this section you can learn how to sell fund shares
, either directly to a fund or through an
investment dealer.
How to exchange shares
..............................................................
...
Find out in this section how you may exchange fund shares
for shares of other Putnam funds. The section also
explains how exchanges can be made without sales charges and the
conditions under which sales charges may be required.
How a fund
value
s its
share
s
..............................................................
...
This section explains how a fund determines the value of its
shares.
How each fund makes distributions to shareholders; tax
information
..............................................................
...
This section describes the various options you have in choosing
how to receive fund dividends . It also discusses
the tax status of the payments and counsels you to
seek specific advice about your own situation.
ABOUT PUTNAM INVESTMENTS, INC.
..............................................................
...
Read this section to learn more about the companies that provide
marketing, investment management, and shareholder account
services to Putnam funds and their shareholders.
APPENDIX
Securities ratings
About the funds
EXPENSES SUMMARY
Expenses are one of several factors to consider when investing.
The following tables summarize your maximum transaction costs
from investing in a fund and expenses based on the most
recent fiscal year. The examples show the cumulative expenses
attributable to a hypothetical $1,000 investment over specified
periods.
Income Fund
Class A Class B Class M
shares shares shares
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) 4.75% NONE* 3.25%*
Deferred sales charge 5.0% in the first
(as a percentage year, declining
of the lower of to 1.0% in the
original purchase sixth year, and
price or redemption eliminated
proceeds) NONE** thereafter NONE
Money Market Fund
Shareholder transaction
expenses
Maximum sales charge
imposed on purchases
(as a percentage of
offering price) NONE
Deferred sales charge
(as a percentage of
the lower of original
purchase price or
redemption proceeds) NONE
Annual fund operating expenses
(as a percentage of average net assets)
Total fund
Management 12b-1 Other operating
fees fees expenses expenses
---------- ----- -------- -----------
Income Fund
Class A 0.45% 0.20% 0.09% 0.74%
Class B 0.45% 0.85% 0.09% 1.39%
Class M 0.45% 0.50% 0.09% 1.04%
Money Market Fund 0.45% NONE 0.50% 0.95%
The table is provided to help you understand the expenses of
investing and your share of fund operating
expenses . The expenses shown in the table do not reflect
the application of credits that reduce fund expenses. "Other
expenses" shown in the table reflect expenses related to
insurance expected to be incurred by the Money Market Fund. See
"Insurance." Actual "Other expenses" and total fund operating
expenses for the Money Market Fund for the past fiscal year were
0.48% and 0.93%, respectively.
Examples
Your investment of $1,000 would incur the following expenses,
assuming 5% annual return and, except as indicated, redemption at
the end of each period:
1 3 5 10
year years years years
Income Fund
Class A $55 $70 $87 $135
Class B $64 $74 $96 $149***
Class B (no redemption) $14 $44 $76 $149***
Class M $43 $65 $88 $155
Money Market Fund $10 $30 $53 $117
The examples do not represent past or future expense levels.
Actual expenses may be greater or less than those shown. Federal
regulations require the examples to assume a 5% annual return,
but actual annual return varies.
* The higher 12b-1 fees borne by class B and class M shares
of the Income Fund may cause long-term shareholders to pay
more than the economic equivalent of the maximum permitted
front-end sales charge on class A shares.
** A deferred sales charge of up to 1.00% is assessed on
certain redemptions of class A shares that were purchased
without an initial sales charge as part of an investment
of $1 million or more. See "How to buy shares -- The
Income Fund -- Class A shares."
*** Reflects conversion of class B shares to class A shares
(which pay lower ongoing expenses) approximately eight
years after purchase. See "Alternative sales arrangements
-- The Income Fund."
FINANCIAL HIGHLIGHTS
The following tables present per share financial information for
class A, B and M shares of the Income Fund and shares of the
Money Market Fund. This information has been audited and
reported on by the independent accountants. The "Report
of independent accountants" and financial statements included in
each fund's annual report to shareholders for the 1996
fiscal year are incorporated by reference into this prospectus.
Each fund's annual report, which contains additional unaudited
performance information, is available without charge upon
request.
<TABLE> <CAPTION>
Putnam California Tax Exempt Income Fund
Financial Highlights * (For a share outstanding
throughout the
period)
For the period
For the period
February 14, 1995
January 4, 1993
(commencement
(commencement of
Year ended of operations) to
Year ended operations)to Year ended
September 30 September 30
September 30 September 30 September 30
1996 1995 1996
1995 1994 1993 1996 1995
Class M
Class B Class A
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Net asset value, beginning
of period $8.36
$8.13 $8.37 $8.08 $8.91 $8.37 $8.37 $8.09
Investment operations:
Net investment income .45 .29 .42
.42 .45 .32 .47 .48
Net realized and unrealized
gain (loss) on investments .08 .24 .07
.32 (.81) .55 .09 .31
Total from investment operations.53 .53.49
.74 (.36) .87 .56 .79
Distributions to shareholders:
From net investment income(.44)
(.30)** (.41) (.42)** (.45) (.33) (.47)
(.48)**
From net realized gain or loss
on investments -- -- --
-- (.02) -- -- --
In excess of net realized gain
or loss on investments -- -- --
(.03) -- -- -- (.03)
Total distributions (.44)
(.30) (.41) (.45) (.47) (.33) (.47)
(.51)
Net asset value, end of period$8.45 $8.36$8.45
$8.37 $8.08 $8.91 $8.46 $8.37
Total investment return at
net asset value (%) (a) 6.48 6.56(b) 5.99
9.47 (4.15) 10.51(b) 6.81 10.07
Net assets, end of period
(in thousands) $9,149
$4,108 $510,394 $416,367$349,609
$209,657 $3,149,797 $3,16
8,277
Ratio of expenses to
average net assets (%)(c) 1.04 .69(b) 1.39
1.39 1.32 1.00(b) .74 .74
Ratio of net investment
income to average net assets (%)5.24 3.52(b) 4.94
5.17 5.16 3.68(b) 5.60 5.86
Portfolio Turnover (%) 29.47
47.73 29.47 47.73 21.06 22.95 29.47 47.73
</TABLE>
<TABLE> <CAPTION>
Putnam California Tax Exempt Income Fund (continued)
Financial highlights* (For a share outstanding throughout the
period)
Year ended September 30
1994 1993 1992
1991 1990 1989 19881987
<S> <C> <C> <C>
<C> <C> <C> <C>
Net asset value,
beginning of period $8.92 $8.39 $8.11
$7.70 $7.83 $7.67 $7.14$7.80
Investment operations:
Net investment income .50 .53 .54
.54 .54 .56 .57 .57
Net realized and unrealized
gain (loss) on investments(.81) .57 .27
.41 (.10) .16 .52(.66)
Total from investment
operations (.31) 1.10 .81
.95 .44 .72 1.09(.09)
Distributions to
shareholders:
From net investment income (.50) (.53) (.53)
(.54) (.54) (.56) (.56)(.57)
From net realized gain or
loss on investments -- -- --
-- (.03) -- -- --
In excess of net realized
gain or loss on investments (.02) (.04)
-- -- -- -- -- --
Total distributions (.52) (.57) (.53)
(.54) (.57) (.56) (.56) (.57)
Net asset value,
end of period $8.09 $8.92 $8.39
$8.11 $7.70 $7.83 $7.67$7.14
Total investment return at
net asset value (%) (a) (3.53) 13.63 10.34
12.71 5.75 9.63 15.69(1.52)
Net assets, end of period
(in thousands) $3,260,769 $3,600,182$2,854,165
$2,295,154 $1,807,931 $1,541,563 $1,228,401 $1,088,122
Ratio of expenses to
average net assets (%)(c) .69 .60 .69
.56 .52 .52 .51 .52
Ratio of net investment
income to average
net assets (%) 5.86 6.16 6.53
6.79 6.90 7.09 7.517.22
Portfolio turnover (%) 21.06 22.95 31.25
35.76 33.42 60.77 95.05 93.46
</TABLE>
[FN]
* Table has been restated to reflect a 2-for-1 share split
declared by the
fund to shareholders of record on October 27, 1989, effective
October 28, 1989.
** Distributions in excess of net investment income amounted to
less than $0.01
per share for each class.
(a) Total investment return assumes dividend reinvestment and
does not reflect
the effect of sales charges.
(b) Not annualized.
(c) The ratio of expenses to average net assets for the
periods ended
September 30, 1995 and thereafter include amounts paid
through brokerage
service and expense offset arrangements. Prior period ratios
exclude these
amounts.
<TABLE> <CAPTION>
Putnam California Tax Exempt Money Market Fund
Financial highlights (For a share outstanding
throughout the
period)
For the period
October 26,1987
(commencement
of operations) to
Year ended
Year ended September 30
September 30
1996 1995 1994 1993
1992 1991 1990 1989 1988
<S> <C> <C> <C> <C>
<C> <C> <C> <C> <C>
Net investment Income $0.0270 $0.0288 $0.0192 $0.0175
$0.0262(a) $0.0407(a) $0.0513(a) $0.0566(a)$0.0416(a)
Net realized and unrealized
gain on investments -- -- -- --
.0001 -- -- .0001 .0001
Total from investment
operations $0.0270 $0.0288 $0.0192 $0.0175
$0.0263 $0.0407 $0.0513 $0.0567 $0.0417
Total distributions (0.0270) ($0.0288) ($0.0192) ($0.0175)
($0.0263) ($0.0407) ($0.0513) ($0.0567) ($0.0417)
Total investment return at
net asset value (%)(b) 2.74 2.92 1.94 1.77
2.67 4.15 5.26 5.82 4.25(c)
Net assets, end of
period (in thousands) $43,927 $35,140$44,799 $45,364
$58,858 $69,184 $87,095 $73,136$ 43,436
Ratio of expenses to average
net assets (%) (d) .93 1.00 .67 .89
.85(a) .80(a) .69(a) .69(a) .58(a)(c)
Ratio of net investment income
to average net assets (%) 2.73 2.84 1.84
1.78 2.70(a) 4.03(a) 5.12(a) 5.65(a)
4.21(a)(c)
<FN>
(a)Reflects an expense limitation and, during the period ended
September 30,
1988, a waiver of a portion of distribution fees in effect during
the period. As
a result of such expense limitation and waiver, expenses of the
fund for the years ended September 30, 1992, 1991, 1990, 1989 and
for the period
ended September 30, 1988, reflect per share reductions of
$0.0026, $0.0033,
$0.0033, $0.0043 and $0.0051, respectively.
(b)Total investment return assumes dividend reinvestment and does
not reflect
the effect of sales charges.
(c)Not annualized.
(d) The ratio of expenses to average net assets for the
years ended
September 30, 1995 and thereafter include amounts paid
through expense
offset arrangements. Prior period ratios exclude these amounts.
</TABLE>
OBJECTIVES
Putnam California Tax Exempt Income Fund and Putnam California
Tax Exempt Money Market Fund seek as high a level of current
income exempt from federal income tax and California personal
income tax as Putnam Investment Management, Inc., the funds'
investment manager ("Putnam Management"), believes is consistent
with preservation of capital and, in the case of the Money Market
Fund, maintenance of liquidity and stability of principal. Under
current law, to the extent distributions are derived from
interest on California tax-exempt securities (which are described
below) and are designated as such, they are exempt from federal
income tax and California state personal income tax.
Neither fund is intended to be a complete investment program, and
there is no assurance that either fund will achieve its
objective.
HOW THE FUNDS PURSUE THEIR OBJECTIVES
Basic investment strategy
Putnam California Tax Exempt Income Fund and Putnam California
Tax Exempt Money Market Fund seek their objectives by investing
primarily in a portfolio of California tax-exempt securities (as
defined below). The funds have separate investment policies
involving different levels of yield and risk.
The Income Fund
Putnam California Tax Exempt Income Fund seeks its objective by
investing primarily in longer-term California tax-exempt
securities. It is a fundamental policy of the Income Fund that
at least 90% of the Income Fund's income distributions will be
exempt from both federal income tax and California personal
income tax, except during times of adverse market conditions when
more than 10% of the Income Fund's income distributions could be
subject to federal income tax and/or California personal income
tax. For temporary defensive purposes and for purposes of
maintaining liquidity, the Income Fund may also invest in taxable
obligations, provided that not more than 10% of the Income Fund's
income distributions are subject to federal income tax and/or
California personal income tax.
The Income Fund may also invest in taxable obligations to the
extent permitted by its investment policies, or hold its assets
in money market instruments or in cash. Putnam Management
expects that the fund will generally invest in California tax-
exempt securities of longer maturities (10 years or more), but
the fund may invest in California tax-exempt securities having a
broad range of maturities.
The Income Fund's investments in California tax-exempt securities
and taxable obligations will be limited to securities rated at
the time of purchase at least Ba or BB by a nationally
recognized securities rating agency such as Standard & Poor's
("S&P") and Moody's Investors Service, Inc.
("Moody's") , or unrated securities that Putnam Management
determines are of comparable quality.
The Income Fund will not purchase any California tax-
exempt security rated below BBB or Baa by each rating agency
rating such security, or, any unrated California tax-exempt
security, determined by Putnam Management to be of comparable
quality if, as a result, more than 25% of its total assets
would be of that quality. The rating services' descriptions of
the five highest grades of debt securities are included
in the appendix to this prospectus. Securities rated Ba
or BB (and comparable unrated securities) are considered
to have speculative elements, with large uncertainties or major
exposures to adverse conditions. To the extent a security is
assigned a different rating by one or more ratings agencies,
Putnam Management will use the highest rating assigned by any
agency.
The Money Market Fund
Putnam California Tax Exempt Money Market Fund follows the
fundamental policy that at least 90% of the fund's income
distributions normally will be exempt from both federal income
tax and California personal income tax. Subject to this
limitation, the Money Market Fund may also invest in high quality
taxable money market instruments of the type described under
"Alternative investment strategies" below.
The Money Market Fund will invest only in the following short-
term, high quality California tax-exempt securities: (i)
municipal notes; (ii) municipal bonds; (iii) municipal
securities backed by the U.S. government; (iv) short-term
discount notes (tax-exempt commercial paper); (v) participation
interests in any of the foregoing; and (vi) unrated securities or
new types of tax-exempt instruments which become available in the
future if Putnam Management determines they are of comparable
quality. In connection with the purchase of California tax-
exempt securities, the Money Market Fund may acquire stand-by
commitments, which give the Money Market Fund the right to resell
the security to the dealer at a specified price. Stand-by
commitments may provide additional liquidity for the Money Market
Fund but are subject to the risk that the dealer may fail to meet
its obligations. The Money Market Fund does not generally expect
to pay additional consideration for stand-by commitments nor to
assign any value to them. The Money Market Fund's investments
are concentrated in California tax-exempt securities, and an
investment in the fund may therefore be riskier than an
investment in money market funds that do not concentrate their
investments in tax-exempt securities of a single state.
The Money Market Fund will invest only in high-quality California
tax-exempt securities or other money market instruments that
Putnam Management believes present minimal credit risk. High-
quality securities are securities rated in one of the two highest
categories by at least two nationally recognized rating services
(or, if only one rating service has rated the security, by that
service) or if the security is unrated, judged to be of
equivalent quality by Putnam Management. The Money Market Fund
will maintain a dollar-weighted average maturity of 90 days or
less and will not invest in securities with remaining maturities
of more than 397 days. The Money Market Fund may invest in
variable or floating-rate California tax-exempt securities which
bear interest at rates subject to periodic adjustment or which
provide for periodic recovery of principal on demand. Under
certain conditions, these securities may be deemed to have
remaining maturities equal to the time remaining until the next
interest adjustment date or the date on which principal can be
recovered on demand.
Considerations of liquidity and preservation of capital mean that
the Money Market Fund may not necessarily invest in California
tax-exempt securities paying the highest available yield at a
particular time. Consistent with its investment objective, the
Money Market Fund will attempt to maximize yields by portfolio
trading and by buying and selling portfolio investments in
anticipation of or in response to changing economic and money
market conditions and trends. The Money Market Fund will also
invest to take advantage of what Putnam Management believes to be
temporary disparities in yields of different segments of the
market for California tax-exempt securities or among particular
instruments within the same segment of the market. These
policies, as well as the relatively short maturity of obligations
purchased by the fund, may result in frequent changes in the
fund's portfolio. Such portfolio turnover may give rise to
taxable gains.
The value of the securities in the Money Market Fund's
portfolio can be expected to vary inversely with changes
in prevailing interest rates. Although the Money Market Fund's
investment policies are designed to minimize these changes and to
maintain a net asset value of $1.00 per share, there is no
assurance that these policies will be successful. Withdrawals by
shareholders could require the sale of portfolio investments at a
time when such a sale might not otherwise be desirable.
Alternative minimum tax
Interest income distributed by a fund from certain types
of California tax-exempt securities may be subject to federal
alternative minimum tax for individuals and corporations.
Neither of the funds treats interest which may be subject to
federal alternative minimum tax for individuals as income that is
exempt from federal income tax for purposes of determining
compliance with its 90% test. To the extent that a fund earns
such interest income, individual and corporate shareholders,
depending on their own tax status, may be subject to federal (but
not California) alternative minimum tax on that part of the
fund's distributions attributable to such income. All tax-
exempt interest dividends will, however, be included in
determining the federal alternative minimum taxable income of
corporations.
Alternative investment strategies
At times Putnam Management may judge that conditions in the
markets for California tax-exempt securities make pursuing a
fund's basic investment strategy inconsistent with the best
interests of its shareholders. At such times Putnam Management
may temporarily use alternative strategies primarily designed to
reduce fluctuations in the value of fund assets.
In implementing these defensive strategies, the Income Fund may
invest without limit in taxable obligations, including
obligations of the U.S. government, its agencies or
instrumentalities; obligations issued by governmental issuers in
other states, the interest on which would be exempt from federal
(but not California) income tax; other debt securities rated
within the four highest grades by either Moody's or S&P;
commercial paper rated in the highest grade by either rating
service (Prime-1 or A-1+, respectively); certificates of deposit
and bankers' acceptances; repurchase agreements; or any other
securities that Putnam Management considers consistent with such
defensive strategies.
Similarly, when implementing these defensive strategies, the
Money Market Fund may invest in high quality taxable money market
instruments, including: bank certificates of deposit, bankers'
acceptances, prime commercial paper, high-grade short-term
corporate obligations, short-term U.S. government securities or
repurchase agreements, or any other securities Putnam Management
considers consistent with such defensive strategies.
It is impossible to predict when, or for how long, these
alternative strategies will be used . Shareholders would
be subject to federal income tax and/or California state income
tax on distributions of the interest income from these
instruments.
California tax-exempt securities
California tax-exempt securities include obligations of the State
of California, its political subdivisions, and their agencies,
instrumentalities or other governmental units, the interest on
which, in the opinion of bond counsel, is exempt from federal
income tax and California personal income tax.
These securities are issued to obtain funds for various public
purposes, such as the construction of public facilities, the
payment of general operating expenses or the refunding of
outstanding debts.
They may also be issued to finance various private activities,
including the lending of funds to public or private institutions
for the construction of housing, educational or medical
facilities, or to fund short-term cash requirements. They may
also include certain types of industrial development bonds,
private activity bonds or notes issued by public authorities to
finance privately owned or operated facilities.
Short-term California tax-exempt securities may be issued as
interim financing in anticipation of tax collections, revenue
receipts or bond sales to finance various public purposes.
California tax-exempt securities may also include obligations
issued by certain other governmental entities, such as U.S.
territories or possessions, if these debt obligations generate
interest income that is exempt from federal income tax and
California personal income tax.
The two principal classifications of California tax-exempt
securities are general obligation and special obligation (or
special revenue obligation) securities.
General obligation securities involve a pledge of the credit of
an issuer possessing taxing power and are payable from the
issuer's general unrestricted revenues. Their payment may depend
on an appropriation by the issuer's legislative body. The
characteristics and methods of enforcement of general obligation
securities vary according to the law applicable to the particular
issuer.
Special obligation (or special revenue obligation) securities are
payable only from the revenues derived from a particular facility
or class of facilities, or a specific revenue source, and
generally are not payable from the unrestricted revenues of the
issuer. Industrial development bonds and private activity bonds
are in most cases special obligation securities, whose credit
quality is tied to the private user of the facilities.
The Income Fund may also invest in securities representing
interests in California tax-exempt securities, known as "inverse
floating obligations" or "residual interest bonds." These
obligations pay interest rates that vary inversely with changes
in the interest rates of specified short-term tax-exempt
securities or an index of short-term tax-exempt securities. The
interest rates on inverse floating obligations or residual
interest bonds will typically decline as short-term market
interest rates increase and increase as short-term market rates
decline.
These securities have the effect of providing a degree of
investment leverage. They will generally respond to changes in
market interest rates more rapidly than fixed-rate long-term
securities (typically twice as fast). As a result, the market
values of inverse floating obligations and residual interest
bonds will generally be more volatile than the market values of
fixed-rate tax-exempt securities.
Risk factors
The Income Fund
The values of California tax-exempt securities in which the
Income Fund may invest will fluctuate in response to changes in
interest rates. A decrease in interest rates will generally
result in an increase in the value of fund assets.
Conversely, during periods of rising interest rates, the value of
fund assets will generally decline. The magnitude of
these fluctuations generally is greater for securities with
longer maturities. However, the yields on such securities are
generally higher. In addition, the values of fixed-income
securities are affected by changes in general economic conditions
and business conditions affecting the specific industries of
their issuers.
Changes by recognized rating services in their ratings of a
fixed-
income security and changes in the ability of an issuer to make
payments of interest and principal may also affect the value of
these investments. Changes in the value of portfolio securities
generally will not affect income derived from these securities,
but will affect the fund's net asset value.
The Income Fund may invest in both higher-rated and lower-rated
California tax-exempt securities. Lower-rated securities are
securities rated below Baa or BBB by ratings agencies, and,
together with unrated securities of comparable quality, are
commonly known as "junk bonds." The values of these
securities generally fluctuate more than those of higher-rated
securities. In addition, the lower rating reflects a greater
possibility that the financial condition of the issuer or
adverse changes in general economic conditions, or both, may
impair the ability of the issuer to make payments of income and
principal.
The table below shows the percentages of the Income Fund's net
assets invested during fiscal 1996 in securities assigned
to the various rating categories by S&P, or, if unrated by S&P,
assigned to comparable rating categories by another rating
agency , and in unrated securities determined by Putnam
Management to be of comparable quality .
Unrated securities
Rated securities, of comparable quality,
as percentage of as percentage of
Rating net assets net assets
"AAA" 66.70% --
"AA" 8.18% --
"A" 7.72% --
"BBB" 10.41% 1.87%
"BB" 0.88% 3.92%
"B" 0.03% 0.29%
------ -----
93.92% 6.08%
====== =====
Putnam Management seeks to minimize the risks of investing in
lower-rated securities through careful investment analysis.
However, the amount of information available about the financial
condition of an issuer of California tax-exempt securities may
not be as extensive as that which is made available by
corporations whose securities are publicly traded. When the fund
invests in California tax-exempt securities in the lower rating
categories, the achievement of its goals is more dependent
on Putnam Management's ability than would be the case if
it were investing in California tax-exempt securities in
the higher rating categories. Investors should consider
carefully their ability to assume the risks of owning shares of a
mutual fund that may invest in securities in the lower
rating categories.
The fund will not necessarily dispose of a security when its
rating is reduced below its rating at the time of purchase.
However, Putnam Management will consider such reduction in its
determination of whether the fund should continue to hold the
security in its portfolio.
The Income Fund may invest in so-called "zero-coupon" bonds ,
which are issued at a significant discount from face value
and pay interest only at maturity rather than at intervals during
the life of the security. The values of zero-coupon bonds are
subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest currently.
Zero-coupon bonds allow an issuer to avoid the need to generate
cash to meet current interest payments. Accordingly, such bonds
may involve greater credit risks than bonds paying interest
currently. The fund is required to accrue and distribute
interest income from zero-coupon bonds on a current basis,
even though it does not receive that income currently in cash.
Thus, it may be necessary to sell other investments
to obtain cash needed to make income distributions.
The secondary market for California tax-exempt securities is
generally less liquid than that for taxable fixed-income
securities, particularly in the lower rating categories. Thus it
may be more difficult to value or buy and sell certain
of these securities. Certain investment grade
securities share some of the risk factors discussed above
with respect to lower-rated securities.
For additional information concerning the risks associated with
investing in securities in the lower rating categories, see the
SAI.
Investments in premium securities
During a period of declining interest rates, many of the Income
Fund's portfolio investments will likely bear coupon rates that
are higher than current market rates, regardless of whether these
securities were originally purchased at a premium. These
securities would generally carry market values greater than the
principal amounts payable on maturity, which would be reflected
in the net asset value of fund shares.
The values of these "premium" securities tend to approach the
principal amount as the securities approach maturity (or call
price in the case of securities approaching their first call
date). As a result, an investor who purchases fund shares during
these periods would initially receive higher monthly
distributions (derived from the higher coupon rates payable on
fund investments) than might be available from alternative
investments bearing current market interest rates. But the
investor may face an increased risk of capital loss as these
higher coupon securities approach maturity (or first call date).
In evaluating the potential performance of an investment,
investors may find it useful to compare current dividend rate
with a fund's "yield," which is computed on a yield-to-maturity
basis in accordance with SEC regulations and which reflects
amortization of market premiums. See "How performance is shown."
Futures and options
The Income Fund may purchase and sell financial futures contracts
and related options for hedging purposes.
The fund may purchase and sell index futures contracts on the
Municipal Bond Index. This index is intended to represent a
numerical measure of market performance for long-term tax-exempt
bonds. An "index future" is a contract to buy or sell units of a
particular securities index at an agreed price on a specified
future date. Depending on the change in value of the index
between the time the fund enters into and terminates an index
futures contract, the fund realizes a gain or loss. The fund may
purchase and sell futures contracts on the index (or any other
tax-exempt bond index approved for trading by the Commodity
Futures Trading Commission) to hedge against general changes in
market values of California tax-exempt securities that the fund
owns or expects to purchase.
The fund may also purchase and sell put and call options on index
futures or on indexes directly, in addition to or as an
alternative to purchasing and selling index futures. The fund
may also purchase and sell futures contracts and related options
on U.S. Treasury securities, including U.S. Treasury bills, notes
and bonds ("U.S. government securities") and options directly on
U.S. government securities.
In addition, the fund may purchase put and call options on, or
warrants to purchase, California tax-exempt securities, either
directly or through custodial arrangements in which the fund and
other investors own an interest in one or more options on
California tax-exempt securities.
The fund will engage in these transactions for hedging purposes
and, to the extent permitted by applicable law, for nonhedging
purposes, such as to manage the effective duration of the fund's
portfolio or as a substitute for direct investment.
The use of futures and options involves certain special risks and
may result in realization of taxable income or capital gains.
Futures and options transactions involve costs and may result in
losses.
Certain risks arise from the possibility of imperfect
correlations among movements in the prices of financial futures
and options purchased or sold by the fund, of the underlying bond
index or U.S. government securities or of the California tax-
exempt securities that are the subject of the hedge. The
successful use of futures and options further depends on Putnam
Management's ability to forecast interest rate movements
correctly.
Other risks arise from the potential inability to close out
futures or options positions. There can be no assurance that a
liquid secondary market will exist for any futures contract or
option at a particular time. Certain provisions of the Internal
Revenue Code and certain regulatory requirements may limit the
use of futures and options transactions. The successful use of
these strategies further depends on the ability of Putnam
Management to forecast interest rates and market movements
correctly.
A more detailed explanation of financial futures and options
transactions, and the risks associated with them, is included in
the SAI.
Derivatives
Certain of the instruments in which the Income Fund may invest,
such as futures contracts, options, forward contracts and inverse
floating obligations, are considered to be "derivatives."
Derivatives are financial instruments whose value depends upon,
or is derived from, the value of an underlying asset, such as a
security or an index. Further information about these
instruments and the risks involved in their use is included
elsewhere in this prospectus and in the SAI.
Both funds
At times, a substantial portion of fund assets may be
invested in securities as to which a fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds all or a major portion.
Under adverse market or economic conditions or in the event of
adverse changes in the financial condition of the issuer,
it may be more difficult to sell these securities when
Putnam Management believes it advisable to do so or a fund
may be able to sell the securities only at prices lower
than if they were more widely held. Under these circumstances,
it may also be more difficult to determine the fair value of such
securities for purposes of computing that fund's net asset value.
In order to enforce its rights in the event of a default of these
securities, a fund may be required to participate in various
legal proceedings or take possession of and manage assets
securing the issuer's obligations on the securities. This could
increase fund operating expenses and adversely affect
its net asset value. Any income derived from the
ownership or operation of such assets would not be tax-exempt.
The ability of a holder of a tax-exempt security to enforce the
terms of that security in a bankruptcy proceeding may be more
limited than would be the case with respect to securities of
private issuers .
Certain securities held by a fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer
were to redeem securities held by a fund during a time of
declining interest rates, the fund may not be able to reinvest
the proceeds in securities providing the same investment return
as the securities redeemed.
Since each fund invests primarily in California tax-exempt
securities, the performance of each fund may be especially
affected by factors pertaining to the California economy and
other factors affecting the ability of issuers of California tax-
exempt securities to meet their obligations.
As a result, the value of the Income Fund's shares may fluctuate
more widely than the value of shares of a portfolio investing in
securities relating to a number of different states. The ability
of state, county or local governments to meet their obligations
will depend primarily on the availability of tax and other
revenues to those governments and on their fiscal conditions
generally. There is no assurance that any California issuer
will make full payments of principal or interest or remain
solvent. For example, in December 1994, Orange County filed for
bankruptcy.
The amounts of tax and other revenues available to governmental
issuers of California tax-exempt securities may be affected from
time to time by economic, political and demographic conditions
within or outside of California. For example, in recent years
the State of California has experienced recurring budget
deficits, which have been in large part due to a recession in
such years . In addition, constitutional or statutory
restrictions , such as the recently enacted Proposition
218, may limit a government's power to raise revenues or
increase taxes. The availability of federal, state, and local
aid to issuers of California tax-exempt securities may also
affect their ability to meet their obligations.
Payments of principal and interest on special obligation
securities will depend on the economic condition of the facility
or specific revenue source from whose revenues the payments will
be made. The facility's economic status, in turn, could be
affected by economic, political and demographic conditions
affecting California.
Any reduction in the actual or perceived ability of an issuer of
California tax-exempt securities to meet its obligations ,
including reduction in the rating of the issuer's outstanding
securities, would likely have an adverse effect on the market
value and marketability of its obligations. Doubts
surrounding an issuer's ability to meet its obligations could
adversely affect the values of other California tax-exempt
securities as well.
Diversification and concentration policies
Each fund is a "diversified" investment company. This means
that, under the Investment Company Act of 1940 and other
applicable law, each fund may, with respect to 25% of its total
assets, invest without limit in the securities of one or more
issuers of California tax-exempt securities. Each fund is
limited with respect to the remaining portion of its assets to
investing 5% or less of its total assets in the securities of any
one issuer (other than the U.S. government).
Because of the relatively small number of issuers of
California tax-exempt securities, each fund is more likely to
invest a higher percentage of its assets in the securities of a
single issuer than an investment company that invests in a broad
range of tax-exempt securities. This practice involves an
increased risk of loss to a fund if the issuer were unable to
make interest or principal payments or if the market value of
these securities were to decline.
Each fund will not invest more than 25% of its total assets in
any one industry. Governmental issuers of California tax-exempt
securities are not considered part of any "industry." However,
for this purpose California tax-exempt securities backed only by
the assets and revenues of nongovernmental users may be deemed to
be issued by nongovernmental users. Thus, the 25% limitation
would apply to these obligations.
It is possible that a fund may invest more than 25% of its assets
in a broader segment of the market for California tax-exempt
securities, such as revenue obligations of hospitals and other
health care facilities, housing revenue obligations, or airport
revenue obligations. This would be the case only if Putnam
Management determined that the yields available from obligations
in a particular segment of the market justified the additional
risks associated with such concentration.
Although these obligations could be supported by the credit of
governmental issuers or by the credit of nongovernmental issuers
engaged in a number of industries, economic, business, political
and other developments generally affecting the revenues of
such issuers may have a general adverse effect on all
California tax-exempt securities in a particular market segment.
(Examples of such developments would include proposed
legislation or pending court decisions affecting the financing of
such projects and market factors affecting the demand for their
services or products.)
Each fund reserves the right to invest more than 25% of its
assets in industrial development bonds and private activity
securities consistent with its concentration and diversification
policies.
Portfolio turnover
The length of time a fund has held a particular security is not
generally a consideration in investment decisions. A change in
the securities held by a fund is known as "portfolio turnover."
As a result of a fund's investment policies, under certain
market conditions its portfolio turnover rates may be
higher than that of other mutual funds.
Portfolio turnover generally involves some expense ,
including brokerage commissions or dealer markups and other
transaction costs on the sale of securities and reinvestment in
other securities. These transactions may result in realization
of taxable capital gains. Portfolio turnover rates for the
Income Fund are shown in the section "Financial
highlights."
Other investment practices
As specified below, a fund may engage in the following
investment practices, which may result in taxable income
or capital gains and involve certain special risks. The
SAI contains more detailed information about these practices,
including limitations designed to reduce these risks.
Repurchase agreements and forward commitments. A fund may
enter into repurchase agreements on up to 25% of its assets.
These transactions must be fully collateralized at all times.
A fund may also purchase securities for future delivery,
which may increase its overall investment exposure and involves a
risk of loss if the value of the securities declines prior to the
settlement date. These transactions involve some risk if
the other party should default on its obligation and a
fund is delayed or prevented from recovering the collateral or
completing the transaction.
Insurance
The Money Market Fund, along with four other Putnam money
market funds, has purchased insurance, which, among other things,
will insure the fund against a decrease in the value of a
security held by it due to default or bankruptcy. Most
securities and instruments in which the fund invests, other than
U.S. government securities, are covered by this insurance.
Although the insurance, which is subject to certain conditions,
may provide the fund with some protection in the event of a
decrease in value of certain of its portfolio securities due to
default or bankruptcy, the policy does not insure or guarantee
that the fund will maintain a stable net asset value of $1.00 per
share.
The maximum amount of total coverage under the policy is $30
million, subject to a deductible in respect of each loss equal to
the lesser of $1 million or 0.30% of the fund's net assets. As
of January 2, 1997, the fund's net assets totaled $32,486,059.
Each of the funds that has purchased the insurance has access to
the full amount of insurance under the policy, subject to the
deductible. Accordingly, depending upon the circumstances, the
fund may not be entitled to recover under the policy, even though
it has experienced a loss that would otherwise be insurable. The
annual cost to the fund of purchasing the insurance is expected
to equal approximately 0.02% of the fund's average net assets.
This amount is reflected in the expense information shown in the
prospectus under the heading "Expenses summary." The policy may
be cancelled under certain conditions and may not be renewed upon
its expiration.
Limiting investment risk
Specific investment restrictions help to limit investment
risks for the funds' shareholders. These restrictions
prohibit a fund from acquiring (with respect to 75% of its
total assets) more than 10% of the voting securities
of any one issuer .* They also prohibit a fund from investing
more than:
(a) (With respect to 75% of its assets) 5% of its total assets in
securities of any issuer (other than securities issued or
guaranteed by the U.S. government or its agencies or
instrumentalities );* or
(b) 15% of its net assets in any combination of securities
that are not readily marketable, in securities restricted as to
resale (excluding restricted securities that have been
determined by the Trustees (or the person designated by the
Trustees to make such determinations) to be readily marketable)
and in repurchase agreements maturing in more than seven days.
The Money Market Fund has not invested more than 10% of its net
assets in the types of securities listed in item (b) and
has no current intention of doing so.
Restrictions marked with an asterisk (*) above are summaries of
fundamental investment policies. See the SAI for the full text
of these policies and other fundamental investment
policies. Except for investment policies designated as
fundamental in this prospectus or the SAI, the investment
policies described in this prospectus and in the SAI are not
fundamental investment policies. The Trustees may change any
non-
fundamental investment policies without shareholder approval. As
a matter of policy, the Trustees would not materially change a
fund's investment objective without shareholder approval.
HOW PERFORMANCE IS SHOWN
Each fund's advertisements may, from time to time, include
performance information.
The Income Fund . "Yield" for each class of shares is
calculated by dividing the annualized net investment income per
share during a recent 30-day period by the maximum public
offering price per share of the class on the last day of that
period.
For purposes of calculating yield, net investment income is
calculated in accordance with SEC regulations and may differ from
net investment income as determined for tax purposes. SEC
regulations require that net investment income be calculated on a
"yield-to-maturity" basis, which has the effect of amortizing any
premiums or discounts in the current market value of fixed-income
securities. The current dividend rate is based on net investment
income as determined for tax purposes, which may not reflect
amortization in the same manner. See "How the funds pursue
their objectives -- Investments in premium
securities."
Yield is based on the price of the shares, including the maximum
initial sales charge in the case of class A and class M shares,
but does not reflect the deduction of any contingent deferred
sales charge in the case of class B shares. "Tax-equivalent
yield" for each class of shares shows the effect on performance
of the tax-exempt status of distributions received from the fund.
It reflects the approximate yield that a taxable investment must
earn for shareholders at stated income levels to produce an
after-
tax yield equivalent to a class's tax-exempt yield.
"Total return" for the one-, five- and ten-year periods (or for
the life of a class, if shorter) through the most recent calendar
quarter represents the average annual compounded rate of return
on an investment of $1,000 in the Income Fund invested at the
maximum public offering price (in the case of class A and class M
shares) or reflecting the deduction of any applicable contingent
deferred sales charge (in the case of class B shares). Total
return may also be presented for other periods or based on
investment at reduced sales charge levels. Any quotation of
investment performance not reflecting the maximum initial sales
charge or contingent deferred sales charge would be reduced if
the sales charges were used.
The Money Market Fund . "Yield" represents an
annualization of the change in value of a shareholder account
(excluding any capital changes) for a specific seven-day period.
"Effective yield" compounds the Money Market Fund's yield for a
year and is, for that reason, greater than the Money Market
Fund's yield. "Tax-equivalent yield" shows the effect on
performance of the tax-exempt status of distributions received
from the Money Market Fund. It reflects the approximate yield
that a taxable investment must earn for shareholders at stated
income levels to produce an after-tax yield equivalent to the
Money Market Fund's tax-exempt yield or tax-exempt effective
yield.
Both funds
All data are based on past investment results and do not
predict future performance. Investment performance, which
will vary, is based on many factors, including market conditions,
portfolio composition , fund operating expenses and
which class of shares the investor purchases. Investment
performance also often reflects the risks associated with
a fund's investment objective and policies. These factors
should be considered when comparing a fund's investment
results with those of other mutual funds and other investment
vehicles.
Quotations of investment performance for any period when an
expense limitation was in effect will be greater than if the
limitation had not been in effect. Fund performance may
be compared to that of various indexes. See the SAI.
HOW THE FUNDS ARE MANAGED
The Trustees are responsible for generally overseeing the
conduct of fund business. Subject to such policies as the
Trustees may determine, Putnam Management furnishes a continuing
investment program for each fund and makes investment decisions
on its behalf. Subject to the control of the Trustees, Putnam
Management also manages each fund's other affairs and
business.
Each fund pays Putnam Management a quarterly fee for these
services based on average net assets. See "Expenses
summary" and the SAI.
The following officer of Putnam Management has had primary
responsibility for the day-to-day management of the Income Fund's
portfolio since the year stated below:
Business experience Year (at
least 5 years)
---- -------------------------
William H. Reeves 1986 Employed as an investment
Senior Vice President professional by Putnam
Management since 1986.
Each fund pays all expenses not assumed by Putnam Management,
including Trustees' fees, auditing, legal, custodial, investor
servicing and shareholder reporting expenses, and payments under
its distribution plans (in the case of the Income Fund, payments
are in turn allocated to the relevant class of shares). Each
fund also reimburses Putnam Management for the compensation
and related expenses of certain fund officers and their
staff who provide administrative services . The total
reimbursement is determined annually by the Trustees.
Putnam Management places all orders for purchases and sales of
fund securities. In selecting broker-dealers, Putnam
Management may consider research and brokerage services furnished
to it and its affiliates. Subject to seeking the most favorable
price and execution available, Putnam Management may consider
sales of fund shares (and, if permitted by law, of
the other Putnam funds) as a factor in the selection of broker-
dealers.
ORGANIZATION AND HISTORY
The Income Fund and the Money Market Fund are
Massachusetts business trusts organized on December 17,
1982 and September 2, 1987, respectively. Copies of their
Agreements and Declarations of Trust, which are governed by
Massachusetts law, are on file with the Secretary of State of The
Commonwealth of Massachusetts. Prior to January 30, 1997,
the trust now known as Putnam California Tax Exempt Income
Fund was known as Putnam California Tax Exempt Income Trust.
Prior to June 1, 1994, Putnam California Tax Exempt Income Trust
was known as Putnam California Tax Exempt Income Fund.
The Income Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares
of beneficial interest. The Trustees may, without
shareholder approval , create two or more series of shares
representing separate investment portfolios. Any such
series of shares may be divided without shareholder approval into
two or more classes of shares having such preferences and special
or relative rights and privileges as the Trustees determine.
The Income Fund may also offer other classes of shares
with different sales charges and expenses. Because of these
different sales charges and expenses, the investment performance
of the classes will vary. For more information, contact your
investment dealer or Putnam Mutual Funds (at 1-800-225-1581).
The Money Market Fund is an open-end, diversified management
investment company with an unlimited number of authorized shares
of beneficial interest. The Trustees may, without
shareholder approval , create two or more series of shares
representing separate investment portfolios. Any such series of
shares may be divided without shareholder approval into two or
more classes of shares having such preferences and special or
relative rights and privileges as the Trustees determine. The
fund's shares are not currently divided into series or classes.
For both funds, each share has one vote, with fractional shares
voting proportionally. Shares of all classes will vote
together as a single class except when otherwise required by law
or as determined by the Trustees. Shares are freely
transferable, are entitled to dividends as declared by the
Trustees, and, if a fund were liquidated, would receive the net
assets of that fund. Each fund may suspend the sale of
shares at any time and may refuse any order to purchase shares.
Although each fund is not required to hold annual meetings
of their shareholders, shareholders holding at least 10% of the
Income Fund's or the Money Market Fund's outstanding
shares entitled to vote have the right to call a meeting to elect
or remove Trustees, or to take other actions as provided in the
relevant Agreement and Declaration of Trust.
Although each fund is offering only its own shares in this
prospectus, it is possible that a fund might become liable for
any misstatement in the prospectus about another fund. The
Trustees of each fund have considered this factor in approving
the use of a single prospectus.
If you own fewer shares than the minimum set by
the Trustees (presently 20 shares for the Income Fund and 500
shares for the Money Market Fund), a fund may choose to
redeem your shares. You will receive at least 30 days' written
notice before a fund redeems your shares, and you may purchase
additional shares at any time to avoid a redemption. A
fund may also redeem shares if you own shares above a maximum
amount set by the Trustees. There is presently no maximum, but
the Trustees may establish one at any time, which could apply to
both present and future shareholders.
The funds' Trustees : George Putnam,* Chairman.
President of the Putnam funds. Chairman and Director of Putnam
Management and Putnam Mutual Funds Corp. ("Putnam Mutual Funds").
Director, Marsh & McLennan Companies, Inc.; William F. Pounds,
Vice Chairman. Professor of Management, Alfred P. Sloan School
of Management, Massachusetts Institute of Technology; Jameson
Adkins Baxter, President, Baxter Associates, Inc.; Hans H. Estin,
Vice Chairman, North American Management Corp.; John A. Hill,
Chairman and Managing Director, First Reserve
Corporation; Ronald J. Jackson, Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc., Director of Safety
1st, Inc., Trustee of Salem Hospital and the Peabody Essex
Museum; Elizabeth T. Kennan, President Emeritus and
Professor, Mount Holyoke College; Lawrence J. Lasser,* Vice
President of the Putnam funds. President, Chief Executive
Officer and Director of Putnam Investments, Inc. and Putnam
Management. Director, Marsh & McLennan Companies, Inc.; Robert
E. Patterson, Executive Vice President and Director of
Acquisitions , Cabot Partners Limited Partnership; Donald S.
Perkins,* Director of various corporations, including Cummins
Engine Company, Lucent Technologies, Inc., Springs Industries,
Inc. and Time Warner Inc.; George Putnam, III,* President,
New Generation Research, Inc. ; A.J.C. Smith,*
Chairman and Chief Executive Officer , Marsh &
McLennan Companies, Inc.; and W. Nicholas Thorndike, Director of
various corporations and charitable organizations, including Data
General Corporation, Bradley Real Estate, Inc. and Providence
Journal Co. Also, Trustee of Massachusetts General Hospital and
Eastern Utilities Associates. The Trustees are also
Trustees of the other Putnam funds. Those marked with an
asterisk (*) are or may be deemed to be "interested persons" of
a fund , Putnam Management or Putnam Mutual Funds.
About Your Investment
ALTERNATIVE SALES ARRANGEMENTS
The Income Fund
Class A shares. An investor who purchases class A shares pays a
sales charge at the time of purchase. As a result, class A
shares are not subject to any charges when they are redeemed,
except for certain sales at net asset value that are
subject to a contingent deferred sales charge ("CDSC"). Certain
purchases of class A shares qualify for reduced sales charges.
Class A shares bear a lower 12b-1 fee than class B and class M
shares. See "How to buy shares -- Class A shares" and
"Distribution plans."
Class B shares. Class B shares are sold without an initial sales
charge, but are subject to a CDSC if redeemed within a specified
period after purchase. Class B shares also bear a higher 12b-1
fee than class A and class M shares. Class B shares
automatically convert into class A shares, based on relative net
asset value, approximately eight years after purchase. For more
information about the conversion of class B shares, see the SAI.
This discussion includes information about how shares
acquired through reinvestment of distributions are treated for
conversion purposes. The discussion also notes
certain circumstances under which a conversion may not occur.
Class B shares provide an investor the benefit of putting all of
the investor's dollars to work from the time the investment is
made. Until conversion, class B shares will have a higher
expense ratio and pay lower dividends than class A and class M
shares because of the higher 12b-1 fee. See "How to buy shares -
- - Class B shares" and "Distribution plans."
Class M shares. An investor who purchases class M shares pays a
sales charge at the time of purchase that is lower than the sales
charge applicable to class A shares. Certain purchases of class
M shares qualify for reduced sales charges. Class M shares bear
a 12b-1 fee that is lower than class B shares but higher than
class A shares. Class M shares are not subject to any CDSC and
do not convert into any other class of shares. See "How to buy
shares -- Class M shares" and "Distribution plans."
Which arrangement is best for you? The decision as to which
class of shares provides a more suitable investment for an
investor depends on a number of factors, including the amount and
intended length of the investment. Investors making investments
that qualify for reduced sales charges might consider class A or
class M shares. Investors who prefer not to pay an initial sales
charge might consider class B shares. Orders for class B shares
for $250,000 or more and orders for class M shares for $1 million
or more will be treated as orders for class A shares or declined.
For more information about these sales arrangements, consult your
investment dealer or Putnam Investor Services. Shares may only
be exchanged for shares of the same class of another Putnam fund.
See "How to exchange shares."
HOW TO BUY SHARES
The Income Fund
You can open a fund account with as little as $500 and make
additional investments at any time with as little as $50. You
can buy fund shares three ways - through most investment
dealers, through Putnam Mutual Funds (at 1-800-225-1581), or
through a systematic investment plan. If you do not have a
dealer, Putnam Mutual Funds can refer you to one.
Buying shares through Putnam Mutual Funds. Complete an order
form and write a check for the amount you wish to invest, payable
to the fund. Return the completed form and check to Putnam
Mutual Funds, which will act as your agent in purchasing shares
through your designated investment dealer.
Buying shares through systematic investing. You can make regular
investments of $25 or more per month through automatic deductions
from your bank checking or savings account. Application forms
are available from your investment dealer or through Putnam
Investor Services.
Shares are sold at the public offering price based on the net
asset value next determined after Putnam Investor Services
receives your order. In most cases, in order to receive that
day's public offering price, Putnam Investor Services must
receive your order before the close of regular trading on the New
York Stock Exchange. If you buy shares through your investment
dealer, the dealer must receive your order before the close of
regular trading on the New York Stock Exchange to receive that
day's public offering price.
Class A shares
The public offering price of class A shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, in its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 25,000 4.99% 4.75% 4.50%
25,000 but under 100,000 4
.
7
1 4.50
4.25
100,000 but under 250,000 3.90 3.75 3.50
250,000 but under 500,000 3.09 3.00 2.75
500,000 but under 1,000,000 2.04 2.00 1.85
- -----------------------------------------------------------------
There is no initial sales charge on purchases of class A shares
of $1 million or more. However, a CDSC of 1.00% or 0.50%,
respectively, will be imposed on redemptions by any
investor within the first or second year after
purchase . Any shares acquired by reinvestment of
distributions will be redeemed without a CDSC.
Shares purchased by investors investing $1 million or
more in class A shares whose dealer of record waived
its commission with the approval of Putnam Mutual
Funds are not subject to the CDSC.
In determining whether a CDSC is payable, shares not
subject to any charge will be redeemed first, followed by
shares held longest during the CDSC period. Any CDSC will be
based on the lower of the shares' cost and current net asset
value. Any shares acquired by reinvestment of distributions will
be redeemed without a CDSC . Putnam Mutual Funds receives the
entire amount of any CDSC you pay. See the SAI for more
information about the CDSC.
Putnam Mutual Funds pays investment dealers of record commissions
on sales of class A shares of $1 million or more based on an
investor's cumulative purchases during the one-year period
beginning with the date of the initial purchase at net asset
value. Each subsequent one-year measuring period for these
purposes will begin with the first net asset value purchase
following the end of the prior period. Such commissions are paid
at the rate of 1.00% of the amount under $3 million, 0.50% of the
next $47 million and 0.25% thereafter.
Class B shares
Class B shares are sold without an initial sales charge, although
a CDSC will be imposed if you redeem shares within a specified
period after purchase, as shown in the table below. The
following types of shares may be redeemed without charge at any
time: (i) shares acquired by reinvestment of
distributions , and (ii) shares otherwise exempt from the
CDSC, as described in "How to buy shares -- The Income Fund --
General" below. For other shares, the amount of the charge is
determined as a percentage of the lesser of the current market
value or the cost of the shares being redeemed.
Year 1 2 3 4 5 6 7+
- -------------------------------------------------------------
Charge 5% 4% 3% 3% 2% 1% 0%
In determining whether a CDSC is payable on any redemption,
shares not subject to any charge will be redeemed
first, followed by shares held longest during the CDSC
period. For this purpose, the amount of any increase in a
share's value above its initial purchase price is not regarded as
a share exempt from the CDSC. Thus, when a share that has
appreciated in value is redeemed during the CDSC period, a CDSC
is assessed only on its initial purchase price. For information
on how sales charges are calculated if you exchange your shares,
see "How to exchange shares." Putnam Mutual Funds receives the
entire amount of any CDSC you pay.
Class M shares
The public offering price of class M shares is the net asset
value plus a sales charge that varies depending on the size of
your purchase. The fund receives the net asset value. The sales
charge is allocated between your investment dealer and Putnam
Mutual Funds as shown in the following table, except when Putnam
Mutual Funds, at its discretion, allocates the entire amount to
your investment dealer.
Sales charge Amount of
as a percentage of: sales charge
------------------- reallowed to
Net dealers as a
Amount of transaction amount Offering percentage of
at offering price ($) invested price offering price
- -----------------------------------------------------------------
Under 50,000 3.36% 3.25% 3.00%
50,000 but under 100,000 2.30 2.25 2.00
100,000 but under 250,000 1.52 1.50 1.25
250,000 but under 500,000 1.01 1.00 1.00
500,000 and above NONE NONE NONE
Sales charges will not apply to class M shares purchased with
redemption proceeds received within the prior 90 days from non-
Putnam mutual funds on which the investor paid a front-end or a
contingent deferred sales charge. Members of qualified groups
may also purchase class M shares without a sales charge.
General
You may be eligible to buy fund shares at reduced sales
charges.
Consult your investment dealer or Putnam Mutual Funds for details
about Putnam's combined purchase privilege, cumulative quantity
discount, statement of intention, group sales plan, qualified
retirement plans and other plans. Descriptions are
also included in the order form and in the SAI.
The fund may sell class A, class B and class M shares at net
asset value without an initial sales charge or a CDSC to
current and retired Trustees (and their families), current and
retired employees (and their families) of Putnam Management and
affiliates, registered representatives and other employees (and
their families) of broker-dealers having sales agreements with
Putnam Mutual Funds, employees (and their families) of financial
institutions having sales agreements with Putnam Mutual Funds (or
otherwise having an arrangement with a broker-dealer or financial
institution with respect to sales of fund shares), financial
institution trust departments investing an aggregate of $1
million or more in Putnam funds, clients of certain
administrators of tax-qualified plans, tax-qualified plans when
proceeds from repayments of loans to participants are invested
(or reinvested) in Putnam funds, "wrap accounts" for the benefit
of clients of broker-dealers, financial institutions or financial
planners adhering to certain standards established by Putnam
Mutual Funds, and investors meeting certain requirements who sold
shares of certain Putnam closed-end funds pursuant to a tender
offer by the closed-end fund.
In addition, the fund may sell shares at net asset value without
an initial sales charge or a CDSC in connection with the
acquisition by the fund of assets of an investment company or
personal holding company. The CDSC will be waived on redemptions
of shares arising out of the death or post-purchase disability of
a shareholder or settlor of a living trust account, and on
redemptions in connection with certain withdrawals from IRA or
other retirement plans. Up to 12% of the value of shares subject
to a systematic withdrawal plan may also be redeemed each year
without a CDSC. The SAI contains additional information about
purchasing the Income Fund's shares at reduced sales charges.
Shareholders of other Putnam funds may be entitled to exchange
their shares for, or reinvest distributions from their funds in,
fund shares at net asset value.
If you are considering redeeming or exchanging shares or
transferring shares to another person shortly after purchase, you
should pay for those shares with a certified check to avoid any
delay in redemption, exchange or transfer. Otherwise ,
payment may be delayed until the purchase price of those
shares has been collected or, if you redeem by telephone, until
15 calendar days after the purchase date. To eliminate the need
for safekeeping, certificates will not be issued
for your shares unless you request them.
The Money Market Fund
The Money Market Fund continuously offers its shares at a price
of $1.00 per share. You can open an account for $1,000 or more
and make additional investments at any time for as little as
$100. You can buy fund shares three ways -- by mail, by wire, or
through most investment dealers. There are no sales charges on
the sales of shares although the fund pays certain distribution
expenses described below.
Because the fund seeks to be fully invested at all times,
investments must be in Same Day Funds to be accepted. Same Day
Funds are monies credited to the account of the fund's designated
bank by the Federal Reserve Bank of Boston. When payment in Same
Day Funds is available to the fund prior to the close of regular
trading on the New York Stock Exchange, the fund will accept the
order to purchase shares that day.
If you are considering redeeming shares or transferring shares to
another person shortly after purchase, you should pay for those
shares with wired Same Day Funds or a certified check to avoid
any delay in redemption or transfer. Otherwise, the fund may
delay payment for shares until the purchase price of those shares
has been collected or, if you redeem by check or telephone
, until 15 calendar days after the purchase date.
After you make your initial investment in the fund, Putnam
Investor Services will establish an Investing Account for you on
the fund's records. This account is a complete record of all
transactions between you and the fund, which at all times shows
the balance of shares you own. The fund will not issue share
certificates.
Buying shares by mail. Complete the order form and send it to
Putnam Investor Services with your check, Federal Reserve Draft
or other negotiable bank draft drawn on a U.S. bank and payable
in U.S. dollars to the order of Putnam California Tax Exempt
Money Market Fund. If you pay by check or draft, the fund's
designated bank will make Same Day Funds available to the fund,
and the fund will accept the order on the first business day
after receipt of your check or draft. If you pay by Federal
Reserve Draft, the fund will accept the order the day it is
received provided it is received before the close of regular
trading on the New York Stock Exchange.
Buying shares by wire. You may invest in the fund by bank wire
transfer of Same Day Funds to the fund's designated bank. For
wiring instructions, see the order form.
Any commercial bank can transfer Same Day Funds by wire. Wired
funds received by the fund's designated bank by 3:00 p.m. Boston
time are normally accepted for investment on the day received.
To be sure that a bank wire order is accepted on the same day it
is sent, your bank should wire funds as early in the day as
possible. Your bank may charge for sending Same Day Funds on
your behalf. The fund's designated bank presently does not
charge you for receipt of wired Same Day Funds, but reserves the
right to charge for this service.
Buying shares through investment dealers. You may, if you wish,
purchase shares of the fund through investment dealers, which may
charge a fee for their services. Most investment dealers have a
sales agreement with Putnam Mutual Funds and will be glad to
accept your order. If you do not have a dealer, Putnam Mutual
Funds can refer you to one. Investment dealers must follow the
instructions in the order form.
Both funds
Putnam Mutual Funds will from time to time, at its expense,
provide additional promotional incentives or payments to dealers
that sell shares of the Putnam funds. These incentives or
payments may include payments for travel expenses, including
lodging, incurred in connection with trips taken by invited
registered representatives and their guests to locations within
and outside the United States for meetings or seminars of a
business nature. In some instances, these incentives or payments
may be offered only to certain dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
DISTRIBUTION PLANS
The Income Fund
Class A distribution plan. The class A plan provides for
payments by the fund to Putnam Mutual Funds at the annual rate of
up to 0.35% of average net assets attributable to class A shares.
The Trustees currently limit payments under the class A plan to
the annual rate of 0.20% of such assets.
Putnam Mutual Funds makes quarterly payments to qualifying
dealers (including, for this purpose, certain financial
institutions) to compensate them for services provided in
connection with sales of class A shares and the maintenance of
shareholder accounts. The payments are based on the average net
asset value of class A shares attributable to shareholders for
whom the dealers are designated as the dealer of record.
This calculation excludes until one year after purchase shares
purchased at net asset value by shareholders investing $1
million or more. These shares are not subject to the one-
year exclusion provisions in cases where certain shareholders who
invested $1 million or more have made arrangements with Putnam
Mutual Funds and the dealer of record waived the sales
commission.
Putnam Mutual Funds makes the quarterly payments at the annual
rate of 0.15% of such average net asset value for shares
outstanding as of December 31, 1992 and 0.20% of such average net
asset value for shares acquired after that date (including
shares acquired through reinvestment of distributions).
Class B and class M distribution plans. The class B and class M
plans provide for payments by the fund to Putnam Mutual Funds at
the annual rate of up to 1.00% of average net assets attributable
to class B shares and class M shares, as the case may be. The
Trustees currently limit payments under the class B and class M
plans to the annual rate of 0.85% and 0.50% of such assets,
respectively.
Although class B shares are sold without an initial sales charge,
Putnam Mutual Funds pays a sales commission equal to 4.00% of the
amount invested (including a prepaid service fee of 0.20% of the
amount invested) to dealers who sell class B shares. These
commissions are not paid on exchanges from other Putnam funds or
on sales to investors exempt from the CDSC.
The amount paid to dealers at the time of the sale of class M
shares is set forth above under "How to buy shares -- Class M
shares." In addition, to further compensate dealers (including
qualifying financial institutions) for services provided in
connection with sales of class B shares and class M shares and
the maintenance of shareholder accounts, Putnam Mutual Funds
makes quarterly payments to qualifying dealers.
The payments are based on the average net asset value of class B
shares and class M shares attributable to shareholders for whom
the dealers are designated as the dealer of record, except for
the first year's service fees in respect of class B shares, which
are prepaid as described above. Putnam Mutual Funds makes the
payments at an annual rate of 0.20% of such average net asset
value of class B shares and class M shares, as the case may be.
Putnam Mutual Funds also pays to dealers, as additional
compensation with respect to the sale of class M shares, 0.20% of
such average net asset value of class M shares. For class M
shares, the total annual payment to dealers equals 0.40% of such
average net asset value.
The Money Market Fund
The purpose of the distibution plan of the Money Market
Fund is to permit the fund to compensate Putnam Mutual
Funds for services provided and expenses incurred by it in
promoting the sales of shares of the Money Market Fund, reducing
redemptions, or maintaining or improving services provided to
shareholders by Putnam Mutual Funds or dealers. The plan
provides for payments by the Money Market Fund to Putnam Mutual
Funds at the annual rate of up to 0.35% of the Money Market
Fund's average net assets. No payments under the plan are
currently authorized. Should the Money Market Fund's Trustees
decide in the future to approve payments, shareholders will be
notified and this prospectus will be revised.
General
Both funds
Payments under the plans are intended to compensate
Putnam Mutual Funds for services provided and expenses incurred
by it as principal underwriter of each fund's shares, including
the payments to dealers mentioned above. Putnam Mutual Funds may
suspend or modify such payments to dealers.
The payments are also subject to the continuation of the relevant
distribution plan, the terms of service agreements between
dealers and Putnam Mutual Funds, and any applicable limits
imposed by the National Association of Securities Dealers, Inc.
HOW TO SELL SHARES
The Income Fund
You can sell your shares to the fund any day the New York Stock
Exchange is open, either directly to the fund or through your
investment dealer. The fund will only redeem shares for which it
has received payment.
Selling shares directly to your fund. Send a signed
letter of instruction or stock power form to Putnam Investor
Services, along with any certificates that represent shares you
want to sell. The price you will receive is the next net asset
value calculated after the fund receives your request in proper
form less any applicable CDSC. In order to receive that day's
net asset value, Putnam Investor Services must receive your
request before the close of regular trading on the New York Stock
Exchange.
If you sell shares having a net asset value of $100,000 or more,
the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee. Stock
power forms are available from your investment dealer, Putnam
Investor Services and many commercial banks.
If you want your redemption proceeds sent to an address other
than your address as it appears on Putnam's records, a signature
guarantee is required. Putnam Investor Services usually requires
additional documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
Your fund generally sends you payment for your shares the
business day after your request is received. Under unusual
circumstances, the fund may suspend redemptions, or postpone
payment for more than seven days, as permitted by federal
securities law.
You may use Putnam's Telephone Redemption Privilege to redeem
shares valued up to $100,000 from your account unless you have
notified Putnam Investor Services of an address change within the
preceding 15 days. Unless an investor indicates otherwise on the
account application, Putnam Investor Services will be authorized
to act upon redemption and transfer instructions received by
telephone from a shareholder, or any person claiming to act as
his or her representative, who can provide Putnam Investor
Services with his or her account registration and address as it
appears on Putnam Investor Services' records.
Putnam Investor Services will employ these and other reasonable
procedures to confirm that instructions communicated by telephone
are genuine; if it fails to employ reasonable procedures, Putnam
Investor Services may be liable for any losses due to
unauthorized or fraudulent instructions. For information,
consult Putnam Investor Services.
During periods of unusual market changes and shareholder
activity, you may experience delays in contacting Putnam Investor
Services by telephone. In this event, you may wish to submit a
written redemption request, as described above, or contact your
investment dealer, as described below. The Telephone Redemption
Privilege is not available if you were issued certificates for
shares that remain outstanding. The Telephone Redemption
Privilege may be modified or terminated without notice.
Selling shares through your investment dealer. Your dealer must
receive your request before the close of regular trading on the
New York Stock Exchange to receive that day's net asset value.
Your dealer will be responsible for furnishing all necessary
documentation to Putnam Investor Services, and may charge you for
its services.
The Money Market Fund
You can sell your shares to the fund any day the New York Stock
Exchange is open, by check, by telephone , by mail or
through your investment dealer. The fund must receive your
properly completed application before you may sell shares;
certain methods require additional documentation (see below). To
enable shareholders to earn daily dividends as long as possible,
the fund has arranged the following methods of selling shares:
Selling shares by check. If you would like to use the fund's
check-writing service, mark the proper box on the order form and
complete the signature card and, if applicable, the resolution.
Upon receiving the properly completed order form, signature card,
and resolution, the fund will send you checks which may be made
payable to the order of any person in the amount of $500 or more.
When a check is presented for payment, a
sufficient number of full and fractional shares in your account
will be redeemed at the day's net asset value to cover the
amount of the check. An additional amount of shares will be
redeemed to cover any applicable CDSC. Shares to be redeemed by
this method may not be represented by share certificates.
Shareholders utilizing fund checks are subject to the bank's
rules governing checking accounts. There is currently no charge
to shareholders for the use of checks. You should make
sure that there are sufficient shares in the account to
cover the amount of any check drawn, since the net asset value
of shares will fluctuate. If insufficient shares are in the
account, the check will be returned and no shares will be
redeemed. Because dividends declared on shares held in your
account , prior redemptions, and possible changes in net asset
value may cause the value of your account to change, it is
impossible to determine in advance your account's total value.
Accordingly, you should not write a check for the entire value of
your account or close your account by writing a check. The
check-writing service is not available for tax-qualified
retirement plans.
Selling shares by telephone. If you would like to sell fund
shares by telephone with proceeds directed to your bank account,
please mark the proper box on the order form. You may call toll-
free 1-800-225-1581. On the following business day, the amounts
withdrawn from your account will either be mailed by check or
wired in Same Day Funds to the bank account designated on your
application. (To wire proceeds, the amount must be $1,000 or
more and the designated bank must be a commercial bank within the
United States.) You may change a designated bank account by
sending a written request to Putnam Investor Services with your
signature guaranteed by a bank, broker-dealer or certain other
financial institutions. See the SAI for more information about
how to obtain a signature guarantee.
You may also use Putnam's Telephone Redemption Privilege to
redeem shares valued up to $100,000 from your account unless you
have notified Putnam Investor Services of an address change
within the preceding 15 days. Unless an investor indicates
otherwise on the account application, Putnam Investor Services
will be authorized to act upon redemption and transfer
instructions received by telephone from a shareholder, or any
person claiming to act as his or her representative, who can
provide Putnam Investor Services with his or her account
registration and address as it appears on Putnam Investor
Services' records. Putnam Investor Services will employ these
and other reasonable procedures to confirm that instructions
communicated by telephone are genuine; if it fails to employ
reasonable procedures, Putnam Investor Services may be liable for
any losses due to unauthorized or fraudulent instructions. For
information, consult Putnam Investor Services. During periods of
unusual market changes and shareholder activity, you may
experience delays in contacting Putnam Investor Services by
telephone in which case you may wish to submit a written
redemption request, as described below, or contact your
investment dealer. The Telephone Redemption Privilege may be
modified or terminated without notice.
Selling shares by mail. You may also sell shares of the fund by
sending a written withdrawal request to: Putnam Investor
Services, Mailing address: P.O. Box 41203, Providence, RI 02940-
1203. If you sell shares having a net asset value of $100,000 or
more, the signatures of registered owners or their legal
representatives must be guaranteed by a bank, broker-dealer or
certain other financial institutions. See the SAI for more
information about where to obtain a signature guarantee.
Putnam Investor Services may require additional documentation
from shareholders which are corporations, partnerships, agents,
fiduciaries or surviving joint owners. Corporations,
partnerships, agents, trusts and fiduciary accounts must submit a
completed resolution in proper form before selling shares by
telephone or check. Resolution forms are available from Putnam
Investor Services. If you are currently a shareholder and did
not request the check writing service or telephone
redemption privilege on your initial order form, you must first
complete and return an authorization form, available from Putnam
Investor Services. A shareholder may revoke authorization for
the check writing service or telephone redemption by
written notice at any time, effective when Putnam Investor
Services receives such notice.
The fund reserves the right to terminate or modify the terms of
the check writing service or telephone redemption
privilege, or to charge shareholders for the use of these
services at any time.
Your fund generally sends you payment for your shares the
business day after your request is received. Under unusual
circumstances, the fund may suspend repurchases, or postpone
payment for more than seven days, as permitted by federal
securities law.
HOW TO EXCHANGE SHARES
Shareholders of the Money Market Fund who received their shares
in exchange for shares of another Putnam fund with a sales
charge, and shareholders of the Income Fund, can exchange their
shares for shares of other Putnam funds at net asset value
beginning 15 days after purchase. Other shareholders of the
Money Market Fund may need to pay a sales charge, which varies
depending on the fund in which they exchange and the amount
exchanged. Shareholders of the Money Market Fund exchanging into
funds with more than one class of shares may exchange their
shares only for class A shares of the other fund. Shareholders
of the Income Fund may exchange their shares only for shares of
the same class. Not all Putnam funds offer all classes of
shares. If you exchange shares subject to a CDSC, the
transaction will not be subject to the CDSC. However, when you
redeem the shares acquired through the exchange, the redemption
may be subject to the CDSC, depending upon when you originally
purchased the shares. The CDSC will be computed using the
schedule of any fund into or from which you have exchanged your
shares that would result in your paying the highest CDSC
applicable to your class of shares. For purposes of computing
the CDSC, the length of time you have owned your shares will be
measured from the date of original purchase and will not be
affected by any exchange.
To exchange your shares, simply complete an Exchange
Authorization Form and send it to Putnam Investor Services. The
form is available from Putnam Investor Services. For federal
income tax purposes, an exchange is treated as a sale of shares
and generally results in a capital gain or loss. A Telephone
Exchange Privilege is currently available for amounts up to
$500,000. Putnam Investor Services' procedures for telephonic
transactions are described above under "How to sell shares." The
Telephone Exchange Privilege is not available if you were issued
certificates for shares that remain outstanding. Ask your
investment dealer or Putnam Investor Services for prospectuses of
other Putnam funds. Shares of certain Putnam funds are not
available to residents of all states.
The exchange privilege is not intended as a vehicle for short-
term trading. Excessive exchange activity may interfere with
portfolio management and have an adverse effect on all
shareholders. In order to limit excessive exchange activity and
in other circumstances where Putnam Management or the Trustees
believe doing so would be in the best interests of your
fund, each fund reserves the right to revise or terminate the
exchange privilege, limit the amount or number of exchanges or
reject any exchange. Consult Putnam Investor Services
before requesting an exchange. See the SAI to find out more
about the exchange privilege.
HOW A FUND VALUES ITS SHARES
General. The Money Market Fund calculates the net asset value of
a share, and the Income Fund calculates the net asset value of a
share of each class, by dividing the total value of
assets attributable to the fund or class , less liabilities
attributable to the fund or class , by the number of shares
of such fund or class outstanding. Shares are valued as
of the close of regular trading on the New York Stock Exchange
each day the Exchange is open.
The Income Fund. California tax-exempt securities are valued on
the basis of valuations provided by a pricing service approved by
the Trustees, which uses information with respect to transactions
in bonds, quotations from bond dealers, market transactions in
comparable securities and various relationships between
securities in determining value.
The fund believes that reliable market quotations are generally
not readily available for purposes of valuing its portfolio
securities. As a result, it is likely that most of the
valuations provided by a pricing service will be based upon fair
value determined on the basis of the factors listed above.
Non-tax-exempt securities for which market quotations are readily
available are valued at market value. Short-term investments
that will mature in 60 days or less are valued at amortized cost,
which approximates market value. All other securities and assets
are valued at their fair value following procedures approved by
the Trustees.
The Money Market Fund. The Money Market Fund values its
portfolio investments at amortized cost according to Rule 2a-7 of
the 1940 Act. 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.
HOW EACH FUND MAKES DISTRIBUTIONS TO SHAREHOLDERS; TAX
INFORMATION
The Income Fund. The fund declares all of its net interest
income as a distribution on each day it is open for business.
Net interest income consists of interest accrued on portfolio
investments of the fund, less accrued expenses, computed in each
case since the most recent determination of net asset value.
Normally, the fund pays distributions of net interest income
monthly. The fund will distribute at least annually all net
realized capital gains, if any, after applying any available
capital loss carryovers. Distributions paid by the fund with
respect to class A shares will generally be greater than those
paid with respect to class B and class M shares because expenses
attributable to class B and class M shares will generally be
higher.
You begin earning distributions on the business day
Putnam Mutual Funds receives payment for your shares. It is your
responsibility to see that your dealer forwards payment promptly.
The Money Market Fund. The fund determines its net income once
each day the New York Stock Exchange is open, as of the close of
regular trading on the Exchange. Each determination of the
fund's net income includes (i) all accrued interest on portfolio
investments of the fund, (ii) plus or minus all realized and
unrealized gains and losses on the fund's investments, (iii) less
all accrued expenses of the fund. (The fund will not have
unrealized gains or losses so long as it values its investments
by the amortized cost method.) All of the net income of the fund
is declared each day that the fund is open for business as a
dividend to shareholders of record at the time of each
declaration. Shareholders begin earning dividends on the day
after the fund accepts their orders. Normally the fund's
dividends will be paid monthly . Since the net income of
the fund is declared as a dividend each time it is determined,
the net asset value per share of the fund remains at $1.00
immediately after each determination and dividend declaration.
You can choose from these distribution options:
- - (Both funds) Reinvest all distributions in additional shares
of your fund without a sales charge;
- - (Income Fund only) Receive distributions from net investment
income in cash while reinvesting capital gains distributions
in additional shares without a sales charge; or
- - (Both funds) Receive all distributions in cash.
You can change your distribution option by notifying Putnam
Investor Services in writing. If you do not select an option
when you open your account, all distributions will be reinvested.
All distributions not paid in cash will be reinvested in shares
of the class on which the distributions are paid. You will
receive a statement confirming reinvestment of distributions in
additional shares (or in shares of other Putnam funds for
Dividends Plus accounts) promptly following the quarter in which
the reinvestment occurs.
If a check representing a fund distribution is not cashed within
a specified period, Putnam Investor Services will notify you that
you have the option of requesting another check or reinvesting
the distribution in the fund or in another Putnam fund. If
Putnam Investor Services does not receive your election, the
distribution will be reinvested in the fund. Similarly, if
correspondence sent by a fund or Putnam Investor Services is
returned as "undeliverable," fund distributions will
automatically be reinvested in that fund or in another Putnam
fund.
Each fund intends to qualify as a "regulated investment company"
for federal income tax purposes and to meet all other
requirements necessary for it to be relieved of federal taxes on
income and gains it distributes to shareholders. Each fund will
distribute substantially all of its ordinary income and capital
gain net income on a current basis.
Fund distributions designated as "exempt-interest dividends" are
not generally subject to federal income tax. In addition, to the
extent that distributions are derived from interest on California
tax-exempt securities, such distributions will be exempt from
California personal income tax (but not from California franchise
and corporate income tax). However, if you receive social
security or railroad retirement benefits, you should consult your
tax adviser to determine what effect, if any, an investment in a
fund may have on the federal taxation of your benefits.
California does not tax any portion of social security or
railroad retirement benefits. In addition, an investment in a
fund may result in liability for federal alternative minimum tax,
both for individual and corporate shareholders.
The Income Fund may at times purchase California tax-exempt
securities at a discount from the price at which they were
originally issued, especially during periods of rising interest
rates. For federal income tax and California personal income tax
purposes, some or all of this market discount will be included in
the fund's ordinary income and will be taxable to you as
such when it is distributed to you .
All distributions other than exempt-interest dividends
will be taxable to you as ordinary income , except that any
distributions of net long-term capital gains will be taxable
as such, regardless of how long you have held your
shares. Distributions will be taxable as described above whether
received in cash or in shares through the reinvestment of
distributions.
For California personal income tax purposes, distributions
derived from sources other than interest on (i)
California tax-exempt securities and (ii) obligations of the
United States (or other obligations) which pay interest exempt
from California personal income taxation under the Constitution
or laws of the United States will be taxable as ordinary income
or as long-term capital gain , whether paid in cash or
reinvested in additional shares.
Early in each year Putnam Investor Services will notify you of
the amount and tax status of distributions paid to you for the
preceding year.
The foregoing is a summary of certain federal and California
income tax consequences of investing in a fund . You
should consult your tax adviser to determine the precise effect
of an investment in a fund on your particular tax
situation (including possible liability for federal alternative
minimum tax and state and local taxes).
About Putnam Investments, Inc.
Putnam Management has been managing mutual funds since 1937.
Putnam Mutual Funds is the principal underwriter of the
funds and of other Putnam funds. Putnam Fiduciary Trust
Company is the custodian of the funds . Putnam
Investor Services, a division of Putnam Fiduciary Trust Company,
is the investor servicing and transfer agent for the
funds .
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., which is
wholly owned by Marsh & McLennan Companies, Inc., a publicly-
owned holding company whose principal businesses are
international insurance and reinsurance brokerage, employee
benefit consulting and investment management.
Appendix
SECURITIES RATINGS
The following rating services describe rated securities as
follows:
Moody's Investors Service, Inc.
Bonds
Aaa -- Bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk and
are generally referred to as "gilt edged ."
Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality
by all standards. Together with the Aaa group they comprise what
are generally known as high grade bonds. They are rated
lower than the best bonds because margins of protection may not
be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat
larger than the Aaa securities.
A -- Bonds which are rated A possess many favorable investment
attributes and are to be considered as upper-medium-grade
obligations. Factors giving security to principal and interest
are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the
future.
Baa -- Bonds which are rated Baa are considered as medium grade
obligations , (i.e., they are neither highly protected nor
poorly secured). Interest payments and principal security appear
adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as
well.
Ba -- Bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured.
Often the protection of interest and principal payments may be
very moderate , and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal
payments or of maintenance of other terms of the contract over
any long period of time may be small.
Notes
MIG 1/VMIG 1 -- This designation denotes best quality. There is
present strong protection by established cash flows, superior
liquidity support or demonstrated broad-based access to the
market for refinancing.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins
of protection are ample although not so large as in the preceding
group.
Commercial paper
Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by the following characteristics:
- -- Leading market positions in well established industries.
- -- High rates of return on funds employed.
- -- Conservative capitalization structure with moderate
reliance on debt and ample asset protection.
- -- Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
- -- Well established access to a range of financial markets and
assured sources of alternate liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
Standard & Poor's
Bonds
AAA -- Debt rated 'AAA' has the highest rating assigned by
Standard & Poor's. Capacity to pay interest and repay principal
is extremely strong.
AA -- Debt rated 'AA' has a very strong capacity to pay interest
and repay principal and differs from the higher rated issues only
in small degree.
A -- Debt rated 'A' has a strong capacity to pay interest and
repay principal although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions than debt in higher rated categories.
BBB -- Debt rated 'BBB' is regarded as having an adequate
capacity to pay interest and repay principal. Whereas it
normally exhibits adequate protection parameters, adverse
economic conditions or changing circumstances are more likely to
lead to a weakened capacity to pay interest and repay principal
for debt in this category than in higher rated categories.
BB-B-CCC-CC-C -- Debt rated 'BB', 'B', 'CCC', 'CC' and 'C' is
regarded, on balance, as predominantly speculative with respect
to capacity to pay interest and repay principal in accordance
with the terms of the obligation. 'BB' indicates the lowest
degree of speculation and 'C' the highest. While such debt will
likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major exposures to
adverse conditions.
BB -- Debt rated `BB' has less near-term vulnerability to default
than other speculative issues. However, it faces major ongoing
uncertainties or exposure to adverse business, financial, or
economic conditions which could lead to inadequate capacity to
meet timely interest and principal payments. The `BB' rating
category is also used for debt subordinated to senior debt that
is assigned an actual or implied `BBB-' rating.
B -- Debt rated 'B' has a greater vulnerability to default but
currently has the capacity to meet interest payments and
principal repayments. Adverse business, financial, or economic
conditions will likely impair capacity or willingness to pay
interest and repay principal. The 'B' rating category is also
used for debt subordinated to senior debt that is assigned an
actual or implied 'BB' or 'BB-' rating.
Notes
SP-1 -- Strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety
characteristics are given a plus sign (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest .
SP-3 -- Speculative capacity to pay principal and interest.
Commercial paper
A-1 -- This highest category indicates that the degree of safety
regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted with
a plus sign (+) designation.
A-2 -- Capacity for timely payment on issues with this
designation is satisfactory. However, the relative degree of
safety is not as high as for issues designated `A-1'.
A-3 -- Issues carrying this designation have adequate capacity
for timely payment. They are, however, more vulnerable to the
adverse effects of changes in circumstances than obligations
carrying the higher designations.
Duff & Phelps Corporation
Long-Term Debt
AAA -- Highest credit quality. The risk factors are negligible,
being only slightly more than for risk-free U.S. Treasury debt.
AA+, AA, AA- -- High credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time
because of economic conditions.
A+, A, A- -- Protection factors are average but adequate.
However, risk factors are more variable and greater in periods of
economic stress.
BBB+, BBB, BBB- -- Below-average protection factors but still
considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial
protection factors fluctuate according to industry conditions or
company fortunes. Overall quality may move up or down frequently
within this category.
B+, B, B- -- Below investment grade and possessing risk that
obligations will not be met when due. Financial protection
factors will fluctuate widely according to economic cycles,
industry conditions and/or company fortunes. Potential exists
for frequent changes in the rating within this category or into a
higher or lower rating grade.
Fitch Investors Service, Inc.:
AAA -- Bonds considered to be investment grade and of the highest
credit quality. The obligor has an exceptionally strong ability
to pay interest and repay principal, which is unlikely to be
affected by reasonably foreseeable events.
AA -- Bonds considered to be investment grade and of very high
credit quality. The obligor's ability to pay interest and repay
principal is very strong, although not quite as strong as bonds
rated AAA.
A -- Bonds considered to be investment grade and of high credit
quality. The obligor's ability to pay interest and repay
principal is considered to be strong, but may be more vulnerable
to adverse changes in economic conditions and circumstances than
bonds with higher ratings.
BBB -- Bonds considered to be investment grade and of
satisfactory credit quality. The obligor's ability to pay
interest and repay principal is considered to be adequate.
Adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds,
and therefore impair timely payment. The likelihood that the
ratings of these bonds will fall below investment grade is higher
than for bonds with higher ratings.
BB -- Bonds considered to be speculative. The obligor's ability
to pay interest and repay principal may be affected over time by
adverse economic changes. However, business and financial
alternatives can be identified which could assist the obligor in
satisfying its debt service requirements.
B -- Bonds are considered highly speculative. Bonds in this class
are lightly protected as to the obligor's ability to pay interest
over the life of the issue and repay principal when due.
Glossary of terms
Bond An IOU issued by a government or corporation
that usually pays interest.
- -----------------------------------------------------------------
Capital A rise in an investment's principal value.
appreciation Also used to describe the investment objective
of a mutual fund whose primary criterion for
choosing securities is the potential to rise
in value rather than to provide dividend
income.
- -----------------------------------------------------------------
Capital A profit or loss on the sale of securities
gain/loss (generally stocks or bonds).
- -----------------------------------------------------------------
Class A, B, M Types of shares, each class offering
shares investors a different way to pay sales charges
and distribution fees. A fund's prospectus
explains the availability and attributes of
each type.
- -----------------------------------------------------------------
Common A unit of ownership of a corporation.
stock
- -----------------------------------------------------------------
Contingent A charge applied at the time of redemption of
deferred certain mutual fund shares, rather than at the
sales charge time of purchase. A fund's CDSC generally
(CDSC) declines each year after purchase, until it no
longer applies.
- -----------------------------------------------------------------
Cost basis The purchase price of mutual fund shares for
tax purposes, adjusted for such things as
share splits, distributions, and return of
capital distributions.
- -----------------------------------------------------------------
Declaration The date on which the Trustees approve the
date amount of a mutual fund's next distribution.
- -----------------------------------------------------------------
Distribution A payment from a mutual fund to shareholders.
It may include interest from bonds and
dividends from stocks (dividend
distributions). It may also include profits
from the sale of securities from the fund's
portfolio (capital gains distributions).
- -----------------------------------------------------------------
Diversification Investing in a number of securities to reduce
the effect of any one investment going bad. A
basic premise of mutual fund investing.
- -----------------------------------------------------------------
Dividend For mutual fund shares, a payment derived
solely from dividends or interest paid on
securities held in the portfolio (i.e. not
including capital gains).
- -----------------------------------------------------------------
Equity Securities representing ownership in a
securities corporation. Common stock and preferred stock
are equity securities.
- -----------------------------------------------------------------
Ex-dividend The date on or after which a new shareholder
date will not receive the fund's next distribution.
For Putnam funds, it is the same as the record
date.
- -----------------------------------------------------------------
Fiscal year Typically an accounting period of 365 days
(366 days in leap years) for which a mutual
fund prepares financial statements and
performance data. For administrative reasons,
it often differs from a calendar year.
- -----------------------------------------------------------------
Fixed-income Securities that pay an unchanging rate of
securities interest or dividends. Bonds, notes, bills,
money market instruments, and preferred stocks
may all be considered fixed-income securities.
- -----------------------------------------------------------------
Net asset The value of one share of a mutual fund
value (NAV) without regard to sales charges. Some bond
funds aim for a steady NAV, representing
stability; most stock funds aim to raise NAV,
representing growth in the value of an
investment.
- -----------------------------------------------------------------
Payable date The date on which a mutual fund pays its
distributions to shareholders.
- -----------------------------------------------------------------
Public The purchase price of one class A share or
offering price class M share of a mutual fund, including the
(POP) applicable up-front sales charge.
- -----------------------------------------------------------------
Record date The date used to determine which shareholders
are entitled to a distribution. After the
record date, shares are sold "ex-dividend," or
without the dividend. For Putnam funds, the
ex-dividend date is the same as the record
date.
- -----------------------------------------------------------------
Total return A measure of performance showing the change in
the value of an investment over a given
period, assuming all earnings are reinvested .
- -----------------------------------------------------------------
Yield The percentage rate at which a fund has earned
income from its investments over the indicated
period. "Dividend rate" is a current return
that includes interest and dividend income,
net of all fund expenses. "Distribution rate"
is a current return that includes short-term
capital gains, as well as net investment
income. "SEC yield" is a current return based
on net investment income over a recent 30-day
period, computed on a yield-to-maturity basis,
which may differ from net investment income as
determined for financial reporting purposes.
All of these returns are calculated by
annualizing the dividends or distributions
over the indicated period and dividing by the
price of a share at the end of the period.
Make the most of your Putnam privileges
As a Putnam mutual fund shareholder , you have access to
a number of services that can help you build a more effective and
flexible financial program. Here are some of the ways you can use
these privileges to make the most of your Putnam mutual fund
investment.
SYSTEMATIC INVESTMENT PLAN
Invest as much as you wish ($25 or more) on any business
day of the month except for the 29th, 30th, or 31st. The amount
will be automatically transferred monthly from your
checking or savings account.
SYSTEMATIC WITHDRAWAL
Make regular withdrawals of $50 or more monthly,
quarterly, or semiannually from an account valued at $10,000 or
more. Your automatic withdrawal may be made on any
business day of the month except for the 29th, 30th, or 31st.
SYSTEMATIC EXCHANGE
Transfer assets automatically from one Putnam account to
another on a regular, prearranged basis. There is no additional
charge for this service.
FREE EXCHANGE PRIVILEGE
Exchange money between Putnam funds in the same class of
shares without charge. The exchange privilege allows you to
adjust your investments as your objectives change. A signature
guarantee is required for exchanges of more than $500,000 and
shares of all Putnam funds may not be available to all investors.
DIVIDENDS PLUS
Diversify your portfolio by investing dividends and other
distributions from one Putnam fund automatically into another at
net asset value.
STATEMENT OF INTENTION
To reduce a front-end sales charge, you may agree to invest a
minimum dollar amount over 13 months. Depending on your fund,
the minimum is $25,000, $50,000, or $100,000. Whenever you make
an investment under this arrangement, you or your investment
advisor should notify Putnam that a Statement of Intention is in
effect .
Investors may not maintain, within the same fund, simultaneous
plans for systematic investment or exchange (into the
fund) and systematic withdrawal or exchange (out of the
fund) . These privileges are subject to change or
termination.
For more information about any of these services and privileges,
call your investment advisor or a Putnam customer service
representative toll - free at 1 - 800 - 225 -
1581.
Putnam Family of Funds *
PUTNAM GROWTH FUNDS
Putnam Asia Pacific Growth Fund
Putnam Capital Appreciation Fund
Putnam Diversified Equity Trust
Putnam Emerging Markets Fund
Putnam Europe Growth Fund
Putnam Global Growth Fund
Putnam Global Natural Resources Fund
Putnam Health Sciences Trust
Putnam International Growth Fund
Putnam International New Opportunities Fund
Putnam International Voyager Fund
Putnam Investors Fund
Putnam New Opportunities Fund
Putnam OTC & Emerging Growth Fund+
Putnam Vista Fund
Putnam Voyager Fund
Putnam Voyager Fund II
PUTNAM GROWTH AND INCOME FUNDS
Putnam Balanced Retirement Fund
Putnam Convertible Income-Growth Trust
Putnam Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Putnam Growth and Income Fund II
Putnam International Growth and Income Fund
Putnam New Value Fund
Putnam Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Putnam American Government Income Fund
Putnam Diversified Income Trust
Putnam Diversified Income Trust II
Putnam Federal Income Trust
Putnam Global Governmental Income Trust
Putnam High Yield Advantage Fund
Putnam High Yield Total Return Fund
Putnam High Yield Trust++
Putnam Income Fund
Putnam Intermediate U.S. Government Income Fund
Putnam Preferred Income Fund
Putnam U.S. Government Income Trust
PUTNAM TAX-FREE INCOME FUNDS
Putnam Municipal Income Fund
Putnam Tax Exempt Income Fund
Putnam Tax-Free High Yield Fund
Putnam Tax-Free Insured Fund
Putnam State tax-free income funds+++
Arizona, California, Florida, Massachusetts,
Michigan, Minnesota, New Jersey, New York,
Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that
spread your money across a variety of stocks, bonds, and money
market investments seeking to help maximize your return and
reduce your risk.
The three portfolios:
Balanced Portfolio
Conservative Portfolio
Growth Portfolio
PUTNAM MONEY MARKET FUNDS **
Putnam Money Market Fund
Putnam California Tax Exempt Money Market Fund
Putnam New York Tax Exempt Money Market Fund
Putnam Tax Exempt Money Market Fund
*As of 1/1/97.
+Formerly Putnam OTC Emerging Growth Fund
++Closed to new investors.
+++Not available in all states.
**Investments in money market funds are neither insured nor
guaranteed by the U.S. government. These funds are managed to
maintain a steady net asset value of $1.00 per share, although
there is no assurance this net asset value will be maintained in
the future.
Please call your financial advisor or Putnam to obtain a
prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Read it carefully
before you invest or send money.
PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, MA 02109
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
INVESTOR SERVICING AGENT
Putnam Investor Services
Mailing address:
P.O. Box 41203
Providence, RI 02940-1203
CUSTODIAN
Putnam Fiduciary Trust Company
One Post Office Square
Boston, MA 02109
LEGAL COUNSEL
Ropes & Gray
One International Place
Boston, MA 02110
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
PUTNAMINVESTMENTS
One Post Office Square
Boston, Massachusetts 02109
Toll-free 1-800-225-1581
PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
FORM N-1A
PART B
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
January 30, 1997
This SAI is not a prospectus and is only authorized for
distribution when accompanied or preceded by the prospectus of
Putnam California Tax Exempt Income Fund (the "Income
Fund") and Putnam California Tax Exempt Money Market Fund
(the "Money Market Fund") dated January 30, 1997 , as
revised from time to time. This SAI contains information which
may be useful to investors but which is not included in the
prospectus. The Income Fund and the Money Market Fund are
referred to in this SAI as the "funds." If a fund has more than
one form of current prospectus, each reference to the
prospectus in this SAI shall include all of the fund's
prospectuses, unless otherwise noted. The SAI should be read
together with the applicable prospectus. Investors may obtain a
free copy of the applicable prospectus from Putnam Investor
Services, Mailing address: P.O. Box 41203, Providence, RI 02940-
1203.
Part I of this SAI contains specific information about the funds.
Part II includes information about the funds and the other Putnam
funds.
Table of Contents
Part I Page
CALIFORNIA TAX-EXEMPT SECURITIES I-3
INVESTMENT RESTRICTIONS I-6
CHARGES AND EXPENSES I- 8
AMORTIZED COST VALUATION AND DAILY DIVIDENDS (THE MONEY MARKET
FUND) I-14
INVESTMENT PERFORMANCE I- 16
ADDITIONAL OFFICERS I- 19
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS I- 20
Part II
MISCELLANEOUS INVESTMENT PRACTICES II-1
TAXES II- 29
MANAGEMENT II- 34
DETERMINATION OF NET ASSET VALUE II- 44
HOW TO BUY SHARES II- 45
DISTRIBUTION PLANS II- 57
INVESTOR SERVICES II- 58
SIGNATURE GUARANTEES II- 64
SUSPENSION OF REDEMPTIONS II- 64
SHAREHOLDER LIABILITY II- 64
STANDARD PERFORMANCE MEASURES II- 65
COMPARISON OF PORTFOLIO PERFORMANCE II- 66
DEFINITIONS II- 71
SAI
PART I
CALIFORNIA TAX-EXEMPT SECURITIES
General description. As used in the prospectus and in this SAI,
the term "California tax-exempt securities" includes debt
obligations issued by California, its political subdivisions (for
example, counties, cities, towns, districts and
authorities) and their agencies, instrumentalities or other
governmental units, the interest from which is, in the opinion of
bond counsel, exempt from federal income tax and California
personal income tax. Such obligations are issued to obtain funds
for various public purposes, including the construction of a wide
range of public facilities, such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets, and
water and sewer works. Other public purposes for which
California tax-exempt securities may be issued include the
refunding of outstanding obligations or the payment of general
operating expenses.
Short-term California tax-exempt securities are generally
issued by state and local governments and public authorities as
interim financing in anticipation of tax collections, revenue
receipts, or bond sales to finance such public purposes.
In addition, certain types of "private activity" bonds may be
issued by public authorities to finance such projects as
privately operated housing facilities and certain local
facilities for water supply, gas, electricity , sewage or
solid waste disposal, student loans, or the obtaining of funds to
lend to public or private institutions for the construction of
facilities such as educational, hospital and housing facilities.
Such obligations are included within the term California tax-
exempt securities if the interest paid thereon is, in the opinion
of bond counsel, exempt from federal income tax and California
personal income tax (such interest may, however, be subject to
federal alternative minimum tax). Other types of private
activity bonds, the proceeds of which are used for the
construction, repair or improvement of, or to obtain equipment
for, privately operated industrial or commercial facilities, may
constitute California tax-exempt securities, although the current
federal tax laws place substantial limitations on the size of
such issues.
Participation interests. The Money Market Fund may invest in
California tax-exempt securities either by purchasing them
directly or by purchasing certificates of accrual or similar
instruments evidencing direct ownership of interest payments or
principal payments, or both, on California tax-exempt securities,
provided that, in the opinion of counsel to the initial seller of
each such certificate or instrument, any discount accruing on a
certificate or instrument that is purchased at a yield not
greater than the coupon rate of interest on the related
California tax-exempt securities will be exempt from federal
income tax to the same extent as interest on such securities.
The Money Market Fund may also invest in California tax-exempt
securities by purchasing from banks participation interests in
all or part of specific holdings of California tax-exempt
securities. These participations may be backed in whole or in
part by an irrevocable letter of credit or guarantee of the
selling bank. The selling bank may receive a fee from the Money
Market Fund in connection with the arrangement. The Money Market
Fund will not purchase such participation interests unless it
receives an opinion of counsel or a ruling of the Internal
Revenue Service that interest earned by it on California tax-
exempt securities in which it holds such participation interests
is exempt from federal income tax. The Money Market Fund does
not expect to invest more than 5% of its assets in participation
interests.
Stand-by commitments. When a fund purchases California tax-
exempt securities, it has the authority to acquire stand-by
commitments from banks and broker-dealers with respect to those
California tax-exempt securities. A stand-by commitment may be
considered a security independent of the California tax-exempt
security to which it relates. The amount payable by a bank or
dealer during the time a stand-by commitment is exercisable,
absent unusual circumstances, would be substantially the same as
the market value of the underlying California tax-exempt security
to a third party at any time. Each fund expects that stand-by
commitments generally will be available without the payment of
direct or indirect consideration. The funds do not expect to
assign any value to stand-by commitments.
Yields. The yields on California tax-exempt securities depend on
a variety of factors, including general money market conditions,
effective marginal tax rates, the financial condition of the
issuer, general conditions of the California tax-exempt security
market, the size of a particular offering, the maturity of the
obligation and the rating of the issue. The ratings of Moody's
Investors Service, Inc. and Standard & Poor's
represent their opinions as to the quality of the California tax-
exempt securities which they undertake to rate. It should be
emphasized, however, that ratings are general and are not
absolute standards of quality. Consequently, California tax-
exempt securities with the same maturity and interest rate but
with different ratings may have the same yield. Yield
disparities may occur for reasons not directly related to the
investment quality of particular issues or the general movement
of interest rates, due to such factors as changes in the overall
demand or supply of various types of California tax-exempt
securities or changes in the investment objectives of investors.
Subsequent to purchase by a fund, an issue of California tax-
exempt securities or other investments may cease to be rated or
its rating may be reduced below the minimum rating required for
purchase by such fund. Neither event will require the
elimination of an investment from the fund's portfolio, but
Putnam Management will consider such an event in its
determination of whether the fund should continue to hold an
investment in its portfolio.
"Moral obligation" bonds. The funds do not currently intend to
invest in so-called "moral obligation" bonds, where repayment is
backed by a moral commitment of an entity other than the issuer,
unless the credit of the issuer itself, without regard to the
"moral obligation," meets the investment criteria established for
investments by such fund.
Additional risks. Securities in which the funds may invest,
including California tax-exempt securities, are subject to the
provisions of bankruptcy, insolvency and other laws affecting the
rights and remedies of creditors, such as the federal Bankruptcy
Code (including special provisions related to municipalities and
other public entities), and laws, if any, which may be enacted by
Congress or state legislatures extending the time for payment of
principal or interest, or both, or imposing other constraints
upon enforcement of such obligations. There is also the
possibility that as a result of litigation or other conditions
the power, ability or willingness of issuers to meet their
obligations for the payment of interest and principal on their
California tax-exempt securities may be materially affected.
From time to time, proposals have been introduced before Congress
for the purpose of restricting or eliminating the federal income
tax exemption for interest on debt obligations issued by states
and their political subdivisions. Federal tax laws limit the
types and amounts of tax-exempt bonds issuable for certain
purposes, especially for industrial development bonds and private
activity bonds. Such limits may affect the future supply and
yields of these types of California tax-exempt securities.
Further proposals limiting the issuance of tax-exempt bonds may
well be introduced in the future. If it appeared that the
availability of California tax-exempt securities for investment
by a fund and the value of that fund's portfolio could be
materially affected by such changes in law, the Trustees of the
fund would reevaluate its investment objectives and policies and
consider changes in the structure of the fund or its dissolution.
INVESTMENT RESTRICTIONS
As fundamental investment restrictions, which may not be changed
without a vote of a majority of its outstanding voting
securities, a fund may not and will not:
(1) Borrow money in excess of 10% of the value (taken at the
lower of cost or current value) of its total assets (not
including the amount borrowed) at the time the borrowing is made,
and then only from banks as a temporary measure to facilitate the
meeting of redemption requests (not for leverage) which might
otherwise require the untimely disposition of portfolio
investments or for extraordinary or emergency purposes. Such
borrowings will be repaid before any additional investments are
purchased.
(2) Underwrite securities issued by other persons
except to the extent that, in connection with the disposition of
its portfolio investments, it may be deemed to be an underwriter
under certain federal securities laws.
(3) Purchase or sell real estate, although it may
purchase securities of issuers which deal in real estate,
securities which are secured by interests in real estate,
and securities which represent interests in real estate ,
and it may acquire and dispose of real estate or interests in
real estate acquired through the exercise of its rights as a
holder of debt obligations secured by real estate or interests
therein.
(4)(a) (California Tax Exempt Income Fund) Purchase or
sell commodities or commodity contracts , except that the fund
may purchase and sell financial futures contracts and options and
may enter into foreign exchange contracts and other financial
transactions not involving physical commodities.
(4)(b) (California Tax Exempt Money Market Fund) Purchase or sell
commodities or commodity contracts except financial futures
contracts and related options.
(5) Make loans, except by purchase of debt obligations
in which the fund may invest consistent with its investment
policies, by entering into repurchase agreements , or by
lending its portfolio securities.
(6) With respect to 75% of its total assets, invest in
the securities of any issuer if, immediately after such
investment, more than 5% of the total assets of the fund
( taken at current value ) would be invested in the
securities of such issuer; provided that this limitation does not
apply to obligations issued or guaranteed as to interest
or principal by the U.S. government or its agencies or
instrumentalities .
(7) Purchase securities (other than securities of
the U.S. government, its agencies or instrumentalities or tax-
exempt securities, except tax-exempt securities backed only by
the assets and revenues of nongovernmental issuers, if, as a
result of such purchase, more than 25% of the fund's
total assets would be invested in any one industry.
(8) With respect to 75% of its total assets, acquire
more than 10% of the outstanding voting securities of any
issuer.
(9) Issue any class of securities which is senior to
the fund's shares of beneficial interest , except for permitted
borrowings.
Although certain of the funds' fundamental investment
restrictions permit the funds to borrow money to a limited
extent, neither fund currently intends to do so and neither fund
did do so last year.
The Investment Company Act of 1940 provides that a "vote of a
majority of the outstanding voting securities" of a fund means
the affirmative vote of the lesser of (1) more than 50% of the
outstanding shares of such fund or (2) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares
are represented at the meeting in person or by proxy.
It is contrary to a fund's present policy, which may be
changed without shareholder approval, to:
Invest in (a) securities which are not readily marketable, (b)
securities restricted as to resale (excluding securities
determined by the Trustees of the fund (or the person designated
by the Trustees of the Trust to make such determinations) to be
readily marketable), and (c) repurchase agreements maturing in
more than seven days, if, as a result, more than 15% of the
fund's net assets (taken at current value) would be invested in
securities described in (a), (b) and (c) above.
-----------------------
All percentage limitations on investments (other than pursuant to
the non-fundamental restriction above) will apply at the time of
the making of an investment and shall not be considered violated
unless an excess or deficiency occurs or exists immediately after
and as a result of such investment.
CHARGES AND EXPENSES
Management fees
Each fund pays a quarterly fee to Putnam Management based
on the average net assets of that fund, as determined at the
close of each business day during the quarter, at the following
rates (expressed as a percentage of each fund's average net
assets):
Fund name Contract date Rates
Income Fund 1/20/97 0.60% of the first
$500 million
0.50% of the next $500 million
0.45% of the next $500 million
0.40% of the next $5 billion
0.375% of the next $5 billion
0.355% of the next $5 billion
0.34% of the next $5 billion
0.33% of any excess thereafter
Money Market Fund 1/20/97 0.45% of the
first $500 million
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
0.18% of any excess thereafter
Prior to January 20, 1997, pursuant to management contracts then
in effect, the management fees payable to Putnam Management were
paid at the following rates:
Fund name Contract date Rates
Income Fund 7/11/91 0.60% of the first
$500 million
0.50% of the next $500 million
0.45% of the next $500 million
0.40% of any amount over $1.5
billion
Money Market Fund 7/9/92 0.45% of the
first $500 million
0.35% of the next $500 million
0.30% of the next $500 million
0.25% of any amount over $1.5
billion
For the past three fiscal years, pursuant to the management
contracts then in effect , each fund incurred the following
fees:
Fiscal Management
year fee paid
------ ----------
Income Fund 1996 $16,367,611
1995 $15,817,546
1994 $16,608,364
Money Market Fund 1996 $155,509
1995 $214,060
1994 $217,108
Brokerage commissions
It is anticipated that most purchases and sales of
portfolio investments for the funds will be with the
issuer or with major dealers acting as principal. Accordingly,
it is not anticipated that either fund will pay significant
brokerage commissions. The following table shows brokerage
commissions paid by the Income Fund during the fiscal periods
indicated. During fiscal 1994 , 1995 and
1996 , the Money Market Fund paid no brokerage commissions.
Fiscal Brokerage
year commissions
------ ------------
Income Fund 1996 $339,534
1995 $226,174
1994 $0
The following table shows transactions placed by the Income
Fund with brokers and dealers during the most recent fiscal
year to recognize research, statistical and quotation services
received by Putnam Management and its affiliates.
Dollar
value Percent of
of these total Amount of
transactions transactions commissions
------------ ------------ -----------
Income Fund $26,753,320 0.83% $33,194
Administrative expense reimbursement
The funds reimbursed Putnam Management in the following
amounts for administrative services during fiscal 1996 ,
including the following amounts for compensation of certain
officers of the funds and contributions to the Putnam
Investments, Inc. Profit Sharing Retirement Plan for their
benefit:
Portion of total
reimbursement for
compensation
Total and
reimbursement contributions
------------- ----------------
Income Fund $39,517 $34,866
Money Market Fund $4,233 $3,735
Trustee fees
Each Trustee receives a fee for his or her services. Each
Trustee also receives fees for serving as Trustee of other Putnam
funds. The Trustees periodically review their fees to assure
that such fees continue to be appropriate in light of their
responsibilities as well as in relation to fees paid to trustees
of other mutual fund complexes. The Trustees meet monthly over a
two-day period, except in August. The Compensation Committee,
which consists solely of Trustees not affiliated with Putnam
Management and is responsible for recommending Trustee
compensation, estimates that Committee and Trustee meeting time
together with the appropriate preparation requires the equivalent
of at least three business days per Trustee meeting. The
following table shows the year each Trustee was first elected a
Trustee of the Putnam funds, the fees paid to each Trustee by
each fund for fiscal 1996 and the fees paid to each
Trustee by all of the Putnam funds during calendar 1996 :
<TABLE><CAPTION>
COMPENSATION TABLE
Pension
on
Estimated
retirement annual
Aggregate compensation (1) from:
benefits benefits
accrued
as
from
all
Income Money All
Putnam part of
fund Putnam funds
Trustees/Year Fund
Market Fund funds (4) expenses
(2)
upon retirement(3)
<S> <C> <C> <C>
<C> <C>
Jameson A. Baxter/1994 $4,719 $409 $172,291
$0
$76,499
Hans H. Estin/1972 4,694 408 171,291
0
77,333
John A. Hill/1985 (5) 4,686 408 170,791
0 77,416
Ronald J. Jackson/1996 (5)(6) 1,466 133 94,807
0
77,333
Elizabeth T. Kennan/1992 4,694 408 171,291
0
76,999
Lawrence J. Lasser/1992 4,658 406 169,791
0
77,083
Robert E. Patterson/1984 4,931 421 182,291
0
79,999
Donald S. Perkins/1982 4,669 407 170,291
0
76,833
William F. Pounds/1971 5,325(7)415 (7) 197,292
0
81,833
George Putnam/1957 4,694 408 171,291
0
77,333
George Putnam, III/1984 4,694 408 171,291
0
77,333
A.J.C. Smith/1986 4,658 406 169,791
0
76,249
W. Nicholas Thorndike/1992 4,913 419 181,291
0
79,833
(1) Includes an annual retainer and an attendance fee
for each
meeting attended.
(2) The Trustees approved a Retirement Plan for Trustees of
the Putnam
funds on October 1, 1996. Prior to that date,
voluntary retirement
benefits were paid to certain retired Trustees.
(3) Assumes that each Trustee retires at the normal retirement
date. Estimated
benefits for each Trustee are based on Trustee fee rates in
effect during
calendar 1996.
(4) As of December 31, 1996, there were
96 funds in the
Putnam family.
(5) Includes compensation deferred pursuant to
a Trustee
Compensation Deferral Plan. The total amount of
deferred
compensation payable by the Income Fund to
Mr. Hill and
Mr. Jackson as of September 30, 1996 was
$6,864 and
$1,535, respectively , including income earned
on such
amounts.
(6) Elected as a Trustee in May 1996.
(7) Includes additional compensation for service as Vice
Chairman of
the Putnam funds.
</TABLE>
Under a Retirement Plan for Trustees of the Putnam funds (the
"Plan"), each
Trustee who retires with at least five years of service as a
Trustee of the
funds is entitled to receive an annual retirement benefit
equal to one-half
of the average annual compensation paid to such Trustee for
the last three
years of service prior to retirement. This retirement benefit is
payable during
a Trustee's lifetime, beginning the year following retirement,
for a number of
years equal to such Trustee's years of service. A death benefit
is also
available under the Plan which assures that the Trustee and his
or her
beneficiaries will receive benefit payments for the lesser of an
aggregate
period of (i) ten years or (ii) such Trustee's total years of
service.
The Plan Administrator (a committee comprised of Trustees that
are not
"interested persons" of the fund, as defined in the Investment
Company Act of
1940) may terminate or amend the Plan at any time, but no
termination or
amendment will result in a reduction in the amount of benefits
(i) currently
being paid to a Trustee at the time of such termination or
amendment, or (ii) to
which a current Trustee would have been entitled to receive had
he or she
retired immediately prior to such termination or amendment.
For additional information concerning the Trustees, see
"Management" in Part II
of this SAI.
Share ownership
At December 31, 1996 , the officers and Trustees of each
fund as a group
owned less than 1% of the outstanding shares of that fund, (or,
in the case of
the Income Fund, any class of that fund), and, except as noted
below, to the
knowledge of each fund no person owned of record or beneficially
5% or more of
the shares (or in the case of the Income Fund, any
class ) of that
fund.
Shareholder name Percentage
Fund name Class and address owned
Income Fund A Merrill Lynch 10.00%
165 Broadway
1 Liberty Plaza
New York, NY 10006
Income Fund B Merrill Lynch 8.60%
165 Broadway
1 Liberty Plaza
New York, NY 10006
Distribution fees
During fiscal 1996 , the Income Fund paid the following
12b-1 fees to
Putnam Mutual Funds:
Class A Class B Class M
$6,381,441 $3,958,142 $30,333
Class A sales charges and contingent deferred sales charges
Putnam Mutual Funds received sales charges with respect to class
A shares of the
Income Fund in the following amounts during the periods
indicated:
Sales charges
retained by Putnam Contingent
Total Mutual Funds deferred
front-end after sales
sales charges dealer concessions charges
Fiscal year
1996 $5,303,919 $376,757 $32,314
1995 $4,813,579 $342,059 $91,127
1994 $10,267,664 $673,215 $0
Class B contingent deferred sales charges
Putnam Mutual Funds received contingent deferred sales charges
upon redemptions
of class B shares of the Income Fund in the following amounts
during the periods
indicated:
Contingent deferred
sales charges
Fiscal year
1996 $1,032,965
1995 $984,761
1994 $777,478
Class M sales charges
Putnam Mutual Funds received sales charges with respect to class
M shares of the
Income Fund in the following amount during the periods
indicated :
Sales charges
retained by Putnam
Mutual Funds
Total after
sales charges dealer concessions
Fiscal year
1996 $53,902 $5,189
1995 $22,103 $1,781
Investor servicing and custody fees and expenses
During the 1996 fiscal year, each fund incurred the
following fees and
out-of-pocket expenses for investor servicing and custody
services provided by
Putnam Fiduciary Trust Company:
Income Fund $2,496,367
Money Market Fund $63,549
AMORTIZED COST VALUATION AND DAILY DIVIDENDS (THE MONEY MARKET
FUND)
The valuation of the Money Market Fund's portfolio instruments at
amortized cost
is permitted in accordance with Securities and Exchange
Commission Rule 2a-7 and
certain procedures adopted by the Trustees. 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,
regardless of the effect of fluctuating interest rates on the
market value of
the instrument. Although the amortized cost method provides
certainty in
valuation, it may result at times in determinations of value that
are higher or
lower than the price the Money Market Fund would receive if the
instruments were
sold. Consequently, in the absence of circumstances described
below, changes in
the market value of portfolio instruments during periods of
rising or falling
interest rates will not be reflected either in the computation of
net asset
value of the Money Market Fund's portfolio or in the daily
computation of net
income. Under procedures adopted by the Trustees, the Money
Market Fund must
maintain a dollar-weighted average portfolio maturity of 90 days
or less,
purchase only instruments having remaining maturities of 397 days
or less and
invest in securities determined to be of high quality with
minimal credit risks.
The Trustees have also established procedures designed to
stabilize, to the
extent reasonably possible, the Money Market Fund's price per
share as computed
for the purpose of distribution, redemption and repurchase at
$1.00. Such
procedures will include review of the Money Market Fund's
portfolio holdings by
the Trustees, at such intervals as they may deem appropriate, to
determine
whether the Money Market Fund's net asset value calculated by
using readily
available market quotations deviates from $1.00 per share, and,
if so, whether
such deviation may result in material dilution or is otherwise
unfair to
existing shareholders. In the event the Trustees determine that
such a
deviation exists, they will take such corrective action as they
regard as
necessary and appropriate, including the sale of portfolio
instruments prior to
maturity to realize capital gains or losses or to shorten average
portfolio
maturity; withholding dividends; redemption of shares in kind; or
establishing a
net asset value per share by using readily available market
quotations.
Since the net income of the Money Market Fund is declared as a
dividend each
time it is determined, the net asset value per share of the Money
Market Fund
remains at $1.00 per share immediately after such determination
and dividend
declaration. Any increase in the value of a shareholder's
investment in the
Money Market Fund representing the reinvestment of dividend
income is reflected
by an increase in the number of shares of the Money Market Fund
in the
shareholder's account on the fifth day of the next month (or, if
that day is not
a business day, on the next business day). It is expected that
the Money Market
Fund's net income will be positive each time it is determined.
However, if
because of realized losses on sales of portfolio investments, a
sudden rise in
interest rates, or for any other reason the net income of the
Money Market Fund
determined at any time is a negative amount, the Money Market
Fund will offset
such amount allocable to each shareholder's account from
dividends accrued
during the month with respect to such account. If at the time of
payment of a
dividend (either at the regular monthly dividend payment date,
or, in the case
of a shareholder who is withdrawing all or substantially all of
the shares in an
account, at the time of withdrawal), such negative amount exceeds
a
shareholder's accrued dividends, the Money Market Fund will
reduce the number of
outstanding shares by treating the shareholder as having
contributed to the
capital of the Money Market Fund that number of full and
fractional shares which
represent the amount of the excess. Each shareholder is deemed
to have agreed
to such contribution in these circumstances by his or her
investment in the
Money Market Fund.
INVESTMENT PERFORMANCE
Standard performance measures
(for periods ended 9/30/96)
Income Fund
Class A Class B Class M
Inception date: 4/29/83 1/4/93 2/14/95
Annualized
total return
1 year 1.71% 0.99% 3.03%
5 years 6.27%
10 years 7.26%
Life of class 4.97% 5.91%
Yield
30-day
Yield 4.93% 4.51% 4.71%
Tax-equivalent
yield* 9.00% 8.23% 8.60%
Money Market Fund
Inception date: 10/26/87
Annualized
total return
1 year 2.74%
5 years 2.40%
10 years
Life of fund 3.52%
Yield
30-day yield 2.76%
7-day
Yield 2.96%
Tax-equivalent
yield (7-day) 5.40%
Tax-equivalent
yield* (30-day)5.04%
* Assumes the maximum combined 45.22% federal and
state tax rate.
Results for investors subject to lower tax rates would not be as
advantageous.
Data represent past performance and are not indicative of future
results. Total
return and yield for class A and class M shares of the
Income Fund
reflect the deduction of the maximum sales charge of 4.75% and
3.25%,
respectively. Total return for class B shares of the
Income Fund
reflects the deduction of the applicable contingent deferred
sales charge
("CDSC") . The maximum class B CDSC is 5.0%. See
"Standard performance
measures" in Part II of this SAI for information on how
performance is
calculated. Past performance is no guarantee of future results.
EQUIVALENT YIELDS: TAX-EXEMPT VERSUS TAXABLE SECURITIES
The table below shows the effect of the tax status of California
tax-exempt
securities on the effective yield received by their individual
holders under the
federal income tax and California personal income tax laws
currently in effect
for 1996. It gives the approximate yield a taxable security must
earn at
various income levels to produce after-tax yields equivalent to
those of
California tax-exempt securities yielding 4.0%, 6.0% and
8.0% .
----------------------------------------------------------
- ------------
Combined
Taxable Income* California Tax-exempt yield
------------------------ and
- ------------------
federal
Joint*** Single*** rate** 4%
6%
8%
- -----------------------------------------------------------------
- -----
Equivalent taxable
yield
- -----------------------------------------------------------------
- -----
0 - 9,662 0 - 4,831 15.85% 4.75%
7.13%
9.51%
9,663 - 22,898 4,832 - 11,449 16.70% 4.80%
7.20%
9.60%
22,899 - 36,136 11,450 - 18,068 18.40% 4.90%
7.35%
9.80%
36,137 - 40,100 18,069 - 24,000 20.10% 5.01%
7.51%
10.01%
40,101 - 50,166 24,001 - 25,083 32.32% 5.91%
8.87%
11.82%
50,167 - 63,400 25,084 - 31,700 33.76% 6.04%
9.06%
12.08%
63,401 - 96,900 31,701 - 58,150 34.70% 6.13%
9.19%
12.25%
96,901 -147,70058,151 - 121,300
37.42% 6.39% 9.59% 12.78%
147,701 -263,750 12,301 - 263,750 41.95% 6.89%
10.34% 13.78%
over 263,751 over 263,751 45.22% 7.30% 10.95%
14.60%
- -----------------------------------------------------------------
- -----
* This amount represents taxable income as defined in the
Internal Revenue Code of 1986, as amended (the "Code"). It
assumed that taxable income as defined in the Code is the
same as under the California Revenue and Taxation Code;
however, California taxable income may differ due to
differences in exemptions, itemized deductions, and other
items.
** For federal tax purposes, these combined rates reflect the
marginal rates on taxable income currently in effect for
1996. For California personal income tax purposes, the table
reflects the tax rates currently in effect for 1996 ;
the brackets for 1997 may change due to the indexing
provisions of California law, and the 1997 California
personal income tax rates have not yet been released. (These
combined rates include the effect of deducting state
income taxes on your federal return.)
*** The amount of taxable income in certain brackets may be
affected by the phase-out of personal exemptions and the
limitation on itemized deductions based upon adjusted gross
income under the Code, and under the California Revenue and
Taxation Code.
Of course, there is no assurance that the funds will
achieve any specific tax-exempt yield. While it is expected that
the funds will invest principally in obligations which pay
interest exempt from federal income tax and California personal
income tax, other income received by the funds may be taxable.
The table does not take into account any state or local taxes
payable on fund distributions except for California personal
income tax.
ADDITIONAL OFFICERS
In addition to the persons listed as Income Fund or Money
Market Fund officers in Part II of this SAI, each of the
following persons is also a Vice President of each fund and
certain of the other Putnam funds , the total number
of which is noted parenthetically . Officers of Putnam
Management hold the same offices in Putnam Management's parent
company, Putnam Investments, Inc.
Gary N. Coburn (50) (58 funds) , Senior Managing Director
of Putnam Management.
Jerome J. Jacobs (38) (17 funds) , Managing Director of
Putnam Management. Prior to October, 1996, Mr. Jacobs was
Principal at The Vanguard Group.
William J. Curtin (36) (58 funds), Managing Director of Putnam
Management. Prior to August, 1996, Mr Curtin was Managing
Director of Lehman Brothers.
Blake E. Anderson (40) (15 funds), Managing Director of
Putnam Management.
William H. Reeves (53) (4 funds) , Senior Vice President of
Putnam Management.
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP, 160 Federal Street, Boston, MA 02110, are
each fund's independent accountants, providing audit
services, tax return review and other tax consulting services and
assistance and consultation in connection with the review of
various Securities and Exchange Commission filings. The Reports
of Independent Accountants, financial highlights and financial
statements included in the funds' Annual Reports for the fiscal
year ended September 30, 1996, each filed electronically
on December 2, 1996 (File No. 811-3630 for the
Income Fund and File No. 811-5333 for the Money Market
Fund ) , are incorporated by reference into this SAI. The
financial highlights included in the prospectus are incorporated
by reference into this SAI and the financial statements
incorporated by reference into the prospectus and this SAI have
been so included and incorporated in reliance upon the report of
the independent accountants, given on their authority as experts
in auditing and accounting.
<PAGE>
TABLE OF CONTENTS
MISCELLANEOUS INVESTMENT PRACTICES . . . . . . . . . . . . . . . . . . II-1
TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-29
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-34
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . .II-44
HOW TO BUY SHARES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-45
DISTRIBUTION PLANS . . . . . . . . . . . . . . . . . . . . . . . . . .II-57
INVESTOR SERVICES. . . . . . . . . . . . . . . . . . . . . . . . . . .II-58
SIGNATURE GUARANTEES . . . . . . . . . . . . . . . . . . . . . . . . .II-64
SUSPENSION OF REDEMPTIONS. . . . . . . . . . . . . . . . . . . . . . .II-64
SHAREHOLDER LIABILITY. . . . . . . . . . . . . . . . . . . . . . . . .II-64
STANDARD PERFORMANCE MEASURES. . . . . . . . . . . . . . . . . . . . .II-65
COMPARISON OF PORTFOLIO PERFORMANCE. . . . . . . . . . . . . . . . . .II-66
DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .II-71
<PAGE>
THE PUTNAM FUNDS
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
PART II
The following information applies generally to your fund and to
the other Putnam funds. In certain cases the discussion applies
to some but not all of the funds or their shareholders, and you
should refer to your prospectus to determine whether the matter
is applicable to you or your fund. You will also be referred to
Part I for certain information applicable to your particular
fund. Shareholders who purchase shares at net asset value
through employer-sponsored defined contribution plans should also
consult their employer for information about the extent to which
the matters described below apply to them.
MISCELLANEOUS INVESTMENT PRACTICES
Your fund's prospectus states which of the following investment
practices are available to your fund. The fact that your fund is
authorized to engage in a particular practice does not
necessarily mean that it will actually do so. You should
disregard any practice described below which is not mentioned in
the prospectus.
Short-term Trading
In seeking the fund's objectives(s), Putnam Management will buy
or sell portfolio securities whenever Putnam Management believes
it appropriate to do so. In deciding whether to sell a portfolio
security, Putnam Management does not consider how long the fund
has owned the security. From time to time the fund will buy
securities intending to seek short-term trading profits. A
change in the securities held by the fund is known as "portfolio
turnover" and generally involves some expense to the fund. This
expense may include brokerage commissions or dealer markups and
other transaction costs on both the sale of securities and the
reinvestment of the proceeds in other securities. If sales of
portfolio securities cause the fund to realize net short-term
capital gains, such gains will be taxable as ordinary income. As
a result of the fund's investment policies, under certain market
conditions the fund's portfolio turnover rate may be higher than
that of other mutual funds. Portfolio turnover rate for a fiscal
year is the ratio of the lesser of purchases or sales of
portfolio securities to the monthly average of the value of
portfolio securities -- excluding securities whose maturities at
acquisition were one year or less. The fund's portfolio turnover
rate is not a limiting factor when Putnam Management considers a
change in the fund's portfolio.
<PAGE>
Lower-rated Securities
The fund may invest in lower-rated fixed-income securities
(commonly known as "junk bonds"), to the extent described in the
prospectus. The lower ratings of certain securities held by the
fund reflect a greater possibility that adverse changes in the
financial condition of the issuer or in general economic
conditions, or both, or an unanticipated rise in interest rates,
may impair the ability of the issuer to make payments of interest
and principal. The inability (or perceived inability) of issuers
to make timely payment of interest and principal would likely
make the values of securities held by the fund more volatile and
could limit the fund's ability to sell its securities at prices
approximating the values the fund had placed on such securities.
In the absence of a liquid trading market for securities held by
it, the fund at times may be unable to establish the fair value
of such securities.
Securities ratings are based largely on the issuer's historical
financial condition and the rating agencies' analysis at the time
of rating. Consequently, the rating assigned to any particular
security is not necessarily a reflection of the issuer's current
financial condition, which may be better or worse than the rating
would indicate. In addition, the rating assigned to a security
by Moody's Investors Service, Inc. or Standard & Poor's (or by
any other nationally recognized securities rating organization)
does not reflect an assessment of the volatility of the
security's market value or the liquidity of an investment in the
security. See the prospectus or Part I of this SAI for a
description of security ratings.
Like those of other fixed-income securities, the values of
lower-rated securities fluctuate in response to changes in
interest rates. A decrease in interest rates will generally
result in an increase in the value of the fund's assets.
Conversely, during periods of rising interest rates, the value of
the fund's assets will generally decline. The values of lower-
rated securities may often be affected to a greater extent by
changes in general economic conditions and business conditions
affecting the issuers of such securities and their industries.
Negative publicity or investor perceptions may also adversely
affect the values of lower-rated securities. Changes by
recognized rating services in their ratings of any fixed-income
security and changes in the ability of an issuer to make payments
of interest and principal may also affect the value of these
investments. Changes in the value of portfolio securities
generally will not affect income derived from these securities,
but will affect the fund's net asset value. The fund will not
necessarily dispose of a security when its rating is reduced
below its rating at the time of purchase. However, Putnam
Management will monitor the investment to determine whether its
retention will assist in meeting the fund's investment
objective(s).
Issuers of lower-rated securities are often highly leveraged, so
that their ability to service their debt obligations during an
economic downturn or during sustained periods of rising interest
rates may be impaired. Such issuers may not have more
traditional methods of financing available to them and may be
unable to repay outstanding obligations at maturity by
refinancing. The risk of loss due to default in payment of
interest or repayment of principal by such issuers is
significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior
indebtedness.
At times, a substantial portion of the fund's assets may be
invested in securities as to which the fund, by itself or
together with other funds and accounts managed by Putnam
Management and its affiliates, holds all or a major portion.
Although Putnam Management generally considers such securities to
be liquid because of the availability of an institutional market
for such securities, it is possible that, under adverse market or
economic conditions or in the event of adverse changes in the
financial condition of the issuer, the fund could find it more
difficult to sell these securities when Putnam Management
believes it advisable to do so or may be able to sell the
securities only at prices lower than if they were more widely
held. Under these circumstances, it may also be more difficult
to determine the fair value of such securities for purposes of
computing the fund's net asset value. In order to enforce its
rights in the event of a default under such securities, the fund
may be required to participate in various legal proceedings or
take possession of and manage assets securing the issuer's
obligations on such securities. This could increase the fund's
operating expenses and adversely affect the fund's net asset
value. In the case of tax-exempt funds, any income derived from
the fund's ownership or operation of such assets would not be
tax-exempt. The ability of a holder of a tax-exempt security to
enforce the terms of that security in a bankruptcy proceeding may
be more limited than would be the case with respect to securities
of private issuers. In addition, the fund's intention to qualify
as a "regulated investment company" under the Internal Revenue
Code may limit the extent to which the fund may exercise its
rights by taking possession of such assets.
Certain securities held by the fund may permit the issuer at its
option to "call," or redeem, its securities. If an issuer were
to redeem securities held by the fund during a time of declining
interest rates, the fund may not be able to reinvest the proceeds
in securities providing the same investment return as the
securities redeemed.
If the fund's prospectus describes so-called "zero-coupon" bonds
and "payment-in-kind" bonds as possible investments, the fund may
invest without limit in such bonds unless otherwise specified in
the prospectus. Zero-coupon bonds are issued at a significant
discount from their principal amount in lieu of paying interest
periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in
cash or in additional bonds. Because zero-coupon and payment-in-
kind bonds do not pay current interest in cash, their value is
subject to greater fluctuation in response to changes in market
interest rates than bonds that pay interest currently. Both
zero-coupon and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments.
Accordingly, such bonds may involve greater credit risks than
bonds paying interest currently in cash. The fund is required to
accrue interest income on such investments and to distribute such
amounts at least annually to shareholders even though such bonds
do not pay current interest in cash. Thus, it may be necessary
at times for the fund to liquidate investments in order to
satisfy its dividend requirements.
To the extent the fund invests in securities in the lower rating
categories, the achievement of the fund's goals is more dependent
on Putnam Management's investment analysis than would be the case
if the fund were investing in securities in the higher rating
categories. This may be particularly true with respect to tax-
exempt securities, as the amount of information about the
financial condition of an issuer of tax-exempt securities may not
be as extensive as that which is made available by corporations
whose securities are publicly traded.
Investments in Miscellaneous Fixed-Income Securities
Unless otherwise specified in the prospectus or elsewhere in this
SAI, if the fund may invest in inverse floating obligations,
premium securities, or interest-only or principal-only classes of
mortgage-backed securities (IOs and POs), it may do so without
limit. The fund, however, currently does not intend to invest
more than 15% of its assets in inverse floating obligations or
more than 35% of its assets in IOs and POs under normal market
conditions.
Private Placements
The fund may invest in securities that are purchased in private
placements and, accordingly, are subject to restrictions on
resale as a matter of contract or under federal securities laws.
Because there may be relatively few potential purchasers for such
investments, especially under adverse market or economic
conditions or in the event of adverse changes in the financial
condition of the issuer, the fund could find it more difficult to
sell such securities when Putnam Management believes it advisable
to do so or may be able to sell such securities only at prices
lower than if such securities were more widely held. At times,
it may also be more difficult to determine the fair value of such
securities for purposes of computing the fund's net asset value.
Loan Participations
The fund may invest in "loan participations." By purchasing a
loan participation, the fund acquires some or all of the interest
of a bank or other lending institution in a loan to a particular
borrower. Many such loans are secured, and most impose
restrictive covenants which must be met by the borrower.
The loans in which the fund may invest are typically made by a
syndicate of banks, represented by an agent bank which has
negotiated and structured the loan and which is responsible
generally for collecting interest, principal, and other amounts
from the borrower on its own behalf and on behalf of the other
lending institutions in the syndicate and for enforcing its and
their other rights against the borrower. Each of the lending
institutions, including the agent bank, lends to the borrower a
portion of the total amount of the loan, and retains the
corresponding interest in the loan.
The fund's ability to receive payments of principal and interest
and other amounts in connection with loan participations held by
it will depend primarily on the financial condition of the
borrower. The failure by the fund to receive scheduled interest
of principal payments on a loan participation would adversely
affect the income of the fund and would likely reduce the value
of its assets, which would be reflected in a reduction in the
fund's net asset value. Banks and other lending institutions
generally perform a credit analysis of the borrower before
originating a loan or participating in a lending syndicate. In
selecting the loan participations in which the fund will invest,
however, Putnam Management will not rely solely on that credit
analysis, but will perform its own investment analysis of the
borrowers. Putnam Management's analysis may include
consideration of the borrower's financial strength and
experience, and managerial experience, debt coverage, additional
borrowing requirements or debt maturity schedules, changing
financial conditions, and responsiveness to changes in business
conditions and interest rates. Because loan participations in
which the fund may invest are not generally rated by independent
credit rating agencies, a decision by the fund to invest in a
particular loan participation will depend almost exclusively on
Putnam Management's credit analysis, and that of the original
lending institutions, of the borrower.
<PAGE>
Loan participations may be structured in different forms,
including novations, assignments, and participating interests.
In a novation, the fund assumes all of the rights of a lending
institution in a loan, including the right to receive payments of
principal and interest and other amounts directly from the
borrower and to enforce its rights as a lender directly against
the borrower. The fund assumes the position of a co-lender with
other syndicate members. As an alternative, the fund may
purchase an assignment of a portion of a lender's interest in a
loan. In this case, the fund may be required generally to rely
upon the assigning bank to demand payment and enforce its rights
against the borrower, but would otherwise be entitled to all of
such bank's rights in the loan. The fund may also purchase a
participating interest in a portion of the rights of a lending
institution in a loan. In such case, it will be entitled to
receive payments of principal, interest, and premium, if any, but
will not generally be entitled to enforce its rights directly
against the agent bank or the borrower, but must rely for that
purpose on the lending institution. The fund may also acquire a
loan participation directly by acting as a member of the original
lending syndicate.
The fund will in many cases be required to rely upon the lending
institution from which it purchases the loan participation to
collect and pass on to the fund such payments and to enforce the
fund's rights under the loan. As a result, an insolvency,
bankruptcy, or reorganization of the lending institution may
delay or prevent the fund from receiving principal, interest, and
other amounts with respect to the underlying loan. When the fund
is required to rely upon a lending institution to pay to the fund
principal, interest, and other amounts received by it, Putnam
Management will also evaluate the creditworthiness of the lending
institution.
The borrower of a loan in which the fund holds a participation
interest may, either at its own election or pursuant to terms of
the loan documentation, prepay amounts of the loan from time to
time. There is no assurance that the fund will be able to
reinvest the proceeds of any loan prepayment at the same interest
rate or on the same terms as those of the original loan
participation.
Corporate loans in which the fund may purchase a loan
participation are made generally to finance internal growth,
mergers, acquisitions, stock repurchases, leveraged buy-outs, and
other corporate activities. Under current market conditions,
most of the corporate loan participations purchased by the fund
will represent interests in loans made to finance highly
leveraged corporate acquisitions, known as "leveraged buy-out"
transactions. The highly leveraged capital structure of the
borrowers in such transactions may make such loans especially
vulnerable to adverse changes in economic or market conditions.
In addition, loan participations generally are subject to
restrictions on transfer, and only limited opportunities may
exist to sell such participations in secondary markets. As a
result, the fund may be unable to sell loan participations at a
time when it may otherwise be desirable to do so or may be able
to sell them only at a price that is less than their fair market
value.
Certain of the loan participations acquired by the fund may
involve revolving credit facilities under which a borrower may
from time to time borrow and repay amounts up to the maximum
amount of the facility. In such cases, the fund would have an
obligation to advance its portion of such additional borrowings
upon the terms specified in the loan participation. To the
extent that the fund is committed to make additional loans under
such a participation, it will at all times hold and maintain in a
segregated account liquid assets in an amount sufficient to meet
such commitments. Certain of the loan participations acquired by
the fund may also involve loans made in foreign currencies. The
fund's investment in such participations would involve the risks
of currency fluctuations described above with respect to
investments in the foreign securities.
Mortgage Related Securities
The fund may invest in mortgage-backed securities, including
collateralized mortgage obligations ("CMOs") and certain stripped
mortgage-backed securities. CMOs and other mortgage-backed
securities represent a participation in, or are secured by,
mortgage loans.
Mortgage-backed securities have yield and maturity
characteristics corresponding to the underlying assets. Unlike
traditional debt securities, which may pay a fixed rate of
interest until maturity, when the entire principal amount comes
due, payments on certain mortgage-backed securities include both
interest and a partial repayment of principal. Besides the
scheduled repayment of principal, repayments of principal may
result from the voluntary prepayment, refinancing, or foreclosure
of the underlying mortgage loans. If property owners make
unscheduled prepayments of their mortgage loans, these
prepayments will result in early payment of the applicable
mortgage-related securities. In that event the fund may be
unable to invest the proceeds from the early payment of the
mortgage-related securities in an investment that provides as
high a yield as the mortgage-related securities. Consequently,
early payment associated with mortgage-related securities may
cause these securities to experience significantly greater price
and yield volatility than that experienced by traditional fixed-
income securities. The occurrence of mortgage prepayments is
affected by factors including the level of interest rates,
general economic conditions, the location and age of the mortgage
and other social and demographic conditions. During periods of
falling interest rates, the rate of mortgage prepayments tends to
increase, thereby tending to decrease the life of mortgage-
related securities. During periods of rising interest rates, the
rate of mortgage prepayments usually decreases, thereby tending
to increase the life of mortgage-related securities. If the life
of a mortgage-related security is inaccurately predicted, the
fund may not be able to realize the rate of return it expected.
Mortgage-backed securities are less effective than other types of
securities as a means of "locking in" attractive long-term
interest rates. One reason is the need to reinvest prepayments
of principal; another is the possibility of significant
unscheduled prepayments resulting from declines in interest
rates. These prepayments would have to be reinvested at lower
rates. As a result, these securities may have less potential for
capital appreciation during periods of declining interest rates
than other securities of comparable maturities, although they may
have a similar risk of decline in market value during periods of
rising interest rates. Prepayments may also significantly shorten
the effective maturities of these securities, especially during
periods of declining interest rates. Conversely, during periods
of rising interest rates, a reduction in prepayments may increase
the effective maturities of these securities, subjecting them to
a greater risk of decline in market value in response to rising
interest rates than traditional debt securities, and, therefore,
potentially increasing the volatility of the fund.
Prepayments may cause losses on securities purchased at a
premium. At times, some of the mortgage-backed securities in
which the fund may invest will have higher than market interest
rates and therefore will be purchased at a premium above their
par value. Unscheduled prepayments, which are made at par, will
cause the fund to experience a loss equal to any unamortized
premium.
CMOs may be issued by a U.S. government agency or instrumentality
or by a private issuer. Although payment of the principal of,
and interest on, the underlying collateral securing privately
issued CMOs may be guaranteed by the U.S. government or its
agencies or instrumentalities, these CMOs represent obligations
solely of the private issuer and are not insured or guaranteed by
the U.S. government, its agencies or instrumentalities or any
other person or entity.
Prepayments could cause early retirement of CMOs. CMOs are
designed to reduce the risk of prepayment for investors by
issuing multiple classes of securities, each having different
maturities, interest rates and payment schedules, and with the
principal and interest on the underlying mortgages allocated
among the several classes in various ways. Payment of interest
or principal on some classes or series of CMOs may be subject to
contingencies or some classes or series may bear some or all of
the risk of default on the underlying mortgages. CMOS of
different classes or series are generally retired in sequence as
the underlying mortgage loans in the mortgage pool are repaid.
If enough mortgages are repaid ahead of schedule, the classes or
series of a CMO with the earliest maturities generally will be
retired prior to their maturities. Thus, the early retirement of
particular classes or series of a CMO held by the fund would have
the same effect as the prepayment of mortgages underlying other
mortgage-backed securities. Conversely, slower than anticipated
prepayments can extend the effective maturities of CMOs,
subjecting them to a greater risk of decline in market value in
response to rising interest rates than traditional debt
securities, and, therefore, potentially increasing the volatility
of the fund.
Prepayments could result in losses on stripped mortgage-backed
securities. Stripped mortgage-backed securities are usually
structured with two classes that receive different portions of
the interest and principal distributions on a pool of mortgage
loans. The fund may invest in both the interest-only or "IO"
class and the principal-only or "PO" class. The yield to
maturity on an IO class of stripped mortgage-backed securities is
extremely sensitive not only to changes in prevailing interest
rates but also to the rate of principal payments (including
prepayments) on the underlying assets. A rapid rate of principal
prepayments may have a measurable adverse effect on the fund's
yield to maturity to the extent it invests in IOs. If the assets
underlying the IO experience greater than anticipated prepayments
of principal, the fund may fail to recoup fully its initial
investment in these securities. Conversely, POs tend to increase
in value if prepayments are greater than anticipated and decline
if prepayments are slower than anticipated.
The secondary market for stripped mortgage-backed securities may
be more volatile and less liquid than that for other mortgage-
backed securities, potentially limiting the fund's ability to buy
or sell those securities at any particular time.
Securities Loans
The fund may make secured loans of its portfolio securities, on
either a short-term or long-term basis, amounting to not more
than 25% of its total assets, thereby realizing additional
income. The risks in lending portfolio securities, as with other
extensions of credit, consist of possible delay in recovery of
the securities or possible loss of rights in the collateral
should the borrower fail financially. As a matter of policy,
securities loans are made to broker-dealers pursuant to
agreements requiring that the loans be continuously secured by
collateral consisting of cash or short-term debt obligations at
least equal at all times to the value of the securities on loan,
"marked-to-market" daily. The borrower pays to the fund an
amount equal to any dividends or interest received on securities
lent. The fund retains all or a portion of the interest received
on investment of the cash collateral or receives a fee from the
borrower. Although voting rights, or rights to consent, with
respect to the loaned securities may pass to the borrower, the
fund retains the right to call the loans at any time on
reasonable notice, and it will do so to enable the fund to
exercise voting rights on any matters materially affecting the
investment. The fund may also call such loans in order to sell
the securities.
Forward Commitments
The fund may enter into contracts to purchase securities for a
fixed price at a future date beyond customary settlement time
("forward commitments") if the fund holds, and maintains until
the settlement date in a segregated account, cash or high-grade
debt obligations in an amount sufficient to meet the purchase
price, or if the fund enters into offsetting contracts for the
forward sale of other securities it owns. In the case of to-be-
announced ("TBA") purchase commitments, the unit price and the
estimated principal amount are established when the fund enters
into a contract, with the actual principal amount being within a
specified range of the estimate. Forward commitments may be
considered securities in themselves, and involve a risk of loss
if the value of the security to be purchased declines prior to
the settlement date, which risk is in addition to the risk of
decline in the value of the fund's other assets. Where such
purchases are made through dealers, the fund relies on the dealer
to consummate the sale. The dealer's failure to do so may result
in the loss to the fund of an advantageous yield or price.
Although the fund will generally enter into forward commitments
with the intention of acquiring securities for its portfolio or
for delivery pursuant to options contracts it has entered into,
the fund may dispose of a commitment prior to settlement if
Putnam Management deems it appropriate to do so. The fund may
realize short-term profits or losses upon the sale of forward
commitments.
The fund may enter into TBA sale commitments to hedge its
portfolio positions or to sell securities it owns under delayed
delivery arrangements. Proceeds of TBA sale commitments are not
received until the contractual settlement date. During the time
a TBA sale commitment is outstanding, equivalent deliverable
securities, or an offsetting TBA purchase commitment deliverable
on or before the sale commitment date, are held as "cover" for
the transaction. Unsettled TBA sale commitments are valued at
current market value of the underlying securities. If the TBA
sale commitment is closed through the acquisition of an
offsetting purchase commitment, the fund realizes a gain or loss
on the commitment without regard to any unrealized gain or loss
on the underlying security. If the fund delivers securities
under the commitment, the fund realizes a gain or loss from the
sale of the securities based upon the unit price established at
the date the commitment was entered into.
Repurchase Agreements
The fund may enter into repurchase agreements up to the limit
specified in the prospectus. A repurchase agreement is a
contract under which the fund acquires a security for a
relatively short period (usually not more than one week) subject
to the obligation of the seller to repurchase and the fund to
resell such security at a fixed time and price (representing the
fund's cost plus interest). It is the fund's present intention
to enter into repurchase agreements only with commercial banks
and registered broker-dealers and only with respect to
obligations of the U.S. government or its agencies or
instrumentalities. Repurchase agreements may also be viewed as
loans made by the fund which are collateralized by the securities
subject to repurchase. Putnam Management will monitor such
transactions to ensure that the value of the underlying
securities will be at least equal at all times to the total
amount of the repurchase obligation, including the interest
factor. If the seller defaults, the fund could realize a loss on
the sale of the underlying security to the extent that the
proceeds of sale including accrued interest are less than the
resale price provided in the agreement including interest. In
addition, if the seller should be involved in bankruptcy or
insolvency proceedings, the fund may incur delay and costs in
selling the underlying security or may suffer a loss of principal
and interest if the fund is treated as an unsecured creditor and
required to return the underlying collateral to the seller's
estate.
Pursuant to an exemptive order issued by the Securities and
Exchange Commission, the fund may transfer uninvested cash
balances into a joint account, along with cash of other Putnam
funds and certain other accounts. These balances may be invested
in one or more repurchase agreements and/or short-term money
market instruments.
Options on Securities
Writing covered options. The fund may write covered call options
and covered put options on optionable securities held in its
portfolio, when in the opinion of Putnam Management such
transactions are consistent with the fund's investment
objective(s) and policies. Call options written by the fund give
the purchaser the right to buy the underlying securities from the
fund at a stated exercise price; put options give the purchaser
the right to sell the underlying securities to the fund at a
stated price.
The fund may write only covered options, which means that, so
long as the fund is obligated as the writer of a call option, it
will own the underlying securities subject to the option (or
comparable securities satisfying the cover requirements of
securities exchanges). In the case of put options, the fund will
hold cash and/or high-grade short-term debt obligations equal to
the price to be paid if the option is exercised. In addition,
the fund will be considered to have covered a put or call option
if and to the extent that it holds an option that offsets some or
all of the risk of the option it has written. The fund may write
combinations of covered puts and calls on the same underlying
security.
The fund will receive a premium from writing a put or call
option, which increases the fund's return on the underlying
security in the event the option expires unexercised or is closed
out at a profit. The amount of the premium reflects, among other
things, the relationship between the exercise price and the
current market value of the underlying security, the volatility
of the underlying security, the amount of time remaining until
expiration, current interest rates, and the effect of supply and
demand in the options market and in the market for the underlying
security. By writing a call option, the fund limits its
opportunity to profit from any increase in the market value of
the underlying security above the exercise price of the option
but continues to bear the risk of a decline in the value of the
underlying security. By writing a put option, the fund assumes
the risk that it may be required to purchase the underlying
security for an exercise price higher than its then-current
market value, resulting in a potential capital loss unless the
security subsequently appreciates in value.
The fund may terminate an option that it has written prior to its
expiration by entering into a closing purchase transaction, in
which it purchases an offsetting option. The fund realizes a
profit or loss from a closing transaction if the cost of the
transaction (option premium plus transaction costs) is less or
more than the premium received from writing the option. If the
fund writes a call option but does not own the underlying
security, and when it writes a put option, the fund may be
required to deposit cash or securities with its broker as
"margin," or collateral, for its obligation to buy or sell the
underlying security. As the value of the underlying security
varies, the fund may have to deposit additional margin with the
broker. Margin requirements are complex and are fixed by
individual brokers, subject to minimum requirements currently
imposed by the Federal Reserve Board and by stock exchanges and
other self-regulatory organizations.
<PAGE>
Purchasing put options. The fund may purchase put options to
protect its portfolio holdings in an underlying security against
a decline in market value. Such protection is provided during
the life of the put option since the fund, as holder of the
option, is able to sell the underlying security at the put
exercise price regardless of any decline in the underlying
security's market price. In order for a put option to be
profitable, the market price of the underlying security must
decline sufficiently below the exercise price to cover the
premium and transaction costs. By using put options in this
manner, the fund will reduce any profit it might otherwise have
realized from appreciation of the underlying security by the
premium paid for the put option and by transaction costs.
Purchasing call options. The fund may purchase call options to
hedge against an increase in the price of securities that the
fund wants ultimately to buy. Such hedge protection is provided
during the life of the call option since the fund, as holder of
the call option, is able to buy the underlying security at the
exercise price regardless of any increase in the underlying
security's market price. In order for a call option to be
profitable, the market price of the underlying security must rise
sufficiently above the exercise price to cover the premium and
transaction costs.
Risk Factors in Options Transactions
The successful use of the fund's options strategies depends on
the ability of Putnam Management to forecast correctly interest
rate and market movements. For example, if the fund were to
write a call option based on Putnam Management's expectation that
the price of the underlying security would fall, but the price
were to rise instead, the fund could be required to sell the
security upon exercise at a price below the current market price.
Similarly, if the fund were to write a put option based on Putnam
Management's expectation that the price of the underlying
security would rise, but the price were to fall instead, the fund
could be required to purchase the security upon exercise at a
price higher than the current market price.
When the fund purchases an option, it runs the risk that it will
lose its entire investment in the option in a relatively short
period of time, unless the fund exercises the option or enters
into a closing sale transaction before the option's expiration.
If the price of the underlying security does not rise (in the
case of a call) or fall (in the case of a put) to an extent
sufficient to cover the option premium and transaction costs, the
fund will lose part or all of its investment in the option. This
contrasts with an investment by the fund in the underlying
security, since the fund will not realize a loss if the
security's price does not change.
The effective use of options also depends on the fund's ability
to terminate option positions at times when Putnam Management
deems it desirable to do so. There is no assurance that the fund
will be able to effect closing transactions at any particular
time or at an acceptable price.
If a secondary market in options were to become unavailable, the
fund could no longer engage in closing transactions. Lack of
investor interest might adversely affect the liquidity of the
market for particular options or series of options. A market may
discontinue trading of a particular option or options generally.
In addition, a market could become temporarily unavailable if
unusual events -- such as volume in excess of trading or clearing
capability -- were to interrupt its normal operations.
A market may at times find it necessary to impose restrictions on
particular types of options transactions, such as opening
transactions. For example, if an underlying security ceases to
meet qualifications imposed by the market or the Options Clearing
Corporation, new series of options on that security will no
longer be opened to replace expiring series, and opening
transactions in existing series may be prohibited. If an options
market were to become unavailable, the fund as a holder of an
option would be able to realize profits or limit losses only by
exercising the option, and the fund, as option writer, would
remain obligated under the option until expiration or exercise.
Disruptions in the markets for the securities underlying options
purchased or sold by the fund could result in losses on the
options. If trading is interrupted in an underlying security,
the trading of options on that security is normally halted as
well. As a result, the fund as purchaser or writer of an option
will be unable to close out its positions until options trading
resumes, and it may be faced with considerable losses if trading
in the security reopens at a substantially different price. In
addition, the Options Clearing Corporation or other options
markets may impose exercise restrictions. If a prohibition on
exercise is imposed at the time when trading in the option has
also been halted, the fund as purchaser or writer of an option
will be locked into its position until one of the two
restrictions has been lifted. If the Options Clearing
Corporation were to determine that the available supply of an
underlying security appears insufficient to permit delivery by
the writers of all outstanding calls in the event of exercise, it
may prohibit indefinitely the exercise of put options. The fund,
as holder of such a put option, could lose its entire investment
if the prohibition remained in effect until the put option's
expiration.
Foreign-traded options are subject to many of the same risks
presented by internationally-traded securities. In addition,
because of time differences between the United States and various
foreign countries, and because different holidays are observed in
different countries, foreign options markets may be open for
trading during hours or on days when U.S. markets are closed. As
a result, option premiums may not reflect the current prices of
the underlying interest in the United States.
Over-the-counter ("OTC") options purchased by the fund and assets
held to cover OTC options written by the fund may, under certain
circumstances, be considered illiquid securities for purposes of
any limitation on the fund's ability to invest in illiquid
securities.
Futures Contracts and Related Options
Subject to applicable law, and unless otherwise specified in the
prospectus, the fund may invest without limit in the types of
futures contracts and related options identified in the
prospectus for hedging and non-hedging purposes, such as to
manage the effective duration of the fund's portfolio or as a
substitute for direct investment. A financial futures contract
sale creates an obligation by the seller to deliver the type of
financial instrument called for in the contract in a specified
delivery month for a stated price. A financial futures contract
purchase creates an obligation by the purchaser to take delivery
of the type of financial instrument called for in the contract in
a specified delivery month at a stated price. The specific
instruments delivered or taken, respectively, at settlement date
are not determined until on or near that date. The determination
is made in accordance with the rules of the exchange on which the
futures contract sale or purchase was made. Futures contracts
are traded in the United States only on commodity exchanges or
boards of trade -- known as "contract markets" -- approved for
such trading by the Commodity Futures Trading Commission (the
"CFTC"), and must be executed through a futures commission
merchant or brokerage firm which is a member of the relevant
contract market.
Although futures contracts (other than index futures) by their
terms call for actual delivery or acceptance of commodities or
securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out a futures contract sale is effected by purchasing a
futures contract for the same aggregate amount of the specific
type of financial instrument or commodity with the same delivery
date. If the price of the initial sale of the futures contract
exceeds the price of the offsetting purchase, the seller is paid
the difference and realizes a gain. Conversely, if the price of
the offsetting purchase exceeds the price of the initial sale,
the seller realizes a loss. If the fund is unable to enter into
a closing transaction, the amount of the fund's potential loss is
unlimited. The closing out of a futures contract purchase is
effected by the purchaser's entering into a futures contract
sale. If the offsetting sale price exceeds the purchase price,
the purchaser realizes a gain, and if the purchase price exceeds
the offsetting sale price, he realizes a loss. In general, 40%
of the gain or loss arising from the closing out of a futures
contract traded on an exchange approved by the CFTC is treated as
short-term gain or loss, and 60% is treated as long-term gain or
loss.
Unlike when the fund purchases or sells a security, no price is
paid or received by the fund upon the purchase or sale of a
futures contract. Upon entering into a contract, the fund is
required to deposit with its custodian in a segregated account in
the name of the futures broker an amount of liquid assets. This
amount is known as "initial margin." The nature of initial
margin in futures transactions is different from that of margin
in security transactions in that futures contract margin does not
involve the borrowing of funds to finance the transactions.
Rather, initial margin is similar to a performance bond or good
faith deposit which is returned to the fund upon termination of
the futures contract, assuming all contractual obligations have
been satisfied. Futures contracts also involve brokerage costs.
Subsequent payments, called "variation margin" or "maintenance
margin," to and from the broker (or the custodian) are made on a
daily basis as the price of the underlying security or commodity
fluctuates, making the long and short positions in the futures
contract more or less valuable, a process known as "marking to
the market." For example, when the fund has purchased a futures
contract on a security and the price of the underlying security
has risen, that position will have increased in value and the
fund will receive from the broker a variation margin payment
based on that increase in value. Conversely, when the fund has
purchased a security futures contract and the price of the
underlying security has declined, the position would be less
valuable and the fund would be required to make a variation
margin payment to the broker.
The fund may elect to close some or all of its futures positions
at any time prior to their expiration in order to reduce or
eliminate a hedge position then currently held by the fund. The
fund may close its positions by taking opposite positions which
will operate to terminate the fund's position in the futures
contracts. Final determinations of variation margin are then
made, additional cash is required to be paid by or released to
the fund, and the fund realizes a loss or a gain. Such closing
transactions involve additional commission costs.
The fund does not intend to purchase or sell futures or related
options for other than hedging purposes, if, as a result, the sum
of the initial margin deposits on the fund's existing futures and
related options positions and premiums paid for outstanding
options on futures contracts would exceed 5% of the fund's net
assets.
Options on futures contracts. The fund may purchase and write
call and put options on futures contracts it may buy or sell and
enter into closing transactions with respect to such options to
terminate existing positions. Options on future contracts give
the purchaser the right in return for the premium paid to assume
a position in a futures contract at the specified option exercise
price at any time during the period of the option. The fund may
use options on futures contracts in lieu of writing or buying
options directly on the underlying securities or purchasing and
selling the underlying futures contracts. For example, to hedge
against a possible decrease in the value of its portfolio
securities, the fund may purchase put options or write call
options on futures contracts rather than selling futures
contracts. Similarly, the fund may purchase call options or
write put options on futures contracts as a substitute for the
purchase of futures contracts to hedge against a possible
increase in the price of securities which the fund expects to
purchase. Such options generally operate in the same manner as
options purchased or written directly on the underlying
investments.
As with options on securities, the holder or writer of an option
may terminate his position by selling or purchasing an offsetting
option. There is no guarantee that such closing transactions can
be effected.
The fund will be required to deposit initial margin and
maintenance margin with respect to put and call options on
futures contracts written by it pursuant to brokers' requirements
similar to those described above in connection with the
discussion of futures contracts.
Risks of transactions in futures contracts and related options.
Successful use of futures contracts by the fund is subject to
Putnam Management's ability to predict movements in various
factors affecting securities markets, including interest rates.
Compared to the purchase or sale of futures contracts, the
purchase of call or put options on futures contracts involves
less potential risk to the fund because the maximum amount at
risk is the premium paid for the options (plus transaction
costs). However, there may be circumstances when the purchase of
a call or put option on a futures contract would result in a loss
to the fund when the purchase or sale of a futures contract would
not, such as when there is no movement in the prices of the
hedged investments. The writing of an option on a futures
contract involves risks similar to those risks relating to the
sale of futures contracts.
The use of options and futures strategies also involves the risk
of imperfect correlation among movements in the prices of the
securities underlying the futures and options purchased and sold
by the fund, of the options and futures contracts themselves,
and, in the case of hedging transactions, of the securities which
are the subject of a hedge. The successful use of these
strategies further depends on the ability of Putnam Management to
forecast interest rates and market movements correctly.
There is no assurance that higher than anticipated trading
activity or other unforeseen events might not, at times, render
certain market clearing facilities inadequate, and thereby result
in the institution by exchanges of special procedures which may
interfere with the timely execution of customer orders.
To reduce or eliminate a position held by the fund, the fund may
seek to close out such position. The ability to establish and
close out positions will be subject to the development and
maintenance of a liquid secondary market. It is not certain that
this market will develop or continue to exist for a particular
futures contract or option. Reasons for the absence of a liquid
secondary market on an exchange include the following: (i) there
may be insufficient trading interest in certain contracts or
options; (ii) restrictions may be imposed by an exchange on
opening transactions or closing transactions or both; (iii)
trading halts, suspensions or other restrictions may be imposed
with respect to particular classes or series of contracts or
options, or underlying securities; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v)
the facilities of an exchange or a clearing corporation may not
at all times be adequate to handle current trading volume; or
(vi) one or more exchanges could, for economic or other reasons,
decide or be compelled at some future date to discontinue the
trading of contracts or options (or a particular class or series
of contracts or options), in which event the secondary market on
that exchange for such contracts or options (or in the class or
series of contracts or options) would cease to exist, although
outstanding contracts or options on the exchange that had been
issued by a clearing corporation as a result of trades on that
exchange would continue to be exercisable in accordance with
their terms.
U.S. Treasury security futures contracts and options. U.S.
Treasury security futures contracts require the seller to
deliver, or the purchaser to take delivery of, the type of U.S.
Treasury security called for in the contract at a specified date
and price. Options on U.S. Treasury security futures contracts
give the purchaser the right in return for the premium paid to
assume a position in a U.S. Treasury security futures contract at
the specified option exercise price at any time during the period
of the option.
Successful use of U.S. Treasury security futures contracts by the
fund is subject to Putnam Management's ability to predict
movements in the direction of interest rates and other factors
affecting markets for debt securities. For example, if the fund
has sold U.S. Treasury security futures contracts in order to
hedge against the possibility of an increase in interest rates
which would adversely affect securities held in its portfolio,
and the prices of the fund's securities increase instead as a
result of a decline in interest rates, the fund will lose part or
all of the benefit of the increased value of its securities which
it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the fund
has insufficient cash, it may have to sell securities to meet
daily maintenance margin requirements at a time when it may be
disadvantageous to do so.
There is also a risk that price movements in U.S. Treasury
security futures contracts and related options will not correlate
closely with price movements in markets for particular
securities. For example, if the fund has hedged against a
decline in the values of tax-exempt securities held by it by
selling Treasury security futures and the values of Treasury
securities subsequently increase while the values of its
tax-exempt securities decrease, the fund would incur losses on
both the Treasury security futures contracts written by it and
the tax-exempt securities held in its portfolio.
Index futures contracts. An index futures contract is a contract
to buy or sell units of an index at a specified future date at a
price agreed upon when the contract is made. Entering into a
contract to buy units of an index is commonly referred to as
buying or purchasing a contract or holding a long position in
the index. Entering into a contract to sell units of an index is
commonly referred to as selling a contract or holding a short
position. A unit is the current value of the index. The fund
may enter into stock index futures contracts, debt index futures
contracts, or other index futures contracts appropriate to its
objective(s). The fund may also purchase and sell options on
index futures contracts.
For example, the Standard & Poor's 500 Composite Stock Price
Index ("S&P 500") is composed of 500 selected common stocks, most
of which are listed on the New York Stock Exchange. The S&P 500
assigns relative weightings to the common stocks included in the
Index, and the value fluctuates with changes in the market values
of those common stocks. In the case of the S&P 500, contracts
are to buy or sell 500 units. Thus, if the value of the S&P 500
were $150, one contract would be worth $75,000 (500 units x
$150). The stock index futures contract specifies that no
delivery of the actual stocks making up the index will take
place. Instead, settlement in cash must occur upon the
termination of the contract, with the settlement being the
difference between the contract price and the actual level of the
stock index at the expiration of the contract. For example, if
the fund enters into a futures contract to buy 500 units of the
S&P 500 at a specified future date at a contract price of $150
and the S&P 500 is at $154 on that future date, the fund will
gain $2,000 (500 units x gain of $4). If the fund enters into a
futures contract to sell 500 units of the stock index at a
specified future date at a contract price of $150 and the S&P 500
is at $152 on that future date, the fund will lose $1,000 (500
units x loss of $2).
There are several risks in connection with the use by the fund of
index futures. One risk arises because of the imperfect
correlation between movements in the prices of the index futures
and movements in the prices of securities which are the subject
of the hedge. Putnam Management will, however, attempt to reduce
this risk by buying or selling, to the extent possible, futures
on indices the movements of which will, in its judgment, have a
significant correlation with movements in the prices of the
securities sought to be hedged.
Successful use of index futures by the fund is also subject to
Putnam Management's ability to predict movements in the direction
of the market. For example, it is possible that, where the fund
has sold futures to hedge its portfolio against a decline in the
market, the index on which the futures are written may advance
and the value of securities held in the fund's portfolio may
decline. If this occurred, the fund would lose money on the
futures and also experience a decline in value in its portfolio
securities. It is also possible that, if the fund has hedged
against the possibility of a decline in the market adversely
affecting securities held in its portfolio and securities prices
increase instead, the fund will lose part or all of the benefit
of the increased value of those securities it has hedged because
it will have offsetting losses in its futures positions. In
addition, in such situations, if the fund has insufficient cash,
it may have to sell securities to meet daily variation margin
requirements at a time when it is disadvantageous to do so.
In addition to the possibility that there may be an imperfect
correlation, or no correlation at all, between movements in the
index futures and the portion of the portfolio being hedged, the
prices of index futures may not correlate perfectly with
movements in the underlying index due to certain market
distortions. First, all participants in the futures market are
subject to margin deposit and maintenance requirements. Rather
than meeting additional margin deposit requirements, investors
may close futures contracts through offsetting transactions which
could distort the normal relationship between the index and
futures markets. Second, margin requirements in the futures
market are less onerous than margin requirements in the
securities market, and as a result the futures market may attract
more speculators than the securities market does. Increased
participation by speculators in the futures market may also cause
temporary price distortions. Due to the possibility of price
distortions in the futures market and also because of the
imperfect correlation between movements in the index and
movements in the prices of index futures, even a correct forecast
of general market trends by Putnam Management may still not
result in a profitable position over a short time period.
Options on stock index futures. Options on index futures are
similar to options on securities except that options on index
futures give the purchaser the right, in return for the premium
paid, to assume a position in an index futures contract (a long
position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during
the period of the option. Upon exercise of the option, the
delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the
accumulated balance in the writer's futures margin account which
represents the amount by which the market price of the index
futures contract, at exercise, exceeds (in the case of a call) or
is less than (in the case of a put) the exercise price of the
option on the index future. If an option is exercised on the
last trading day prior to its expiration date, the settlement
will be made entirely in cash equal to the difference between the
exercise price of the option and the closing level of the index
on which the future is based on the expiration date. Purchasers
of options who fail to exercise their options prior to the
exercise date suffer a loss of the premium paid.
Options on Indices
As an alternative to purchasing call and put options on index
futures, the fund may purchase and sell call and put options on
the underlying indices themselves. Such options would be used in
a manner identical to the use of options on index futures.
Index Warrants
The fund may purchase put warrants and call warrants whose values
vary depending on the change in the value of one or more
specified securities indices ("index warrants"). Index warrants
are generally issued by banks or other financial institutions and
give the holder the right, at any time during the term of the
warrant, to receive upon exercise of the warrant a cash payment
from the issuer based on the value of the underlying index at the
time of exercise. In general, if the value of the underlying
index rises above the exercise price of the index warrant, the
holder of a call warrant will be entitled to receive a cash
payment from the issuer upon exercise based on the difference
between the value of the index and the exercise price of the
warrant; if the value of the underlying index falls, the holder
of a put warrant will be entitled to receive a cash payment from
the issuer upon exercise based on the difference between the
exercise price of the warrant and the value of the index. The
holder of a warrant would not be entitled to any payments from
the issuer at any time when, in the case of a call warrant, the
exercise price is greater than the value of the underlying index,
or, in the case of a put warrant, the exercise price is less than
the value of the underlying index. If the fund were not to
exercise an index warrant prior to its expiration, then the fund
would lose the amount of the purchase price paid by it for the
warrant.
The fund will normally use index warrants in a manner similar to
its use of options on securities indices. The risks of the
fund's use of index warrants are generally similar to those
relating to its use of index options. Unlike most index options,
however, index warrants are issued in limited amounts and are not
obligations of a regulated clearing agency, but are backed only
by the credit of the bank or other institution which issues the
warrant. Also, index warrants generally have longer terms than
index options. Although the fund will normally invest only in
exchange-listed warrants, index warrants are not likely to be as
liquid as certain index options backed by a recognized clearing
agency. In addition, the terms of index warrants may limit the
fund's ability to exercise the warrants at such time, or in such
quantities, as the fund would otherwise wish to do.
Foreign Securities
Under its current policy, which may be changed without
shareholder approval, the fund may invest up to the limit of its
total assets specified in its prospectus in securities
principally traded in markets outside the United States.
Eurodollar certificates of deposit are excluded for purposes of
this limitation. Since foreign securities are normally
denominated and traded in foreign currencies, the value of the
fund's assets may be affected favorably or unfavorably by changes
in currency exchange rates, exchange control regulations, foreign
withholding taxes and restrictions or prohibitions on the
repatriation of foreign currencies. There may be less
information publicly available about a foreign company than about
a U.S. company, and foreign companies are not generally subject
to accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The
securities of some foreign companies are less liquid and at times
more volatile than securities of comparable U.S. companies.
Foreign brokerage commissions and other fees are also generally
higher than in the United States. Foreign settlement procedures
and trade regulations may involve certain risks (such as delay in
payment or delivery of securities or in the recovery of the
fund's assets held abroad) and expenses not present in the
settlement of domestic investments.
In addition, there may be a possibility of nationalization or
expropriation of assets, imposition of currency exchange
controls, confiscatory taxation, political or financial
instability and diplomatic developments which could affect the
value of the fund's investments in certain foreign countries.
Legal remedies available to investors in certain foreign
countries may be more limited than those available with respect
to investments in the United States or in other foreign
countries. The laws of some foreign countries may limit the
fund's ability to invest in securities of certain issuers located
in those foreign countries. Special tax considerations apply to
foreign securities.
The risks described above, including the risks of nationalization
or expropriation of assets, are typically increased to the extent
that the fund invests in issuers located in less developed and
developing nations, whose securities markets are sometimes
referred to as "emerging securities markets." Investments in
securities located in such countries are speculative and subject
to certain special risks. Political and economic structures in
many of these countries may be in their infancy and developing
rapidly, and such countries may lack the social, political and
economic stability characteristic of more developed countries.
Certain of these countries have in the past failed to recognize
private property rights and have at times nationalized and
expropriated the assets of private companies.
In addition, unanticipated political or social developments may
affect the value of the fund's investments in these countries and
the availability to the fund of additional investments in these
countries. The small size, limited trading volume and relative
inexperience of the securities markets in these countries may
make the fund's investments in such countries illiquid and more
volatile than investments in more developed countries, and the
fund may be required to establish special custodial or other
arrangements before making investments in these countries. There
may be little financial or accounting information available with
respect to issuers located in these countries, and it may be
difficult as a result to assess the value or prospects of an
investment in such issuers.
Foreign Currency Transactions
Unless otherwise specified in the prospectus or Part I of this
SAI, the fund may engage without limit in currency exchange
transactions, including purchasing and selling foreign currency,
foreign currency options, foreign currency forward contracts and
foreign currency futures contracts and related options, to
protect against uncertainty in the level of future currency
exchange rates. In addition, the fund may write covered call and
put options on foreign currencies for the purpose of increasing
its current return.
Generally, the fund may engage in both "transaction hedging" and
"position hedging." When it engages in transaction hedging, the
fund enters into foreign currency transactions with respect to
specific receivables or payables, generally arising in connection
with the purchase or sale of portfolio securities. The fund will
engage in transaction hedging when it desires to "lock in" the
U.S. dollar price of a security it has agreed to purchase or
sell, or the U.S. dollar equivalent of a dividend or interest
payment in a foreign currency. By transaction hedging the fund
will attempt to protect itself against a possible loss resulting
from an adverse change in the relationship between the U.S.
dollar and the applicable foreign currency during the period
between the date on which the security is purchased or sold, or
on which the dividend or interest payment is earned, and the date
on which such payments are made or received.
The fund may purchase or sell a foreign currency on a spot (or
cash) basis at the prevailing spot rate in connection with the
settlement of transactions in portfolio securities denominated in
that foreign currency. If conditions warrant, for transaction
hedging purposes the fund may also enter into contracts to
purchase or sell foreign currencies at a future date ("forward
contracts") and purchase and sell foreign currency futures
contracts. A foreign currency forward contract is a negotiated
agreement to exchange currency at a future time at a rate or
rates that may be higher or lower than the spot rate. Foreign
currency futures contracts are standardized exchange-traded
contracts and have margin requirements. In addition, for
transaction hedging purposes the fund may also purchase or sell
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies.
The fund may also enter into contracts to purchase or sell
foreign currencies at a future date ("forward contracts") and
purchase and sell foreign currency futures contracts.
For transaction hedging purposes the fund may also purchase
exchange-listed and over-the-counter call and put options on
foreign currency futures contracts and on foreign currencies. A
put option on a futures contract gives the fund the right to
assume a short position in the futures contract until the
expiration of the option. A put option on a currency gives the
fund the right to sell the currency at an exercise price until
the expiration of the option. A call option on a futures
contract gives the fund the right to assume a long position in
the futures contract until the expiration of the option. A call
option on a currency gives the fund the right to purchase the
currency at the exercise price until the expiration of the
option.
<PAGE>
The fund may engage in position hedging to protect against a
decline in the value relative to the U.S. dollar of the
currencies in which its portfolio securities are denominated or
quoted (or an increase in the value of the currency in which the
securities the fund intends to buy are denominated, when the fund
holds cash or short-term investments). For position hedging
purposes, the fund may purchase or sell foreign currency futures
contracts, foreign currency forward contracts and options on
foreign currency futures contracts and on foreign currencies on
exchanges or in over-the-counter markets. In connection with
position hedging, the fund may also purchase or sell foreign
currency on a spot basis.
It is impossible to forecast with precision the market value of
portfolio securities at the expiration or maturity of a forward
or futures contract. Accordingly, it may be necessary for the
fund to purchase additional foreign currency on the spot market
(and bear the expense of such purchase) if the market value of
the security or securities being hedged is less than the amount
of foreign currency the fund is obligated to deliver and a
decision is made to sell the security or securities and make
delivery of the foreign currency. Conversely, it may be
necessary to sell on the spot market some of the foreign currency
received upon the sale of the portfolio security or securities if
the market value of such security or securities exceeds the
amount of foreign currency the fund is obligated to deliver.
Transaction and position hedging do not eliminate fluctuations in
the underlying prices of the securities which the fund owns or
intends to purchase or sell. They simply establish a rate of
exchange which one can achieve at some future point in time.
Additionally, although these techniques tend to minimize the risk
of loss due to a decline in the value of the hedged currency,
they tend to limit any potential gain which might result from the
increase in value of such currency. See "Risk factors in options
transactions" above.
The fund may seek to increase its current return or to offset
some of the costs of hedging against fluctuations in current
exchange rates by writing covered call options and covered put
options on foreign currencies. The fund receives a premium from
writing a call or put option, which increases the fund's current
return if the option expires unexercised or is closed out at a
net profit. The fund may terminate an option that it has written
prior to its expiration by entering into a closing purchase
transaction in which it purchases an option having the same terms
as the option written.
<PAGE>
The fund's currency hedging transactions may call for the
delivery of one foreign currency in exchange for another foreign
currency and may at times not involve currencies in which its
portfolio securities are then denominated. Putnam Management
will engage in such "cross hedging" activities when it believes
that such transactions provide significant hedging opportunities
for the fund. Cross hedging transactions by the fund involve the
risk of imperfect correlation between changes in the values of
the currencies to which such transactions relate and changes in
the value of the currency or other asset or liability which is
the subject of the hedge.
The value of any currency, including U.S. dollars and foreign
currencies, may be affected by complex political and economic
factors applicable to the issuing country. In addition, the
exchange rates of foreign currencies (and therefore the values of
foreign currency options, forward contracts and futures
contracts) may be affected significantly, fixed, or supported
directly or indirectly by U.S. and foreign government actions.
Government intervention may increase risks involved in purchasing
or selling foreign currency options, forward contracts and
futures contracts, since exchange rates may not be free to
fluctuate in response to other market forces.
The value of a foreign currency option, forward contract or
futures contract reflects the value of an exchange rate, which in
turn reflects relative values of two currencies, the U.S. dollar
and the foreign currency in question. Because foreign currency
transactions occurring in the interbank market involve
substantially larger amounts than those that may be involved in
the exercise of foreign currency options, forward contracts and
futures contracts, investors may be disadvantaged by having to
deal in an odd-lot market for the underlying foreign currencies
in connection with options at prices that are less favorable than
for round lots. Foreign governmental restrictions or taxes could
result in adverse changes in the cost of acquiring or disposing
of foreign currencies.
There is no systematic reporting of last sale information for
foreign currencies and there is no regulatory requirement that
quotations available through dealers or other market sources be
firm or revised on a timely basis. Available quotation
information is generally representative of very large round-lot
transactions in the interbank market and thus may not reflect
exchange rates for smaller odd-lot transactions (less than $1
million) where rates may be less favorable. The interbank market
in foreign currencies is a global, around-the-clock market. To
the extent that options markets are closed while the markets for
the underlying currencies remain open, significant price and rate
movements may take place in the underlying markets that cannot be
reflected in the options markets.
The decision as to whether and to what extent the fund will
engage in foreign currency exchange transactions will depend on a
number of factors, including prevailing market conditions, the
composition of the fund's portfolio and the availability of
suitable transactions. Accordingly, there can be no assurance
that the fund will engage in foreign currency exchange
transactions at any given time or from time to time.
Currency forward and futures contracts. A forward foreign
currency contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number
of days from the date of the contract as agreed by the parties,
at a price set at the time of the contract. In the case of a
cancelable forward contract, the holder has the unilateral right
to cancel the contract at maturity by paying a specified fee.
The contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial
banks) and their customers. A forward contract generally has no
deposit requirement, and no commissions are charged at any stage
for trades. A foreign currency futures contract is a
standardized contract for the future delivery of a specified
amount of a foreign currency at a price set at the time of the
contract. Foreign currency futures contracts traded in the
United States are designed by and traded on exchanges regulated
by the CFTC, such as the New York Mercantile Exchange.
Forward foreign currency exchange contracts differ from foreign
currency futures contracts in certain respects. For example, the
maturity date of a forward contract may be any fixed number of
days from the date of the contract agreed upon by the parties,
rather than a predetermined date in a given month. Forward
contracts may be in any amounts agreed upon by the parties rather
than predetermined amounts. Also, forward foreign exchange
contracts are traded directly between currency traders so that no
intermediary is required. A forward contract generally requires
no margin or other deposit.
At the maturity of a forward or futures contract, the fund either
may accept or make delivery of the currency specified in the
contract, or at or prior to maturity enter into a closing
transaction involving the purchase or sale of an offsetting
contract. Closing transactions with respect to forward contracts
are usually effected with the currency trader who is a party to
the original forward contract. Closing transactions with respect
to futures contracts are effected on a commodities exchange; a
clearing corporation associated with the exchange assumes
responsibility for closing out such contracts.
Positions in the foreign currency futures contracts may be closed
out only on an exchange or board of trade which provides a
secondary market in such contracts. Although the fund intends to
purchase or sell foreign currency futures contracts only on
exchanges or boards of trade where there appears to be an active
secondary market, there is no assurance that a secondary market
on an exchange or board of trade will exist for any particular
contract or at any particular time. In such event, it may not be
possible to close a futures position and, in the event of adverse
price movements, the fund would continue to be required to make
daily cash payments of variation margin.
Foreign currency options. In general, options on foreign
currencies operate similarly to options on securities and are
subject to many of the risks described above. Foreign currency
options are traded primarily in the over-the-counter market,
although options on foreign currencies are also listed on several
exchanges. Options are traded not only on the currencies of
individual nations, but also on the European Currency Unit
("ECU"). The ECU is composed of amounts of a number of
currencies, and is the official medium of exchange of the
European Community's European Monetary System.
The fund will only purchase or write foreign currency options
when Putnam Management believes that a liquid secondary market
exists for such options. There can be no assurance that a liquid
secondary market will exist for a particular option at any
specific time. Options on foreign currencies are affected by all
of those factors which influence foreign exchange rates and
investments generally.
Settlement procedures. Settlement procedures relating to the
fund's investments in foreign securities and to the fund's
foreign currency exchange transactions may be more complex than
settlements with respect to investments in debt or equity
securities of U.S. issuers, and may involve certain risks not
present in the fund's domestic investments. For example,
settlement of transactions involving foreign securities or
foreign currencies may occur within a foreign country, and the
fund may be required to accept or make delivery of the underlying
securities or currency in conformity with any applicable U.S. or
foreign restrictions or regulations, and may be required to pay
any fees, taxes or charges associated with such delivery. Such
investments may also involve the risk that an entity involved in
the settlement may not meet its obligations.
Foreign currency conversion. Although foreign exchange dealers
do not charge a fee for currency conversion, they do realize a
profit based on the difference (the "spread") between prices at
which they are buying and selling various currencies. Thus, a
dealer may offer to sell a foreign currency to the fund at one
rate, while offering a lesser rate of exchange should the fund
desire to resell that currency to the dealer.
<PAGE>
Restricted Securities
The SEC Staff currently takes the view that any delegation by the
Trustees of the authority to determine that a restricted security
is readily marketable (as described in the investment
restrictions of the funds) must be pursuant to written procedures
established by the Trustees. It is the present intention of the
funds' Trustees that, if the Trustees decide to delegate such
determinations to Putnam Management or another person, they would
do so pursuant to written procedures, consistent with the Staff's
position. Should the Staff modify its position in the future,
the Trustees would consider what action would be appropriate in
light of the Staff's position at that time.
TAXES
Taxation of the fund. The fund intends to qualify each year as a
regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). In order so to
qualify and to qualify for the special tax treatment accorded
regulated investment companies and their shareholders, the fund
must, among other things:
(a) Derive at least 90% of its gross income from dividends,
interest, payments with respect to certain securities loans, and
gains from the sale of stock, securities and foreign currencies,
or other income (including but not limited to gains from options,
futures, or forward contracts) derived with respect to its
business of investing in such stock, securities, or currencies;
(b) derive less than 30% of its gross income from the sale or
other disposition of certain assets (including stock or
securities and certain options, futures contracts, forward
contracts and foreign currencies) held for less than three
months;
(c) distribute with respect to each taxable year at least 90% of
the sum of its taxable net investment income, its net tax-exempt
income, and the excess, if any, of net short-term capital gains
over net long-term capital losses for such year; and
(d) diversify its holdings so that, at the end of each fiscal
quarter, (i) at least 50% of the market value of the fund's
assets is represented by cash and cash items, U.S. government
securities, securities of other regulated investment companies,
and other securities limited in respect of any one issuer to a
value not greater than 5% of the value of the fund's total assets
and to not more than 10% of the outstanding voting securities of
such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities (other than those of the
U.S. Government or other regulated investment companies) of any
one issuer or of two or more issuers which the fund controls and
which are engaged in the same, similar, or related trades or
businesses.
If the fund qualifies as a regulated investment company that is
accorded special tax treatment, the fund will not be subject to
federal income tax on income paid to its shareholders in the form
of dividends (including capital gain dividends).
If the fund failed to qualify as a regulated investment company
accorded special tax treatment in any taxable year, the fund
would be subject to tax on its taxable income at corporate rates,
and all distributions from earnings and profits, including any
distributions of net tax-exempt income and net long-term capital
gains, would be taxable to shareholders as ordinary income. In
addition, the fund could be required to recognize unrealized
gains, pay substantial taxes and interest and make substantial
distributions before requalifying as a regulated investment
company that is accorded special tax treatment.
If the fund fails to distribute in a calendar year substantially
all of its ordinary income for such year and substantially all of
its capital gain net income for the one-year period ending
October 31 (or later if the fund is permitted so to elect and so
elects), plus any retained amount from the prior year, the fund
will be subject to a 4% excise tax on the undistributed amounts.
A dividend paid to shareholders by the fund in January of a year
generally is deemed to have been paid by the fund on December 31
of the preceding year, if the dividend was declared and payable
to shareholders of record on a date in October, November or
December of that preceding year. The fund intends generally to
make distributions sufficient to avoid imposition of the 4%
excise tax.
Exempt-interest dividends. The fund will be qualified to pay
exempt-interest dividends to its shareholders only if, at the
close of each quarter of the fund's taxable year, at least 50% of
the total value of the fund's assets consists of obligations the
interest on which is exempt from federal income tax.
Distributions that the fund properly designates as exempt-
interest dividends are treated as interest excludable from
shareholders' gross income for federal income tax purposes but
may be taxable for federal alternative minimum tax purposes and
for state and local purposes. If the fund intends to be
qualified to pay exempt-interest dividends, the fund may be
limited in its ability to enter into taxable transactions
involving forward commitments, repurchase agreements, financial
futures and options contracts on financial futures, tax-exempt
bond indices and other assets.
<PAGE>
Part or all of the interest on indebtedness, if any, incurred or
continued by a shareholder to purchase or carry shares of a fund
paying exempt-interest dividends is not deductible. The portion
of interest that is not deductible is equal to the total interest
paid or accrued on the indebtedness, multiplied by the percentage
of the fund's total distributions (not including distributions
from net long-term capital gains) paid to the shareholder that
are exempt-interest dividends. Under rules used by the Internal
Revenue Service for determining when borrowed funds are
considered used for the purpose of purchasing or carrying
particular assets, the purchase of shares may be considered to
have been made with borrowed funds even though such funds are not
directly traceable to the purchase of shares.
In general, exempt-interest dividends, if any, attributable to
interest received on certain private activity obligations and
certain industrial development bonds will not be tax-exempt to
any shareholders who are "substantial users" of the facilities
financed by such obligations or bonds or who are "related
persons" of such substantial users.
A fund which is qualified to pay exempt-interest dividends will
inform investors within 60 days of the fund's fiscal year-end of
the percentage of its income distributions designated as
tax-exempt. The percentage is applied uniformly to all
distributions made during the year. The percentage of income
designated as tax-exempt for any particular distribution may be
substantially different from the percentage of the fund's income
that was tax-exempt during the period covered by the
distribution.
Hedging transactions. If the fund engages in hedging
transactions, including hedging transactions in options, futures
contracts, and straddles, or other similar transactions, it will
be subject to special tax rules (including mark-to-market,
straddle, wash sale, and short sale rules), the effect of which
may be to accelerate income to the fund, defer losses to the
fund, cause adjustments in the holding periods of the fund's
securities, or convert short-term capital losses into long-term
capital losses. These rules could therefore affect the amount,
timing and character of distributions to shareholders. The fund
will endeavor to make any available elections pertaining to such
transactions in a manner believed to be in the best interests of
the fund.
Under the 30% of gross income test described above (see "Taxation
of the fund"), the fund will be restricted in selling assets held
or considered under Code rules to have been held for less than
three months, and in engaging in certain hedging transactions
(including hedging transactions in options and futures) that in
some circumstances could cause certain fund assets to be treated
as held for less than three months.
Certain of the fund's hedging activities (including its
transactions, if any, in foreign currencies or foreign
currency-denominated instruments) are likely to produce a
difference between its book income and its taxable income. If
the fund's book income exceeds its taxable income, the
distribution (if any) of such excess will be treated as (i) a
dividend to the extent of the fund's remaining earnings and
profits (including earnings and profits arising from tax-exempt
income), (ii) thereafter as a return of capital to the extent of
the recipient's basis in the shares, and (iii) thereafter as gain
from the sale or exchange of a capital asset. If the fund's book
income is less than its taxable income, the fund could be
required to make distributions exceeding book income to qualify
as a regulated investment company that is accorded special tax
treatment.
Return of capital distributions. If the fund makes a
distribution to you in excess of its current and accumulated
"earnings and profits" in any taxable year, the excess
distribution will be treated as a return of capital to the extent
of your tax basis in your shares, and thereafter as capital gain.
A return of capital is not taxable, but it reduces your tax basis
in your shares, thus reducing any loss or increasing any gain on
a subsequent taxable disposition by you of your shares.
Securities issued or purchased at a discount. The fund's
investment in securities issued at a discount and certain other
obligations will (and investments in securities purchased at a
discount may) require the fund to accrue and distribute income
not yet received. In order to generate sufficient cash to make
the requisite distributions, the fund may be required to sell
securities in its portfolio that it otherwise would have
continued to hold.
Capital loss carryover. Distributions from capital gains are
made after applying any available capital loss carryovers. The
amounts and expiration dates of any capital loss carryovers
available to the fund are shown in Note 1 (Federal income taxes)
to the financial statements included in Part I of this SAI or
incorporated by reference into this SAI.
Foreign currency-denominated securities and related hedging
transactions. The fund's transactions in foreign currencies,
foreign currency-denominated debt securities and certain foreign
currency options, futures contracts and forward contracts (and
similar instruments) may give rise to ordinary income or loss to
the extent such income or loss results from fluctuations in the
value of the foreign currency concerned.
<PAGE>
If more than 50% of the fund's assets at year end consists of the
debt and equity securities of foreign corporations, the fund may
elect to permit shareholders to claim a credit or deduction on
their income tax returns for their pro rata portion of qualified
taxes paid by the fund to foreign countries. In such a case,
shareholders will include in gross income from foreign sources
their pro rata shares of such taxes. A shareholder's ability to
claim a foreign tax credit or deduction in respect of foreign
taxes paid by the fund may be subject to certain limitations
imposed by the Code, as a result of which a shareholder may not
get a full credit or deduction for the amount of such taxes.
Shareholders who do not itemize on their federal income tax
returns may claim a credit (but no deduction) for such foreign
taxes.
Investment by the fund in "passive foreign investment companies"
could subject the fund to a U.S. federal income tax or other
charge on the proceeds from the sale of its investment in such a
company; however, this tax can be avoided by making an election
to mark such investments to market annually or to treat the
passive foreign investment company as a "qualified electing
fund."
A "passive foreign investment company" is any foreign
corporation: (i) 75 percent of more of the income of which for
the taxable year is passive income, or (ii) the average
percentage of the assets of which (generally by value, but by
adjusted tax basis in certain cases) that produce or are held for
the production of passive income is at least 50 percent.
Generally, passive income for this purpose means dividends,
interest (including income equivalent to interest), royalties,
rents, annuities, the excess of gains over losses from certain
property transactions and commodities transactions, and foreign
currency gains. Passive income for this purpose does not include
rents and royalties received by the foreign corporation from
active business and certain income received from related persons.
Sale or redemption of shares. The sale, exchange or redemption
of fund shares may give rise to a gain or loss. In general, any
gain or loss realized upon a taxable disposition of shares will
be treated as long-term capital gain or loss if the shares have
been held for more than 12 months, and otherwise as short-term
capital gain or loss. However, if a shareholder sells shares at
a loss within six months of purchase, any loss will be disallowed
for Federal income tax purposes to the extent of any exempt-
interest dividends received on such shares. In addition, any
loss (not already disallowed as provided in the preceding
sentence) realized upon a taxable disposition of shares held for
six months or less will be treated as long-term, rather than
short-term, to the extent of any long-term capital gain
distributions received by the shareholder with respect to the
shares. All or a portion of any loss realized upon a taxable
disposition of fund shares will be disallowed if other shares of
the same fund are purchased within 30 days before or after the
disposition. In such a case, the basis of the newly purchased
shares will be adjusted to reflect the disallowed loss.
Shares purchased through tax-qualified plans. Special tax rules
apply to investments though defined contribution plans and other
tax-qualified plans. Shareholders should consult their tax
adviser to determine the suitability of shares of a fund as an
investment through such plans and the precise effect of an
investment on their particular tax situation.
Backup withholding. The fund generally is required to withhold
and remit to the U.S. Treasury 31% of the taxable dividends and
other distributions paid to any individual shareholder who fails
to furnish the fund with a correct taxpayer identification number
(TIN), who has under-reported dividends or interest income, or
who fails to certify to the fund that he or she is not subject to
such withholding. Shareholders who fail to furnish their correct
TIN are subject to a penalty of $50 for each such failure unless
the failure is due to reasonable cause and not wilful neglect.
An individual's taxpayer identification number is his or her
social security number.
MANAGEMENT
Trustees Name (Age)
*+George Putnam (70), Chairman and President. Chairman and
Director of Putnam Management and Putnam Mutual Funds. Director,
The Boston Company, Inc., Boston Safe Deposit and Trust Company,
Freeport-McMoRan, Inc., Freeport Copper and Gold, Inc., McMoRan
Oil and Gas, Inc., General Mills, Inc., Houghton Mifflin Company,
Marsh & McLennan Companies, Inc. and Rockefeller Group, Inc.
+William F. Pounds (68), Vice Chairman. Professor of Management,
Alfred P. Sloan School of Management, Massachusetts Institute of
Technology. Director of EG&G, Inc., IDEXX Laboratories, Inc.,
Perseptive Biosystems, Inc., Management Sciences for Health,
Inc., and Sun Company, Inc.
Jameson A. Baxter (53), Trustee. President, Baxter Associates,
Inc. (a management and financial consultant). Director of
Avondale Federal Savings Bank, ASHTA Chemicals, Inc. and Banta
Corporation. Chairman Emeritus of the Board of Trustees, Mount
Holyoke College.
+Hans H. Estin (68), Trustee. Vice Chairman, North American
Management Corp. (a registered investment adviser). Director of
The Boston Company, Inc. and Boston Safe Deposit and Trust
Company.
John A. Hill (54), Trustee. Chairman and Managing Director,
First Reserve Corporation (a registered investment adviser).
Director, Maverick Tube Corporation, PetroCorp Incorporated,
Snyder Oil Corporation, Weatherford Enterra, Inc. (an oil field
service company) and various First Reserve Funds.
Ronald J. Jackson (52), Trustee. Former Chairman, President and
Chief Executive Officer of Fisher-Price, Inc., Director of Safety
1st, Inc., Trustee of Salem Hospital and the Peabody Essex
Museum.
Elizabeth T. Kennan (58), Trustee. President Emeritus and
Professor, Mount Holyoke College. Director, the Kentucky Home
Life Insurance Companies, NYNEX Corporation, Northeast Utilities
and Talbots. Trustee of the University of Notre Dame.
*Lawrence J. Lasser (53), Trustee and Vice President. President,
Chief Executive Officer and Director of Putnam Investments, Inc.
and Putnam Investment Management, Inc. Director of Marsh &
McLennan Companies, Inc.
+Robert E. Patterson (51), Trustee. Executive Vice President and
Director of Acquisitions, Cabot Partners Limited Partnership (a
registered investment adviser).
*Donald S. Perkins (69), Trustee. Director of various
corporations, including AON Corp., Cummins Engine Company, Inc.,
Current Assets L.L.C., Illinova and Illinois Power Company,
Inland Steel Industries, Inc., LaSalle Street Fund, Inc., Lucent
Technologies Inc., Springs Industries, Inc. (a textile
manufacturer), and Time Warner Inc.
*#George Putnam III (45), Trustee. President, New Generation
Research, Inc. (publisher of bankruptcy information) and New
Generation Advisers, Inc. (a registered investment adviser).
Eli Shapiro (80), Trustee. Alfred P. Sloan Professor of
Management, Emeritus, Alfred P. Sloan School of Management,
Massachusetts Institute of Technology. Former Trustee of the
Putnam funds (1984-1990).
*A.J.C. Smith (62), Trustee. Chairman and Chief Executive
Officer, Marsh & McLennan Companies, Inc. Director, Trident
Corp.
W. Nicholas Thorndike (63), Trustee. Director of various
corporations and charitable organizations, including Courier
Corporation, Data General Corporation, Bradley Real Estate, Inc.,
and Providence Journal Co.
<PAGE>
Officers Name (Age)
Charles E. Porter (58), Executive Vice President. Managing
Director of Putnam Investments, Inc. and Putnam Management.
Patricia C. Flaherty (49), Senior Vice President. Senior Vice
President of Putnam Investments, Inc. and Putnam Management.
William N. Shiebler (54), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. President and
Director of Putnam Mutual Funds.
Gordon H. Silver (49), Vice President. Director and Senior
Managing Director of Putnam Investments, Inc. and Putnam
Management.
John R. Verani (57), Vice President. Senior Vice President of
Putnam Investments, Inc. and Putnam Management.
Paul M. O'Neil (43), Vice President. Vice President of Putnam
Investments, Inc. and Putnam Management.
John D. Hughes (61), Senior Vice President and Treasurer.
Beverly Marcus (52), Clerk and Assistant Treasurer.
*Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund,
Putnam Management or Putnam Mutual Funds.
+Members of the Executive Committee of the Trustees. The
Executive Committee meets between regular meetings of the
Trustees as may be required to review investment matters and
other affairs of the fund and may exercise all of the powers of
the Trustees.
#George Putnam, III is the son of George Putnam.
-----------------
Certain other officers of Putnam Management are officers of the
fund. See "Additional officers" in Part I of this SAI. The
mailing address of each of the officers and Trustees is One Post
Office Square, Boston, Massachusetts 02109.
Except as stated below, the principal occupations of the officers
and Trustees for the last five years have been with the employers
as shown above, although in some cases they have held different
positions with such employers. Prior to 1993, Mr. Jackson was
Chairman of the Board, President and Chief Executive Officer of
Fisher-Price, Inc. Prior to January, 1992, Ms. Baxter was Vice
President and Principal, Regency Group, Inc. and Consultant, The
First Boston Corporation. Prior to May, 1991, Dr. Pounds was
Senior Advisor to the Rockefeller Family and Associates, Chairman
of Rockefeller Trust Company and Director of Rockefeller Group,
Inc. During the past five years Dr. Shapiro has provided
economic and financial consulting services to various clients.
Each Trustee of the fund receives an annual fee and an additional
fee for each Trustees' 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 and for special services rendered
in that connection. All of the Trustees are Trustees of all the
Putnam funds and each receives fees for his or her services. For
details of Trustees' fees paid by the fund and information
concerning retirement guidelines for the Trustees, see "Charges
and expenses" in Part I of this SAI.
The Agreement and Declaration of Trust of the fund provides that
the fund will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with litigation
in which they may be involved because of their offices with the
fund, except if it is determined in the manner specified in the
Agreement and Declaration of Trust that they have not acted in
good faith in the reasonable belief that their actions were in
the best interests of the fund or that such indemnification would
relieve any officer or Trustee of any liability to the fund or
its shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of his or her duties. The
fund, at its expense, provides liability insurance for the
benefit of its Trustees and officers.
Putnam Management and its affiliates
Putnam Management is one of America's oldest and largest money
management firms. Putnam Management's staff of experienced
portfolio managers and research analysts selects securities and
constantly supervises the fund's portfolio. By pooling an
investor's money with that of other investors, a greater variety
of securities can be purchased than would be the case
individually; the resulting diversification helps reduce
investment risk. Putnam Management has been managing mutual funds
since 1937. Today, the firm serves as the investment manager for
the funds in the Putnam Family, with over $113 billion in assets
in over 6.2 million shareholder accounts at June 30, 1996. An
affiliate, The Putnam Advisory Company, Inc., manages domestic
and foreign institutional accounts and mutual funds, including
the accounts of many Fortune 500 companies. Another affiliate,
Putnam Fiduciary Trust Company, provides investment advice to
institutional clients under its banking and fiduciary powers. At
June 30, 1996, Putnam Management and its affiliates managed
nearly $149 billion in assets, including over $17 billion in tax-
exempt securities and over $66 billion in retirement plan assets.
Putnam Management, Putnam Mutual Funds and Putnam Fiduciary Trust
Company are subsidiaries of Putnam Investments, Inc., a holding
company which is in turn wholly owned by Marsh & McLennan
Companies, Inc., a publicly-owned holding company whose principal
operating subsidiaries are international insurance and
reinsurance brokers, investment managers and management
consultants.
Trustees and officers of the fund who are also officers of Putnam
Management or its affiliates or who are stockholders of Marsh &
McLennan Companies, Inc. will benefit from the advisory fees,
sales commissions, distribution fees, custodian fees and transfer
agency fees paid or allowed by the fund.
The Management Contract
Under a Management Contract between the fund and Putnam
Management, subject to such policies as the Trustees may
determine, Putnam Management, at its expense, furnishes
continuously an investment program for the fund and makes
investment decisions on behalf of the fund. Subject to the
control of the Trustees, Putnam Management also manages,
supervises and conducts the other affairs and business of the
fund, furnishes office space and equipment, provides bookkeeping
and clerical services (including determination of the fund's net
asset value, but excluding shareholder accounting services) and
places all orders for the purchase and sale of the fund's
portfolio securities. Putnam Management may place fund portfolio
transactions with broker-dealers which furnish Putnam Management,
without cost to it, certain research, statistical and quotation
services of value to Putnam Management and its affiliates in
advising the fund and other clients. In so doing, Putnam
Management may cause the fund to pay greater brokerage
commissions than it might otherwise pay.
For details of Putnam Management's compensation under the
Management Contract, see "Charges and expenses" in Part I of this
SAI. Putnam Management's compensation under the Management
Contract may be reduced in any year if the fund's expenses exceed
the limits on investment company expenses imposed by any statute
or regulatory authority of any jurisdiction in which shares of
the fund are qualified for offer or sale. The term "expenses" is
defined in the statutes or regulations of such jurisdictions, and
generally excludes brokerage commissions, taxes, interest,
extraordinary expenses and, if the fund has a distribution plan,
payments made under such plan.
Under the Management Contract, Putnam Management may reduce its
compensation to the extent that the fund's expenses exceed such
lower expense limitation as Putnam Management may, by notice to
the fund, declare to be effective. The expenses subject to this
limitation are exclusive of brokerage commissions, interest,
taxes, deferred organizational and extraordinary expenses and, if
the fund has a distribution plan, payments required under such
plan. For the purpose of determining any such limitation on
Putnam Management's compensation, expenses of the fund shall not
reflect the application of commissions or cash management credits
that may reduce designated fund expenses. The terms of any
expense limitation from time to time in effect are described in
either the prospectus or Part I of this SAI.
In addition to the fee paid to Putnam Management, the fund
reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their assistants who
provide certain administrative services for the fund and the
other Putnam funds, each of which bears an allocated share of the
foregoing costs. The aggregate amount of all such payments and
reimbursements is determined annually by the Trustees.
The amount of this reimbursement for the fund's most recent
fiscal year is included in "Charges and Expenses" in Part I of
this SAI. Putnam Management pays all other salaries of officers
of the fund. The fund pays all expenses not assumed by Putnam
Management including, without limitation, auditing, legal,
custodial, investor servicing and shareholder reporting expenses.
The fund pays the cost of typesetting for its prospectuses and
the cost of printing and mailing any prospectuses sent to its
shareholders. Putnam Mutual Funds pays the cost of printing and
distributing all other prospectuses.
The Management Contract provides that Putnam Management shall not
be subject to any liability to the fund or to any shareholder of
the fund for any act or omission in the course of or connected
with rendering services to the fund in the absence of willful
misfeasance, bad faith, gross negligence or reckless disregard of
its duties on the part of Putnam Management.
The Management Contract may be terminated without penalty by vote
of the Trustees or the shareholders of the fund, or by Putnam
Management, on 30 days' written notice. It may be amended only
by a vote of the shareholders of the fund. The Management
Contract also terminates without payment of any penalty in the
event of its assignment. The Management Contract provides that
it will continue in effect only so long as such continuance is
approved at least annually by vote of either the Trustees or the
shareholders, and, in either case, by a majority of the Trustees
who are not "interested persons" of Putnam Management or the
fund. In each of the foregoing cases, the vote of the
shareholders is the affirmative vote of a "majority of the
outstanding voting securities" as defined in the Investment
Company Act of 1940.
<PAGE>
Personal Investments by Employees of Putnam Management
Employees of Putnam Management are permitted to engage in
personal securities transactions, subject to requirements and
restrictions set forth in Putnam Management's Code of Ethics.
The Code of Ethics contains provisions and requirements designed
to identify and address certain conflicts of interest between
personal investment activities and the interests of investment
advisory clients such as the funds. Among other things, the Code
of Ethics, consistent with standards recommended by the
Investment Company Institute's Advisory Group on Personal
Investing, prohibits certain types of transactions absent prior
approval, imposes time periods during which personal transactions
may not be made in certain securities, and requires the
submission of duplicate broker confirmations and quarterly
reporting of securities transactions. Additional restrictions
apply to portfolio managers, traders, research analysts and
others involved in the investment advisory process. Exceptions
to these and other provisions of the Code of Ethics may be
granted in particular circumstances after review by appropriate
personnel.
Portfolio Transactions
Investment decisions. Investment decisions for the fund and for
the other investment advisory clients of Putnam Management and
its affiliates are made with a view to achieving their respective
investment objectives. Investment decisions are the product of
many factors in addition to basic suitability for the particular
client involved. Thus, a particular security may be bought or
sold for certain clients even though it could have been bought or
sold for other clients at the same time. Likewise, a particular
security may be bought for one or more clients when one or more
other clients are selling the security. In some instances, one
client may sell a particular security to another client. It also
sometimes happens that two or more clients simultaneously
purchase or sell the same security, in which event each day's
transactions in such security are, insofar as possible, averaged
as to price and allocated between such clients in a manner which
in Putnam Management's opinion is equitable to each and in
accordance with the amount being purchased or sold by each.
There may be circumstances when purchases or sales of portfolio
securities for one or more clients will have an adverse effect on
other clients.
Brokerage and research services. Transactions on U.S. stock
exchanges, commodities markets and futures markets and other
agency transactions involve the payment by the fund of negotiated
brokerage commissions. Such commissions vary among different
brokers. A particular broker may charge different commissions
according to such factors as the difficulty and size of the
transaction. Transactions in foreign investments often involve
the payment of fixed brokerage commissions, which may be higher
than those in the United States. There is generally no stated
commission in the case of securities traded in the
over-the-counter markets, but the price paid by the fund usually
includes an undisclosed dealer commission or mark-up. In
underwritten offerings, the price paid by the fund includes a
disclosed, fixed commission or discount retained by the
underwriter or dealer. It is anticipated that most purchases and
sales of securities by funds investing primarily in tax-exempt
securities and certain other fixed-income securities will be with
the issuer or with underwriters of or dealers in those
securities, acting as principal. Accordingly, those funds would
not ordinarily pay significant brokerage commissions with respect
to securities transactions. See "Charges and expenses" in Part I
of this SAI for information concerning commissions paid by the
fund.
It has for many years been a common practice in the investment
advisory business for advisers of investment companies and other
institutional investors to receive brokerage and research
services (as defined in the Securities Exchange Act of 1934, as
amended (the "1934 Act")) from broker-dealers that execute
portfolio transactions for the clients of such advisers and from
third parties with which such broker-dealers have arrangements.
Consistent with this practice, Putnam Management receives
brokerage and research services and other similar services from
many broker-dealers with which Putnam Management places the
fund's portfolio transactions and from third parties with which
these broker-dealers have arrangements. These services include
such matters as general economic and market reviews, industry and
company reviews, evaluations of investments, recommendations as
to the purchase and sale of investments, newspapers, magazines,
pricing services, quotation services, news services and personal
computers utilized by Putnam Management's managers and analysts.
Where the services referred to above are not used exclusively by
Putnam Management for research purposes, Putnam Management, based
upon its own allocations of expected use, bears that portion of
the cost of these services which directly relates to their
non-research use. Some of these services are of value to Putnam
Management and its affiliates in advising various of their
clients (including the fund), although not all of these services
are necessarily useful and of value in managing the fund. The
management fee paid by the fund is not reduced because Putnam
Management and its affiliates receive these services even though
Putnam Management might otherwise be required to purchase some of
these services for cash.
Putnam Management places all orders for the purchase and sale of
portfolio investments for the fund and buys and sells investments
for the fund through a substantial number of brokers and dealers.
In so doing, Putnam Management uses its best efforts to obtain
for the fund the most favorable price and execution available,
except to the extent it may be permitted to pay higher brokerage
commissions as described below. In seeking the most favorable
price and execution, Putnam Management, having in mind the fund's
best interests, considers all factors it deems relevant,
including, by way of illustration, price, the size of the
transaction, the nature of the market for the security or other
investment, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the
broker-dealer involved and the quality of service rendered by the
broker-dealer in other transactions.
As permitted by Section 28(e) of the 1934 Act, and by the
Management Contract, Putnam Management may cause the fund to pay
a broker-dealer which provides "brokerage and research services"
(as defined in the 1934 Act) to Putnam Management an amount of
disclosed commission for effecting securities transactions on
stock exchanges and other transactions for the fund on an agency
basis in excess of the commission which another broker-dealer
would have charged for effecting that transaction. Putnam
Management's authority to cause the fund to pay any such greater
commissions is also subject to such policies as the Trustees may
adopt from time to time. Putnam Management does not currently
intend to cause the fund to make such payments. It is the
position of the staff of the Securities and Exchange Commission
that Section 28(e) does not apply to the payment of such greater
commissions in "principal" transactions. Accordingly Putnam
Management will use its best effort to obtain the most favorable
price and execution available with respect to such transactions,
as described above.
The Management Contract provides that commissions, fees,
brokerage or similar payments received by Putnam Management or an
affiliate in connection with the purchase and sale of portfolio
investments of the fund, less any direct expenses approved by the
Trustees, shall be recaptured by the fund through a reduction of
the fee payable by the fund under the Management Contract.
Putnam Management seeks to recapture for the fund soliciting
dealer fees on the tender of the fund's portfolio securities in
tender or exchange offers. Any such fees which may be recaptured
are likely to be minor in amount.
Consistent with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. and subject to seeking
the most favorable price and execution available and such other
policies as the Trustees may determine, Putnam Management may
consider sales of shares of the fund (and, if permitted by law,
of the other Putnam funds) as a factor in the selection of
broker-dealers to execute portfolio transactions for the fund.
<PAGE>
Principal Underwriter
Putnam Mutual Funds is the principal underwriter of shares of the
fund and the other continuously offered Putnam funds. Putnam
Mutual Funds is not obligated to sell any specific amount of
shares of the fund and will purchase shares for resale only
against orders for shares. See "Charges and expenses" in Part I
of this SAI for information on sales charges and other payments
received by Putnam Mutual Funds.
Investor Servicing Agent and Custodian
Putnam Investor Services, a division of Putnam Fiduciary Trust
Company ("PFTC"), is the fund's investor servicing agent
(transfer, plan and dividend disbursing agent), for which it
receives fees which are paid monthly by the fund as an expense of
all its shareholders. The fee paid to Putnam Investor Services
is determined on the basis of the number of shareholder accounts,
the number of transactions and the assets of the fund. Putnam
Investor Services has won the DALBAR Quality Tested Service Seal
every year since the award's 1990 inception. Over 10,000 tests
of 38 separate shareholder service components demonstrated that
Putnam Investor Services tied for highest scores, with two other
mutual fund companies, in all categories.
PFTC is the custodian of the fund's assets. In carrying out its
duties under its custodian contract, PFTC may employ one or more
subcustodians whose responsibilities include safeguarding and
controlling the fund's cash and securities, handling the receipt
and delivery of securities and collecting interest and dividends
on the fund's investments. PFTC and any subcustodians employed
by it have a lien on the securities of the fund (to the extent
permitted by the fund's investment restrictions) to secure
charges and any advances made by such subcustodians at the end of
any day for the purpose of paying for securities purchased by the
fund. The fund expects that such advances will exist only in
unusual circumstances. Neither PFTC nor any subcustodian
determines the investment policies of the fund or decides which
securities the fund will buy or sell. PFTC pays the fees and
other charges of any subcustodians employed by it. The fund may
from time to time pay custodial expenses in full or in part
through the placement by Putnam Management of the fund's
portfolio transactions with the subcustodians or with a third-
party broker having an agreement with the subcustodians. The
fund pays PFTC an annual fee based on the fund's assets,
securities transactions and securities holdings and reimburses
PFTC for certain out-of-pocket expenses incurred by it or any
subcustodian employed by it in performing custodial services.
<PAGE>
See "Charges and expenses" in Part I of this SAI for information
on fees and reimbursements for investor servicing and custody
received by PFTC. The fees may be reduced by credits allowed by
PFTC.
DETERMINATION OF NET ASSET VALUE
The fund determines the net asset value per share of each class
of shares once each day the New York Stock Exchange (the
"Exchange") is open. Currently, the Exchange is closed
Saturdays, Sundays and the following holidays: New Year's Day,
Presidents' Day, Good Friday, Memorial Day, the Fourth of July,
Labor Day, Thanksgiving and Christmas. The fund determines net
asset value as of the close of regular trading on the Exchange,
currently 4:00 p.m. However, equity options held by the fund are
priced as of the close of trading at 4:10 p.m., and futures
contracts on U.S. government and other fixed-income securities
and index options held by the fund are priced as of their close
of trading at 4:15 p.m.
Securities for which market quotations are readily available are
valued at prices which, in the opinion of Putnam Management, most
nearly represent the market values of such securities.
Currently, such prices are determined using the last reported
sale price or, if no sales are reported (as in the case of some
securities traded over-the-counter), the last reported bid price,
except that certain securities are valued at the mean between the
last reported bid and asked prices. Short-term investments
having remaining maturities of 60 days or less are valued at
amortized cost, which approximates market value. All other
securities and assets are valued at their fair value following
procedures approved by the Trustees. Liabilities are deducted
from the total, and the resulting amount is divided by the number
of shares of the class outstanding.
Reliable market quotations are not considered to be readily
available for long-term corporate bonds and notes, certain
preferred stocks, tax-exempt securities, and certain foreign
securities. These investments are valued at fair value on the
basis of valuations furnished by pricing services, which
determine valuations for normal, institutional-size trading units
of such securities using methods based on market transactions for
comparable securities and various relationships between
securities which are generally recognized by institutional
traders.
If any securities held by the fund are restricted as to resale,
Putnam Management determines their fair value following
procedures approved by the Trustees. The fair value of such
securities is generally determined as the amount which the fund
could reasonably expect to realize from an orderly disposition of
such securities over a reasonable period of time. The valuation
procedures applied in any specific instance are likely to vary
from case to case. However, consideration is generally given to
the financial position of the issuer and other fundamental
analytical data relating to the investment and to the nature of
the restrictions on disposition of the securities (including any
registration expenses that might be borne by the fund in
connection with such disposition). In addition, specific factors
are also generally considered, such as the cost of the
investment, the market value of any unrestricted securities of
the same class, the size of the holding, the prices of any recent
transactions or offers with respect to such securities and any
available analysts' reports regarding the issuer.
Generally, trading in certain securities (such as foreign
securities) is substantially completed each day at various times
prior to the close of the Exchange. The values of these
securities used in determining the net asset value of the fund's
shares are computed as of such times. Also, because of the
amount of time required to collect and process trading
information as to large numbers of securities issues, the values
of certain securities (such as convertible bonds, U.S. government
securities, and tax-exempt securities) are determined based on
market quotations collected earlier in the day at the latest
practicable time prior to the close of the Exchange.
Occasionally, events affecting the value of such securities may
occur between such times and the close of the Exchange which will
not be reflected in the computation of the fund's net asset
value. If events materially affecting the value of such
securities occur during such period, then these securities will
be valued at their fair value following procedures approved by
the Trustees.
Money market funds generally value their portfolio securities at
amortized cost according to Rule 2a-7 under the Investment
Company Act of 1940.
HOW TO BUY SHARES
General
The prospectus contains a general description of how investors
may buy shares of the fund and states whether the fund offers
more than one class of shares. This SAI contains additional
information which may be of interest to investors.
Class A shares and class M shares are generally sold with a sales
charge payable at the time of purchase (except for class A shares
and class M shares of money market funds). As used in this SAI
and unless the context requires otherwise, the term "class A
shares" includes shares of funds that offer only one class of
shares. The prospectus contains a table of applicable sales
charges. For information about how to purchase class A or class
M shares of a Putnam fund at net asset value through an
employer's defined contribution plan, please consult your
employer. Certain purchases of class A shares and class M shares
may be exempt from a sales charge or, in the case of class A
shares, may be subject to a contingent deferred sales charge
("CDSC"). See "General--Sales without sales charges or
contingent deferred sales charges," "Additional Information About
Class A and Class M shares," and "Contingent Deferred Sales
Charges--Class A shares."
Class B shares and class C shares are sold subject to a CDSC
payable upon redemption within a specified period after purchase.
The prospectus contains a table of applicable CDSCs.
Class B shares will automatically convert into class A shares at
the end of the month eight years after the purchase date. Class
B shares acquired by exchanging class B shares of another Putnam
fund will convert into class A shares based on the time of the
initial purchase. Class B shares acquired through reinvestment
of distributions will convert into Class A shares based on the
date of the initial purchase to which such shares relate. For
this purpose, class B shares acquired through reinvestment of
distributions will be attributed to particular purchases of class
B shares in accordance with such procedures as the Trustees may
determine from time to time. The conversion of class B shares to
class A shares is subject to the condition that such conversions
will not constitute taxable events for Federal tax purposes.
Class Y shares, which are not subject to sales charges or a CDSC,
are available only to certain defined contribution plans. See
the prospectus that offers class Y shares for more information.
Certain purchase programs described below are not available to
defined contribution plans. Consult your employer for
information on how to purchase shares through your plan.
The fund is currently making a continuous offering of its shares.
The fund receives the entire net asset value of shares sold. The
fund will accept unconditional orders for shares to be executed
at the public offering price based on the net asset value per
share next determined after the order is placed. In the case of
class A shares and class M shares, the public offering price is
the net asset value plus the applicable sales charge, if any. No
sales charge is included in the public offering price of other
classes of shares. In the case of orders for purchase of shares
placed through dealers, the public offering price will be based
on the net asset value determined on the day the order is placed,
but only if the dealer receives the order before the close of
regular trading on the Exchange. If the dealer receives the
order after the close of the Exchange, the price will be based on
the net asset value next determined. If funds for the purchase
of shares are sent directly to Putnam Investor Services, they
will be invested at the public offering price based on the net
asset value next determined after receipt. Payment for shares of
the fund must be in U.S. dollars; if made by check, the check
must be drawn on a U.S. bank.
Initial and subsequent purchases must satisfy the minimums stated
in the prospectus, except that (i) individual investments under
certain employee benefit plans or Tax Qualified Retirement Plans
may be lower, (ii) persons who are already shareholders may make
additional purchases of $50 or more by sending funds directly to
Putnam Investor Services (see "Your investing account" below),
and (iii) for investors participating in systematic investment
plans and military allotment plans, the initial and subsequent
purchases must be $25 or more. Information about these plans is
available from investment dealers or from Putnam Mutual Funds.
As a convenience to investors, shares may be purchased through a
systematic investment plan. Pre-authorized monthly bank drafts
for a fixed amount (at least $25) are used to purchase fund
shares at the applicable public offering price next determined
after Putnam Mutual Funds receives the proceeds from the draft
(normally the 20th of each month, or the next business day
thereafter). Further information and application forms are
available from investment dealers or from Putnam Mutual Funds.
Except for funds that declare a distribution daily, distributions
to be reinvested are reinvested without a sales charge in shares
of the same class as of the ex-dividend date using the net asset
value determined on that date, and are credited to a
shareholder's account on the payment date. Dividends for Putnam
money market funds are credited to a shareholder's account on the
payment date. Distributions for all other funds that declare a
distribution daily are reinvested without a sales charge as of
the next day following the period for which distributions are
paid using the net asset value determined on that date, and are
credited to a shareholder's account on the payment date.
Payment in securities. In addition to cash, the fund may accept
securities as payment for fund shares at the applicable net asset
value. Generally, the fund will only consider accepting
securities to increase its holdings in a portfolio security, or
if Putnam Management determines that the offered securities are a
suitable investment for the fund and in a sufficient amount for
efficient management.
While no minimum has been established, it is expected that the
fund would not accept securities with a value of less than
$100,000 per issue as payment for shares. The fund may reject in
whole or in part any or all offers to pay for purchases of fund
shares with securities, may require partial payment in cash for
such purchases to provide funds for applicable sales charges, and
may discontinue accepting securities as payment for fund shares
at any time without notice. The fund will value accepted
securities in the manner described in the section "Determination
of Net Asset Value" for valuing shares of the fund. The fund
will only accept securities which are delivered in proper form.
The fund will not accept options or restricted securities as
payment for shares. The acceptance of securities by certain
funds in exchange for fund shares is subject to additional
requirements. For federal income tax purposes, a purchase of
fund shares with securities will be treated as a sale or exchange
of such securities on which the investor will realize a taxable
gain or loss. The processing of a purchase of fund shares with
securities involves certain delays while the fund considers the
suitability of such securities and while other requirements are
satisfied. For information regarding procedures for payment in
securities, contact Putnam Mutual Funds. Investors should not
send securities to the fund except when authorized to do so and
in accordance with specific instructions received from Putnam
Mutual Funds.
Sales without sales charges or contingent deferred sales charges.
The fund may sell shares without a sales charge or CDSC to:
(i) current and retired Trustees of the fund; officers of
the fund; directors and current and retired U.S. full-time
employees of Putnam Management, Putnam Mutual Funds, their
parent corporations and certain corporate affiliates;
family members of and employee benefit plans for the
foregoing; and partnerships, trusts or other entities in
which any of the foregoing has a substantial interest;
(ii) employee benefit plans, for the repurchase of shares
in connection with repayment of plan loans made to plan
participants (if the sum loaned was obtained by redeeming
shares of a Putnam fund sold with a sales charge) (not
offered by tax-exempt funds);
(iii) clients of administrators of tax-qualified employee
benefit plans which have entered into agreements with
Putnam Mutual Funds (not offered by tax-exempt funds);
(iv) registered representatives and other employees of
broker-dealers having sales agreements with Putnam Mutual
Funds; employees of financial institutions having sales
agreements with Putnam Mutual Funds or otherwise having an
arrangement with any such broker-dealer or financial
institution with respect to sales of fund shares; and
their spouses and children under age 21 (Putnam Mutual
Funds is regarded as the dealer of record for all such
accounts);
(v) investors meeting certain requirements who sold shares
of certain Putnam closed-end funds pursuant to a tender
offer by such closed-end fund;
(vi) a trust department of any financial institution
purchasing shares of the fund in its capacity as trustee
of any trust, if the value of the shares of the fund and
other Putnam funds purchased or held by all such trusts
exceeds $1 million in the aggregate; and
(vii) "wrap accounts" maintained for clients of broker-
dealers, financial institutions or financial planners who
have entered into agreements with Putnam Mutual Funds with
respect to such accounts.
In addition, the fund may issue its shares at net asset value
without an initial sales charge or a CDSC in connection with the
acquisition of substantially all of the securities owned by other
investment companies or personal holding companies, and the CDSC
will be waived on redemptions of shares arising out of death or
post-purchase disability or in connection with certain
withdrawals from IRA or other retirement plans. Up to 12% of the
value of shares subject to a systematic withdrawal plan may also
be redeemed each year without a CDSC. The fund may sell class M
shares at net asset value to members of qualified groups. See
"Group purchases of class A and class M shares" below.
Payments to dealers. Putnam Mutual Funds may, at its expense,
pay concessions in addition to the payments disclosed in the
prospectus to dealers which satisfy certain criteria established
from time to time by Putnam Mutual Funds relating to increasing
net sales of shares of the Putnam funds over prior periods, and
certain other factors.
Additional Information About Class A and Class M Shares
The underwriter's commission is the sales charge shown in the
prospectus less any applicable dealer discount. Putnam Mutual
Funds will give dealers ten days' notice of any changes in the
dealer discount. Putnam Mutual Funds retains the entire sales
charge on any retail sales made by it.
Putnam Mutual Funds offers several plans by which an investor may
obtain reduced sales charges on purchases of class A shares and
class M shares. The variations in sales charges reflect the
varying efforts required to sell shares to separate categories of
purchasers. These plans may be altered or discontinued at any
time.
Combined purchase privilege. The following persons may qualify
for the sales charge reductions or eliminations shown in the
prospectus by combining into a single transaction the purchase of
class A shares or class M shares with other purchases of any
class of shares:
(i) an individual, or a "company" as defined in Section
2(a)(8) of the Investment Company Act of 1940 (which
includes corporations which are corporate affiliates of
each other);
(ii) an individual, his or her spouse and their children
under twenty-one, purchasing for his, her or their own
account;
(iii) a trustee or other fiduciary purchasing for a single
trust estate or single fiduciary account (including a
pension, profit-sharing, or other employee benefit trust
created pursuant to a plan qualified under Section 401 of
the Internal Revenue Code of 1986, as amended (the
"Code"));
(iv) tax-exempt organizations qualifying under Section
501(c)(3) of the Internal Revenue Code (not including tax-
exempt organizations qualifying under Section 403(b)(7) (a
"403(b) plan") of the Code; and
(v) employee benefit plans of a single employer or of
affiliated employers, other than 403(b) plans.
A combined purchase currently may also include shares of any
class of other continuously offered Putnam funds (other than
money market funds) purchased at the same time through a single
investment dealer, if the dealer places the order for such shares
directly with Putnam Mutual Funds.
Cumulative quantity discount (right of accumulation). A
purchaser of class A shares or class M shares may qualify for a
cumulative quantity discount by combining a current purchase (or
combined purchases as described above) with certain other shares
of any class of Putnam funds already owned. The applicable sales
charge is based on the total of:
(i) the investor's current purchase; and
(ii) the maximum public offering price (at the close of
business on the previous day) of:
(a) all shares held by the investor in all of the
Putnam funds (except money market funds); and
(b) any shares of money market funds acquired by
exchange from other Putnam funds; and
(iii) the maximum public offering price of all shares
described in paragraph (ii) owned by another shareholder
eligible to participate with the investor in a "combined
purchase" (see above).
To qualify for the combined purchase privilege or to obtain the
cumulative quantity discount on a purchase through an investment
dealer, when each purchase is made the investor or dealer must
provide Putnam Mutual Funds with sufficient information to verify
that the purchase qualifies for the privilege or discount. The
shareholder must furnish this information to Putnam Investor
Services when making direct cash investments.
Statement of Intention. Investors may also obtain the reduced
sales charges for class A shares or class M shares shown in the
prospectus for investments of a particular amount by means of a
written Statement of Intention, which expresses the investor's
intention to invest that amount (including certain "credits," as
described below) within a period of 13 months in shares of any
class of the fund or any other continuously offered Putnam fund
(excluding money market funds). Each purchase of class A shares
or class M shares under a Statement of Intention will be made at
the public offering price applicable at the time of such purchase
to a single transaction of the total dollar amount indicated in
the Statement of Intention. A Statement of Intention may include
purchases of shares made not more than 90 days prior to the date
that an investor signs a Statement; however, the 13-month period
during which the Statement of Intention is in effect will begin
on the date of the earliest purchase to be included.
An investor may receive a credit toward the amount indicated in
the Statement of Intention equal to the maximum public offering
price as of the close of business on the previous day of all
shares he or she owns on the date of the Statement of Intention
which are eligible for purchase under a Statement of Intention
(plus any shares of money market funds acquired by exchange of
such eligible shares). Investors do not receive credit for
shares purchased by the reinvestment of distributions. Investors
qualifying for the "combined purchase privilege" (see above) may
purchase shares under a single Statement of Intention.
The Statement of Intention is not a binding obligation upon the
investor to purchase the full amount indicated. The minimum
initial investment under a Statement of Intention is 5% of such
amount, and must be invested immediately. Class A shares or
class M shares purchased with the first 5% of such amount will be
held in escrow to secure payment of the higher sales charge
applicable to the shares actually purchased if the full amount
indicated is not purchased. When the full amount indicated has
been purchased, the escrow will be released. If an investor
desires to redeem escrowed shares before the full amount has been
purchased, the shares will be released from escrow only if the
investor pays the sales charge that, without regard to the
Statement of Intention, would apply to the total investment made
to date.
To the extent that an investor purchases more than the dollar
amount indicated on the Statement of Intention and qualifies for
a further reduced sales charge, the sales charge will be adjusted
for the entire amount purchased at the end of the 13-month
period, upon recovery from the investor's dealer of its portion
of the sales charge adjustment. Once received from the dealer,
which may take a period of time or may never occur, the sales
charge adjustment will be used to purchase additional shares at
the then current offering price applicable to the actual amount
of the aggregate purchases. These additional shares will not be
considered as part of the total investment for the purpose of
determining the applicable sales charge pursuant to the Statement
of Intention. No sales charge adjustment will be made unless and
until the investor's dealer returns any excess commissions
previously received.
To the extent that an investor purchases less than the dollar
amount indicated on the Statement of Intention within the 13-
month period, the sales charge will be adjusted upward for the
entire amount purchased at the end of the 13-month period. This
adjustment will be made by redeeming shares from the account to
cover the additional sales charge, the proceeds of which will be
paid to the investor's dealer and Putnam Mutual Funds in
accordance with the prospectus. If the account exceeds an amount
that would otherwise qualify for a reduced sales charge, that
reduced sales charge will be applied.
Statements of Intention are not available for certain employee
benefit plans.
Statement of Intention forms may be obtained from Putnam Mutual
Funds or from investment dealers. Interested investors should
read the Statement of Intention carefully.
Group purchases of class A and class M shares. Members of
qualified groups may purchase class A shares of the fund at a
group sales charge rate of 4.50% of the public offering price
(4.71% of the net amount invested). The dealer discount on such
sales is 3.75% of the offering price. Members of qualified
groups may also purchase class M shares at net asset value.
To receive the class A or class M group rate, group members must
purchase shares through a single investment dealer designated by
the group. The designated dealer must transmit each member's
initial purchase to Putnam Mutual Funds, together with payment
and completed application forms. After the initial purchase, a
member may send funds for the purchase of shares directly to
Putnam Investor Services. Purchases of shares are made at the
public offering price based on the net asset value next
determined after Putnam Mutual Funds or Putnam Investor Services
receives payment for the shares. The minimum investment
requirements described above apply to purchases by any group
member. Only shares purchased under the class A group discount
are included in calculating the purchased amount for the purposes
of these requirements.
Qualified groups include the employees of a corporation or a sole
proprietorship, members and employees of a partnership or
association, or other organized groups of persons (the members of
which may include other qualified groups) provided that: (i) the
group has at least 25 members of which, with respect to the class
A discount only, at least 10 members participate in the initial
purchase; (ii) the group has been in existence for at least six
months; (iii) the group has some purpose in addition to the
purchase of investment company shares at a reduced sales charge;
(iv) the group's sole organizational nexus or connection is not
that the members are credit card holders of a company, policy
holders of an insurance company, customers of a bank or
broker-dealer, clients of an investment adviser or security
holders of a company; (v) with respect to the class A discount
only, the group agrees to provide its designated investment
dealer access to the group's membership by means of written
communication or direct presentation to the membership at a
meeting on not less frequently than an annual basis; (vi) the
group or its investment dealer will provide annual certification
in form satisfactory to Putnam Investor Services that the group
then has at least 25 members and, with respect to the class A
discount only, that at least ten members participated in group
purchases during the immediately preceding 12 calendar months;
and (vii) the group or its investment dealer will provide
periodic certification in form satisfactory to Putnam Investor
Services as to the eligibility of the purchasing members of the
group.
Members of a qualified group include: (i) any group which meets
the requirements stated above and which is a constituent member
of a qualified group; (ii) any individual purchasing for his or
her own account who is carried on the records of the group or on
the records of any constituent member of the group as being a
good standing employee, partner, member or person of like status
of the group or constituent member; or (iii) any fiduciary
purchasing shares for the account of a member of a qualified
group or a member's beneficiary. For example, a qualified group
could consist of a trade association which would have as its
members individuals, sole proprietors, partnerships and
corporations. The members of the group would then consist of the
individuals, the sole proprietors and their employees, the
members of the partnerships and their employees, and the
corporations and their employees, as well as the trustees of
employee benefit trusts acquiring class A shares for the benefit
of any of the foregoing.
<PAGE>
A member of a qualified group may, depending upon the value of
class A shares of the fund owned or proposed to be purchased by
the member, be entitled to purchase class A shares of the fund at
non-group sales charge rates shown in the prospectus which may be
lower than the group sales charge rate, if the member qualifies
as a person entitled to reduced non-group sales charges. Such a
group member will be entitled to purchase at the lower rate if,
at the time of purchase, the member or his or her investment
dealer furnishes sufficient information for Putnam Mutual Funds
or Putnam Investor Services to verify that the purchase qualifies
for the lower rate.
Interested groups should contact their investment dealer or
Putnam Mutual Funds. The fund reserves the right to revise the
terms of or to suspend or discontinue group sales at any time.
Employee benefit plans; Individual account plans. The term
"employee benefit plan" means any plan or arrangement, whether or
not tax-qualified, which provides for the purchase of class A
shares. The term "affiliated employer" means employers who are
affiliated with each other within the meaning of Section
2(a)(3)(C) of the Investment Company Act of 1940. The term
"individual account plan" means any employee benefit plan whereby
(i) class A shares are purchased through payroll deductions or
otherwise by a fiduciary or other person for the account of
participants who are employees (or their spouses) of an employer,
or of affiliated employers, and (ii) a separate investing account
is maintained in the name of such fiduciary or other person for
the account of each participant in the plan.
The table of sales charges in the prospectus applies to sales to
employee benefit plans, except that the fund may sell class A
shares at net asset value to employee benefit plans, including
individual account plans, of employers or of affiliated employers
which have at least 750 employees to whom such plan is made
available, in connection with a payroll deduction system of plan
funding (or other system acceptable to Putnam Investor Services)
by which contributions or account information for plan
participation are transmitted to Putnam Investor Services by
methods acceptable to Putnam Investor Services. The fund may
also sell class A shares at net asset value to participant-
directed qualified retirement plans with at least 200 eligible
employees, or prior to December 1, 1995, a plan sponsored by an
employer or by affiliated employers which have at least 750
employees and the fund may sell class M shares at net asset value
to participant-directed qualified retirement plans with at least
50 eligible employees.
A participant-directed qualified retirement plan participating in
a "multi-fund" program approved by Putnam Mutual Funds may
include amounts invested in the other mutual funds participating
in such program for purposes of determining whether the plan may
purchase class A shares at net asset value based on the size of
the purchase as described in the prospectus. These investments
will also be included for purposes of the discount privileges and
programs described above.
Additional information about participant-directed qualified
retirement plans and individual account plans is available from
investment dealers or from Putnam Mutual Funds.
Contingent Deferred Sales Charges
Class A shares. Class A shares purchased at net asset value
after July 31, 1996 by a participant-directed qualified
retirement plan (including a plan with at least 200 eligible
employees) that initially invested less than $20 million in
Putnam funds and other investments managed By Putnam Management
or its affiliates and that redeems 90% of more of the amount
initially within two years after its initial purchase are subject
to a CDSC of 1.00%. Similarly, class A shares purchased at net
asset value by any investor other than a participant-directed
qualified retirement plan investing $1 million or more, including
purchases pursuant to any Combined Purchase Privilege, Right of
Accumulation or Statement of Intention, are subject to a CDSC of
1.00% or 0.50%, respectively, if redeemed within the first or
second year after purchase. The class A CDSC is imposed on the
lower of the cost and the current net asset value of the shares
redeemed. The CDSC does not apply to shares purchased by certain
investors (including participant-directed qualified retirement
plans with more than 200 eligible employees) investing $1 million
or more that have made arrangements with Putnam Mutual Funds and
whose dealer of record waived the commission described in the
next paragraph.
Except as stated below, Putnam Mutual Funds pays investment
dealers of record commissions on sales of class A shares of $1
million or more based on an investor's cumulative purchases of
such shares, including purchases pursuant to any Combined
Purchase Privilege, Right of Accumulation or Statement of
Intention, during the one-year period beginning with the date of
the initial purchase at net asset value. Each subsequent one-year
measuring period for these purposes will begin with the first net
asset value purchase following the end of the prior period. Such
commissions are paid at the rate of 1.00% of the amount under $3
million, 0.50% of the next $47 million and 0.25% thereafter. On
sales at net asset value to a participant-directed qualified
retirement plan initially investing less than $20 million in
Putnam funds and other investments managed by Putnam Management
or its affiliates (including a plan with at least 200 eligible
employees, or, prior to December 1, 1995, a plan sponsored by an
employer with more than 750 employees), Putnam Mutual Funds pays
commissions during each one-year measuring period, determined as
described above, at the rate of 1.00% of the first $2 million,
0.80% of the next $1 million and 0.50% thereafter, except that
commissions on sales prior to December 1, 1995 are based on
cumulative purchases during the life of the account and are paid
at the rate of 1.00% of the amount under $3 million and 0.50%
thereafter. On sales at net asset value to all other
participant-directed qualified retirement plans, Putnam Mutual
Funds pays commissions on the initial investment and on
subsequent net quarterly sales (gross sales minus gross
redemptions during the quarter) at the rate of 0.15%. Money
market fund shares are excluded from all commission calculations,
except for determining the amount initially invested by a
participant-directed qualified retirement plan. Commissions on
sales at net asset value to such plans are subject to Putnam
Mutual Funds' right to reclaim such commissions if the shares are
redeemed within two years.
Different CDSC and commission rates may apply to shares purchased
before April 1, 1994.
All shares. Investors who set up an Automatic Cash Withdrawal
Plan ("ACWP") for a share account (see "Plans available to
shareholders -- Automatic Cash Withdrawal Plan") may withdraw
through the ACWP up to 12% of the net asset value of the account
(calculated as set forth below) each year without incurring any
CDSC. Shares not subject to a CDSC (such as shares representing
reinvestment of distributions) will be redeemed first and will
count toward the 12% limitation. If there are insufficient
shares not subject to a CDSC, shares subject to the lowest CDSC
liability will be redeemed next until the 12% limit is reached.
The 12% figure is calculated on a pro rata basis at the time of
the first payment made pursuant to an ACWP and recalculated
thereafter on a pro rata basis at the time of each ACWP payment.
Therefore, shareholders who have chosen an ACWP based on a
percentage of the net asset value of their account of up to 12%
will be able to receive ACWP payments without incurring a CDSC.
However, shareholders who have chosen a specific dollar amount
(for example, $100 per month from a fund that pays income
distributions monthly) for their periodic ACWP payment should be
aware that the amount of that payment not subject to a CDSC may
vary over time depending on the net asset value of their account.
For example, if the net asset value of the account is $10,000 at
the time of payment, the shareholder will receive $100 free of
the CDSC (12% of $10,000 divided by 12 monthly payments).
However, if at the time of the next payment the net asset value
of the account has fallen to $9,400, the shareholder will receive
$94 free of any CDSC (12% of $9,400 divided by 12 monthly
payments) and $6 subject to the lowest applicable CDSC. This
ACWP privilege may be revised or terminated at any time.
<PAGE>
No CDSC is imposed on shares of any class subject to a CDSC
("CDSC Shares") to the extent that the CDSC Shares redeemed (i)
are no longer subject to the holding period therefor, (ii)
resulted from reinvestment of distributions on CDSC Shares, or
(iii) were exchanged for shares of another Putnam fund, provided
that the shares acquired in such exchange or subsequent exchanges
(including shares of a Putnam money market fund) will continue to
remain subject to the CDSC, if applicable, until the applicable
holding period expires. In determining whether the CDSC applies
to each redemption of CDSC Shares, CDSC Shares not subject to a
CDSC are redeemed first.
The fund will waive any CDSC on redemptions, in the case of
individual, joint or Uniform Transfers to Minors Act accounts, in
the event of death or post-purchase disability of a shareholder,
for the purpose of paying benefits pursuant to tax-qualified
retirement plans ("Benefit Payments"), or, in the case of living
trust accounts, in the event of the death or post-purchase
disability of the settlor of the trust). Benefit payments
currently include, without limitation, (1) distributions from an
IRA due to death or disability, (2) a return of excess
contributions to an IRA or 401(k) plan, and (3) distributions
from retirement plans qualified under Section 401(a) of the Code
or from a 403(b) plan due to death, disability, retirement or
separation from service. These waivers may be changed at any
time. Additional waivers may apply to IRA accounts opened prior
to February 1, 1994.
DISTRIBUTION PLANS
If the fund or a class of shares of the fund has adopted a
distribution plan, the prospectus describes the principal
features of the plan. This SAI contains additional information
which may be of interest to investors.
Continuance of a plan is subject to annual approval by a vote of
the Trustees, including a majority of the Trustees who are not
interested persons of the fund and who have no direct or indirect
interest in the plan or related arrangements (the "Qualified
Trustees"), cast in person at a meeting called for that purpose.
All material amendments to a plan must be likewise approved by
the Trustees and the Qualified Trustees. No plan may be amended
in order to increase materially the costs which the fund may bear
for distribution pursuant to such plan without also being
approved by a majority of the outstanding voting securities of
the fund or the relevant class of the fund, as the case may be.
A plan terminates automatically in the event of its assignment
and may be terminated without penalty, at any time, by a vote of
a majority of the Qualified Trustees or by a vote of a majority
of the outstanding voting securities of the fund or the relevant
class of the fund, as the case may be.
If plan payments are made to reimburse Putnam Mutual Funds for
payments to dealers based on the average net asset value of fund
shares attributable to shareholders for whom the dealers are
designated as the dealer of record, "average net asset value"
attributable to a shareholder account means the product of (i)
the fund's average daily share balance of the account and (ii)
the fund's average daily net asset value per share (or the
average daily net asset value per share of the class, if
applicable). For administrative reasons, Putnam Mutual Funds may
enter into agreements with certain dealers providing for the
calculation of "average net asset value" on the basis of assets
of the accounts of the dealer's customers on an established day
in each quarter.
Financial institutions receiving payments from Putnam Mutual
Funds as described above may be required to comply with various
state and federal regulatory requirements, including among others
those regulating the activities of securities brokers or dealers.
INVESTOR SERVICES
Shareholder Information
Each time shareholders buy or sell shares, they will receive a
statement confirming the transaction and listing their current
share balance. (Under certain investment plans, a statement may
only be sent quarterly.) Shareholders will receive a statement
confirming reinvestment of distributions in additional fund
shares (or in shares of other Putnam funds for Dividends Plus
accounts) promptly following the quarter in which the
reinvestment occurs. To help shareholders take full advantage of
their Putnam investment, they will receive a Welcome Kit and a
periodic publication covering many topics of interest to
investors. The fund also sends annual and semiannual reports
that keep shareholders informed about its portfolio and
performance, and year-end tax information to simplify their
recordkeeping. Easy-to-read, free booklets on special subjects
such as the Exchange Privilege and IRAs are available from Putnam
Investor Services. Shareholders may call Putnam Investor
Services toll-free weekdays at 1-800-225-1581 between 8:30 a.m.
and 7:00 p.m. Boston time for more information, including account
balances.
Your Investing Account
The following information provides more detail concerning the
operation of a Putnam Investing Account. For further information
or assistance, investors should consult Putnam Investor Services.
Shareholders who purchase shares through a defined contribution
plan should note that not all of the services or features
described below may be available to them, and they should contact
their employer for details.
A shareholder may reinvest a cash distribution without a
front-end sales charge or without the reinvested shares being
subject to a CDSC, as the case may be, by delivering to Putnam
Investor Services the uncashed distribution check, endorsed to
the order of the fund. Putnam Investor Services must receive the
properly endorsed check within 1 year after the date of the
check.
The Investing Account also provides a way to accumulate shares of
the fund. In most cases, after an initial investment of $500, a
shareholder may send checks to Putnam Investor Services for $50
or more, made payable to the fund, to purchase additional shares
at the applicable public offering price next determined after
Putnam Investor Services receives the check. Checks must be
drawn on a U.S. bank and must be payable in U.S. dollars.
Putnam Investor Services acts as the shareholder's agent whenever
it receives instructions to carry out a transaction on the
shareholder's account. Upon receipt of instructions that shares
are to be purchased for a shareholder's account, shares will be
purchased through the investment dealer designated by the
shareholder. Shareholders may change investment dealers at any
time by written notice to Putnam Investor Services, provided the
new dealer has a sales agreement with Putnam Mutual Funds.
Shares credited to an account are transferable upon written
instructions in good order to Putnam Investor Services and may be
sold to the fund as described under "How to sell shares" in the
prospectus. Money market funds and certain other funds will not
issue share certificates. A shareholder may send to Putnam
Investor Services any certificates which have been previously
issued for safekeeping at no charge to the shareholder.
Putnam Mutual Funds, at its expense, may provide certain
additional reports and administrative material to qualifying
institutional investors with fiduciary responsibilities to assist
these investors in discharging their responsibilities.
Institutions seeking further information about this service
should contact Putnam Mutual Funds, which may modify or terminate
this service at any time.
Putnam Investor Services may make special services available to
shareholders with investments exceeding $1,000,000. Contact
Putnam Investor Services for details.
The fund pays Putnam Investor Services' fees for maintaining
Investing Accounts.
<PAGE>
Reinstatement Privilege
An investor who has redeemed shares of the fund may reinvest
(within 1 year) the proceeds of such sale in shares of the same
class of the fund, or may be able to reinvest (within 1 year) the
proceeds in shares of the same class of one of the other
continuously offered Putnam funds (through the Exchange Privilege
described in the prospectus), including, in the case of shares
subject to a CDSC, the amount of CDSC charged on the redemption.
Any such reinvestment would be at the net asset value of the
shares of the fund(s) the investor selects, next determined after
Putnam Mutual Funds receives a Reinstatement Authorization. The
time that the previous investment was held will be included in
determining any applicable CDSC due upon redemptions and, in the
case of class B shares, the eight-year period for conversion to
class A shares. Shareholders will receive from Putnam Mutual
Funds the amount of any CDSC paid at the time of redemption as
part of the reinstated investment, which may be treated as
capital gains to the shareholder for tax purposes. Exercise of
the Reinstatement Privilege does not alter the federal income tax
treatment of any capital gains realized on a sale of fund shares,
but to the extent that any shares are sold at a loss and the
proceeds are reinvested in shares of the fund, some or all of the
loss may be disallowed as a deduction. Consult your tax adviser.
Investors who desire to exercise the Reinstatement Privilege
should contact their investment dealer or Putnam Investor
Services.
Exchange Privilege
Except as otherwise set forth in this section, by calling Putnam
Investor Services, investors may exchange shares valued up to
$500,000 between accounts with identical registrations, provided
that no certificates are outstanding for such shares and no
address change has been made within the preceding 15 days.
During periods of unusual market changes and shareholder
activity, shareholders may experience delays in contacting Putnam
Investor Services by telephone to exercise the Telephone Exchange
Privilege.
Putnam Investor Services also makes exchanges promptly after
receiving a properly completed Exchange Authorization Form and,
if issued, share certificates. If the shareholder is a
corporation, partnership, agent, or surviving joint owner, Putnam
Investor Services will require additional documentation of a
customary nature. Because an exchange of shares involves the
redemption of fund shares and reinvestment of the proceeds in
shares of another Putnam fund, completion of an exchange may be
delayed under unusual circumstances if the fund were to suspend
redemptions or postpone payment for the fund shares being
exchanged, in accordance with federal securities laws. Exchange
Authorization Forms and prospectuses of the other Putnam funds
are available from Putnam Mutual Funds or investment dealers
having sales contracts with Putnam Mutual Funds. The prospectus
of each fund describes its investment objective(s) and policies,
and shareholders should obtain a prospectus and consider these
objectives and policies carefully before requesting an exchange.
Shares of certain Putnam funds are not available to residents of
all states. The fund reserves the right to change or suspend the
Exchange Privilege at any time. Shareholders would be notified
of any change or suspension. Additional information is available
from Putnam Investor Services.
Shareholders of other Putnam funds may also exchange their shares
at net asset value for shares of the fund, as set forth in the
current prospectus of each fund.
For federal income tax purposes, an exchange is a sale on which
the investor generally will realize a capital gain or loss
depending on whether the net asset value at the time of the
exchange is more or less than the investor's basis. The Exchange
Privilege may be revised or terminated at any time. Shareholders
would be notified of any such change or suspension.
Dividends PLUS
Shareholders may invest the fund's distributions of net
investment income or distributions combining net investment
income and short-term capital gains in shares of the same class
of another continuously offered Putnam fund (the "receiving
fund") using the net asset value per share of the receiving fund
determined on the date the fund's distribution is payable. No
sales charge or CDSC will apply to the purchased shares unless
the fund paying the distribution is a money market fund. The
prospectus of each fund describes its investment objective(s) and
policies, and shareholders should obtain a prospectus and
consider these objective(s) and policies carefully before
investing their distributions in the receiving fund. Shares of
certain Putnam funds are not available to residents of all
states.
The minimum account size requirement for the receiving fund will
not apply if the current value of your account in the fund paying
the distribution is more than $5,000.
Shareholders of other Putnam funds (except for money market
funds, whose shareholders must pay a sales charge or become
subject to a CDSC) may also use their distributions to purchase
shares of the fund at net asset value.
For federal tax purposes, distributions from the fund which are
reinvested in another fund are treated as paid by the fund to the
shareholder and invested by the shareholder in the receiving fund
and thus, to the extent comprised of taxable income and deemed
paid to a taxable shareholder, are taxable.
The Dividends PLUS program may be revised or terminated at any
time.
Plans Available To Shareholders
The plans described below are fully voluntary and may be
terminated at any time without the imposition by the fund or
Putnam Investor Services of any penalty. All plans provide for
automatic reinvestment of all distributions in additional shares
of the fund at net asset value. The fund, Putnam Mutual Funds or
Putnam Investor Services may modify or cease offering these plans
at any time.
Automatic cash withdrawal plan ("ACWP"). An investor who owns or
buys shares of the fund valued at $10,000 or more at the current
public offering price may open an ACWP plan and have a designated
sum of money ($50 or more) paid monthly, quarterly, semi-annually
or annually to the investor or another person. (Payments from
the fund can be combined with payments from other Putnam funds
into a single check through a designated payment plan.) Shares
are deposited in a plan account, and all distributions are
reinvested in additional shares of the fund at net asset value
(except where the plan is utilized in connection with a
charitable remainder trust). Shares in a plan account are then
redeemed at net asset value to make each withdrawal payment.
Payment will be made to any person the investor designates;
however, if shares are registered in the name of a trustee or
other fiduciary, payment will be made only to the fiduciary,
except in the case of a profit-sharing or pension plan where
payment will be made to a designee. As withdrawal payments may
include a return of principal, they cannot be considered a
guaranteed annuity or actual yield of income to the investor.
The redemption of shares in connection with a plan generally will
result in a gain or loss for tax purposes. Some or all of the
losses realized upon redemption may be disallowed pursuant to the
so-called wash sale rules if shares of the same fund from which
shares were redeemed are purchased (including through the
reinvestment of fund distributions) within a period beginning 30
days before, and ending 30 days after, such redemption. In such
a case, the basis of the replacement shares will be increased to
reflect the disallowed loss. Continued withdrawals in excess of
income will reduce and possibly exhaust invested principal,
especially in the event of a market decline. The maintenance of
a plan concurrently with purchases of additional shares of the
fund would be disadvantageous to the investor because of the
sales charge payable on such purchases. For this reason, the
minimum investment accepted while a plan is in effect is $1,000,
and an investor may not maintain a plan for the accumulation of
shares of the fund (other than through reinvestment of
distributions) and a plan at the same time. The cost of
administering these plans for the benefit of those shareholders
participating in them is borne by the fund as an expense of all
shareholders. The fund, Putnam Mutual Funds or Putnam Investor
Services may terminate or change the terms of the plan at any
time. A plan will be terminated if communications mailed to the
shareholder are returned as undeliverable.
Investors should consider carefully with their own financial
advisers whether the plan and the specified amounts to be
withdrawn are appropriate in their circumstances. The fund and
Putnam Investor Services make no recommendations or
representations in this regard.
Tax Qualified Retirement Plans; 403(b) and SEP Plans. (Not
offered by funds investing primarily in tax-exempt securities.)
Investors may purchase shares of the fund through the following
Tax Qualified Retirement Plans, available to qualified
individuals or organizations:
Standard and variable profit-sharing (including 401(k))
and money purchase pension plans; and
Individual Retirement Account Plans (IRAs).
Each of these Plans has been qualified as a prototype plan by the
Internal Revenue Service. Putnam Investor Services will furnish
services under each plan at a specified annual cost. Putnam
Fiduciary Trust Company serves as trustee under each of these
Plans.
Forms and further information on these Plans are available from
investment dealers or from Putnam Mutual Funds. In addition,
specialized professional plan administration services are
available on an optional basis; contact Putnam Defined
Contribution Plan Services at 1-800-225-2465, extension 8600.
A 403(b) Retirement Plan is available for employees of public
school systems and organizations which meet the requirements of
Section 501(c)(3) of the Internal Revenue Code. Forms and
further information on the 403(b) Plan are also available from
investment dealers or from Putnam Mutual Funds. Shares of the
fund may also be used in simplified employee pension (SEP) plans.
For further information on the Putnam prototype SEP plan, contact
an investment dealer or Putnam Mutual Funds.
Consultation with a competent financial and tax adviser regarding
these Plans and consideration of the suitability of fund shares
as an investment under the Employee Retirement Income Security
Act of 1974, or otherwise, is recommended.
<PAGE>
SIGNATURE GUARANTEES
Redemption requests for shares having a net asset value of
$100,000 or more must be signed by the registered owners or their
legal representatives and must be guaranteed by a bank,
broker/dealer, municipal securities dealer or broker, government
securities dealer or broker, credit union, national securities
exchange, registered securities association, clearing agency,
savings association or trust company, provided such institution
is acceptable under and conforms with Putnam Fiduciary Trust
Company's signature guarantee procedures. A copy of such
procedures is available upon request. If you want your
redemption proceeds sent to an address other than your address as
it appears on Putnam's records, you must provide a signature
guarantee. Putnam Investor Services usually requires additional
documentation for the sale of shares by a corporation,
partnership, agent or fiduciary, or a surviving joint owner.
Contact Putnam Investor Services for details.
SUSPENSION OF REDEMPTIONS
The fund may not suspend shareholders' right of redemption, or
postpone payment for more than seven days, unless the New York
Stock Exchange is closed for other than customary weekends or
holidays, or if permitted by the rules of the Securities and
Exchange Commission during periods when trading on the Exchange
is restricted or during any emergency which makes it
impracticable for the fund to dispose of its securities or to
determine fairly the value of its net assets, or during any other
period permitted by order of the Commission for protection of
investors.
SHAREHOLDER LIABILITY
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the fund. However, the Agreement and Declaration of Trust
disclaims shareholder liability for acts or obligations of the
fund and requires that notice of such disclaimer be given in each
agreement, obligation, or instrument entered into or executed by
the fund or the Trustees. The Agreement and Declaration of Trust
provides for indemnification out of fund property for all loss
and expense of any shareholder held personally liable for the
obligations of the fund. Thus, the risk of a shareholder
incurring financial loss on account of shareholder liability is
limited to circumstances in which the fund would be unable to
meet its obligations. The likelihood of such circumstances is
remote.
<PAGE>
STANDARD PERFORMANCE MEASURES
Yield and total return data for the fund may from time to time be
presented in Part I of this SAI and in advertisements. In the
case of funds with more than one class of shares, all performance
information is calculated separately for each class. The data is
calculated as follows.
Total return for one-, five- and ten-year periods (or for such
shorter periods as the fund has been in operation or shares of
the relevant class have been outstanding) is determined by
calculating the actual dollar amount of investment return on a
$1,000 investment in the fund made at the beginning of the
period, at the maximum public offering price for class A shares
and class M shares and net asset value for other classes of
shares, and then calculating the annual compounded rate of return
which would produce that amount. Total return for a period of
one year is equal to the actual return of the fund during that
period. Total return calculations assume deduction of the fund's
maximum sales charge or CDSC, if applicable, and reinvestment of
all fund distributions at net asset value on their respective
reinvestment dates.
The fund's yield is presented for a specified thirty-day period
(the "base period"). Yield is based on the amount determined by
(i) calculating the aggregate amount of dividends and interest
earned by the fund during the base period less expenses for that
period, and (ii) dividing that amount by the product of (A) the
average daily number of shares of the fund outstanding during the
base period and entitled to receive dividends and (B) the per
share maximum public offering price for class A shares or class M
shares, as appropriate, and net asset value for other classes of
shares on the last day of the base period. The result is
annualized on a compounding basis to determine the yield. For
this calculation, interest earned on debt obligations held by the
fund is generally calculated using the yield to maturity (or
first expected call date) of such obligations based on their
market values (or, in the case of receivables-backed securities
such as the Government National Mortgage Association ("GNMAs"),
based on cost). Dividends on equity securities are accrued daily
at their stated dividend rates. The amount of expenses used in
determining the fund's yield includes, in addition to expenses
actually accrued by the fund, an estimate of the amount of
expenses that the fund would have incurred if brokerage
commissions had not been used to reduce such expenses.
If the fund is a money market fund, yield is computed by
determining the percentage net change, excluding capital changes,
in the value of an investment in one share over the seven-day
period for which yield is presented (the "base period"), and
multiplying the net change by 365/7 (or approximately 52 weeks).
Effective yield represents a compounding of the yield by adding 1
to the number representing the percentage change in value of the
investment during the base period, raising that sum to a power
equal to 365/7, and subtracting 1 from the result.
If the fund is a tax-exempt fund, the tax-equivalent yield during
the base period may be presented for shareholders in one or more
stated tax brackets. Tax-equivalent yield is calculated by
adjusting the tax-exempt yield by a factor designed to show the
approximate yield that a taxable investment would have to earn to
produce an after-tax yield equal, for that shareholder, to the
tax-exempt yield. The tax-equivalent yield will differ for
shareholders in other tax brackets.
At times, Putnam Management may reduce its compensation or assume
expenses of the fund in order to reduce the fund's expenses. The
per share amount of any such fee reduction or assumption of
expenses during the fund's past ten fiscal years (or for the life
of the fund, if shorter) is reflected in the table in the section
entitled "Financial highlights" in the prospectus. Any such fee
reduction or assumption of expenses would increase the fund's
yield and total return during the period of the fee reduction or
assumption of expenses.
All data are based on past performance and do not predict future
results.
COMPARISON OF PORTFOLIO PERFORMANCE
Independent statistical agencies measure the fund's investment
performance and publish comparative information showing how the
fund, and other investment companies, performed in specified time
periods. Three agencies whose reports are commonly used for such
comparisons are set forth below. From time to time, the fund may
distribute these comparisons to its shareholders or to potential
investors. The agencies listed below measure performance based
on their own criteria rather than on the standardized performance
measures described in the preceding section.
Lipper Analytical Services, Inc. distributes mutual fund
rankings monthly. The rankings are based on total return
performance calculated by Lipper, generally reflecting
changes in net asset value adjusted for reinvestment of
capital gains and income dividends. They do not reflect
deduction of any sales charges. Lipper rankings cover a
variety of performance periods, including year-to-date,
1-year, 5-year, and 10-year performance. Lipper
classifies mutual funds by investment objective and asset
category.
<PAGE>
Morningstar, Inc. distributes mutual fund ratings twice a
month. The ratings are divided into five groups:
highest, above average, neutral, below average and lowest.
They represent a fund's historical risk/reward ratio
relative to other funds in its broad investment class as
determined by Morningstar, Inc. Morningstar ratings cover
a variety of performance periods, including 1-year, 3-
year, 5-year, 10-year and overall performance. The
performance factor for the overall rating is a
weighted-average assessment of the fund's 1-year, 3-year,
5-year, and 10-year total return performance (if
available) reflecting deduction of expenses and sales
charges. Performance is adjusted using quantitative
techniques to reflect the risk profile of the fund. The
ratings are derived from a purely quantitative system that
does not utilize the subjective criteria customarily
employed by rating agencies such as Standard & Poor's and
Moody's Investor Service, Inc.
CDA/Wiesenberger's Management Results publishes mutual
fund rankings and is distributed monthly. The rankings
are based entirely on total return calculated by
Weisenberger for periods such as year-to-date, 1-year,
3-year, 5-year and 10-year. Mutual funds are ranked in
general categories (e.g., international bond,
international equity, municipal bond, and maximum capital
gain). Weisenberger rankings do not reflect deduction of
sales charges or fees.
Independent publications may also evaluate the fund's
performance. The fund may from time to time refer to results
published in various periodicals, including Barrons, Financial
World, Forbes, Fortune, Investor's Business Daily, Kiplinger's
Personal Finance Magazine, Money, U.S. News and World Report and
The Wall Street Journal.
Independent, unmanaged indexes, such as those listed below, may
be used to present a comparative benchmark of fund performance.
The performance figures of an index reflect changes in market
prices, reinvestment of all dividend and interest payments and,
where applicable, deduction of foreign withholding taxes, and do
not take into account brokerage commissions or other costs.
Because the fund is a managed portfolio, the securities it owns
will not match those in an index. Securities in an index may
change from time to time.
The Consumer Price Index, prepared by the U.S. Bureau of
Labor Statistics, is a commonly used measure of the rate
of inflation. The index shows the average change in the
cost of selected consumer goods and services and does not
represent a return on an investment vehicle.
The Dow Jones Industrial Average is an index of 30 common
stocks frequently used as a general measure of stock
market performance.
The Dow Jones Utilities Average is an index of 15 utility
stocks frequently used as a general measure of stock
market performance.
CS First Boston High Yield Index is a market-weighted
index including publicly traded bonds having a rating
below BBB by Standard & Poor's and Baa by Moody's.
The Lehman Brothers Aggregate Bond Index is an index
composed of securities from The Lehman Brothers
Government/Corporate Bond Index, The Lehman Brothers
Mortgage-Backed Securities Index and The Lehman Brothers
Asset-Backed Securities Index and is frequently used as a
broad market measure for fixed-income securities.
The Lehman Brothers Asset-Backed Securities Index is an
index composed of credit card, auto, and home equity
loans. Included in the index are pass-through, bullet
(noncallable), and controlled amortization structured debt
securities; no subordinated debt is included. All
securities have an average life of at least one year.
The Lehman Brothers Corporate Bond Index is an index of
publicly issued, fixed-rate, non-convertible
investment-grade domestic corporate debt securities
frequently used as a general measure of the performance of
fixed-income securities.
The Lehman Brothers Government/Corporate Bond Index is an
index of publicly issued U.S. Treasury obligations, debt
obligations of U.S. government agencies (excluding
mortgage-backed securities), fixed-rate, non-convertible,
investment-grade corporate debt securities and U.S.
dollar-denominated, SEC-registered non-convertible debt
issued by foreign governmental entities or international
agencies used as a general measure of the performance of
fixed-income securities.
The Lehman Brothers Intermediate Treasury Bond Index is an
index of publicly issued U.S. Treasury obligations with
maturities of up to ten years and is used as a general
gauge of the market for intermediate-term fixed-income
securities.
The Lehman Brothers Long-Term Treasury Bond Index is an
index of publicly issued U.S. Treasury obligations
(excluding flower bonds and foreign-targeted issues) that
are U.S. dollar-denominated and have maturities of 10
years or greater.
The Lehman Brothers Mortgage-Backed Securities Index
includes 15- and 30-year fixed rate securities backed by
mortgage pools of the Government National Mortgage
Association, Federal Home Loan Mortgage Corporation, and
Federal National Mortgage Association.
The Lehman Brothers Municipal Bond Index is an index of
approximately 20,000 investment-grade, fixed-rate
tax-exempt bonds.
The Lehman Brothers Treasury Bond Index is an index of
publicly issued U.S. Treasury obligations (excluding
flower bonds and foreign-targeted issues) that are U.S.
dollar denominated, have a minimum of one year to
maturity, and are issued in amounts over $100 million.
The Morgan Stanley Capital International World Index is an
index of approximately 1,482 equity securities listed on
the stock exchanges of the United States, Europe, Canada,
Australia, New Zealand and the Far East, with all values
expressed in U.S. dollars.
The Morgan Stanley Capital International EAFE Index is an
index of approximately 1,045 equity securities issued by
companies located in 18 countries and listed on the stock
exchanges of Europe, Australia, and the Far East. All
values are expressed in U.S. dollars.
The Morgan Stanley Capital International Europe Index is
an index of approximately 627 equity securities issued by
companies located in one of 13 European countries, with
all values expressed in U.S. dollars.
The Morgan Stanley Capital International Pacific Index is
an index of approximately 418 equity securities issued by
companies located in 5 countries and listed on the
exchanges of Australia, New Zealand, Japan, Hong Kong,
Singapore/Malaysia. All values are expressed in U.S.
dollars.
The NASDAQ Industrial Average is an index of stocks traded
in The Nasdaq Stock Market, Inc. National Market System.
The Russell 2000 Index is composed of the 2,000 smallest
securities in the Russell 3000 Index, representing
approximately 7% of the Russell 3000 total market
capitalization. The Russell 3000 Index is composed of
3,000 large U.S. companies ranked by market
capitalization, representing approximately 98% of the U.S.
equity market.
The Salomon Brothers Long-Term High-Grade Corporate Bond
Index is an index of publicly traded corporate bonds
having a rating of at least AA by Standard & Poor's or Aa
by Moody's and is frequently used as a general measure of
the performance of fixed-income securities.
The Salomon Brothers Long-Term Treasury Index is an index
of U.S. government securities with maturities greater than
10 years.
The Salomon Brothers World Government Bond Index is an
index that tracks the performance of the 14 government
bond markets of Australia, Austria, Belgium Canada,
Denmark, France, Germany, Italy, Japan, Netherlands,
Spain, Sweden, United Kingdom and the United States.
Country eligibility is determined by market capitalization
and investability criteria.
The Salomon Brothers World Government Bond Index (non
$U.S.) is an index of foreign government bonds calculated
to provide a measure of performance in the government bond
markets outside of the United States.
Standard & Poor's 500 Composite Stock Price Index is an
index of common stocks frequently used as a general
measure of stock market performance.
Standard & Poor's 40 Utilities Index is an index of 40
utility stocks.
Standard & Poor's/Barra Value Index is an index
constructed by ranking the securities in the Standard &
Poor's 500 Composite Stock Price Index by price-to-book
ratio and including the securities with the lowest price-
to-book ratios that represent approximately half of the
market capitalization of the Standard & Poor's 500
Composite Stock Price Index.
In addition, Putnam Mutual Funds may distribute to shareholders
or prospective investors illustrations of the benefits of
reinvesting tax-exempt or tax-deferred distributions over
specified time periods, which may include comparisons to fully
taxable distributions. These illustrations use hypothetical
rates of tax-advantaged and taxable returns and are not intended
to indicate the past or future performance of any fund.
<PAGE>
DEFINITIONS
"Putnam Management" -- Putnam Investment Management,
Inc., the fund's investment
manager.
"Putnam Mutual Funds" -- Putnam Mutual Funds Corp., the
fund's principal underwriter.
"Putnam Fiduciary Trust -- Putnam Fiduciary Trust Company,
Company" the fund's custodian.
"Putnam Investor Services" -- Putnam Investor Services, a
division of Putnam Fiduciary
Trust Company, the fund's
investor servicing agent.
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
FORM N-1A
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Index to Financial Statements and
Supporting Schedules:
(1) Financial Statements for
Putnam California Tax Exempt Income
Fund and Putnam California Tax Exempt
Money Market Fund:
Statement of assets and liabilities
--September 30, 1996 (a).
Statement of operations -- year ended
September 30, 1996 (a).
Statement of changes in net assets
-- years ended September 30, 1996 and
September 30, 1995 (a).
Financial highlights (a) (b).
Notes to financial statements (a).
(2) Supporting Schedules for Putnam California
Tax Exempt Income Fund and Putnam
California Tax Exempt Money Market Fund:
Schedule I -- Portfolio of investments owned
-- September 30, 1996 (a).
Schedules II through IX omitted because the
required matter is not present.
- --------------------
(a) Incorporated by reference into
Parts A and B.
(b) Included in Part A.
(b) Exhibits:
1a. Agreement and Declaration of Trust, as
amended January 30, 1997 for Putnam
California Tax Exempt Income Fund --
Exhibit 1.
1b. Agreement and Declaration of Trust, as
amended July 9, 1992 for Putnam California
Tax Exempt Money Market Fund -- Incorporated
by reference to Post-Effective Amendment No.
6 to the Registrants'
Registration Statement.
2a . By-Laws, as amended January 30,
1997 for Putnam California Tax
Exempt Income Fund --Exhibit 2.
2b. By-Laws, as amended February 1, 1994 for
Putnam California Tax Exempt Money Market
Fund -- Incorporated by reference to Post-
Effective Amendment No. 10 to
the Registrants' Registration Statements.
3. Not applicable.
4a. Class A Specimen share certificate for Putnam
California Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 17 to the Registrant's
Registration Statement.
4b. Class B Specimen share certificate for Putnam
California Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 17 to the Registrant's
Registration Statement.
4c. Class M Specimen share certificate for Putnam
California Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 17 to the Registrant's
Registration Statement.
4d. Portions of Agreement and Declaration
of Trust relating to Shareholders' Rights for
Putnam California Tax Exempt Income Fund -
-Exhibit 3.
4e . Portions of Agreement and
Declaration of Trust relating to
Shareholders' Rights for Putnam
California Tax Exempt Money Market
Fund -- Incorporated by reference
to Post-Effective Amendment No. 7
to the Registrant's Registration
Statement.
4f . Portions of Bylaws Relating to
Shareholders' Rights for Putnam
California Tax Exempt Income
Fund -- Exhibit 4.
4g. Portions of Bylaws Relating to Shareholders'
Rights for Putnam California Tax Exempt
Money Market Fund -- Incorporated by
reference to Post-Effective Amendment No.
10 to the Registrants'
Registration Statements.
5a. Management Contract
dated January 20, 1997 for Putnam
California Tax Exempt Income Fund --
Exhibit 5.
5b. Management Contract for Putnam California Tax
Exempt Money Market Fund dated January 20,
1997 -- Exhibit 6.
6a. Distributor's
Contract dated January , 1997 for
Putnam California Tax Exempt Income
Trust -- Incorporated by
reference to Post-Effective Amendment
No. 17 to the Registrant's
Registration Statement.
6b. Distributor's Contract dated May 6,
1994 for Putnam California Tax
Exempt Money Market Fund --
Incorporated by reference to Post-
Effective Amendment No. 10 to the
Registrant's Registration Statement.
6c. Form of Specimen Dealer Sales
Contract for Putnam California Tax
Exempt Income Fund and Putnam
California Tax Exempt Money Market
Fund -- Incorporated by reference
to Post-Effective Amendment Nos. 18
and 11, respectively, to the
Registrant's Registration Statement.
6d. Form of Specimen Financial Institution
Sales Contract for Putnam California
Tax Exempt Income Fund --
Incorporated by reference to Post-
Effective Amendment Nos. 18 and 11,
respectively, to the Registrant's
Registration Statement.
7. Trustee Retirement Benefit Plan --
Exhibit 7.
8. Custodian Agreement with Putnam Fiduciary
Trust Company dated May 3, 1991, as amended,
July 13, 1992 for Putnam California Tax
Exempt Income Fund and Putnam
California Tax Exempt Money Market Fund --
Incorporated by reference to Post-Effective
Amendment Nos . 14 and 7,
respectively , to the Registrants'
Registration Statements.
9. Investor Servicing Agreement dated June 3,
1991 for Putnam California Tax Exempt Income
Fund and Putnam California Tax Exempt
Money Market Fund -- Incorporated by
reference to Post- Effective Amendment
Nos . 12 and 5, respectively , to
the Registrants' Registration Statements.
10a. Opinion of Ropes & Gray,
including consent for Putnam California Tax
Exempt Income Fund -- Exhibit 8 .
10b. Opinion of Ropes & Gray, including consent
for Putnam California Tax Exempt Money Market
-- Exhibit 9 .
11. Not applicable.
12. Not applicable.
13a. Investment Letter from Putnam Investment
Management, Inc. to Putnam California Tax
Exempt Income Fund -- Incorporated by
reference to Post-Effective Amendment No. 14
to the Registrant's Registration Statement.
13b. Investment Letter from Putnam Investment
Management, Inc. to Putnam California Tax
Exempt Money Market Fund -- Incorporated by
reference to the Registrant's Initial
Registration Statement.
14. Not applicable.
15a. Class A Distribution Plan and Agreement for
Putnam California Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 17 to the Registrant's
Registration Statement.
15b. Class B Distribution Plan and
Agreement for Putnam California Tax Exempt
Income Fund --Incorporated by reference to
Post-Effective Amendment No. 17 to the
Registrant's Registration Statement.
15c. Class M Distribution Plan and Agreement for
Putnam California Tax Exempt Income Fund --
Incorporated by reference to Post-Effective
Amendment No. 17 to the Registrant's
Registration Statement.
15d. Distribution Plan and Agreement for
Putnam California Tax
Exempt Money Market Fund --
Incorporated by reference to Post-
Effective Amendment No. 14
to the Registrant's Registration
Statement.
15e. Form of Specimen Dealer Service
Agreement for Putnam California Tax
Exempt Income Fund and Putnam
California Tax Exempt Money Market
Fund -- Incorporated by reference to
Post-Effective Amendment Nos. 18 and
11, respectively, to the
Registrants' Registration
Statements.
15f . Form of Specimen
Financial Institution Service
Agreement for Putnam California Tax
Exempt Income Fund and Putnam
California Tax Exempt Money Market Fund
-- Incorporated by reference to Post-
Effective Amendment Nos. 18 and 11,
respectively, to the Registrants'
Registration Statements .
16a . Schedules
for computation of performance
quotations for Putnam California
Tax Exempt Income
Fund -- Exhibit 10 .
16b . Schedules for computation of
performance quotations for Putnam
California Tax Exempt Money Market
Fund -- Exhibit 11 .
17a. Financial Data Schedule for Putnam California
Tax Exempt Income Fund Class A shares --
Exhibit 12 .
17b. Financial Data Schedule for Putnam California
Tax Exempt Income Fund Class B shares --
Exhibit 13 .
17c. Financial Data Schedules for Putnam
California Tax Exempt Income Fund Class M
shares -- Exhibit 14 .
17d . Financial Data Schedule for Putnam
California Tax Exempt Money Market
Fund -- Exhibit 15.
18. Rule 18f-3 (d) Plan for
Putnam California Tax Exempt Income Fund and
Putnam California Tax Exempt Money Market
Fund -- Incorporated by reference to Post-
Effective Amendment Nos. 18 and 11,
respectively, to the Registrant's
Registration Statement.
Item 25. Persons Controlled by or under Common Control with
Registrant
None.
Item 26. Number of Holders of Securities
As of December 31, 1996 the number of record holders
of each class of securities of the Registrants is as follows:
Number of record holders
----------------------------------------
Class A Class B Class M
------- ------- -------
Putnam California Tax
Exempt Income Fund 50,265 11,600 224
Putnam California Tax
Exempt Money Market Fund 2,015
Item 27. Indemnification
The information required by this item is incorporated
herein by reference from the Registrants' initial Registration
Statements on Form N-1A under the Investment Company Act of 1940
(File Nos. 811-3630 for the Income Fund and 811-5333 for
the Money Market Fund).
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Except as set forth below, the directors and officers
of the Registrant's investment adviser have been engaged during
the past two fiscal years in no business, vocation or employment
of a substantial nature other than as directors or officers of
the investment adviser or certain of its corporate affiliates.
Certain officers of the investment adviser serve as officers of
some or all of the Putnam funds. The address of the investment
adviser, its corporate affiliates and the Putnam Funds is One
Post Office Square, Boston, Massachusetts 02109.
NAME NON-PUTNAM BUSINESS AND OTHER
CONNECTIONS
Manjit S. Bakshi Prior to October, 1995, Fidelity
Vice President Management & Research Company, 82
Devonshire St., Boston, MA 02110
Robert K. Baumbach Prior to August, 1994, Vice President
Vice President and Analyst, Keystone Custodian
Funds, 200 Berkeley St., Boston, MA
02110
Robert R. Beck Director, Charles Bridge Publishing,
Senior Vice President 85 Main St., Watertown, MA 02172
Janet S. Becker Prior to July, 1995, National Account
Assistant Vice President Manager for Booz-Allen & Hamilton,
American Express Travel Management
Services, 100 Cambridge Park Drive,
02140; Prior to August, 1994,
Account Manager, Hilton at Dedham
Place, Dedham, MA 02026
Matthew G. Bevin Prior to February, 1995, Consultant,
Assistant Vice President SEI Corporation, 680 East Swedesford
Road, Wayne, PA 19807
Thomas Bogan Prior to November, 1994, Analyst
Senior Vice President Lord, Abbett & Co., 767 Fifth
Avenue, New York, NY 10153
John A. Boselli Prior to April, 1996, Senior Manager,
Vice President Price Waterhouse LLP, 200 E.
Randolph Drive, Chicago, IL 60601
Susan M. Braid Prior to October, 1995, Manager,
Vice President Pioneer Group, Inc., 60 State St.,
Boston, MA 02109
Brian E. Broyles Prior to September, 1995, Accounts
Assistant Vice President Payable Manager, Entex Information
Services, Six International Drive,
Rye Brook, NY 10573
Andrea Burke Prior to August, 1994, Vice President
Vice President and Portfolio Manager, Back Bay
Advisors, 399 Boylston St., Boston,
MA 02116
Robert W. Burke Member-Executive Committee, The Ridge
Senior Managing Director Club, Country Club Road, Sandwich,
MA 02563; Member-Advisory Board,
Cathedral High School, 74 Union Park
St., So. Boston, MA 02118
Peter A. Capodilupo Prior to June, 1996, Chief Human
Vice President Resources Officer, Harvard Business
School, Soldiers Field Rd., Boston,
MA 02163
Susan Chapman Prior to June, 1995, Vice President,
Senior Vice President Forbes, Walsh, Kelly & Company,
Inc., 17 Battery Place, New York, NY
10004
Louis F. Chrostowski Prior to August, 1995, Manager of
Vice President Compensation and Benefits, Itek
Optical Systems, 10 MacGuire Rd.,
Lexington, MA 02173
C. Beth Cotner Director, The Lyric Stage Theater, 140
Senior Vice President Clarendon St., Boston, MA; Prior to
September, 1995, Executive Vice
President, Director of U.S. Equity
Funds, Kemper Financial Services,
120 S. LaSalle St., Chicago, IL
60603
Peter J. Curran Prior to January, 1996, Vice President
Senior Vice President ITT Sheraton Director Worldwide
Staffing, ITT Sheraton Corporation,
60 State St., Boston, MA 02109
Judith S. Deming Prior to May, 1995, Asset Manager,
Assistant Vice President Fidelity Management & Research
Company, 82 Devonshire St., Boston,
MA 02109
Theodore J. Deutz Prior to January, 1995, Senior Vice
Vice President President, Metropolitan West
Securities, Inc. 10880 Wilshire
Blvd., Suite 200, Los Angeles, CA
90024
Michael G. Dolan Chairman-Finance Council, St. Mary's
Assistant Vice President Parish, 44 Myrtle St., Melrose, MA
02176; Member, School Advisory
Board, St. Mary's School, 44 Myrtle
St., Melrose, MA 02176
Andrea Donnelly Prior to March, 1996, Equity Trader,
Assistant Vice President Hellman Jordan Management Company,
Inc., 75 State St., Suite 2420,
Boston, MA 02109
Joseph J. Eagleeye Prior to August, 1994, Associate,
Assistant Vice President David Taussig & Associates, 424
University Ave., Sacramento, CA
95813
Ian C. Ferguson
Senior Managing Director Prior to April, 1996, Chief
Executive Officer, HSBC Asset
Management, Ltd., 6 Bevis Marks,
London, England
Michael T. Fitzgerald Prior to September, 1994, Senior
Senior Vice President Vice President, Vantage Global
Advisers, 1201 Morningside Dr.,
Manhattan Beach, CA 90266
Brian J. Fullterton Prior to November, 1995, Vice
Senior Vice President President, Pension and 401(k)
Derivatives Marketing, J.P. Morgan,
60 Wall Street, New York, NY 10260
Roland Gillis Prior to March, 1995, Vice President
Senior Vice President and Senior Portfolio Manager,
Keystone Group, Inc., 200 Berkeley
St., Boston, MA 02116
C. Kim Goodwin Prior to May, 1996, Vice President
Senior Vice President Prudential Mutual Fund Investment
Management, 751 Broad St., Newark,
NJ 07101
J. Peter Grant Trustee, The Dover Church, Dover, MA
Senior Vice President 02030
Jill Grossberg Prior to March, 1995, Associate
Assistant Vice President Counsel, 440 Financial Group of
and Associate Counsel Worcester, Inc., 440 Lincoln St.,
Worcester, MA 01653
Paul E. Haagensen Director, Haagensen Research
Senior Vice President Foundation, 630 West 168th St., New
York, NY 10032
Matthew C. Halperin Prior to April, 1996, Portfolio
Senior Vice President Manager, Allstate Insurance, 3075
Sanders Road, Northbrook, IL 60062
Richard Harris Prior to October, 1995, Senior Vice
Vice President President, Smith Mitchell Investment
Group, 135 Main St., San Francisco,
CA 94105; Prior to January, 1995,
Managing Director, Dean Witter
Reynolds, Inc., 101 California St.,
San Francisco, CA 94941
Deborah R. Healey Director and Secretary, Edwin Warren,
Senior Vice President Inc., Rte. 100, Waitsfield, VT 05673
Daniel Herbert Prior to April, 1996, Vice President
Vice President and Analyst, Keystone Group, Inc.,
200 Berkeley St., Boston, MA 02116
Pamela Holding Prior to May, 1995, Senior Securities
Vice President Analyst, Kemper Financial Services,
Inc., 120 South LaSalle St.,
Chicago, IL 60603
Thomas J. Hoey Prior to April, 1996, Securities
Vice President Analyst, Driehaus Capital
Management, Inc., 25 East Erie St.,
Chicago, IL 60610
Joseph Joseph Prior to October, 1994, Managing
Vice President Director, Vert Independent Capital
Research, 53 Wall St., New York, NY
10052
Omid Kamshad Prior to January, 1996, Investment
Senior Vice President Director, Lombard Odier, 13
Southampton Place, London, England,
WC1; Prior to May, 1995, Director,
Baring Asset Management, 155
Bishopsgate, London, England EC23XY
Mary E. Kearney Trustee, Massachusetts Eye and Ear
Managing Director Infirmary, 243 Charles St., Boston,
MA 02114; Prior to February, 1995,
Partner, Price Waterhouse, 160
Federal St., Boston, MA 02110
<PAGE>
Paula Kienert Prior to June, 1995, Senior Reference
Assistant Vice President Librarian, Fidelity Investments, 82
Devonshire Street, Boston, MA 02109
John P. Kihn Prior to April, 1996, Associate
Vice President Portfolio Manager, Colonial
Management Associates, Inc., One
Financial Center, Boston, MA 02110
Chief Financial Officer, Bergman
Research Group, Inc., 640 Bailey
Road, Pittsburg, CA 94565
D. William Kohli Prior to September, 1994, Executive
Managing Director Vice President and Co-Director of
Global Bond Management, Franklin
Advisors/Templeton Investment
Counsel, 777 Mariners Island Blvd.,
San Mateo, CA 94404
Peter B. Krug Prior to January, 1995, Owner and
Vice President Director, Griswold Special Care, 42
Ethan Allen Drive, Acton, MA 01720
Catherine A. Latham Prior to August, 1995, Director of
Vice President Human Resources, Electronic Data
Systems, 1601 Trapello Rd., Waltham,
MA 02254
Kevin Lemire Prior to March, 1995, Corporate
Assistant Vice President Facilities Manager, Bose
Corporation, The Mountain,
Framingham, MA 01701; Prior to June,
1994, Facilities Manager, The
Pioneer Group, 60 State St., Boston,
MA 02109
Lawrence J. Lasser Director, Marsh & McLennan Companies,
President, Director Inc., 1221 Avenue of the Americas,
and Chief Executive New York, NY 10020; Board Member,
Artery Business Committee, One
Beacon Street, Boston, MA 02108;
Board of Managers, Investment and
Finance Committees, Beth Israel
Hospital, 330 Brookline Avenue,
Boston, MA 02215; Board of
Governors, Executive Committee,
Investment Company Institute, 1401
H. St., N.W., Suite 1200,
Washington, DC 20005; Board of
Overseers, Museum of Fin Arts, 465
Huntington Ave., Boston, MA 02115;
Board Member, Trust for City Hall
Plaza, Three Center Plaza, Boston,
MA 02108; Board Member, The Vault
Coordinating Committee, c/o John
Hancock Mutual Life Insurance
Company, Law Sector, T-55, P.O. Box
111, Boston, MA 02117
James W. Lukens Prior to February, 1995, Vice
Senior Vice President President of Institutional
Marketing, Keystone Group, Inc., 200
Berkeley St., Boston, MA 02116
Kevin Maloney Trustee, Town of Hanover, NH, Trustee
Managing Director of Trust Funds, Hanover, NH 03755;
President and Board Member,
Hampshire Cooperative Nursery
School, Dartmouth College Highway,
Hanover, NH 03755; Prior to April,
1995, Associate Professor, Amos Tuck
School of Business, Dartmouth
College, Hanover, NH 03255
Helen Mazareas Prior to May, 1995, Librarian,
Assistant Vice President Scudder, Stevens & Clark, 2
International Place, Boston, MA
02110
Alexander J. McAuley Prior to June, 1995, Vice President,
Senior Vice President Deutsche Bank Securities Corp. -
Deutsche Asset Management, 1290
Avenue of the Americas, New York, NY
10019
William F. McGue Member, Advisory Committee, Academy
Managing Director of Finance, 2 Oliver St., Boston, MA
02109
Carol McMullen Prior to June, 1995, Senior Vice,
Managing Director President and Senior Portfolio
Manager, Baring Asset Management,
125 High Street, Boston, MA 02110
Sandeep Mehta Prior to May, 1996, Vice President,
Vice President Wellington Management Co., 100
Vanguard Blvd., Malvern, PA 19355
Darryl Mikami Prior to June, 1995, Vice President,
Senior Vice President Fidelity Management & Research
Company, 82 Devonshire St., Boston,
MA 02109
Carol H. Miller Board Member, The Lyric Stage Theater,
Assistant Vice President 140 Clarendon St., Boston, MA; Prior
to July, 1995, Business Development
Officer, Bank of Boston -
Connecticut, 100 Pearl St.,
Hartford, CT 06101
Seung H. Minn Prior to June, 1995, Vice President
Vice President Portfolio Management and Research,
Templeton Quantitative Advisors,
Inc., 31 W. 52nd St., New York, NY
10019
Maziar Minovi Prior to January, 1995, Associate
Vice President Privatization Specialist, The
International Bank for
Reconstruction and Development, 1818
H St. N.W., Washington, DC 20433
Jeanne L. Mockard Trustee, The Bryn Mawr School, 109
Senior Vice President W. Melrose Avenue, Baltimore, MD
21210
Kenneth Mongtomery Prior to July, 1995, Senior Vice
Managing Director President and Director of World Wide
Sales, Chemcial Banking Corporation,
Paul G. Murphy Prior to January, 1995, Section
Assistant Vice President Manager, First Data Corp., 53 State
Street, Boston, MA 02109
Lois O'Brien Prior to March, 1996, Director,
Assistant Vice President Training and Development, J. Baker,
Inc., 555 Turnpike St., Canton, MA
02021
C. Patrick O'Donnell, Jr. Prior to May, 1994, President,
Managing Director Exeter Research, Inc., 163 Water
Street, Exeter, New Hampshire, 03833
Keith Plapinger Vice Chairman and Trustee, Advent
Vice President School, 17 Brimmer St., Boston, MA
Jane E. Price Prior to February, 1995, Associate
Assistant Vice President ERISA Attorney, Hale & Dorr,
60 State St., Boston, MA 02109
<PAGE>
Charles E. Porter Director, The Boston Fulbright
Executive Vice President Committee, 99 Garden St., Cambridge,
MA; Trustee, Anatolia College and
The American College of
Thessaloniki, 555 10 Pycea,
Thessaloniki, Greece
George Putnam Chairman and Director, Putnam Mutual
Chairman and Director Funds Corp.; Director, The Boston
Company, Inc., One Boston Place,
Boston, MA 02108; Director, Boston
Safe Deposit and Trust Company, One
Boston Place, Boston, MA 02108;
Director, Freeport-McMoRan, Inc.,
200 Park Avenue, New York, NY 10166;
Director, General Mills, Inc., 9200
Wayzata Boulevard, Minneapolis, MN
55440; Director, Houghton Mifflin
Company, One Beacon Street, Boston,
MA 02108; Director, Marsh & McLennan
Companies, Inc., 1221 Avenue of the
Americas, New York, NY 10020;
Director, Rockefeller Group, Inc.,
1230 Avenue of the Americas, New
York, NY 10020
Keith Quinton Director, Eleazar, Inc., West Wheelock
Senior Vice President St., Hanover, NH 03755; Prior to
July, 1995, Vice President,
Falconwood Securities Corporation,
565 5th Avenue, New York, NY 10017
Paul T. Quistberg Prior to July, 1995, Assistant
Assistant Vice President Investment Officer, The Travelers
Insurance Group., One Tower Square,
Hartford, CT 06101
Kimberly A. Raynor Prior to April, 1996, Principal,
Vice President Principal, Scudder, Stevens & Clark,
2 International Place, Boston, MA
02110
Thomas Rosalanko Prior to February, 1995, Senior
Senior Vice President Account Manager, SEI Corporation,
680 East Swedesford Road, Wayne, PA
19807
Michael Scanlon Prior to February, 1995, Senior
Assistant Vice President Financial Analyst, Massachusetts
Financial Services, 500 Boylston
St., Boston, MA 02116
Justin M. Scott Director, DSI Properties (Neja) Ltd.
Managing Director Epping Rd., Reydon, Essex CM19 5RD;
Director, DSI Management (Neja)
Ltd., Epping Rd., Reydon, Essex CM19
5RD
Max S. Senter General Partner, M.S. Senter & Sons
Senior Vice President Partnership, 4900 Fayetteville, Rd.,
Raleigh, NC 27611
Robert M. Shafto Prior to January, 1995, Account
Assistant Vice President Manager, IBM Corporation, 404 Wyman
St., Waltham, MA 02254
Gordon H. Silver Trustee, Wang Center for the
Managing Director Performing Arts, 270 Tremont St.,
Boston, MA 02116
Diedre West-Smith Prior to January, 1995, Senior Finance
Assistant Vice President Officer, BayBank, 3 Universal Office
Park, Waltham, MA 02254
Margaret Smith Prior to September, 1995, Vice
Senior Vice President President, State Street Research,
One Financial Center, Boston, MA
02111
Erin J. Spatz Prior to May, 1996, Vice
Vice President President, Pioneering Management
Organization, 60 State St., Boston,
MA 02109
Steven Spiegel Director, Ultra Corp., 29 East
Senior Managing Director Madison St., Chicago, IL 60602;
Trustee, Babson College, One College
Drive, Wellesley, MA 02157; Prior to
December, 1994, Managing
Director/Retirement, Lehman
Brothers, Inc., 200 Vesey St., World
Financial Center, New York, NY 10285
George W. Stairs Prior to July, 1994, Equity Research
Vice President Analyst, ValueQuest Limited,
Roundy's Hill, Marblehead, MA 01945
James H. Steggall Prior to May, 1995, Senior Municipal
Assistant Vice President Analyst, Colonial Management
Associates, Inc., One Financial
Center, Boston, MA 02111; Prior to
May, 1994, Controller, Wheelabrator
Environmental Systems, Libery Lane,
Hampton, NH 03842
Karen Stewart Prior to May, 1995, Equity Research
Assistant Vice President Analyst, Chancellor Capital
Management, 1166 Avenue of the
Americas, New York, NY 10036
Roger Sullivan Prior to December, 1994, Vice
Senior Vice President President, State Street Research &
Management Co., One Financial
Center, Boston, MA 02111
Robert Swift Prior to August, 1995, Far East Team
Senior Vice President Leader and Portfolio Manager, IAI
International/Hill Samuel Investment
Advisors, 10 Fleet Place, London,
England
Jerry H. Tempelman Prior to May, 1994, Senior Money
Assistant Vice President Market Trader, State Street Bank &
Trust Co., 225 Franklin, Street,
Boston, MA 02110
Michael Temple Prior to June, 1995, Vice President,
Vice President Duff & Phelps, 55 East Monroe,
Chicago, IL 60613
John A. Thompson Prior to September, 1995, Senior
Vice President Trader, John Hancock Mutual Life
Insurance Company, 200 Clarendon
St., Boston, MA 02117
Hillary F. Till Prior to May, 1994, Fixed-Income
Vice President Derivative Trader, Bank of Boston,
100 Federal Street, Boston, MA 02109
Lisa L. Trubiano Prior to July, 1995, Senior Marketing
Vice President Consultant, John Hancock Mutual Life
Insurance Company, 200 Clarendon
St., Boston, MA 02117
Elizabeth A. Underhill Prior to August, 1994, Vice President
Senior Vice President and Senior Equity Analyst, State
Street Bank and Trust Company, 225
Franklin St., Boston, MA 02110
Charles C. Van Vleet Prior to August, 1994, Vice President
Senior Vice President and Fixed-Income Manager, Alliance
Capital Management, 1345 Avenue of
the Americas, New York, NY 10105
Herbert S. Wagner, III Prior to August, 1995, Investment
Assistant Vice President The First National Bank of Chicago,
One First National Plaza, Chicago,
IL 60670
<PAGE>
Francis P. Walsh Prior to November, 1994, Research
Vice President Analyst, Furman, Selz, Inc. 230 Park
Avenue, New York, NY 10169
Michael R. Weinstein Prior to March, 1994, Management
Vice President Consultant, Arthur D. Little, Acorn
Park, Cambridge, MA 02140
ITEM 29. PRINCIPAL UNDERWRITER
(a) Putnam Mutual Funds Corp. is the principal underwriter for
each of the following investment companies, including the
Registrant:
Putnam Adjustable Rate U.S. Government Fund, Putnam American
Government Income Fund, Putnam Arizona Tax Exempt Income Fund,
Putnam Asia Pacific Growth Fund, Putnam Asset Allocation Funds,
Putnam Balanced Retirement Fund, Putnam California Tax Exempt
Income Trust, Putnam California Tax Exempt Money Market Fund,
Putnam Capital Appreciation Fund, Putnam Capital Manager Trust,
Putnam Convertible Income-Growth Trust, Putnam Diversified Equity
Trust, Putnam Diversified Income Trust, Putnam Diversified Income
Trust II, Putnam Equity Income Fund, Putnam Europe Growth Fund,
Putnam Federal Income Trust, Putnam Florida Tax Exempt Income
Fund, Putnam Funds Trust, The George Putnam Fund of Boston,
Putnam Global Governmental Income Trust, Putnam Global Growth
Fund, Putnam Global Natural Resources Fund, Putnam Growth Fund,
The Putnam Fund for Growth and Income, Putnam Growth and Income
Fund II, Putnam Health Sciences Trust, Putnam High Yield Trust,
Putnam High Yield Advantage Fund, Putnam High Yield Municipal
Trust, Putnam Income Fund, Putnam Intermediate Tax Exempt Fund,
Putnam Intermediate U.S. Government Income Fund, Putnam
Investment Funds, Putnam Investors Fund, Putnam International
Growth Fund, Putnam Massachusetts Tax Exempt Income Fund, Putnam
Michigan Tax Exempt Income Fund, Putnam Minnesota Tax Exempt
Income Fund, Putnam Money Market Fund, Putnam Municipal Income
Fund, Putnam Natural Resources Fund, Putnam New Jersey Tax Exempt
Income Fund, Putnam New Opportunities Fund, Putnam New York Tax
Exempt Income Trust, Putnam New York Tax Exempt Money Market
Fund, Putnam New York Tax Exempt Opportunities Fund, Putnam Ohio
Tax Exempt Income Fund, Putnam OTC Emerging Growth Fund, Putnam
Pennsylvania Tax Exempt Income Fund, Putnam Preferred Income
Fund, Putnam Tax Exempt Income Fund, Putnam Tax Exempt Money
Market Fund, Putnam Tax-Free Income Trust, Putnam U.S. Government
Income Trust, Putnam Utilities Growth and Income Fund, Putnam
Vista Fund, Putnam Voyager Fund, Putnam Voyager Fund II.<PAGE>
(b) The directors and officers of the Registrant's principal underwriter are
listed below. The principal business address of each person is
One Post Office Square, Boston,
MA 02109:
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
John V. Adduci Assistant Vice President None
Christopher S. Alpaugh Vice President None
Paulette C. Amisano Vice President None
Ronald J. Anwar Vice President None
Steven E. Asher Senior Vice President None
Scott A. Avery Vice President None
Christian E. Aymond Vice President None
Hallie L. Baron Assistant Vice President None
Ira G. Baron Senior Vice President None
John L. Bartlett Senior Vice President None
Dale Beardon Senior Vice President None
Steven M. Beatty Vice President None
Deborah A. Beaudette Assistant Vice President None
Matthew F. Beaudry Vice President None
John J. Bent Vice President None
Thomas A. Beringer Vice President None
Sharon A. Berka Vice President None
Kathleen A. Blackman Vice President None
Maureen L. Boisvert Vice President None
John F. Boneparth Managing Director None
Keith R. Bouchard Vice President None
Linda M. Brady Assistant Vice President None
Leslee R. Bresnahan Senior Vice President None
James D. Brockelman Senior Vice President None
Joel S. Brookman Assistant Vice President None
Dale R.C. Brown Assistant Vice President None
Brian E. Broyles Assistant Vice President None
Gail D. Buckner Senior Vice President None
Robert W. Burke Senior Managing Director None
Susan D. Cabana Vice President None
Ellen S. Callahan Vice President None
Thomas C. Callahan Assistant Vice President None
Peter J. Campagna Vice President None
Peter A. Capodilupo Vice President None
Robert Capone Vice President None
Patricia A. Cartwright Assistant Vice President None
Janet Casale-Sweeney Vice President None
Stephen J. Chaput Assistant Vice President None
Steven F. Charlton Assistant Vice President None
Louis F. Chrostowski Vice President None
Daniel J. Church Vice President None
James E. Clinton Assistant Vice President None
John C. Clinton Assistant Vice President None
Kathleen M. Collman Managing Director None
Mark L. Coneeny Vice President None
Clare D. Connelly Vice President None
Donald A. Connelly Senior Vice President None
Karen E. Connolly Assistant Vice President None
Barry M. Conyers Assistant Vice President None
Anna Coppola Vice President None
F. Nicholas Corvinus Senior Vice President None
Thomas A. Cosmer Vice President None
Michele A. Cranston Vice President None
Chad H. Cristo Assistant Vice President None
Peter J. Curran Senior Vice President None
Jessica E. Dahill Vice President None
Kenneth L. Daly Senior Vice President None
Edward H. Dane Vice President None
Nancy M. Days Assistant Vice President None
Pamela De Oliveira-Smith Assistant Vice President None
Lisa M. DeMont Assistant Vice President None
Richard D. DeSalvo Vice President None
Joseph C. DeSimone Assistant Vice President None
Daniel J. Delianedis Vice President None
Judith S. Deming Assistant Vice President None
Teresa F. Dennehy Assistant Vice President None
Karen E. DiStasio Vice President None
Michael G. Dolan Assistant Vice President None
Scott M. Donaldson Vice President None
Emily J. Durbin Vice President None
David B. Edlin Senior Vice President None
James M. English Senior Vice President None
Vincent Esposito Managing Director None
Mary K. Farrell Assistant Vice President None
Michael J. Fechter Vice President None
Susan H. Feldman Vice President None
Paul F. Fichera Senior Vice President None
C. Nancy Fisher Senior Vice President None
Mitchell B. Fishman Senior Vice President None
Joseph C. Fiumara Vice President None
Patricia C. Flaherty Senior Vice President None
Brian J. Fullerton Senior Vice President None
Samuel F. Gagliardi Vice President None
Karen M. Gardner Assistant Vice President None
Judy S. Gates Vice President None
Richard W. Gauger Assistant Vice President None
Joseph P. Gennaco Vice President None
Stephen E. Gibson Managing Director None
Mark P. Goodfellow Assistant Vice President None
Robert Goodman Managing Director None
Mark D. Goodwin Assistant Vice President None
Anthony J. Grace Assistant Vice President None
Linda K. Grace Assistant Vice President None
Robert G. Greenly Vice President None
Jill Grossberg Assistant Vice President None
Denise Grove Assistant Vice President None
Jeffrey P. Gubala Vice President None
James E. Halloran Vice President None
Thomas W. Halloran Vice President None
Meghan C. Hannigan Assistant Vice President None
Bruce D. Harrington Assistant Vice President None
Craig W. Hartigan Vice President None
Howard W. Hawkins, III Vice President None
Deanna R. Hayes-Castro Vice President None
Paul P. Heffernan Vice President None
Susan M. Heimanson Vice President None
Joanne Heyman Assistant Vice President None
Bess J.M. Hochstein Vice President None
Jeremiah K. Holly, Sr. Vice President None
Maureen A. Holmes Assistant Vice President None
Paula J. Hoyt Assistant Vice President None
William J. Hurley Senior Vice President None
Gregory E. Hyde Senior Vice President None
Dwight D. Jacobsen Senior Vice President None
Douglas B. Jamieson Senior Managing Director, Director None
Jay M. Johnson Vice President None
Kevin M. Joyce Senior Vice President None
Karen R. Kay Senior Vice President None
Mary E. Kearney Managing Director None
John P. Keating Vice President None
A. Siobahn Kelly Assistant Vice President None
Brian J. Kelly Vice President None
Anne Kinsman Assistnat Vice President None
Deborah H. Kirk Senior Vice President None
Jill A. Koontz Assistant Vice President None
Linda G. Kraunelis Assistant Vice President None
Howard H. Kreutzberg Senior Vice President None
Marjorie B. Krieger Assistant Vice President None
Charles Lacasia Assistant Vice President None
Arthur B. Laffer, Jr. Vice President None
Catherine A. Latham Vice President None
James D. Lathrop Vice President None
Charles C. Ledbetter Vice President None
Kevin Lemire Assistant Vice President None
Anthony J. Leonard Vice President None
Eric S. Levy Vice President None
Edward V. Lewandowski Senior Vice President None
Edward V. Lewandowski, Jr. Vice President None
Samuel L. Lieberman Vice President None
David M. Lifsitz Assistant Vice President None
David R. Lilien Vice President None
Ann Marie Linehan Assistant Vice President None
Lisa M. Litant Assistant Vice President None
Thomas W. Littauer Managing Director None
Maura A. Lockwood Vice President None
Rufino R. Lomba Vice President None
Peter V. Lucas Senior Vice President None
Robert F. Lucey Senior Managing Director, Director None
Kathryn A. Lucier Assistant Vice President None
Ann Malatos Assistant Vice President None
Bonnie Mallin Vice President None
Frederick S. Marius Assistant Vice President None
Anne B. McCarthy Assistant Vice President None
Paul McConville Vice President None
McDermott, Daniel E. Assistant Vice President None
Walter S. McFarland Vice President None
Mark J. McKenna Senior Vice President None
Gregory J. McMillan Vice President None
Claye A. Metelmann Vice President None
Bart D. Miller Vice President None
Jeffery M. Miller Senior Vice President None
Trisha A. Miller Senior Vice President None
Ronald K. Mills Vice President None
Kimberly A. Monahan Vice President None
John L. Moore, III Vice President None
Peter M. Moore Assistant Vice President None
Mitchell Moret Senior Vice President None
Barry L. Mosher Assistant Vice President None
Donald E. Mullen Vice President None
Paul G. Murphy Assistant Vice President None
Brendan R. Murray Vice President None
Robert Nadherny Vice President None
Alexander L. Nelson Managing Director None
John P. Nickodemus Vice President None
Kristen P. O'Brien Vice President None
Kevin L. O'Shea Senior Vice President None
Nathan D. O'Steen Assistant Vice President None
Joseph R. Palombo Managing Director None
Scott A. Papes Vice President None
Cynthia O. Parr Vice President None
Samuel W. Perry Vice President None
John G. Phoenix Vice President None
Joseph Phoenix Senior Vice President None
Keith Plapinger Vice President None
Douglas H. Powell Vice President None
Howard B. Present Senior Vice President None
Jane E. Price Assistant Vice President None
Scott M. Pulkrabek Vice President None
George Putnam Director Chairman & President
Kimberly Raynor Vice President None
Debra V. Rothman Vice President None
Robert B. Rowe Vice President None
Kevin A. Rowell Senior Vice President None
Thomas C. Rowley Vice President None
Charles A. Ruys de Perez Senior Vice President None
Deborah A. Ryan Assistant Vice President None
Louise I. Santosuosso Assistant Vice President None
Debra J. Sarkisian Assistant Vice President None
Catherine A. Saunders Senior Vice President None
Robbin L. Saunders Assistant Vice President None
Karl W. Saur Vice President None
Michael Scanlon Assistant Vice President None
Shannon D. Schofield Vice President None
Christine A. Scordato Vice President None
Joseph W. Scott Assistant Vice President None
John B. Shamburg Vice President None
Kathleen G. Sharpless Managing Director None
William N. Shiebler Director and President Vice President
Robert J. Shull, II Vice President None
Mark J. Siebold Assistant Vice President None
Gordon H. Silver Senior Managing Director Vice President
John Skistimas, Jr. Assistant Vice President None
Steven Spiegel Senior Managing Director None
Nicholas T. Stanojev Senior Vice President None
Paul R. Stickney Vice President None
John B. Stillwagon Assistant Vice President None
Eric J. Studer Assistant Vice President None
Brian L. Sullivan Vice President None
Guy Sullivan Seniior Vice President None
Kevin J. Sullivan Vice President None
Moira Sullivan Vice President None
Maureen C. Tallon Vice President None
James S. Tambone Managing Director None
B. Iris Tanner Assistant Vice President None
Louis Tasiopoulos Managing Director None
David S. Taylor Vice President None
John R. Telling Vice President None
Cynthia Tercha Vice President None
Richard B. Tibbetts Senior Vice President None
Patrice M. Tirado Vice President None
Janet E. Tosi Assistant Vice President None
Bonnie L. Troped Vice President None
Christine M. Twigg Assistant Vice Presient None
Larry R. Unger Vice President None
Douglas J. Vander Linde Senior Vice President None
Deirdre West-Smith Assistant Vice President None
Edward F. Whalen Vice President None
J. Bennett White Vice President None
Kirk E. Williamson Senior Vice President None
Leigh T. Williamson Vice President None
Jane Wolfson Vice President None
Benjamin I. Woloshin Vice President None
William H. Woolverton Senior Vice President None
Laura J. Zografos Vice President None
Item 30. Location of Accounts and Records
Persons maintaining physical possession of accounts, books
and other documents required to be maintained by Section 31(a) of
the Investment Company Act of 1940 and the Rules promulgated
thereunder are Registrants' Clerk, Beverly Marcus; Registrants'
investment adviser, Putnam Investment Management, Inc.;
Registrants' principal underwriter, Putnam Mutual Funds Corp.;
Registrants' custodian, Putnam Fiduciary Trust Company ("PFTC");
and Registrants' transfer and dividend disbursing agent, Putnam
Investor Services, a division of PFTC. The address of the Clerk,
investment adviser, principal underwriter, custodian and transfer
and dividend disbursing agent is One Post Office Square, Boston,
Massachusetts 02109.
Item 31. Management Services
None.
Item 32. Undertakings
Each Registrant undertakes to furnish to each person to
whom a prospectus of the Registrant is delivered a copy of the
Registrant's latest annual report to shareholders, upon request
and without charge.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectuses and Statements of Additional Information
constituting parts of Post-Effective Amendment No.
19 for the Putnam California Tax Exempt Income Fund
(the "Income Fund") and Post-Effective Amendment No.
12 for the Putnam California Tax Exempt Money Market Fund
(the "Money Market Fund") to the Registration Statements on Form
N-1A (File No. 2-81011 for the Income Fund) (File No. 33-
17211 for the Money Market Fund) (the "Registration Statements")
of our reports dated November 12, 1996 and November 12,
1996 , relating to the financial statements and financial
highlights appearing in the September 30, 1996 Annual
Reports of Putnam California Tax Exempt Income Fund and
Putnam California Tax Exempt Money Market Fund, respectively,
which financial statements and financial highlights are also
incorporated by reference into the Registration Statements. We
also consent to the references to us under the headings
"Independent Accountants and Financial Statements" in such
Statements of Additional Information and under the heading
"Financial highlights" in the Prospectus of the Income
Fund and the Money Market Fund.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
January 29, 1997
NOTICE
A copy of the Agreement and Declaration of Trust of each of
Putnam California Tax Exempt Income Fund and Putnam
California Tax Exempt Money Market Fund is on file with the
Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this instrument is executed on behalf
of each Registrant by an officer of each Registrant as an officer
and not individually and the obligations of or arising out of
this instrument are not binding upon any of the Trustees,
officers or shareholders individually but are binding only upon
the assets and property of the relevant Registrant.
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam California Tax Exempt
Income Trust, hereby severally constitute and appoint George
Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin,
Timothy W. Diggins and John W. Gerstmayr, and each of them
singly, my true and lawful attorneys, with full power to them and
each of them, to sign for me, and in my name and in the capacity
indicated below, the Registration Statement on Form N-1A of
Putnam California Tax Exempt Income Trust and any and all
amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto my said
attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to
all intents and purposes as he might or could do in person, and
hereby ratify and confirm all that said attorneys or any of them
may lawfully do or cause to be done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
Signature Title Date
/s/ Ronald J. Jackson
- --------------------- Trustee October
4, 1996
Ronald J. Jackson
POWER OF ATTORNEY
I, the undersigned Trustee of Putnam California Tax Exempt
Money Market Fund, hereby severally constitute and appoint George
Putnam, Charles E. Porter, Gordon H. Silver, Edward A. Benjamin,
Timothy W. Diggins and John W. Gerstmayr, and each of them
singly, my true and lawful attorneys, with full power to them and
each of them, to sign for me, and in my name and in the capacity
indicated below, the Registration Statement on Form N-1A of
Putnam California Tax Exempt Money Market Fund and any and all
amendments (including post-effective amendments) to said
Registration Statement and to file the same with all exhibits
thereto, and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto my said
attorneys, and each of them acting alone, full power and
authority to do and perform each and every act and thing
requisite or necessary to be done in the premises, as fully to
all intents and purposes as he might or could do in person, and
hereby ratify and confirm all that said attorneys or any of them
may lawfully do or cause to be done by virtue thereof.
WITNESS my hand and seal on the date set forth below.
Signature Title Date
/s/ Ronald J. Jackson
- --------------------- Trustee October
4, 1996
Ronald J. Jackson
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940 each Registrant certifies
that it meets all of the requirements for effectiveness of this
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston,
and The Commonwealth of Massachusetts, on the 30th day of
January, 1997 .
PUTNAM CALIFORNIA TAX EXEMPT
INCOME TRUST
PUTNAM CALIFORNIA TAX EXEMPT MONEY
MARKET FUND
By: Gordon H. Silver, Vice President
Pursuant to the requirements of the Securities Act of
1933, this Amendment to the Registration Statements of Putnam
California Tax Exempt Income Trust and Putnam California Tax
Exempt Money Market Fund has been signed below by the following
persons in the capacities and on the dates indicated:
Signature Title
George Putnam President and Chairman of the
Board; Principal Executive
Officer; Trustee
John D. Hughes Senior Vice President;
Treasurer and Principal
Financial Officer
Paul G. Bucuvalas Assistant Treasurer and
Principal Accounting Officer
Jameson A. Baxter Trustee
Hans H. Estin Trustee
John A. Hill Trustee
Ronald J. Jackson Trustee
Elizabeth T. Kennan Trustee
Lawrence J. Lasser Trustee
Robert E. Patterson Trustee
Donald S. Perkins Trustee
William F. Pounds Trustee
George Putnam, III Trustee
A.J.C. Smith Trustee
W. Nicholas Thorndike Trustee
By: Gordon H. Silver,
as Attorney-in-Fact
January 30, 1997
PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND
(FORMERLY KNOWN AS PUTNAM CALIFORNIA TAX EXEMPT INCOME
TRUST)
--------------------
AMENDED AND RESTATED AGREEMENT
AND DECLARATION OF TRUST
This AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST
made at Boston, Massachusetts, this 3rd day of January, 1997,
hereby amends and restates in its entirety the Trust's amended
and restated Agreement and Declaration of Trust dated May 6,
1994. This Amended and Restated Agreement and Declaration of
Trust shall take effect as of January 30, 1997.
WITNESSETH that
WHEREAS, this Trust has been formed to carry on the business
of an investment company; and
WHEREAS, the Trustees have agreed to manage all property
coming into their hands as trustees of a Massachusetts voluntary
association with transferable shares in accordance with the
provisions hereinafter set forth.
NOW, THEREFORE, the Trustees hereby declare that they will
hold all cash, securities and other assets, which they may from
time to time acquire in any manner as Trustees hereunder IN TRUST
to manage and dispose of the same upon the following terms and
conditions for the pro rata benefit of the holders from time to
time of Shares in this Trust as hereinafter set forth.
ARTICLE I
Name and Definitions
NAME
Section 1. This Trust shall be known as "Putnam California
Tax Exempt Income Fund", and the Trustees shall conduct the
business of the Trust under that name or any other name as they
may from time to time determine.
DEFINITIONS
Section 2. Whenever used herein, unless otherwise required
by the context or specifically provided:
(a) The "Trust" refers to the Massachusetts business trust
established by this Agreement and Declaration of Trust, as
amended from time to time;
(b) "Trustees" refers to the Trustees of the Trust named
herein or elected in accordance with Article IV;
(c) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than
one series or class of Shares is authorized by the Trustees,
the equal proportionate transferable units into which each
series or class of Shares shall be divided from time to
time;
(d) "Shareholder" means a record owner of Shares;
(e) The "1940 Act" refers to the Investment Company Act of
1940 and the Rules and Regulations thereunder, all as
amended from time to time;
(f) The terms "Affiliated Person", "Assignment",
"Commission", "Interested Person", "Principal Underwriter"
and "Majority Shareholder Vote" (the 67% or 50% requirement
of the third sentence of Section 2(a)(42) of the 1940 Act,
whichever may be applicable) shall have the meanings given
them in the 1940 Act;
(g) "Declaration of Trust" shall mean this Amended and
Restated Agreement and Declaration of Trust as amended or
restated from time to time;
(h) "Bylaws" shall mean the Bylaws of the Trust as amended
from time to time;
(i) The term "series" or "series of Shares" refers to the
one or more separate investment portfolios of the Trust into
which the assets and liabilities of the Trust may be divided
and the Shares of the Trust representing the beneficial
interest of Shareholders in such respective portfolios; and
(j) The term "class" or "class of Shares" refers to the
division of Shares into two or more classes as provided in
Article III, Section 1 hereof.
<PAGE>
ARTICLE II
Purpose of Trust
The purpose of the Trust is to provide investors a managed
investment primarily in securities and debt instruments and other
instruments and rights of a financial character.
ARTICLE III
Shares
DIVISION OF BENEFICIAL INTEREST
Section 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without shareholder approval,
authorize. Each series shall be preferred over all other series
in respect of the assets allocated to that series. The
beneficial interest in each series shall at all times be divided
into Shares, without par value, each of which shall, except as
provided in the following sentence, represent an equal
proportionate interest in the series with each other Share of the
same series, none having priority or preference over another. The
Trustees may, without shareholder approval, divide the Shares of
any series into two or more classes, Shares of each such class
having such preferences and special or relative rights and
privileges (including conversion rights, if any) as the Trustees
may determine and as shall be set forth in the Bylaws. The
number of Shares authorized shall be unlimited. The Trustees may
from time to time divide or combine the Shares of any series or
class into a greater or lesser number without thereby changing
the proportionate beneficial interest in the series or class.
OWNERSHIP OF SHARES
Section 2. The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the issuance of Share Certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each series and
class and as to the number of Shares of each series and class
held from time to time by each Shareholder.
<PAGE>
INVESTMENT IN THE TRUST
Section 3. The Trustees shall accept investments in the
Trust from such persons and on such terms and for such
consideration, which may consist of cash or tangible or
intangible property or a combination thereof, as they from time
to time authorize.
All consideration received by the Trust for the issue or
sale of Shares of each series, together with all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation thereof, and any
funds or payments derived from any reinvestment of such proceeds
in whatever form the same may be, shall irrevocably belong to the
series of Shares with respect to which the same were received by
the Trust for all purposes, subject only to the rights of
creditors, and shall be so handled upon the books of account of
the Trust and are herein referred to as "assets of" such series.
NO PREEMPTIVE RIGHTS
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities
issued by the Trust.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
Section 5. Shares shall be deemed to be personal property
giving only the rights provided in this Declaration of Trust or
the Bylaws. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed
to the terms of this Declaration of Trust and the Bylaws and to
have become a party hereto. The death of a Shareholder during
the continuance of the Trust shall not operate to terminate the
same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division
of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor
except as specifically provided herein to call upon any
shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
<PAGE>
ARTICLE IV
The Trustees
ELECTION
Section 1. A Trustee may be elected either by the Trustees
or by the Shareholders. There shall not be less than three
Trustees. The number of Trustees shall be fixed by the Trustees.
Each Trustee elected by the Trustees or the Shareholders shall
serve until he or she retires, resigns, is removed or dies or
until the next meeting of Shareholders called for the purpose of
electing Trustees and until the election and qualification of his
or her successor. At any meeting called for the purpose, a
Trustee may be removed by vote of two-thirds of the outstanding
Shares.
EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE
Section 2. The death, declination, resignation, retirement,
removal or incapacity of the Trustees, or any one of them, shall
not operate to annul the Trust or to revoke any existing agency
created pursuant to the terms of this Declaration of Trust.
POWERS
Section 3. Subject to the provisions of this Declaration of
Trust, the business of the Trust shall be managed by the
Trustees, and they shall have all powers necessary or convenient
to carry out that responsibility. Without limiting the
foregoing, the Trustees may adopt Bylaws not inconsistent with
this Declaration of Trust providing for the conduct of the
business of the Trust and may amend and repeal them to the extent
that such Bylaws do not reserve that right to the Shareholders;
they may fill vacancies in or add to their number, and may elect
and remove such officers and appoint and terminate such agents as
they consider appropriate; they may appoint from their own
number, and terminate, any one or more committees consisting of
two or more Trustees, including an executive committee which may,
when the Trustees are not in session, exercise some or all of the
power and authority of the Trustees as the Trustees may
determine; they may employ one or more custodians of the assets
of the Trust and may authorize such custodians to employ
subcustodians and to deposit all or any part of such assets in a
system or systems for the central handling of securities, retain
a transfer agent or a Shareholder servicing agent, or both,
provide for the distribution of Shares by the Trust, through one
or more principal underwriters or otherwise, set record dates for
the determination of Shareholders with respect to various
matters, and in general delegate such authority as they consider
desirable to any officer of the Trust, to any committee of the
Trustees and to any agent or employee of the Trust or to any such
custodian or underwriter.
Without limiting the foregoing, the Trustees shall have
power and authority:
(a) To invest and reinvest cash, and to hold cash
uninvested;
(b) To sell, exchange, lend, pledge, mortgage, hypothecate,
write options on and lease any or all of the assets of the
Trust;
(c) To vote or give assent, or exercise any rights of
ownership, with respect to stock or other securities or
property; and to execute and deliver proxies or powers of
attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power
and discretion with relation to securities or property as
the Trustees shall deem proper;
(d) To exercise powers and rights of subscription or
otherwise which in any manner arise out of ownership of
securities;
(e) To hold any security or property in a form not
indicating any trust, whether in bearer, unregistered or
other negotiable form, or in the name of the Trustees or of
the Trust or in the name of a custodian, subcustodian or
other depositary or a nominee or nominees or otherwise;
(f) Subject to the provisions of Article III, Section 3, to
allocate assets, liabilities, income and expenses of the
Trust to a particular series of Shares or to apportion the
same among two or more series, provided that any liabilities
or expenses incurred by or arising in connection with a
particular series of Shares shall be payable solely out of
the assets of that series; and to the extent necessary or
appropriate to give effect to the preferences and special or
relative rights and privileges of any classes of Shares, to
allocate assets, liabilities, income and expenses of a
series to a particular class of Shares of that series or to
apportion the same among two or more classes of Shares of
that series;
(g) To consent to or participate in any plan for the
reorganization, consolidation or merger of any corporation
or issuer, any security of which is or was held in the
Trust; to consent to any contract, lease, mortgage, purchase
or sale of property by such corporation or issuer, and to
pay calls or subscriptions with respect to any security held
in the Trust;
<PAGE>
(h) To join with other security holders in acting through a
committee, depositary, voting trustee or otherwise, and in
that connection to deposit any security with, or transfer
any security to, any such committee, depositary or trustee,
and to delegate to them such power and authority with
relation to any security (whether or not so deposited or
transferred) as the trustees shall deem proper, and to agree
to pay, and to pay, such portion of the expenses and
compensation of such committee, depositary or trustee as the
Trustees shall deem proper;
(i) To compromise, arbitrate or otherwise adjust claims in
favor of or against the Trust or any matter in controversy,
including but not limited to claims for taxes;
(j) To enter into joint ventures, general or limited
partnerships and any other combinations or associations;
(k) To borrow funds;
(l) To endorse or guarantee the payment of any notes or
other obligations of any person; to make contracts of
guaranty or suretyship, or otherwise assume liability for
payment thereof; and to mortgage and pledge the Trust
property or any part thereof to secure any of or all such
obligations;
(m) To purchase and pay for entirely out of Trust property
such insurance as they may deem necessary or appropriate for
the conduct of the business, including without limitation,
insurance policies insuring the assets of the Trust and
payment of distributions and principal on its portfolio
investments, and insurance policies insuring the
Shareholders, Trustees, officers, employees, agents,
investment advisers or managers, principal underwriters, or
independent contractors of the Trust individually against
all claims and liabilities of every nature arising by reason
of holding, being or having held any such office or
position, or by reason of any action alleged to have been
taken or omitted by any such person as Shareholder, Trustee,
officer, employee, agent, investment adviser or manager,
principal underwriter, or independent contractor, including
any action taken or omitted that may be determined to
constitute negligence, whether or not the Trust would have
the power to indemnify such person against such liability;
and
(n) To pay pensions for faithful service, as deemed
appropriate by the Trustees, and to adopt, establish and
carry out pension, profit-sharing, share bonus, share
purchase, savings, thrift and other retirement, incentive
and benefit plans, trusts and provisions, including the
purchasing of life insurance and annuity contracts as a
means of providing such retirement and other benefits, for
any or all of the Trustees, officers, employees and agents
of the Trust.
The Trustees shall not in any way be bound or limited by any
present or future law or custom in regard to investments by
trustees. Except as otherwise provided herein or from time to
time in the Bylaws, any action to be taken by the Trustees may be
taken by a majority of the Trustees present at a meeting of
Trustees (a quorum being present), within or without
Massachusetts, including any meeting held by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall
constitute presence in person at a meeting, or by written
consents of a majority of the Trustees then in office.
PAYMENT OF EXPENSES BY TRUST
Section 4. The Trustees are authorized to pay or to cause
to be paid out of the principal or income of the Trust, or partly
out of principal and partly out of income, as they deem fair, all
expenses, fees, charges, taxes and liabilities incurred or
arising in connection with the Trust, or in connection with the
management thereof, including, but not limited to, the Trustees'
compensation and such expenses and charges for the services of
the Trust's officers, employees, investment adviser or manager,
principal underwriter, auditor, counsel, custodian, transfer
agent, Shareholder servicing agent, and such other agents or
independent contractors and any such other expenses and charges
as the Trustees may deem necessary or proper to incur, provided,
however, that all expenses, fees, charges, taxes and liabilities
incurred or arising in connection with a particular series of
Shares shall be payable solely out of the assets of that series.
OWNERSHIP OF ASSETS OF THE TRUST
Section 5. Title to all of the assets of each series of
Shares and of the Trust shall at all times be considered as
vested in the Trustees.
ADVISORY, MANAGEMENT AND DISTRIBUTION
Section 6. Subject to a favorable Majority Shareholder
Vote, the Trustees may, at any time and from time to time,
contract for exclusive or nonexclusive advisory and/or management
services with any corporation, trust, association or other
organization (the "Manager"), every such contract to comply with
such requirements and restrictions as may be set forth in the
Bylaws; and any such contract may contain such other terms
interpretive of or in addition to said requirements and
restrictions as the Trustees may determine, including, without
limitation, authority to determine from time to time what
investments shall be purchased, held, sold or exchanged and what
portion, if any, of the assets of the Trust shall be held
uninvested and to make changes in the Trust's investments. The
Trustees may also, at any time and from time to time, contract
with the Manager or any other corporation, trust, association or
other organization, appointing it exclusive or nonexclusive
distributor or principal underwriter for the Shares, every such
contract to comply with such requirements and restrictions as may
be set forth in the Bylaws; and any such contract may contain
such other terms interpretive of or in addition to said
requirements and restrictions as the Trustees may determine.
The fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust is a shareholder, director, officer, partner, trustee,
employee, manager, adviser, principal underwriter or
distributor or agent of or for any corporation, trust,
association, or other organization, or of or for any parent
or affiliate of any organization, with which an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing
or other agency contract may have been or may hereafter be
made, or that any such organization, or any parent or
affiliate thereof, is a Shareholder or has an interest in
the Trust, or that
(ii) any corporation, trust, association or other
organization with which an advisory or management contract
or principal underwriter's or distributor's contract, or
transfer, Shareholder servicing or other agency contract may
have been or may hereafter be made also has an advisory or
management contract, or principal underwriter's or
distributor's contract, or transfer, Shareholder servicing
or other agency contract with one or more other
corporations, trusts, associations, or other organizations,
or has other business or interests,
shall not affect the validity of any such contract or disqualify
any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability
to the Trust or its Shareholders.
<PAGE>
ARTICLE V
Shareholders' Voting Powers and Meetings
VOTING POWERS
Section 1. Subject to the voting powers of one or more
classes of shares as set forth elsewhere in this Declaration of
Trust or in the Bylaws, the Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article IV,
Section 1, (ii) for the removal of Trustees as provided in
Article IV, Section 1, (iii) with respect to any Manager as
provided in Article IV, Section 6, (iv) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4, (v) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX,
Section 7, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or the Shareholders, and (vii) with respect to such
additional matters relating to the Trust as may be required by
this Declaration of Trust, the Bylaws or any registration of the
Trust with the Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall
be voted in the aggregate as a single class without regard to
series or classes of shares, except (1) when required by the 1940
Act or when the Trustees shall have determined that the matter
affects one or more series or classes of Shares materially
differently, Shares shall be voted by individual series or class;
and (2) when the Trustees have determined that the matter affects
only the interests of one or more series or classes, then only
Shareholders of such series or classes shall be entitled to vote
thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy
with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior
to exercise of the proxy the Trust receives a specific written
notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until
Shares of any series or class are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such series or class.
VOTING POWER AND MEETINGS
Section 2. Meetings of Shareholders of any or all series or
classes may be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote or
authority of the Shareholders of such series or classes as herein
provided or upon any other matter deemed by the Trustees to be
necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees
by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it
appears on the records of the Trust. If the Trustees shall fail
to call or give notice of any meeting of Shareholders for a
period of 30 days after written application by Shareholders
holding at least 10% of the then outstanding Shares of all series
and classes is entitled to vote at such meeting requesting that a
meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 10% of the then outstanding Shares
of all series and classes entitled to vote at such meeting may
call and give notice of such meeting, and thereupon the meeting
shall be held in the manner provided for herein in case of call
thereof by the Trustees.
QUORUM AND REQUIRED VOTE
Section 3. Thirty percent of Shares entitled to vote on a
particular matter shall be a quorum for the transaction of
business on that matter at a Shareholders' meeting, except that
where any provision of law or of this Declaration of Trust
permits or requires that holders of any series or class shall
vote as an individual series or class, then thirty percent of the
aggregate number of Shares of that series or class entitled to
vote shall be necessary to constitute a quorum for the
transaction of business by that series or class. Any lesser
number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of
further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the Bylaws, or by the
1940 Act, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Declaration of Trust
permits or requires that the holders of any series or classes
shall vote as an individual series or class, then a majority of
the Shares of that series or class voted on the matter shall
decide that matter insofar as that series or class is concerned.
<PAGE>
ACTION BY WRITTEN CONSENT
Section 4. Any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote
on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or
the Bylaws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
ADDITIONAL PROVISIONS
Section 5. The Bylaws may include further provisions not
inconsistent with this Declaration of Trust regarding
Shareholders' voting powers, the conduct of meetings and related
matters.
ARTICLE VI
Distributions, Redemptions and Repurchases
DISTRIBUTIONS
Section 1. The Trustees may each year, or more frequently
if they so determine, distribute to the Shareholders of each
series out of the assets of such series such amounts as the
Trustees may determine. Such amounts shall be distributed pro
rata to Shareholders of each series in proportion to the number
of Shares of each series held by each of them, except to the
extent otherwise required or permitted by the preferences and
special or relative rights and privileges of any classes of
Shares of that series, and any distribution to the Shareholders
of a particular class of Shares shall be made to such
Shareholders pro rata in proportion to the number of Shares of
such class held by each of them. Such distributions shall be
made in cash or Shares or a combination thereof as determined by
the Trustees. Any such distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance with
the Bylaws.
REDEMPTIONS AND REPURCHASES
Section 2. The Trust shall purchase such Shares as are
offered by any Shareholder for redemption, upon the presentation
of any certificate for the Shares to be purchased, a proper
instrument of transfer and a request directed to the Trust or a
person designated by the Trust that the Trust purchase such
Shares, or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof, as next
determined in accordance with the Bylaws. Payment for said
Shares shall be made by the Trust to the Shareholder within seven
days after the date on which the request is made. The obligation
set forth in this Section 2 is subject to the provision that in
the event that any time the New York Stock Exchange is closed for
other than customary weekends or holidays, or, if permitted by
rules of the Securities and Exchange Commission, during periods
when trading on the Exchange is restricted or during any
emergency which makes it impractical for the Trust to dispose of
its investments or to determine fairly the value of its net
assets, or during any other period permitted by order of the
Securities and Exchange Commission for the protection of
investors, such obligation may be suspended or postponed by the
Trustees. The Trust may also purchase or repurchase Shares at a
price not exceeding the net asset value of such Shares in effect
when the purchase or repurchase or any contract to purchase or
repurchase is made.
REDEMPTIONS AT THE OPTION OF THE TRUST
Section 3. The Trust shall have the right at its option and
at any time to redeem Shares of any Shareholder at the net asset
value thereof as determined in accordance with the Bylaws: (i) if
at such time such Shareholder owns fewer Shares than, or Shares
having an aggregate net asset value of less than, an amount
determined from time to time by the Trustees; or (ii) to the
extent that such Shareholder owns Shares of a particular series
or class of Shares equal to or in excess of a percentage of the
outstanding Shares of that series or class determined from time
to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage
equal to or in excess of such percentage of the aggregate number
of outstanding Shares of the Trust or the aggregate net asset
value of the Trust determined from time to time by the Trustees.
ARTICLE VII
Compensation and Limitation of Liability of Trustees
COMPENSATION
Section 1. The Trustees as such shall be entitled to
reasonable compensation from the Trust; they may fix the amount
of their compensation. Nothing herein shall in any way prevent
the employment of any Trustee for advisory, management, legal,
accounting, investment banking or other services and payment for
the same by the Trust.
LIMITATION OF LIABILITY
Section 2. The Trustees shall not be responsible or liable
in any event for any neglect or wrongdoing of any officer, agent,
employee, manager or principal underwriter of the Trust, nor
shall any Trustee be responsible for the act or omission of any
other Trustee, but nothing herein contained shall protect any
Trustee against any liability to which he or she would otherwise
be subject by reason of wilful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the
conduct of his or her office.
Every note, bond, contract, instrument, certificate or
undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust or the Trustees or any of them
in connection with the Trust shall be conclusively deemed to have
been executed or done only in or with respect to their or his or
her capacity as Trustees or Trustee, and such Trustees or Trustee
shall not be personally liable thereon.
ARTICLE VIII
Indemnification
TRUSTEES, OFFICERS, ETC.
Section 1. The Trust shall indemnify each of its Trustees
and officers (including persons who serve at the Trust's request
as directors, officers or trustees of another organization in
which the Trust has any interest as a shareholder, creditor or
otherwise) (hereinafter referred to as a "Covered Person")
against all liabilities and expenses, including but not limited
to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees reasonably incurred by any
Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal,
before any court or administrative or legislative body, in which
such Covered Person may be or may have been involved as a party
or otherwise or with which such Covered Person may be or may have
been threatened, while in office or thereafter, by reason of
being or having been such a Covered Person except with respect to
any matter as to which such Covered Person shall have been
finally adjudicated in any such action, suit or other proceeding
(a) not to have acted in good faith in the reasonable belief that
such Covered Person's action was in the best interests of the
Trust or (b) to be liable to the Trust or its Shareholders by
reason of wilful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such
Covered Person's office. Expenses, including counsel fees so
incurred by any such Covered Person (but excluding amounts paid
in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in
advance of the final disposition of any such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such
Covered Person to repay amounts so paid to the Trust if it is
ultimately determined that indemnification of such expenses is
not authorized under this Article, provided, however, that either
(a) such Covered Person shall have provided appropriate security
for such undertaking, (b) the Trust shall be insured against
losses arising from any such advance payments or (c) either a
majority of the disinterested Trustees acting on the matter
(provided that a majority of the disinterested Trustees then in
office act on the matter), or independent legal counsel in a
written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a full trial type inquiry)
that there is reason to believe that such Covered Person will be
found entitled to indemnification under this Article.
COMPROMISE PAYMENT
Section 2. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise)
without an adjudication by a court, or by any other body before
which the proceeding was brought, that such Covered Person either
(a) did not act in good faith in the reasonable belief that his
or her action was in the best interests of the Trust or (b) is
liable to the Trust or its Shareholders by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office,
indemnification shall be provided if (a) approved as in the best
interests of the Trust, after notice that it involves such
indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts (as
opposed to a full trial type inquiry) that such Covered Person
acted in good faith in the reasonable belief that his or her
action was in the best interests of the Trust and is not liable
to the Trust or its Shareholders by reasons of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (b)
there has been obtained an opinion in writing of independent
legal counsel, based upon a review of readily available facts (as
opposed to a full trial type inquiry) to the effect that such
Covered Person appears to have acted in good faith in the
reasonable belief that his or her action was in the best
interests of the Trust and that such indemnification would not
protect such Person against any liability to the Trust to which
he or she would otherwise be subject by reason of wilful
misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office. Any
approval pursuant to this Section shall not prevent the recovery
from any Covered Person of any amount paid to such Covered Person
in accordance with this Section as indemnification if such
Covered Person is subsequently adjudicated by a court of
competent jurisdiction not to have acted in good faith in the
reasonable belief that such Covered Person's action was in the
best interests of the Trust or to have been liable to the Trust
or its Shareholders by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of such Covered Person's office.
INDEMNIFICATION NOT EXCLUSIVE
Section 3. The right of indemnification hereby provided
shall not be exclusive of or affect any other rights to which
such Covered Person may be entitled. As used in this Article
VIII, the term "Covered Person" shall include such person's
heirs, executors and administrators and a "disinterested Trustee"
is a Trustee who is not an "interested person" of the Trust as
defined in Section 2(a)(19) of the Investment Company Act of
1940, as amended (or who has been exempted from being an
"interested person" by any rule, regulation or order of the
Commission) and against whom none of such actions, suits or other
proceedings or another action, suit or other proceeding on the
same or similar grounds is then or has been pending. Nothing
contained in this Article shall affect any rights to
indemnification to which personnel of the Trust, other than
Trustees or officers, and other persons may be entitled by
contract or otherwise under law, nor the power of the Trust to
purchase and maintain liability insurance on behalf of any such
person.
SHAREHOLDERS
Section 4. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or
her being or having been a Shareholder and not because of his or
her acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such
liability, but only out of the assets of the particular series of
Shares of which he or she is or was a Shareholder.
ARTICLE IX
Miscellaneous
TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular series
of Shares shall look only to the assets of the Trust or the
assets of that particular series of Shares for payment under such
credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any
Trustee against any liability to which such Trustee would
otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer or
officers shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust or by them as Trustee or Trustees or
as officer or officers and not individually and that the
obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further
recital as he or she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholder or Shareholders
individually.
TRUSTEE'S GOOD FAITH ACTION, EXPERT ADVICE, NO BOND OR SURETY
Section 2. The exercise by the Trustees of their powers and
discretions hereunder shall be binding upon everyone interested.
A Trustee shall be liable for his or her own wilful misfeasance,
bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes
of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this
Declaration of Trust, and shall be under no liability for any act
or omission in accordance with such advice or for failing to
follow such advice. The Trustees shall not be required to give
any bond as such, nor any surety if a bond is required.
LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES
Section 3. No person dealing with the Trustees shall be
bound to make any inquiry concerning the validity of any
transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the
Trust or upon its order.
DURATION AND TERMINATION OF TRUST
Section 4. Unless terminated as provided herein, the Trust
shall continue without limitation of time. The Trust may be
terminated at any time by vote of Shareholders holding at least
66-2/3% of the Shares entitled to vote or by the Trustees by
written notice to the Shareholders. Any series of Shares may be
terminated at any time by vote of Shareholders holding at least
66-2/3% of the Shares of such series entitled to vote or by the
Trustees by written notice to the Shareholders of such series.
Upon termination of the Trust or of any one or more series
of Shares, after paying or otherwise providing for all charges,
taxes, expenses and liabilities, whether due or accrued or
anticipated of the Trust or of the particular series as may be
determined by the Trustees, the Trust shall in accordance with
such procedures as the Trustees consider appropriate, reduce the
remaining assets to distributable form in cash or shares or other
securities, or any combination thereof, and distribute the
proceeds to the Shareholders of the series involved, ratably
according to the number of Shares of such series held by the
several Shareholders of such series on the date of termination,
except to the extent otherwise required or permitted by the
preferences and special or relative rights and privileges of any
classes of any series of Shares of the Trust, provided that any
distribution to the Shareholders of a particular class of any
series of Shares shall be made to such Shareholders pro rata in
proportion to the number of Shares of such class held by each of
them.
FILING OF COPIES, REFERENCES, HEADINGS
Section 5. The original or a copy of this instrument and of
each amendment hereto shall be kept at the office of the Trust
where it may be inspected by any Shareholder. A copy of this
instrument and of each amendment hereto shall be filed by the
Trust with the Secretary of State of The Commonwealth of
Massachusetts and with the Boston City Clerk, as well as any
other governmental office where such filing may from time to time
be required. Anyone dealing with the Trust may rely on a
certificate by an officer of the Trust as to whether or not any
such amendments have been made and as to any matters in
connection with the Trust hereunder, and, with the same effect as
if it were the original, may rely on a copy certified by an
officer of the Trust to be a copy of this instrument or of any
such amendments. In this instrument and in any such amendment,
references to this instrument, and all expressions like "herein",
"hereof" and "hereunder", shall be deemed to refer to this
instrument as amended or affected by any such amendments.
Headings are placed herein for convenience of reference only and
shall not be taken as a part hereof or control or affect the
meaning, construction or effect of this instrument. This
instrument may be executed in any number of counterparts each of
which shall be deemed an original.
APPLICABLE LAW
Section 6. This Declaration of Trust is made in The
Commonwealth of Massachusetts, and it is created under and is to
be governed by and construed and administered according to the
laws of said Commonwealth. The Trust shall be of the type
commonly called a Massachusetts business trust, and without
limiting the provisions hereof, the Trust may exercise all powers
which are ordinarily exercised by such a trust.
<PAGE>
AMENDMENTS
Section 7. This Declaration of Trust may be amended at any
time by an instrument in writing signed by a majority of the then
Trustees when authorized to do so by vote of Shareholders holding
a majority of the Shares entitled to vote, except that an
amendment which shall affect the holders of one or more series or
classes of Shares but not the holders of all outstanding series
and classes shall be authorized by vote of the Shareholders
holding a majority of the Shares entitled to vote of each series
and class affected and no vote of Shareholders of a series or
class not affected shall be required. Amendments having the
purpose of changing the name of the Trust or of supplying any
omission, curing any ambiguity or curing, correcting or
supplementing any defective or inconsistent provision contained
herein shall not require authorization by Shareholder vote.
This instrument shall be effective only upon filing with the
Secretary of State of The Commonwealth of Massachusetts and may
be executed in several counterparts, each of which shall be
deemed an original, but all taken together shall constitute one
instrument.
IN WITNESS WHEREOF, the undersigned, being a majority of the
Trustees of the Trust, have hereunto set their hands and seals in
the City of Boston, Massachusetts, for themselves and their
assigns, as of the day and year first above written.
/s/ George Putnam /s/ Elizabeth T. Kennan
- ------------------------- -------------------------
George Putnam Elizabeth T. Kennan
/s/ William F. Pounds /s/ Lawrence J. Lasser
- -------------------------- -------------------------
William F. Pounds Lawrence J. Lasser
/s/ Jameson A. Baxter /s/ Robert E. Patterson
- -------------------------- -------------------------
Jameson A. Baxter Robert E. Patterson
/s/ Hans H. Estin /s/ Donald S. Perkins
- -------------------------- -------------------------
Hans H. Estin Donald S. Perkins
/s/ John A. Hill /s/ George Putnam, III
- -------------------------- -------------------------
John A. Hill George Putnam, III
/s/ Ronald J. Jackson /s/ A.J.C. Smith
- -------------------------- -------------------------
Ronald J. Jackson A.J.C. Smith
/s/ W. Nicholas Thorndike
-------------------------
W. Nicholas Thorndike
THE COMMONWEALTH OF MASSACHUSETTS
Boston, January 9, 1997
Suffolk, ss.
Then personally appeared each of the above named Trustees of
Putnam California Tax Exempt Income Fund and acknowledged the
foregoing instrument to be their free act and deed, before me,
/S/ ANNE B. MCCARTHY
---------------------------------
ANNE B. MCCARTHY
NOTARY PUBLIC
MY COMMISSION EXPIRES:
SEPTEMBER 18, 2003
The address of the Trust is One Post Office Square, Boston,
Massachusetts 02109
BYLAWS
OF
PUTNAM AMERICAN GOVERNMENT INCOME FUND,
PUTNAM ARIZONA TAX EXEMPT INCOME FUND,
PUTNAM ASIA PACIFIC GROWTH FUND,
PUTNAM ASSET ALLOCATION FUNDS,
PUTNAM BALANCED RETIREMENT FUND,
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND,
PUTNAM CONVERTIBLE INCOME-GROWTH TRUST,
PUTNAM DIVERSIFIED INCOME TRUST,
PUTNAM EQUITY INCOME FUND,
PUTNAM EUROPE GROWTH FUND,
PUTNAM FLORIDA TAX EXEMPT INCOME FUND,
THE GEORGE PUTNAM FUND OF BOSTON,
PUTNAM GLOBAL GOVERNMENTAL INCOME TRUST,
PUTNAM GLOBAL GROWTH FUND,
PUTNAM HEALTH SCIENCES TRUST,
PUTNAM HIGH YIELD TRUST,
PUTNAM INCOME FUND,
PUTNAM INVESTORS FUND,
PUTNAM INTERMEDIATE U.S. GOVERNMENT INCOME FUND
PUTNAM MASSACHUSETTS TAX EXEMPT INCOME FUND,
PUTNAM MICHIGAN TAX EXEMPT INCOME FUND,
PUTNAM MINNESOTA TAX EXEMPT INCOME FUND,
PUTNAM MONEY MARKET FUND,
PUTNAM MUNICIPAL INCOME FUND,
PUTNAM NEW JERSEY TAX EXEMPT INCOME FUND,
PUTNAM NEW OPPORTUNITIES FUND,
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND,
PUTNAM NEW YORK TAX EXEMPT OPPORTUNITIES FUND,
PUTNAM OHIO TAX EXEMPT INCOME FUND,
PUTNAM PENNSYLVANIA TAX EXEMPT INCOME FUND,
PUTNAM TAX EXEMPT INCOME FUND,
PUTNAM TAX EXEMPT MONEY MARKET FUND,
PUTNAM TAX-FREE INCOME TRUST,
PUTNAM U.S. GOVERNMENT INCOME TRUST,
PUTNAM UTILITIES GROWTH AND INCOME FUND,
PUTNAM VISTA FUND,
PUTNAM VOYAGER FUND
(AS AMENDED THROUGH FEBRUARY 1, 1994),
PUTNAM DIVERSIFIED EQUITY TRUST
(AS APPROVED APRIL 13, 1994),
PUTNAM HIGH YIELD ADVANTAGE FUND
(AS AMENDED THROUGH JUNE 1, 1994),
PUTNAM FEDERAL INCOME TRUST
(AS AMENDED THROUGH JUNE 6, 1994),
THE PUTNAM FUND FOR GROWTH AND INCOME
(AS AMENDED THROUGH JULY 7, 1994),
PUTNAM DIVERSIFIED INCOME TRUST II,
PUTNAM GROWTH AND INCOME FUND II
(AS AMENDED THROUGH OCTOBER 5, 1994),
<PAGE>
PUTNAM PREFERRED INCOME FUND
(AS AMENDED THROUGH OCTOBER 6, 1994),
PUTNAM INVESTMENT FUNDS
(AS AMENDED THROUGH OCTOBER 30, 1994),
PUTNAM FUNDS TRUST
(AS AMENDED THROUGH JANUARY 19, 1996),
PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND,
PUTNAM GLOBAL NATURAL RESOURCES FUND,
PUTNAM INTERNATIONAL GROWTH FUND,
PUTNAM NEW YORK TAX EXEMPT INCOME FUND,
PUTNAM OTC & EMERGING GROWTH FUND, AND
PUTNAM VARIABLE TRUST
(AS AMENDED THROUGH JANUARY 30, 1997)
ARTICLE 1
Agreement and Declaration of Trust and Principal Office
1.1 AGREEMENT AND DECLARATION OF TRUST. These Bylaws shall
be subject to the Agreement and Declaration of Trust, as from
time to time in effect (the "Declaration of Trust"), of the
Massachusetts business trust established by the Declaration of
Trust (the "Trust").
1.2 PRINCIPAL OFFICE OF THE TRUST. The principal office of
the Trust shall be located in Boston, Massachusetts.
ARTICLE 2
MEETINGS OF TRUSTEES
2.1 REGULAR MEETINGS. Regular meetings of the Trustees may
be held without call or notice at such places and at such times
as the Trustees may from time to time determine, provided that
notice of the first regular meeting following any such
determination shall be given to absent Trustees.
2.2 SPECIAL MEETINGS. Special meetings of the Trustees may
be held at any time and at any place designated in the call of
the meeting when called by the Chairman of the Trustees, the
President or the Treasurer or by two or more Trustees, sufficient
notice thereof being given to each Trustee by the Clerk or an
Assistant Clerk or by the officer or the Trustees calling the
meeting.
2.3 NOTICE OF SPECIAL MEETINGS. It shall be sufficient
notice to a Trustee of a special meeting to send notice by mail
at least forty-eight hours or by telegram at least twenty-four
hours before the meeting addressed to the Trustee at his or her
usual or last known business or residence address or to give
notice to him or her in person or by telephone at least
twenty-four hours before the meeting. Notice of a special
meeting need not be given to any Trustee if a written waiver of
notice, executed by him or her before or after the meeting, is
filed with the records of the meeting, or to any Trustee who
attends the meeting without protesting prior thereto or at its
commencement the lack of notice to him or her. Neither notice of
a meeting nor a waiver of a notice need specify the purposes of
the meeting.
2.4 QUORUM. At any meeting of the Trustees a majority of
the Trustees then in office shall constitute a quorum. Any
meeting may be adjourned from time to time by a majority of the
votes cast upon the question, whether or not a quorum is present,
and the meeting may be held as adjourned without further notice.
2.5 NOTICE OF CERTAIN ACTIONS BY CONSENT. If in accordance
with the provisions of the Declaration of Trust any action is
taken by the Trustees by a written consent of less than all of
the Trustees, then prompt notice of any such action shall be
furnished to each Trustee who did not execute such written
consent, provided that the effectiveness of such action shall not
be impaired by any delay or failure to furnish such notice.
ARTICLE 3
OFFICERS
3.1 ENUMERATION; QUALIFICATION. The officers of the Trust
shall be a Chairman of the Trustees, a President, a Treasurer, a
Clerk and such other officers, if any, as the Trustees from time
to time may in their discretion elect. The Trust may also have
such agents as the Trustees from time to time may in their
discretion appoint. The Chairman of the Trustees and the
President shall be a Trustee and may but need not be a
shareholder; and any other officer may but need not be a Trustee
or a shareholder. Any two or more offices may be held by the
same person. A Trustee may but need not be a shareholder.
3.2 ELECTION. The Chairman of the Trustees, the President,
the Treasurer and the Clerk shall be elected by the Trustees upon
the occurrence of any vacancy in any such office. Other
officers, if any, may be elected or appointed by the Trustees at
any time. Vacancies in any such other office may be filled at
any time.
3.3 TENURE. The Chairman of the Trustees, the President,
the Treasurer and the Clerk shall hold office in each case until
he or she dies, resigns, is removed or becomes disqualified.
Each other officer shall hold office and each agent shall retain
authority at the pleasure of the Trustees.
<PAGE>
3.4 POWERS. Subject to the other provisions of these
Bylaws, each officer shall have, in addition to the duties and
powers herein and in the Declaration of Trust set forth, such
duties and powers as are commonly incident to the office occupied
by him or her as if the Trust were organized as a Massachusetts
business corporation and such other duties and powers as the
Trustees may from time to time designate.
3.5 CHAIRMAN; PRESIDENT. Unless the Trustees otherwise
provide, the Chairman of the Trustees or, if there is none or in
the absence of the Chairman of the Trustees, the President shall
preside at all meetings of the shareholders and of the Trustees.
Unless the Trustees otherwise provide, the President shall be the
chief executive officer.
3.6 TREASURER. Unless the Trustees shall provide
otherwise, the Treasurer shall be the chief financial and
accounting officer of the Trust, and shall, subject to the
provisions of the Declaration of Trust and to any arrangement
made by the Trustees with a custodian, investment adviser or
manager, or transfer, shareholder servicing or similar agent, be
in charge of the valuable papers, books of account and accounting
records of the Trust, and shall have such other duties and powers
as may be designated from time to time by the Trustees or by the
President.
3.7 CLERK. The Clerk shall record all proceedings of the
shareholders and the Trustees in books to be kept therefor, which
books or a copy thereof shall be kept at the principal office of
the Trust. In the absence of the Clerk from any meeting of the
shareholders or Trustees, an Assistant Clerk, or if there be none
or if he or she is absent, a temporary Clerk chosen at such
meeting shall record the proceedings thereof in the aforesaid
books.
3.8 RESIGNATIONS AND REMOVALS. Any Trustee or officer may
resign at any time by written instrument signed by him or her and
delivered to the Chairman of the Trustees, the President or the
Clerk or to a meeting of the Trustees. Such resignation shall be
effective upon receipt unless specified to be effective at some
other time. The Trustees may remove any officer elected by them
with or without cause. Except to the extent expressly provided
in a written agreement with the Trust, no Trustee or officer
resigning and no officer removed shall have any right to any
compensation for any period following his or her resignation or
removal, or any right to damages on account of such removal.
<PAGE>
ARTICLE 4
COMMITTEES
4.1 QUORUM; VOTING. A majority of the members of any
Committee of the Trustees shall constitute a quorum for the
transaction of business, and any action of such a Committee may
be taken at a meeting by a vote of a majority of the members
present (a quorum being present) or evidenced by one or more
writings signed by such a majority. Members of a Committee may
participate in a meeting of such Committee by means of a
conference telephone or other communications equipment by means
of which all persons participating in the meeting can hear each
other at the same time and participation by such means shall
constitute presence in person at a meeting.
ARTICLE 5
REPORTS
5.1 GENERAL. The Trustees and officers shall render
reports at the time and in the manner required by the Declaration
of Trust or any applicable law. Officers and Committees shall
render such additional reports as they may deem desirable or as
may from time to time be required by the Trustees.
ARTICLE 6
FISCAL YEAR
6.1 GENERAL. Except as from time to time otherwise
provided by the Trustees, the initial fiscal year of the Trust
shall end on such date as is determined in advance or in arrears
by the Treasurer, and subsequent fiscal years shall end on such
date in subsequent years.
ARTICLE 7
SEAL
7.1 GENERAL. The seal of the Trust shall consist of a
flat-faced die with the word "Massachusetts", together with the
name of the Trust and the year of its organization cut or
engraved thereon but, unless otherwise required by the Trustees,
the seal shall not be necessary to be placed on and its absence
shall not impair the validity of, any document, instrument or
other paper executed and delivered by or on behalf of the Trust.
<PAGE>
ARTICLE 8
EXECUTION OF PAPERS
8.1 GENERAL. Except as the Trustees may generally or in
particular cases authorize the execution thereof in some other
manner, all deeds, leases, contracts, notes and other obligations
made by the Trustees shall be signed by the President, the Vice
Chairman, a Vice President or the Treasurer and need not bear the
seal of the Trust.
ARTICLE 9
ISSUANCE OF SHARES AND SHARE CERTIFICATES
9.1 SALE OF SHARES. Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities
from time to time, full and fractional shares of its shares of
beneficial interest, such shares to be issued and sold at a price
of not less than the par value per share, if any, and not less
than the net asset value per share as from time to time
determined in accordance with the Declaration of Trust and these
Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for
securities, such securities shall be valued in accordance with
the provisions for determining the value of the assets of the
Trust as stated in the Declaration of Trust and these Bylaws.
The officers of the Trust are severally authorized to take all
such actions as may be necessary or desirable to carry out this
Section 9.1.
9.2 SHARE CERTIFICATES. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares of each class owned
by him, in such form as shall be prescribed from time to time by
the Trustees. Such certificate shall be signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer. Such signatures may be facsimile if the certificate
is signed by a transfer agent or by a registrar. In case any
officer who has signed or whose facsimile signature has been
placed on such certificate shall cease to be such officer before
such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its
issue.
9.3 LOSS OF CERTIFICATES. The transfer agent of the Trust,
with the approval of any two officers of the Trust, is authorized
to issue and countersign replacement certificates for the shares
of the Trust which have been lost, stolen or destroyed upon (i)
receipt of an affidavit or affidavits of loss or non-receipt and
of an indemnity agreement executed by the registered holder or
his legal representative and supported by an open penalty surety
bond, said agreement and said bond in all cases to be in form and
content satisfactory to and approved by the President or the
Treasurer, or (ii) receipt of such other documents as may be
approved by the Trustees.
9.4 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder and
entitled to vote thereon.
9.5 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S
BUSINESS
10.1 CERTAIN DEFINITIONS. When used herein the following
words shall have the following meanings: "Distributor" shall mean
any one or more corporations, firms or associations which have
distributor's or principal underwriter's contracts in effect with
the Trust providing that redeemable shares issued by the Trust
shall be offered and sold by such Distributor. "Manager" shall
mean any corporation, firm or association which may at the time
have an advisory or management contract with the Trust.
10.2 LIMITATIONS ON DEALINGS WITH OFFICERS OR TRUSTEES.
The Trust will not lend any of its assets to the Distributor or
Manager or to any officer or director of the Distributor or
Manager or any officer or Trustee of the Trust, and shall not
permit any officer or Trustee or any officer or director of the
Distributor or Manager to deal for or on behalf of the Trust with
himself or herself as principal or agent, or with any
partnership, association or corporation in which he or she has a
financial interest; provided that the foregoing provisions shall
not prevent (a) officers and Trustees of the Trust or officers
and directors of the Distributor or Manager from buying, holding
or selling shares in the Trust or from being partners, officers
or directors of or otherwise financially interested in the
Distributor or the Manager; (b) purchases or sales of securities
or other property if such transaction is permitted by or is
exempt or exempted from the provisions of the Investment Company
Act of 1940 or any Rule or Regulation thereunder and if such
transaction does not involve any commission or profit to any
security dealer who is, or one or more of whose partners,
shareholders, officers or directors is, an officer or Trustee of
the Trust or an officer or director of the Distributor or
Manager; (c) employment of legal counsel, registrar, transfer
agent, shareholder servicing agent, dividend disbursing agent or
custodian who is, or has a partner, shareholder, officer or
director who is, an officer or Trustee of the Trust or an officer
or director of the Distributor or Manager; (d) sharing
statistical, research, legal and management expenses and office
hire and expenses with any other investment company in which an
officer or Trustee of the Trust or an officer or director of the
Distributor or Manager is an officer or director or otherwise
financially interested.
10.3 SECURITIES AND CASH OF THE TRUST TO BE HELD BY
CUSTODIAN SUBJECT TO CERTAIN TERMS AND CONDITIONS.
(a) All securities and cash owned by the Trust
shall be held by or deposited with one or more banks or
trust companies having (according to its last published
report) not less than $1,000,000 aggregate capital,
surplus and undivided profits (any such bank or trust
company being hereby designated as "Custodian"),
provided such a Custodian can be found ready and
willing to act; subject to such rules, regulations and
orders, if any, as the Securities and Exchange
Commission may adopt, the Trust may, or may permit any
Custodian to, deposit all or any part of the securities
owned by the Trust in a system for the central handling
of securities pursuant to which all securities of any
particular class or series of any issue deposited
within the system may be transferred or pledged by
bookkeeping entry, without physical delivery. The
Custodian may appoint, subject to the approval of the
Trustees, one or more subcustodians.
(b) The Trust shall enter into a written contract
with each Custodian regarding the powers, duties and
compensation of such Custodian with respect to the cash
and securities of the Trust held by such Custodian.
Said contract and all amendments thereto shall be
approved by the Trustees.
(c) The Trust shall upon the resignation or
inability to serve of any Custodian or upon change of
any Custodian:
(i) in case of such resignation or inability to
serve, use its best efforts to obtain a successor
Custodian;
(ii) require that the cash and securities owned
by the Trust be delivered directly to the successor
Custodian; and
(iii) in the event that no successor Custodian
can be found, submit to the shareholders, before
permitting delivery of the cash and securities owned by
the Trust otherwise than to a successor Custodian, the
question whether the Trust shall be liquidated or shall
function without a Custodian.
10.4 REPORTS TO SHAREHOLDERS. The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations,
containing all information required by applicable laws or
regulations.
10.5 DETERMINATION OF NET ASSET VALUE PER SHARE. Net asset
value per share of each class or series of shares of the Trust
shall mean: (i) the value of all the assets properly allocable
to such class or series; (ii) less total liabilities properly
allocable to such class or series; (iii) divided by the number of
shares of such class or series outstanding, in each case at the
time of each determination. Except as otherwise determined by
the Trustees, the net asset value per share of each class or
series shall be determined no less frequently than once daily,
Monday through Friday, on days on which the New York Stock
Exchange is open for trading, at such time or times that the
Trustees set at least annually.
In valuing the portfolio investments of any class or series
of shares for the determination of the net asset value per share
of such class or series, securities for which market quotations
are readily available shall be valued at prices which, in the
opinion of the Trustees or the person designated by the Trustees
to make the determination, most nearly represent the market value
of such securities, and other securities and assets shall be
valued at their fair value as determined by or pursuant to the
direction of the Trustees, which in the case of debt obligations,
commercial paper and repurchase agreements may, but need not, be
on the basis of yields for securities of comparable maturity,
quality and type, or on the basis of amortized cost. Expenses
and liabilities of the Trust shall be accrued each day.
Liabilities may include such reserves for taxes, estimated
accrued expenses and contingencies as the Trustees or their
designates may in their sole discretion deem fair and reasonable
under the circumstances. No accruals shall be made in respect of
taxes on unrealized appreciation of securities owned unless the
Trustees shall otherwise determine.
ARTICLE 11
SHAREHOLDERS
11.1 MEETINGS. A meeting of the shareholders shall be
called by the Clerk whenever ordered by the Trustees, the
Chairman of the Trustees or requested in writing by the holder or
holders of at least one-tenth of the outstanding shares entitled
to vote at such meeting. If the Clerk, when so ordered or
requested, refuses or neglects for more than two days to call
such meeting, the Trustees, Chairman of the Trustees or the
shareholders so requesting may, in the name of the Clerk, call
the meeting by giving notice thereof in the manner required when
notice is given by the Clerk.
11.2 ACCESS TO SHAREHOLDER LIST. Shareholders of record
may apply to the Trustees for assistance in communicating with
other shareholders for the purpose of calling a meeting in order
to vote upon the question of removal of a Trustee. When ten or
more shareholders of record who have been such for at least six
months preceding the date of application and who hold in the
aggregate shares having a net asset value of at least $25,000 so
apply, the Trustees shall within five business days either:
(i) afford to such applicants access to a list of
names and addresses of all shareholders as recorded on
the books of the Trust; or
(ii) inform such applicants of the approximate
number of shareholders of record and the approximate
cost of mailing material to them, and, within a
reasonable time thereafter, mail, at the applicants'
expense, materials submitted by the applicants, to all
such shareholders of record. The Trustees shall not be
obligated to mail materials which they believe to be
misleading or in violation of applicable law.
11.3 RECORD DATES. For the purpose of determining the
shareholders of any class or series of shares of the Trust who
are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date
of any meeting of shareholders or more than 60 days before the
date of payment of any dividend or of any other distribution, as
the record date for determining the shareholders of such class or
series having the right to notice of and to vote at such meeting
and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on
such record date shall have such right notwithstanding any
transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or
part of such period.
11.4 PROXIES. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably designed
to verify that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by or on
behalf of such shareholder.
ARTICLE 12
PREFERENCES, RIGHTS AND PRIVILEGES OF THE
TRUST'S CLASSES OF SHARES
12.1 GENERAL. Each class of shares of the Trust or of a
particular series of the Trust, as the case may be, will
represent interests in the same portfolio of investments of the
Trust (or that series) and be identical in all respects, except
as set forth below: (a) each class of shares shall be charged
with the expense of any Distribution Plan adopted by the Trust
pursuant to Rule 12b-1 under the Investment Company Act of 1940
with respect to such class of shares, (b) each class of shares
will be charged with any incremental shareholder servicing
expense attributable solely to such class, as determined by the
Trustees, (c) each class of shares shall be charged with any
other expenses properly allocated to such class, as determined by
the Trustees and approved by the Securities and Exchange
Commission, (d) each class of shares shall vote as a separate
class on matters which pertain to any Rule 12b-1 Distribution
Plan pertaining to such class of shares, (e) each class of shares
will have only such exchange privileges as may from time to time
be described in the Trust's prospectus with respect to such
class, (f) each class of shares shall bear such designation as
may be approved from time to time by the Trustees and (g)
reinvestments of distributions from the Trust paid with respect
to the shares of a particular class will be paid in additional
shares of such class.
12.2. CONVERSION OF CLASS B SHARES. Except as hereinafter
provided with respect to shares acquired by exchange or
reinvestment of distributions, Class B shares of the Trust will
automatically convert into Class A shares of the Trust at the end
of the month eight years after the month of purchase, or at such
earlier time as the Trustees may in their sole discretion
determine from time to time as to all Class B shares purchased on
or before such date as the Trustees may specify. Class B shares
acquired by exchange from Class B shares of another Putnam Fund
will convert into Class A shares based on the date of the initial
purchase of the Class B shares of such other Fund. Class B
shares acquired through reinvestment of distributions will
convert into Class A shares based on the date of the initial
purchase of Class B shares to which such reinvestment shares
relate. For this purpose, Class B shares acquired through
reinvestment of distributions will be attributed to particular
purchases of Class B shares in accordance with such procedures,
which may include without limitation methods of proration or
approximation, as the Trustees may in their sole discretion
determine from time to time.
ARTICLE 13
AMENDMENTS TO THE BYLAWS
13.1 GENERAL. These Bylaws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at
any meeting of the Trustees, or by one or more writings signed by
such a majority.
NF-04G
(PORTIONS OF AGREEMENT AND DECLARATION OF TRUST
OF PUTNAM CALIFORNIA TAX EXEMPT INCOME FUND
RELATING TO SHAREHOLDERS' RIGHTS)
ARTICLE I
NAME AND DEFINITIONS
(c) "Shares" means the equal proportionate transferable
units of interest into which the beneficial interest in the
Trust shall be divided from time to time or, if more than
one series or class of Shares is authorized by the Trustees,
the equal proportionate transferable units into which each
series or class of Shares shall be divided from time to
time;
(d) "Shareholder" means a record owner of Shares;
ARTICLE III
SHARES
DIVISION OF BENEFICIAL INTEREST
Section 1. The Shares of the Trust shall be issued in one
or more series as the Trustees may, without shareholder approval,
authorize. Each series shall be preferred over all other series
in respect of the assets allocated to that series. The
beneficial interest in each series shall at all times be divided
into Shares, without par value, each of which shall, except as
provided in the following sentence, represent an equal
proportionate interest in the series with each other Share of the
same series, none having priority or preference over another. The
Trustees may, without shareholder approval, divide the Shares of
any series into two or more classes, Shares of each such class
having such preferences and special or relative rights and
privileges (including conversion rights, if any) as the Trustees
may determine and as shall be set forth in the Bylaws. The
number of Shares authorized shall be unlimited. The Trustees may
from time to time divide or combine the Shares of any series or
class into a greater or lesser number without thereby changing
the proportionate beneficial interest in the series or class.
OWNERSHIP OF SHARES
Section 2. The ownership of Shares shall be recorded on the
books of the Trust or a transfer or similar agent. No
certificates certifying the ownership of Shares shall be issued
except as the Trustees may otherwise determine from time to time.
The Trustees may make such rules as they consider appropriate for
the issuance of Share Certificates, the transfer of Shares and
similar matters. The record books of the Trust as kept by the
Trust or any transfer or similar agent, as the case may be, shall
be conclusive as to who are the Shareholders of each series and
class and as to the number of Shares of each series and class
held from time to time by each Shareholder.
NO PREEMPTIVE RIGHTS
Section 4. Shareholders shall have no preemptive or other
right to subscribe to any additional Shares or other securities
issued by the Trust.
STATUS OF SHARES AND LIMITATION OF PERSONAL LIABILITY
Section 5. Shares shall be deemed to be personal property
giving only the rights provided in this Declaration of Trust or
the Bylaws. Every Shareholder by virtue of having become a
Shareholder shall be held to have expressly assented and agreed
to the terms of this Declaration of Trust and the Bylaws and to
have become a party hereto. The death of a Shareholder during
the continuance of the Trust shall not operate to terminate the
same nor entitle the representative of any deceased Shareholder
to an accounting or to take any action in court or elsewhere
against the Trust or the Trustees, but only to the rights of said
decedent under this Trust. Ownership of Shares shall not entitle
the Shareholder to any title in or to the whole or any part of
the Trust property or right to call for a partition or division
of the same or for an accounting, nor shall the ownership of
Shares constitute the Shareholders partners. Neither the Trust
nor the Trustees, nor any officer, employee or agent of the Trust
shall have any power to bind personally any Shareholder, nor
except as specifically provided herein to call upon any
shareholder for the payment of any sum of money or assessment
whatsoever other than such as the Shareholder may at any time
personally agree to pay.
ARTICLE V
SHAREHOLDERS' VOTING POWERS AND MEETINGS
VOTING POWERS
Section 1. Subject to the voting powers of one or more
classes of shares as set forth elsewhere in this Declaration of
Trust or in the Bylaws, the Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Article IV,
Section 1, (ii) for the removal of Trustees as provided in
Article IV, Section 1, (iii) with respect to any Manager as
provided in Article IV, Section 6, (iv) with respect to any
termination of this Trust to the extent and as provided in
Article IX, Section 4, (v) with respect to any amendment of this
Declaration of Trust to the extent and as provided in Article IX,
Section 7, (vi) to the same extent as the stockholders of a
Massachusetts business corporation as to whether or not a court
action, proceeding or claim should or should not be brought or
maintained derivatively or as a class action on behalf of the
Trust or the Shareholders, and (vii) with respect to such
additional matters relating to the Trust as may be required by
this Declaration of Trust, the Bylaws or any registration of the
Trust with the Securities and Exchange Commission (or any
successor agency) or any state, or as the Trustees may consider
necessary or desirable. Each whole Share shall be entitled to
one vote as to any matter on which it is entitled to vote and
each fractional Share shall be entitled to a proportionate
fractional vote. Notwithstanding any other provision of this
Declaration of Trust, on any matter submitted to a vote of
Shareholders, all Shares of the Trust then entitled to vote shall
be voted in the aggregate as a single class without regard to
series or classes of shares, except (1) when required by the 1940
Act or when the Trustees shall have determined that the matter
affects one or more series or classes of Shares materially
differently, Shares shall be voted by individual series or class;
and (2) when the Trustees have determined that the matter affects
only the interests of one or more series or classes, then only
Shareholders of such series or classes shall be entitled to vote
thereon. There shall be no cumulative voting in the election of
Trustees. Shares may be voted in person or by proxy. A proxy
with respect to Shares held in the name of two or more persons
shall be valid if executed by any one of them unless at or prior
to exercise of the proxy the Trust receives a specific written
notice to the contrary from any one of them. A proxy purporting
to be executed by or on behalf of a Shareholder shall be deemed
valid unless challenged at or prior to its exercise and the
burden of proving invalidity shall rest on the challenger. Until
Shares of any series or class are issued, the Trustees may
exercise all rights of Shareholders and may take any action
required by law, this Declaration of Trust or the Bylaws to be
taken by Shareholders as to such series or class.
VOTING POWER AND MEETINGS
Section 2. Meetings of Shareholders of any or all series or
classes may be called by the Trustees from time to time for the
purpose of taking action upon any matter requiring the vote or
authority of the Shareholders of such series or classes as herein
provided or upon any other matter deemed by the Trustees to be
necessary or desirable. Written notice of any meeting of
Shareholders shall be given or caused to be given by the Trustees
by mailing such notice at least seven days before such meeting,
postage prepaid, stating the time, place and purpose of the
meeting, to each Shareholder at the Shareholder's address as it
appears on the records of the Trust. If the Trustees shall fail
to call or give notice of any meeting of Shareholders for a
period of 30 days after written application by Shareholders
holding at least 10% of the then outstanding Shares of all series
and classes is entitled to vote at such meeting requesting that a
meeting be called for a purpose requiring action by the
Shareholders as provided herein or in the Bylaws, then
Shareholders holding at least 10% of the then outstanding Shares
of all series and classes entitled to vote at such meeting may
call and give notice of such meeting, and thereupon the meeting
shall be held in the manner provided for herein in case of call
thereof by the Trustees.
<PAGE>
QUORUM AND REQUIRED VOTE
Section 3. Thirty percent of Shares entitled to vote on a
particular matter shall be a quorum for the transaction of
business on that matter at a Shareholders' meeting, except that
where any provision of law or of this Declaration of Trust
permits or requires that holders of any series or class shall
vote as an individual series or class, then thirty percent of the
aggregate number of Shares of that series or class entitled to
vote shall be necessary to constitute a quorum for the
transaction of business by that series or class. Any lesser
number shall be sufficient for adjournments. Any adjourned
session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of
further notice. Except when a larger vote is required by any
provision of this Declaration of Trust or the Bylaws, or by the
1940 Act, a majority of the Shares voted shall decide any
questions and a plurality shall elect a Trustee, provided that
where any provision of law or of this Declaration of Trust
permits or requires that the holders of any series or classes
shall vote as an individual series or class, then a majority of
the Shares of that series or class voted on the matter shall
decide that matter insofar as that series or class is concerned.
ACTION BY WRITTEN CONSENT
Section 4. Any action taken by Shareholders may be taken
without a meeting if a majority of Shareholders entitled to vote
on the matter (or such larger proportion thereof as shall be
required by any express provision of this Declaration of Trust or
the Bylaws) consent to the action in writing and such written
consents are filed with the records of the meetings of
Shareholders. Such consent shall be treated for all purposes as
a vote taken at a meeting of Shareholders.
ADDITIONAL PROVISIONS
Section 5. The Bylaws may include further provisions not
inconsistent with this Declaration of Trust regarding
Shareholders' voting powers, the conduct of meetings and related
matters.
ARTICLE VI
DISTRIBUTIONS, REDEMPTIONS AND REPURCHASES
DISTRIBUTIONS
Section 1. The Trustees may each year, or more frequently
if they so determine, distribute to the Shareholders of each
series out of the assets of such series such amounts as the
Trustees may determine. Such amounts shall be distributed pro
rata to Shareholders of each series in proportion to the number
of Shares of each series held by each of them, except to the
extent otherwise required or permitted by the preferences and
special or relative rights and privileges of any classes of
Shares of that series, and any distribution to the Shareholders
of a particular class of Shares shall be made to such
Shareholders pro rata in proportion to the number of Shares of
such class held by each of them. Such distributions shall be
made in cash or Shares or a combination thereof as determined by
the Trustees. Any such distribution paid in Shares will be paid
at the net asset value thereof as determined in accordance with
the Bylaws.
REDEMPTIONS AND REPURCHASES
Section 2. The Trust shall purchase such Shares as are
offered by any Shareholder for redemption, upon the presentation
of any certificate for the Shares to be purchased, a proper
instrument of transfer and a request directed to the Trust or a
person designated by the Trust that the Trust purchase such
Shares, or in accordance with such other procedures for
redemption as the Trustees may from time to time authorize; and
the Trust will pay therefor the net asset value thereof, as next
determined in accordance with the Bylaws. Payment for said
Shares shall be made by the Trust to the Shareholder within seven
days after the date on which the request is made. The obligation
set forth in this Section 2 is subject to the provision that in
the event that any time the New York Stock Exchange is closed for
other than customary weekends or holidays, or, if permitted by
rules of the Securities and Exchange Commission, during periods
when trading on the Exchange is restricted or during any
emergency which makes it impractical for the Trust to dispose of
its investments or to determine fairly the value of its net
assets, or during any other period permitted by order of the
Securities and Exchange Commission for the protection of
investors, such obligation may be suspended or postponed by the
Trustees. The Trust may also purchase or repurchase Shares at a
price not exceeding the net asset value of such Shares in effect
when the purchase or repurchase or any contract to purchase or
repurchase is made.
REDEMPTIONS AT THE OPTION OF THE TRUST
Section 3. The Trust shall have the right at its option and
at any time to redeem Shares of any Shareholder at the net asset
value thereof as determined in accordance with the Bylaws: (i) if
at such time such Shareholder owns fewer Shares than, or Shares
having an aggregate net asset value of less than, an amount
determined from time to time by the Trustees; or (ii) to the
extent that such Shareholder owns Shares of a particular series
or class of Shares equal to or in excess of a percentage of the
outstanding Shares of that series or class determined from time
to time by the Trustees; or (iii) to the extent that such
Shareholder owns Shares of the Trust representing a percentage
equal to or in excess of such percentage of the aggregate number
of outstanding Shares of the Trust or the aggregate net asset
value of the Trust determined from time to time by the Trustees.
ARTICLE VIII
INDEMNIFICATION
SHAREHOLDERS
Section 4. In case any Shareholder or former Shareholder
shall be held to be personally liable solely by reason of his or
her being or having been a Shareholder and not because of his or
her acts or omissions or for some other reason, the Shareholder
or former Shareholder (or his or her heirs, executors,
administrators or other legal representatives or in the case of a
corporation or other entity, its corporate or other general
successor) shall be entitled to be held harmless from and
indemnified against all loss and expense arising from such
liability, but only out of the assets of the particular series of
Shares of which he or she is or was a Shareholder.
ARTICLE IX
MISCELLANEOUS
TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE
Section 1. All persons extending credit to, contracting
with or having any claim against the Trust or a particular series
of Shares shall look only to the assets of the Trust or the
assets of that particular series of Shares for payment under such
credit, contract or claim; and neither the Shareholders nor the
Trustees, nor any of the Trust's officers, employees or agents,
whether past, present or future, shall be personally liable
therefor. Nothing in this Declaration of Trust shall protect any
Trustee against any liability to which such Trustee would
otherwise be subject by reason of wilful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in
the conduct of the office of Trustee.
Every note, bond, contract, instrument, certificate or
undertaking made or issued by the Trustees or by any officer or
officers shall give notice that this Declaration of Trust is on
file with the Secretary of State of The Commonwealth of
Massachusetts and shall recite that the same was executed or made
by or on behalf of the Trust or by them as Trustee or Trustees or
as officer or officers and not individually and that the
obligations of such instrument are not binding upon any of them
or the Shareholders individually but are binding only upon the
assets and property of the Trust, and may contain such further
recital as he or she or they may deem appropriate, but the
omission thereof shall not operate to bind any Trustee or
Trustees or officer or officers or Shareholder or Shareholders
individually.
(PORTIONS OF BYLAWS OF PUTNAM CALIFORNIA TAX EXEMPT INCOME
FUND
AND PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
RELATING TO SHAREHOLDER RIGHTS)
ARTICLE 9
ISSUANCE OF SHARES AND SHARE CERTIFICATES
9.1 SALE OF SHARES. Except as otherwise determined by the
Trustees, the Trust will issue and sell for cash or securities
from time to time, full and fractional shares of its shares of
beneficial interest, such shares to be issued and sold at a price
of not less than the par value per share, if any, and not less
than the net asset value per share as from time to time
determined in accordance with the Declaration of Trust and these
Bylaws and, in the case of fractional shares, at a proportionate
reduction in such price. In the case of shares sold for
securities, such securities shall be valued in accordance with
the provisions for determining the value of the assets of the
Trust as stated in the Declaration of Trust and these Bylaws.
The officers of the Trust are severally authorized to take all
such actions as may be necessary or desirable to carry out this
Section 9.1.
9.2 SHARE CERTIFICATES. In lieu of issuing certificates
for shares, the Trustees or the transfer agent may either issue
receipts therefor or may keep accounts upon the books of the
Trust for the record holders of such shares, who shall in either
case be deemed, for all purposes hereunder, to be the holders of
certificates for such shares as if they had accepted such
certificates and shall be held to have expressly assented and
agreed to the terms hereof.
The Trustees may at any time authorize the issuance of share
certificates. In that event, each shareholder shall be entitled
to a certificate stating the number of shares of each class owned
by him, in such form as shall be prescribed from time to time by
the Trustees. Such certificate shall be signed by the President
or a Vice President and by the Treasurer or an Assistant
Treasurer. Such signatures may be facsimile if the certificate
is signed by a transfer agent or by a registrar. In case any
officer who has signed or whose facsimile signature has been
placed on such certificate shall cease to be such officer before
such certificate is issued, it may be issued by the Trust with
the same effect as if he were such officer at the time of its
issue.
9.3 LOSS OF CERTIFICATES. The transfer agent of the Trust,
with the approval of any two officers of the Trust, is authorized
to issue and countersign replacement certificates for the shares
of the Trust which have been lost, stolen or destroyed upon (i)
receipt of an affidavit or affidavits of loss or non-receipt and
of an indemnity agreement executed by the registered holder or
his legal representative and supported by an open penalty surety
bond, said agreement and said bond in all cases to be in form and
content satisfactory to and approved by the President or the
Treasurer, or (ii) receipt of such other documents as may be
approved by the Trustees.
9.4 ISSUANCE OF NEW CERTIFICATE TO PLEDGEE. A pledgee of
shares transferred as collateral security shall be entitled to a
new certificate if the instrument of transfer substantially
describes the debt or duty that is intended to be secured
thereby. Such new certificate shall express on its face that it
is held as collateral security, and the name of the pledgor shall
be stated thereon, who alone shall be liable as a shareholder and
entitled to vote thereon.
9.5 DISCONTINUANCE OF ISSUANCE OF CERTIFICATES. The
Trustees may at any time discontinue the issuance of share
certificates and may, by written notice to each shareholder,
require the surrender of share certificates to the Trust for
cancellation. Such surrender and cancellation shall not affect
the ownership of shares in the Trust.
ARTICLE 10
PROVISIONS RELATING TO THE CONDUCT OF THE TRUST'S
BUSINESS
10.4 REPORTS TO SHAREHOLDERS. The Trust shall send to each
shareholder of record at least semi-annually a statement of the
condition of the Trust and of the results of its operations,
containing all information required by applicable laws or
regulations.
ARTICLE 11
SHAREHOLDERS
11.1 MEETINGS. A meeting of the shareholders shall be
called by the Clerk whenever ordered by the Trustees, the
Chairman of the Trustees or requested in writing by the holder or
holders of at least one-tenth of the outstanding shares entitled
to vote at such meeting. If the Clerk, when so ordered or
requested, refuses or neglects for more than two days to call
such meeting, the Trustees, Chairman of the Trustees or the
shareholders so requesting may, in the name of the Clerk, call
the meeting by giving notice thereof in the manner required when
notice is given by the Clerk.
11.2 ACCESS TO SHAREHOLDER LIST. Shareholders of record
may apply to the Trustees for assistance in communicating with
other shareholders for the purpose of calling a meeting in order
to vote upon the question of removal of a Trustee. When ten or
more shareholders of record who have been such for at least six
months preceding the date of application and who hold in the
aggregate shares having a net asset value of at least $25,000 so
apply, the Trustees shall within five business days either:
(i) afford to such applicants access to a list of
names and addresses of all shareholders as recorded on
the books of the Trust; or
(ii) inform such applicants of the approximate
number of shareholders of record and the approximate
cost of mailing material to them, and, within a
reasonable time thereafter, mail, at the applicants'
expense, materials submitted by the applicants, to all
such shareholders of record. The Trustees shall not be
obligated to mail materials which they believe to be
misleading or in violation of applicable law.
11.3 RECORD DATES. For the purpose of determining the
shareholders of any class or series of shares of the Trust who
are entitled to vote or act at any meeting or any adjournment
thereof, or who are entitled to receive payment of any dividend
or of any other distribution, the Trustees may from time to time
fix a time, which shall be not more than 90 days before the date
of any meeting of shareholders or more than 60 days before the
date of payment of any dividend or of any other distribution, as
the record date for determining the shareholders of such class or
series having the right to notice of and to vote at such meeting
and any adjournment thereof or the right to receive such dividend
or distribution, and in such case only shareholders of record on
such record date shall have such right notwithstanding any
transfer of shares on the books of the Trust after the record
date; or without fixing such record date the Trustees may for any
such purposes close the register or transfer books for all or
part of such period.
11.4 PROXIES. The placing of a shareholder's name on a
proxy pursuant to telephone or electronically transmitted
instructions obtained pursuant to procedures reasonably designed
to verify that such instructions have been authorized by such
shareholder shall constitute execution of such proxy by or on
behalf of such shareholder.
ARTICLE 13
AMENDMENTS TO THE BYLAWS
13.1 GENERAL. These Bylaws may be amended or repealed, in
whole or in part, by a majority of the Trustees then in office at
any meeting of the Trustees, or by one or more writings signed by
such a majority.
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST
MANAGEMENT CONTRACT
Management Contract dated as of January 20, 1997 between
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST, a Massachusetts
business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT,
INC., a Massachusetts corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an investment program for the Fund, will determine what
investments shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Fund and its stated investment objectives, policies and
restrictions, and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies
which the Trustees may from time to time determine and shall
exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the Fund's
net asset value, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for the
Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Manager, bearing in
mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the
Trustees of the Fund may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for (i) the
compensation of the Vice Chairman of the Fund and of persons
assisting him in this office, as determined from time to time by
the Trustees of the Fund, (ii) the compensation in whole or in
part of such other officers of the Fund and persons assisting
them as may be determined from time to time by the Trustees of
the Fund, and (iii) the cost of suitable office space, utilities,
support services and equipment of the Vice Chairman and persons
assisting him and, as determined from time to time by the
Trustees of the Fund, all or a part of such cost attributable to
the other officers and persons assisting them whose compensation
is paid in whole or in part by the Fund. The Fund will pay the
fees, if any, of the Trustees of the Fund.
(e) The Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Manager pursuant
to this Section 1 other than as provided in Section 3.
<PAGE>
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Fund may be a shareholder,
director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common
control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have
an interest in the Fund. It is also understood that the Manager
and any person controlled by or under common control with the
Manager have and may have advisory, management, service or other
contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and paid quarterly
at the following annual rates:
(a) 0.60% of the first $500 million of the average net
asset value of the Fund;
(b) 0.50% of the next $500 million of such average net
asset value;
(c) 0.45% of the next $500 million of such average net
asset value;
(d) 0.40% of the next $5 billion of such average net asset
value;
(e) 0.375% of the next $5 billion of such average net asset
value;
(f) 0.355% of the next $5 billion of such average net asset
value;
(g) 0.34% of the next $5 billion of such average net asset
value; and
(h) 0.33% of any excess thereafter.
<PAGE>
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value
during such quarter at the close of business on each business day
during such quarter while this Contract is in effect. Such fee
shall be payable for each fiscal quarter within 30 days after the
close of such quarter.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund for any fiscal year
should exceed the expense limitation on investment company
expenses imposed by any statute or regulatory authority of any
jurisdiction in which shares of the Fund are qualified for offer
or sale, the compensation due the Manager for such fiscal year
shall be reduced by the amount of excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to
the Fund, voluntarily declare to be effective subject to such
terms and conditions as the Manager may prescribe in such notice,
the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund to the
extent required by the terms and conditions of such expense
limitation.
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment; and this
Contract shall not be amended unless such amendment be approved
at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Fund who are not interested
persons of the Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' nor less than thirty days'
written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
(b) If (i) the Trustees of the Fund or the shareholders by
the affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees of the Fund who are
not interested persons of the Fund or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the
continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second
anniversary of its execution, or upon the expiration of one year
from the effective date of the last such continuance, whichever
is later.
Action by the Fund under (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares of the Fund" means the
affirmative vote, at a duly called and held meeting of
shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50%
of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment Company
Act of 1940 and the Rules and Regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities
and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules
and Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
<PAGE>
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
8. TERMINATION OF PRIOR CONTRACT.
This Contract shall become effective as of its date and
supersedes the Management Contract dated July 11, 1991.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Fund.
IN WITNESS WHEREOF, PUTNAM CALIFORNIA TAX EXEMPT INCOME
TRUST and PUTNAM INVESTMENT MANAGEMENT, INC. have each caused
this instrument to be signed in duplicate in its behalf by its
President or a Vice President thereunto duly authorized, all as
of the day and year first above written.
PUTNAM CALIFORNIA TAX EXEMPT INCOME TRUST
/S/ Charles E. Porter
By: --------------------------------
Charles E. Porter
Executive Vice President
PUTNAM INVESTMENT MANAGEMENT, INC.
/S/ Gordon H. Silver
By: --------------------------------
Gordon H. Silver
Senior Managing Director
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
MANAGEMENT CONTRACT
Management Contract dated as of January 20, 1997 between
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND, a Massachusetts
business trust (the "Fund"), and PUTNAM INVESTMENT MANAGEMENT,
INC., a Massachusetts corporation (the "Manager").
WITNESSETH:
That in consideration of the mutual covenants herein
contained, it is agreed as follows:
1. SERVICES TO BE RENDERED BY MANAGER TO FUND.
(a) The Manager, at its expense, will furnish continuously
an investment program for the Fund, will determine what
investments shall be purchased, held, sold or exchanged by the
Fund and what portion, if any, of the assets of the Fund shall be
held uninvested and shall, on behalf of the Fund, make changes in
the Fund's investments. Subject always to the control of the
Trustees of the Fund and except for the functions carried out by
the officers and personnel referred to in Section 1(d), the
Manager will also manage, supervise and conduct the other affairs
and business of the Fund and matters incidental thereto. In the
performance of its duties, the Manager will comply with the
provisions of the Agreement and Declaration of Trust and By-Laws
of the Fund and its stated investment objectives, policies and
restrictions, and will use its best efforts to safeguard and
promote the welfare of the Fund and to comply with other policies
which the Trustees may from time to time determine and shall
exercise the same care and diligence expected of the Trustees.
(b) The Manager, at its expense, except as such expense is
paid by the Fund as provided in Section 1(d), will furnish (1)
all necessary investment and management facilities, including
salaries of personnel, required for it to execute its duties
faithfully; (2) suitable office space for the Fund; and (3)
administrative facilities, including bookkeeping, clerical
personnel and equipment necessary for the efficient conduct of
the affairs of the Fund, including determination of the Fund's
net asset value, but excluding shareholder accounting services.
Except as otherwise provided in Section 1(d), the Manager will
pay the compensation, if any, of the officers of the Fund.
(c) The Manager, at its expense, shall place all orders for
the purchase and sale of portfolio investments for the Fund's
account with brokers or dealers selected by the Manager. In the
selection of such brokers or dealers and the placing of such
orders, the Manager shall use its best efforts to obtain for the
Fund the most favorable price and execution available, except to
the extent it may be permitted to pay higher brokerage
commissions for brokerage and research services as described
below. In using its best efforts to obtain for the Fund the most
favorable price and execution available, the Manager, bearing in
mind the Fund's best interests at all times, shall consider all
factors it deems relevant, including by way of illustration,
price, the size of the transaction, the nature of the market for
the security, the amount of the commission, the timing of the
transaction taking into account market prices and trends, the
reputation, experience and financial stability of the broker or
dealer involved and the quality of service rendered by the broker
or dealer in other transactions. Subject to such policies as the
Trustees of the Fund may determine, the Manager shall not be
deemed to have acted unlawfully or to have breached any duty
created by this Contract or otherwise solely by reason of its
having caused the Fund to pay a broker or dealer that provides
brokerage and research services to the Manager an amount of
commission for effecting a portfolio investment transaction in
excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Manager
determines in good faith that such amount of commission was
reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer, viewed in terms of
either that particular transaction or the Manager's overall
responsibilities with respect to the Fund and to other clients of
the Manager as to which the Manager exercises investment
discretion. The Manager agrees that in connection with purchases
or sales of portfolio investments for the Fund's account, neither
the Manager nor any officer, director, employee or agent of the
Manager shall act as a principal or receive any commission other
than as provided in Section 3.
(d) The Fund will pay or reimburse the Manager for the
compensation in whole or in part of such officers of the Fund and
persons assisting them as may be determined from time to time by
the Trustees of the Fund. The Fund will also pay or reimburse
the Manager for all or part of the cost of suitable office space,
utilities, support services and equipment attributable to such
officers and persons, as may be determined in each case by the
Trustees of the Fund. The Fund will pay the fees, if any, of the
Trustees of the Fund.
(e) The Manager shall pay all expenses incurred in
connection with the organization of the Fund and the initial
public offering and sale of its shares of beneficial interest,
provided that upon the issuance and sale of such shares to the
public pursuant to the offering, and only in such event, the Fund
shall become liable for, and to the extent requested reimburse
the Manager for, registration fees payable to the Securities and
Exchange Commission and for an additional amount not exceeding
$125,000 as its agreed share of such expenses.
(f) The Manager shall not be obligated to pay any expenses
of or for the Fund not expressly assumed by the Manager pursuant
to this Section 1 other than as provided in Section 3.
2. OTHER AGREEMENTS, ETC.
It is understood that any of the shareholders, Trustees,
officers and employees of the Fund may be a shareholder,
director, officer or employee of, or be otherwise interested in,
the Manager, and in any person controlled by or under common
control with the Manager, and that the Manager and any person
controlled by or under common control with the Manager may have
an interest in the Fund. It is also understood that the Manager
and any person controlled by or under common control with the
Manager have and may have advisory, management, service or other
contracts with other organizations and persons, and may have
other interests and business.
3. COMPENSATION TO BE PAID BY THE FUND TO THE MANAGER.
The Fund will pay to the Manager as compensation for the
Manager's services rendered, for the facilities furnished and for
the expenses borne by the Manager pursuant to paragraphs (a),
(b), (c) and (e) of Section 1, a fee, computed and paid quarterly
at the following annual rates of:
(a) 0.45% of the first $500 million of the average net
asset value of the Fund;
(b) 0.35% of the next $500 million of such average net
asset value;
(c) 0.30% of the next $500 million of such average net
asset value;
(d) 0.25% of the next $5 billion of such average net asset
value;
(e) 0.225% of the next $5 billion of such average net asset
value;
(f) 0.205% of the next $5 billion of such average net asset
value;
(g) 0.19% of the next $5 billion of such average net asset
value; and
(h) 0.18% of any excess thereafter.
Such average net asset value shall be determined by taking an
average of all of the determinations of such net asset value
during such quarter at the close of business on each business day
during such quarter while this Contract is in effect. Such fee
shall be payable for each fiscal quarter within 30 days after the
close of such quarter and shall commence accruing as of the date
of the initial issuance of shares of the Fund to the public.
The fees payable by the Fund to the Manager pursuant to this
Section 3 shall be reduced by any commissions, fees, brokerage or
similar payments received by the Manager or any affiliated person
of the Manager in connection with the purchase and sale of
portfolio investments of the Fund, less any direct expenses
approved by the Trustees incurred by the Manager or any
affiliated person of the Manager in connection with obtaining
such payments.
In the event that expenses of the Fund for any fiscal year
should exceed the expense limitation on investment company
expenses imposed by any statute or regulatory authority of any
jurisdiction in which shares of the Fund are qualified for offer
or sale, the compensation due the Manager for such fiscal year
shall be reduced by the amount of excess by a reduction or refund
thereof. In the event that the expenses of the Fund exceed any
expense limitation which the Manager may, by written notice to
the Fund, voluntarily declare to be effective subject to such
terms and conditions as the Manager may prescribe in such notice,
the compensation due the Manager shall be reduced, and, if
necessary, the Manager shall assume expenses of the Fund to the
extent required by the terms and conditions of such expense
limitation.
If the Manager shall serve for less than the whole of a
quarter, the foregoing compensation shall be prorated.
4. ASSIGNMENT TERMINATES THIS CONTRACT; AMENDMENTS OF THIS
CONTRACT.
This Contract shall automatically terminate, without the
payment of any penalty, in the event of its assignment; and this
Contract shall not be amended unless such amendment be approved
at a meeting by the affirmative vote of a majority of the
outstanding shares of the Fund, and by the vote, cast in person
at a meeting called for the purpose of voting on such approval,
of a majority of the Trustees of the Fund who are not interested
persons of the Fund or of the Manager.
5. EFFECTIVE PERIOD AND TERMINATION OF THIS CONTRACT.
This Contract shall become effective upon its execution, and
shall remain in full force and effect continuously thereafter
(unless terminated automatically as set forth in Section 4) until
terminated as follows:
(a) Either party hereto may at any time terminate this
Contract by not more than sixty days' nor less than thirty days'
written notice delivered or mailed by registered mail, postage
prepaid, to the other party, or
<PAGE>
(b) If (i) the Trustees of the Fund or the shareholders by
the affirmative vote of a majority of the outstanding shares of
the Fund, and (ii) a majority of the Trustees of the Fund who are
not interested persons of the Fund or of the Manager, by vote
cast in person at a meeting called for the purpose of voting on
such approval, do not specifically approve at least annually the
continuance of this Contract, then this Contract shall
automatically terminate at the close of business on the second
anniversary of its execution, or upon the expiration of one year
from the effective date of the last such continuance, whichever
is later.
Action by the Fund under (a) above may be taken either (i)
by vote of a majority of its Trustees, or (ii) by the affirmative
vote of a majority of the outstanding shares of the Fund.
Termination of this Contract pursuant to this Section 5 will
be without the payment of any penalty.
6. CERTAIN DEFINITIONS.
For the purposes of this Contract, the "affirmative vote of
a majority of the outstanding shares of the Fund" means the
affirmative vote, at a duly called and held meeting of
shareholders of the Fund, (a) of the holders of 67% or more of
the shares of the Fund present (in person or by proxy) and
entitled to vote at such meeting, if the holders of more than 50%
of the outstanding shares of the Fund entitled to vote at such
meeting are present in person or by proxy, or (b) of the holders
of more than 50% of the outstanding shares of the Fund entitled
to vote at such meeting, whichever is less.
For the purposes of this Contract, the terms "affiliated
person", "control", "interested person" and "assignment" shall
have their respective meanings defined in the Investment Company
Act of 1940 and the Rules and Regulations thereunder, subject,
however, to such exemptions as may be granted by the Securities
and Exchange Commission under said Act; the term "specifically
approve at least annually" shall be construed in a manner
consistent with the Investment Company Act of 1940 and the Rules
and Regulations thereunder; and the term "brokerage and research
services" shall have the meaning given in the Securities Exchange
Act of 1934 and the Rules and Regulations thereunder.
7. NON-LIABILITY OF MANAGER.
In the absence of willful misfeasance, bad faith or gross
negligence on the part of the Manager, or reckless disregard of
its obligations and duties hereunder, the Manager shall not be
subject to any liability to the Fund or to any shareholder of the
Fund, for any act or omission in the course of, or connected
with, rendering services hereunder.
<PAGE>
8. TERMINATION OF PRIOR CONTRACT.
This Contract should become effective as of its date, and
supersede the Management Contract dated July 9, 1992.
9. LIMITATION OF LIABILITY OF THE TRUSTEES AND SHAREHOLDERS.
A copy of the Agreement and Declaration of Trust of the Fund
is on file with the Secretary of State of The Commonwealth of
Massachusetts, and notice is hereby given that this instrument is
executed on behalf of the Trustees of the Fund as Trustees and
not individually and that the obligations of or arising out of
this instrument are not binding upon any of the Trustees or
shareholders individually but are binding only upon the assets
and property of the Fund.
IN WITNESS WHEREOF, PUTNAM CALIFORNIA TAX EXEMPT MONEY
MARKET FUND and PUTNAM INVESTMENT MANAGEMENT, INC. have each
caused this instrument to be signed in duplicate in its behalf by
its President or a Vice President thereunto duly authorized, all
as of the day and year first above written.
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
/S/ Charles E. Porter
By: ----------------------------------
Charles E. Porter
Executive Vice President
PUTNAM INVESTMENT MANAGEMENT, INC.
/S/ Gordon H. Silver
By: ----------------------------------
Gordon H. Silver
Senior Managing Director
RETIREMENT PLAN
FOR THE
TRUSTEES OF THE PUTNAM FUNDS
1. General; effective date. This Retirement Plan For The
Trustees Of The Putnam Funds is intended to provide, on the terms
and conditions specified below, cash retirement benefits to
certain individuals who have served as trustees ("Trustees") of
the Funds. Except as provided at Section 12 below, the Plan is
effective with respect to retirements occurring on or after
January 1, 1996.
2. Statement of Purpose. The purpose of this Plan is to
assist the Funds in attracting and retaining highly qualified
individuals to serve as Trustees of the Putnam Funds by providing
a form of deferred compensation which is competitive with
compensation practices of other major investment company
complexes as well as those of major business corporations and
which recognizes the benefits to the Funds and of having Trustees
with many years of experience with the affairs of the Funds.
3. Defined terms. When used in the Plan, the following
terms shall have the meanings set forth in this Section:
- "Administrator": such committee, consisting solely of
Trustees who are not "interested persons" of the Funds
within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940, as may be designated
from time to time by the Trustees to administer the
Plan.
- "Service": active service as a Trustee for one or more
of the Funds, including service prior to the Effective
Date. For purposes of this definition, service for an
entity that was a Fund at the time of such service
shall not be disregarded merely because the entity
later ceases to be a Fund. A Participant who dies
prior to retirement or who retires by reason of total
and permanent disability (as determined by the
Administrator) shall be deemed to have served at least
one hundred twenty (120) months of Service regardless
of his or her actual period of service.
- "Effective Date": the date specified in the second
sentence of Section 1.
- "Final Average Remuneration": the quotient obtained by
dividing (i) a Participant's total retainer and meeting
fees paid to the individual by the Funds for the last
thirty-six (36) months of the individual's service as a
Trustee, by (ii) three.
<PAGE>
- "Fund": any of the Putnam Funds, other than any such
Fund that has either (i) elected by vote of a majority
of its Trustees who are not "interested persons" of the
Fund (as defined above) not to participate in the Plan,
or (ii) terminated its participation in the Plan in
accordance with Section 14(c).
- "Participant": a Trustee with at least sixty (60)
months of Service.
- "Plan": the Retirement Plan For The Trustees Of The
Putnam Funds set forth herein, as the same may from
time to time be amended and in effect.
- "Retirement": ceasing to be an active Trustee
(regardless of whether service to one or more Funds
continues in a capacity other than as a Trustee) for
any reason other than (i) termination for cause as
determined by the Administrator, or (ii) death. The
terms "retire," "retires" and "retired" shall be
similarly construed.
- "Trustee": a trustee of any of the Funds.
4. Eligibility for retirement benefit. Each Participant
shall receive the normal retirement benefit specified in Section
5 below commencing in the calendar year next following the date
of retirement.
5. Form and amount of retirement benefit. The retirement
benefit payable to a Participant shall be an annual cash payment
equal to fifty percent (50%) of the Participant's Final Average
Remuneration. Such retirement benefit shall be paid on January
15 of each calendar year commencing with the year specified in
Section 4 above and continuing for the lesser of (i) a number of
years equal to the Participant's years of Service (rounded to the
nearest whole year) or (ii) the lifetime of the Participant.
6. Death benefit. The only death benefits payable under
the Plan shall be those described in this Section:
(a) If a Participant dies after retirement but before
ten (10) annual retirement benefit payments have been made,
the Participant's designated beneficiary shall be entitled
to receive an annual death benefit, in the same amount,
payable on January 15 of each year for the lesser of (i) the
remainder, if any, of the period specified in clause (i) of
Section 5 above or (ii) the remainder of such 10-year
period.
<PAGE>
(b) If a Participant dies before retirement, there
shall be paid to his or her designated beneficiary an annual
death benefit equal in amount to the annual retirement
benefit specified in Section 5 above. The death benefit
described in this paragraph (b) shall be paid on January 15
of each year commencing in the calendar year next following
the Participant's death for a number of years equal to the
lesser of (i) the period specified in clause (i) of Section
5 above or (ii) ten (10) years.
(c) The Administrator in its discretion may commute any
death benefit under this Section to an immediate lump sum
payment or may otherwise accelerate such payments, in each
case applying such reasonable discount rates as it deems
appropriate.
7. Designation of beneficiary. For purposes of Section 6
above, a Participant's designated beneficiary shall be such
person or persons, including a trust, as the Participant shall
have designated in writing on a form acceptable to and delivered
to the Administrator. In the absence of an effective beneficiary
designation governing the payment of any portion of the death
benefit described in Section 6 above, payment of such portion
shall be made to the Participant's estate, which shall be deemed
to be the Participant's designated beneficiary for all purposes
hereunder. If the person designated as the beneficiary to
receive any portion of the death benefit should die prior to
completion of payments to such beneficiary without the
Participant having made effective provision (by a designation
delivered to the Administrator as hereinabove prescribed) for a
successor or contingent beneficiary, payment of such portion or
the remainder thereof shall be made to the decedent beneficiary's
estate.
8. Agreement not to compete, etc. Eligibility for and
payment of benefits under the Plan is conditioned on agreement by
the Participant (i) to refrain from engaging in any business
activity in competition with the Funds, and (ii) not to disclose
any proprietary or otherwise confidential information pertaining
to the Funds. Any breach by an active or retired Trustee of the
agreement or conditions specified in the preceding sentence shall
be grounds for termination or reduction by the Administrator of
benefits under the Plan.
9. Nature of rights. Nothing in the Plan shall be
construed as requiring the Funds, or any of them, to set aside or
to segregate any assets of any kind to meet any of its
obligations hereunder or otherwise to fund the Plan. The rights
of persons claiming benefits under the Plan shall be no greater
than those of general unsecured creditors of a Fund, and no such
person shall have any right in or to any specific assets of any
Fund. All rights to benefits under the Plan shall be construed
and interpreted consistent with the continued qualification of
each Fund as a registered investment company under the Investment
Company Act of 1940, as amended.
10. Rights non-assignable. No Participant, beneficiary or
other person shall have any right to assign, pledge, encumber, or
otherwise alienate or transfer any right to receive benefits or
payments hereunder or any other interest under the Plan, in whole
or in part, and any attempt by any such person to effectuate such
an assignment, pledge, encumbrance, or other alienation or
transfer shall be null and void.
11. No rights to continuation of status. Nothing in the
Plan shall be construed as giving any individual a right to
continue to serve as a Trustee of the Funds, or any of them, or
to receive any particular level of remuneration for any such
service.
12. Application of Plan to certain persons. This Plan
supersedes in its entirety the voluntary retirement program
heretofore maintained by the Funds and any benefits previously
authorized under such program but not yet paid for periods
commencing on or after January 1, 1996. Reference is made to
those former Trustees listed on Schedule A hereto who retired
prior to the effective date of this Plan and who are currently
receiving benefits under such voluntary retirement program. In
addition, reference is made to a current Trustee listed on
Schedule B hereto who previously received certain retirement
benefits under such voluntary retirement program following such
Trustee's initial retirement from the Funds. Each person listed
on Schedules A or B shall be entitled to a retirement benefit in
the amount and payable in accordance with the terms of the Plan
except that, to the extent inconsistent with the generally
applicable provisions of the Plan, the specific provisions of
Schedule A and B shall control.
13. Payment of benefits. Benefits shall be paid by the
Funds, in cash, upon direction by the Administrator. The
Administrator shall allocate the obligation to make payments with
respect to a Trustee under the Plan for any calendar year among
the Funds in proportion to their respective cumulative
liabilities accrued with respect to such Trustee's participation
in the Plan for financial reporting purposes or on such other
reasonable basis as the Administrator may determine.
14. Amendment and termination.
(a) AMENDMENT. The Plan may be amended at any time by the
Administrator. No amendment shall reduce the benefits or future
benefits of any Trustee who has retired, and in the case of a
participant who is still an active Trustee no amendment shall
reduce the amount such Trustee would have been entitled to
receive if he or she had ceased to serve as a Trustee immediately
prior to such amendment.
(b) TERMINATION OF THE PLAN AS A WHOLE. The Plan as a
whole may be terminated by the Administrator. Upon termination
of the plan as a whole, benefits in pay status shall continue to
be paid. Any Participant not yet in pay status shall continue to
be entitled to a benefit equal to the benefit to which he or she
would have been entitled had retirement as a Trustee occurred
immediately prior to such Plan termination. Notwithstanding the
foregoing, in its discretion the Administrator may commute and
pay as a single lump sum payment any benefits remaining payable
upon termination of the Plan as a whole, and in determining such
lump sum amounts the Administrator may apply such reasonable
discount factors and mortality assumptions as it determines in
its discretion.
(c) TERMINATION BY INDIVIDUAL FUND. A Fund may terminate
its participation in the Plan at any time by vote of a majority
of its Trustees who are not "interested persons" of the Fund (as
defined under "Administrator" in Section 3 above), provided that
upon any such termination such Fund shall remain liable for its
allocable share of the benefits to which Participants would have
been entitled is the Plan as a whole had been terminated as of
the date of such individual termination, as determined by the
Administrator in its sole discretion.
As Adopted October 4, 1996
ROPES & GRAY
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
January 23, 1997
Putnam California Tax Exempt Income Fund (the "Fund")
One Post Office Square
Boston, Massachusetts 02109
Gentlemen:
You have informed us that you propose to offer and sell from
time to time 23,801,992 of your shares of beneficial interest
(the "Shares"), for cash or securities at the net asset value per
share, determined in accordance with your Bylaws, which Shares
are in addition to your shares of beneficial interest which you
have previously offered and sold or which you are currently
offering.
We have examined copies of (i) your Agreement and
Declaration of Trust as on file at the office of the Secretary of
State of The Commonwealth of Massachusetts, which provides for an
unlimited number of authorized shares of beneficial interest, and
(ii) your Bylaws, which provide for the issue and sale by the
Fund of such Shares.
We assume that appropriate action will be taken to register
or qualify the sale of the Shares under any applicable state and
federal laws regulating offerings and sales of securities.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a legally organized and validly existing
voluntary association with transferable shares of beneficial
interest under the laws of The Commonwealth of Massachusetts and
is authorized to issue an unlimited number of shares of
beneficial interest.
2. Upon the issue of any of the Shares referred to in the
first paragraph hereof for cash or securities at net asset value,
and the receipt of the appropriate consideration therefor as
provided in your Bylaws, such Shares so issued will be validly
issued, fully paid and nonassessable by the Fund.
<PAGE>
ROPES & GRAY
Putnam California Tax Exempt -2- January
23,
1997
Income Fund
The Fund is an entity of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or its
Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the Fund for all loss and
expense of any shareholder of the Fund held personally liable for
the obligations of the Fund solely by reason of his being or
having been a shareholder. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection
with the registration of the Shares for offering and sale
pursuant to the Securities Act of 1933, as amended, and the
provisions of Rule 24e-2 under the Investment Company Act of
1940, as amended. We consent to the filing of this opinion with
and as a part of Post-Effective Amendment No. 19 to your
Registration Statement No. 2-81011.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
ROPES & GRAY
One International Place
Boston, Massachusetts 02110-2624
(617) 951-7000
January 23, 1997
Putnam California Tax Exempt Money Market Fund (the "Fund")
One Post Office Square
Boston, Massachusetts 02109
Gentlemen:
You have informed us that you propose to offer and sell from
time to time 4,411,365 of your shares of beneficial interest (the
"Shares"), for cash or securities at the net asset value per
share, determined in accordance with your Bylaws, which Shares
are in addition to your shares of beneficial interest which you
have previously offered and sold or which you are currently
offering.
We have examined copies of (i) your Agreement and
Declaration of Trust as on file at the office of the Secretary of
State of The Commonwealth of Massachusetts, which provides for an
unlimited number of authorized shares of beneficial interest, and
(ii) your Bylaws, which provide for the issue and sale by the
Fund of such Shares.
We assume that appropriate action will be taken to register
or qualify the sale of the Shares under any applicable state and
federal laws regulating offerings and sales of securities.
Based upon the foregoing, we are of the opinion that:
1. The Fund is a legally organized and validly existing
voluntary association with transferable shares of beneficial
interest under the laws of The Commonwealth of Massachusetts and
is authorized to issue an unlimited number of shares of
beneficial interest.
2. Upon the issue of any of the Shares referred to in the
first paragraph hereof for cash or securities at net asset value,
and the receipt of the appropriate consideration therefor as
provided in your Bylaws, such Shares so issued will be validly
issued, fully paid and nonassessable by the Fund.
<PAGE>
ROPES & GRAY
Putnam California Tax Exempt -2- January
23,
1997
Money Market Fund
The Fund is an entity of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law,
shareholders could, under certain circumstances, be held
personally liable for the obligations of the Fund. However, the
Agreement and Declaration of Trust disclaims shareholder
liability for acts or obligations of the Fund and requires that
notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or its
Trustees. The Agreement and Declaration of Trust provides for
indemnification out of the property of the Fund for all loss and
expense of any shareholder of the Fund held personally liable for
the obligations of the Fund solely by reason of his being or
having been a shareholder. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is
limited to circumstances in which the Fund itself would be unable
to meet its obligations.
We understand that this opinion is to be used in connection
with the registration of the Shares for offering and sale
pursuant to the Securities Act of 1933, as amended, and the
provisions of Rule 24e-2 under the Investment Company Act of
1940, as amended. We consent to the filing of this opinion with
and as a part of Post-Effective Amendment No. 12 to your
Registration Statement No. 33-17211.
Very truly yours,
/s/ Ropes & Gray
Ropes & Gray
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam California Tax Exempt Income Fund --
Class A Shares
Fiscal period ending: September 30, 1996
Inception date (if less than 10 years of performance):
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T) n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1,000 $1,000 $1,000
ERV = Ending Redeemable Value $1,017 $1,355 $2,016
T = Average Annual
Total Return 1.71% 6.27% 7.26%*
*Life of fund, if less than 10 years
YIELD
Formula:
Interest + Dividends - Expenses
2 (-------------------------------------------------- +1)(6) -1
POP x Average shares
Interest and Dividends $15,414,929
Expenses $1,943,844
Reimbursement --
Average shares 372,587,087
NAV 8.46$
Sales Charge 4.75%
POP $8.88
Yield at POP 4.93%
<PAGE>
TAX-EXEMPT EQUIVALENT YIELD
Formula: 30 day yield
--------------- = TAX EQUIVALENT YIELD
1-(Highest Individual Tax Rate)
4.93% 4.93%
------ = ------ = 9.00%
1-45.22% .5478%
<PAGE>
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam California Tax Exempt Income Fund --
Class B Shares
Fiscal period ending: September 30, 1996
Inception date (if less than 10 years of performance):
January 4, 1993
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T) n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1,000 $ $1,000
ERV = Ending Redeemable Value $1,010 $ $1,199
T = Average Annual
Total Return 0.99% % 4.97%*
*Life of fund, if less than 10 years
YIELD
Formula:
Interest + Dividends - Expenses
2 (-------------------------------------------------- +1)(6) -1
POP x Average shares
Interest and Dividends $2,475,180
Expenses $592,829
Reimbursement --
Average shares 59,885,602
NAV $8.45
Maximum Contingent Deferred
Sales Charge 5.0%
Yield at NAV 4.51%
<PAGE>
TAX-EXEMPT EQUIVALENT YIELD
Formula: 30 day yield
--------------- = TAX EQUIVALENT YIELD
1-(Highest Individual Tax Rate)
4.51% 4.51%
------ = ------ = 8.23%
1-45.22% .5478%
<PAGE>
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam California Tax Exempt Income Fund --
Class M Shares
Fiscal period ending: September 30, 1996
Inception date (if less than 10 years of performance):
February 14, 1995
TOTAL RETURN
Formula -- Average Annual Total Return: ERV = P(1+T) n
n = Number of Time Periods 1 Year 5 Years 10 Years*
P = Initial Investment $1,000 $ $1,000
ERV = Ending Redeemable Value $1,030 $ $1,099
T = Average Annual
Total Return 3.03% % 5.91%*
*Life of fund, if less than 10 years
YIELD
Formula:
Interest + Dividends - Expenses
2 (-------------------------------------------------- +1)(6) -1
POP x Average shares
Interest and Dividends $43,042
Expenses $7,697
Reimbursement --
Average shares $1,041,063
NAV $8.45
Sales Charge 3.25%
POP $8.73
Yield at POP 4.71%
<PAGE>
TAX-EXEMPT EQUIVALENT YIELD
Formula: 30 day yield
--------------- = TAX EQUIVALENT YIELD
1-(Highest Individual Tax Rate)
4.71% 4.71%
------ = ------ = 8.60%
1-45.22% .5478%
MONEY MARKET FUNDS CALC. SHEET
SCHEDULES FOR COMPUTATION OF PERFORMANCE QUOTATIONS
Fund name: Putnam California Tax Exempt Money Market Fund
Fiscal periods ending: September 30, 1996
Inception date (if less than 10 years of performance):
October 26, 1997
7 DAY YIELD FORMULA - DIVIDENDS DECLARED FOR LAST 7 DAYS / 7 *365
TOTAL DIVIDENDS DECLARED
PER SHARE FOR LAST 7 DAYS:
7 DAY YIELD = 2.96%
CALCULATION OF 7 DAY EFFECTIVE YIELD
2.96% 52.142857
( 1 + --------------------) -1
(100 * 52.142587)
7 DAY EFFECTIVE YIELD = 3.0%
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000821545
<NAME> Putnam California Tax Exempt Money Market Fund
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Putnam California Tax Exempt Income Fund Class A AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3,439,073,596
<INVESTMENTS-AT-VALUE> 3,669,802,421
<RECEIVABLES> 56,399,301
<ASSETS-OTHER> 1,786,673
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,727,988,395
<PAYABLE-FOR-SECURITIES> 27,575,351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,073,282
<TOTAL-LIABILITIES> 58,648,633
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,462,672,960
<SHARES-COMMON-STOCK> 372,260,671
<SHARES-COMMON-PRIOR> 378,321,219
<ACCUMULATED-NII-CURRENT> 725,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (24,657,906)
<ACCUM-APPREC-OR-DEPREC> 230,599,606
<NET-ASSETS> 3,669,339,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 229,747,544
<OTHER-INCOME> 0
<EXPENSES-NET> 27,826,713
<NET-INVESTMENT-INCOME> 201,920,831
<REALIZED-GAINS-CURRENT> 31,619,858
<APPREC-INCREASE-CURRENT> 2,237,252
<NET-CHANGE-FROM-OPS> 235,777,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (176,564,618)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,772,082
<NUMBER-OF-SHARES-REDEEMED> (67,524,053)
<SHARES-REINVESTED> 10,044,390
<NET-CHANGE-IN-ASSETS> 80,587,665
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,100,798)
<OVERDIST-NET-GAINS-PRIOR> (54,391,483)
<GROSS-ADVISORY-FEES> 16,367,611
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,115,789
<AVERAGE-NET-ASSETS> 3,187,525,052
<PER-SHARE-NAV-BEGIN> 8.37
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> .09
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.46
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711402
<NAME> Putnam California Tax Exempt Income Fund
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Putnam California Tax Exempt Income Fund Class B AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3,439,073,596
<INVESTMENTS-AT-VALUE> 3,669,802,421
<RECEIVABLES> 56,399,301
<ASSETS-OTHER> 1,786,673
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,727,988,395
<PAYABLE-FOR-SECURITIES> 27,575,351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,073,282
<TOTAL-LIABILITIES> 58,648,633
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,462,672,960
<SHARES-COMMON-STOCK> 60,380,372
<SHARES-COMMON-PRIOR> 49,768,052
<ACCUMULATED-NII-CURRENT> 725,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (24,657,906)
<ACCUM-APPREC-OR-DEPREC> 230,599,606
<NET-ASSETS> 3,669,339,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 229,747,544
<OTHER-INCOME> 0
<EXPENSES-NET> 27,826,713
<NET-INVESTMENT-INCOME> 201,920,831
<REALIZED-GAINS-CURRENT> 31,619,858
<APPREC-INCREASE-CURRENT> 2,237,252
<NET-CHANGE-FROM-OPS> 235,777,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (22,679,219)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 16,422,370
<NUMBER-OF-SHARES-REDEEMED> (7,677,551)
<SHARES-REINVESTED> 1,417,502
<NET-CHANGE-IN-ASSETS> 80,587,665
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,100,798)
<OVERDIST-NET-GAINS-PRIOR> (54,391,483)
<GROSS-ADVISORY-FEES> 16,367,611
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,115,789
<AVERAGE-NET-ASSETS> 465,235,859
<PER-SHARE-NAV-BEGIN> 8.37
<PER-SHARE-NII> .42
<PER-SHARE-GAIN-APPREC> .07
<PER-SHARE-DIVIDEND> (.41)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.45
<EXPENSE-RATIO> 1.39
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711402
<NAME> Putnam California Tax Exempt Income Fund
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Putnam California Tax Exempt Income Fund Class M AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3,439,073,596
<INVESTMENTS-AT-VALUE> 3,669,802,421
<RECEIVABLES> 56,399,301
<ASSETS-OTHER> 1,786,673
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,727,988,395
<PAYABLE-FOR-SECURITIES> 27,575,351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,073,282
<TOTAL-LIABILITIES> 58,648,633
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,462,672,960
<SHARES-COMMON-STOCK> 1,082,149
<SHARES-COMMON-PRIOR> 491,213
<ACCUMULATED-NII-CURRENT> 725,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (24,657,906)
<ACCUM-APPREC-OR-DEPREC> 230,599,606
<NET-ASSETS> 3,669,339,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 229,747,544
<OTHER-INCOME> 0
<EXPENSES-NET> 27,826,713
<NET-INVESTMENT-INCOME> 201,920,831
<REALIZED-GAINS-CURRENT> 31,619,858
<APPREC-INCREASE-CURRENT> 2,237,252
<NET-CHANGE-FROM-OPS> 235,777,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (313,339)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,194,539
<NUMBER-OF-SHARES-REDEEMED> (627,733)
<SHARES-REINVESTED> 24,130
<NET-CHANGE-IN-ASSETS> 80,587,665
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,100,798)
<OVERDIST-NET-GAINS-PRIOR> (54,391,483)
<GROSS-ADVISORY-FEES> 16,367,611
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,115,789
<AVERAGE-NET-ASSETS> 6,068,435
<PER-SHARE-NAV-BEGIN> 8.36
<PER-SHARE-NII> .45
<PER-SHARE-GAIN-APPREC> .08
<PER-SHARE-DIVIDEND> (.44)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.45
<EXPENSE-RATIO> 1.04
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000711402
<NAME> Putnam California Tax Exempt Income Fund
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM Putnam California Tax Exempt Income Fund Class A AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<INVESTMENTS-AT-COST> 3,439,073,596
<INVESTMENTS-AT-VALUE> 3,669,802,421
<RECEIVABLES> 56,399,301
<ASSETS-OTHER> 1,786,673
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 3,727,988,395
<PAYABLE-FOR-SECURITIES> 27,575,351
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 31,073,282
<TOTAL-LIABILITIES> 58,648,633
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,462,672,960
<SHARES-COMMON-STOCK> 372,260,671
<SHARES-COMMON-PRIOR> 378,321,219
<ACCUMULATED-NII-CURRENT> 725,102
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (24,657,906)
<ACCUM-APPREC-OR-DEPREC> 230,599,606
<NET-ASSETS> 3,669,339,762
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 229,747,544
<OTHER-INCOME> 0
<EXPENSES-NET> 27,826,713
<NET-INVESTMENT-INCOME> 201,920,831
<REALIZED-GAINS-CURRENT> 31,619,858
<APPREC-INCREASE-CURRENT> 2,237,252
<NET-CHANGE-FROM-OPS> 235,777,941
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (176,564,618)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 50,772,082
<NUMBER-OF-SHARES-REDEEMED> (67,524,053)
<SHARES-REINVESTED> 10,044,390
<NET-CHANGE-IN-ASSETS> 80,587,665
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (1,100,798)
<OVERDIST-NET-GAINS-PRIOR> (54,391,483)
<GROSS-ADVISORY-FEES> 16,367,611
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30,115,789
<AVERAGE-NET-ASSETS> 3,187,525,052
<PER-SHARE-NAV-BEGIN> 8.37
<PER-SHARE-NII> .47
<PER-SHARE-GAIN-APPREC> .09
<PER-SHARE-DIVIDEND> (.47)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 8.46
<EXPENSE-RATIO> .74
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
