PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109
April 20 , 1994
TO THE SHAREHOLDERS:
Enclosed you will find several documents being furnished to
you in connection with a meeting of Putnam California Tax Exempt
Money Market Fund (the "California Fund") shareholders to be held
June 2, 1994 at 1:00 p.m. in Boston, Massachusetts. I hope this
material will receive your immediate attention and that, if you
cannot attend the meeting in person, you will vote your proxy
promptly.
The Trustees of the California Fund are recommending that
shareholders approve a reorganization of the California Fund in
which your shares of the California Fund would, in effect, be
exchanged at net asset value for shares of Putnam Tax Exempt
Money Market Fund (the "Money Market Fund"). Under the proposed
plan of reorganization, the California Fund will transfer all of
its assets to the Money Market Fund in return for shares of the
Money Market Fund and the assumption by the Money Market Fund of
all of the liabilities of the California Fund. After the
transfer, the shares of the Money Market Fund will be distributed
to holders of California Fund shares thereby liquidating the
California Fund. Both Funds are managed by Putnam Investment
Management, Inc. ("Putnam Management") and have the same
Trustees. You should note that a similar reorganization
involving Putnam New York Tax Exempt Money Market Fund (the "New
York Fund") and the Money Market Fund is concurrently being
submitted to the S hareholders of the New York Fund.
Each Fund seeks as high a level of current income exempt
from federal income tax (and, in the case of the California Fund,
exempt from California income tax) as Putnam Management believes
is consistent with maintenance of liquidity and stability of
principal. The principal difference between the Funds is that
the California Fund normally invests in tax-exempt securities of
California issuers while the Money Market Fund normally invests
in tax-exempt securities of issuers located in various states
(including the District of Columbia). Because of the
similarities between the Funds, the proposed reorganization will
not affect the general strategy or style in which the Portfolio
Manager will manage your investment. Shareholders should
recognize, however, that income distributions received by them on
shares of the Money Market Fund following the reorganization will
not be exempt from California income tax.
Putnam Management believes that combining your fund with the
Money Market Fund offers shareholders of the California Fund an
opportunity to pursue a similar investment objective with greater
economies of scale that, over the longer term, will result in
lower operating expense ratios. Further, Putnam Management is
concerned that if current trends in the Fund's net asset levels
continue, the California Fund might soon be burdened with an
uneconomically high expense ratio.
YOUR TRUSTEES BELIEVE THAT THE PROPOSED COMBINATION WITH THE
MONEY MARKET FUND IS IN THE BEST INTERESTS OF SHAREHOLDERS AND
RECOMMEND THAT YOU VOTE IN FAVOR OF IT.
The Notice of Meeting of Shareholders and the accompanying
Prospectus/Proxy Statement and form of proxy are enclosed.
Please read them carefully. If you are unable to attend the
meeting in person, we urge you to sign, date and return the proxy
card so that your shares may be voted in accordance with your
instructions.
SINCE THE MEETING IS LESS THAN EIGHT WEEKS AWAY, I URGE YOU
TO GIVE THE ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO THAT YOUR
FUND WILL NOT HAVE TO INCUR THE EXPENSE OF ADDITIONAL MAILINGS.
Sincerely Yours,
George Putnam
Chairman<PAGE>
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
NOTICE OF MEETING OF SHAREHOLDERS
To the Shareholders of Putnam California Tax Exempt Money Market
Fund
NOTICE IS HEREBY GIVEN that a Meeting of Shareholders (the
"Meeting") of Putnam California Tax Exempt Money Market Fund (the
"Fund" or the "California Fund") will be held at One Post Office
Square, 8th floor, Boston, Massachusetts, on June 2, 1994, at
1:00 p.m., Boston time, for the following purposes:
1. To consider and act upon an Agreement and Plan of
Reorganization providing for the transfer of all of the
assets of the Fund to Putnam Tax Exempt Money Market
Fund (the "Money Market Fund") in exchange for shares
of the Money Market Fund and the assumption by the
Money Market Fund of all of the liabilities of the
Fund, and the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund;
and
2. To transact such other business as may properly come
before the Meeting or any adjournment or adjournments
thereof.
The Trustees have fixed the close of business on March 11,
1994 as the record date for determination of shareholders
entitled to notice of, and to vote at, the Meeting.
Each shareholder who does not expect to attend in person is
requested to date, fill in, sign and return promptly the enclosed
form of proxy.
By the Trustees
GEORGE PUTNAM, CHAIRMAN
WILLIAM F. POUNDS, VICE CHAIRMAN
JAMESON ADKINS BAXTER ROBERT E. PATTERSON
HANS H. ESTIN DONALD S. PERKINS
JOHN A. HILL GEORGE PUTNAM, III
ELIZABETH T. KENNAN A.J.C. SMITH
LAWRENCE J. LASSER W. NICHOLAS THORNDIKE
<PAGE>
Boston, Massachusetts
April 20, 1994
Your prompt attention to the enclosed form of proxy will
help to avoid the expense of additional mailings.<PAGE>
PROSPECTUS/PROXY STATEMENT
April 6, 1994
Acquisition of the assets of
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
BY AND IN EXCHANGE FOR SHARES OF
PUTNAM TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
TABLE OF CONTENTS
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . 6
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . 7
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . 7
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION . . 8
INFORMATION ABOUT THE REORGANIZATION . . . . . . . . . . . 9
VOTING INFORMATION . . . . . . . . . . . . . . . . . . . 12
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . .EXHIBIT A
An investment in the Money Market Fund is neither
insured nor guaranteed by the U.S. Government. There can be
no assurance that the Fund will be able to maintain a stable
net asset value of $1.00 per share.
THIS PROSPECTUS/PROXY STATEMENT RELATES TO THE PROPOSED
TRANSFER OF ALL OF THE ASSETS OF PUTNAM CALIFORNIA TAX EXEMPT
MONEY MARKET FUND (THE "CALIFORNIA FUND") TO PUTNAM TAX
EXEMPT MONEY MARKET FUND (THE "MONEY MARKET FUND") IN
EXCHANGE FOR SHARES OF BENEFICIAL INTEREST OF THE MONEY
MARKET FUND (THE "MONEY MARKET FUND SHARES") AND THE
ASSUMPTION BY THE MONEY MARKET FUND OF ALL OF THE LIABILITIES
OF THE CALIFORNIA FUND. (THE MONEY MARKET FUND AND THE
CALIFORNIA FUND ARE COLLECTIVELY REFERRED TO HEREIN AS THE
"FUNDS", AND EACH IS REFERRED TO INDIVIDUALLY AS A "FUND").
FOLLOWING THE TRANSFER, THE MONEY MARKET FUND SHARES RECEIVED
BY THE CALIFORNIA FUND WILL BE DISTRIBUTED TO SHAREHOLDERS OF
THE CALIFORNIA FUND IN LIQUIDATION OF THE CALIFORNIA FUND.
AS A RESULT OF THE PROPOSED TRANSACTION, EACH SHAREHOLDER OF
THE CALIFORNIA FUND WILL RECEIVE, SUBJECT TO ANY APPLICABLE
STATE AND FEDERAL TAXES, A NUMBER OF FULL AND FRACTIONAL
MONEY MARKET FUND SHARES EQUAL IN VALUE AT THE DATE OF THE
EXCHANGE TO THE AGGREGATE VALUE OF THE SHARES OF THE
CALIFORNIA FUND HELD BY THE SHAREHOLDER.
CALIFORNIA FUND SHAREHOLDERS SHOULD NOTE THAT A
VIRTUALLY IDENTICAL REORGANIZATION INVOLVING THE ACQUISITION
OF THE ASSETS OF PUTNAM NEW YORK TAX EXEMPT MONEY FUND (THE
"NEW YORK FUND") BY THE MONEY MARKET FUND IS CONCURRENTLY
BEING SUBMITTED FOR THE APPROVAL OF THE SHAREHOLDERS OF THE
NEW YORK FUND. THE REORGANIZATION INVOLVING THE CALIFORNIA
FUND IS NOT IN ANY WAY CONTINGENT UPON THE COMPLETION OF THE
REORGANIZATION INVOLVING THE NEW YORK FUND.
This Prospectus/Proxy Statement explains concisely
what you should know before investing in the Money Market
Fund. Please read it and keep it for future reference. This
Prospectus/Proxy Statement is accompanied by the Prospectus,
dated February 1, 1994, of the Money Market Fund which
contains information about the Money Market Fund and is
incorporated into this Prospectus/Proxy Statement by
reference.
The following documents have been filed with the
Securities and Exchange Commission and are also incorporated
into this Prospectus/Proxy Statement by reference: (i) the
current Statement of Additional Information of the Money
Market Fund, dated February 1, 1994, (ii) the current
Prospectus and Statement of Additional Information of the
California Fund, each dated February 1, 1994, (iii) the
Report of Independent Accountants and Financial Statements
included in each Fund's Annual Report to Shareholders for the
1993 fiscal year, and (iv) a Statement of Additional
Information dated April 6, 1994 relating to the trans-
actions described in this Prospectus/Proxy Statement. For a
free copy of any or all of these Prospectuses/Statements of
Additional Information or Reports, call Putnam Investor
Services at 1-800-225-1581. Proxy materials,
information statements and other information filed by the
registrant can be inspected and copied at the Public
Reference Facilities maintained by the Securities and
Exchange Commission at 450 Fifth Street , N.W.,
Washington , D.C. 20549. Copies of such material
can also be obtained from the Public Reference Branch, Office
of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington , D.C. 20549 at
prescribed rates .
THE SECURITIES OFFERED BY THE ACCOMPANYING
PROSPECTUS/PROXY STATEMENT 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 SUCH PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE MONEY MARKET FUND 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.<PAGE>
SYNOPSIS
PROPOSED TRANSACTION. The Trustees of the California
Fund have approved an Agreement and Plan of Reorganization
providing for the transfer of all of the assets of the
California Fund to the Money Market Fund in exchange for the
assumption by the Money Market Fund of all of the liabilities
of the California Fund and for a number of Money Market Fund
Shares equal in value to the value of the net assets of the
California Fund transferred to the Money Market Fund.
Following the transfer, the California Fund will distribute
the Money Market Fund Shares received by it to its
shareholders of record, in complete liquidation of the
California Fund. A small amount of gain or loss may be
recognized for federal income tax purposes by the California
Fund and its shareholders as a result of the reorganization.
See "Information About the Reorganization -- Federal Income
Tax Consequences."
For the reasons set forth below under "Background and
Reasons for the Proposed Reorganization", the Funds'
Trustees, including the Trustees who are not interested
persons of either Fund (the "Independent Trustees"), have
concluded that (i) the interests of the Funds' existing
shareholders will not be diluted as a result of the
transactions contemplated by the reorganization and that
(ii) the reorganization would be in the best interests of the
Funds' shareholders . The Trustees recommend approval of the
reorganization. The Money Market Fund and the California
Fund have the same Trustees.
In addition, the Trustees of the Putnam New York Tax
Exempt Money Market Fund (the "New York Fund"), which are
also the Trustees of the Funds, have approved a similar
reorganization of the Money Market Fund and the New York Fund
(also sometimes referred to as a "Fund") which is
concurrently being submitted for the approval of the
shareholders of the New York Fund. As a result of this
additional proposed reorganization, this Prospectus/Proxy
Statement in certain sections describes the consequences of
combining the assets of all three Funds on a pro-forma basis.
However, the reorganization is not in any way contingent upon
the completion of the reorganization involving the New
York Fund.
CERTAIN TAX CONSEQUENCES RELATING TO THE REORGANIZATION.
The reorganization is expected to be a taxable transaction
for the California Fund and its shareholders. As a result,
California Fund shareholders acquiring Money Market Fund
shares in the transaction may realize a small amount of
taxable gain or loss which will be reflected in their
distribution for the month in which the reorganization
occurs. See "Information About the Reorganization -- Federal
Income Tax Consequences." In addition, following the
reorganization, California Fund shareholders will receive
distributions with respect to their Money Market Fund shares
which are not exempt from California State income tax.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The
California Fund and the Money Market Fund are both money
market funds with similar investment objectives and similar
investment policies except as described below. Each Fund
seeks as high a level of current income exempt from federal
income tax (and, in the case of the California Fund, from
California State income tax) as Putnam
Managementbelieves is consistent with maintenance of
liquidity and stability of principal. The California Fund
primarily invests in short-term, high quality, California Tax
Exempt Securities (as defined below). It is a fundamental
policy of the California Fund that at least 90% of the Fund's
income distributions normally will be exempt from both
federal and California personal income tax. The Money Market
Fund follows the fundamental policy of normally investing at
least 80% of its assets in short-term "Tax Exempt
Securities". Although the Funds have adopted slightly
different percentage policies with respect to investment in
securities generating income which is exempt from federal
income tax (and California State income tax in the case of
the California Fund), in practice each Fund is managed such
that all of its income distributions ordinarily will be
exempt from federal income tax (and California State income
tax in the case of the California Fund).
"Tax Exempt Securities" are debt obligations issued by a
state (including the District of Columbia), a territory or a
United States possession, or any of their political
subdivisions, the interest from which is, in the opinion of
bond counsel, exempt from federal tax. "California Tax
Exempt Securities" are the same such securities, the interest
of which is also, in the opinion of bond counsel, exempt from
California state personal income tax. Each Fund invests in
the following 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 meet the Fund's quality
standards.
The Funds invest only in high-quality Tax Exempt
Securities and 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
Funds maintain a dollar-weighted average maturity of 90 days
or less and do not invest in securities with remaining
maturities of more than 397 days. The Funds may invest in
variable or floating-rate 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. The Funds follow investment and
valuation policies designed to maintain a stable net asset
value of $1.00 per share. However, there can be no assurance
that the Fund will be able to maintain a stable net asset
value of $1.00 per share.
The principal difference between the Funds is
that the California Fund's income distributions
normally will be exempt from both federal income tax and
California personal income tax while the Money Market Fund's
distributions normally will be exempt only from federal
income tax. Because of the relatively small number of
issuers of California Tax Exempt Securities, the California
Fund is more likely to invest a higher percentage of its
assets in the securities of a single issuer than the Money
Market Fund, which invests in a broad range of Tax Exempt
Securities.
Despite these differences, the securities currently held
by the California Fund are substantially similar in kind to
those securities currently held by the Money Market Fund.
Because both Funds have comparable investment
objectives, similar investment policies and currently invest
in certain of the same issues, the reorganization will not
affect the general strategy or style in which the merged
Money Market Fund will be managed. Shareholders should
recognize, however, that income distributions received by
them on shares of the Money Market Fund following the
reorganization will not be exempt from California
income tax.
MANAGEMENT FEES AND OTHER EXPENSES. Both Funds pay a
quarterly fee to Putnam Management based on their respective
average net assets, as determined at the close of business
each day during the quarter, at an annual rate of .45% of the
first $500 million of average net assets, .35% of the next
$500 million, .30% of the next $500 million and .25% of any
amount over $1.5 billion. This would result in an effective
fee rate of .45% based on combined average net assets of the
Funds (including the New York Fund) of approximately
$177.4 million at January 31, 1994. Each of the Funds
currently pays management fees at the rate of .45%. Because
it does not project such combined asset levels to increase
beyond $500 million, Putnam Management has advised the
Trustees that it expects the effective management fee rate
paid by the Money Market Fund would not change following the
proposed reorganization.
The Funds have adopted identical distribution plans
pursuant to Rule 12b-1 under the Investment Company Act of
1940 to permit the Funds to compensate Putnam Mutual Funds
Corp. ("Putnam Mutual Funds") by paying it a fee at an annual
rate of up to 0.35% of the Fund's average net assets for
services provided and expenses incurred by it in promoting
the sale of shares of the Funds, reducing redemptions, or
maintaining or improving services provided to shareholders by
Putnam Mutual Funds or dealers. The Trustees had previously
authorized payments under each Fund's plan at an annual rate
of up to 0.10% of average net assets. However, the Trustees
have terminated payments under each Fund's distribution plan
effective January 1, 1994 . See "Distribution Plans" in the
enclosed Money Market Fund Prospectus for a detailed
description of the distribution plan.
Based on expenses for the month ended January 31, 1994,
Putnam Management estimates that the Money Market Fund's
total annual fund operating expenses are currently
0.94% of average net assets, reflecting the
termination of distribution plan payments effective January
1, 1994. Based on expenses for the month ended January 31,
1994, Putnam Management estimates that, the California Fund's
total fund operating expenses are currently 0.80% of average
net assets, reflecting the termination of distribution plan
effective January 1, 1994. Following the reorganization, the
total operating expenses of the Money Market Fund are
expected to be 0.83% of average net assets on a pro forma
basis, assuming the acquisition by the Money Market Fund of
the assets of both of the California and New York Funds and
excluding costs of the reorganization itself. Total
operating expenses of the Money Market Fund following the
reorganization are expected to be 0.86% on a pro forma basis,
assuming the acquisition of the assets of only the California
Fund.
OPERATING PROCEDURES. The procedures for purchasing
and redeeming shares of the California Fund and shares of the
Money Market Fund, and for exchanging such shares of each
Fund for shares of other Putnam funds, are identical and are
described in detail in the enclosed Money Market Fund
Prospectus.
<PAGE>
RISK FACTORS
An Investment in the Funds is neither insured nor
guaranteed by the U.S. Government. Although the Funds'
investment policies are designed to maintain a net asset
value of $1.00 per share, there can be no assurance that
these policies will be successful . However, because
the Money Market Fund and the California Fund (but for the
California Fund's pursuit of income exempt from California
income tax) share comparable investment objectives and very
similar investment policies, the risks of an investment in
the Money Market Fund are similar to the risks of an
investment in the California Fund, except as provided below.
The market value of the Funds' investments will be affected
by general changes in interest rates resulting in increases
or decreases in the value of the obligations held by the
Funds. Withdrawals by shareholders could require the
sale of portfolio investments at a time when such a sale
might not otherwise be desirable. Since the California
Fund's portfolio investments generally emphasize Tax Exempt
Securities of California issuers, the value of its shares may
be especially affected by factors pertaining to the
California economy and other factors specifically affecting
the ability of issuers of such securities to meet their
obligations. The Money Market Fund, on the other hand, may
take full advantage of the entire range of short-term high-
quality Tax Exempt Securities.
<PAGE>
INTRODUCTION
This Prospectus/Proxy Statement is furnished in
connection with the proposed reorganization of Putnam
California Tax Exempt Money Market Fund (the "California
Fund") by the transfer of all of its assets and liabilities
to Putnam Tax Exempt Money Market Fund (the "Money Market
Fund") and the solicitation of proxies by and on behalf of
the Trustees of the California Fund for use at the Meeting of
Shareholders. The Meeting is to be held on June 2 ,
1994 at 1:00 p.m. at One Post Office Square, 8th Floor,
Boston, Massachusetts. This Prospectus/Proxy Statement and
the enclosed form of proxy are being mailed to shareholders
on or about April 20 , 1994.
Any shareholder giving a proxy has the power to revoke
it by mail (addressed to the California Fund's Clerk at the
principal office of the California Fund, One Post Office
Square, Boston, Massachusetts 02109) or in person at the
Meeting , by executing a superseding proxy, or by
submitting a notice of revocation to the California Fund.
All properly executed proxies received in time for the
meeting will be voted as specified in the proxy, or, if no
specification is made, FOR the proposal (set forth in item
(1) of the Notice of Meeting) to implement the reorganization
of the California Fund by the transfer of all of its assets
to the Money Market Fund in exchange for Money Market Fund
Shares and the assumption by the Money Market Fund of all of
the liabilities of the California Fund.
At March 11, 1994 there were outstanding 50,277,513
shares of beneficial interest of the California Fund. Only
shareholders of record on March 11, 1994 will be entitled to
notice of and to vote at the meeting. Each share is entitled
to one vote, with fractional shares voting proportionally.
The California Fund's Trustees know of no matters other
than those set forth herein to be brought before the
Meeting . If, however, any other matters properly come
before the meeting, it is the Trustees' intention that
proxies will be voted on such matters in accordance with the
judgment of the persons named in the enclosed form of proxy.
In addition, shareholders of the California Fund should
note that the Trustees of Putnam New York Tax Exempt Money
Market Fund (the "New York Fund," sometimes also referred to
as a "Fund"), which are the same as the Trustees of the
Funds, have approved a similar reorganization of the Money
Market Fund and the New York Fund which is concurrently being
submitted for the approval of the shareholders of the New
York Fund. As a result of this additional proposed
reorganization, this Prospectus/Proxy Statement in certain
sections describes the consequences of combining the assets
of all three Funds on a pro forma basis. The reorganization
involving the California Fund is not in any way contingent on
the completion of the reorganization involving the New York
Fund.
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
The shareholders of the California Fund are being asked
to approve or disapprove the Agreement and Plan of
Reorganization by and between the Money Market Fund and the
California Fund, dated as of December 3, 1993 (the
"Agreement"), a copy of which is attached to this
Prospectus/Proxy Statement as Exhibit A. The Agreement
provides, among other things, for the transfer of all of the
assets of the California Fund to the Money Market Fund in
exchange for the assumption by the Money Market Fund of all
of the liabilities of the California Fund and for a number of
Money Market Fund Shares, calculated based on the value of
the net assets of the California Fund acquired by the Money
Market Fund and the net asset value per share of the Money
Market Fund, all as more fully described below under
"Information about the Reorganization". After receipt of the
Money Market Fund Shares, the California Fund will cause the
Money Market Fund Shares to be distributed to its
shareholders in complete liquidation of the California Fund
and the legal existence of the California Fund as a separate
business trust under Massachusetts law will be terminated.
In addition, the California Fund will file an application for
deregistration under Section 8(f) of the Investment Company
Act of 1940.
Prior to the date of the transfer (the "Exchange Date"),
the California Fund will declare a distribution to
shareholders which, together with all previous distributions,
will have the effect of distributing to shareholders all of
its investment company taxable income and net realized
capital gains, if any, through the Exchange Date.
The Trustees of the California Fund have voted
unanimously to approve the proposed transaction and to
recommend that shareholders also approve the transaction.
The affirmative vote of two-thirds (66 2/3%) of the
outstanding shares of beneficial interest of the California
Fund that are entitled to be voted at the Meeting is
necessary for the consummation of the proposed transaction.
The Money Market Fund and the California Fund have the same
Trustees.
A shareholder of the California Fund objecting to the
proposed transaction is not entitled under either
Massachusetts law or the Agreement and Declaration of Trust
to demand payment for and an appraisal of his or her
California Fund shares if the transaction is consummated over
his or her objection. Like shares of the California Fund,
shares of the Money Market Fund are redeemable for cash at
their net asset value on any day on which the New York Stock
Exchange is open.
In the event that this proposal is not approved by the
shareholders of the California Fund, the California Fund will
continue to be managed as a separate fund in accordance with
its current investment objectives and policies, and the
Trustees may consider such alternatives as may be in the best
interests of the shareholders.
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
The Trustees of each of the Money Market Fund and the
California Fund, including all Trustees who are not
"interested persons" of the Money Market Fund and the
California Fund, have determined that the reorganization
would be in the best interests of each Fund's shareholders,
and that the interests of existing shareholders of each of
the Funds would not be diluted as a result of effecting the
reorganization. The Trustees have unanimously approved the
proposed reorganization and have recommended its approval by
shareholders.
The principal reasons why the Trustees are recommending
the reorganization are:
(1) ECONOMIES OF SCALE . Putnam Management
believes the proposed reorganization over the longer-term
will achieve economies of scale for the shareholders of the
California Fund by permitting them to invest in a
substantially larger fund with a similar investment
objective and investment policies. Such economies of scale
are not expected to have an immediate positive impact on
shareholders of the California Fund. However, given the
small size and declining asset base of the California Fund,
Putnam Management believes that California Fund shareholders
eventually will benefit from lower operating expenses.
Based upon the projections of Putnam Management, the
Trustees believe that immediately following the combination
of the Funds (and the proposed concurrent combination of the
New York Fund into the Money Market Fund) the expense ratio
of the Money Market Fund will be slightly higher than the
expenses the California Fund would likely incur if the
combination were not effected. Putnam Management has advised
the Trustees that it expects, based on the projected relative
sizes of the two Funds, that the management fees paid by the
Money Market Fund after the proposed reorganization would
likely remain stable at the effective rate of 0.45% of
average net assets. Putnam Management also estimates that
the total annual expense rate of 0.80% of average net
assets currently paid by shareholders of the California Fund
would increase to 0.83% of average net assets after the
contemplated reorganization, assuming average net
assets of $177,444,844 for the Money Market,
California and New York Funds combined (and to 0.86% of
average net assets, assuming net assets of
$124,962,270 for the Money Market and California Funds
combined).
Notwithstanding these expense projections based on
net asset levels as of January 31, 1994, Putnam Management
has advised the Trustees that over the longer-term it expects
there will be expense benefits for California Fund
shareholders as a result of the reorganization because of the
California Fund's declining asset base. The California Fund
experienced net redemptions of $13.5 million
(equivalent to nearly 30% of the Fund's total assets
at the end of the year) for the fiscal year ended
September 30, 1993. Putnam Management believes that such
redemptions of California Fund shares are in large measure a
consequence of the historically low yields of short term
California Tax Exempt Securities under current interest rate
conditions. Putnam Management does not expect these
conditions to change significantly in the near future. As a
result, Putnam Management believes that the California Fund
likely will not experience substantial asset growth in the
near term and may in fact continue to experience a high level
of redemptions. If such redemptions continue and the Fund is
not combined with the Money Market Fund, total operating
expenses could increase significantly and yields would
decline commensurately as existing economies of scale are
lost.
(2) PERFORMANCE BENEFITS . Putnam Management
believes that the economies of scale expected to be realized
over the longer-term as a result of the reorganization and
other factors relating to the small size of the California
Fund will result in long-term performance benefits for
California Fund shareholders acquiring Money Market Fund
Shares pursuant to the reorganization. The annualized
yield net of expenses for both the California Fund and the
Money Market Fund for the thirty-day period ended January 31,
1994 was 1.74%. The annualized yield net of expenses for the
combined Funds on a pro-forma basis was 1.85% (1.82%
excluding the assets of the New York Fund) based on results
for the month ending January 31, 1994. The annualized tax
equivalent yield for the California Fund, the Money Market
Fund and the three combined Funds on a pro-forma basis
was 3.24%, 2.88% and 3.06% (3.01% excluding the assets
of the New York Fund), respectively, based on results for the
month ending January 31, 1994. The California Fund's higher
tax equivalent yield reflects the fact that California Fund
distributions are exempt from both federal and California
state personal income taxes for California shareholders while
Money Market Fund distributions are subject to California and
other relevant state income taxation.
Notwithstanding the current tax equivalent yield
advantage of the California Fund, Putnam Management expects
that over the longer-term the combined Funds would realize
performance advantages over the California Fund if the
reorganization were not implemented as a result of the
projected long-term higher operating expenses of the
California Fund and the investment management limitations
inherent in a portfolio with a steadily declining asset base.
Putnam Management believes that the California Fund may not
be able to maintain a sufficient net asset level to achieve
competitive investment returns over the long-term.<PAGE>
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION. The proposed
Agreement and Plan of Reorganization provides that the Money
Market Fund will acquire all of the assets of the California
Fund in exchange for the assumption by the Money Market Fund
of all of the liabilities of the California Fund and for the
issuance of shares of the Money Market Fund, all as of the
Exchange Date (defined in the Agreement to be the next full
business day following the Valuation Time, defined in the
Plan as 4:00 p.m. Boston time on June 3 , 1994 or such
other date as may be agreed upon by the parties). The
following discussion of the Agreement is qualified in its
entirety by the full text of the Agreement, which is attached
as Exhibit A to this Prospectus/Proxy Statement.
The California Fund will sell all of its assets to the
Money Market Fund, and in exchange, the Money Market Fund
will assume all of the liabilities of the California Fund and
deliver to the California Fund a number of full and
fractional shares of the Money Market Fund having an
aggregate net asset value equal to the value of assets of the
California Fund transferred to the Money Market Fund, less
the value of the liabilities of the California Fund assumed
by the Money Market Fund attributable to shares of the Money
Market Fund.
As a result of the proposed transaction, each
shareholder of the California Fund will receive that number
of full and fractional Money Market Fund shares equal in
aggregate value at the Exchange Date to the value of the
shares of the California Fund held by the shareholder. It is
expected that the shares of the Funds will effectively be
exchanged on a one-for-one basis since each Fund normally
maintains a stable net asset value of $1.00 per share.
Portfolio securities of the Money Market Fund will be valued
in accordance with the amortized cost method of valuation
described under "How the Fund values its shares" in the
enclosed Money Market Fund Prospectus. For purposes of the
Reorganization, Portfolio securities of the Money
Market Fund will be valued at fair market value pursuant to
procedures which the Money Market Fund would use for such
valuation in determining the fair market value of the Money
Market Fund's assets as if the assets were to be purchased
or sold on a given day. It is expected that the
reorganization will be accounted for as a taxable transaction
as described more fully below under "Federal Income Tax
Consequences." The Trustees of the California Fund have
determined that the interests of the California Fund's
shareholders will not be diluted as a result of the trans-
actions contemplated by the reorganization, and the Trustees
of both Funds have determined that the proposed
reorganization is in the best interests of each Fund.
Immediately following the Exchange Date, the California
Fund will distribute pro rata to its shareholders of record
as of the close of business on the Exchange Date the full and
fractional Money Market Fund shares received by the
California Fund. Such liquidation and distribution will be
accomplished by the establishment of accounts on the share
records of the Money Market Fund in the name of such
California Fund shareholders, each account representing the
respective number of full and fractional Money Market Fund
shares due such shareholder.
The consummation of the reorganization is subject to the
conditions set forth in the Agreement. The Agreement may be
terminated and the reorganization abandoned at any time,
before or after approval by the shareholders, prior to the
Exchange Date by mutual consent of the Money Market Fund and
the California Fund or, if any condition set forth in the
Agreement has not been fulfilled and has not been waived by
the party entitled to its benefits, by such party.
All fees and expenses, including legal and accounting
expenses, portfolio transfer taxes (if any) or other similar
expenses incurred in connection with the consummation of the
transactions contemplated by the Agreement will be allocated
ratably between the two Funds in proportion to their net
assets as of the day of the transfer, except that the costs
of proxy materials and proxy solicitations will be borne by
the California Fund. However, to the extent that any payment
by the Money Market Fund of such fees or expenses would
result in the disqualification of the Money Market Fund or
the California Fund as a "regulated investment company"
within the meaning of Section 851 of the Internal Revenue
Code of 1986, as amended (the "Code"), such fees and expenses
will be paid directly by the party incurring them.
DESCRIPTION OF SHARES. Full and fractional
shares of the Money Market Fund will be issued to the
California Fund's shareholders in accordance with the
procedure under the Agreement as described above. Shares of
the Money Market Fund are not subject to any sales charges,
redemption fees and, at present, any payments under its
distribution plan.
Each share of the Money Market Fund will be fully paid
and nonassessable when issued, will be transferable without
restriction, and will have no preemptive or conversion
rights. Like that of the California Fund, the Money Market
Fund's Agreement and Declaration of Trust permits the Fund to
divide its shares, without shareholder approval, into two or
more series of shares representing separate investment
portfolios and to further divide any such series, without
shareholder approval, into two or more classes of shares
having such preferences and special or relative rights and
privileges as the Trustees may determine. Neither Fund's
shares are presently divided into series.
Under Massachusetts law, shareholders could, under
certain circumstances, be held personally liable for the
obligations of the Money Market Fund. However, the Agreement
and Declaration of Trust disclaims shareholder liability for
acts or obligations of the Money Market Fund and requires
that notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Money Market 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 Money Market
Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to
circumstances in which the Money Market Fund would be unable
to meet its obligations. The likelihood of such
circumstances is remote. The shareholders of the California
Fund are currently subject to this same risk of shareholder
liability.
FEDERAL INCOME TAX CONSEQUENCES. Because the
California Fund's portfolio manager will be disposing
of certain assets in order to hold investments appropriate to
the combined Funds, it is expected that the
reorganization will be a taxable transaction under the Code.
As a consequence, (i) the California Fund will recognize gain
or loss, if any, upon the disposition of its assets in the
reorganization, (ii) the shareholders of the California Fund
may recognize a gain or a loss upon the exchange of their
shares for Money Market Fund Shares, (iii) the basis of Money
Market Shares received by California Fund shareholders in
place of their California Fund shares will be the net asset
value of such Money Market Shares on the Valuation Date, and
(iv) the holding period for determining whether Money Market
Shares received in connection with the reorganization are a
capital asset will commence on the Exchange Date
Each of the Funds normally values its assets according
to the amortized cost method of valuation described in the
enclosed Money Market Fund Prospectus . This valuation
method disregards minor unrealized gains or losses resulting
from fluctuating market prices of the Fund's investments in
order to permit a Fund to maintain a stable daily net asset
value of $1.00 per share. However, for purposes of the
Reorganization, the assets of the California Fund will be
valued at fair market value and any such gains or losses in
the Fund's portfolio would be realized as of the time of the
Reorganization. Any difference between fair market value and
amortized cost will be reflected in the Fund's accrued but
unpaid dividend account for that month , consistent with the
Fund's Agreement and Declaration of Trust and with the
provisions of the Code governing regulated investment
companies. It is currently expected that any gains which may
be realized by California Fund shareholders as a result of
the Reorganization would be very small relative to the value
of their shares.
<PAGE>
<TABLE>
<CAPTION>
CAPITALIZATION. The following tables show the capitalization of the Money
Market Fund and the California Fund as of January 31, 1994 and on a pro forma basis as
of that date, giving effect to the proposed acquisition of assets at net asset value:
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
The Money California New York Pro Forma Pro Forma
Market Fund Fund Fund Combined(1)
Combined(2)
Net assets $68,635 $43,473 $45,203 $157,311 $112,108
(000's omitted)
Shares outstanding 68,535 43,473 45,203 157,311 112,108
(000's omitted)
Net asset value per share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_______________
<FN>
(1) Reflects combination of the Money Market, California and New York Funds.
(2) Reflects the combination of the Money Market and California Funds.
</FN>
</TABLE>
Unaudited pro forma financial statements of the Funds as
of and for the period ended September 30, 1993 are included
in the Statement of Additional Information. Because the
Agreement provides that the Money Market Fund will be the
surviving fund following the reorganization and because the
Money Market Fund's investment objective and policies will
remain unchanged, the pro forma financial statements reflect
the transfer of the assets and liabilities of the California
Fund and the New York Fund to the Money Market Fund as
contemplated by the Agreement and the proposed combination of
the New York Fund with the Money Market Fund.
VOTING INFORMATION
Proxies are being solicited from the California Fund's
shareholders by the Trustees for the Meeting of Shareholders
to be held on June 2, 1994 at 1:00 p.m., at One Post Office
Square, 8th Floor, Boston, Massachusetts, or at such later
time made necessary by adjournment. A proxy may be revoked
at any time at or before the meeting by oral or written
notice to Beverly Marcus, Clerk of the Fund, c/o Putnam
California Tax Exempt Money Market Fund, One Post Office
Square, Boston, Massachusetts 02109 or as otherwise described
in the "Introduction" above. Unless revoked, all valid
proxies will be voted in accordance with the specification
thereon or, in the absence of specifications, FOR approval of
the Agreement and Plan of Reorganization. The transactions
contemplated by the Agreement and Plan of Reorganization will
be consummated only if approved by the affirmative vote of
the holders of at least two-thirds (66 2/3%) of the
outstanding shares of the California Fund that are entitled
to vote thereon at the Meeting. In the event the
shareholders do not approve the reorganization, the Money
Market Fund's Trustees will consider possible alternative
arrangements in the best interests of the Money Market Fund
and its shareholders.
Proxies are being solicited by mail. Additional
solicitations may be made by telephone, telegraph, or
personal contact by officers or employees of Putnam
Management and its affiliates or by proxy soliciting firms
retained by the California Fund or the Money Market Fund.
The California Fund may also arrange to have votes recorded
by telephone. If this procedure were subject to a successful
legal challenge, such votes would not be counted at the
meeting. The California Fund has retained at its expense
Tritech Services, Four Corporate Place, Corporate Park 287,
Piscataway, New Jersey 08854, to aid in the solicitation of
proxies for a fee not to exceed $8,100 plus reasonable
out-of-pocket expenses.
Shareholders of record of the California Fund at the close
of business on March 11, 1994 (the "record date") will be
entitled to vote at the Meeting or any adjournment thereof.
The holders of 30% of the shares of the California Fund
outstanding at the close of business on the record date
present in person or represented by proxy will constitute a
quorum for the meeting ; however, as noted above, the
affirmative vote of at least two-thirds (66 2/3%) of the
shares outstanding at the close of business on the record
date is necessary to approve the reorganization.
Shareholders are entitled to one vote for each share held,
with fractional shares voting proportionally.
Votes cast by proxy or in person at the Meeting
will be counted by persons appointed by the California Fund
as tellers for the meeting. The tellers will count the total
number of votes cast "for" approval of the proposal for
purposes of determining whether sufficient affirmative votes
have been cast. The tellers will count shares represented by
proxies that reflect abstentions and "broker non-votes"
(i.e., shares held by brokers or nominees as to which (i)
instructions have not been received from the beneficial
owners or the persons entitled to vote and (ii) the broker or
nominee does not have the discretionary voting power on a
particular matter) as shares that are present and entitled to
vote on the matter for purposes of determining the presence
of a quorum. Abstentions and broker non-votes have the
effect of a negative vote on the proposal.
As of March 11, 1994 as shown on the books of the
California Fund, there were issued and outstanding 50,277,513
shares of beneficial interest of the California Fund. As
of February 28, 1994, the officers and Trustees of the
California Fund as a group beneficially owned less than 1% of
the outstanding shares of the California Fund. At
February 28, 1994, to the best of the knowledge of the
California Fund, no person owned beneficially 5% or more of
the outstanding shares of the California Fund.
The votes of the shareholders of the Money Market Fund are
not being solicited, since their approval or consent is not
necessary for this transaction. As of February 28,
1994, the officers and Trustees of the Money Market Fund as a
group beneficially owned less than 1% of the outstanding
shares of the Money Market Fund. At February 28,
1994, to the best of the knowledge of the Money Market Fund,
no person beneficially owned 5% or more of the outstanding
shares of the Money Market Fund.
THE TRUSTEES OF PUTNAM CALIFORNIA TAX EXEMPT MONEY
MARKET FUND, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMEND APPROVAL OF THE PLAN.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the
"Agreement") is made as of December 3, 1993 in Boston,
Massachusetts, by and between Putnam Tax Exempt Money Market
Fund, a Massachusetts business trust (the "Money Market
Fund"), and Putnam California Tax Exempt Money Market Fund, a
Massachusetts business trust (the "California
Fund")(collectively, the "Funds").
PLAN OF REORGANIZATION
(a) The California Fund will sell, assign, convey,
transfer and deliver to the Money Market Fund on the Exchange
Date (as defined in Section 7) all of its properties and
assets existing at the Valuation Time. In consideration
therefor, the Money Market Fund shall, on the Exchange Date,
assume all of the liabilities of the California Fund existing
at the Valuation Time and deliver to the California Fund, a
number of full and fractional shares of beneficial interest
of the Money Market Fund ("Money Market Fund Shares") having
an aggregate net asset value equal to the value of assets of
the California Fund attributable to shares of the California
Fund transferred to the Money Market Fund on such date less
the value of the liabilities of the California Fund
attributable to shares of the California Fund assumed by the
Money Market Fund on that date.
(b) Upon consummation of the transactions described in
paragraph (a) of this Plan, the California Fund shall
distribute in complete liquidation to its shareholders of
record as of the Exchange Date the Money Market Fund Shares,
each shareholder being entitled to receive that proportion of
such Money Market Fund Shares which the number of shares of
beneficial interest of the California Fund held by such
shareholder bears to the number of shares of the California
Fund outstanding on such date.
(c) As promptly as practicable after the liquidation of
the California Fund as aforesaid, the California Fund shall
be dissolved pursuant to the provisions of its Agreement and
Declaration of Trust, as amended, and applicable law, and its
legal existence terminated.
(d) It is intended that the reorganization described in
this Plan shall be a taxable transaction under the Internal
Revenue Code of 1986, as amended (the "Code").
AGREEMENT
The Money Market Fund and the California Fund agree as
follows:
1. REPRESENTATIONS AND WARRANTIES OF THE MONEY MARKET
FUND . The Money Market Fund represents and warrants to
and agrees with the California Fund that:
(a) The Money Market Fund is a business trust duly
established and validly existing under the laws of The
Commonwealth of Massachusetts and has power to own all of its
properties and assets and to carry out its obligations under
this Agreement. The Money Market Fund is not required to
qualify as a foreign association in any jurisdiction. The
Money Market Fund has all necessary federal, state and local
authorizations to carry on its business as now being
conducted and to carry out this Agreement.
(b) The Money Market Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"),
as an open-end management investment company, and such
registration has not been revoked or rescinded and is in full
force and effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and
schedules of investments (indicating their market values) of
the Money Market Fund for the year ended September 30, 1993,
such statements and schedules having been audited by
Coopers & Lybrand, independent accountants, have been
furnished to the California Fund. Such statements of assets
and liabilities and schedules fairly present the financial
position of the Money Market Fund as of their dates and said
statements of operations and changes in net assets fairly
reflect the results of its operations and changes in net
assets for the periods covered thereby in conformity with
generally accepted accounting principles.
(d) Post-Effective Amendment No. 9 (File No. 811-
5215) to the Registration Statement of the Money Market Fund
under the 1940 Act, to be filed with the Securities
and Exchange Commission (the "Commission") on or about
February 18, 1994, to be furnished to the California
Fund upon filing, will not as of such date
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Money Market
Fund, threatened against the Money Market Fund which assert
liability on the part of the Money Market Fund.
(f) There are no material contracts outstanding to which
the Money Market Fund is a party, other than as will be
disclosed in the Proxy Statement.
(g) The Money Market Fund has no known liabilities of a
material nature, contingent or otherwise, other than those
shown as belonging to it on its statement of assets and
liabilities as of September 30, 1993 and those incurred in
the ordinary course of the Money Market Fund's business as an
investment company since September 30, 1993.
(h) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by the Money Market Fund of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), the 1940 Act, state
securities or blue sky laws (which term as used herein shall
include the laws of the District of Columbia and of
Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "H-S-R Act").
(i) The registration statement (the "Registration
Statement") filed with the Commission by the Money Market
Fund on Form N-14 relating to the Money Market Fund Shares
issuable hereunder, and the proxy statement of the California
Fund included therein (the "Proxy Statement"), on the
effective date of the Registration Statement (i) will comply
in all material respects with the provisions of the 1933 Act,
the 1934 Act and the 1940 Act and the rules and regulations
thereunder and (ii) will not contain any untrue statement of
a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting
referred to in Section 8(a) and at the Exchange Date, the
prospectus contained in the Registration Statement of which
the Proxy Statement is a part (the "Prospectus"), as amended
or supplemented by any amendments or supplements filed with
the Commission by the California Fund, will not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading; provided,
however, that none of the representations and warranties in
this subsection shall apply to statements in or omissions
from the Registration Statement, the Prospectus or the Proxy
Statement made in reliance upon and in conformity with
information furnished by the California Fund for use in the
Registration Statement, the Prospectus or the Proxy
Statement.
(j) All of the issued and outstanding shares of
beneficial interest of the Money Market Fund have been
offered for sale and sold in conformity with all applicable
federal securities laws.
(k) The Money Market Fund is and will at all times
through the Exchange Date qualify for taxation as a
"regulated investment company" under Sections 851 and 852 of
the Code.
(l) The issuance of the Money Market Fund Shares pursuant
to this Agreement will be in compliance with all applicable
federal securities laws.
(m) The Money Market Fund shares to be issued to the
California Fund have been duly authorized and, when issued
and delivered pursuant to this Agreement, will be legally and
validly issued and will be fully paid and nonassessable by
the Money Market Fund, and no shareholder of the Money Market
Fund will have any preemptive right of subscription or
purchase in respect thereof.
2. REPRESENTATIONS AND WARRANTIES OF THE CALIFORNIA
FUND . The California Fund represents and warrants to and
agrees with the Money Market Fund that:
(a) The California Fund is a business trust duly
established and validly existing under the laws of The
Commonwealth of Massachusetts and has power to carry on its
business as it is now being conducted and to carry out this
Agreement. The California Fund is not required to qualify as
a foreign association in any jurisdiction. The California
Fund has all necessary federal, state and local
authorizations to own all of its properties and assets and to
carry on its business as now being conducted and to carry out
this Agreement.
(b) The California Fund is registered under the 1940 Act
as an open-end management investment company and such
registration has not been revoked or rescinded and is in full
force and effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and
schedules of investments (indicating their market values) of
the California Fund for the fiscal year ended September 30,
1993, such statements and schedules having been audited by
Price Waterhouse, independent accountants, have been
furnished to the Money Market Fund. Such statements of
assets and liabilities and schedules fairly present the
financial position of the California Fund as of their dates,
and said statements of operations and changes in net assets
fairly reflect the results of its operations and changes in
financial position for the periods covered thereby in
conformity with generally accepted accounting principles.
(d) Post-Effective Amendment No. 6 (File No. 811-5333) to
the Registration Statement of the California Fund under the
1940 Act, as filed with the Commissioner on or about
February 1, 1994, to be furnished to the Money Market
Fund upon filing, will not contain as of its date any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the California
Fund, threatened against the California Fund which assert
liability or may, if successfully prosecuted to their
conclusion, result in liability on the part of the California
Fund, other than as have been disclosed in the Prospectus.
(f) There are no material contracts outstanding to which
the California Fund is a party, other than as will be
disclosed in the Proxy Statement.
(g) The California Fund has no known liabilities of a
material nature, contingent or otherwise, other than those
shown on the California Fund's statement of assets and
liabilities as of September 30, 1993 referred to above and
those incurred in the ordinary course of the business of the
California Fund as an investment company since such date.
Prior to the Exchange Date, the California Fund will advise
the Money Market Fund of all material liabilities, contingent
or otherwise, incurred by it subsequent to September 30,
1993, whether or not incurred in the ordinary course of
business.
(h) As used in this Agreement, the term "Investments"
shall mean the California Fund's investments shown on the
schedule of its investments as of September 30, 1993 referred
to in Section 2(c) hereof, as supplemented with such changes
as the California Fund shall make after advising the Money
Market Fund of such proposed changes, and changes resulting
from stock dividends, stock split-ups, mergers and similar
corporate actions, but excluding such investments as the
Money Market Fund may designate in a writing addressed to the
California Fund as being unsuitable for the Money Market Fund
to acquire by reason of charter limitations or of investment
restrictions disclosed in the Money Market Fund
Prospectus.
(i) The California Fund has filed or will file all
federal and state tax returns which, to the knowledge of the
California Fund's officers, are required to be filed by the
California Fund and has paid or will pay all federal and
state taxes shown to be due on said returns or on any
assessments received by the California Fund. All tax
liabilities of the California Fund have been adequately
provided for on its books, and no tax deficiency or liability
of the California Fund has been asserted, and no question
with respect thereto has been raised, by the Internal Revenue
Service or by any state or local tax authority for taxes in
excess of those already paid.
(j) At both the Valuation Time (as defined in
Section 3(c)) and the Exchange Date, the California Fund will
have full right, power and authority to sell, assign,
transfer and deliver the Investments and any other assets and
liabilities of the Money Market Fund to be transferred to the
California Fund pursuant to this Agreement. At the Exchange
Date, subject only to the delivery of the Investments and any
such other assets and liabilities as contemplated by this
Agreement, the Money Market Fund will acquire the Investments
and any such other assets subject to no encumbrances, liens
or security interests whatsoever and without any restrictions
upon the transfer thereof.
(k) No registration under the Securities Act of 1933, as
amended (the "1933 Act"), of any of the Investments would
be required if they were, as of the time of such transfer,
the subject of a public distribution by either of the Money
Market Fund or the California Fund, except as previously
disclosed to the Money Market Fund by the California Fund.
(l) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by the California Fund of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940 Act,
state securities laws or the H-S-R Act.
(m) The Registration Statement, the Prospectus and the
Proxy Statement, on the Effective Date of the Registration
Statement and insofar as they do not relate to the Money
Market Fund (i) will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder and (ii) will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
at the time of the shareholders' meeting referred to in
Section 8(a) below and on the Exchange Date, the Prospectus,
as amended or supplemented by any amendments or supplements
filed with the Commission by the Money Market Fund, insofar
as it does not relate to the Money Market Fund, will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in
this subsection shall apply only to statements of fact
relating to the California Fund contained in the Registration
Statement, the Prospectus or the Proxy Statement, or
omissions to state in any thereof a material fact relating to
the California Fund, as such Registration Statement,
Prospectus and Proxy Statement shall be furnished to the
California Fund in definitive form as soon as practicable
following effectiveness of the Registration Statement and
before any public distribution of the Prospectus or Proxy
Statement.
(n) The California Fund is and will at all times through
the Exchange Date qualify for taxation as a "regulated
investment company" under Sections 851 and 852 of the Code.
(o) At the Exchange Date, the California Fund will have
sold such of its assets, if any, as necessary to assure that,
after giving effect to the acquisition of the assets of the
California Fund pursuant to this Agreement, the Money Market
Fund will remain a "diversified company" within the meaning
of Section 5(b)(1) of the 1940 Act and in compliance with
such other mandatory investment restrictions as are set forth
in the prospectus and statement of additional information of
the Money Market Fund dated February 1, 1994 (collectively,
the "Money Market Fund Prospectus"), previously furnished to
the California Fund. The Money Market Fund Shares to be
issued to the California Fund have been duly authorized and,
when issued and delivered pursuant to this Agreement, will be
legally and validly issued and will be fully paid and
nonassessable by the California Fund, and no shareholder of
the Money Market Fund will have any preemptive right of
subscription or purchase in respect thereof.
3. REORGANIZATION . (a) Subject to the requisite
approval of the shareholders of the California Fund and to
the other terms and conditions contained herein (including
the California Fund's obligation to distribute to its
shareholders all of its investment company taxable income and
net capital gain as described in Section 9(l) hereof), the
California Fund agrees to sell, assign, convey, transfer and
deliver to the Money Market Fund, and the Money Market Fund
agrees to acquire from the California Fund, on the Exchange
Date all of the Investments and all of the cash and other
properties and assets of the New York Fund, whether accrued
or contingent of the California Fund (including cash received
by the California Fund upon the liquidation by the California
Fund of any investments purchased by the California Fund
after September 30, 1993 and designated by the Money Market
Fund as being unsuitable for it to acquire), in exchange for
that number of shares of beneficial interest of the Money
Market Fund provided for in Section 4 and the assumption by
the Money Market Fund of all of the liabilities of the
California Fund. Pursuant to this Agreement, the California
Fund will, as soon as practicable after the Exchange Date,
distribute all of the Money Market Fund Shares received by it
to the shareholders of the California Fund in exchange for
their shares of beneficial interest of the California Fund.
(b) The California Fund will pay or cause to be paid to
the Money Market Fund any interest, cash or such dividends,
rights and other payments received by it on or after the
Exchange Date with respect to the Investments and other
properties and assets of the California Fund,
whether accrued or contingent, received by it on or after
the Exchange Date. Any such distribution shall be deemed
included in the assets transferred to the Money Market Fund
at the Exchange Date and shall not be separately valued
unless the securities in respect of which such distribution
is made shall have gone "ex" such distribution prior to the
Valuation Time, in which case any such distribution which
remains unpaid at the Exchange Date shall be included in the
determination of the value of the assets of the California
Fund acquired by the Money Market Fund.
(c) The Valuation Time shall be 4:00 p.m. Boston time on
June 3 , 1994 or such earlier or later day as may be
mutually agreed upon in writing by the parties hereto (the
"Valuation Time").
4. EXCHANGE DATE; VALUATION TIME . On the
Exchange Date, the Money Market Fund will deliver to the
California Fund, a number of full and fractional Money Market
Fund Shares having an aggregate net asset value equal to the
value of assets of the California Fund attributable to shares
of the California Fund transferred to the Money Market Fund
on such date less the value of the liabilities of the
California Fund attributable to shares of the California Fund
assumed by the Money Market Fund on that date, determined as
hereafter provided in this Section 4.
(a) The net asset value of the Money Market Fund Shares
to be delivered to the California Fund, the value of the
assets of the California Fund and the value of the
liabilities of the California Fund to be assumed by the Money
Market Fund shall in each case be determined as of the
Valuation Time.
(b) The net asset value of the Money Market Fund Shares
shall be computed in the manner set forth in the current
Money Market Fund Prospectus. The value of the assets and
liabilities of the California Fund shall be determined by the
Money Market Fund, in cooperation with the California Fund,
pursuant to procedures which the Money Market Fund would use
in determining the fair market value of the Money Market
Fund's assets as if such assets were to be evidenced or sold
on a given day. Accordingly, the Money Market Fund shall not
employ the amortized cost method of valuation in valuing the
California Fund's assets.
(c) No adjustment shall be made in the net asset value of
either the California Fund or the Money Market Fund to take
into account differences in realized and unrealized gains and
losses.
(d) The Money Market Fund shall issue the Money Market
Fund Shares to the California Fund in one certificate
(excluding any fractional share) registered in the name of
the California Fund. The California Fund shall distribute
the Money Market Fund Shares to the shareholders of the
California Fund by redelivering such certificate to the Money
Market Fund's transfer agent which will as soon as
practicable set up open accounts for each California Fund
shareholder in accordance with written instructions furnished
by the California Fund.
(e) The Money Market Fund shall assume all liabilities of
the California Fund, whether accrued or contingent, in
connection with the acquisition of assets and subsequent
dissolution of the California Fund or otherwise.
5. EXPENSES, FEES, ETC . (a) All fees and
expenses, including legal and accounting expenses, portfolio
transfer taxes (if any) or other similar expenses incurred in
connection with the consummation by the California Fund and
the Money Market Fund of the transactions contemplated by
this Agreement will be allocated ratably between the two
Funds in proportion to their net assets as of the Valuation
Time, except that the costs of proxy materials and proxy
solicitation will be borne by the California Fund; provided,
however, that such expenses will in any event be paid by the
party directly incurring such expenses if and to the extent
that the payment by the other party of such expenses would
result in the disqualification of the Money Market Fund or
the California Fund, as the case may be, as a "regulated
investment company" within the meaning of Section 851 of the
Code.
(b) In the event the transactions contemplated by this
Agreement are not consummated by reason of the Money Market
Fund's being either unwilling or unable to go forward (other
than by reason of the nonfulfillment or failure of any
condition to the Money Market Fund's obligations referred to
in Section 8(a) or Section 9) the Money Market Fund shall pay
directly all reasonable fees and expenses incurred by the
California Fund in connection with such transactions,
including, without limitation, legal, accounting and filing
fees.
(c) In the event the transactions contemplated by this
Agreement are not consummated by reason of the California
Fund's being either unwilling or unable to go forward (other
than by reason of the nonfulfillment or failure of any
condition to the California Fund's obligations referred to in
Section 8(a) or Section 10), the California Fund shall pay
directly all reasonable fees and expenses incurred by the
Money Market Fund in connection with such transactions,
including without limitation legal, accounting and filing
fees.
(d) In the event the transactions contemplated by this
Agreement are not consummated for any reason other than
(i) the Money Market Fund's or the California Fund's being
either unwilling or unable to go forward or (ii) the
nonfulfillment or failure of any condition to the Money
Market Fund's or the California Fund's obligations referred
to in Section 8(a), Section 9 or Section 10 of this
Agreement, then each of the Money Market Fund and the
California Fund shall bear all of its own expenses incurred
in connection with such transactions.
(e) Notwithstanding any other provisions of this
Agreement, if for any reason the transactions contemplated by
this Agreement are not consummated, no party shall be liable
to the other party for any damages resulting therefrom,
including without limitation consequential damages, except as
specifically set forth above.
6. PERMITTED ASSETS . The Money Market Fund
agrees to advise the California Fund promptly if at any time
prior to the Exchange Date the assets of the California Fund
include any assets that the Money Market Fund is not
permitted, or reasonably believes to be unsuitable for it, to
acquire, including without limitation any security that,
prior to its acquisition by the California Fund, the Money
Market Fund has informed the California Fund is unsuitable
for the Money Market Fund to acquire.
7. EXCHANGE DATE . Delivery of the assets of the
California Fund to be transferred, assumption of the
liabilities of the California Fund to be assumed and the
delivery of the Money Market Fund Shares to be issued shall
be made at the offices of Ropes & Gray, One International
Place, Boston, Massachusetts, at 10:00 a.m . on the
next full business day following the Valuation Time, or at
such other time and date agreed to by the Money Market Fund
and the California Fund, the date and time upon which such
delivery is to take place being referred to herein as the
"Exchange Date."
8. MEETING OF SHAREHOLDERS; DISSOLUTION . (a) The
California Fund agrees to call a meeting of its shareholders
as soon as is practicable after the effective date of the
Registration Statement for the purpose of considering the
sale of all of its assets to and the assumption of all of its
liabilities by the Money Market Fund as herein provided,
adopting this Agreement, and authorizing the liquidation and
dissolution of the California Fund, and it shall be a
condition to the obligations of each of the parties hereto
that the holders of at least two-thirds (66 2/3%) of the
shares of beneficial interest of the California Fund shall
have approved such vote at such a meeting on or before the
Valuation Time.
(b) The California Fund agrees that the liquidation and
dissolution of the California Fund will be effected in the
manner provided in the California Fund's Agreement and
Declaration of Trust in accordance with applicable law, and
that on and after the Exchange Date, the California Fund
shall not conduct any business except in connection with its
liquidation and dissolution.
(c) The Money Market Fund will, as promptly as
practicable after the preparation and delivery to the Money
Market Fund by the California Fund of a preliminary version
of the Proxy Statement which is satisfactory to the Money
Market Fund and to Ropes & Gray for inclusion in the
Registration Statement, file the Registration Statement with
the Commission. Each of the California Fund and the Money
Market Fund will cooperate with the other, and each will
furnish to the other the information relating to itself
required by the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder to be set forth in the
Registration Statement, including the Prospectus and the
Proxy Statement.
9. CONDITIONS TO THE MONEY MARKET FUND'S OBLIGATIONS.
The obligations of the Money Market Fund hereunder shall
be subject to the following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by
the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the outstanding shares of beneficial interest of
the California Fund.
(b) That the California Fund shall have furnished to the
Money Market Fund a statement of the California Fund's assets
and liabilities, with values determined as provided in
Section 4 of this Agreement, together with a list of
Investments and all other assets of the California Fund with
their respective tax costs, all as of the Valuation Time,
certified on the California Fund's behalf by its President
(or any Vice President) and Treasurer, and a certificate of
both such officers, dated the Exchange Date, that there has
been no material adverse change in the financial position of
the California Fund since September 30, 1993 other than
changes in the Investments and other assets and properties of
the California Fund since that date or changes in the market
value of the Investments and other assets of the California
Fund, or changes due to net redemptions of shares of the
California Fund, dividends paid or losses from operations.
(c) That the California Fund shall have furnished to the
Money Market Fund a statement, dated the Exchange Date,
signed by the California Fund's President (or any Vice
President) and Treasurer certifying that as of the Valuation
Time and as of the Exchange Date all representations and
warranties of the California Fund made in this Agreement are
true and correct in all material respects as if made at and
as of such dates and the California Fund has complied with
all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to such dates.
(d) That the California Fund shall have delivered to the
Money Market Fund a letter from Price Waterhouse dated the
Exchange Date stating that such firm reviewed the federal and
state income tax returns of the California Fund for the year
ended September 30, 1993, and for the period from September
30, 1993 to the Exchange Date, and that, in the course of
such review, nothing came to their attention which caused
them to believe that such returns did not properly reflect,
in all material respects, the federal and state income taxes
of the California Fund for the periods covered thereby, or
that the California Fund would not qualify as a regulated
investment company for federal income tax purposes.
(e) That there shall not be any material litigation
pending with respect to the matters contemplated by this
Agreement.
(f) That the Money Market Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Money
Market Fund and dated the Exchange Date, to the effect that
(i) the California Fund is a business trust duly established
and validly existing under the laws of The Commonwealth of
Massachusetts, and the California Fund is not, to the
knowledge of such counsel, required to qualify to do business
as a foreign association in any jurisdiction, (ii) this
Agreement has been duly authorized, executed, and delivered
by the California Fund and, assuming that the Registration
Statement, the Prospectus and the Proxy Statement comply with
the 1933 Act, the 1934 Act and the 1940 Act and assuming due
authorization, execution and delivery of this Agreement by
the Money Market Fund, is a valid and binding obligation of
the California Fund, (iii) the California Fund has power to
sell, assign, convey, transfer and deliver the assets
contemplated hereby and, upon consummation of the
transactions contemplated hereby in accordance with the terms
of this Agreement, the California Fund will have duly sold,
assigned, conveyed, transferred and delivered such assets to
the Money Market Fund, (iv) the execution and delivery of
this Agreement did not, and the consummation of the
transactions contemplated hereby will not, violate the
California Fund's Agreement and Declaration of Trust, as
amended, or any provision of any agreement known to such
counsel to which the California Fund is a party or by which
it is bound, and (v) no consent, approval, authorization or
order of any court or governmental authority is required for
the consummation by the California Fund of the transactions
contemplated hereby, except such as have been obtained under
the 1933 Act, the 1934 Act and the 1940 Act and such as may
be required under state securities or blue sky laws and the
H-S-R Act, it being understood that with respect to
investment restrictions as contained in the California Fund's
Agreement and Declaration of Trust, Bylaws or then-current
prospectus or statement of additional information, such
counsel may rely upon a certificate of an officer of the
California Fund whose responsibility it is to advise the
California Fund with respect to such matters.
(g) That the Money Market Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Money
Market Fund, with respect to the matters specified in Section
10(f) of this Agreement, and such other matters as the Money
Market Fund may reasonably deem necessary or desirable.
(h) That the assets of the California Fund to be acquired
by the Money Market Fund will include no assets which the
Money Market Fund, by reason of charter limitations or of
investment restrictions disclosed in the Money Market Fund
Prospectus in effect on the Exchange Date, may not properly
acquire.
(i) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending
such effectiveness shall have been instituted or, to the
knowledge of the Money Market Fund, contemplated by the
Commission.
(j) That the Money Market Fund shall have received from
the Commission, any relevant state securities administrator,
the Federal Trade Commission (the "FTC") and the Department
of Justice (the "Department") such order or orders as Ropes &
Gray deems reasonably necessary or desirable under the 1933
Act, the 1934 Act, the 1940 Act, any applicable state
securities or blue sky laws and the H-S-R Act in connection
with the transactions contemplated hereby, and that all such
orders shall be in full force and effect.
(k) That all proceedings taken by the California Fund in
connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be
satisfactory in form and substance to the Money Market Fund
and Ropes & Gray.
(l) That, prior to the Exchange Date, the California Fund
shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of
distributing to the shareholders of the California Fund all
of the California Fund's investment company taxable income
for its taxable years ending on or after September 30, 1993
and on or prior to the Exchange Date (computed without regard
to any deduction for dividends paid), and all of its net
capital gain realized in each of its taxable years ending on
or after September 30, 1993 and on or prior to the Exchange
Date.
(m) That the California Fund's custodian shall have
delivered to the Money Market Fund a certificate identifying
all of the assets of the California Fund held by such
custodian as of the Valuation Time.
(n) That the California Fund's transfer agent shall have
provided to the Money Market Fund (i) the originals or true
copies of all of the records of the California Fund in the
possession of such transfer agent as of the Exchange Date,
(ii) a certificate setting forth the number of shares of the
California Fund outstanding as of the Valuation Time and
(iii) the name and address of each holder of record of any
such shares and the number of shares held of record by each
such shareholder.
(o) That all of the issued and outstanding shares of
beneficial interest of the California Fund shall have been
offered for sale and sold in conformity with all applicable
state securities or blue sky laws and, to the extent that any
audit of the records of the California Fund or its transfer
agent by the Money Market Fund or its agents shall have
revealed otherwise, either (i) the California Fund shall have
taken all actions that in the opinion of the Money Market
Fund or its counsel are necessary to remedy any prior failure
on the part of the California Fund to have offered for sale
and sold such shares in conformity with such laws or (ii) the
California Fund shall have furnished (or caused to be
furnished) surety, or deposited (or caused to be deposited)
assets in escrow, for the benefit of the Money Market Fund in
amounts sufficient and upon terms satisfactory, in the
opinion of the Money Market Fund or its counsel, to indemnify
the Money Market Fund against any expense, loss, claim,
damage or liability whatsoever that may be asserted or
threatened by reason of such failure on the part of the
California Fund to have offered and sold such shares in
conformity with such laws.
(p) That the Money Market Fund shall have received from
Price Waterhouse a letter addressed to the Money Market Fund
dated as of the Exchange Date satisfactory in form and
substance to the Money Market Fund to the effect that, on the
basis of limited procedures agreed upon by the Money Market
Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), as of
the Valuation Time the value of the assets of the California
Fund to be exchanged for the Money Market Fund Shares has
been determined in accordance with procedures customarily
utilized to determine the fair market value of assets of
such character.
10. CONDITIONS TO THE CALIFORNIA FUND'S OBLIGATIONS.
The obligations of the California Fund hereunder shall
be subject to the following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by
the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the outstanding shares of beneficial interest of
the California Fund.
(b) That the Money Market Fund shall have furnished to
the California Fund a statement of the Money Market Fund's
net assets, together with a list of portfolio holdings with
values determined as provided in Section 4, all as of the
Valuation Time, certified on the Money Market Fund's behalf
by its President (or any Vice President) and Treasurer (or
any Assistant Treasurer), and a certificate of both such
officers, dated the Exchange Date, to the effect that as of
the Valuation Time and as of the Exchange Date there has been
no material adverse change in the financial position of the
Money Market Fund since September 30, 1993, other than
changes in its portfolio securities since that date, changes
in the market value of its portfolio securities, changes due
to net redemptions, dividends paid or losses from operations.
(c) That the Money Market Fund shall have executed and
delivered to the California Fund an Assumption of Liabilities
dated as of the Exchange Date pursuant to which the Money
Market Fund will assume all of the liabilities of the
California Fund existing at the Valuation Time in connection
with the transactions contemplated by this Agreement.
(d) That the Money Market Fund shall have furnished to
the California Fund a statement, dated the Exchange Date,
signed by the Money Market Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer)
certifying that as of the Valuation Time and as of the
Exchange Date all representations and warranties of the Money
Market Fund made in this Agreement are true and correct in
all material respects as if made at and as of such dates, and
that the Money Market Fund has complied with all of the
agreements and satisfied all of the conditions on its part to
be performed or satisfied at or prior to each of such dates.
(e) That there shall not be any material litigation
pending with respect to the matters contemplated by this
Agreement.
(f) That the California Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the
California Fund and dated the Exchange Date, to the effect
that (i) the Money Market Fund is an unincorporated voluntary
association duly established and validly existing in
conformity with the laws of The Commonwealth of
Massachusetts, and, to the knowledge of such counsel, is not
required to qualify to do business as a foreign association
in any jurisdiction except as may be required by state
securities or blue sky laws, (ii) the Money Market Fund
Shares to be delivered to the California Fund as provided for
by this Agreement are duly authorized and upon such delivery
will be validly issued and will be fully paid and
nonassessable by the Money Market Fund and no shareholder of
the Money Market Fund has any preemptive right to
subscription or purchase in respect thereof, (iii) this
Agreement has been duly authorized, executed and delivered by
the Money Market Fund and, assuming that the Prospectus, the
Registration Statement and the Proxy Statement comply with
the 1933 Act, the 1934 Act and the 1940 Act and assuming due
authorization, execution and delivery of this Agreement by
the California Fund, is a valid and binding obligation of the
Money Market Fund, (iv) the execution and delivery of this
Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate the Money Market Fund's
Agreement and Declaration of Trust, as amended, or By-laws,
or any provision of any agreement known to such counsel to
which the Money Market Fund is a party or by which it is
bound, it being understood that with respect to investment
restrictions as contained in the Money Market Fund's
Agreement and Declaration of Trust, as amended, By-Laws or
then-current prospectus or statement of additional
information, such counsel may rely upon a certificate of an
officer of the Money Market Fund whose responsibility it is
to advise the Money Market Fund with respect to such matters,
(v) no consent, approval, authorization or order of any court
or governmental authority is required for the consummation by
the Money Market Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required
under state securities or blue sky laws, and (vi) the
Registration Statement has become effective under the 1933
Act, and to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the
1933 Act.
(g) That all proceedings taken by the Money Market Fund in
connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be
satisfactory in form and substance to the California Fund and
Ropes & Gray.
(h) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending
such effectiveness shall have been instituted or, to the
knowledge of the Money Market Fund, contemplated by the
Commission.
(i) That the California Fund shall have received from the
Commission, any relevant state securities administrator, the
FTC and the Department such order or orders as Ropes & Gray
deems reasonably necessary or desirable under the 1933 Act,
the 1934 Act, the 1940 Act, any applicable state securities
or blue sky laws and the H-S-R Act in connection with the
transactions contemplated hereby, and that all such orders
shall be in full force and effect.
11. INDEMNIFICATION . (a) The California Fund will
indemnify and hold harmless, out of the assets of the
California Fund but no other assets, the Money Market Fund,
its trustees and its officers (for purposes of this
subparagraph, the "Indemnified Parties") against any and all
expenses, losses, claims, damages and liabilities at any time
imposed upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which
any one or more of the Indemnified Parties may be involved or
with which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged
untrue statement of a material fact relating to the
California Fund contained in the Registration Statement, the
Prospectus or the Proxy Statement or any amendment or
supplement to any of the foregoing, or arising out of or
based upon the omission or alleged omission to state in any
of the foregoing a material fact relating to the California
Fund required to be stated therein or necessary to make the
statements relating to the California Fund therein not
misleading, including, without limitation, any amounts paid
by any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding
made with the consent of the California Fund. The
Indemnified Parties will notify the California Fund in
writing within ten days after the receipt by any one or more
of the Indemnified Parties of any notice of legal process or
any suit brought against or claim made against such
Indemnified Party as to any matters covered by this Section
11(a) . The California Fund shall be entitled to
participate at its own expense in the defense of any claim,
action, suit or proceeding covered by this Section
11(a) , or, if it so elects, to assume at its expense
by counsel satisfactory to the Indemnified Parties the
defense of any such claim, action, suit or proceeding, and if
the California Fund elects to assume such defense, the
Indemnified Parties shall be entitled to participate in the
defense of any such claim, action, suit or proceeding at
their expense. The California Fund's obligation under this
Section 11(a) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment
so that the California Fund will pay in the first instance
any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 11(a)
without the necessity of the Indemnified Parties' first
paying the same.
(b) The Money Market Fund will indemnify and hold
harmless, out of the assets of the Money Market Fund but no
other assets, the California Fund, its trustees and its
officers (for purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or
reasonably incurred by any one or more of the Indemnified
Parties in connection with, arising out of, or resulting from
any claim, action, suit or proceeding in which any one or
more of the Indemnified Parties may be involved or with which
any one or more of the Indemnified Parties may be threatened
by reason of any untrue statement or alleged untrue statement
of a material fact relating to the Money Market Fund
contained in the Registration Statement, the Prospectus or
the Proxy Statement, or any amendment or supplement to any
thereof, or arising out of, or based upon, the omission or
alleged omission to state in any of the foregoing a material
fact relating to the Money Market Fund required to be stated
therein or necessary to make the statements relating to the
Money Market Fund therein not misleading, including without
limitation any amounts paid by any one or more of the
Indemnified Parties in a reasonable compromise or settlement
of any such claim, action, suit or proceeding, or threatened
claim, action, suit or proceeding made with the consent of
the Money Market Fund. The Indemnified Parties will notify
the Money Market Fund in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any
notice of legal process or any suit brought against or claim
made against such Indemnified Party as to any matters covered
by this Section 11(b) . The Money Market Fund shall be
entitled to participate at its own expense in the defense of
any claim, action, suit or proceeding covered by this Section
11(b) , or, if it so elects, to assume at its expense
by counsel satisfactory to the Indemnified Parties the
defense of any such claim, action, suit or proceeding, and,
if the Money Market Fund elects to assume such defense, the
Indemnified Parties shall be entitled to participate in the
defense of any such claim, action, suit or proceeding at
their own expense. The Money Market Fund's obligation under
this Section 11(b) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment
so that the Money Market Fund will pay in the first instance
any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 11(b)
without the necessity of the Indemnified Parties' first
paying the same.
12. NO BROKER, ETC . Each of the California Fund
and the Money Market Fund represents that there is no person
who has dealt with it who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or
commission arising out of the transactions contemplated by
this Agreement.
13. TERMINATION . The California Fund and the
Money Market Fund may, by mutual consent of their respective
trustees, terminate this Agreement, and the California Fund
or the Money Market Fund, after consultation with counsel and
by consent of their respective trustees or an officer
authorized by such trustees, may waive any condition to their
respective obligations hereunder. If the transactions
contemplated by this Agreement have not been substantially
completed by December 31, 1994, this Agreement shall
automatically terminate on that date unless a later date is
agreed to by the California Fund and the Money Market Fund.
14. RULE 145. Pursuant to Rule 145 under the 1933
Act, the Money Market Fund will, in connection with the
issuance of any Money Market Fund Shares to any person who at
the time of the transaction contemplated hereby is deemed to
be an affiliate of a party to the transaction pursuant to
Rule 145(c), cause to be affixed upon the certificates issued
to such person (if any) a legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT TO PUTNAM TAX
EXEMPT MONEY MARKET FUND OR ITS PRINCIPAL UNDERWRITER
UNLESS (i) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (ii) IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PUTNAM TAX EXEMPT MONEY
MARKET FUND SUCH REGISTRATION IS NOT REQUIRED."
and, further, the Money Market Fund will issue stop transfer
instructions to the Money Market Fund's transfer agent with
respect to such shares. The California Fund will provide the
Money Market Fund on the Exchange Date with the name of any
California Fund shareholder who is to the knowledge of the
California Fund an affiliate of the California Fund on such
date.
15. COVENANTS, ETC. DEEMED MATERIAL . All
covenants, agreements, representations and warranties made
under this Agreement and any certificates delivered pursuant
to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any
investigation made by them or on their behalf.
16. SOLE AGREEMENT; AMENDMENTS . This Agreement
supersedes all previous correspondence and oral
communications between the parties regarding the subject
matter hereof, constitutes the only understanding with
respect to such subject matter, may not be changed except by
a letter of agreement signed by each party hereto, and shall
be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
17. AGREEMENTS AND DECLARATIONS OF TRUST . Copies
of the Agreements and Declarations of Trust of the California
Fund and the Money Market Fund, respectively, are 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
California Fund and the Money Market Fund, respectively, as
trustees and not individually and that the obligations of
this instrument are not binding upon any of the trustees,
officers or shareholders of the California Fund or the Money
Market Fund individually but are binding only upon the assets
and property of the California Fund and the Money Market
Fund, respectively.
This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered,
shall be deemed to be an original.
PUTNAM TAX EXEMPT MONEY MARKET FUND
By: /s/ Gordon H. Silver
Vice President
PUTNAM CALIFORNIA TAX EXEMPT MONEY
MARKET FUND
By: /s/ Gordon H. Silver
Vice President
<PAGE>
PROXY
BALLOT
PUTNAM CALIFORNIA TAX EXEMPT MONEY MARKET FUND
PROXY FOR A MEETING OF
SHAREHOLDERS, June 2, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE
FUND.
The undersigned hereby appoints George Putnam, Hans H. Estin
and William F. Pounds, and each of them separately, proxies,
with power of substitution, and hereby authorizes them to
represent and to vote, as designated below, at the Meeting of
Shareholders of Putnam California Tax Exempt Money Market
Fund on June 2, 1994, at 1:00 P.M., Boston time, and at any
adjournments thereof, all of the shares of the Fund which the
undersigned would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE
SIDE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears on this card. All
joint owners should sign. When signing as executor,
administrator, attorney, trustee or guardian or as custodian
for a minor, please give full title as such, if a corpora-
tion, please sign in full corporate name and indicate the
signer's office. If a partner, sign in the partnership name.
CHANGE OF ADDRESS NOTIFICATION. Please use this form to
inform us of any change in address or telephone number or to
provide us with your comments. Detach this form from the
Proxy Ballot and return it with your executed proxy in the
enclosed envelope.
HAS YOUR ADDRESS CHANGED?
DO YOU HAVE ANY COMMENTS?
Please mark your choice \ x \ in blue or black ink.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL LISTED BELOW.
Dear Shareholder:
YOUR VOTE IS IMPORTANT. Please help us
to eliminate the expense of follow-up mail-
ings
by executing and returning this Proxy as
soon as possible. A postage-paid business
reply envelope is enclosed for your
convenience.
Thank you!
1. Approval of the Agreement and Plan of Reorganization
providing for the transfer of all of the assets of Putnam
California Tax Exempt Money Market Fund (the "Fund") to
Putnam Tax Exempt Money Market Fund (the "Money Market Fund")
in exchange for shares of the Money Market Fund and the
assumption by the Money Market Fund of all of the liabilities
of the Fund, and the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please be sure to sign and date this Proxy.
Shareholder sign here
Co-owner sign here
Date
Please fold at perforation before detaching
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
April 20, 1994
To the Shareholders:
Enclosed you will find several documents being furnished
to you in connection with a meeting of Putnam New York Tax
Exempt Money Market Fund (the "New York Fund") shareholders
to be held June 2, 1994 at 1:00 p.m. in Boston,
Massachusetts. I hope this material will receive your
immediate attention and that, if you cannot attend the
meeting in person, you will vote your proxy promptly.
The Trustees of the Putnam New York Tax Fund
are recommending that shareholders approve a reorganization
of the New York Fund in which your shares of the New York
Fund would, in effect, be exchanged at net asset value for
shares of Putnam Tax Exempt Money Market Fund (the "Money
Market Fund"). Under the proposed plan of reorganization,
the New York Fund will transfer all of its assets to the
Money Market Fund in return for shares of the Money Market
Fund and the assumption by the Money Market Fund of all of
the liabilities of the New York Fund. After the transfer,
the shares of the Money Market Fund will be distributed to
holders of New York Fund shares thereby liquidating the New
York Fund. Both Funds are managed by Putnam Investment
Management, Inc. ("Putnam Management") and have the same
Trustees. You should note that a similar reorganization
involving Putnam California Tax Exempt Money Market Fund (the
"California Fund") and the Money Market Fund is concurrently
being submitted to the Shareholders of the California Fund.
Each Fund seeks as high a level of current income exempt
from federal income tax (and, in the case of the New York
Fund, exempt from New York State and City income tax)
as Putnam Management believes is consistent with maintenance
of liquidity and stability of principal. The principal
difference between the Funds is that the New York Fund
normally invests in tax-exempt securities of issuers
while the Money Market Fund normally invests in tax-exempt
securities of issuers located in various states (including
the District of Columbia). Because of the similarities
between the Funds, the proposed reorganization will not
affect the general strategy or style in which the Portfolio
Manager will manage your investment. Shareholders should
recognize, however, that income distributions received by
them on shares of the Money Market Fund following the
reorganization will not be exempt from New York State and
City income tax.
Putnam Management believes that combining your fund with
the Money Market Fund offers shareholders of the New York
Fund an opportunity to pursue a similar investment objective
with greater economies of scale that, over the longer term,
will result in lower operating expense ratios. Further,
Putnam Management is concerned that if current trends in the
Fund's net asset levels continue, the New York Fund might
soon be burdened with an uneconomically high expense ratio.
YOUR TRUSTEES BELIEVE THAT THE PROPOSED COMBINATION WITH THE
MONEY MARKET FUND IS IN THE BEST INTERESTS OF SHAREHOLDERS
AND RECOMMEND THAT YOU VOTE IN FAVOR OF IT.
The Notice of Meeting of Shareholders and the accompanying
Prospectus/Proxy Statement and form of proxy are enclosed.
Please read them carefully. If you are unable to attend the
meeting in person, we urge you to sign, date and return the
proxy card so that your shares may be voted in accordance
with your instructions.
SINCE THE MEETING IS LESS THAN EIGHT WEEKS AWAY, I URGE
YOU TO GIVE THE ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO
THAT YOUR FUND WILL NOT HAVE TO INCUR THE EXPENSE OF
ADDITIONAL MAILINGS.
Sincerely yours,
George Putnam
Chairman<PAGE>
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
NOTICE OF MEETING OF SHAREHOLDERS
To the Shareholders of Putnam New York Tax Exempt Money
Market Fund
NOTICE IS HEREBY GIVEN that a Meeting of Shareholders (the
"Meeting") of Putnam New York Tax Exempt Money Market Fund
(the "Fund" or the "New York Fund") will be held at One Post
Office Square, 8th Floor, Boston, Massachusetts, on June 2,
1994, at 1:00 p.m., Boston time, for the following purposes:
1. To consider and act upon an Agreement and Plan of
Reorganization providing for the transfer of all of
the assets of the Fund to Putnam Tax Exempt Money
Market Fund (the "Money Market Fund") in exchange for
shares of the Money Market Fund and the assumption by
the Money Market Fund of all of the liabilities of
the Fund, and the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund;
and
2. To transact such other business as may properly come
before the Meeting or any adjournment or adjournments
thereof.
The Trustees have fixed the close of business on March
11, 1994 as the record date for determination of shareholders
entitled to notice of, and to vote at, the Meeting.
Each shareholder who does not expect to attend in person
is requested to date, fill in, sign and return promptly the
enclosed form of proxy.
By the Trustees
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter Robert E. Patterson
Hans H. Estin Donald S. Perkins
John A. Hill George Putnam, III
Elizabeth T. Kennan A.J.C. Smith
Lawrence J. Lasser W. Nicholas
Thorndike
Boston, Massachusetts
April 20, 1994
Your prompt attention to the enclosed form of proxy will
help to avoid the expense of additional mailings.<PAGE>
PROSPECTUS/PROXY STATEMENT
April 6, 1994
Acquisition of the assets of
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
By and in exchange for shares of
PUTNAM TAX EXEMPT MONEY MARKET FUND
One Post Office Square
Boston, Massachusetts 02109
(617) 292-1000
TABLE OF CONTENTS
SYNOPSIS . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . 6
INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . 7
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . 7
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION . 8
INFORMATION ABOUT THE REORGANIZATION . . . . . . . . . 10
VOTING INFORMATION . . . . . . . . . . . . . . . . . . . 12
AGREEMENT AND PLAN OF REORGANIZATION . . . . . . . . . . . .Exhibit A
An investment in the Money Market Fund is neither insured
nor guaranteed by the U.S. Government. There can be no
assurance that the Fund will be able to maintain a stable net
asset value of $1.00 per share.
THIS PROSPECTUS/PROXY STATEMENT RELATES TO THE PROPOSED
TRANSFER OF ALL OF THE ASSETS OF PUTNAM NEW YORK TAX EXEMPT
MONEY MARKET FUND (THE "NEW YORK FUND") TO PUTNAM TAX EXEMPT
MONEY MARKET FUND (THE "MONEY MARKET FUND") IN EXCHANGE FOR
SHARES OF BENEFICIAL INTEREST OF THE MONEY MARKET FUND (THE
"MONEY MARKET FUND SHARES") AND THE ASSUMPTION BY THE MONEY
MARKET FUND OF ALL OF THE LIABILITIES OF THE NEW YORK FUND.
(THE MONEY MARKET FUND AND THE NEW YORK FUND ARE COLLECTIVELY
REFERRED TO HEREIN AS THE "FUNDS", AND EACH IS REFERRED TO
INDIVIDUALLY AS A "FUND"). FOLLOWING THE TRANSFER, THE MONEY
MARKET FUND SHARES RECEIVED BY THE NEW YORK FUND WILL BE
DISTRIBUTED TO SHAREHOLDERS OF THE NEW YORK FUND IN
LIQUIDATION OF THE NEW YORK FUND. AS A RESULT OF THE
PROPOSED TRANSACTION, EACH SHAREHOLDER OF THE NEW YORK FUND
WILL RECEIVE, SUBJECT TO ANY APPLICABLE STATE AND FEDERAL
TAXES, A NUMBER OF FULL AND FRACTIONAL MONEY MARKET FUND
SHARES EQUAL IN VALUE AT THE DATE OF THE EXCHANGE TO THE
AGGREGATE VALUE OF THE SHARES OF THE NEW YORK FUND HELD BY
THE SHAREHOLDER.
NEW YORK FUND SHAREHOLDERS SHOULD NOTE THAT A VIRTUALLY
IDENTICAL REORGANIZATION INVOLVING THE ACQUISITION OF THE
ASSETS OF PUTNAM CALIFORNIA TAX EXEMPT MONEY FUND (THE
"CALIFORNIA FUND") BY THE MONEY MARKET FUND IS CONCURRENTLY
BEING SUBMITTED FOR THE APPROVAL OF THE SHAREHOLDERS OF THE
CALIFORNIA FUND. THE REORGANIZATION INVOLVING THE NEW YORK
FUND IS NOT IN ANY WAY CONTINGENT UPON THE COMPLETION OF THE
REORGANIZATION INVOLVING THE CALIFORNIA FUND.
This Prospectus/Proxy Statement explains concisely what
you should know before investing in the Money Market Fund.
Please read it and keep it for future reference. This
Prospectus/Proxy Statement is accompanied by the Prospectus,
dated February 1, 1994, of the Money Market Fund which
contains information about the Money Market Fund and is
incorporated into this Prospectus/Proxy Statement by
reference.
The following documents have been filed with the
Securities and Exchange Commission and are also incorporated
into this Prospectus/Proxy Statement by reference: (i) the
current Statement of Additional Information of the Money
Market Fund, dated February 1, 1994, (ii) the current
Prospectus and Statement of Additional Information of the New
York Fund, each dated April 1, 1994, (iii) the Report
of Independent Accountants and Financial Statements included
in each Fund's Annual Report to Shareholders for the
1993 fiscal year, and (iv) a Statement of Additional
Information dated April 6, 1994 relating to the transactions
described in this Prospectus/Proxy Statement. For a free
copy of any or all of these Prospectuses , Statements of
Additional Information or Reports, call Putnam Investor
Services at 1-800-225-1581. Proxy materials, information
statements and other information filed by the registrant can
be inspected and copied at the Public Reference Facilities
maintained by the Securities and Exchange Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. Copies of
such material can also be obtained from the Public Reference
Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549 at
prescribed rates.
THE SECURITIES OFFERED BY THE ACCOMPANYING
PROSPECTUS/PROXY STATEMENT 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 SUCH PROSPECTUS/PROXY
STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
SHARES OF THE MONEY MARKET FUND 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.<PAGE>
SYNOPSIS
Proposed Transaction. The Trustees of the New York Fund
have approved an Agreement and Plan of Reorganization
providing for the transfer of all of the assets of the New
York Fund to the Money Market Fund in exchange for the
assumption by the Money Market Fund of all of the liabilities
of the New York Fund and for a number of Money Market Fund
Shares equal in value to the value of the net assets of the
New York Fund transferred to the Money Market Fund.
Following the transfer, the New York Fund will distribute the
Money Market Fund Shares received by it to its shareholders
of record, in complete liquidation of the New York Fund. A
small amount of gain or loss may be recognized for federal
income tax purposes by the New York Fund and its shareholders
as a result of the reorganization. See "Information About
the Reorganization -- Federal Income Tax Consequences."
For the reasons set forth below under "Background and
Reasons for the Proposed Reorganization", the Funds'
Trustees, including the Trustees who are not interested
persons of either Fund (the "Independent Trustees"), have
concluded that the interests of the Funds' existing
shareholders will not be diluted as a result of the
transactions contemplated by the reorganization and that the
reorganization would be in the best interests of the Funds'
shareholders . The Trustees recommend approval of the
reorganization. The Money Market Fund and the New York Fund
have the same Trustees.
In addition, the Trustees of the Putnam California Tax
Exempt Money Market Fund (the "California Fund"), which are
also the Trustees of the Funds, have approved a similar
reorganization of the Money Market Fund and the California
Fund (also sometimes referred to as a "Fund") which is
concurrently being submitted for the approval of the
shareholders of the California Fund. As a result of this
additional proposed reorganization, this Prospectus/Proxy
Statement in certain sections describes the consequences of
combining the assets of all three Funds on a pro-forma basis.
However, the reorganization is not in any way contingent upon
the completion of the reorganization involving the California
Fund.
CERTAIN TAX CONSEQUENCES RELATING TO THE REORGANIZATION.
The reorganization is expected to be a taxable transaction
for the New York Fund and its shareholders. As a result, New
York Fund shareholders acquiring Money Market Fund Shares in
the transaction may realize a small amount of taxable gain
or loss which will be reflected in their distribution
for the month in which the reorganization occurs. See
"Information About the Reorganization -- Federal Income Tax
Consequences." In addition, following the reorganization,
New York Fund shareholders will receive distributions with
respect to their Money Market Fund Shares which are not
exempt from New York State and City income tax.
INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS. The New
York Fund and the Money Market Fund are both money market
funds with similar investment objectives and similar
investment policies except as described below. Each Fund
seeks as high a level of current income exempt from federal
income tax (and, in the case of the New York Fund, from New
York State and City income tax) as Putnam Management
believes is consistent with maintenance of liquidity and
stability of principal. The New York Fund primarily invests
in short-term, high quality, New York Tax Exempt Securities
(as defined below). It is a fundamental policy of the New
York Fund that at least 90% of the Fund's income
distributions normally will be exempt from both federal and
New York State and City income tax. The Money
Market Fund follows the fundamental policy of normally
investing at least 80% of its assets in short-term "Tax
Exempt Securities". Although the Funds have adopted slightly
different percentage policies with respect to investment in
securities generating income which is exempt from federal
income tax (and New York State and City income tax in the
case of the New York Fund), in practice each Fund is managed
such that all of its income distributions ordinarily will be
exempt from federal income tax (and New York State and City
income tax in the case of the New York Fund).
"Tax Exempt Securities" are debt obligations issued by a
state (including the District of Columbia), a territory or a
United States possession, or any of their political
subdivisions, the interest from which is, in the opinion of
bond counsel, exempt from federal tax. "New York Tax Exempt
Securities" are the same such securities, the interest of
which is also, in the opinion of bond counsel, exempt from
New York state and local personal income tax. Each Fund
invests in the following 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 meet
Fund's quality standards.
The Funds invest only in high-quality Tax Exempt
Securities and 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
Funds maintain a dollar-weighted average maturity of 90 days
or less and do not invest in securities with remaining
maturities of more than 397 days. The Funds may invest in
variable or floating-rate 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. The Funds follow investment and
valuation policies designed to maintain a stable net asset
value of $1.00 per share. However, there can be no assurance
that the Fund will be able to maintain a stable net asset
value of $1.00 per share.
The principal difference between the Funds is that the New
York Fund normally invests so that at least 90% of the New
York Fund's income distributions normally will be exempt from
both federal income tax and New York State and City
personal income tax while the Money Market Fund's
distributions normally will be exempt only from federal
income tax. Because of the relatively small number of
issuers of New York Tax Exempt Securities, the New York Fund
is more likely to invest a higher percentage of its assets in
the securities of a single issuer than the Money Market Fund,
which invests in a broad range of tax exempt securities.
Despite these differences, the securities currently held
by the New York Fund are substantially similar in kind to
those securities currently held by the Money Market Fund.
Because both Funds have comparable investment objectives,
similar investment policies and currently invest in certain
of the same issues, the reorganization will not affect the
general strategy or style in which the merged Money Market
Fund will be managed. Shareholders should recognize,
however, that income distributions received by them on shares
of the Money Market Fund following the reorganization will
not be exempt from New York State or City income tax.
MANAGEMENT FEES AND OTHER EXPENSES. Both Funds pay a
quarterly fee to Putnam Management based on their respective
average net assets, as determined at the close of business
each day during the quarter, at an annual rate of .45% of the
first $500 million of average net assets, .35% of the next
$500 million, .30% of the next $500 million and .25% of any
amount over $1.5 billion. This would result in an effective
fee rate of .45% based on combined average net assets of the
Funds (including the California Fund) of approximately
$177.4 million at January 31, 1994. Each of the Funds
currently pays management fees at the rate of .45%. Because
it does not project such combined asset levels to increase
beyond $500 million, Putnam Management has advised the
Trustees that it expects the effective management fee rate
paid by the Money Market Fund would not change following the
proposed reorganization.
The Funds have adopted identical distribution plans
pursuant to Rule 12b-1 under the Investment Company Act of
1940 to permit the Funds to compensate Putnam Mutual Funds
Corp. ("Putnam Mutual Funds") by paying it a fee at an annual
rate of up to 0.35% of the Fund's average net assets for
services provided and expenses incurred by it in promoting
the sale of shares of the Funds, reducing redemptions, or
maintaining or improving services provided to shareholders by
Putnam Mutual Funds or dealers. The Trustees had previously
authorized payments under each Fund's plan at an annual rate
of up to 0.10% of average net assets. However, the Trustees
have terminated payments under each Fund's distribution plan
effective January 1, 1994 . See "Distribution Plans" in the
enclosed Money Market Fund Prospectus for a detailed
description of the distribution plan.
Based on expenses for the month ended January 31, 1994,
Putnam Management estimates that the Money Market Fund's
total annual fund operating expenses are currently .94% of
average net assets, reflecting the termination of
distribution plan payments effective January 1, 1994. Based
on expenses for the month ended January 31, 1994, Putnam
Management estimates that the New York Fund's total annual
fund operating expenses are currently 0.79% of average net
assets, reflecting the termination of distribution plan
payments effective January 1, 1994. Following the
reorganization, the total annual operating expenses of the
Money Market Fund are expected to be 0.83% of average net
assets on a pro forma basis, assuming the acquisition by the
Money Market Fund of the assets of both of the New York and
California Funds and excluding costs of the reorganization
itself. Total annual operating expenses of the Money Market
Fund following the reorganization are expected to be 0.85% on
a pro forma basis, assuming the acquisition of the assets of
only the New York Fund.
OPERATING PROCEDURES. The procedures for purchasing and
redeeming shares of the New York Fund and shares of the Money
Market Fund, and for exchanging such shares of each Fund for
shares of other Putnam funds, are identical and are described
in detail in the enclosed Money Market Fund Prospectus.
<PAGE>
RISK FACTORS
An Investment in the Funds is neither insured nor
guaranteed by the U.S. Government. Although the Funds'
investment policies are designed to maintain a
net asset value of $1.00 per share , there can be no
assurance that these policies will be successful .
However, because the Money Market Fund and the New York Fund
(but for the New York Fund's pursuit of income exempt from
New York State and City income tax) share comparable
investment objectives and very similar investment policies,
the risks of an investment in the Money Market Fund are
similar to the risks of an investment in the New York Fund,
except as provided below. The market value of the Funds'
investments will be affected by general changes in interest
rates resulting in increases or decreases in the value of the
obligations held by the Funds. Withdrawals by
shareholders could require the sale of portfolio investments
at a time when such a sale might not otherwise be desirable.
Since the New York Fund's portfolio investments generally
emphasize Tax Exempt Securities of New York issuers, the
value of its shares may be especially affected by factors
pertaining to the New York economy and other factors
specifically affecting the ability of issuers of such
securities to meet their obligations. The Money Market Fund,
on the other hand, may take full advantage of the entire
range of short-term high-quality Tax Exempt Securities.
<PAGE>
INTRODUCTION
This Prospectus/Proxy Statement is furnished in connection
with the proposed reorganization of Putnam New York Tax
Exempt Money Market Fund (the "New York Fund") by the
transfer of all of its assets and liabilities to Putnam Tax
Exempt Money Market Fund (the "Money Market Fund") and the
solicitation of proxies by and on behalf of the Trustees of
the New York Fund for use at the Meeting of Shareholders.
The Meeting is to be held on June 2, 1994 at 1:00 p.m. at One
Post Office Square, 8th Floor, Boston, Massachusetts. This
Prospectus/Proxy Statement and the enclosed form of proxy are
being mailed to shareholders on or about April 20 ,
1994.
Any shareholder giving a proxy has the power to revoke it
by mail (addressed to the New York Fund's Clerk at the
principal office of the New York Fund, One Post Office
Square, Boston, Massachusetts 02109) or in person at the
Meeting , by executing a superseding proxy, or by
submitting a notice of revocation to the New York Fund. All
properly executed proxies received in time for the meeting
will be voted as specified in the proxy, or, if no
specification is made, FOR the proposal (set forth in item
(1) of the Notice of Meeting) to implement the reorganization
of the New York Fund by the transfer of all of its assets to
the Money Market Fund in exchange for Money Market Fund
Shares and the assumption by the Money Market Fund of all of
the liabilities of the New York Fund.
At March 11, 1994 there were outstanding 53,999,106 shares
of beneficial interest of the New York Fund. Only
shareholders of record on March 11, 1994 will be entitled to
notice of and to vote at the meeting. Each share is entitled
to one vote, with fractional shares voting proportionally.
The New York Fund's Trustees know of no matters other than
those set forth herein to be brought before the meeting. If,
however, any other matters properly come before the meeting,
it is the Trustees' intention that proxies will be voted on
such matters in accordance with the judgment of the persons
named in the enclosed form of proxy.
In addition, shareholders of the New York Fund should note
that the Trustees of Putnam California Tax Exempt Money
Market Fund (the "California Fund," sometimes also referred
to as a "Fund"), which are the same as the Trustees of the
Funds, have approved a similar reorganization of the Money
Market Fund and the California Fund which is concurrently
being submitted for the approval of the shareholders of the
California Fund. As a result of this additional proposed
reorganization, this Prospectus/Proxy Statement in certain
sections describes the consequences of combining the assets
of all three Funds on a pro forma basis. The reorganization
involving the New York Fund is not in any way contingent on
the completion of the reorganization involving the California
Fund.
PROPOSAL REGARDING APPROVAL OR DISAPPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
The shareholders of the New York Fund are being asked to
approve or disapprove the Agreement and Plan of
Reorganization by and between the Money Market Fund and the
New York Fund, dated as of December 3, 1993 (the
"Agreement"), a copy of which is attached to this
Prospectus/Proxy Statement as Exhibit A. The Agreement
provides, among other things, for the transfer of all of the
assets of the New York Fund to the Money Market Fund in
exchange for the assumption by the Money Market Fund of all
of the liabilities of the New York Fund and for a number of
Money Market Fund Shares, calculated based on the value of
the net assets of the New York Fund acquired by the Money
Market Fund and the net asset value per share of the Money
Market Fund, all as more fully described below under
"Information about the Reorganization". After receipt of the
Money Market Fund Shares, the New York Fund will cause the
Money Market Fund Shares to be distributed to its
shareholders in complete liquidation of the New York Fund and
the legal existence of the New York Fund as a separate
business trust under Massachusetts law will be terminated.
In addition, the New York Fund will file an application for
deregistration under Section 8(f) of the Investment Company
Act of 1940.
Prior to the date of the transfer (the "Exchange Date"),
the New York Fund will declare a distribution to shareholders
which, together with all previous distributions, will have
the effect of distributing to shareholders all of its
investment company taxable income and net realized capital
gains, if any, through the Exchange Date.
The Trustees of the New York Fund have voted unanimously
to approve the proposed transaction and to recommend that
shareholders also approve the transaction. The affirmative
vote of two-thirds (66 2/3%) of the outstanding shares of
beneficial interest of the New York Fund that are entitled to
be voted at the Meeting is necessary for the consummation of
the proposed transaction. The Money Market Fund and the New
York Fund have the same Trustees.
A shareholder of the New York Fund objecting to the
proposed transaction is not entitled under either
Massachusetts law or the Agreement and Declaration of Trust
to demand payment for and an appraisal of his or her New York
Fund shares if the transaction is consummated over his or her
objection. Like shares of the New York Fund, shares of the
Money Market Fund are redeemable for cash at their net asset
value on any day on which the New York Stock Exchange is
open.
In the event that this proposal is not approved by the
shareholders of the New York Fund, the New York Fund will
continue to be managed as a separate fund in accordance with
its current investment objectives and policies, and the
Trustees may consider such alternatives as may be in the best
interests of the shareholders.
BACKGROUND AND REASONS FOR THE PROPOSED REORGANIZATION
The Trustees of each of the Money Market Fund and the New
York Fund, including all Trustees who are not "interested
persons" of the Money Market Fund and the New York Fund, have
determined that the reorganization would be in the best
interests of each Fund's shareholders, and that the interests
of existing shareholders of each of the Funds would not be
diluted as a result of effecting the reorganization. The
Trustees have unanimously approved the proposed
reorganization and have recommended its approval by
shareholders.
The principal reasons why the Trustees are recommending
the reorganization are:
(1) ECONOMIES OF SCALE . Putnam Management
believes the proposed reorganization over the longer-term
will achieve economies of scale for the shareholders of the
New York Fund by permitting them to invest in a substantially
larger fund with a similar investment objective and
investment policies. Such economies of scale are not
expected to have an immediate positive impact on shareholders
of the New York Fund. However, given the small size and
declining asset base of the New York Fund, Putnam Management
believes that New York Fund shareholders eventually will
benefit from lower operating expenses.
Based upon the projections of Putnam Management, the
Trustees believe that immediately following the combination
of the Funds (and the proposed concurrent combination of the
California Fund into the Money Market Fund) the expense ratio
of the Money Market Fund will be slightly higher than the
expenses the New York Fund would likely incur if the
combination were not effected. Putnam Management has advised
the Trustees that it expects, based on the projected relative
sizes of the two Funds, that the management fees paid by the
Money Market Fund after the proposed reorganization would
likely remain stable at the effective rate of 0.45% of
average net assets. Putnam Management also estimates that
the total annual expense rate of 0.79% of average net assets
currently paid by shareholders of the New York Fund would
increase to 0.83% of average net assets after the
contemplated reorganization, assuming average net assets of
$177,444,844 for the Money Market, New York and California
Funds combined (and to 0.85% of average net assets, assuming
average net assets of $126,985,018 for the Money Market and
New York Funds combined).
Notwithstanding these expense projections based on net
asset levels as of January 31, 1994, Putnam Management has
advised the Trustees that over the longer-term it expects
there will be expense benefits for New York Fund shareholders
as a result of the reorganization because of the New York
Fund's declining asset base. The New York Fund experienced
net redemptions of $7.2 million (equivalent to nearly
14% of the Fund's total assets at the end of the year)
for the fiscal year ended November 30, 1993. Putnam
Management believes that such redemptions of New York Fund
shares are in large measure a consequence of the historically
low yields of short-term New York Tax Exempt Securities under
current interest rate conditions. Putnam Management does not
expect these conditions to change significantly in the near
future. As a result, Putnam Management believes that the New
York Fund likely will not experience substantial asset growth
in the near term and may in fact continue to experience a
high level of redemptions. If such redemptions continue and
the Fund is not combined with the Money Market Fund, total
operating expenses could increase significantly and yields
would decline commensurately as existing economies of scale
are lost.
(2) PERFORMANCE BENEFITS . Putnam Management
believes that the economies of scale expected to be realized
over the longer-term as a result of the reorganization and
other factors relating to the small size of the New York Fund
will result in long-term performance benefits for New York
Fund shareholders acquiring Money Market Fund Shares pursuant
to the reorganization. The annualized yield net of expenses
for both the New York Fund and the Money Market Fund for the
thirty-day period ended January 31, 1994 was 1.74%. The
annualized yield net of expenses for the combined Funds on a
pro-forma basis was 1.85% (1.83% excluding the assets of the
California Fund) based on results for the month ending
January 31, 1994. The annualized tax-equivalent yield
(assuming the maximum marginal tax rates) for the New York
Fund, the Money Market Fund and the three combined Funds on a
pro-forma basis was 3.12%, (3.28% including the effect
of exemption from New York City income tax), 2.88% and 3.06%
(3.03% excluding the assets of the California Fund),
respectively, based on results for the month ending
January 31, 1994. The New York Fund's higher tax-equivalent
yield reflects the fact that New York Fund distributions are
exempt from both federal and New York state personal income
taxes for New York shareholders while Money Market Fund
distributions are subject to New York and other relevant
state income taxation.
Notwithstanding the current tax-equivalent
yield advantage of the New York Fund, Putnam Management
expects that over the longer-term the combined Funds would
realize performance advantages over the New York Fund if the
reorganization were not implemented as a result of the
projected long-term higher operating expenses of the New York
Fund and the investment management limitations inherent in a
portfolio with a steadily declining asset base. Putnam
Management believes that it is unlikely that the New
York Fund will be able to maintain a sufficient net asset
level to achieve competitive investment returns over the
long-term.
<PAGE>
INFORMATION ABOUT THE REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION . The proposed
Agreement and Plan of Reorganization provides that the Money
Market Fund will acquire all of the assets of the New York
Fund in exchange for the assumption by the Money Market Fund
of all of the liabilities of the New York Fund and for the
issuance of shares of the Money Market Fund, all as of the
Exchange Date (defined in the Agreement to be the next full
business day following the Valuation Time, defined in the
Plan as 4:00 p.m. Boston time on June 3 , 1994 or such
other date as may be agreed upon by the parties). The
following discussion of the Agreement is qualified in its
entirety by the full text of the Agreement, which is attached
as Exhibit A to this Prospectus/Proxy Statement.
The New York Fund will sell all of its assets to the Money
Market Fund, and in exchange, the Money Market Fund will
assume all of the liabilities of the New York Fund and
deliver to the New York Fund a number of full and fractional
shares of the Money Market Fund having an aggregate net asset
value equal to the value of assets of the New York Fund
transferred to the Money Market Fund, less the value of the
liabilities of the New York Fund assumed by the Money Market
Fund attributable to shares of the Money Market Fund.
As a result of the proposed transaction, each shareholder
of the New York Fund will receive that number of full and
fractional Money Market Fund shares equal in aggregate value
at the Exchange Date to the value of the shares of the New
York Fund held by the shareholder. It is expected that the
shares of the Funds will effectively be exchanged on a one-
for-one basis since each Fund normally maintains a stable net
asset value of $1.00 per share. Portfolio securities of the
Money Market Fund will be valued in accordance with the
amortized cost method of valuation described under "How the
Fund values its shares" in the enclosed Money Market Fund
Prospectus. For purposes of the Reorganization, Portfolio
securities of the Money Market Fund will be valued at
fair market value pursuant to procedures which the Money
Market Fund would use for such valuation in determining the
fair market value of the Money Market Fund's assets as if the
assets were to be purchased or sold on a given
day. It is expected that the reorganization will be
accounted for as a taxable transaction as described more
fully below under "Federal Income Tax Consequences." The
Trustees of the New York Fund have determined that the
interests of the New York Fund's shareholders will not be
diluted as a result of the transactions contemplated by the
reorganization, and the Trustees of both Funds have
determined that the proposed reorganization is in the best
interests of each Fund.
Immediately following the Exchange Date, the New York Fund
will distribute pro rata to its shareholders of record as of
the close of business on the Exchange Date the full and
fractional Money Market Fund shares received by the New York
Fund. Such liquidation and distribution will be accomplished
by the establishment of accounts on the share records of the
Money Market Fund in the name of such New York Fund
shareholders, each account representing the respective number
of full and fractional Money Market Fund shares due such
shareholder.
The consummation of the reorganization is subject to the
conditions set forth in the Agreement. The Agreement may be
terminated and the reorganization abandoned at any time,
before or after approval by the shareholders, prior to the
Exchange Date by mutual consent of the Money Market Fund and
the New York Fund or, if any condition set forth in the
Agreement has not been fulfilled and has not been waived by
the party entitled to its benefits, by such party.
All fees and expenses, including legal and accounting
expenses, portfolio transfer taxes (if any) or other similar
expenses incurred in connection with the consummation of the
transactions contemplated by the Agreement will be allocated
ratably between the two Funds in proportion to their net
assets as of the day of the transfer, except that the costs
of proxy materials and proxy solicitations will be borne by
the New York Fund. However, to the extent that any payment
by the Money Market Fund of such fees or expenses would
result in the disqualification of the Money Market Fund or
the New York Fund as a "regulated investment company" within
the meaning of Section 851 of the Internal Revenue Code of
1986, as amended (the "Code"), such fees and expenses will be
paid directly by the party incurring them.
DESCRIPTION OF SHARES. Full and fractional shares
of the Money Market Fund will be issued to the New York
Fund's shareholders in accordance with the procedure under
the Agreement as described above. Shares of the Money Market
Fund are not subject to any sales charges, redemption fees
and, at present, any payments under its distribution plan.
Each share of the Money Market Fund will be fully paid and
nonassessable when issued, will be transferable without
restriction, and will have no preemptive or conversion
rights. Like that of the New York Fund, the Money Market
Fund's Agreement and Declaration of Trust permits the Fund to
divide its shares, without shareholder approval, into two or
more series of shares representing separate investment
portfolios and to further divide any such series, without
shareholder approval, into two or more classes of shares
having such preferences and special or relative rights and
privileges as the Trustees may determine. Neither Fund's
shares are presently divided into series.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations
of the Money Market Fund. However, the Agreement and
Declaration of Trust disclaims shareholder liability for acts
or obligations of the Money Market Fund and requires that
notice of such disclaimer be given in each agreement,
obligation, or instrument entered into or executed by the
Money Market 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 Money Market
Fund. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to
circumstances in which the Money Market Fund would be unable
to meet its obligations. The likelihood of such
circumstances is remote. The shareholders of the New York
Fund are currently subject to this same risk of shareholder
liability.
FEDERAL INCOME TAX CONSEQUENCES. Because the New
York Fund's portfolio manager will be disposing of
certain assets in order to hold investments appropriate to
the combined Funds, it is expected that the reorganization
will be a taxable transaction under the Code. As a
consequence, (i) the New York Fund will recognize a gain or
loss, if any, upon the disposition of its assets in
the reorganization, (ii) the shareholders of the New York
Fund may recognize a gain or a loss upon the exchange of
their shares for Money Market Fund Shares, (iii) the basis of
Money Market Shares received by New York Fund shareholders in
place of their New York Fund shares will be the net asset
value of such Money Market Shares on the Valuation Date, and
(iv) the holding period for determining whether Money Market
Shares received in connection with the reorganization are a
capital asset will commence on the Exchange Date
Each of the Funds normally values its assets according to
the amortized cost method of valuation described in the
enclosed Money Market Fund Prospectus . This valuation
method disregards minor unrealized gains or losses resulting
from fluctuating market prices of the Fund's investments in
order to permit a Fund to maintain a stable daily net asset
value of $1.00 per share. However, for purposes of the
Reorganization, the assets of the New York Fund will be
valued at fair market value and any such gains or losses in
the Fund's portfolio would be realized as of the time of the
Reorganization. Any difference between fair market value and
amortized cost will be reflected in the Fund's accrued but
unpaid dividend account for that month consistent with the
Fund's Agreement and Declaration and Trust and with the
provisions of the Code governing regulated investment
companies. It is currently expected that any gains which may
be realized by New York Fund shareholders as a result of the
Reorganization would be very small relative to the value of
their shares.
<TABLE>
<CAPTION>
CAPITALIZATION . The following tables show the capitalization of the Money
Market Fund and the New York Fund as of January 31, 1994 and on a pro forma basis as
of that date, giving effect to the proposed acquisition of assets at net asset value:
(UNAUDITED)
The Money New York California Pro Forma Pro Forma
Market Fund Fund Fund Combined(1) Combined(2)
<S> <C> <C> <C> <C> <C>
Net assets $68,635 $45,203 $43,473 $157,311 $113,838
(000's omitted)
Shares outstanding 68,535 45,203 43,473 157,311 113,838
(000's omitted)
Net asset value per share $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
_______________
<FN>
(1) Reflects combination of the Money Market, California and New York Funds.
(2) Reflects the combination of the Money Market and New York Funds.
</FN>
</TABLE>
Unaudited pro forma financial statements of the Funds as
of and for the period ended September 30, 1993 are included
in the Statement of Additional Information. Because the
Agreement provides that the Money Market Fund will be the
surviving fund following the reorganization and because the
Money Market Fund's investment objective and policies will
remain unchanged, the pro forma financial statements reflect
the transfer of the assets and liabilities of the California
Fund and the New York Fund to the Money Market Fund as
contemplated by the Agreement and the proposed combination of
the California Fund with the Money Market Fund.
VOTING INFORMATION
Proxies are being solicited from the New York Fund's
shareholders by the Trustees for the Meeting of Shareholders
to be held on June 2, 1994 at 1:00 p.m., at One Post Office
Square, 8th Floor, Boston, Massachusetts, or at such later
time made necessary by adjournment. A proxy may be revoked
at any time at or before the Meeting by oral or written
notice to Beverly Marcus, Clerk of the Fund, c/o Putnam New
York Tax Exempt Money Market Fund , One Post Office Square,
Boston, Massachusetts 02109 or as otherwise described in the
"Introduction" above. Unless revoked, all valid proxies will
be voted in accordance with the specification thereon or, in
the absence of specifications, FOR approval of the Agreement
and Plan of Reorganization. The transactions contemplated by
the Agreement and Plan of Reorganization will be consummated
only if approved by the affirmative vote of the holders of at
least two-thirds (66 2/3%) of the outstanding shares of the
New York Fund that are entitled to vote thereon at the
Meeting. In the event the shareholders do not approve the
reorganization, the Money Market Fund's Trustees will
consider possible alternative arrangements in the best
interests of the Money Market Fund and its shareholders.
Proxies are being solicited by mail. Additional
solicitations may be made by telephone, telegraph, or
personal contact by officers or employees of Putnam
Management and its affiliates or by proxy soliciting firms
retained by the New York Fund or the Money Market Fund. The
New York Fund may also arrange to have votes recorded by
telephone. If this procedure were subject to a successful
legal challenge, such votes would not be counted at the
meeting. The New York Fund has retained at its expense
Tritech Services, Four Corporate Place, Corporate Park 287,
Piscataway, New Jersey 08854, to aid in the solicitation of
proxies for a fee not to exceed $7,800 plus reasonable out-
of-pocket expenses.
Shareholders of record of the New York Fund at the close
of business on March 11, 1994 (the "record date") will be
entitled to vote at the Meeting or any adjournment thereof.
The holders of 30% of the shares of the New York Fund
outstanding at the close of business on the record date
present in person or represented by proxy will constitute a
quorum for the Meeting; however, as noted above, the
affirmative vote of at least two-thirds (66 2/3%) of the
shares outstanding at the close of business on the record
date is necessary to approve the reorganization.
Shareholders are entitled to one vote for each share held,
with fractional shares voting proportionally.
Votes cast by proxy or in person at the meeting will be
counted by persons appointed by the New York Fund as tellers
for the meeting. The tellers will count the total number of
votes cast "for" approval of the proposal for purposes of
determining whether sufficient affirmative votes have been
cast. The tellers will count shares represented by proxies
that reflect abstentions and "broker non-votes" (i.e., shares
held by brokers or nominees as to which (i) instructions have
not been received from the beneficial owners or the persons
entitled to vote and (ii) the broker or nominee does not have
the discretionary voting power on a particular matter) as
shares that are present and entitled to vote on the matter
for purposes of determining the presence of a quorum.
Abstentions and broker non-votes have the effect of a
negative vote on the proposal.
As of March 11, 1994 as shown on the books of the
New York Fund, there were issued and outstanding
53,999,106 shares of beneficial interest of the New
York Fund. As of February 28, 1994, the officers and
Trustees of the New York Fund as a group beneficially owned
less than 1% of the outstanding shares of the New York Fund.
At February 28, 1994, to the best of the knowledge of
the New York Fund, no person owned beneficially 5% or more of
the outstanding shares of the New York Fund.
The votes of the shareholders of the Money Market Fund are
not being solicited, since their approval or consent is not
necessary for this transaction. As of February 28,
1994, the officers and Trustees of the Money Market Fund as a
group beneficially owned less than 1% of the outstanding
shares of the Money Market Fund. At February 28, 1994, to
the best of the knowledge of the Money Market Fund, no person
beneficially owned 5% or more of the outstanding shares of
the Money Market Fund.
THE BOARD OF TRUSTEES OF PUTNAM NEW YORK TAX EXEMPT MONEY
MARKET FUND, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS APPROVAL OF THE PLAN.<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the
"Agreement") is made as of December 3, 1993 in Boston,
Massachusetts, by and between Putnam Tax Exempt Money Market
Fund, a Massachusetts business trust (the "Money Market
Fund"), and Putnam New York Tax Exempt Money Market Fund, a
Massachusetts business trust (the "New York
Fund")(collectively, the "Funds").
PLAN OF REORGANIZATION
(a) The New York Fund will sell, assign, convey, transfer
and deliver to the Money Market Fund on the Exchange Date (as
defined in Section 7) all of its properties and assets
existing at the Valuation Time. In consideration therefor,
the Money Market Fund shall, on the Exchange Date, assume all
of the liabilities of the New York Fund existing at the
Valuation Time and deliver to the New York Fund, a number of
full and fractional shares of beneficial interest of the
Money Market Fund ("Money Market Fund Shares") having an
aggregate net asset value equal to the value of assets of the
New York Fund attributable to shares of the New York Fund
transferred to the Money Market Fund on such date less the
value of the liabilities of the New York Fund attributable to
shares of the New York Fund assumed by the Money Market Fund
on that date.
(b) Upon consummation of the transactions described in
paragraph (a) of this Plan, the New York Fund shall
distribute in complete liquidation to its shareholders of
record as of the Exchange Date the Money Market Fund Shares,
each shareholder being entitled to receive that proportion of
such Money Market Fund Shares which the number of shares of
beneficial interest of the New York Fund held by such
shareholder bears to the number of shares of the New York
Fund outstanding on such date.
(c) As promptly as practicable after the liquidation of
the New York Fund as aforesaid, the New York Fund shall be
dissolved pursuant to the provisions of its Agreement and
Declaration of Trust, as amended, and applicable law, and its
legal existence terminated.
(d) It is intended that the reorganization described in
this Plan shall be a taxable transaction under the Internal
Revenue Code of 1986, as amended (the "Code").
AGREEMENT
The Money Market Fund and the New York Fund agree as
follows:
1. REPRESENTATIONS AND WARRANTIES OF THE MONEY MARKET
FUND . The Money Market Fund represents and warrants to
and agrees with the New York Fund that:
(a) The Money Market Fund is a business trust duly
established and validly existing under the laws of The
Commonwealth of Massachusetts and has power to own all of its
properties and assets and to carry out its obligations under
this Agreement. The Money Market Fund is not required to
qualify as a foreign association in any jurisdiction. The
Money Market Fund has all necessary federal, state and local
authorizations to carry on its business as now being
conducted and to carry out this Agreement.
(b) The Money Market Fund is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"),
as an open-end management investment company, and such
registration has not been revoked or rescinded and is in full
force and effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and
schedules of investments (indicating their market values) of
the Money Market Fund for the year ended September 30, 1993,
such statements and schedules having been audited by
independent accountants, have been furnished to the New York
Fund. Such statements of assets and liabilities and
schedules fairly present the financial position of the Money
Market Fund as of their dates and said statements of
operations and changes in net assets fairly reflect the
results of its operations and changes in net assets for the
periods covered thereby in conformity with generally accepted
accounting principles.
(d) Post-Effective Amendment No. 9 (File No. 811-
5215) to the Registration Statement of the Money Market Fund
under the 1940 Act, to be filed with the Securities
and Exchange Commission (the "Commission") on January
27, 1992, to be furnished to the New York Fund upon
filing, will not contain any untrue statement of a
material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein
not misleading.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the Money Market
Fund, threatened against the Money Market Fund which assert
liability on the part of the Money Market Fund.
(f) There are no material contracts outstanding to which
the Money Market Fund is a party, other than as will be
disclosed in the Proxy Statement.
(g) The Money Market Fund has no known liabilities of a
material nature, contingent or otherwise, other than those
shown as belonging to it on its statement of assets and
liabilities as of September 30, 1993 and those incurred in
the ordinary course of the Money Market Fund's business as an
investment company since September 30, 1993.
(h) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by the Money Market Fund of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the Securities Exchange Act of
1934, as amended (the "1934 Act"), the 1940 Act, state
securities or blue sky laws (which term as used herein shall
include the laws of the District of Columbia and of
Puerto Rico) or the Hart-Scott-Rodino Antitrust Improvements
Act of 1976 (the "H-S-R Act").
(i) The registration statement (the "Registration
Statement") filed with the Commission by the Money Market
Fund on Form N-14 relating to the Money Market Fund Shares
issuable hereunder, and the proxy statement of the New York
Fund included therein (the "Proxy Statement"), on the
effective date of the Registration Statement (i) will comply
in all material respects with the provisions of the 1933 Act,
the 1934 Act and the 1940 Act and the rules and regulations
thereunder and (ii) will not contain any untrue statement of
a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein
not misleading; and at the time of the shareholders' meeting
referred to in Section 8(a) and at the Exchange Date, the
prospectus contained in the Registration Statement of which
the Proxy Statement is a part (the "Prospectus"), as amended
or supplemented by any amendments or supplements filed with
the Commission by the New York Fund, will not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements therein not misleading; provided,
however, that none of the representations and warranties in
this subsection shall apply to statements in or omissions
from the Registration Statement, the Prospectus or the Proxy
Statement made in reliance upon and in conformity with
information furnished by the New York Fund for use in the
Registration Statement, the Prospectus or the Proxy
Statement.
(j) All of the issued and outstanding shares of
beneficial interest of the Money Market Fund have been
offered for sale and sold in conformity with all applicable
federal securities laws.
(k) The Money Market Fund is and will at all times
through the Exchange Date qualify for taxation as a
"regulated investment company" under Sections 851 and 852 of
the Code.
(l) The issuance of the Money Market Fund Shares pursuant
to this Agreement will be in compliance with all applicable
federal securities laws.
(m) The Money Market Fund shares to be issued to the New
York Fund have been duly authorized and, when issued and
delivered pursuant to this Agreement, will be legally and
validly issued and will be fully paid and nonassessable by
the Money Market Fund, and no shareholder of the Money Market
Fund will have any preemptive right of subscription or
purchase in respect thereof.
2. REPRESENTATIONS AND WARRANTIES OF THE NEW YORK
FUND . The New York Fund represents and warrants to and
agrees with the Money Market Fund that:
(a) The New York Fund is a business trust duly
established and validly existing under the laws of The
Commonwealth of Massachusetts and has power to carry on its
business as it is now being conducted and to carry out this
Agreement. The New York Fund is not required to qualify as a
foreign association in any jurisdiction. The New York Fund
has all necessary federal, state and local authorizations to
own all of its properties and assets and to carry on its
business as now being conducted and to carry out this
Agreement.
(b) The New York Fund is registered under the 1940 Act as
an open-end management investment company and such
registration has not been revoked or rescinded and is in full
force and effect.
(c) A statement of assets and liabilities, statements of
operations, and statements of changes in net assets and
schedules of investments (indicating their market values) of
the New York Fund for the fiscal year ended November 30,
1993, such statements and schedules having been audited by
Coopers & Lybrand, independent accountants, have been
furnished to the Money Market Fund. Such statements of
assets and liabilities and schedules fairly present the
financial position of the New York Fund as of their dates,
and said statements of operations and changes in net assets
fairly reflect the results of its operations and changes in
financial position for the periods covered thereby in
conformity with generally accepted accounting principles.
(d) Post-Effective Amendment No. 6 (File No. 811-5355) to
the Registration Statement of the New York Fund under the
1940 Act, to be filed with the Commissioner on or
about January 1, 1994, to be furnished to the
Money Market Fund upon filing, will not contain as of
its date any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading.
(e) There are no material legal, administrative or other
proceedings pending or, to the knowledge of the New York
Fund, threatened against the New York Fund which assert
liability or may, if successfully prosecuted to their
conclusion, result in liability on the part of the New York
Fund, other than as have been disclosed in the Prospectus.
(f) There are no material contracts outstanding to which
the New York Fund is a party, other than as will be disclosed
in the Proxy Statement.
(g) The New York Fund has no known liabilities of a
material nature, contingent or otherwise, other than those
shown on the New York Fund's statement of assets and
liabilities as of November 30, 1993 referred to above and
those incurred in the ordinary course of the business of the
New York Fund as an investment company since such date.
Prior to the Exchange Date, the New York Fund will advise the
Money Market Fund of all material liabilities, contingent or
otherwise, incurred by it subsequent to November 30, 1993,
whether or not incurred in the ordinary course of business.
(h) As used in this Agreement, the term "Investments"
shall mean the New York Fund's investments shown on the
schedule of its investments as of November 30, 1993 referred
to in Section 2(c) hereof, as supplemented with such changes
as the New York Fund shall make after advising the Money
Market Fund of such proposed changes, and changes resulting
from stock dividends, stock split-ups, mergers and similar
corporate actions, but excluding such investments as the
Money Market Fund may designate in a writing addressed to the
New York Fund as being unsuitable for the Money Market Fund
to acquire by reason of charter limitations or of investment
restrictions disclosed in the Money Market Fund
Prospectus.
(i) The New York Fund has filed or will file all federal
and state tax returns which, to the knowledge of the New York
Fund's officers, are required to be filed by the New York
Fund and has paid or will pay all federal and state taxes
shown to be due on said returns or on any assessments
received by the New York Fund. All tax liabilities of the
New York Fund have been adequately provided for on its books,
and no tax deficiency or liability of the New York Fund has
been asserted, and no question with respect thereto has been
raised, by the Internal Revenue Service or by any state or
local tax authority for taxes in excess of those already
paid.
(j) At both the Valuation Time (as defined in
Section 3(c)) and the Exchange Date, the New York Fund will
have full right, power and authority to sell, assign,
transfer and deliver the Investments and any other assets and
liabilities of the Money Market Fund to be transferred to the
New York Fund pursuant to this Agreement. At the Exchange
Date, subject only to the delivery of the Investments and any
such other assets and liabilities as contemplated by this
Agreement, the Money Market Fund will acquire the Investments
and any such other assets subject to no encumbrances, liens
or security interests whatsoever and without any restrictions
upon the transfer thereof.
(k) No registration under the Securities Act of 1933, as
amended (the "1933 Act"), of any of the Investments would
be required if they were, as of the time of such transfer,
the subject of a public distribution by either of the Money
Market Fund or the New York Fund, except as previously
disclosed to the Money Market Fund by the New York Fund.
(l) No consent, approval, authorization or order of any
court or governmental authority is required for the
consummation by the New York Fund of the transactions
contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act, the 1940 Act,
state securities laws or the H-S-R Act.
(m) The Registration Statement, the Prospectus and the
Proxy Statement, on the Effective Date of the Registration
Statement and insofar as they do not relate to the Money
Market Fund (i) will comply in all material respects with the
provisions of the 1933 Act, the 1934 Act and the 1940 Act and
the rules and regulations thereunder and (ii) will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading; and
at the time of the shareholders' meeting referred to in
Section 8(a) below and on the Exchange Date, the Prospectus,
as amended or supplemented by any amendments or supplements
filed with the Commission by the Money Market Fund, insofar
as it does not relate to the Money Market Fund, will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading;
provided, however, that the representations and warranties in
this subsection shall apply only to statements of fact
relating to the New York Fund contained in the Registration
Statement, the Prospectus or the Proxy Statement, or
omissions to state in any thereof a material fact relating to
the New York Fund, as such Registration Statement, Prospectus
and Proxy Statement shall be furnished to the New York Fund
in definitive form as soon as practicable following
effectiveness of the Registration Statement and before any
public distribution of the Prospectus or Proxy Statement.
(n) The New York Fund is and will at all times through
the Exchange Date qualify for taxation as a "regulated
investment company" under Sections 851 and 852 of the Code.
(o) At the Exchange Date, the New York Fund will have
sold such of its assets, if any, as necessary to assure that,
after giving effect to the acquisition of the assets of the
New York Fund pursuant to this Agreement, the Money Market
Fund will remain a "diversified company" within the meaning
of Section 5(b)(1) of the 1940 Act and in compliance with
such other mandatory investment restrictions as are set forth
in the prospectus and statement of additional information of
the Money Market Fund dated February 1, 1994 (collectively,
the "Money Market Fund Prospectus"), previously furnished to
the New York Fund. The Money Market Fund Shares to be issued
to the New York Fund have been duly authorized and, when
issued and delivered pursuant to this Agreement, will be
legally and validly issued and will be fully paid and
nonassessable by the New York Fund, and no shareholder of the
Money Market Fund will have any preemptive right of
subscription or purchase in respect thereof.
3. REORGANIZATION . (a) Subject to the requisite
approval of the shareholders of the New York Fund and to the
other terms and conditions contained herein (including the
New York Fund's obligation to distribute to its shareholders
all of its investment company taxable income and net capital
gain as described in Section 9(l) hereof), the New York Fund
agrees to sell, assign, convey, transfer and deliver to the
Money Market Fund, and the Money Market Fund agrees to
acquire from the New York Fund, on the Exchange Date all of
the Investments and all of the cash and other properties and
assets of the New York Fund, whether accrued or contingent,
of the New York Fund (including cash received by the New York
Fund upon the liquidation by the New York Fund of any
investments purchased by the New York Fund after
September 30, 1993 and designated by the Money Market Fund as
being unsuitable for it to acquire), in exchange for that
number of shares of beneficial interest of the Money Market
Fund provided for in Section 4 and the assumption by the
Money Market Fund of all of the liabilities of the New York
Fund. Pursuant to this Agreement, the New York Fund will, as
soon as practicable after the Exchange Date, distribute all
of the Money Market Fund Shares received by it to the
shareholders of the New York Fund in exchange for their
shares of beneficial interest of the New York Fund.
(b) The New York Fund will pay or cause to be paid to the
Money Market Fund any interest, cash or such dividends,
rights and other payments received by it on or after the
Exchange Date with respect to the Investments and other
properties and assets of the New York Fund, whether
accrued or contingent, received by it on or after the
Exchange Date. And such distribution shall be deemed
included in the assets transferred to the Money Market Fund
at the Exchange Date and shall not be separately valued
unless the securities in respect of which such distribution
is made shall have gone "ex" such distribution prior to the
Valuation Time, in which case any such distribution which
remains unpaid at the Exchange Date shall be included in the
determination of the value of the assets of the New York Fund
acquired by the Money Market Fund.
(c) The Valuation Time shall be 4:00 p.m. Boston time on
June 3 , 1994 or such earlier or later day as may be
mutually agreed upon in writing by the parties hereto (the
"Valuation Time").
4. EXCHANGE DATE; VALUATION TIME . On the
Exchange Date, the Money Market Fund will deliver to the New
York Fund, a number of full and fractional Money Market Fund
Shares having an aggregate net asset value equal to the value
of assets of the New York Fund attributable to shares of the
New York Fund transferred to the Money Market Fund on such
date less the value of the liabilities of the New York Fund
attributable to shares of the New York Fund assumed by the
Money Market Fund on that date, determined as hereafter
provided in this Section 4.
(a) The net asset value of the Money Market Fund Shares
to be delivered to the New York Fund, the value of the assets
of the New York Fund and the value of the liabilities of the
New York Fund to be assumed by the Money Market Fund shall in
each case be determined as of the Valuation Time.
(b) The net asset value of the Money Market Fund Shares
shall be computed in the manner set forth in the current
Money Market Fund Prospectus. The value of the assets and
liabilities of the New York Fund shall be determined by the
Money Market Fund, in cooperation with the New York Fund,
pursuant to procedures which the Money Market Fund would use
in determining the fair market value of the Money Market
Fund's assets as if such assets were to be purchased or sold
on a given day. Accordingly, the Money Market fund shall not
employ the amortized cost method of valuation in valuing the
California Fund's assets.
(c) No adjustment shall be made in the net asset value of
either the New York Fund or the Money Market Fund to take
into account differences in realized and unrealized gains and
losses.
(d) The Money Market Fund shall issue the Money Market
Fund Shares to the New York Fund in one certificate
(excluding any fractional share) registered in the name of
the New York Fund. The New York Fund shall distribute the
Money Market Fund Shares to the shareholders of the New York
Fund by redelivering such certificate to the Money Market
Fund's transfer agent which will as soon as practicable set
up open accounts for each New York Fund shareholder in
accordance with written instructions furnished by the New
York Fund.
(e) The Money Market Fund shall assume all liabilities of
the New York Fund, whether accrued or contingent, in
connection with the acquisition of assets and subsequent
dissolution of the New York Fund or otherwise.
5. EXPENSES, FEES, ETC . (a) All fees and
expenses, including legal and accounting expenses, portfolio
transfer taxes (if any) or other similar expenses incurred in
connection with the consummation by the New York Fund and the
Money Market Fund of the transactions contemplated by this
Agreement will be allocated ratably between the two Funds in
proportion to their net assets as of the Valuation Time,
except that the costs of proxy materials and proxy
solicitation will be borne by the New York Fund; provided,
however, that such expenses will in any event be paid by the
party directly incurring such expenses if and to the extent
that the payment by the other party of such expenses would
result in the disqualification of the Money Market Fund or
the New York Fund, as the case may be, as a "regulated
investment company" within the meaning of Section 851 of the
Code.
(b) In the event the transactions contemplated by this
Agreement are not consummated by reason of the Money Market
Fund's being either unwilling or unable to go forward (other
than by reason of the nonfulfillment or failure of any
condition to the Money Market Fund's obligations referred to
in Section 8(a) or Section 9) the Money Market Fund shall pay
directly all reasonable fees and expenses incurred by the New
York Fund in connection with such transactions, including,
without limitation, legal, accounting and filing fees.
(c) In the event the transactions contemplated by this
Agreement are not consummated by reason of the New York
Fund's being either unwilling or unable to go forward (other
than by reason of the nonfulfillment or failure of any
condition to the New York Fund's obligations referred to in
Section 8(a) or Section 10), the New York Fund shall pay
directly all reasonable fees and expenses incurred by the
Money Market Fund in connection with such transactions,
including without limitation legal, accounting and filing
fees.
(d) In the event the transactions contemplated by this
Agreement are not consummated for any reason other than
(i) the Money Market Fund's or the New York Fund's being
either unwilling or unable to go forward or (ii) the
nonfulfillment or failure of any condition to the Money
Market Fund's or the New York Fund's obligations referred to
in Section 8(a), Section 9 or Section 10 of this Agreement,
then each of the Money Market Fund and the New York Fund
shall bear all of its own expenses incurred in connection
with such transactions.
(e) Notwithstanding any other provisions of this
Agreement, if for any reason the transactions contemplated by
this Agreement are not consummated, no party shall be liable
to the other party for any damages resulting therefrom,
including without limitation consequential damages, except as
specifically set forth above.
6. PERMITTED ASSETS . The Money Market Fund
agrees to advise the New York Fund promptly if at any time
prior to the Exchange Date the assets of the New York Fund
include any assets that the Money Market Fund is not
permitted, or reasonably believes to be unsuitable for it, to
acquire, including without limitation any security that,
prior to its acquisition by the New York Fund, the Money
Market Fund has informed the New York Fund is unsuitable for
the Money Market Fund to acquire.
7. EXCHANGE DATE . Delivery of the assets of the
New York Fund to be transferred, assumption of the
liabilities of the New York Fund to be assumed and the
delivery of the Money Market Fund Shares to be issued shall
be made at the offices of Ropes & Gray, One International
Place, Boston, Massachusetts, at 10:00 a.m . on the
next full business day following the Valuation Time, or at
such other time and date agreed to by the Money Market Fund
and the New York Fund, the date and time upon which such
delivery is to take place being referred to herein as the
"Exchange Date."
8. MEETING OF SHAREHOLDERS; DISSOLUTION . (a) The
New York Fund agrees to call a meeting of its shareholders as
soon as is practicable after the effective date of the
Registration Statement for the purpose of considering the
sale of all of its assets to and the assumption of all of its
liabilities by the Money Market Fund as herein provided,
adopting this Agreement, and authorizing the liquidation and
dissolution of the New York Fund, and it shall be a condition
to the obligations of each of the parties hereto that the
holders of at least two-thirds (66 2/3%) of the shares of
beneficial interest of the New York Fund shall have approved
such vote at such a meeting on or before the Valuation Time.
(b) The New York Fund agrees that the liquidation and
dissolution of the New York Fund will be effected in the
manner provided in the New York Fund's Agreement and
Declaration of Trust in accordance with applicable law, and
that on and after the Exchange Date, the New York Fund shall
not conduct any business except in connection with its
liquidation and dissolution.
(c) The Money Market Fund will, as promptly as
practicable after the preparation and delivery to the Money
Market Fund by the New York Fund of a preliminary version of
the Proxy Statement which is satisfactory to the Money Market
Fund and to Ropes & Gray for inclusion in the Registration
Statement, file the Registration Statement with the
Commission. Each of the New York Fund and the Money Market
Fund will cooperate with the other, and each will furnish to
the other the information relating to itself required by the
1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder to be set forth in the Registration
Statement, including the Prospectus and the Proxy Statement.
9. CONDITIONS TO THE MONEY MARKET FUND'S OBLIGATIONS.
The obligations of the Money Market Fund hereunder shall
be subject to the following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by
the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the outstanding shares of beneficial interest of
the New York Fund.
(b) That the New York Fund shall have furnished to the
Money Market Fund a statement of the New York Fund's assets
and liabilities, with values determined as provided in
Section 4 of this Agreement, together with a list of
Investments and all other Assets of the Texas Fund with their
respective tax costs, all as of the Valuation Time, certified
on the New York Fund's behalf by its President (or any Vice
President) and Treasurer, and a certificate of both such
officers, dated the Exchange Date, that there has been no
material adverse change in the financial position of the New
York Fund since November 30, 1993 other than changes in the
Investments and other assets and properties of the New York
Fund since that date or changes in the market value of the
Investments and other assets of the New York Fund, or changes
due to net redemptions of shares of the New York Fund,
dividends paid or losses from operations.
(c) That the New York Fund shall have furnished to the
Money Market Fund a statement, dated the Exchange Date,
signed by the New York Fund's President (or any Vice
President) and Treasurer certifying that as of the Valuation
Time and as of the Exchange Date all representations and
warranties of the New York Fund made in this Agreement are
true and correct in all material respects as if made at and
as of such dates and the New York Fund has complied with all
the agreements and satisfied all the conditions on its part
to be performed or satisfied at or prior to such dates.
(d) That the New York Fund shall have delivered to the
Money Market Fund a letter from Coopers & Lybrand dated the
Exchange Date stating that such firm reviewed the federal and
state income tax returns of the New York Fund for the year
ended November 30, 1993, and for the period from
November 30, 1993 to the Exchange Date, and that, in
the course of such review, nothing came to their attention
which caused them to believe that such returns did not
properly reflect, in all material respects, the federal and
state income taxes of the New York Fund for the periods
covered thereby, or that the New York Fund would not qualify
as a regulated investment company for federal income tax
purposes.
(e) That there shall not be any material litigation
pending with respect to the matters contemplated by this
Agreement.
(f) That the Money Market Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Money
Market Fund and dated the Exchange Date, to the effect that
(i) the New York Fund is a business trust duly established
and validly existing under the laws of The Commonwealth of
Massachusetts, and the New York Fund is not, to the knowledge
of such counsel, required to qualify to do business as a
foreign association in any jurisdiction, (ii) this Agreement
has been duly authorized, executed, and delivered by the New
York Fund and, assuming that the Registration Statement, the
Prospectus and the Proxy Statement comply with the 1933 Act,
the 1934 Act and the 1940 Act and assuming due authorization,
execution and delivery of this Agreement by the Money Market
Fund, is a valid and binding obligation of the New York Fund,
(iii) the New York Fund has power to sell, assign, convey,
transfer and deliver the assets contemplated hereby and, upon
consummation of the transactions contemplated hereby in
accordance with the terms of this Agreement, the New York
Fund will have duly sold, assigned, conveyed, transferred and
delivered such assets to the Money Market Fund, (iv) the
execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will
not, violate the New York Fund's Agreement and Declaration of
Trust, as amended, or any provision of any agreement known to
such counsel to which the New York Fund is a party or by
which it is bound, and (v) no consent, approval,
authorization or order of any court or governmental authority
is required for the consummation by the New York Fund of the
transactions contemplated hereby, except such as have been
obtained under the 1933 Act, the 1934 Act and the 1940 Act
and such as may be required under state securities or blue
sky laws and the H-S-R Act, it being understood that with
respect to investment restrictions as contained in the New
York Fund's Agreement and Declaration of Trust, Bylaws or
then-current prospectus or statement of additional
information, such counsel may rely upon a certificate of an
officer of the New York Fund whose responsibility it is to
advise the New York Fund with respect to such matters.
(g) That the Money Market Fund shall have received an
opinion of Ropes & Gray, in form satisfactory to the Money
Market Fund, with respect to the matters specified in Section
10(f) of this Agreement, and such other matters as the Money
Market Fund may reasonably deem necessary or desirable.
(h) That the assets of the New York Fund to be acquired
by the Money Market Fund will include no assets which the
Money Market Fund, by reason of charter limitations or of
investment restrictions disclosed in the Money Market Fund
Prospectus in effect on the Exchange Date, may not properly
acquire.
(i) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending
such effectiveness shall have been instituted or, to the
knowledge of the Money Market Fund, contemplated by the
Commission.
(j) That the Money Market Fund shall have received from
the Commission, any relevant state securities administrator,
the Federal Trade Commission (the "FTC") and the Department
of Justice (the "Department") such order or orders as Ropes &
Gray deems reasonably necessary or desirable under the 1933
Act, the 1934 Act, the 1940 Act, any applicable state
securities or blue sky laws and the H-S-R Act in connection
with the transactions contemplated hereby, and that all such
orders shall be in full force and effect.
(k) That all proceedings taken by the New York Fund in
connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be
satisfactory in form and substance to the Money Market Fund
and Ropes & Gray.
(l) That, prior to the Exchange Date, the New York Fund
shall have declared a dividend or dividends which, together
with all previous such dividends, shall have the effect of
distributing to the shareholders of the New York Fund all of
the New York Fund's investment company taxable income for its
taxable years ending on or after November 30, 1993 and on or
prior to the Exchange Date (computed without regard to any
deduction for dividends paid), and all of its net capital
gain realized in each of its taxable years ending on or after
September 30, 1993 and on or prior to the Exchange Date.
(m) That the New York Fund's custodian shall have
delivered to the Money Market Fund a certificate identifying
all of the assets of the New York Fund held by such custodian
as of the Valuation Time.
(n) That the New York Fund's transfer agent shall have
provided to the Money Market Fund (i) the originals or true
copies of all of the records of the New York Fund in the
possession of such transfer agent as of the Exchange Date,
(ii) a certificate setting forth the number of shares of the
New York Fund outstanding as of the Valuation Time and (iii)
the name and address of each holder of record of any such
shares and the number of shares held of record by each such
shareholder.
(o) That all of the issued and outstanding shares of
beneficial interest of the New York Fund shall have been
offered for sale and sold in conformity with all applicable
state securities or blue sky laws and, to the extent that any
audit of the records of the New York Fund or its transfer
agent by the Money Market Fund or its agents shall have
revealed otherwise, either (i) the New York Fund shall have
taken all actions that in the opinion of the Money Market
Fund or its counsel are necessary to remedy any prior failure
on the part of the New York Fund to have offered for sale and
sold such shares in conformity with such laws or (ii) the New
York Fund shall have furnished (or caused to be furnished)
surety, or deposited (or caused to be deposited) assets in
escrow, for the benefit of the Money Market Fund in amounts
sufficient and upon terms satisfactory, in the opinion of the
Money Market Fund or its counsel, to indemnify the Money
Market Fund against any expense, loss, claim, damage or
liability whatsoever that may be asserted or threatened by
reason of such failure on the part of the New York Fund to
have offered and sold such shares in conformity with such
laws.
(p) That the Money Market Fund shall have received from
Coopers & Lybrand a letter addressed to the Money Market Fund
dated as of the Exchange Date satisfactory in form and
substance to the Money Market Fund to the effect that, on the
basis of limited procedures agreed upon by the Money Market
Fund and described in such letter (but not an examination in
accordance with generally accepted auditing standards), as of
the Valuation Time the value of the assets of the New York
Fund to be exchanged for the Money Market Fund Shares has
been determined in accordance with procedures customarily
utilized to determine the fair market value of assets of
such character.
10. CONDITIONS TO THE NEW YORK FUND'S OBLIGATIONS .
The obligations of the New York Fund hereunder shall be
subject to the following conditions:
(a) That this Agreement shall have been adopted and the
transactions contemplated hereby shall have been approved by
the affirmative vote of the holders of at least two-thirds
(66 2/3%) of the outstanding shares of beneficial interest of
the New York Fund.
(b) That the Money Market Fund shall have furnished to
the New York Fund a statement of the Money Market Fund's net
assets, together with a list of portfolio holdings with
values determined as provided in Section 4, all as of the
Valuation Time, certified on the Money Market Fund's behalf
by its President (or any Vice President) and Treasurer (or
any Assistant Treasurer), and a certificate of both such
officers, dated the Exchange Date, to the effect that as of
the Valuation Time and as of the Exchange Date there has been
no material adverse change in the financial position of the
Money Market Fund since September 30, 1993, other than
changes in its portfolio securities since that date, changes
in the market value of its portfolio securities, changes due
to net redemptions, dividends paid or losses from operations.
(c) That the Money Market Fund shall have executed and
delivered to the New York Fund an Assumption of Liabilities
dated as of the Exchange Date pursuant to which the Money
Market Fund will assume all of the liabilities of the New
York Fund existing at the Valuation Time in connection with
the transactions contemplated by this Agreement.
(d) That the Money Market Fund shall have furnished to
the New York Fund a statement, dated the Exchange Date,
signed by the Money Market Fund's President (or any Vice
President) and Treasurer (or any Assistant Treasurer)
certifying that as of the Valuation Time and as of the
Exchange Date all representations and warranties of the Money
Market Fund made in this Agreement are true and correct in
all material respects as if made at and as of such dates, and
that the Money Market Fund has complied with all of the
agreements and satisfied all of the conditions on its part to
be performed or satisfied at or prior to each of such dates.
(e) That there shall not be any material litigation
pending with respect to the matters contemplated by this
Agreement.
(f) That the New York Fund shall have received an opinion
of Ropes & Gray, in form satisfactory to the New York Fund
and dated the Exchange Date, to the effect that (i) the Money
Market Fund is an unincorporated voluntary association duly
established and validly existing in conformity with the laws
of The Commonwealth of Massachusetts, and, to the knowledge
of such counsel, is not required to qualify to do business as
a foreign association in any jurisdiction except as may be
required by state securities or blue sky laws, (ii) the Money
Market Fund Shares to be delivered to the New York Fund as
provided for by this Agreement are duly authorized and upon
such delivery will be validly issued and will be fully paid
and nonassessable by the Money Market Fund and no shareholder
of the Money Market Fund has any preemptive right to
subscription or purchase in respect thereof, (iii) this
Agreement has been duly authorized, executed and delivered by
the Money Market Fund and, assuming that the Prospectus, the
Registration Statement and the Proxy Statement comply with
the 1933 Act, the 1934 Act and the 1940 Act and assuming due
authorization, execution and delivery of this Agreement by
the New York Fund, is a valid and binding obligation of the
Money Market Fund, (iv) the execution and delivery of this
Agreement did not, and the consummation of the transactions
contemplated hereby will not, violate the Money Market Fund's
Agreement and Declaration of Trust, as amended, or By-laws,
or any provision of any agreement known to such counsel to
which the Money Market Fund is a party or by which it is
bound, it being understood that with respect to investment
restrictions as contained in the Money Market Fund's
Agreement and Declaration of Trust, as amended, By-Laws or
then-current prospectus or statement of additional
information, such counsel may rely upon a certificate of an
officer of the Money Market Fund whose responsibility it is
to advise the Money Market Fund with respect to such matters,
(v) no consent, approval, authorization or order of any court
or governmental authority is required for the consummation by
the Money Market Fund of the transactions contemplated
herein, except such as have been obtained under the 1933 Act,
the 1934 Act and the 1940 Act and such as may be required
under state securities or blue sky laws, and (vi) the
Registration Statement has become effective under the 1933
Act, and to the best of the knowledge of such counsel, no
stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose
have been instituted or are pending or contemplated under the
1933 Act.
(g) That all proceedings taken by the Money Market Fund in
connection with the transactions contemplated by this
Agreement and all documents incidental thereto shall be
satisfactory in form and substance to the New York Fund and
Ropes & Gray.
(h) That the Registration Statement shall have become
effective under the 1933 Act, and no stop order suspending
such effectiveness shall have been instituted or, to the
knowledge of the Money Market Fund, contemplated by the
Commission.
(i) That the New York Fund shall have received from the
Commission, any relevant state securities administrator, the
FTC and the Department such order or orders as Ropes & Gray
deems reasonably necessary or desirable under the 1933 Act,
the 1934 Act, the 1940 Act, any applicable state securities
or blue sky laws and the H-S-R Act in connection with the
transactions contemplated hereby, and that all such orders
shall be in full force and effect.
11. INDEMNIFICATION . (a) The New York Fund will
indemnify and hold harmless, out of the assets of the New
York Fund but no other assets, the Money Market Fund, its
trustees and its officers (for purposes of this subparagraph,
the "Indemnified Parties") against any and all expenses,
losses, claims, damages and liabilities at any time imposed
upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which
any one or more of the Indemnified Parties may be involved or
with which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged
untrue statement of a material fact relating to the New York
Fund contained in the Registration Statement, the Prospectus
or the Proxy Statement or any amendment or supplement to any
of the foregoing, or arising out of or based upon the
omission or alleged omission to state in any of the foregoing
a material fact relating to the New York Fund required to be
stated therein or necessary to make the statements relating
to the New York Fund therein not misleading, including,
without limitation, any amounts paid by any one or more of
the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made with the
consent of the New York Fund. The Indemnified Parties will
notify the New York Fund in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any
notice of legal process or any suit brought against or claim
made against such Indemnified Party as to any matters covered
by this Section 11(a) . The New York Fund shall be
entitled to participate at its own expense in the defense of
any claim, action, suit or proceeding covered by this Section
11(a) , or, if it so elects, to assume at its expense
by counsel satisfactory to the Indemnified Parties the
defense of any such claim, action, suit or proceeding, and if
the New York Fund elects to assume such defense, the
Indemnified Parties shall be entitled to participate in the
defense of any such claim, action, suit or proceeding at
their expense. The New York Fund's obligation under this
Section 11(a) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment
so that the New York Fund will pay in the first instance any
expenses, losses, claims, damages and liabilities required to
be paid by it under this Section 11(a) without the
necessity of the Indemnified Parties' first paying the same.
(b) The Money Market Fund will indemnify and hold
harmless, out of the assets of the Money Market Fund but no
other assets, the New York Fund, its trustees and its
officers (for purposes of this subparagraph, the "Indemnified
Parties") against any and all expenses, losses, claims,
damages and liabilities at any time imposed upon or
reasonably incurred by any one or more of the Indemnified
Parties in connection with, arising out of, or resulting from
any claim, action, suit or proceeding in which any one or
more of the Indemnified Parties may be involved or with which
any one or more of the Indemnified Parties may be threatened
by reason of any untrue statement or alleged untrue statement
of a material fact relating to the Money Market Fund
contained in the Registration Statement, the Prospectus or
the Proxy Statement, or any amendment or supplement to any
thereof, or arising out of, or based upon, the omission or
alleged omission to state in any of the foregoing a material
fact relating to the Money Market Fund required to be stated
therein or necessary to make the statements relating to the
Money Market Fund therein not misleading, including without
limitation any amounts paid by any one or more of the
Indemnified Parties in a reasonable compromise or settlement
of any such claim, action, suit or proceeding, or threatened
claim, action, suit or proceeding made with the consent of
the Money Market Fund. The Indemnified Parties will notify
the Money Market Fund in writing within ten days after the
receipt by any one or more of the Indemnified Parties of any
notice of legal process or any suit brought against or claim
made against such Indemnified Party as to any matters covered
by this Section 11(b) . The Money Market Fund shall be
entitled to participate at its own expense in the defense of
any claim, action, suit or proceeding covered by this Section
11(b) , or, if it so elects, to assume at its expense
by counsel satisfactory to the Indemnified Parties the
defense of any such claim, action, suit or proceeding, and,
if the Money Market Fund elects to assume such defense, the
Indemnified Parties shall be entitled to participate in the
defense of any such claim, action, suit or proceeding at
their own expense. The Money Market Fund's obligation under
this Section 11(b) to indemnify and hold harmless the
Indemnified Parties shall constitute a guarantee of payment
so that the Money Market Fund will pay in the first instance
any expenses, losses, claims, damages and liabilities
required to be paid by it under this Section 11(b)
without the necessity of the Indemnified Parties' first
paying the same.
12. NO BROKER, ETC . Each of the New York Fund and
the Money Market Fund represents that there is no person who
has dealt with it who by reason of such dealings is entitled
to any broker's or finder's or other similar fee or
commission arising out of the transactions contemplated by
this Agreement.
13. TERMINATION . The New York Fund and the Money
Market Fund may, by mutual consent of their respective
trustees, terminate this Agreement, and the New York Fund or
the Money Market Fund, after consultation with counsel and by
consent of their respective trustees or an officer authorized
by such trustees, may waive any condition to their respective
obligations hereunder. If the transactions contemplated by
this Agreement have not been substantially completed by
December 31, 1994, this Agreement shall automatically
terminate on that date unless a later date is agreed to by
the New York Fund and the Money Market Fund.
14. RULE 145. Pursuant to Rule 145 under the 1933
Act, the Money Market Fund will, in connection with the
issuance of any Money Market Fund Shares to any person who at
the time of the transaction contemplated hereby is deemed to
be an affiliate of a party to the transaction pursuant to
Rule 145(c), cause to be affixed upon the certificates issued
to such person (if any) a legend as follows:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD OR OTHERWISE TRANSFERRED EXCEPT TO PUTNAM TAX
EXEMPT MONEY MARKET FUND OR ITS PRINCIPAL UNDERWRITER
UNLESS (i) A REGISTRATION STATEMENT WITH RESPECT
THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR (ii) IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO PUTNAM New York TAX EXEMPT
MONEY MARKET FUND SUCH REGISTRATION IS NOT REQUIRED."
and, further, the Money Market Fund will issue stop transfer
instructions to the Money Market Fund's transfer agent with
respect to such shares. The New York Fund will provide the
Money Market Fund on the Exchange Date with the name of any
New York Fund shareholder who is to the knowledge of the New
York Fund an affiliate of the New York Fund on such date.
15. COVENANTS, ETC . Deemed Material. All
covenants, agreements, representations and warranties made
under this Agreement and any certificates delivered pursuant
to this Agreement shall be deemed to have been material and
relied upon by each of the parties, notwithstanding any
investigation made by them or on their behalf.
16. SOLE AGREEMENT; AMENDMENTS. This Agreement
supersedes all previous correspondence and oral
communications between the parties regarding the subject
matter hereof, constitutes the only understanding with
respect to such subject matter, may not be changed except by
a letter of agreement signed by each party hereto, and shall
be construed in accordance with and governed by the laws of
The Commonwealth of Massachusetts.
17. AGREEMENTS AND DECLARATIONS OF TRUST . Copies
of the Agreements and Declarations of Trust of the New York
Fund and the Money Market Fund, respectively, are 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 New
York Fund and the Money Market Fund, respectively, as
trustees and not individually and that the obligations of
this instrument are not binding upon any of the trustees,
officers or shareholders of the New York Fund or the Money
Market Fund individually but are binding only upon the assets
and property of the New York Fund and the Money Market Fund,
respectively.
<PAGE>
This Agreement may be executed in any number of
counterparts, each of which, when executed and delivered,
shall be deemed to be an original.
PUTNAM TAX EXEMPT MONEY MARKET
FUND
By: /s/ Gordon H. Silver
Vice President
PUTNAM NEW YORK TAX EXEMPT
MONEY MARKET FUND
By: /s/ Gordon H. Silver
Vice President
<PAGE>
<PAGE>
PROXY BALLOT
PUTNAM NEW YORK TAX EXEMPT MONEY MARKET FUND
PROXY FOR A MEETING OF
SHAREHOLDERS, JUNE 2, 1994
THIS PROXY IS SOLICITED ON BEHALF OF THE TRUSTEES OF THE
FUND.
The undersigned hereby appoints George Putnam, Hans H. Estin
and William F. Pounds, and each of them separately, proxies,
with power of substitution, and hereby authorizes them to
represent and to vote, as designated below, at the Meeting of
Shareholders of Putnam New York Tax Exempt Money Market Fund
on June 2, 1994, at 1:00 P.M., Boston time, and at any
adjournments thereof, all of the shares of the Fund which the
undersigned would be entitled to vote if personally present.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO
DIRECTION IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSAL 1.
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON
SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE MEETING.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL ON THE REVERSE
SIDE.
PLEASE VOTE AND SIGN ON OTHER SIDE AND RETURN PROMPTLY IN
ENCLOSED ENVELOPE.
NOTE: Please sign exactly as name appears on this card. All
joint owners should sign. When signing as executor,
administrator, attorney, trustee or guardian or as custodian
for a minor, please give full title as such, if a corpora-
tion, please sign in full corporate name and indicate the
signer's office. If a partner, sign in the partnership name.
CHANGE OF ADDRESS NOTIFICATION. Please use this form to
inform us of any change in address or telephone number or to
provide us with your comments. Detach this form from the
Proxy Ballot and return it with your executed proxy in the
enclosed envelope.
HAS YOUR ADDRESS CHANGED?
DO YOU HAVE ANY COMMENTS?
Telephone
Please mark your choice \ x \ in blue or black ink.
THE TRUSTEES RECOMMEND A VOTE FOR THE PROPOSAL LISTED BELOW.
Dear Shareholder:
YOUR VOTE IS IMPORTANT. Please help us
to eliminate the expense of follow-up mail-
ings
by executing and returning this Proxy as
soon as possible. A postage-paid business
reply envelope is enclosed for your
convenience.
Thank you!
Please fold at perforation before detaching
1. Approval of the Agreement and Plan of Reorganization
providing for the transfer of all of the assets of Putnam New
York Tax Exempt Money Market Fund (the "Fund") to Putnam Tax
Exempt Money Market Fund (the "Money Market Fund") in
exchange for shares of the Money Market Fund and the
assumption by the Money Market Fund of all of the liabilities
of the Fund, and the distribution of such shares to the
shareholders of the Fund in liquidation of the Fund.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
Please be sure to sign and date this Proxy.
Shareholder sign here
Co-owner sign here
Date
<PAGE>
