Putnam
California
Tax Exempt
Money Market
Fund
ANNUAL REPORT
September 30, 1994
(graphic scales)
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
>
"Money funds are among the few investments to benefit from the Fed's interest
rate hikes so far this year. While the average stock and bond fund has lost
money since January 12, money fund yields have climbed from 2.7% to 3.9%."
- -- "Fearful Investors Flee To Money Funds," Money (August 1994)
>
Performance should always be considered in light of a fund's investment
strategy. Putnam California Tax Exempt Money Market Fund is designed for
investors seeking current income free from federal and California personal
income taxes, consistent with capital preservation, stable principal and
liquidity.
FISCAL 1994 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Total return NAV
<S> <C> <C> <C>
..........................................................................
12 months ended 9/30/94 (change in value plus reinvested
earnings) 1.94%
Distributions(1) No. Income Total
..........................................................................
12 $0.0192 $0.0192
Current return
(End of period)
..........................................................................
Current 7-day SEC yield(2) 2.64%
Taxable equivalent(3) 4.91
Current 30-day SEC yield(2) 2.52
Taxable equivalent(3) 4.69
</TABLE>
Performance data represent past results. For performance over longer periods,
see page 6.
(1)For some investors, investment income may also be subject to the federal
alternative minimum tax.
(2)The yield is the rate at which an investment earns interest income. The 7-
and 30-day yields are the two most common gauges for measuring money market
mutual fund performance.
(3)Assumes maximum 46.24% federal and state tax rate. Results for investors
subject to lower tax rates would not be as advantageous.
<PAGE>
From the Chairman
(graphic - picture of George Putnam)
(C)Karsh, Ottawa
Dear Shareholder:
The bond market environment that has given anxiety to most fixed-income
investors actually worked in Putnam California Tax Exempt Money Market Fund's
favor during the 12 months ended September 30, 1994. The rise in short-term
interest rates raised yields on the money market instruments in which the
fund invests. Since your fund seeks to maintain a constant $1.00 per share
value, the greater cash flow provided by the rising rates almost immediately
translated into a higher total return.
When the Federal Reserve Board raised short-term rates last February, Fund
Manager Lindsey Callen began repositioning the portfolio in anticipation of
further rate increases. She also shortened the portfolio's average maturity
to allow faster reinvestment of proceeds from maturing securities in
higher-yielding ones. To allow the fund to take immediate advantage of rising
rates, she provided further flexibility by adding floating-rate securities
that reset yields weekly.
Lindsey discusses these and other aspects of the fund's fiscal 1994
performance and prospects for fiscal 1995 in the report that follows.
Respectfully yours,
(Graphic - signature of George Putnam)
George Putnam
Chairman of the Trustees
October 19, 1994
<PAGE>
Report from the fund manager
Lindsey M. Callen
For the fiscal year ended September 30, 1994, Putnam California Tax Exempt
Money Market Fund continued to provide a steady stream of double-tax-free
income while emphasizing capital preservation and maintaining a stable $1.00
share price. After reaching historic lows in the fall of 1993, short-term
interest rates rose during 1994, creating a more favorable investment climate
for your fund.
As the table on page 2 indicates, your fund's current 30-day yield of 2.52%
is the equivalent of a 4.69% yield on a taxable investment for investors in
the combined maximum state and federal income tax bracket of 46.24%. Those in
lower brackets would also enjoy tax benefits, though to a lesser extent.
During the fiscal year, your fund was managed against a backdrop of an
improving national economy. Economic indicators such as employment growth and
the rise in home and automobile sales pointed to a more robust economy. Side
by side with these trends, however, came concerns that inflation might rise.
In moves to keep inflation at bay, the Federal Reserve Board began a series
of short-term interest rate increases in February. By the end of your fund's
fiscal year, the federal funds rate, the interest rate banks charge each
other for overnight loans, had climbed from 3.00% to 4.75%. The discount
rate, the rate the Fed charges member banks for loans, increased from 3% to
4% over the same period.
> CAPTURING HIGHER YIELDS
During the fiscal year, our strategy emphasized increasing the fund's income
by taking advantage of higher interest rates. We structured the fund to be in
the best possible position to benefit from each incremental rise in interest
rates. For example, we reduced the average maturity of portfolio securities,
so the fund would not be locked into lower-yielding investments in a rising-
rate environment. We also built a position in floating-rate securities,
targeting those with yields that reset weekly. Interest rates on
floating-rate securities adjust at regular intervals, and when market rates
rise, investors benefit promptly.
<PAGE>
Superior portfolio quality is one of your fund's most important attributes.
Ideally, every holding must be rated by two or more nationally recognized
rating services and receive at least two ratings within the top two
categories. If a security has only been rated by one service, its rating must
be within that service's top category. If the securities are nonrated, Putnam
Management must judge them to be of equivalent quality. After a security is
selected for the portfolio, we continue to monitor quality, while making sure
each holding provides a balance of attractive yield and relative stability.
> OUR OUTLOOK
While the California economy has suffered its share of difficulties over the
past few years, the tide now appears to have turned. Major economic
indicators have stabilized, and the overall business climate is improving. As
the state economy continues to improve, we will maintain our strategy of
diversifying your fund's assets among a variety of tax-exempt securities. We
expect that we will continue adding floating-rate securities to the portfolio
to take advantage of rising interest rates. Furthermore, we expect to keep
the average maturity of the portfolio relatively short and believe our
emphasis on traditional, high- quality instruments should enable the fund to
maintain the stability that is most shareholders' top priority.
PERFORMANCE COMPARISONS (9/30/94)
<TABLE>
<CAPTION>
Current After-tax
return* return
<S> <C> <C>
............................................................
Passbook savings account 2.17% 1.17%
............................................................
Taxable money market fund 7-day
yield 4.35 2.34
............................................................
3-month certificate of deposit 3.25 1.75
............................................................
Putnam California Tax Exempt
Money Market Fund 7-day yield 2.64 2.64
</TABLE>
The net asset value of money market mutual funds is uninsured and designed to
be fixed, while distributions vary daily. The principal value on passbook
savings and bank CDs are generally insured up to certain limits by state and
federal agencies. Unlike money market funds, early withdrawals from bank CDs
may be subject to substantial penalties. Investment returns will fluctuate.
After-tax return assumes 46.24% combined federal and California state tax.
*Sources: Bank of Boston (passbook savings), Bank Rate Monitor (3-month CDs),
IBC/Donaghue's Money Fund Report (taxable money market fund 7-day yield).
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of your investment changed over
time, assuming you held the shares through the entire period and reinvested
all distributions back into the fund. We show total return in two ways: on a
cumulative long- term basis and on average, how the fund might have grown
each year over varying periods. For comparative purposes, we show how the
fund performed relative to appropriate indexes and benchmarks.
TOTAL RETURN FOR PERIODS ENDED 9/30/94
<TABLE>
<CAPTION>
Lipper
California
Tax Exempt
Fund shares Money Market
at NAV Average CPI
<S> <C> <C> <C>
1 year 1.94% 2.14% 2.96%
5 years 16.76 17.90 19.52
Annual average 3.15 3.35 3.63
Life of fund 28.80 29.98 29.58
Annual average 3.72 3.86 3.81
</TABLE>
Performance data represent past results and should not be taken as an
assurance of future performance. Investment returns will fluctuate. An
investment in the fund is neither insured nor guaranteed by the U.S.
government. There can be no assurance that the fund will be able to maintain
a stable net asset value of $1.00 per share. However, since the fund's
inception on October 26, 1987, no investor has ever lost a penny of net asset
value.
<PAGE>
TERMS AND DEFINITIONS
Net asset value (NAV) is the value of all your fund's assets, minus any
liabilities, divided by the number of outstanding shares.
COMPARATIVE BENCHMARKS
Lipper California Tax Exempt Money Market Fund Average is an arithmetic
average of the total return of all California tax-exempt money market mutual
funds tracked by Lipper Analytical Services. Lipper is an independent rating
organization for the mutual fund industry. Lipper rankings vary for other
periods. The fund's holdings do not match those in the Lipper Average.
Consumer Price Index (CPI) is a commonly used measure of inflation; it does
not represent an investment return.
<PAGE>
Life cycle investing
As we move through life, our investment needs change. As these needs change,
so does the way we allocate our assets. Here are some basic rules for setting
up and maintaining an investment program and some examples of how assets
might be allocated. However, these illustrations are not intended as
investment advice.
> DETERMINE YOUR INVESTMENT OBJECTIVES.
Objectives may include a new home, college education expenses, or retirement.
> EVALUATE YOUR RISK TOLERANCE.
Generally, risk tolerance is higher for younger investors with longer
timelines and lower for older investors who may depend on their investment
for current income.
> ALLOCATE YOUR INVESTABLE SAVINGS.
Your investment advisor will help you determine how much of your investable
dollars should be allocated to each investment category.
> CHOOSE THE APPROPRIATE PUTNAM FUNDS.
Using Putnam's free exchange privilege among securities of the same class of
shares, you can adjust your own Putnam portfolio of funds as your financial
needs change -- without a service fee.*
Look at the facing page for some ways you can allocate your assets, then turn
the page to see how the Putnam Family of Funds can help you make your
choices.
*Putnam reserves the right to change or terminate the exchange privilege. In
some cases, a sales charge may apply. See prospectus for details.
<PAGE>
Four ways to allocate assetsYour investment advisor can help you determine
your objectives, evaluate your risk tolerance, and develop a long-term
financial plan. These sample portfolios can help you diversify your portfolio
within the Putnam Family of Funds. These illustrations are not intended as
investment advice.
SEEKING MAXIMUM GROWTH
Risk tolerance:
Generally
investors with a
higher risk
tolerance
(often in their 20s
and early 30s.)
(Graphic - Pie Chart 1 of 4)
30%-40% Growth and Income
40%-50% Growth
5%-20% Income or tax-free income
SEEKING GROWTH AND SOME INCOME
Risk tolerance:
Generally
investors with a
high to moder-
ate risk toler-
ance (often in
their late 30s
and early 40s.)
(Graphic - Pie Chart 2 of 4)
40%-50% Growth and income
30%-40% Growth
10%-30% Income or tax-free income
SEEKING INCOME AND SOME GROWTH
WITH PROTECTION AGAINST INFLATION
Risk tolerance:
Generally
investors with a
moderate risk
tolerance (often
in their late 40s
and 50s.)
(Graphic - Pie Chart 3 of 4)
30%-40% Growth and income
25%-60% Income or tax-free income
10%-20% Growth
SEEKING HIGH CURRENT INCOME AND
PROTECTION AGAINST INFLATION
Risk tolerance:
Generally
investors with
a moderate
to low risk
tolerance
(often over 60
and retired)
(Graphic - Pie Chart 4 of 4)
20%-30% Growth and income
5%-10% Growth
40%-70% Income or tax-free income
<PAGE>
The Putnam Fund Selector(tm)
The Putnam Fund Selector shows the many opportunities for investors within
every investment strategy. All investors should first accumulate a base of
conservative, cash-equivalent investments. Then, with the help of your
investment advisor, diversify your portfolio by investing in the Putnam
Family of Funds.
(Graphic - Risk/Reward Pyramid)
Putnam Growth Funds
Putnam Growth and Income Funds
Putnam Income or Tax-Free Income Funds
Most Conservative Investments
<PAGE>
Putnam Family of Funds
PUTNAM GROWTH FUNDS
Asia Pacific Growth Fund
Diversified Equity Trust
Europe Growth Fund
Global Growth Fund
Health Sciences Trust
Investors Fund
Natural Resources Fund*
New Opportunities Fund
OTC Emerging Growth Fund
Overseas Growth Fund
Vista Fund
Voyager Fund
PUTNAM GROWTH AND
INCOME FUNDS
Convertible Income-Growth Trust
Dividend Growth Fund
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
Managed Income Trust
Utilities Growth and Income Fund
PUTNAM INCOME FUNDS
Adjustable Rate U.S. Government Fund
American Government Income Fund
Balanced Government Fund
Corporate Asset Trust
Diversified Income Trust
Federal Income Trust
Global Governmental Income Trust
High Yield Advantage Fund
High Yield Trust
Income Fund
U.S. Government Income Trust
Please call your financial advisor or Putnam to
obtain a prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Read it carefully before you
invest or send money.
PUTNAM TAX-FREE FUNDS
Intermediate Tax Exempt Fund
Municipal Income Fund
Tax Exempt Income Fund
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free funds+
Arizona, California, Florida, Massachusetts, Michigan, Minnesota, New Jersey,
New York, Ohio, and Pennsylvania
LIFESTAGE(SM) FUNDS
Putnam Asset Allocation Funds -- three investment portfolios that spread your
money across a variety of stocks, bonds, and money market investments to help
maximize your return and reduce your risk.
The three portfolios:
Putnam Asset Allocation: Balanced Portfolio
Putnam Asset Allocation: Conservative Portfolio
Putnam Asset Allocation: Growth Portfolio
MOST CONSERVATIVE
INVESTMENTS++
Putnam money market funds:
Money Market FundS.(section)
Tax Exempt Money Market Fund
California Tax Exempt Money Market Fund
New York Tax Exempt Money Market Fund
CDs and savings accounts**
*Formerly Energy-Resources Trust.
+Not available in all states.
++Relative to above.
(section)Formerly Daily Dividend Trust.
**Not offered by Putnam Investments. Certificates of deposit offer a fixed
rate of return and may be insured, up to certain limits, by federal/state
agencies. Savings accounts may also be insured up to certain limits.
<PAGE>
Report of Independent Accountants
For the Fiscal Year Ended September 30, 1994
To the Trustees and Shareholders of
Putnam California Tax Exempt Money Market Fund
In our opinion, the accompanying statement of assets and liabilities,
including the portfolio of investments owned (except for bond ratings), and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of Putnam California Tax Exempt Money Market Fund (the "fund") at
September 30, 1994, and the results of its operations, the changes in its net
assets, and the financial highlights for the periods indicated, in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are
the responsibility of the fund's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted
our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits, which included confirmation of investments owned at
September 30, 1994 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 8, 1994
<PAGE>
Portfolio of investments owned
September 30, 1994
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Municipal Bonds and Notes (93.3%)(a)
Principal Amount Ratings(b) Value
California
$2,000,000 CA Hlth. Facs. Fing. Auth. Variable Rate Demand Notes (VRDN) (St. Joseph
Hlth. Syst), Ser. A, 3-1/2s, 7/1/13 VMIG1 $2,000,000
1,000,000 CA Poll. Control Fing. Auth. VRDN (Southn. CA Edison), Ser. C, 3.6s,
2/28/08 VMIG1 1,000,000
1,400,000 CA Poll. Control Res. Recvy. VRDN (Burney Forest Project) Ser. A, 3.55s,
9/1/20 (National Westminster Bk., USA Letter of Credit (LOC))(c) P-1 1,400,000
3,000,000 CA Pub. Cap Impts. Fing. Auth. VRDN
Ser. C, 3.45s, 6/1/28 (National Westminster Bk. USA LOC) VMIG1 3,000,000
2,000,000 CA State Rev. Anticipation Notes (RAN), Ser. A, 5s, 6/28/95 MIG1 2,011,647
2,000,000 Fontana Variable Certif. of Participation (COP) (Empire Ctr. Project) 3.7s,
7/1/21 (Sakura Bk. LOC) A-1 2,000,000
1,600,000 Hermosa Beach, Pkg. Auth. Variable COP (Hermosa Beach Pkg. Fac. ) 3.0s,
12/1/13 (Wells Fargo Bk., NA LOC) A-1 1,600,000
1,200,000 Irvine Ranch Wtr. Dist. VRDN Ser. B, 3-1/2s, 10/1/99 (Sumitomo Bk. LOC) A-1 1,200,000
2,000,000 Loma Linda, Hosp. VRDN (U. Med. Ctr. ) Ser. C, 3-1/2s, 12/1/15 (The Indl.
Bk. of Japan LOC) A-1 2,000,000
Los Angeles Cnty., Hsg. Auth. VRDN
2,000,000 (Riverpark Apts. Project) Ser. D, 3.6s, 9/1/10 (Dai-Ichi Kangyo Bk. LOC) VMIG1 2,000,000
2,000,000 (Malibu Meadows II Projects) Ser. B, 3.45s, 12/1/15 (Sumitomo Bk. LOC) A-1 2,000,000
1,800,000 Monterey Peninsula , Wtr. Mgmt. Dist. Variable COP (Waste Wtr. Reclamation
Project), 3.6s, 7/1/22 (Sumitomo Bk. LOC) VMIG1 1,800,000
2,000,000 Moorpark Multi-Family VRDN (Le Club Apts. Project) 3.65s, 11/1/15
(Citibank, NA LOC) A-1 2,000,000
2,100,000 Oakland Tax & RAN 4-1/2s, 7/28/95 MIG1 2,108,142
2,000,000 Oakland Variable COP (Cap. Equip. Project) 3.9s, 12/1/15 (National
Westminster Bk. PLC LOC) A-1 2,000,000
Palm Springs, Cmnty. Redev. Agcy. Variable COP
2,000,000 (Headquarters Hotel 10 Project) 3.6s, 12/1/14 (First Bk. Systems LOC) A-1 2,000,000
200,000 (Headquarters Hotel 7 Project) 3.6s, 12/1/14 (First Bk. Systems LOC) A-1 200,000
2,000,000 Pomona Redev. Agcy. VRDN (Bauer Group Apt.) 3.85s, 12/1/07 (First Bk.
Systems LOC) A-1 2,000,000
<PAGE>
Municipal Bonds and Notes
Principal Amount Ratings(b) Value
California (continued)
Sacramento, Cnty. Multi-Family Hsg. VRDN
$ 1,495,000 (Smoketree), Ser A, 3.85s, 4/15/10 A-1 $ 1,495,000
2,000,000 (River Oaks Apts.) Ser. E, 3-3/4s, 9/15/07 (Dai-Ichi Kangyo Bk. LOC) VMIG1 2,000,000
2,000,000 San Bernardino Cnty., Brd. of Ed. Tax & RAN, 4-1/4s, 7/28/95 SP-1 2,003,113
2,000,000 San Diego, Hsg. Auth. Multi-Family Hsg. VRDN (Paseo Pt. Apts. ) Ser. A,
3-1/2s, 8/1/15 (Bk.) VMIG1 2,000,000
2,000,000 Upland, Hsg. Auth. Multi-Family VRDN (Upland Vlg. Green Project), 3.7s,
9/1/10 (Bk. of Tokyo LOC) VMIG1 2,000,000
Total Municipal Bonds and Notes
(cost $41,817,902) $41,817,902
Municipal Commercial Paper (5.0%)(a) (cost $2,200,000)
Principal Amount Ratings(b) Value
$ 2,200,000 Orange Cnty. Arpt. Dev. Auth., 3.10s, 10/5/94
(Citibank NA LOC) A-1 $ 2,200,000
Total Investments
(cost $44,017,902)(d) $44,017,902
</TABLE>
<PAGE>
NOTES
(a)Percentages indicated are based on total net assets of $44,798,772 which
correspond to a net asset value per share of $1.00.
(b)The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at September 30, 1994, for the securities
listed. Ratings are generally ascribed to securities at the time of issuance.
While the agencies may from time to time revise such ratings, they undertake
no obligations to do so, and the ratings do not necessarily represent what
the agencies would ascribe to these securities at September 30, 1994.
Securities rated by Putnam are indicated by "/P" and are not publicly rated.
These ratings are not covered by the Report of Independent Accountants.
Moody's Investors Service, Inc. and Standard & Poor's Corp. are the leading
independent rating agencies for debt securities. Moody's uses the designation
"Moody's Investment Grade," or "MIG," for most short-term municipal
obligations, adding a "V" ("VMIG") for bonds with a demand or variable
feature; the designation "P" is used for tax exempt commercial paper.
Standard & Poor's uses "SP" for notes maturing in three years or less, "A"
for bonds with a demand or variable feature.
Moody's Investors Service, Inc.
MIG1/VMIG1 = Best quality; strong protection of cash flow, superior liquidity
and broad access to refinancing
MIG2/VMIG2 = High quality; ample protection of cash flow, liquidity support
and ability to refinance
P-1 = Superior capacity for repayment
P-2 = Strong capacity for repayment
Standard & Poor's Corp.
SP-1 = Overwhelming safety characteristics
SP-2 = Strong capacity to pay principal interest
A-1+ = Overwhelming degree of credit protection
A-1 = Strong degree of safety
A-2 = Considered strong but lacks solid strength for timely repayment
(c)Income may be subject to the Alternative Minimum Tax.
(d)The aggregate identified cost for federal income tax purposes is the same.
The rates shown on Variable Rate Demand Notes (VRDN) are the current
interest rates at September 30, 1994 which are subject to change based on the
terms of the security.
The fund had the following industry group concentrations greater than 10%
on September 30, 1994 (as a percentage of net assets):
Housing 34.6%
Finance 13.7
The accompanying notes are an integral of these financial statements.
<PAGE>
Statement of assets and liabilities
September 30, 1994
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities, at amortized cost (Note 1) $44,017,902
Cash 59,099
Interest and other receivables 190,311
Receivable for shares of the fund sold 770,847
Total assets $45,038,159
Liabilities
Payable for shares of the fund repurchased 68,319
Distributions payable to shareholders 84,204
Payable for compensation of Manager (Note 2) 50,264
Payable for administrative services (Note 2) 993
Other accrued expenses 35,607
Total liabilities 239,387
Net assets $44,798,772
Represented by
Paid-in capital (Note 4) $44,798,772
Net asset value, offering and redemption price per share
($44,798,772 divided by 44,798,772 shares) $1.00
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of operations
Year ended September 30, 1994
<TABLE>
<CAPTION>
<S> <C>
Tax exempt interest income $1,223,828
Expenses:
Compensation of Manager (Note 2) 217,108
Compensation of Trustees (Note 2) 5,053
Reports to shareholders 42,492
Auditing 15,527
Legal 10,932
Postage 20,174
Registration fees 6,690
Administrative services (Note 2) 3,245
Distribution fees (Note 2) 4,724
Other expenses 1,394
Total expenses 327,339
Net investment income 896,489
Net increase in net assets resulting from operations $ 896,489
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Year ended
September 30
1994 1993
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income $ 896,489 $ 956,224
Net increase in net assets resulting from operations 896,489 956,224
Distributions to shareholders from:
Net investment income (896,489) (956,224)
Decrease from capital share transactions (Note 4) (565,336) (13,493,726)
Total decrease in net assets (565,336) (13,493,726)
Net assets
Beginning of year 45,364,108 58,857,834
End of year $ 44,798,772 $ 45,364,108
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
Financial Highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
For the period
October 26, 1987
(commencement
of operations) to
Year ended September 30 September 30
1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C>
Net Investment
Income $ .0192 $ .0175 $.0262(a) $.0407(a) $.0513(a) $.0566(a) $.0416(a)
Net Realized Gain
on Investments -- -- .0001 -- -- .0001 .0001
Total from
Investment
Operations $ .0192 $ .0175 $ .0263 $ .0407 $ .0513 $ .0567 $ .0417
Total
Distributions: ($ .0192) ($ .0175) ($ .0263) ($ .0407) ($ .0513) ($ .0567) ($ .0417)
Total Investment
Return at Net
Asset Value
(%)(b) 1.94 1.77 2.67 4.15 5.26 5.82 4.25(c)
Net Assets, End of
Period (in
thousands) $44,799 $45,364 $ 58,858 $ 69,184 $ 87,095 $ 73,136 $ 43,436
Ratio of Expenses
to Average Net
Assets (%) .67 .89 .85(a) .80(a) .69(a) .69(a) .58(a)(c)
Ratio of Net
Investment
Income to
Average Net
Assets (%) 1.84 1.78 2.70(a) 4.03(a) 5.12(a) 5.65(a) 4.21(a)(c)
</TABLE>
(a)Reflects a voluntary expense limitation and, during the period ended
September 30, 1988, a wavier of a portion of distribution fees in effect
during the period. As a result of such limitation and waiver, expenses of the
fund for the years ended September 30, 1992, 1991, 1990, 1989 and for the
period ended September 30, 1988, reflect per share reductions of $0.0026,
$0.0033, $0.0033, $0.0043 and $0.0051, respectively.
(b)Total investment return assumes dividend reinvestment and does not reflect
the effect of sales charges.
(c)Not annualized.
<PAGE>
Notes to financial statements
September 30, 1994
Note 1
Significant accounting policies
The fund is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end management investment company. The fund seeks as
high a level of current income exempt from federal income tax and California
personal income tax as is consistent with preservation of capital,
maintenance of liquidity and stability of principal by investing primarily in
a diversified portfolio of short-term California tax-exempt securities.
The following is a summary of significant accounting policies consistently
followed by the fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A) Security valuation The valuation of the fund's portfolio instruments is
determined by means of the amortized cost method as set forth in Rule 2a-7
under the Investment Company Act of 1940. The amortized cost of an instrument
is determined by valuing it at cost originally and thereafter amortizing any
discount or premium from its face value at a constant rate until maturity.
B) Security transactions Security transactions are accounted for on trade
date (date the order to buy or sell is executed).
C) Federal taxes It is the policy of the fund to distribute all of its income
within the prescribed time and otherwise comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies. It is
also the intention of the fund to distribute an amount sufficient to avoid
imposition of any excise tax under Section 4982 of the Internal Revenue Code
of 1986. Therefore, no provision has been made for federal income and excise
taxes on income and capital gains.
D) Interest income and distributions to shareholders Interest is recorded on
the accrual basis. Income distributions (and distributions of capital gains,
if any) are recorded daily by the fund and are distributed to shareholders
monthly.
Note 2
Management fee, administrative services, and other transactions
Compensation of Putnam Investment Management, Inc. "Putnam Management," the
fund's Manager, a wholly- owned subsidiary of Putnam Investments, Inc., for
management and investment advisory services is paid quarterly based on the
average net assets of the fund. Such fee is based on the following annual
rates: 0.45% of the first $500 million of average net assets, 0.35% of the
next $500 million, 0.30% of the next $500 million, and 0.25% of any amount
over $1.5 billion, subject to reduction in any year by the amount of certain
brokerage commissions and fees (less expenses) received by affiliates of
the Manager on the fund's portfolio transactions.
The fund also reimburses the Manager for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees. For the year ended
September 30, 1994, the fund paid $3,245 for these services.
Trustees of the fund receive an annual Trustee's fee of $400 and an
additional
<PAGE>
fee for each Trustees' meeting attended. Trustees who are not interested
persons of the Manager and who serve on committees of the Trustees receive
additional fees for attendance at certain committee meetings.
Custodial functions for the fund are provided by the Putnam Fiduciary Trust
Company (PFTC), a subsidiary of Putnam Investments, Inc. Investor servicing
agent functions are provided by Putnam Investor Services, a division of PFTC.
Investor servicing and custodian fees reported in the Statement of operations
for the year ended September 30, 1994 have been reduced by credits allowed by
PFTC. Such credits amounted to $136,136.
Pursuant to the fund's underwriting agreement and to a distribution plan
adopted under Rule 12b-1 of the Investment Company Act of 1940, the fund paid
Putnam Mutual Funds Corp., a wholly owned subsidiary of Putnam Investments,
Inc., a monthly distribution fee at the annual rate of 0.10% of the average
net assets of the fund. For the period ended December 31, 1993, the fund paid
distribution fees in the amount of $4,724. The Trustees voted to discontinue
payments under the fund's distribution plan effective January 1, 1994.
Putnam Mutual Funds Corp., acting as the underwriter, receives proceeds from
contingent deferred sales charges. These charges apply only to certain shares
that have been exchanged from other Putnam Funds. Putnam Mutual Funds Corp.
received $10,567 in contingent deferred sales charges from such redemptions
for the year ended September 30, 1994.
Note 3
Purchases and sales of securities
During the year ended September 30, 1994, purchases and sales (including
maturities) of investment securities (all short-term obligations) aggregated
$112,226,330 and $113,529,540, respectively. In determining the net gain or
loss on securities sold, the cost of securities has been determined on the
identified cost basis.
Note 4
Capital shares
At September 30, 1994, there was an unlimited number of shares of beneficial
interest authorized. Transactions in capital shares, at a constant net asset
value of $1.00 per share, were as follows:
<TABLE>
<CAPTION>
Year ended September 30
1994 1993
<S> <C> <C>
Shares sold 125,528,473 84,583,103
Shares issued in connection
with reinvestment of
distributions 834,320 900,537
126,362,793 85,483,640
Shares repurchased (126,928,129) (98,977,366)
Net decrease (565,336) (13,493,726)
</TABLE>
<PAGE>
Tax information
The fund has designated all dividends paid during the fiscal year as
exempt-interest dividends. Thus, 100% of these distributions are exempt from
federal income tax. For residents of the state of California, 100% of the
fund's distributions are exempt from California personal income tax.
Investors who receive Social Security benefits should consult a tax advisor
to determine what effect, if any, the fund's income has on the taxation of
benefits. An investment in the fund may be subject to state, local or the
alternative minimum tax. Distributions of capital gains, if any, are taxable.
<PAGE>
Fund information
INVESTMENT MANAGER
Putnam Investment
Management, Inc.
One Post Office Square
Boston, MA 02109
MARKETING SERVICES
Putnam Mutual Funds Corp.
One Post Office Square
Boston, MA 02109
CUSTODIAN
Putnam Fiduciary Trust Company
LEGAL COUNSEL
Ropes & Gray
INDEPENDENT
ACCOUNTANTS
Price Waterhouse LLP
TRUSTEES
George Putnam, Chairman
William F. Pounds, Vice Chairman
Jameson Adkins Baxter
Hans H. Estin
John A. Hill
Elizabeth T. Kennan
Lawrence J. Lasser
Robert E. Patterson
Donald S. Perkins
George Putnam, III
A.J.C. Smith
W. Nicholas Thorndike
OFFICERS
George Putnam
President
Charles E. Porter
Executive Vice President
Patricia C. Flaherty
Senior Vice President
Lawrence J. Lasser
Vice President
Gordon H. Silver
Vice President
Gary N. Coburn
Vice President
William F. McGue
Vice President
Blake E. Anderson
Vice President
Lindsey M. Callen
Vice President and Fund Manager
William N. Shiebler
Vice President
John R. Verani
Vice President
Paul M. O'Neil
Vice President
John D. Hughes
Vice President and Treasurer
Beverly Marcus
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam California Tax
Exempt Money Market Fund. It may also be used as sales literature when
preceded or accompanied by the current prospectus, which gives details of
sales charges, investment objectives, and operating policies of the fund, and
the most recent copy of Putnam's Quarterly Performance Summary. For more
information or to request a prospectus, call toll-free: 1-800-225-1581.
<PAGE>
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The Putnam Funds
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