Putnam
California
Tax Exempt
Money Market
Fund
ANNUAL REPORT
September 30, 1995
[Putnam scales logo]
B O S T O N * L O N D O N * T O K Y O
<PAGE>
Performance highlights
> "In just five years, total assets of money funds have grown by 72%, and in
the not too distant future, assets should break the elusive $1 trillion
barrier. . . . There are many factors contributing to asset growth. One of
the most important has been the tremendous acceptance of money funds as a
viable cash alternative to traditional market securities."
--IBC Money Market Insight, September 1995
> 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 1995 RESULTS AT A GLANCE
<TABLE>
<CAPTION>
Total return NAV
<S> <C> <C> <C>
.............................................................
12 months ended 9/30/95
(change in value during
period plus reinvested
distributions) 2.92%
Distributions No. Income Total
.............................................................
12 $0.028848 $0.028848
Current return
.............................................................
End of period
Current 7-day SEC yield(1) 3.05%
Taxable equivalent(2) 5.67
Current 30-day SEC yield(1) 2.79
Taxable equivalent(2) 5.19
</TABLE>
Performance data represent past results. For performance over longer periods,
see page 7. (1)The 7- and 30-day yields are the two most common gauges for
measuring money-market mutual-fund performance. Investment income may be
subject to state and local taxes. For some investors, investment income may
also be subject to the federal alternative minimum tax. (2)Assumes maximum
46.24% federal and state tax rate. Results for investors subject to lower tax
rates would not be as advantageous.
2
<PAGE>
From the Chairman
[photo of George Putnam]
(c)Karsh, Ottawa
Dear Shareholder:
Putnam California Tax Exempt Money Market Fund ends one fiscal year and
begins another in one of the most lively bond markets in years. Inflation
appears to have peaked at 3%, a lower level than in the mid-1980s. With
modest growth, it could fall lower, making real yields even more attractive
than they are now.
This favorable environment belies the challenges your fund faced during the
12 months ended September 30, 1995, as the economy slowed and interest rates
- -- especially short-term rates -- began a descent. The decline in short-term
rates was foreshadowed when the Federal Reserve Board opted not to adjust
rates upward in February and then was confirmed as the Fed actually lowered
rates a notch in July.
Fund Manager Lindsey Strong's challenge in this environment was to stay ahead
of the trend, which she did by extending the average maturity of the
securities in the portfolio. She made the move before the Fed's July rate
cut, thus helping the fund maintain its competitive edge. Lindsey's report
for fiscal 1995 and her outlook for the months ahead appear on the following
pages.
Respectfully yours,
(signature of George Putnam)
George Putnam
Chairman of the Trustees
November 15, 1995
3
<PAGE>
Report from the Fund Manager
Lindsey C. Strong
During the 12 months ended September 30, 1995, Putnam California Tax Exempt
Money Market Fund once again generated a competitive return. Faced with the
challenge of maintaining a high-quality portfolio at a time when the supply
of tax-exempt securities was relatively low, your fund rose to the occasion.
Throughout the period, our conservative approach of investing in high-quality
short-term instruments resulted in a steady stream of double-tax-free income
and a stable price of $1.00 per share.
> A CHANGED INVESTMENT ENVIRONMENT
The investment environment in which your fund was managed changed
dramatically during the period. During the last quarter of 1994, economic
growth remained strong and concerns about increased inflation dominated the
financial markets. At that time, the Federal Reserve Board's anti-inflation
policy of periodically raising short-term interest rates was in full force.
Even as the Fed was raising rates for the last time in February 1995, the
success of its anti-inflation policy was becoming apparent. The growth in
gross domestic product (GDP) slowed from 5.1% during the fourth quarter of
1994 to 2.8% during the first quarter of 1995. During the second quarter of
1995, GDP growth declined to 0.5%. By early summer, recession fears began to
mount, and in July, the Fed lowered short-term interest rates from 6.0% to
5.75%. Toward the end of the summer, leading economic indicators began to
show signs of strength, and recession concerns abated. However, the Fed took
no other action.
The California economy continued to gain strength during the period. After
the disruptions caused by the Orange County bankruptcy and a series of
natural disasters, major indicators showed relatively strong growth and an
improved business climate. While it still lags the national economy,
California seems to be on the road to recovery.
4
<PAGE>
> CAPITALIZING ON INTEREST-RATE MOVES
As interest rates fluctuated during the period, our strategy centered on
maximizing income while at the same time maintaining a very high-quality
portfolio of securities. To this end, while interest rates were rising, we
shortened the average maturity of the portfolio. This allowed us to take
advantage of incrementally higher yields.
When it became apparent that rates were unlikely to rise further, we reversed
our approach, seeking to lock in higher yields by lengthening the average
maturity of the portfolio. Finally, toward the end of the fiscal year, as
interest rates became somewhat uncertain, we put the fund's average maturity
in a more neutral position. It is no longer as short as it was very early in
the period, nor is it as long as it was in the summer.
> SECURITY SELECTION FOCUSED ON QUALITY
Typically, the supply of tax-exempt securities ebbs and flows throughout the
year. Because the fiscal year for many municipalities begins in June or July,
new issues of tax-exempt securities are usually plentiful during the summer
months. While new
PERFORMANCE COMPARISONS (9/30/95)
<TABLE>
<CAPTION>
Current After-tax
return* return
<S> <C> <C>
..............................................................
Passbook savings account 2.01% 1.08%
..............................................................
Taxable money-market fund
7-day yield 5.35 2.88
..............................................................
3-month certificate of deposit
(as of 9/21/95) (CD) 3.26 1.75
..............................................................
Putnam California Tax Exempt
Money Market Fund (7-day yield) 3.05 3.05
</TABLE>
The net asset value of money-market mutual funds is uninsured and designed to
be fixed, while distributions vary daily. The principal values on passbook
savings and bank CDs are generally insured up to certain limits by state and
federal agencies. CDs--unlike money-market funds, which incur more
risk--offer a fixed rate of return. Unlike money-market funds, early
withdrawals from bank CDs may be subject to substantial penalties. Investment
returns will fluctuate. After-tax return assumes a combined 46.24% federal
and state tax rate.
*Sources: Bank of Boston (passbook savings), Bank Rate Monitor (3-month CDs),
IBC/Donaghue's Money Fund Report (taxable money-market fund 7-day yield).
5
<PAGE>
issuance of California securities has lagged that of previous years, we were
still able to find securities that measured up to our strict standards for
high quality and liquidity.
In selecting securities for the portfolio, we invested in variable rate
demand notes (VRDNs). VRDNs pay variable interest rates that reset at daily,
weekly, or monthly intervals. Nearly 80% of your fund's investments are
insured or backed by bank letters of credit. These features enhance the
quality assurance of the securities in the portfolio, even those rated in the
highest categories by nationally recognized rating services.
> OUR OUTLOOK
As always, we will be monitoring the national and the California economies
very carefully in the coming months. Because the Federal Reserve Board seems
to have achieved its goal of low inflation and a slowly growing economy, we
believe interest rates could decline modestly in the months ahead. However,
we do not expect to see extremely steep declines in rates such as the ones we
experienced in 1993.
Because your fund's average maturity is relatively neutral, we believe it is
well positioned to generate a relatively high amount of tax-free income even
if rates decline. In the months ahead, we will continue to seek a competitive
amount of income by investing in a well-diversified portfolio of tax-exempt
money market instruments and, as always, maintaining our emphasis on
stability of principal, high quality, and liquidity.
The views expressed throughout the report are exclusively those of Putnam
Management and are not meant as investment advice. Although the current
holdings were viewed favorably as of 9/30/95, there is no guarantee the fund
will continue to hold these securities in the future.
6
<PAGE>
Performance summary
This section provides, at a glance, information about your fund's
performance. Total return shows how the value of the fund's shares changed
over time, assuming you held the shares through the entire period and
reinvested all distributions 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.
TOTAL RETURN FOR PERIODS ENDED 9/30/95
<TABLE>
<CAPTION>
Lipper California
Fund shares Tax Exempt Consumer
at Money Market Price
NAV Fund Average Index
<S> <C> <C> <C>
1 year 2.92% 3.24% 2.54%
5 years 14.17 15.70 15.45
Annual average 2.69 2.96 2.91
Life of fund (10/26/87) 32.57 34.22 32.87
Annual average 3.62 3.79 3.65
</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.
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.
7
<PAGE>
Report of independent accountants
For the fiscal year ended September 30, 1995
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, 1995, 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 of 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 from 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, 1995 by correspondence with the custodian,
provide a reasonable basis for the opinion expressed above.
Price Waterhouse LLP
Boston, Massachusetts
November 14, 1995
8
<PAGE>
Portfolio of investments owned
September 30, 1995
Key to Abbreviations
FGIC -- Federal Guaranty Insurance Corporation
LOC -- Letter of Credit
VRDN -- Variable Rate Demand Notes
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES (84.8%)*
PRINCIPAL AMOUNT RATINGS** VALUE
<S> <C> <C> <C>
California
$1,400,000 Alameda Cnty. Transn. Auth. Sales Tax
Rev. Bonds, FGIC 4-1/2s, 5/1/96 AAA $ 1,404,840
1,770,000 CA Hlth. Facs. Fing. Auth. VRDN (Good
Samaritan Hlth. Syst), Ser. A, 3-1/2s,
8/1/17 (Bk. of Amer. Nat'l. Tr. & Svgs.
Assoc. LOC) VMIG1 1,770,000
3,000,000 CA Pub. Cap Impts. Fing. Auth. VRDN Ser.
C, 3.75s, 6/1/28 (National Westminster
Bk. USA Letter of Credit LOC) VMIG1 3,000,000
1,810,000 Loma Linda, Hosp. VRDN (U. Med. Ctr. )
Ser. C, 4.3s, 12/1/15 (The Indl. Bk. of
Japan LOC) A-1 1,810,000
500,000 Los Angeles Cnty., Hsg. Auth. Multi-Fam.
VRDN (Malibu Meadows II Projects )
Ser. B, 4.25s, 12/1/15 (Sumitomo Bk.
LOC) A-1 500,000
1,800,000 Monterey Peninsula, Wtr. Mgmt. Dist.
VRDN COP (Waste Wtr. Reclamation
Project), 4.35s, 7/1/22 (Sumitomo Bk.,
Ltd. LOC) VMIG1 1,800,000
1,500,000 Moorpark Multi-Family VRDN (Le Club
Apts. Project) 4.25s, 11/1/15 (Citibank,
NA LOC) A-1+ 1,500,000
2,000,000 Oakland VRDN (Cap. Equip. Project) 4.5s,
12/1/15 (National Westminster Bk. PLC
LOC) A-1 2,000,000
Palm Springs, Cmnty. Redev. Agcy. VRDN
COP
1,900,000 (Headquarters Hotel 10 Project) 4s,
12/1/14 (Citibank NY LOC) A-1+ 1,900,000
200,000 (Headquarters Hotel 7 Project) 4s,
12/1/14 (Citibank NY LOC) A-1+ 200,000
2,000,000 Pomona Redev. Agcy. Multi-Fam. VRDN
(Bauer Group Apt.) 4.85s, 12/1/07
(Mercury Savings & Loan LOC) A-1+ 2,000,000
1,525,000 Riverside Cnty. Hsg. Auth. Multi-Fam.
VRDN (Mtn. View Apts.) Ser. A, 3-1/2s,
8/1/25 (Redlands Federal Savings & Loan
LOC) A-1+ 1,525,000
1,495,000 Sacramento, Cnty. Multi- Fam. Hsg. VRDN
(Smoketree), Ser A 4.2s, 4/15/10 A-1+ 1,495,000
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
MUNICIPAL BONDS AND NOTES
PRINCIPAL AMOUNT RATINGS** VALUE
<S> <C> <C> <C>
California (continued)
$2,000,000 San Diego Cmty. Regl. Transn. Comm.
Sales Tax Rev. Bonds, FGIC, Ser. A,
4.75s, 4/1/96 AAA $ 2,007,372
1,800,000 San Diego, Hsg. Auth. Multi-Fam. VRDN
(Paseo Pt. Apts. ) Ser. A, 4.3s,
8/1/15
(Bk. of Tokyo LOC) VMIG1 1,800,000
2,000,000 Upland, Hsg. Auth. Multi-Fam. VRDN
(Upland Village Green Project), 4.3s,
9/1/10
(Bank of Tokyo LOC) VMIG1 2,000,000
1,100,000 Vallejo Hsg. Auth. Multi-Fam. VRDN
3.65s, 5/15/22 A-1+ 1,100,000
2,000,000 Woodland Multi-Fam. Mtg. VRDN 3.65s,
7/15/18 A-1+ 2,000,000
Total Municipal Bonds and Notes
(cost $29,812,212) $29,812,212
</TABLE>
<TABLE>
<CAPTION>
MUNICIPAL COMMERCIAL PAPER (15.9%)*
PRINCIPAL AMOUNT RATINGS** VALUE
<S> <C> <C> <C>
$2,000,000 CA Poll. Control VRDN (Pacific Gas & Elec.
Co.) 4.15s, 10/11/95 (Morgan Gnty. LOC) A-1+ $ 2,000,000
1,800,000 Los Angeles Cnty. Metropolitan Trans. Auth.
Sales Tax 3.4s 10/6/95 (National
Westminister Banque, Nationale de Paris,
Canadian Imperial Bank of Commerce, Bank
Of Canada: LOC) P-1 1,800,000
1,800,000 Sacramento Muni. Utility Dist. 3.6s, 12/1/95
(Bayerisch Landes Bank Girozentrale LOC) P-1 1,800,000
Total Municipal Commercial Paper (cost
$5,600,000) $ 5,600,000
Total Investments (cost $35,412,212)*** $35,412,212
</TABLE>
* Percentages indicated are based on total net assets of $35,139,643 which
correspond to a net asset value per share of $1.00
** The Moody's or Standard & Poor's ratings indicated are believed to be the
most recent ratings available at September 30, 1995, 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 do so, and the ratings do not necessarily
represent what the agencies would ascribe to these securities at September
30, 1995. 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.
10
<PAGE>
Moody's Investor 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
AAA = Strong capacity to pay interest and repay principal and differs from
the higher rated issues only in a small degree
P-1= Superior capacity for repayment
P-2= Strong capacity for repayment
Standard & Poor's Corp.
SP-1= Overwhelming safety characteristics
SP-2= Strong capacity to pay principal and 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
*** The aggregate identified cost on a tax basis is the same.
The rates shown on Variable Rate Demand Notes (VRDN) are the current interest
rates at September 30, 1995 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, 1995 (as a percentage of net assets):
<TABLE>
<CAPTION>
<S> <C>
Housing 45.6%
Building & construction 19.4
Hospital/healthcare 10.2
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
Statement of assets and liabilities
September 30, 1995
<TABLE>
<CAPTION>
Assets
<S> <C>
Investments in securities, at amortized cost (Note 1) $35,412,212
Cash 25,578
Interest and other receivables 232,113
Receivable for shares of the fund sold 35,809
Total assets 35,705,712
Liabilities
Payable for shares of the fund repurchased 390,294
Distributions payable to shareholders 78,817
Payable for compensation of Manager (Note 2) 43,413
Payable for compensation of Trustee (Note 2) 104
Payable for administrative services (Note 2) 1,252
Payable for investor servicing and custodian fees (Note 2) 15,286
Other accrued expenses 36,903
Total liabilities 566,069
Net assets $35,139,643
Represented by
Paid-in capital (Note 4) $35,139,643
Net asset value, offering and redemption price per share
($35,139,643 divided by 35,139,643 shares) $1.00
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
Statement of operations
Year ended September 30, 1995
<TABLE>
<CAPTION>
<S> <C>
Tax exempt interest income $1,682,146
Expenses:
Compensation of Manager (Note 2) 214,060
Investor servicing and custodian fees (Note 2) 110,238
Compensation of Trustees (Note 2) 5,627
Reports to shareholders 32,146
Auditing 25,358
Legal 70,245
Postage 3,193
Registration 5,579
Administrative services (Note 2) 5,100
Other expenses 707
Total expenses 472,253
Fees paid indirectly (Note 2) (131,067)
Net expenses 341,186
Net investment income 1,340,960
Net increase in net assets resulting from
operations $1,340,960
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
Statement of changes in net assets
<TABLE>
<CAPTION>
Year ended
September 30
1995 1994
<S> <C> <C>
Decrease in net assets
Operations:
Net investment income $ 1,340,960 $ 896,489
Net increase in net assets resulting from
operations 1,340,960 896,489
Distributions to shareholders from:
Net investment income (1,340,960) (896,489)
Decrease from capital share transactions (Note 4) (9,659,129) (565,336)
Total decrease in net assets (9,659,129) (565,336)
Net assets
Beginning of year 44,798,772 45,364,108
End of year $35,139,643 $44,798,772
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
Financial highlights
(For a share outstanding throughout the period)
<TABLE>
<CAPTION>
Year ended September 30
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net investment income $0.0288 $0.0192 $.0175 $.0262(a) $.0407(a)
Net realized gain on investments -- -- -- .0001 --
Total from investment operations $0.0288 $0.0192 $.0175 $.0263 $.0407
Total distributions: ($0.0288) ($0.0192) ($.0175) ($.0263) ($.0407)
Total investment return at net
asset value (%) (b) 2.92 1.94 1.77 2.67 4.15
Net assets, end of period
(in thousands) $35,140 $44,799 $45,364 $58,858 $69,184
Ratio of expenses to average net
assets (%) (c) 1.00 .67 .89 .85(a) .80(a)
Ratio of net investment income to
average net assets (%) 2.84 1.84 1.78 2.70(a) 4.03(a)
</TABLE>
(a) Reflects an expense limitation in effect during the period. As a result
of such limitation, expenses of the fund for the years ended September
30, 1992 and 1991 reflect per share reductions of $0.0026 and $0.0033,
respectively.
(b) Total investment return assumes dividend reinvestment and does not
reflect the effect of sales charges.
(c) The ratio of expenses to average net assets for the year ended September
30, 1995 includes amounts paid through expense offset arrangements. Prior
period ratios exclude these amounts. See Note 2.
15
<PAGE>
Notes to financial statements
September 30, 1995
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 dividends (and distributions of capital gains, if
any) are recorded daily by the fund and are distributed monthly to
shareholders.
The amount and character of income and gains to be distributed are determined
in accordance with income tax regulations which may differ from generally
accepted accounting principles.
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, under current law, to reduction in any year by
the amount of certain brokerage commissions and fees (less expenses) received
by affiliates of Putnam Management on the fund's portfolio transactions.
The fund reimburses Putnam Management for the compensation and related
expenses of certain officers of the fund and their staff who provide
administrative services to the fund. The aggregate amount of all such
reimbursements is determined annually by the Trustees.
16
<PAGE>
Trustees of the fund receive an annual Trustee's fee of $390 and an
additional fee for each Trustees' meeting attended. Trustees who are not
interested persons of Putnam Management and who serve on committees of the
Trustees receive additional fees for attendance at certain committee
meetings.
During the year ended September 30, 1995, the fund adopted a Trustee Fee
Deferral Plan (the "Plan") which allows the Trustees to defer the receipt of
all or a portion of Trustees fees payable on or after July 1, 1995. The
deferred fees remain in the fund and are invested in the fund or in other
Putnam funds until distribution in accordance with the Plan.
Custodial functions for the fund's assets are provided by the Putnam
Fiduciary Trust Company (PFTC), a wholly-owned subsidiary of Putnam
Investments, Inc. Investor servicing agent functions are provided by Putnam
Investor Services, a division of PFTC.
For the year ended September 30, 1995, fund expenses were reduced by $131,067
under expenses offset arrangements with PFTC. Investor servicing and
custodian fees reported in the Statement of operations exclude these credits.
The fund could have invested a portion of the assets utilized in connection
with the offset arrangements in an income- producing asset if it had not
entered into such arrangements.
The fund has adopted a distribution plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The purpose of the Plan is to
compensate Putnam Mutual Funds Corp., a wholly-owned subsidiary of Putnam
Investments Inc., for services provided and expenses incurred by it in
distributing shares of the fund. The Plan provides for payments by the fund
to Putnam Mutual Funds Corp. at an annual rate up to 0.35% of the average net
assets of the fund. Currently, no payments are being made under the plan.
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 $24,973 in contingent sales charges from such redemptions for the
year ended September 30, 1995.
Note 3
Purchases and sales of securities
During the year ended September 30, 1995, purchases and sales (including
maturities) of investment securities (all short-term obligations) aggregated
$103,096,431 and $111,695,057, 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, 1995, 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
1995 1994
<S> <C> <C>
Shares sold 114,301,007 125,528,473
Shares issued in connection with
reinvestment of distributions 1,230,354 834,320
115,531,361 126,362,793
Shares repurchased (125,190,490) (126,928,129)
Net decrease (9,659,129) (565,336)
</TABLE>
17
<PAGE>
Federal tax information
The fund has designated 100% of dividends paid from net investment income
during the fiscal year as tax exempt for Federal income tax purposes.
The Form 1099 you receive in January 1996 will show the status of all
distributions paid to your account in calendar 1995.
18
<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
Eli Shapiro
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 C. Strong
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.
Shares of mutual funds are not deposits or obligations of, or guaranteed or
endorsed by, any financial institution; are not insured by the Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board or any other
agency; and involve risk, including the possible loss of the principal amount
invested.
19
<PAGE>
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
Bulk Rate
U.S. Postage
PAID
Putnam
Investments
20967-064 11/95
