Putnam
Money Market
Fund
Item 1. Report to Stockholders:
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The following is a copy of the report transmitted to stockholders pursuant
to Rule 30e-1 under the Investment Company Act of 1940:
ANNUAL REPORT ON PERFORMANCE AND OUTLOOK
9/30/03
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From the Trustees
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John A. Hill and
George Putnam, III
Dear Fellow Shareholder:
You may have seen media coverage of market timing allegations involving
Putnam Investments. A separate letter has been sent to you detailing the
steps being taken by Putnam Investments to address these matters. In
addition, the Board of Trustees of The Putnam Funds is conducting an
independent investigation of these issues. When that investigation is
complete, we will report to you on the steps we are taking to make sure
that nothing like this happens in the future. We will, of course, ensure
that your fund is fully compensated for any losses resulting from
improper trading activity at Putnam. We appreciate your loyalty and want
you to know that we intend to restore full confidence in Putnam, an
organization that aspires to the highest ethical and business standards.
The balance of this report focuses on the performance of your fund. In
the face of a persistently challenging interest-rate environment, Putnam
Money Market Fund was able to deliver positive results at net asset
value (NAV) for the fiscal year ended September 30, 2003. Though the
fund underperformed its benchmark index, class A shares at NAV
outperformed the fund's Lipper category average for the period. The
details are on the facing page.
When it comes to money market funds, differences in yields are measured
in fractions of percentage points. At the same time, the highest
standards of quality in the selection of securities must be maintained.
In the face of generally declining short-term interest rates, your
fund's management team continually works to try to lock in the highest
possible rates for the longest possible time, consistent with the fund's
strict selection criteria. In the following report, the managers discuss
their strategy during the fiscal year just ended and offer their views
on prospects for the months ahead.
Respectfully yours,
/S/ JOHN A. HILL /S/ GEORGE PUTNAM, III
John A. Hill George Putnam, III
Chairman of the Trustees President of the Funds
November 19, 2003
Report from Fund Management
Fund highlights
* Putnam Money Market Fund's class A shares had a total return at net
asset value of 0.87% for the 12 months ended September 30, 2003.
* The fund underperformed its benchmark, the Merrill Lynch 91-Day
Treasury Bill Index, which returned 1.32% for the period.
* The fund's returns were in line with the 0.56% average return for
Lipper's Money Market Funds category.
* See the Performance Summary beginning on page 7 for complete fund
performance and comparative performance.
Performance commentary
Low interest rates proved to be the most decisive factor affecting the
performance of money market securities during the fund's fiscal year.
With short-term interest rates hovering around 40-year lows for much of
the 12 months ended September 30, 2003, it took a sharp, patient eye to
locate money-market-eligible securities with the right balance of
competitive income, quality, and maturity structure. In spite of the
flat-to-declining interest-rate environment, we managed to extend the
fund's average days to maturity -- thereby taking advantage of
attractive rates for longer periods of time -- while enhancing its
diversification mix. This enabled us to keep the fund's performance
competitive relative to its Lipper category, but was not enough to
enable the fund to match the returns of its benchmark index. As has been
our tradition, we strive not to sacrifice quality to capture relatively
higher-income securities, which can occur when investors place too high
a priority on yield. The fund's broad array of issuers and security
types also contributed to its success relative to its Lipper peer group.
FUND PROFILE
By emphasizing high-quality short-term fixed-income securities, Putnam
Money Market Fund seeks to protect principal by seeking to maintain a
constant $1.00 share price while providing shareholders with easy access
to their money. Putnam Money Market Fund may be appropriate for
investors seeking current income consistent with capital preservation,
stability of principal, and liquidity of assets.
Market overview
During the first half of the fund's fiscal year, disappointing levels of
economic growth and increasing tensions with Iraq gave rise to a
cautious Federal Reserve Board. As had been the case over the preceding
two years, economic and political uncertainty prompted uneasy investors
to focus on more predictable, high-quality investments. Money market
investments were a prime beneficiary of this more conservative
sentiment.
However, in the second half of the fiscal year, investor confidence
improved following the surprisingly brief war in Iraq and the
announcement of stronger economic data. With optimism returning to the
financial markets, investors began to reallocate assets out of
shorter-term, money market investments into equities. In addition, the
improving economic growth shifted the debate about the Federal Reserve
Board's future monetary policy from one of easing (i.e., lowering) to
one of tightening (i.e., increasing) short-term interest rates.
The prospect for higher rates caused the yield curve to steepen a bit
over the summer months, increasing the difference in yields between
shorter-term and longer-term securities. With shorter-term rates moving
a bit higher, we took advantage of the situation by extending the fund's
average days to maturity. By doing this, we believe we were able to lock
in as high a level of income as possible, given our investment
objectives.
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MARKET SECTOR PERFORMANCE 12 MONTHS ENDED 9/30/03
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Bonds
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Merrill Lynch 91-Day Treasury Bill Index 1.32%
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Lipper Money Market Funds category average 0.56%
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Lehman Aggregate Bond Index (broad bond market) 5.41%
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Citigroup World Government Bond Index 14.39%
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Equities
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S&P 500 Index (broad stock market) 24.40%
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Russell 1000 Index (large-company stocks) 25.14%
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Russell 2000 Index (small-company stocks) 36.50%
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These indexes provide an overview of performance in different market
sectors for the 12 months ended 9/30/03.
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Strategy overview
With the first half of the fund's fiscal year shrouded in much
uncertainty, we believed our best course of action was to position the
portfolio to minimize risk. Toward the summer months, our thinking began
to change as new data suggested that the Federal Reserve Board might
adopt a more neutral outlook or possibly raise interest rates. By
August, with the economy looking healthier, the yield curve steepened to
reflect investors' anticipation of a Fed tightening, and we decided to
institute a blended strategy. We purchased U.S. government agency notes
with maturities out to one year. By investing in these agency notes,
which are money-market-eligible securities, we were able to extend the
fund's average days to maturity. At the same time, to effectively manage
interest-rate risk, we balanced these purchases with shorter-term money
market securities from both U.S. and foreign issuers. From March 30, the
midpoint of the fund's fiscal year, to September 30, the average days to
maturity climbed from 59 days to 72 days. We achieved this extension
primarily through the purchase of U.S. government agency obligations,
which climbed from 6.8% of the fund's market value to 17.2% by September
30.
[GRAPHIC OMITTED: horizontal bar chart PORTFOLIO COMPOSITION COMPARED]
PORTFOLIO COMPOSITION COMPARED
as of 3/31/03 as of 9/30/03
Domestic money
market instruments
(exclusive of U.S.
government obligations) 54.8% 45.0%
Foreign money
market instruments 35.9% 37.8%
U.S. government
obligations 6.8% 17.2%
Repurchase agreements 2.5% 0.0%
Footnote reads:
This chart shows how the fund's weightings have changed over the last
six months. Weightings are shown as a percentage of market value.
Holdings will vary over time.
How sector allocations affected performance
In the flat-to-declining interest-rate environment, which characterized
your fund's fiscal year, issuers have taken advantage of their ability
to issue short-term, low-interest-rate debt. Investors benefit from this
situation, because a larger supply of money market issuance can provide
increased investment opportunities for your fund. One area of the money
market universe where issuance increased considerably during the last
half of your fund's fiscal year was the U.S. government obligations
market. The Federal National Mortgage Association (FNMA) and the Federal
Home Loan Bank (FHLB) increased their issuance of U.S. government agency
notes to meet the mortgage demand created by the ongoing refinancing
boom.
On the other hand, we continued to see a contraction of issuance in the
U.S. commercial paper market as a result of companies' preference to
avoid spending or investing during a slow economic period. Furthermore,
with interest rates so low across all fixed-income markets, many
businesses found it advantageous to issue intermediate-term bonds at
current rates rather than repeatedly issuing short-term debt and
assuming the risk of higher interest rates each time they came to market
with a new commercial paper issuance. We are pleased to see that many of
the credit issues that plagued this sector before the fiscal year began
appear to have been resolved and, in our opinion, prospects for this
market have improved considerably.
Asset-backed commercial paper, which represents 55% of the total commercial
paper market, comprises the largest component of the fund's domestic
commercial paper exposure. These instruments, which we believe are
relatively low risk, are investments backed by portfolios of highly
diversified assets. The diversification of the supporting assets, coupled
with additional structural protection, such as credit support from highly
rated banks, makes these securities, in our opinion, attractive,
high-quality investments.
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PERFORMANCE COMPARISONS (9/30/03)
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Current return*
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Passbook savings account 0.30%
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Taxable money market fund 7-day yield 0.52
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3-month certificate of deposit 1.08
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Putnam Money Market Fund (7-day yield)
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Class A 0.60
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Class B 0.11
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Class C 0.11
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Class M 0.45
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Class R 0.10
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Class T 0.37
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The net asset value of money market mutual funds is uninsured and
designed to be fixed, while distributions vary daily. Investment returns
will fluctuate.The principal value on passbook savings and on bank CDs
is generally insured up to certain limits by state and federal agencies.
Unlike stocks, which incur more risk, CDs offer a fixed rate of return.
Unlike money market funds, bank CDs may be subject to substantial
penalties for early withdrawals.
* Sources: FleetBoston (passbook savings), Federal Reserve Board of
Governors (3-month CDs), and imoneynet's Money Fund Report (taxable
money market fund compound 7-day yield).
Amstel Funding Corporation, Park Granada and Eureka Securitization rank
among the fund's largest issuers in this sector.
The fund's exposure to foreign money market instruments remained
relatively consistent throughout the fiscal year. ING NV and Nordea PLC,
two of the fund's larger issuers, are European financial institutions
that control significant market share in their respective home markets.
We believe both are well diversified, which has helped them maintain
their solid financial strength during difficult markets.
Please note that all holdings discussed in this report are subject to
review in accordance with the fund's investment strategy and may vary
in the future.
The fund's management team
The fund is managed by the Putnam Fixed-Income Money Market Team. The
members of the team are Joanne Driscoll (Portfolio Leader), Jonathan
Topper (Portfolio Member), Kevin Cronin, and Joyce Dragone.
The outlook for your fund
The following commentary reflects anticipated developments that could
affect your fund over the next six months, as well as your management
team's plans for responding to them.
As the new fiscal year begins, we are comfortable with the fund's
average days to maturity and do not anticipate extending it further at
this time. We think this level is prudent during what we see as a
transition period. We believe interest rates are likely to fluctuate at
current levels, until economic or geopolitical events dictate a more
decisive direction up or down. We expect to continue to ladder the
portfolio, that is, to spread assets relatively evenly across different
maturities in order to reduce risk.
Just as we have witnessed a flight-to-quality mentality among investors
during periods of uncertainty, we've seen investors lower their quality
standards in an effort to capture higher-yielding -- and lower-rated --
money market securities as economic conditions improve. Even as the
economy strengthens, we think this strategy is a dangerous tradeoff for
money market funds that seek to maintain a constant $1.00 share price.
As we search for money-market-eligible securities with attractive
income, we expect to keep our commitment to quality.
The views expressed in this report are exclusively those of Putnam
Management. They are not meant as investment advice. Money market funds
are not insured or guaranteed by the Federal Deposit Insurance
Corporation (FDIC) or any other governmental agency. Although the fund
seeks to maintain a constant share price of $1.00, it is possible to
lose money by investing in this fund.
Performance summary
This section provides information about your fund's performance during
its fiscal year, which ended September 30, 2003. Performance should
always be considered in light of a fund's investment strategy. Past
performance does not indicate future results. More recent returns may be
less or more than those shown. Investment return will fluctuate. A
profile of your fund's strategy appears on the first page of this
report. See page 8 for definitions of some terms used in this section.
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TOTAL RETURN FOR PERIODS ENDED 9/30/03
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Class A Class B Class C Class M Class R Class T
(inception dates) (10/1/76) (4/27/92) (2/1/99) (12/8/94) (1/21/03) (12/31/01)
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NAV NAV CDSC NAV CDSC NAV NAV NAV
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1 year 0.87% 0.37% -4.63% 0.37% -0.63% 0.72% 0.47% 0.62%
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5 years 19.53 16.58 14.58 16.68 16.68 18.67 16.70 18.10
Annual average 3.63 3.12 2.76 3.13 3.13 3.48 3.14 3.38
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10 years 51.45 44.02 44.02 44.15 44.15 49.23 44.20 47.85
Annual average 4.24 3.72 3.72 3.72 3.72 4.08 3.73 3.99
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Annual average
(life of fund) 6.69 6.16 6.16 6.17 6.17 6.53 6.15 6.43
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Current return
(end of period)
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Current
7-day yield* 0.60 0.11 0.11 0.45 0.10 0.37
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Current
30-day yield* 0.60 0.11 0.11 0.45 0.10 0.35
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Performance assumes reinvestment of distributions. None of the share
classes carry an initial sales charge. Class B shares reflect the
applicable contingent deferred sales charge (CDSC), which is 5% in the
first year, declines to 1% in the sixth year, and is eliminated
thereafter. Class C shares reflect a 1% CDSC for the first year that is
eliminated thereafter. Class A, M, R, and T shares have no initial sales
charge or CDSC. Performance for B, C, M, R, and T shares before their
inception is derived from the historical performance of class A shares,
adjusted for the applicable sales charge (or CDSC) and higher or lower
operating expenses for such shares.
* The 7-day and 30-day yields are the two most common gauges for
measuring money market mutual fund performance. Yield more closely
reflects current performance than total return.
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COMPARATIVE INDEX RETURNS FOR PERIODS ENDED 9/30/03
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Merrill Lynch Lipper Money
91-Day Market Funds
Treasury category
Bill Index average*
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1 year 1.32% 0.56%
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5 years 20.71 17.24
Annual average 3.84 3.23
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10 years 55.13 48.21
Annual average 4.49 4.01
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Annual average
(life of fund) --+ 6.69
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Index and Lipper results should be compared to fund performance at net
asset value.
* Over the 1-, 5-, and 10-year periods ended 9/30/03, there were 400,
280, and 160 funds, respectively, in this Lipper category.
+ Inception date of index was 12/31/77, after the fund's inception.
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DISTRIBUTION INFORMATION 12 MONTHS ENDED 9/30/03
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Class A Class B Class C Class M Class R Class T
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Distributions
(number) 12 12 12 12 9 12
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Income $0.008662 $0.003673 $0.003677 $0.007162 $0.002520 $0.006151
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Total $0.008662 $0.003673 $0.003677 $0.007162 $0.002520 $0.006151
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Terms and definitions
Total return shows how the value of the fund's shares changed over time,
assuming you held the shares through the entire period and reinvested
all distributions in the fund.
Net asset value (NAV) is the price, or value, of one share of a mutual
fund, without a sales charge. NAVs fluctuate with market conditions. The
NAV is calculated by dividing the net value of all the fund's assets by
the number of outstanding shares.
Contingent deferred sales charge (CDSC) is a charge applied at the time
of the redemption of class B or C shares and assumes redemption at the
end of the period. Your fund's class B CDSC declines from a 5% maximum
during the first year to 1% during the sixth year. After the sixth year,
the CDSC no longer applies. The CDSC for class C shares is 1% for one
year after purchase.
Class A shares generally are fund shares purchased with an initial sales
charge. In the case of your fund, which has no sales charge, the
reference is to shares purchased or acquired through the exchange of
class A shares from another Putnam fund. Exchange of your fund's class A
shares into another fund may involve a sales charge, however.
Class B shares may be subject to a sales charge upon redemption.
Class C shares are not subject to an initial sales charge and are
subject to a contingent deferred sales charge only if the shares are
redeemed during the first year.
Class M shares generally have a lower initial sales charge and a higher
12b-1 fee than class A shares and no sales charge on redemption. In the
case of your fund, which has no sales charge, the reference is to shares
purchased or acquired through the exchange of class M shares from
another Putnam fund. Exchange of your fund's class M shares into another
fund may involve a sales charge, however.
Class R shares are not subject to an initial sales charge or CDSC and
are available only to certain defined contribution plans.
Class T shares are not subject to an initial sales charge or sales
charge on redemption (except on certain redemptions of shares bought
without an initial sales charge); however, they are subject to a 12b-1
fee.
Comparative indexes
Citigroup (formerly Salomon Smith Barney) World Government Bond Index is
an unmanaged index of government bonds from 14 countries.
Lehman Aggregate Bond Index is an unmanaged index used as a general
measure of U.S. fixed-income securities.
Lipper Money Market Funds category average is an arithmetic average of
the total return of all money market mutual funds. The fund's holdings
do not match those in the Lipper average.
Merrill Lynch 91-Day Treasury Bill Index is an unmanaged index that
seeks to measure the performance of U.S. Treasury bills available in the
marketplace.
Russell 1000 Index is an unmanaged index of the largest 1000 companies
in the Russell 3000 Index.
Russell 2000 Index is an unmanaged index of common stocks that generally
measure performance of small to midsize companies within the Russell
3000 Index.
S&P 500 Index is an unmanaged index of common stock performance.
Indexes assume reinvestment of all distributions and do not account for
fees. Securities and performance of a fund and an index will differ. You
cannot invest directly in an index.
Lipper Inc. is a third-party industry ranking entity that ranks funds
(without sales charges) with similar current investment styles or
objectives as determined by Lipper. Lipper category averages reflect
performance trends for funds within a category and are based on results
at net asset value.
Putnam's policy on confidentiality
In order to conduct business with our shareholders, we must obtain
certain personal information such as account holders' addresses,
telephone numbers, Social Security numbers, and the names of their
financial advisors. We use this information to assign an account number
and to help us maintain accurate records of transactions and account
balances.
It is our policy to protect the confidentiality of your information,
whether or not you currently own shares of our funds, and in particular,
not to sell information about you or your accounts to outside marketing
firms. We have safeguards in place designed to prevent unauthorized
access to our computer systems and procedures to protect personal
information from unauthorized use.
Under certain circumstances, we share this information with outside
vendors who provide services to us, such as mailing and proxy
solicitation. In those cases, the service providers enter into
confidentiality agreements with us, and we provide only the information
necessary to process transactions and perform other services related to
your account. We may also share this information with our Putnam
affiliates to service your account or provide you with information about
other Putnam products or services. It is also our policy to share
account information with your financial advisor, if you've listed one on
your Putnam account.
If you would like clarification about our confidentiality policies or
have any questions or concerns, please don't hesitate to contact us at
1-800-225-1581, Monday through Friday, 8:30 a.m. to 7:00 p.m., or
Saturdays from 9:00 a.m. to 5:00 p.m. Eastern Time.
A guide to the financial statements
These sections of the report, as well as the accompanying Notes,
preceded by the Independent Auditors' Report, constitute the fund's
financial statements.
The fund's portfolio lists all the fund's investments and their values
as of the last day of the reporting period. Holdings are organized by
asset type and industry sector, country, or state to show areas of
concentration and diversification.
Statement of assets and liabilities shows how the fund's net assets and
share price are determined. All investment and noninvestment assets are
added together. Any unpaid expenses and other liabilities are
subtracted from this total. The result is divided by the number of
shares to determine the net asset value per share, which is calculated
separately for each class of shares. (For funds with preferred shares,
the amount subtracted from total assets includes the net assets
allocated to remarketed preferred shares.)
Statement of operations shows the fund's net investment gain or loss.
This is done by first adding up all the fund's earnings -- from
dividends and interest income -- and subtracting its operating expenses
to determine net investment income (or loss). Then, any net gain or
loss the fund realized on the sales of its holdings -- as well as any
unrealized gains or losses over the period -- is added to or subtracted
from the net investment result to determine the fund's net gain or loss
for the fiscal year.
Statement of changes in net assets shows how the fund's net assets were
affected by distributions to shareholders and by changes in the number
of the fund's shares. It lists distributions and their sources (net
investment income or realized capital gains) over the current reporting
period and the most recent fiscal year-end. The distributions listed
here may not match the sources listed in the Statement of operations
because the distributions are determined on a tax basis and may be paid
in a different period from the one in which they were earned.
Financial highlights provide an overview of the fund's investment
results, per-share distributions, expense ratios, net investment
income ratios, and portfolio turnover in one summary table, reflecting
the five most recent reporting periods. In a semiannual report, the
highlight table also includes the current reporting period. For open-end
funds, a separate table is provided for each share class.
Independent auditors' report
To the Trustees and Shareholders of
Putnam Money Market Fund
In our opinion, the accompanying statement of assets and liabilities,
including the fund's portfolio, 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 Money
Market Fund (the "fund") at September 30, 2003, and the results of its
operations, the changes in its net assets and the financial highlights
for the periods indicated, in conformity with accounting principles
generally accepted in the United States of America. 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 auditing standards generally accepted in
the United States of America, 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, 2003, by correspondence with the custodian, provide a
reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 17, 2003
The fund's portfolio
September 30, 2003
Commercial paper (60.2%) (a) Maturity
Principal amount date Value
Domestic (35.2%) (a)
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$123,500,00 Amstel Funding Corp. 1.04s 12/12/03 $123,239,552
54,841,000 Amstel Funding Corp. 1.05s 10/31/03 54,791,415
35,000,000 Amstel Funding Corp. 1.06s 10/2/03 34,997,939
42,000,000 Amstel Funding Corp. 1.09s 12/8/03 41,912,255
25,000,000 Banc One Australia, Ltd. 1.08s 12/16/03 24,942,250
40,000,000 CAFCO, LLC. 1.06s 10/24/03 39,971,733
75,000,000 CAFCO, LLC. 1.07s 10/28/03 74,937,583
30,000,000 CIT Group, Inc. 1.08s 10/16/03 29,985,600
54,000,000 CIT Group, Inc. 1.09s 10/1/03 53,998,365
75,000,000 Citicorp 1.06s 11/21/03 74,885,167
40,000,000 Citicorp 1.06s 10/21/03 39,975,267
59,000,000 CRC Funding, LLC 1.10s 11/18/03 58,911,664
40,000,000 Eureka Securitization, Inc. 1.06s 11/6/03 39,956,422
45,000,000 Eureka Securitization, Inc. 1.07s 10/8/03 44,989,300
45,000,000 Eureka Securitization, Inc. 1.08s 10/24/03 44,967,600
50,000,000 Eureka Securitization, Inc. 1.09s 11/18/03 49,925,819
50,000,000 Eureka Securitization, Inc. 1.09s 11/17/03 49,927,333
55,000,000 GE Capital International Funding
1.05s 10/15/03 54,975,938
50,000,000 GE Capital International Funding
1.06s 11/19/03 49,926,389
50,000,000 GE Capital International Funding
1.09s 12/17/03 49,881,917
61,000,000 GE Capital International Funding
1.13s 10/22/03 60,957,876
49,000,000 Goldman Sachs Group, Inc. 1.3s 11/25/03 48,900,911
66,000,000 Goldman Sachs Group, Inc. 1.3s 11/12/03 65,897,517
36,000,000 Jupiter Securitization Corp. 1.08s 10/27/03 35,970,840
50,000,000 Morgan Stanley Dean Witter & Co.
1.07s 11/7/03 49,943,528
87,000,000 NATC California, LLC (Chase
Manhattan Bank Letter of Credit
(LOC)) 1.04s 10/20/03 86,949,733
39,700,000 Park Avenue Receivables Corp. 1.11s 10/6/03 39,692,655
43,000,000 Park Granada, LLC 1.08s 11/18/03 42,936,790
30,000,000 Park Granada, LLC 1.09s 11/24/03 29,950,042
40,116,000 Park Granada, LLC 1.10s 12/22/03 40,014,261
35,000,000 Park Granada, LLC 1.10s 12/19/03 34,914,444
25,000,000 Park Granada, LLC 1.10s 11/26/03 24,956,458
65,000,000 Park Granada, LLC 1.11s 12/18/03 64,841,671
38,292,000 Preferred Receivables Funding Corp.
1.06s 10/23/03 38,266,068
45,000,000 Receivables Capital Corp. 1.085s 11/17/03 44,934,900
36,780,000 Sheffield Receivables Corp 1.06s 10/6/03 36,773,502
18,660,000 Sheffield Receivables Corp. 1.07s 10/23/03 18,647,244
18,750,000 Sheffield Receivables Corp. 1.07s 10/10/03 18,744,427
54,500,000 Sheffield Receivables Corp. 1.104s 2/25/04 54,500,000
58,331,000 Ventures Business Trust 1.12s 10/1/03 58,329,185
55,000,000 Yorktown Capital, LLC 1.06s 10/20/03 54,967,611
74,358,000 Yorktown Capital, LLC 1.12s 10/1/03 74,355,687
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2,062,544,858
Foreign (25.0%) (a)
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45,000,000 Aegon Funding Corp. 1.07s
(Netherlands) 10/27/03 44,963,887
48,000,000 Atlantis One Funding Corp. 1.12s
(Netherlands) 3/25/04 47,735,680
60,000,000 Atlantis One Funding Corp. 1.12s
(Netherlands) 3/15/04 59,688,267
45,000,000 Atlantis One Funding Corp. 1.15s
(Netherlands) 11/13/03 44,936,750
44,600,000 Atlantis One Funding Corp. 1.26s
(Netherlands) 10/16/03 44,575,024
23,100,000 Banco Continental de Panama SA
(Credit Lyonnais (LOC)) 1.05s
(France) 10/7/03 23,095,284
5,000,000 Banco Continental de Panama SA
(Credit Lyonnais (LOC)) 1.07s
(France) 12/22/03 4,987,665
20,000,000 Banco Continental de Panama SA
(Credit Lyonnais (LOC)) 1.13s
(France) 3/2/04 19,903,322
180,000,000 CBA Delaware Finance 1.13s
(Australia) 10/1/03 179,994,350
25,000,000 COFCO Capital Corp. (Rabobank
Nederland (LOC)) 1.10s (Netherlands) 11/25/03 24,957,222
29,000,000 Den Norske Bank 1.08s (Norway) 11/19/03 28,951,689
43,000,000 Den Norske Bank 1.28s (Norway) 11/19/03 42,928,367
49,000,000 HBOS Treasury Services PLC 1.035s
(United Kingdom) 10/3/03 48,995,774
46,000,000 HBOS Treasury Services PLC 1.07s
(United Kingdom) 10/23/03 45,968,554
38,290,000 HBOS Treasury Services PLC 1.09s
(United Kingdom) 11/4/03 38,249,423
67,000,000 LaSalle Bank Corp. 1.07s
(Netherlands) 11/10/03 67,000,000
62,500,000 Nordea North America, Inc. 1.05s
(Sweden) 10/17/03 62,469,010
53,800,000 Nordea North America, Inc. 1.08s
(Sweden) 10/14/03 53,777,404
25,000,000 Scotiabanc, Inc. 1.04s (Canada) 10/9/03 24,993,500
21,342,000 Shell Finance PLC 1.05s (United
Kingdom) 10/21/03 21,328,928
59,000,000 Spintab AB 1.09s (Sweden) 12/30/03 58,837,439
67,000,000 Stadshypotek Delaware, Inc. 1.06s
(Sweden) 10/29/03 66,942,789
50,000,000 Toronto Dominion Holdings 1.045s
(Canada) 11/20/03 49,925,979
67,000,000 Toyota Motor Credit Corp. 1.06s
(Japan) 10/31/03 66,938,844
50,000,000 Transamerica Finance Corp. 1.07s
(Netherlands) 11/12/03 49,936,097
43,000,000 Transamerica Finance Corp. 1.08s
(Netherlands) 10/29/03 42,962,590
67,000,000 WestLB AG 1.08s (Germany) 11/3/03 66,931,660
50,000,000 WestLB AG 1.13s (Germany) 3/17/04 49,734,764
81,000,000 Westpac Trust Securities NZ, Ltd.
1.06s (Australia) 12/29/03 80,785,350
--------------
1,462,495,612
--------------
Total Commercial paper
(cost $3,525,040,470) $3,525,040,470
U.S. government and agency obligations (17.5%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$67,000,000 Federal Home Loan Bank bonds 1.5s 9/3/04 $67,000,000
65,000,000 Federal Home Loan Bank bonds
Ser. LU04 1.42s 4/21/04 65,000,000
90,000,000 Federal Home Loan Mortgage Corp.
1.01s 10/30/03 89,924,250
44,000,000 Federal Home Loan Mortgage Corp.
1.03s 11/14/03 43,943,350
25,000,000 Federal Home Loan Mortgage Corp.
1.04s 10/10/03 24,992,778
44,000,000 Federal Home Loan Mortgage Corp.
1.045s 12/31/03 43,882,496
44,000,000 Federal Home Loan Mortgage Corp.
1.08s 11/13/03 43,941,920
50,000,000 Federal Home Loan Mortgage Corp.
1.23s 5/20/04 49,601,958
50,000,000 Federal Home Loan Mortgage Corp.
1.24s 6/15/04 49,553,944
40,000,000 Federal Home Loan Mortgage Corp.
1.255s 12/12/03 39,898,206
50,000,000 Federal Home Loan Mortgage Corp.
notes 1.25s 8/27/04 50,000,000
89,500,000 Federal National Mortgage
Association 1.04s 10/17/03 89,456,046
28,003,000 Federal National Mortgage
Association 1.15s 2/18/04 27,876,870
47,000,000 Federal National Mortgage
Association 1.275s 12/31/03 46,846,568
44,000,000 Federal National Mortgage
Association 1.28s 12/31/03 43,856,361
45,000,000 Federal National Mortgage
Association notes 1.35s 10/22/04 45,000,000
50,000,000 Federal National Mortgage
Association notes 1.36s 9/10/04 50,000,000
57,000,000 Federal National Mortgage
Association notes 1.45s 9/14/04 57,000,000
45,000,000 Federal National Mortgage
Association notes 1.5s 9/21/04 45,000,000
49,000,000 Federal National Mortgage
Association notes 1.55s 10/1/04 49,000,000
--------------
Total U.S. Government and Agency
Obligations (cost $1,021,774,747) $1,021,774,747
Certificates of deposit (13.4%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$75,000,000 Banque Nationale de Paris 1.08s
Canada (France) 12/15/03 $74,992,002
49,000,000 Barclays Bank PLC 1.37s (United
Kingdom) 8/5/04 49,000,000
20,000,000 Canadian Imperial Bank of Commerce
1.042s (Canada) 11/28/03 19,999,593
50,000,000 Canadian Imperial Bank of Commerce
1.06s (Canada) 11/14/03 50,000,000
66,000,000 Canadian Imperial Bank of Commerce
1.079s (Canada) 6/7/04 65,986,754
50,000,000 Canadian Imperial Bank of Commerce
1.358s (Canada) 9/13/04 49,996,685
66,000,000 Credit Agricole Indosuez, NY 1.074s
(France) 6/7/04 65,986,754
44,000,000 ING Bank NV 1.045s (Netherlands) 12/23/03 44,000,000
67,000,000 ING Bank NV 1.05s (Netherlands) 10/14/03 67,000,000
65,000,000 ING Bank NV 1.05s (Netherlands) 10/2/03 65,000,000
25,000,000 Nordea Bank Finland PLC 1.335s
(Sweden) 10/30/03 24,999,586
45,000,000 Societe Generale 1.4s (France) 8/5/04 45,000,000
67,000,000 State Street Bank & Trust Co. 1.24s 8/18/04 67,000,000
44,000,000 Wells Fargo Bank NA 1.07s 10/9/03 44,000,000
50,000,000 Wells Fargo Bank NA 1.07s 10/8/03 50,000,000
--------------
Total Certificates of deposit
(cost $782,961,374) $782,961,374
Corporate bonds and notes (7.3%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$71,000,000 HSBC USA, Inc. sr. notes FRN 1.29s 9/24/04 $71,122,279
69,000,000 ING Verzekeringen NV FRN 1.29s
(Netherlands) 4/15/04 69,000,000
27,380,000 Merrill Lynch & Co., Inc. FRN
Ser. MTNB, 1.43s 5/21/04 27,438,028
29,000,000 Morgan Stanley Dean Witter & Co. FRN
Ser. MTNC 1.43s 5/14/04 29,060,034
65,000,000 National City Bank of Indiana FRN
1.09s 12/15/03 64,993,500
84,500,000 Nordbanken AB FRN 1.16s (Sweden) 2/19/04 84,521,091
56,000,000 U.S. Bank N.A. FRN 1.07s 11/24/03 55,999,090
25,000,000 U.S. Bank N.A. North Dakota FRN
1.456s 12/8/03 25,019,221
--------------
Total Corporate bonds and notes
(cost $427,153,243) $427,153,243
Promissory notes (2.0%) (a) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$25,000,000 Goldman Sachs Group, Inc.
1.115s (acquired 9/30/03, cost
$25,000,000) (RES) 11/20/03 $25,000,000
39,000,000 Goldman Sachs Group, Inc.
1.17s (acquired 9/30/03, cost
$39,000,000) (RES) 1/30/04 39,000,000
54,000,000 Goldman Sachs Group, Inc.
1.285s (acquired 9/30/03, cost
$54,000,000) (RES) 10/10/03 54,000,000
--------------
Total Promissory Notes
(cost $118,000,000) $118,000,000
Time deposits (0.9%) (a) (cost $50,000,000) Maturity
Principal amount date Value
- -------------------------------------------------------------------------------
$50,000,000 HBOS Treasury Services 1.09s 12/12/03 $50,000,000
- -------------------------------------------------------------------------------
Total Investments
(cost $5,924,929,834) $5,924,929,834
- -------------------------------------------------------------------------------
(a) Percentages indicated are based on net assets of $5,852,081,322.
(RES) Restricted, excluding 144A securities, as to public resale. The
total market value of restricted securities held at
September 30, 2003 was $118,000,000, or 2.0% of net assets.
The rates shown on Floating Rate Notes (FRN) are the current interest
rates shown at September 30, 2003.
DIVERSIFICATION BY COUNTRY
Distribution of investments by country of issue at September 30, 2003:
(as a percentage of Market Value)
Australia 4.4%
Canada 4.4
France 4.0
Germany 2.0
Japan 1.1
Netherlands 11.4
Norway 1.2
Sweden 5.9
United Kingdom 3.4
United States 62.2
-----
Total 100.0%
The accompanying notes are an integral part of these financial
statements.
Statement of assets and liabilities
September 30, 2003
Assets
- -------------------------------------------------------------------------------
Investments in securities, at amortized cost (Note 1) $5,924,929,834
- -------------------------------------------------------------------------------
Cash 188,086
- -------------------------------------------------------------------------------
Interest and other receivables 3,009,262
- -------------------------------------------------------------------------------
Receivable for shares of the fund sold 39,224,278
- -------------------------------------------------------------------------------
Total assets 5,967,351,460
Liabilities
- -------------------------------------------------------------------------------
Payable for securities purchased 39,000,000
- -------------------------------------------------------------------------------
Payable for shares of the fund repurchased 68,977,823
- -------------------------------------------------------------------------------
Payable for compensation of Manager (Note 2) 4,704,137
- -------------------------------------------------------------------------------
Payable for investor servicing and custodian fees (Note 2) 1,669,819
- -------------------------------------------------------------------------------
Payable for Trustee compensation and expenses (Note 2) 171,599
- -------------------------------------------------------------------------------
Payable for administrative services (Note 2) 2,923
- -------------------------------------------------------------------------------
Payable for distribution fees (Note 2) 458,368
- -------------------------------------------------------------------------------
Other accrued expenses 285,469
- -------------------------------------------------------------------------------
Total liabilities 115,270,138
- -------------------------------------------------------------------------------
Net assets $5,852,081,322
Represented by
- -------------------------------------------------------------------------------
Paid-in capital (Notes 1 and 4) $5,851,919,457
- -------------------------------------------------------------------------------
Accumulated net realized gain on investments (Note 1) 161,865
- -------------------------------------------------------------------------------
Total -- Representing net assets applicable to capital
shares outstanding $5,852,081,322
Computation of net asset value and offering price
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class A share ($4,745,555,438 divided by 4,745,391,731
shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class B share
($874,068,897 divided by 874,069,696 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value and offering price per class C share
($61,755,309 divided by 61,755,244 shares)** $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class M share ($74,921,395 divided by 74,924,558 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption price per
class R share ($1,003 divided by 1,003 shares)* $1.00
- -------------------------------------------------------------------------------
Net asset value, offering price and redemption per class T
share ($95,779,280 divided by 95,777,225 shares)* $1.00
- -------------------------------------------------------------------------------
* Offered at net asset value.
** Class B and class C shares are available only by exchange of class B
and class C shares from other Putnam funds and to certain systematic
investment plan investors. Redemption price per share is equal to net
asset value less an applicable contingent deferred sales charge.
The accompanying notes are an integral part of these financial statements.
Statement of operations
Year ended September 30, 2003
Interest income: $90,706,075
- -------------------------------------------------------------------------------
Expenses:
- -------------------------------------------------------------------------------
Compensation of Manager (Note 2) 20,060,191
- -------------------------------------------------------------------------------
Investor servicing and custodian fees (Note 2) 11,390,777
- -------------------------------------------------------------------------------
Trustee compensation and expenses (Note 2) 109,089
- -------------------------------------------------------------------------------
Administrative services (Note 2) 41,845
- -------------------------------------------------------------------------------
Distribution fees -- Class B (Note 2) 5,392,188
- -------------------------------------------------------------------------------
Distribution fees -- Class C (Note 2) 284,671
- -------------------------------------------------------------------------------
Distribution fees -- Class M (Note 2) 130,606
- -------------------------------------------------------------------------------
Distribution fees -- Class R (Note 2) 3
- -------------------------------------------------------------------------------
Distribution fees -- Class T (Note 2) 138,134
- -------------------------------------------------------------------------------
Other 2,352,952
- -------------------------------------------------------------------------------
Total expenses 39,900,456
- -------------------------------------------------------------------------------
Expense reduction (Note 2) (327,608)
- -------------------------------------------------------------------------------
Net expenses 39,572,848
- -------------------------------------------------------------------------------
Net investment income 51,133,227
- -------------------------------------------------------------------------------
Net realized gain on investments (Notes 1 and 3) 161,865
- -------------------------------------------------------------------------------
Net gain on investments 161,865
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $51,295,092
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Statement of changes in net assets
Year ended September 30
Increase (decrease) in net assets 2003 2002
- -------------------------------------------------------------------------------
Operations:
- -------------------------------------------------------------------------------
Net investment income $51,133,227 $102,049,714
- -------------------------------------------------------------------------------
Net realized gain on investments 161,865 --
Net increase in net assets resulting from
operations 51,295,092 102,049,714
- -------------------------------------------------------------------------------
Distributions to shareholders: (Note 1)
- -------------------------------------------------------------------------------
From net investment income
- -------------------------------------------------------------------------------
Class A (45,737,713) (87,229,262)
- -------------------------------------------------------------------------------
Class B (4,239,307) (12,239,608)
- -------------------------------------------------------------------------------
Class C (220,931) (854,060)
- -------------------------------------------------------------------------------
Class M (648,250) (1,674,176)
- -------------------------------------------------------------------------------
Class R (3) --
- -------------------------------------------------------------------------------
Class T (287,023) (52,608)
- -------------------------------------------------------------------------------
Increase (decrease) from capital share
transactions (Note 4) (1,051,366,625) 313,838,888
- -------------------------------------------------------------------------------
Total increase (decrease) in net assets (1,051,204,760) 313,838,888
Net assets
- -------------------------------------------------------------------------------
Beginning of year 6,903,286,082 6,589,447,194
- -------------------------------------------------------------------------------
End of year $5,852,081,322 $6,903,286,082
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial
statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS A
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0087 .0166 .0493 .0564 .0478
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0087 .0166 .0493 .0564 .0478
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0087) (.0166) (.0493) (.0564) (.0478)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0087) (.0166) (.0493) (.0564) (.0478)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .87 1.67 5.04 5.79 4.89
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $4,745,555 $5,512,532 $5,215,127 $3,780,309 $3,691,475
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .52 .50 .50 .49 .48
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .88 1.68 4.77 5.69 4.73
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS B
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0037 .0116 .0443 .0513 .0429
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0037 .0116 .0443 .0513 .0429
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0037) (.0116) (.0443) (.0513) (.0429)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0037) (.0116) (.0443) (.0513) (.0429)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .37 1.16 4.52 5.25 4.37
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $874,069 $1,193,459 $1,162,039 $649,826 $1,041,452
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.02 1.00 1.00 .99 .98
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .39 1.19 4.26 5.13 4.24
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS C
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
February 1, 1999+
Per-share Year ended September 30 to September 30
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0037 .0116 .0444 .0513 .0284
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0037 .0116 .0444 .0513 .0284
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0037) (.0116) (.0444) (.0513) (.0284)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0037) (.0116) (.0444) (.0513) (.0284)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .37 1.17 4.53 5.26 2.87*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $61,755 $79,227 $90,226 $52,872 $17,091
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) 1.02 1.00 1.00 .99 .65*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .38 1.20 4.32 5.34 2.83*
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS M
- ---------------------------------------------------------------------------------------------------------------------------------
Per-share Year ended September 30
operating performance 2003 2002 2001 2000 1999
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0072 .0151 .0478 .0551 .0463
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments -- (c) -- -- -- --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0072 .0151 .0478 .0551 .0463
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0072) (.0151) (.0478) (.0551) (.0463)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0072) (.0151) (.0478) (.0551) (.0463)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00 $1.00 $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .72 1.52 4.89 5.65 4.73
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $74,921 $105,938 $122,055 $114,458 $136,134
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .67 .65 .65 .64 .63
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .74 1.55 4.70 5.51 4.58
- ---------------------------------------------------------------------------------------------------------------------------------
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS R
- ---------------------------------------------------------------------------------------------------------------------------------
For the period
January 21, 2003+
Per-share to September 30
operating performance 2003
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0025
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments --(c)
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0025
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0025)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0025)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .25*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $1
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .71*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .25*
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Financial highlights
(For a common share outstanding throughout the period)
CLASS T
- ---------------------------------------------------------------------------------------------------------------------------------
For the
Year period
ended Dec. 31, 2001+
Per-share Sept. 30 to Sept. 30
operating performance 2003 2002
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
beginning of period $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Investment operations:
- ---------------------------------------------------------------------------------------------------------------------------------
Net investment income .0062 .0092
- ---------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments --(c) --
- ---------------------------------------------------------------------------------------------------------------------------------
Total from
investment operations .0062 .0092
- ---------------------------------------------------------------------------------------------------------------------------------
Less distributions:
- ---------------------------------------------------------------------------------------------------------------------------------
From net
investment income (.0062) (.0092)
- ---------------------------------------------------------------------------------------------------------------------------------
Total distributions (.0062) (.0092)
- ---------------------------------------------------------------------------------------------------------------------------------
Net asset value,
end of period $1.00 $1.00
- ---------------------------------------------------------------------------------------------------------------------------------
Total return
at net asset value (%)(a) .62 .93*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratios and supplemental data
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets, end of period
(in thousands) $95,779 $12,130
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets (%)(b) .77 .56*
- ---------------------------------------------------------------------------------------------------------------------------------
Ratio of net investment income
to average net assets (%) .52 .88*
- ---------------------------------------------------------------------------------------------------------------------------------
+ Commencement of operations.
* Not annualized.
(a) Total return assumes dividend reinvestment and does not reflect the effect of sales charges.
(b) Includes amounts paid through expense offset arrangements (Note 2).
(c) Amount represents less than $0.0001 per share.
The accompanying notes are an integral part of these financial statements.
Notes to financial statements
September 30, 2003
Note 1
Significant accounting policies
Putnam Money Market Fund (the "fund") is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end management
investment company. The fund seeks as high a rate of current income
consistent with preservation of capital and maintenance of liquidity.
The fund pursues its objective by investing in a portfolio of
high-quality short-term obligations. The fund may invest up to 100% of
its assets in money market instruments from the banking, personal credit
and business credit industries.
The fund offers class A, class B, class C, class M, class R and class T
shares. The fund began offering class R shares on January 21, 2003. Each
class of shares is sold without a front-end sales charge. Class B and
class C shares are offered only in exchange for class B and class C
shares of other Putnam funds, or purchased by systematic investment
plans. Class B shares, which convert to class A shares after
approximately eight years, pay a higher ongoing distribution fee than
class A (which does not have an approved distribution fee), class M and
class T shares, and are subject to a contingent deferred sales charge,
if those shares are redeemed within six years of purchase (including any
holding period of the shares in other Putnam funds). Class C shares are
subject to the same fees and expenses as class B shares, except that
class C shares have a one-year 1.00% contingent deferred sales charge
and do not convert to class A shares. Shareholders who acquired class B
and class C shares through an exchange are subject to the same deferred
sales charge schedule as the fund from which they were exchanged. Class
M and class T shares pay an ongoing distribution fee that is higher than
class A shares but lower than class B, class C and class R shares and
are not subject to a contingent deferred sales charge. Class R shares
pay an ongoing distribution fee that is higher than class A, class M and
class T shares. Class R shares are offered to qualified
employee-benefit plans.
Expenses of the fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class
(including the distribution fees applicable to such class). Each class
votes as a class only with respect to its own distribution plan or other
matters on which a class vote is required by law or determined by the
Trustees. Shares of each class would receive their pro-rata share of the
net assets of the fund, if the fund were liquidated. In addition, the
Trustees declare separate dividends on each class of shares.
The following is a summary of significant accounting policies
consistently followed by the fund in the preparation of its financial
statements. The preparation of financial statements is in conformity
with accounting principles generally accepted in the United States of
America and requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities in the financial
statements and the reported amounts of increases and decreases in net
assets from operations during the reporting period. Actual results could
differ from those estimates.
A) Security valuation The valuation of the fund's portfolio instruments
is determined by means of the amortized cost method (which approximates
market value) 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 its original cost and thereafter amortizing any discount or premium
from its face value at a constant rate until maturity.
B) Joint trading account The fund may transfer uninvested cash balances,
including cash collateral received under security lending arrangements,
into a joint trading account along with the cash of other registered
investment companies and certain other accounts managed by Putnam
Investment Management, LLC ("Putnam Management"), the fund's manager, an
indirect wholly-owned subsidiary of Putnam, LLC. These balances may be
invested in issuers of high-grade short-term investments having maturities
of up to 397 days for collateral received under security lending
arrangements and up to 90 days for other cash investments.
C) Repurchase agreements The fund, or any joint trading account, through
its custodian, receives delivery of the underlying securities, the
market value of which at the time of purchase is required to be in an
amount at least equal to the resale price, including accrued interest.
Collateral for certain tri-party repurchase agreements is held at the
counterparty's custodian in a segregated account for the benefit of the
fund and the counterparty. Putnam Management is responsible for
determining that the value of these underlying securities is at all
times at least equal to the resale price, including accrued interest.
D) Security transactions and related investment income Security
transactions are recorded on the trade date (the date the order to buy
or sell is executed). Interest is recorded on the accrual basis.
Premiums and discounts from purchases of short-term investments are
amortized/accreted at a constant rate until maturity. Gains or losses on
securities sold are determined on the identified cost basis.
E) Federal taxes It is the policy of the fund to distribute all of its
taxable income within the prescribed time and otherwise comply with the
provisions of the Internal Revenue Code applicable to regulated
investment companies. It is also the intention of the fund to distribute
an amount sufficient to avoid imposition of any excise tax under Section
4982 of the Internal Revenue Code of 1986, as amended. Therefore, no
provision has been made for federal taxes on income, capital gains or
unrealized appreciation on securities held nor for excise tax on income
and capital gains.
The aggregate identified cost on a financial reporting and tax basis is
the same.
F) Distributions to shareholders Income dividends are recorded daily by
the fund and are paid monthly to the shareholders. Distributions of
realized gains, if any, are paid at least annually.
Note 2
Management fee, administrative
services and other transactions
Putnam Management is paid for management and investment advisory
services quarterly based on the average net assets of the fund. Such fee
is based on the following annual rates: 0.50% of the first $100 million
of average net assets, 0.40% of the next $100 million, 0.35% of the next
$300 million, 0.325% of the next $500 million and 0.30% thereafter.
The fund reimburses Putnam Management an allocated amount for the
compensation and related expenses of certain officers of the fund and
their staff who provide administrative services to the fund. The
aggregate amount of all such reimbursements is determined annually by
the Trustees.
Custodial functions for the fund's assets are provided by Putnam
Fiduciary Trust Company (PFTC), a subsidiary of Putnam, LLC. Investor
servicing agent functions are provided by Putnam Investor Services, a
division of PFTC.
The fund has entered into an arrangement with PFTC whereby credits
realized as a result of uninvested cash balances are used to reduce a
portion of the fund's expenses. For the year ended September 30, 2003,
the fund's expenses were reduced by $327,608 under these arrangements.
Each independent Trustee of the fund receives an annual Trustee fee, of
which $4,268 has been allocated to the fund, and an additional fee for
each Trustees meeting attended. Trustees receive additional fees for
attendance at certain committee meetings.
The fund has adopted a Trustee Fee Deferral Plan (the "Deferral Plan"),
which allows the Trustees to defer the receipt of all or a portion of
Trustees fees payable on or after July 1, 1995. The deferred fees remain
invested in certain Putnam funds until distribution in accordance with
the Deferral Plan.
The fund has adopted an unfunded noncontributory defined benefit pension
plan (the "Pension Plan") covering all Trustees of the fund who have served
as a Trustee for at least five years. Benefits under the Pension Plan are
equal to 50% of the Trustee's average total retainer and meeting fees for
the three years preceding retirement. Pension expense for the fund is
included in Trustee compensation and expenses in the Statement of
operations. Accrued pension liability is included in Payable for Trustee
compensation and expenses in the Statement of assets and liabilities.
The fund has adopted distribution plans (the "Plans") with respect to
its class B, class C, class M, class R and class T shares pursuant to
Rule 12b-1 under the Investment Company Act of 1940. The purpose of the
Plans is to compensate Putnam Retail Management, a wholly-owned
subsidiary of Putnam, LLC and Putnam Retail Management GP, Inc., for
services provided and expenses incurred by it in distributing shares of
the fund. The Plans provide for payments by the fund to Putnam Retail
Management at an annual rate up to 0.75%, 1.00%, 1.00%, 1.00% and 0.35%
of the average net assets attributable to class B, class C, class M,
class R and class T shares, respectively. The Trustees have approved
payment by the fund at the annual rates of 0.50%, 0.50%, 0.15%, 0.50%
and 0.25% of the average net assets attributable to class B, class C,
class M, class R and class T shares, respectively.
For the year ended September 30, 2003, Putnam Retail Management, acting
as underwriter, received net commissions of $5,762,395 and $58,748 in
contingent deferred sales charges from redemptions of class B and class
C shares, respectively. A deferred sales charge of up to 1.00% is
assessed on redemptions of class A and class T shares, and 0.15% for
class M shares may be assessed on certain redemptions. For the year
ended September 30, 2003, Putnam Retail Management, acting as
underwriter, received no monies in contingent deferred sales charges
from redemptions of class A, class M or class T shares acquired through
an exchange from another fund.
Note 3
Purchases and sales of securities
During the year ended September 30, 2003, cost of purchases and proceeds
from sales (including maturities) of investment securities (all
short-term obligations) aggregated $88,546,223,837 and $89,585,624,821,
respectively.
Note 4
Capital shares
At September 30, 2003, there were 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:
Year ended Year ended
September 30, September 30,
2003 2002
- ----------------------------------------------------------------
Class A
- ----------------------------------------------------------------
Shares sold 4,838,754,924 9,387,236,895
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 44,288,887 84,364,207
- ----------------------------------------------------------------
4,883,043,811 9,471,601,102
Shares repurchased (5,650,184,351) (9,174,195,954)
- ----------------------------------------------------------------
Net increase
(decrease) (767,140,540) 297,405,148
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2003 2002
- ----------------------------------------------------------------
Class B
- ----------------------------------------------------------------
Shares sold 744,531,708 1,483,572,641
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 3,895,813 11,157,218
- ----------------------------------------------------------------
748,427,521 1,494,729,859
Shares repurchased (1,067,816,748) (1,463,309,443)
- ----------------------------------------------------------------
Net increase
(decrease) (319,389,227) 31,420,416
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2003 2002
- ----------------------------------------------------------------
Class C
- ----------------------------------------------------------------
Shares sold 188,630,840 587,433,756
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 203,687 776,797
- ----------------------------------------------------------------
188,834,527 588,210,553
Shares repurchased (206,305,804) (599,210,265)
- ----------------------------------------------------------------
Net decrease (17,471,277) (10,999,712)
- ----------------------------------------------------------------
Year ended Year ended
September 30, September 30,
2003 2002
- ----------------------------------------------------------------
Class M
- ----------------------------------------------------------------
Shares sold 88,896,695 433,265,530
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 616,202 1,570,131
- ----------------------------------------------------------------
89,512,897 434,835,661
Shares repurchased (120,526,766) (450,952,565)
- ----------------------------------------------------------------
Net decrease (31,013,869) (16,116,904)
- ----------------------------------------------------------------
For the period January 21, 2003
(commencement of operations) to
September 30, 2003
- ----------------------------------------------------------------
Class R
- ----------------------------------------------------------------
Shares sold 1,000
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 3
- ----------------------------------------------------------------
1,003
Shares repurchased --
- ----------------------------------------------------------------
Net increase 1,003
- ----------------------------------------------------------------
For the period
Dec. 31, 2001
Year ended (commencement
Sept. 30, of operations) to
2003 Sept. 30, 2002
- ----------------------------------------------------------------
Class T
- ----------------------------------------------------------------
Shares sold 119,422,469 22,566,017
- ----------------------------------------------------------------
Shares issued in
connection with
reinvestment
of distributions 277,295 52,538
- ----------------------------------------------------------------
119,699,764 22,618,555
Shares repurchased (36,052,479) (10,488,615)
- ----------------------------------------------------------------
Net increase 83,647,285 12,129,940
- ----------------------------------------------------------------
At September 30, 2003, Putnam, LLC owned 1,003 class R shares of the
fund (100% of class R shares outstanding), valued at $1,003.
Note 5
Regulatory matters and litigation
On November 13, 2003, Putnam Management agreed to entry of an order by the
Securities and Exchange Commission in partial resolution of administrative
and cease-and-desist proceedings initiated by the SEC on October 28, 2003
in connection with alleged excessive short-term trading by certain
investment professionals. Under the order, Putnam Management will make
restitution for losses attributable to excessive short-term trading by
Putnam employees, institute new employee trading restrictions and enhanced
employee trading compliance, retain an independent compliance consultant,
and take other remedial actions. Putnam Management neither admitted nor
denied the order's findings that it willfully violated provisions of the
securities laws. A civil monetary penalty and other monetary relief, if
any, will be determined at a later date. Putnam Management, and not the
investors in any Putnam fund, will bear all costs, including restitution,
civil penalties and associated legal fees. Administrative proceedings
initiated by the Commonwealth of Massachusetts on October 28, 2003 against
Putnam Management in connection with alleged market timing activities by
Putnam employees and by participants in some Putnam-administered 401(k)
plans are pending. The SEC's and Commonwealth's allegations also serve as
the general basis for numerous lawsuits, including purported class action
lawsuits, filed against Putnam Management and certain related parties,
including certain open-end Putnam funds. Putnam Management has agreed to
bear any reasonable legal costs incurred by the Putnam funds in connection
with defending these lawsuits. Based on currently available information,
Putnam Management believes that the likelihood that the pending actions
will have a material adverse financial impact on the fund is remote, and
that the pending actions are not likely to materially affect its ability to
provide investment management services to its clients, including the Putnam
funds.
Review of these matters by counsel for Putnam Management and by separate
independent counsel for the Putnam funds and their independent Trustees
is continuing. In addition, Marsh & McLennan Companies, Inc., Putnam
Management's parent company, has engaged counsel to conduct a separate
review of Putnam Management's trading policies and controls. Putnam
Management has committed to make complete restitution for any losses
suffered by Putnam shareholders as a result of any improper
market-timing activities by Putnam employees or within
Putnam-administered 401(k) plans.
- ---------------------------------------------------------------------
Federal tax information
(Unaudited)
The Form 1099 you receive in January 2004 will show the tax status of
all distributions paid to your account in calendar 2003.
About the Trustees
Jameson A. Baxter (9/6/43), Trustee since 1994
Ms. Baxter is the President of Baxter Associates, Inc., a private
investment firm that she founded in 1986.
Ms. Baxter serves as a Director of ASHTA Chemicals, Inc., Banta
Corporation (a printing and digital imaging firm), Ryerson Tull, Inc. (a
steel service corporation), Advocate Health Care, and BoardSource,
formerly the National Center for Nonprofit Boards. She is Chairman
Emeritus of the Board of Trustees, Mount Holyoke College, having served
as Chairman for five years and as a board member for thirteen years.
Until 2002, Ms. Baxter was a Director of Intermatic Corporation (a
manufacturer of energy control products).
Ms. Baxter has held various positions in investment banking and
corporate finance, including Vice President and Principal of the Regency
Group, and Vice President of and Consultant to First Boston Corporation.
She is a graduate of Mount Holyoke College.
Charles B. Curtis (4/27/40), Trustee since 2001
Mr. Curtis is President and Chief Operating Officer of the Nuclear
Threat Initiative (a private foundation dealing with national security
issues) and serves as Senior Advisor to the United Nations Foundation.
Mr. Curtis is a member of the Council on Foreign Relations and the
Trustee Advisory Council of the Applied Physics Laboratory, Johns
Hopkins University. Until 2003, Mr. Curtis was a member of the Electric
Power Research Institute Advisory Council and the University of Chicago
Board of Governors for Argonne National Laboratory. Prior to 2002, Mr.
Curtis was a Member of the Board of Directors of the Gas Technology
Institute and the Board of Directors of the Environment and Natural
Resources Program Steering Committee, John F. Kennedy School of
Government, Harvard University. Until 2001, Mr. Curtis was a member of
the Department of Defense Policy Board and Director of EG&G Technical
Services, Inc. (a fossil energy research and development support
company).
Prior to May 1997, Mr. Curtis was Deputy Secretary of Energy. He served
as Chairman of the Federal Energy Regulatory Commission from 1977 to
1981 and has held positions on the staff of the U.S. House of
Representatives, the U.S. Treasury Department, and the Securities and
Exchange Commission.
John A. Hill (1/31/42), Trustee since 1985 and Chairman since 2000
Mr. Hill is Vice Chairman and Managing Director of First Reserve
Corporation, a private equity buyout firm that specializes in energy
investments in the diversified worldwide energy industry.
Mr. Hill is a Director of Devon Energy Corporation, TransMontaigne Oil
Company, Continuum Health Partners of New York, and various private
companies controlled by First Reserve Corporation, as well as a Trustee
of TH Lee Putnam Investment Trust (a closed-end investment company). He
is also a Trustee of Sarah Lawrence College.
Prior to acquiring First Reserve Corporation in 1983, Mr. Hill held
executive positions in investment banking and investment management with
several firms and with the federal government, including Deputy
Associate Director of the Office of Management and Budget, and Deputy
Director of the Federal Energy Administration. He is active in various
business associations, including the Economic Club of New York, and
lectures on energy issues in the United States and Europe. Mr. Hill
holds a B.A. degree in Economics from Southern Methodist University and
pursued graduate studies there as a Woodrow Wilson Fellow.
Ronald J. Jackson (12/17/43), Trustee since 1996
Mr. Jackson is a private investor.
Mr. Jackson is President of the Kathleen and Ronald J. Jackson
Foundation (a charitable trust). He is also a member of the Board of
Overseers of WGBH (a public television and radio station) as well as a
member of the Board of Overseers of the Peabody Essex Museum.
Mr. Jackson is the former Chairman, President, and Chief Executive
Officer of Fisher-Price, Inc. (a major toy manufacturer), from which he
retired in 1993. He previously served as President and Chief Executive
Officer of Stride-Rite, Inc. (a manufacturer and distributor of
footwear) and of Kenner Parker Toys, Inc. (a major toy and game
manufacturer). Mr. Jackson was President of Talbots, Inc. (a distributor
of women's apparel) and has held financial and marketing positions with
General Mills, Inc. and Parker Brothers (a toy and game company). Mr.
Jackson is a graduate of the University of Michigan Business School.
Paul L. Joskow (6/30/47), Trustee since 1997
Dr. Joskow is the Elizabeth and James Killian Professor of Economics and
Management, and Director of the Center for Energy and Environmental
Policy Research at the Massachusetts Institute of Technology.
Dr. Joskow serves as a Director of National Grid Transco (a UK-based
holding company with interests in electric and gas transmission and
distribution, and telecommunications infrastructure). He also serves on
the board of the Whitehead Institute for Biomedical Research (a
non-profit research institution) and has been President of the Yale
University Council since 1993. Prior to February 2002, he was a Director
of State Farm Indemnity Company (an automobile insurance company) and
prior to March 2000 he was a Director of New England Electric System (a
public utility holding company).
Dr. Joskow has published five books and numerous articles on topics in
industrial organization, government regulation of industry, and
competition policy. He is active in industry restructuring,
environmental, energy, competition, and privatization policies --
serving as an advisor to governments and corporations worldwide. Dr.
Joskow holds a Ph.D. and M. Phil from Yale University and B.A. from
Cornell University.
Elizabeth T. Kennan (2/25/38), Trustee since 1992
Dr. Kennan is a partner in and Chairman of Cambus-Kenneth Bloodstock,
LLC (cattle and thoroughbred horses). She is President Emeritus of Mount
Holyoke College.
Dr. Kennan serves as a Trustee of Northeast Utilities and is a Director
of Talbots, Inc. She has served as Director on a number of other boards,
including Bell Atlantic, Chastain Real Estate, Shawmut Bank, Berkshire
Life Insurance, and Kentucky Home Life Insurance. She is a Trustee of
Centre College and of Midway College in Midway, Kentucky. She is also a
member of The Trustees of Reservations. Dr. Kennan has served on the
oversight committee of the Folger Shakespeare Library, as President of
Five Colleges Incorporated, as a Trustee of Notre Dame University, and
is active in various educational and civic associations.
As a member of the faculty of Catholic University for twelve years,
until 1978, Dr. Kennan directed the post-doctoral program in Patristic
and Medieval Studies, taught history, and published numerous articles.
Dr. Kennan holds a Ph.D. from the University of Washington in Seattle,
an M.S. from St. Hilda's College at Oxford University, and an A.B. from
Mount Holyoke College. She holds several honorary doctorates.
John H. Mullin, III (6/15/41), Trustee since 1997
Mr. Mullin is the Chairman and CEO of Ridgeway Farm (a limited liability
company engaged in timber and farming).
Mr. Mullin serves as a Director of Alex. Brown Realty, Inc., The Liberty
Corporation (a broadcasting company), Progress Energy, Inc. (a utility
company, formerly known as Carolina Power & Light), and Sonoco Products,
Inc. (a packaging company). Mr. Mullin is Trustee Emeritus of Washington
& Lee University, where he served as Chairman of the Investment
Committee. Prior to May 2001, he was a Director of Graphic Packaging
International Corp.
Mr. Mullin also served as a Director of Dillon, Read & Co., Inc. until
October 1997 and The Ryland Group, Inc. until January 1998. Mr. Mullin
is a graduate of Washington & Lee University and The Wharton Graduate
School, University of Pennsylvania.
Robert E. Patterson (3/15/45), Trustee since 1984
Mr. Patterson is Senior Partner of Cabot Properties, L.P. and Chairman
of Cabot Properties, Inc.
Mr. Patterson serves as Chairman of the Joslin Diabetes Center, as a
Trustee of Sea Education Association, and as a Director of Brandywine
Trust Company. Prior to December 2001, he was President and Trustee of
Cabot Industrial Trust (a publicly traded real estate investment trust).
Prior to February 1998, Mr. Patterson was Executive Vice President and
Director of Acquisitions of Cabot Partners Limited Partnership (a
registered investment advisor involved in institutional real estate
investments). Prior to 1990, he served as Executive Vice President of
Cabot, Cabot & Forbes Realty Advisors, Inc. (the predecessor company of
Cabot Partners) and as a Senior Vice President of the Beal Companies (a
real estate management, investment, and development firm).
Mr. Patterson practiced law and held various positions in state
government, and was the founding Executive Director of the Massachusetts
Industrial Finance Agency. Mr. Patterson is a graduate of Harvard
College and Harvard Law School.
W. Thomas Stephens (9/2/42), Trustee since 1997
Mr. Stephens serves on a number of corporate boards.
Mr. Stephens serves as a Director of Xcel Energy Incorporated (a public
utility company), TransCanada Pipelines Limited, Norske Canada, Inc. (a
paper manufacturer), and Qwest Communications. Until 2003, Mr. Stephens
was a Director of Mail-Well, Inc. (a diversified printing company). He
served as Chairman of Mail-Well until 2001 and as CEO of
MacMillan-Bloedel, Ltd. (a forest products company) until 1999.
Prior to 1996, Mr. Stephens was Chairman and Chief Executive Officer of
Johns Manville Corporation. He holds B.S. and M.S. degrees from the
University of Arkansas.
W. Nicholas Thorndike (3/28/33), Trustee since 1992
Mr. Thorndike serves on the boards of various corporations and
charitable organizations.
Mr. Thorndike is a Director of Courier Corporation (a book publisher and
manufacturer) and The Providence Journal Co. (a newspaper publisher). He
is also a Trustee of Northeastern University and an honorary Trustee of
Massachusetts General Hospital, where he previously served as Chairman
and President. Prior to September 2000, he was a Director of Bradley
Real Estate, Inc.; prior to April 2000, he was a Trustee of Eastern
Utilities Associates; and prior to December 2001, he was a Trustee of
Cabot Industrial Trust.
Mr. Thorndike has also served as Chairman of the Board and Managing
Partner of Wellington Management Company/Thorndike, Doran, Paine & Lewis
(a registered investment advisor that manages mutual funds and
institutional assets), as a Trustee of the Wellington Group of Funds
(currently The Vanguard Group), and as Chairman and a Director of Ivest
Fund, Inc. Mr. Thorndike is a graduate of Harvard College.
George Putnam, III* (8/10/51), Trustee since 1984 and President
since 2000
Mr. Putnam is President of New Generation Research, Inc. (a publisher of
financial advisory and other research services), and of New Generation
Advisers, Inc. (a registered investment advisor to private funds). Mr.
Putnam founded the New Generation companies in 1986.
Mr. Putnam is a Director of The Boston Family Office, LLC (a registered
investment advisor). He is a Trustee of St. Mark's School, Shore Country
Day School, and until 2002 was a Trustee of the Sea Education
Association.
Mr. Putnam previously worked as an attorney with the law firm of Dechert
Price & Rhoads in Philadelphia. He is a graduate of Harvard College,
Harvard Business School, and Harvard Law School.
A.J.C. Smith* (4/13/34), Trustee since 1986
Mr. Smith is Chairman of Putnam Investments and a Director of Marsh &
McLennan Companies, Inc.
Mr. Smith is also a Director of Trident Corp. (a limited partnership
with over thirty institutional investors). He is also a Trustee of the
Carnegie Hall Society, the Educational Broadcasting Corporation, and the
National Museums of Scotland. He is Chairman of the Central Park
Conservancy and a Member of the Board of Overseers of the Joan and
Sanford I. Weill Graduate School of Medical Sciences of Cornell
University. Prior to May 2000 and November 1999, Mr. Smith was Chairman
and CEO, respectively, of Marsh & McLennan Companies, Inc.
The address of each Trustee is One Post Office Square, Boston, MA 02109.
As of September 30, 2003, there were 102 Putnam Funds.
Each Trustee serves for an indefinite term, until his or her
resignation, retirement at age 72, death, or removal.
* Trustees who are or may be deemed to be "interested persons" (as
defined in the Investment Company Act of 1940) of the fund, Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc., the parent company of Putnam, LLC and its affiliated companies.
Messrs. Putnam, III, and Smith are deemed "interested persons" by virtue
of their positions as officers or shareholders of the fund or Putnam
Management, Putnam Retail Management, or Marsh & McLennan Companies,
Inc. George Putnam, III is the President of your fund and each of the
other Putnam funds. Mr. Smith serves as a Director of Marsh & McLennan
Companies, Inc.
Officers
In addition to George Putnam, III, the other officers of the
fund are shown below:
Charles E. Porter (7/26/38)
Executive Vice President, Treasurer and Principal Financial
Officer
Since 1989
Managing Director, Putnam Investments
and Putnam Management
Patricia C. Flaherty (12/1/46)
Senior Vice President
Since 1993
Senior Vice President, Putnam Investments and Putnam
Management
Karnig H. Durgarian (1/13/56)
Vice President and Principal Executive Officer
Since 2002
Senior Managing Director, Putnam Investments
Steven D. Krichmar (6/27/58)
Vice President and Principal Financial Officer
Since 2002
Managing Director, Putnam Investments. Prior to July 2001,
Partner, PricewaterhouseCoopers LLP
Michael T. Healy (1/24/58)
Assistant Treasurer and Principal
Accounting Officer
Since 2000
Managing Director, Putnam Investments
Beth S. Mazor (4/6/58)
Vice President
Since 2002
Senior Vice President, Putnam Investments
Gordon H. Silver (7/3/47)
Vice President
Since 1990
Senior Managing Director, Putnam Investments, Putnam
Management and Putnam Retail Management
Mark C. Trenchard (6/5/62)
Vice President and BSA Compliance Officer
Since 2002
Senior Vice President, Putnam Investments
William H. Woolverton (1/17/51)
Vice President and Chief Legal Officer
Since 2003
Managing Director, Putnam Investments, Putnam Management and
Putnam Retail Management
Judith Cohen (6/7/45)
Clerk and Assistant Treasurer
Since 1993
Clerk and Assistant Treasurer, The Putnam Funds
The address of each Officer is One Post Office Square,
Boston, MA 02109.
The Putnam family of funds
The following is a complete list of Putnam's open-end mutual funds.
Please call your financial advisor or Putnam at 1-800-225-1581 to obtain
a prospectus for any Putnam fund. It contains more complete
information, including charges and expenses. Please read it carefully
before you invest or send money.
Growth Funds
Discovery Growth Fund
Growth Opportunities Fund
Health Sciences Trust
International New Opportunities Fund
New Opportunities Fund
OTC & Emerging Growth Fund
Small Cap Growth Fund
Vista Fund
Voyager Fund
Blend Funds
Capital Appreciation Fund
Capital Opportunities Fund
Europe Equity Fund
Global Equity Fund
Global Natural Resources Fund
International Capital Opportunities Fund
International Equity Fund
Investors Fund
Research Fund
Tax Smart Equity Fund
Utilities Growth and Income Fund
Value Funds
Classic Equity Fund
Convertible Income-Growth Trust
Equity Income Fund
The George Putnam Fund of Boston
The Putnam Fund for Growth and Income
International Growth and Income Fund
Mid Cap Value Fund
New Value Fund
Small Cap Value Fund*
Income Funds
American Government Income Fund
Diversified Income Trust
Global Income Trust
High Yield Advantage Fund*
High Yield Trust
Income Fund
Intermediate U.S. Government
Income Fund
Money Market Fund +
U.S. Government Income Trust
Tax-free Income Funds
Municipal Income Fund
Tax Exempt Income Fund
Tax Exempt Money Market Fund +
Tax-Free High Yield Fund
Tax-Free Insured Fund
State tax-free income funds
Arizona, California, Florida, Massachusetts, Michigan,
Minnesota, New Jersey, New York, Ohio and Pennsylvania
Asset Allocation Funds
Putnam Asset Allocation Funds--three investment portfolios
that spread your money across a variety of stocks, bonds,
and money market investments.
The three portfolios:
Asset Allocation: Balanced Portfolio
Asset Allocation: Conservative Portfolio
Asset Allocation: Growth Portfolio
* Closed to new investors.
+ An investment in a money market fund is not insured or
guaranteed by the Federal Deposit Insurance Corporation or
any other government agency. Although the funds seek to
preserve your investment at $1.00 per share, it is possible
to lose money by investing in the fund.
Check your account balances and current performance at
www.putnaminvestments.com.
Fund information
One of the largest mutual fund families in the United States, Putnam
Investments has a heritage of investment leadership dating back to Judge
Samuel Putnam, whose Prudent Man Rule has defined fiduciary tradition
and practice since 1830. Founded over 65 years ago, Putnam Investments
was built around the concept that a balance between risk and reward is
the hallmark of a well-rounded financial program. We presently manage
over 100 mutual funds in growth, value, blend, fixed income, and
international.
Investment Manager
Putnam Investment
Management, LLC
One Post Office Square
Boston, MA 02109
Marketing Services
Putnam Retail Management
One Post Office Square
Boston, MA 02109
Custodian
Putnam Fiduciary Trust Company
Legal Counsel
Ropes & Gray LLP
Independent Auditors
PricewaterhouseCoopers LLP
Trustees
John A. Hill, Chairman
Jameson Adkins Baxter
Charles B. Curtis
Ronald J. Jackson
Paul L. Joskow
Elizabeth T. Kennan
John H. Mullin III
Robert E. Patterson
George Putnam, III
A.J.C. Smith
W. Thomas Stephens
W. Nicholas Thorndike
Officers
George Putnam, III
President
Charles E. Porter
Executive Vice President, Treasurer
and Principal Financial Officer
Patricia C. Flaherty
Senior Vice President
Karnig H. Durgarian
Vice President and Principal
Executive Officer
Steven D. Krichmar
Vice President and Principal
Financial Officer
Michael T. Healy
Assistant Treasurer and
Principal Accounting Officer
Beth S. Mazor
Vice President
Gordon H. Silver
Vice President
Mark C. Trenchard
Vice President and BSA Compliance Officer
William H. Woolverton
Vice President and
Chief Legal Officer
Judith Cohen
Clerk and Assistant Treasurer
This report is for the information of shareholders of Putnam 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 and
Putnam's Quarterly Ranking Summary. For more information or to request a
prospectus, call toll free: 1-800-225-1581. The fund's Statement of
Additional Information contains additional information about the fund's
Trustees and is available without charge upon request by calling
1-800-225-1581.
[LOGO OMITTED]
PUTNAM INVESTMENTS
The Putnam Funds
One Post Office Square
Boston, Massachusetts 02109
PRSRT STD
U.S. POSTAGE PAID
PUTNAM
INVESTMENTS
Call 1-800-225-1581 or visit our Web site www.putnaminvestments.com.
May Lose Value Not FDIC Insured No Bank Guarantee
AN039-203390 010/879/2LY/534/210/2XR 11/03
Item 2. Code of Ethics:
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All officers of the Fund, including its principal executive, financial and
accounting officers, are employees of Putnam Investment Management, LLC,
the Fund's investment manager. As such they are subject to a comprehensive
Code of Ethics adopted and administered by Putnam Investments which is
designed to protect the interests of the firm and its clients. The Fund
has adopted a Code of Ethics which incorporates the Code of Ethics of
Putnam Investments with respect to all of its officers and Trustees who are
employees of Putnam Investment Management, LLC. For this reason, the Fund
has not adopted a separate code of ethics governing its principal
executive, financial and accounting officers.
Item 3. Audit Committee Financial Expert:
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The Funds' Audit and Pricing Committee is comprised solely of Trustees
who are "independent" (as such term has been defined by the Securities
and Exchange Commission ("SEC") in regulations implementing Section 407
of the Sarbanes-Oxley Act (the "Regulations")). The Trustees believe
that each of the members of the Audit and Pricing Committee also possess
a combination of knowledge and experience with respect to financial
accounting matters, as well as other attributes, that qualify them for
service on the Committee. In addition, the Trustees have determined
that all members of the Funds' Audit and Pricing Committee meet the
financial literacy requirements of the New York Stock Exchange's rules
and that Mr. Patterson and Mr. Stephens qualify as "audit committee
financial experts" (as such term has been defined by the Regulations)
based on their review of their pertinent experience and education.
Certain other Trustees, although not on the Audit and Pricing Committee,
would also qualify as "audit committee financial experts." The SEC has
stated that the designation or identification of a person as an audit
committee financial expert pursuant to this Item 3 of Form N-CSR does
not impose on such person any duties, obligations or liability that are
greater than the duties, obligations and liability imposed on such
person as a member of the Audit and Pricing Committee and the Board of
Trustees in the absence of such designation or identification.
Item 4. Principal Accountant Fees and Services:
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Not applicable
Items 5-6. [Reserved]
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Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed End
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Management Investment Companies: Not applicable
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Item 8. [Reserved]
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Item 9. Controls and Procedures:
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(a) The registrant's principal executive officer and principal financial
officers have concluded, based on their evaluation of the effectiveness
of the design and operation of the registrant's disclosure controls and
procedures as of a date within 90 days of the filing date of this report
on Form N-CSR, that the design and operation of such procedures are
effective to provide reasonable assurance that information required to
be disclosed by the investment company in the reports that it files or
submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized, and reported within the time periods specified in
the Commission's rules and forms.
(b) Changes in internal control over financial reporting:
Not applicable
Item 10. Exhibits:
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(a) The Code of Ethics of The Putnam Funds, which incorporates the
Code of Ethics of Putnam Investments, is filed herewith.
(b) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2
under the Investment Company Act of 1940, as amended, and the officer
certifications as required by Section 906 of the Sarbanes-Oxley Act of 2002
are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NAME OF REGISTRANT
By (Signature and Title): /s/Michael T. Healy
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Michael T. Healy
Principal Accounting Officer
Date: November 25, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934
an the Investment Company Act of 1940, this report has been signed
below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
By (Signature and Title): /s/Karnig H. Durgarian
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Karnig H. Durgarian
Principal Executive Officer
Date: November 25, 2003
By (Signature and Title): /s/Charles E. Porter
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Charles E. Porter
Principal Financial Officer
Date: November 25, 2003
By (Signature and Title): /s/Steven D. Krichmar
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Steven D. Krichmar
Principal Financial Officer
Date: November 25, 2003